–Washington ‘Mostly Evokes Despair’
By Denny Gulino
WASHINGTON (MNI) – His term in its last six months, U.S. Treasury
Secretary Tim Geithner Wednesday lamented the economy is not stronger,
the future more uncertain and the tax and fiscal policy he’s responsible
for paralyzed.
“The economy’s definitely slower, slower than it was last year,”
Geithner said on CNBC, as its annual “Delivering Alpha” conference
searched for what this year are only elusive signs of expansion.
Geithner again blamed “the trauma from Europe, the aftereffects of
the rising oil prices early this year and because government spending ..
is actually falling now quite significantly.”
Geithner betrayed his frustration with the deepening fiscal crisis,
which unlike Europe’s travails is made up of challenges “completely
under our control.”
What the administration does continue to take credit for, he said,
is the massive stimulus program after the financial crisis and the
federal assistance which now extends to nearly half the American
population.
Because of the stimulus program and other crisis remedies, six
months after the crisis “we were growing again as a country,” he said,
“remarkably quick.”
Growth never did accelerate enough because of the overhang of
housing problems and a wave of deleveraging that “was essential,
unavoidable and we are very far long in that process.”
Add Europe, higher oil prices, the Japan supply chain disruption
and a debt-limit impasse, fiscal drag and what growth there was began to
fade as stimulus ran out, Geithner repeated.
Geithner recounted administration recommendations to Congress,
within a framework of a “very substantial, well designed program of
support for economic growth” coupled with long-term spending and tax
reform that doesn’t hurt the current fragile recovery.
After the obligatory promotion of administration programs, Geithner
faced up to the larger reality, of an election-year paralysis of
Congress that prevents any substantial decisionmaking, “a broader
concern about whether Washington can do things that can help the
country’s economic problems.”
“Washington’s a crazy place, hard to read, and mostly evokes
despair at the moment,” Geithner said. “It’s stuck and it needs to get
unstuck.”
The “most powerful instruments of economic policy that the country
needs right now are in the hands of the Congress,” he continued.
Stretching to see something positive, Geithner said, “If you listen
carefully there is a lot of very valuable foundation-laying underway
among lawmakers in both parties in trying to think through how to design
that long-term framework” for spending and taxing reform.
He also noted how convoluted the debate can become, with some on
Capitol Hill ready to let the Bush-era tax cuts expire as scheduled at
the end of the year, raising taxes, so then a more politically palatable
vote can be taken to cut taxes and restore the current status quo. “That
is not a responsible way to approach tax reform or fiscal policy,” he
said.
“Nobody wants ever to raise taxes but when you govern you have to
figure out how to make sure you’re putting in place reforms that balance
all the conflicting challenges we face,” he said.
On Europe, Geithner said he still believes the common currency will
survive and that a “very strong core group” of eurozone officials are
dedicated to solidifying its future. But they can’t be satisfied yet, he
said, because so much remains to be done.
“What is very important is that they not leave the Continent
hanging on the edge of the abyss as a device for getting more leverage
for reform,” he said, “because that leaves the rest of the world much
more exposed to financial pressure and slower growth from Europe.”
On LIBOR, Geithner defended his actions as the president of the New
York Federal Reserve Bank four years ago, saying he and Fed staff
briefed U.S. regulators on what was seen as an “impaired and flawed”
system of setting rates and regulators then initiated investigations
that culminated in huge fines. And more is to come, he said, citing what
the regulators have said is under way.
“We acted very early,” he said. “I took the initiative to brief the
entire U.S. regulatory community on this at a very early stage,” he
said, echoing Federal Reserve Chairman Ben Bernanke Tuesday, who said
the president’s inter-agency working group, including the CFTC and SEC,
was briefed at the time.
There is “more to come on that,” Geithner said, cautioning he was
not referring to any possible involvement by the three U.S. banks who
participate in the LIBOR dollar rate-setting process. “We’re going to
make sure there’s a strong credible reform effort to follow.”
Asked ahead for him, given his statement that he will not serve in
any second Obama term, Geithner said only he has a lot ahead in his
current job.
** MNI Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,MI$$$$,MGU$$$,MFU$$$,MCU$$$,M$X$$$,MK$$$$]