Deficit Plan Must Balance Growth, Fairness: Geithner
Special to CNBC.com
Treasury Secretary Tim Geithner told CNBC Friday he sees second-half growth of 2.5 percent and wants a balanced agreement on raising the debt ceiling that will be fair while promoting that growth.
The "potential for us over the long run is 2.5 percent" in the second half, which is "a perfectly achievable outcome for us," he said, in an exclusive interview. "We just have to make sure we do things in Washington to make that more likely, not less likely."
One of those things must be reaching a bipartisan deal in Congress that will cut the deficit and raise the debt ceiling.
"There has to be a deal," Geithner told CNBC's Steve Liesman. "We have large, unsustainable deficits, and we have to bring them down. The country and the world are watching, waiting for us to do that. We need to demonstrate to them that we can live within our means again."
However, he added, "The question is, will it be a good agreement, or an agreement that’s less good? What we want to make sure is we have an agreement that’s good for growth, good for the economy in the short run and the long term" and is "a more growth-friendly package of reforms."
He disagreed with J.P. Morgan boss Jamie Dimon's belief there is too much regulation, saying, "There's almost no basis for that concern."
The Dodd-Frank financial services law was needed because "we had a crisis that caused devastating damage and alot of people who spent decades telling the world they knew how to manage risk didn’t know what they were doing. We have to clean that up and fix it to protect American businesses and average people from the excesses of that crisis. If we do that carefully, that restores the great strength of the American financial system."
But he said the Treasury Department and other federal agencies are looking at "the overall effect of these reforms on stability and on the economy as a whole."
There is also a corporate tax proposal being developed at Treasury, but the main focus now is the deficit talks. "Once we get that done we can look at a lot of things," Geithner said. But he said tax reform is essential to "strengthen incentives to invest in the U.S."
The problems in Greece "should not be a threat to the U.S. economy," Geithner said, and the European nations will have to "do more than they're doing to make sure they have a broader financial backstop to make sure these reforms will work."
Although the U.S. dollar has been weak, Geithner noted that "when people are most worried, they seek the safety of U.S. assets." The dollar gained about a percent against the euro this week, as markets reacted to concerns about Greek default.