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Jennifer Dauble



Following is the unofficial transcript of a CNBC interview with Treasury Secretary Timothy Geithner today on CNBC's "Closing Bell with Maria Bartiromo." All references must be sourced to CNBC.

JOHN HARWOOD: Secretary, thanks for jo-- we hear the president in the Rose Garden today, he did not look comfortable to me at the position that we've got to today. That is, we're tryin' to get a grand bargain with the speaker over the summer. Now you've got both sides retreating to their political corners. Speaker, sketching out publicly last week, "No tax increases." The president proposing something today far short of what he had been talking about with the speaker. Are you comfortable with the situation where we're now gonna have a political brawl between now and election day?

SECRETARY TIMOTHY GEITHNER: Well, that was gonna happen anyway. But what we're tryin' to do is lay the foundation for-- the capacity to do something about our growth challenges for short-term and long-run. All that requires doing things that help growth right now, get more Americans back to work. Part of it is about in the long-run, demonstrating to people, we know how to go back to living within our means as a country.

I think both sides know the economy could use a bit more support for growth. And I think both sides understand that we have deficits that are unsustainable in the long-run. The question is, and this is what we're debating as how to bring those-- down those deficits. Well, I'll give you the optimistic case, though. I think if you listen carefully, you know, we're in a political moment, it's a political town, the country's very divided.

But I think if you listen carefully, you're seeing-- people recognize these deficit issues are serious. And if you listen to what the American people are saying about what they think is a fair and balanced approach, you're seeing a little bit more consensus that you need to do some things that not just affect-- the size of government, the role of government, redefine what government does, but you need to define ways to get more revenue in a sensible way out of the American tax system so that we can help create some more room for the things we need as a country.

I think you're seeing more support for that broad approach. The only approach we've seen that has bipartisan support across in the Congress recently are-- are-- are-- kind of balanced-- framework of tax reform and spending reforms that the president laid out. So we think that's the best economics, best for the country, and-- and we're gonna fight for that.

JOHN HARWOOD: But you would agree that the kind of grand bargain that the president and speaker were discussing this summer is no longer possible, not going to happen, maybe you get something in a more limited compromise, but not the large-scale reform that the economy needs?

SECRETARY TIMOTHY GEITHNER: I just don't know, John. I think it's too early to tell. Again, even the speak said last week that he believes still we should try and do something that's gonna do as much as we can about the long-term problems as possible. He was making the case for going big again.

So there's a lot of support, a lot more realism across the American political spectrum that we can't just put off these problems forever. And if we try and put 'em off forever, we're gonna be hurting growth, hurt incentives for investment. So you know, we just gotta keep trying, keep looking for ways to get broader political support for a sensible package. That's what the President's doing.

JOHN HARWOOD: You say you'll keep trying, but if in fact we are in a political moment, we'll remain in a political moment. And nothing big will get done. What would be the economic impact of that?

SECRETARY TIMOTHY GEITHNER: Well, the longer we put this stuff off, the greater risk we take as a country that people will decide that our political system is not up to the challenges of living in a global economy. And they'll decide at the margin, they'll invest elsewhere. Now, that'll they may come very slowly over time, it's not gonna happen overnight.

Again, the most important thing right now that we look for ways-- sensible tax incentives to help get people back to work, ways to mash-- make sure we can investment in things that are good for growth like infrastructure, find a way to do that now, but in the context of things-- that make Americans more confident that we're gonna go back to living means.

You know, this economic is much stronger than Washington, much more resilient than Washington. But ultimately, the health of the economy in the long-run depend on us demonstrating that our political system can do a better job of trying to solve problems, not just debate the politics.

JOHN HARWOOD: If the so-called "Buffett rule" that the president articulated, were an actual tax policy and not just a political talking point, why wouldn't the administration have come out wanna specific proposal and be able to explain how it's gonna work.

SECRETARY TIMOTHY GEITHNER: Let me just say something about this proposal the president s-- we call the "Buffett principle." We've been sitting around a table with the president's economic advisors and the tax experts for some time, over the course of the summer, at his request, to try to think through foundations for tax reform.

And it was in that context-- that we took a look at a set of principles for tax reform, including this one. The basic principle is, if you make more than a million dollars in the United States, you should be paying as a share of income-- no less than what a mid-- middle class family pays. It's a simple principle. It came from the economic team, from the tax policy experts-- fully supporting it's economics.

But what the president's saying is as part of comprehensive tax reform, that's an important foundation. Now, there's other things that are important too. You know, we wanna make sure that we're improving incentives for investing in the United States, tryin' to bring down l-- rates where we can, wanna clean up a lot of the spending, special preferences, tax expenditures, waste in the tax code. We're gonna try to do those things. And you know, we're gonna start-- start to have that debate.

JOHN HARWOOD: The-- let me ask you a different tax reform question. For some years now, you've had-- economists on the left and right saying that tax reform in the United States oughta tax consumption more, savings and investment less. Does that still make sense in the economy we're in right now?

SECRETARY TIMOTHY GEITHNER: A lot of countries have done that, but I don't think there's any realistic prospect of us moving in that direction as a country any time soon. And you don't-- whatever you think about the merits of it, and they're very complicated, there's no-- credible prospect of that happening in the near term. We think you can do sensible reforms, as-- as I said, clean up a lot of the waste in the tax system, a lot of the unfairness, use that to both bring down rates and bring down the long-term deficits.

We're-- we've been looking at ways to improve incentives for investment, and we think by lowering the corporate rate and cleaning up a bunch of the special-interest loopholes in the corporate system, we can also make business more competitive in the United States. And the-- these are things where there should be common ground. You know, the tax cuts we propose get more Americans back to work, help middle class c-- families right now.

The tax incentives we proposed for business investment, the investments we proposed for infrastructure, those things are very sensible, very good for growth, they've had broad bipartisan support in the past, and there's just no reason why with the economy growing more slowly, why it doesn't make sense for Congress to enact those things now.

JOHN HARWOOD: Two things quickly before I let you go, on Europe-- do you think your colleagues invited you over there for the purpose of slapping you around, or how did you feel about the criticism that you received when you were there?

SECRETARY TIMOTHY GEITHNER: Oh, that doesn't bother me at all. You know, they're in a very sensitive moment. And they're having a very active internal debate in Europe. And they invited us-- me to come and talk about Europe. But of course, when I talk to the Europeans, I always talk about our challenges first. I always explain we face very formidable challenges as a country, we're still healing from the crisis, we had a lot of work to do at home.

And I explained to them what we're trying to do. But they also asked me to come and talk about Europe. And I did that because we, as a country, have such a large stake in them getting through this. Again, it's not in the interest of the United States to see Europe weaken by a projected crisis. We've got a lot of interest in helping them through this.

And we're gonna continue to work with them, encourage them to do the kinda things that would help them-- contain the risk of broader pressure on the global economy and our economy. It's-- it's affecting the U.S. economy now, and we like it-- we'd like them to-- resolve those tensions, pressures.

JOHN HARWOOD: And finally, you know, there's a new book out which-- might explain why some-- members of the president's base have been concerned since the beginning of the administration that he wasn't tough enough on Wall Street, wasn't tough enough on banks. Some wanted him to nationalize banks, restructure banks. The new book that out suggests that-- that was because you, Larry Summers, others with ties to Wall Street, subverted what the president wanted to do. Is that what happened?

SECRETARY TIMOTHY GEITHNER: There is no truth to that, and I have not read that book. But I lived that reality. I lived the original for that period of time. And based on the reports I've seen, it bears no resemblance, those stories in that book bear on resemblance to the reality we lived-- to the debates we had, to the choice that the president made.

And I think if you look at what we did in that early moment of crisis, this president did-- he acted with enormous political courage at a very difficult moment and did very effective things to help pull us back from the edge of the abyss and help stabilize the financial system at very, very low cost much more effectively than anybody thought we could. And if you look carefully around the world now, you're seeing people, somewhat late, try to replicate that initial success.

JOHN HARWOOD: Secretary, thanks.


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