WASHINGTON — As the White House geared up for a fight to end tax cuts of the last administration, Treasury Secretary Timothy Geithner said Sunday that allowing the expiration of those targeted at wealthy Americans was “the responsible thing to do” and would not deter economic growth.
The president’s plan would end tax cuts for only 2 percent or 3 percent of the highest-earning Americans, Geithner said, while sending an important message to the world about the government’s commitment to fiscal austerity.
“We think that’s the responsible thing to do,” Geithner said, speaking to Jake Tapper on ABC’s This Week. “We need to make sure we can show the world that we’re willing as a country now to start to make some progress bringing down our long-term deficits.”
Enacted under President George W. Bush, the tax cuts will expire next year if Congress and the president don’t act to extend them. Republicans and some Democrats favor continuing them all, at a cost of adding at least $2 trillion to the federal deficit over the next 10 years.
Obama has supported continuing only those for lower-income and middle-class workers, which would cost slightly less. He has suggested keeping the cuts in place for individuals making less than $200,000 a year and for families earning less than $250,000.
On Sunday, Geithner took the administration’s argument to both the ABC show and to NBC’s Meet the Press. He said he doesn’t think that ending the tax cuts would negatively affect the economic recovery.
“Just letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest-earning Americans in the country, expire, I do not believe it will have a negativeeffect on growth,” Geithner said on ABC.
In addition, Geithner said the administration was pushing Congress to pass a series of tax measures to benefit small businesses and help them get credit so they can expand their operations. He said he expected the administration push for this would “absolutely” come before the midterm elections in November.
But critics disputed Geithner’s predictions Sunday about how the expiration of the tax cuts would play out across the economy and with American voters.
“Businesses with narrow margins, they’re going to go under,” said Steve Forbes, publishing magnate and twotime Republican presidential candidate, on CNN’s State of the Union.
“Even entrepreneurs, people who are willing to buck the tide” are “very hesitant,” he said, “because they don’t know what kind of costs they’re going to get hit with.”
But Geithner said he didn’t think there was a chance that all of the Bush tax cuts would survive, even for a year or two.
“I don’t believe it should,” he said, “and I don’t believe it will.”
Geithner said on NBC’s Meet the Press on Sunday that U.S. companies scarred by thefinancial crisis remain “very cautious” and are trying to get more productivity from current employees before hiring new ones.
Job growth is “not as fast as we need,” Geithner said. Employers “are still cautious, still very cautious,” he said. “So they’ve been trying to get as much productivity out of their employees as possible.”
Geithner said he doesn’t think the U.S. will suffer a socalled double-dip recession. “The most likely thing is you see an economy that gradually strengthens over the next year or two,” he said.
Geithner, 48, also said he didn’t have concerns about the candidacy of Elizabeth Warren to lead the new consumerprotection agency created by the financial-regulatory overhaul Obama signed into law Wednesday.
Warren, who heads the congressional panel overseeing the Treasury’s bailout program, “has huge credibility and she played a decisive role in helping make the public case for reform,” Geithner said on the ABC program. “She was early on this, way ahead of everybody else.” Information for this article was contributed by Christi Parsons of the Tribune Washington Bureau and by Ian Katz of Bloomberg News.
Front Section, Pages 2 on 07/26/2010