Reporting and analysis from ABC News Chief Washington Correspondent and “This Week” Host George Stephanopoulos.
To get the economy back on track, will President Barack Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a “This Week” exclusive, Treasury Secretary Tim Geithner told me, “We’re going to have to do what’s necessary.”
Geithner was clear that he believes a key component of economic recovery is deficit reduction. When I gave him several opportunities to rule out a middle class tax hike, he wouldn’t do it.
“We have to bring these deficits down very dramatically,” Geithner told me. “And that’s going to require some very hard choices.”
“We will not get this economy back on track, recovery will be not strong and sustained, unless we convince the American people that we are going to have the will to bring these deficits down once recovery is firmly established,” he said.
While Geithner told me, “There are signs the recession is easing,” he warned that, “We have a ways to go.”
“I want to emphasize the basic reality that unemployment is very high in this country,” the secretary said. But, he underlined that the administration is “going to do what is necessary to bring growth back on track.”
Turning to the bank bailout, he told me it is “quite unlikely” that the U.S. Treasury will go back to Congress to ask for more funding for the financial rescue package.
“We do not plan to ask for more money and I think it’s quite unlikely that we do,” Geithner said in his most blunt language to date on TARP funding. The secretary said that today the TARP has roughly $130 billion, in part due to more than $70 billion that has already come back into the government.
Geithner also strongly endorsed legislation currently pending in the House that would increase the power of the SEC and give shareholders more rights to vote on executive compensation. He insisted that Republican criticism that the government is overly involved in the financial system is unfounded.
“Everybody understands that we cannot have our financial system go back to the practices that brought this economy to the brink of collapse,” he told me. “It is going to take fundamental reform.”
Tons of news today from my exclusive interview with Alan Greenspan. The former Fed chairman told me he’s “pretty sure we’ve already seen the bottom.”
Greenspan listed a number of reasons for his positive outlook, citing upward production trends in several industries and the recovery of the financial system.
“There’s been a very significant improvement in the financial system and it’s been the financial system where the problems have been,” he said.
When I asked him about the possibility of a collapse, Greenspan responded, “Collapse now, I think, is off the table.”
When he last appeared on “This Week” in September 2008, the economy was in the midst of the financial crisis which Greenspan then called a “once-in-a-century type event.”
This morning, he told me that the U.S. economy had gotten past the crisis.
“We were teetering for awhile,” he said, “but I do think that the TARP program, for example, was very helpful in shoring up the capitals, that stock of banks and the like. And not an insignificant event is the $3.5 trillion increase in the stock market value of American corporations.
Now, he says business inventories are so depleted that he anticipates a sharp turnaround in growth.
“It strikes me that we may very well have 2.5 percent in the current quarter,” he said.
That would be significant because it would be near the level necessary to ease huge job losses.
“The unemployment rate is going to continue to rise,” Greenspan told me, “but more slowly than it’s been.”
There’s one caveat to this, however. Housing prices, he said, must remain stable.
“If you get another dip and a renewed decline in prices, we’re going to run into an acceleration of a number of homes that are less than the debt,” he said. “If that happens — and, clearly, looking at the structure of where debt and values, it would, if, for example, home prices fell by 10 percent or more — that would create a major acceleration in foreclosures.”
– Inflation: Greenspan worried that current Fed Chair Bernanke’s estimate of having a couple years before reigning in inflation may be too optimistic. “I hope they have a couple years,” he said. “I don’t think they do.”
– Health Care: He asserted that health care reforms could reduce the deficit, but “it is not adequate to be strictly revenue neutral because there is a lot more that needs to be done.”
– Taxes: Greenspan endorsed the proposal for a value-added tax put forth by former Clinton Deputy Treasury Secretary Roger Altman. “I don’t like a value-added tax but I agree with Roger. I think that there is a fairly significant probability that the least worst solution to the problem will end up to be a value-added tax, quantities without significantly impacting on the economy.”
– Cash for Clunkers: With the House voting to increase funding for the program, Greenspan expressed support for program. “I have qualms about the concept, but there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up.”
- George Stephanopoulos
Jerry Seib has smart take on why health care has been so hard to sell despite so many efforts.
As President Obama prepares to rally his Senate troops over lunch today — a lunch, by the way, that’s never happened before — here are the three numbers that will matter most when they return to the Capitol post-Labor Day:
1) OMB’s mid-session budget review: How much worse will the deficit numbers be? Can the Administration beat back the story line that its projections have been too optimistic?
2) August unemployment figures: Will they stay below that 10 percent level Mark Penn has called the “tipping point?”
3) The Dow: Nothing has done more for consumer confidence than the summer rally. Will it approach 10,000?
Unemployment below 10, Dow close to 10K, deficit projection adjusted by less than 20 percent and chances of passing health care rise by 50 percent.
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