BREAK IN TRANSCRIPT
STEPHANOPOULOS: No question about that. And investigations continue today both by the Secret Service and the Congress. Thanks, Pierre.
Now to the economy, right at the heart of this already-hot presidential campaign, with our headliner, Treasury Secretary Tim Geithner.
Good morning, Mr. Geithner.
GEITHNER: Nice to see you, George.
STEPHANOPOULOS: Good to see you.
You know, I want to begin with a pretty startling number in our ABC News-"Washington Post" poll this week. It shows that 76 percent of the country thinks we're still in a recession. What do you say to those Americans?
GEITHNER: Well, it's obviously still a very tough economy out there. And I think it's not surprising, given the scale of the damage the crisis caused and how much damage you still see out there.
But if you look at the evidence, the economy is getting stronger. We have a ways to go still, a lot of challenges still ahead. But the broad indicators are pretty encouraging. They show an economy still growing. We'd like it to be stronger, and we've got a lot of work to do. But getting better.
STEPHANOPOULOS: But last month's job report was much weaker than people had hoped for, only about 121,000 jobs created, and the weekly unemployment claims took a big jump last week. Are we seeing the pattern of the past couple of years repeated, a strong start to the year, but then a stall-out in the spring?
GEITHNER: Can't tell yet, but if you look back at what happened in 2010 and 2011, you're right that you saw some early strength in the beginning of the year. But then what happened was, the crisis in Europe in 2010 and 2011 and then the crisis in Japan and then the oil shock caused growth to slow. And then in '11, it was made worse by the -- by all the political drama around the debt limit, which was very damaging to confidence.
STEPHANOPOULOS: So you're saying we can't...
GEITHNER: But those...
STEPHANOPOULOS: ... we can't tell yet. So -- but does that mean you're not confident that we're going to keep creating jobs this year?
GEITHNER: No. I would say that, you know, the economy, again, is gradually getting stronger and you get more people going back to work, and those are sort of good, encouraging signs. Obviously, we have a lot of challenges ahead and some risks and uncertainty ahead. And some of those risks are, of course, Europe's still going through a -- a difficult crisis. And Iran and oil still pose some risks to us.
But the available evidence is still, I think, pretty encouraging.
STEPHANOPOULOS: Do you expect that unemployment will be lower today -- lower on Election Day than it is today?
GEITHNER: If the economy keeps growing at a moderate pace, then, yes, the -- more people will be back to work and you should see a gradual reduction in the unemployment rate.
STEPHANOPOULOS: You've given a pretty measured view of where the economy is right now. As you -- as you might imagine, some of your critics take a much harsher tone, from both the right and the left. You know, President Bush's CEA, chairman of the Council of Economic Advisers, Eddie Lazarus, called this the worst recovery since the depression.
And liberal economist Nouriel Roubini seems to agree. I want to read you what he wrote, said last week. He said, "This recovery is anemic, subpar, below trend, below potential. If we avoid a major external or internal shock, we may avoid another recession, and that might be good news. But that's where the good news ends."
Now, they may have different prescriptions, but their analysis seems to converge on this key argument that we'd be better off had President Obama made better decisions.
GEITHNER: Oh, I don't think there's any basis for that. I mean, obviously, if he had said, he -- if he'd had more support from his opponents in Congress, then we could have got more things passed that would have put more people back to work more quickly.
But the -- the actions the president took, at considerable political cost at the time -- as you know, he had no support for them from the Republicans -- were incredibly effective in preventing a Great Depression, getting growth restarted again very, very quickly.
You know, again, it's important to look back at, you know, this was a -- a financial crisis caused by a shock larger than what caused the Great Depression, caused by a lot of borrowing, a lot of risk-taking, too much investment in housing. And it takes time to work off those things. That makes recoveries following financial crises slower than were other -- than they would otherwise be.
But we're making a lot of progress on those fronts, bringing down risk in the financial system, working through the housing problems. And consumers are bringing down those debt burdens. And those are all very encouraging things for the strength of the economy going forward.
And, again, if you look at broad measures of health of the private sector in the United States, they are really pretty encouraging. Profits, of course, are very high, productivity higher, private investment growing very rapidly. A huge boom in energy production and exploration. A lot of strength in manufacturing, in exports, in agriculture and high tech.
STEPHANOPOULOS: But you also get right to the heart of something that's puzzling a lot of economists and a lot of Americans. They've seen these profits go up. They've seen the Dow go up. But they haven't seen jobs created in a real, consistent way, and they haven't seen their wages go up.
GEITHNER: Well, again, unemployment is still very high. And until that comes down, income growth is going to be very -- very soft, very weak. That's the tragic legacy of a crisis this bad.
But, again, if you look at broad measures of the basic resilience and dynamism of the economy, they're pretty encouraging. We've got to work to reinforce them.
STEPHANOPOULOS: Women have been front and center in the presidential race this week. And Governor Romney tried to turn the table on Democrats, who said that Republicans have prosecuted a war on women with this argument. Listen.
(BEGIN VIDEO CLIP)
ROMNEY: The real war on women has been waged by the policies of the Obama administration. Did you know that of all the jobs lost during the Obama years, 92.3 percent of them are women? During the Obama years, women have suffered.
(END VIDEO CLIP)
STEPHANOPOULOS: Now, I -- I know you disagree with the point that Governor Romney is making, but that number he's citing, 92.3 percent of the job losses are women, is accurate, isn't it?
GEITHNER: It's a -- it's a ridiculous way to look at the problem. And this is a political moment, and you're going to seeing -- just to borrow a line from Mario Cuomo -- you're going to see a lot of politicians choose to campaign in fiction, but we have to govern in fact.
And this crisis was a very damaging crisis, hurt everybody. And it began in, as you know, in early 2008. And a lot of the early job losses in 2008 affected men, because they affected construction and manufacturing. And as the crisis spread, and state and local governments were forced to cut back on services, fire a lot of teachers, that caused a lot of damage to women, too.
But what matters is -- and this is why this debate is so important -- is what can we do to help families across the America -- America, men and women, not just get -- get back to work, but help them afford college, help them get access to affordable health care, preventative care, and make sure that we're strengthening this important safety net at a time where so many Americans are suffering?
And that's the debate we're having across the country. And that's a good debate to have.
STEPHANOPOULOS: But you completely reject his argument?
GEITHNER: Oh, it's a ridiculous argument. Ridiculous. It's been largely debunked this week by the people who've looked at it.
STEPHANOPOULOS: Even though, but you -- you do concede that the number is correct, it's -- it's technically accurate?
GEITHNER: But, you know, again, the crisis began in early 2008, a year before the president took office. It was gaining momentum throughout 2008, even coming up to the time of the inauguration.
You know, unemployment -- as you know, the GDP at that point was falling. Economy was contracting at an annual rate of almost 9 percent at that point. We were losing 750,000 jobs a month, devastating damage. Now -- and it hurt men and women. It hurt families across the country. There's no doubt about it.
And, again, the early job losses were concentrated in manufacturing and construction. A lot of men lost jobs then; a lot of women lost jobs later on. The question we should all be debating is, what can we do to make the economy stronger and make sure the gains of growth are -- are shared more broadly?
And the president's policies are making the economy stronger. And the alternatives proposed by his opposition would be devastating, not just to the safety net, but to investments in education, be very damaging to the economy.
STEPHANOPOULOS: And the president has been arguing this week, the whole administration this week, for the so-called Buffett rule, which would establish a minimum effective tax rate of 30 percent for millionaires. When he first announced this last fall, the president argued that the rule would, quote, "stabilize our debt and deficits for the next decade," but your own numbers show it would raise only about $5 billion a year.GEITHNER: Well, let me just -- let me just correct that. The president proposed this as part of a very comprehensive, detailed, long-term fiscal program that would bring our deficits down to a sustainable level. And as part of that, he's proposed a modest increase in the effective tax rates paid by the richest Americans.
This is one way to do that, important to do. And we're proposing to do it as part of a balanced package of fiscal reforms. But he never claimed and we never claimed that this measure alone would get us the trillions in savings we need to bring those deficits down.
STEPHANOPOULOS: Well, he seemed to at one fundraiser back in September, but I take your point. You're saying he's making the -- that it's just one part of his overall...
STEPHANOPOULOS: ... economic plan. Are you worried at all, though, that it might harm growth, these taxes, when the economy is still weak?
GEITHNER: No risk of that. Again, we're proposing a balanced set of fiscal reforms that make room for investments that will be good for job creation and the economy, in education, in infrastructure, in investment. Those things are necessary to make sure that we're making this economy stronger in the near term and in the long run.
Now, as part of that, we don't see a feasible way -- a feasible economic strategy, a feasible political strategy, for bringing down those long-term deficits, except by asking the most fortunate Americans to -- to pay a somewhat larger share of their income in taxes. And what this Buffett rule does is makes sure that happens by limiting the ability of millionaires to take advantage of deductions and loopholes in the tax codes.
It's a simple, fair thing. It's good economic policy. It's good tax policy. And it should be part of a broad program to restore fiscal stability (ph).
STEPHANOPOULOS: But your main argument for this is that it's part of shared sacrifice, everyone has to contribute to deficit reduction.
GEITHNER: Exactly. And if you look at the -- a big part of the burden for a sensible long-term fiscal plan is going to fall on middle-class Americans. You know, again, we're proposing an approach where there's $2.50 of spending cuts for every $1.00 in revenue raises. A lot of the burden of those spending cuts is going to be shared broadly across the American people.
So these taxes (ph) are very modest. They -- they ask for modest additional sacrifice and responsibility by the Americans in the most fortunate -- the most -- you know, in the best position to do that.
And remember, the effective tax rates on the richest Americans today are at the lowest point they've been in a very long period of time. And I think there's no credible argument that asking them to pay a modestly higher share of their income in taxes would be damaging to economic growth, particularly relative to the alternatives.
Again, if you don't do this, whose taxes do you want to raise? Or whose benefits do you want to cut? Those -- those other types of alternative proposals would be much more damaging to growth.
STEPHANOPOULOS: At the end of the year, if Congress doesn't take action -- and I know you've been pushing for congressional action -- everyone's taxes are going to go up, one of the most massive tax increases in American history. Some people are already calling it Taxmageddon.We're going to see the Bush tax cuts expire. That's going to be an increase in income and investment taxes. We're going to see the marriage penalty returning, the child tax credit decreasing, the alternative minimum tax patch expires. Payroll tax increases go up for everyone.
How worried are you that Congress and the president will not be able to come together to solve this problem before December 31st?
GEITHNER: You know, there's no reason that has to happen. And, of course, we'd sign today an extension of the middle-class tax cuts that go to 98 percent of Americans just to protect for them today -- protect them against any risk that -- that the politicians in Washington can't -- can't come together on this by the end of the year. And they have a very strong incentive to come together, as you say...
STEPHANOPOULOS: But that's not going to happen during an election year, is it?
GEITHNER: Well, you mean you -- not pass the middle class tax cuts? Of course you could do that in an election year. They just have to be willing to do that.
But they have a -- a very strong incentive to come together in the lame-duck session after the election, before the end of the year, and put in place a balanced package of fiscal reforms over the long run, to prevent that kind of damage to the economy.
STEPHANOPOULOS: The last couple of weeks, we've seen some good news in the economy. Oil and gas prices have begun to stabilize. And gas prices have actually gone down just a tick in the last couple of weeks. Do you expect that trend to continue this year?
GEITHNER: I think it depends a lot on two factors. One is how strong growth is around the world. That's the biggest factor that affects oil prices. And it affects -- and it depends on how events develop in the gulf and with respect to Iran.
But you're right that there's been a little bit encouraging news recently, particularly because we've seen the supply of oil, because of actions that the Saudis have taken and others, increase quite significantly. And that's helped calm prices in oil markets, and that's pretty encouraging.
STEPHANOPOULOS: I know you told the president you plan on leaving office even if he is re-elected, and I don't want to revisit that right now. But I -- I -- just one question. From what you've learned, what's the most important quality or qualification the next president, whoever he is, should look for in a treasury secretary?
GEITHNER: That's a -- that's kind of a good question, but that's really a question for him. I've got some views on that, of course.
STEPHANOPOULOS: So just give me one.
GEITHNER: Well, I think it's very important that you have somebody who's willing to tell him the truth and, you know, help him do the tough things you need to do in these -- in these jobs. But that sort of understates the magnitude of the challenge.
STEPHANOPOULOS: Mr. Secretary, thanks very much for your time this morning.
GEITHNER: Good to see you, George.
BREAK IN TRANSCRIPT