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GREGORY: And, good Sunday morning. Amidst a lot of partisan rhetoric on both sides, talks on the fiscal cliff are now at a stand still we're led to believe and the president is back on the campaign trail of sorts this time to try to win in the court of public opinion for his plan to avert an automatic tax hike for everyone on January 1st. That's where we're going to start this morning with the point man on the negotiations for all of this, the secretary of treasury, Tim Geithner. And our roundtable is also here, standing by for reaction including the man behind the Republican pledge not to raise taxes at all, not to raise tax rates, Grover Norquist. He's here. We're going to get reaction from him as well in our roundtable. But first, I sat down with Secretary Geithner at the Treasury Department late Friday.
GREGORY: Mister Secretary, welcome back to MEET THE PRESS. Thanks for having us at the Treasury Department.
MR. TIMOTHY GEITHNER (Treasure Secretary): Good to see you.
GREGORY: You-- you're the president's lead negotiator to avert the fiscal cliff. You have been Capitol Hill. You presented the president's offer. And it immediately was not received well. It was called by Republican leaders unserious. They've accused that president and you of wasting precious time here to avert the fiscal cliff. Was this the intended effect, the president's first offer?
MR. GEITHNER: That's like the normal political theater of this place. You know, what we're trying to do is to make it more likely, we come together on a good agreement for the American people. It extends tax cuts for the middle class, brings our long-term deficits down. Tough spending savings is-- is part of that, and-- and invest in things that matter to the American economy, like
infrastructure, things to help get Americans back to work. And-- and we think we can do that. We have a good chance of do it now and it's very important we do that. And I think we're going to get there, David.
GREGORY: Do you think we'll get a deal by the end of the year?
MR. GEITHNER: I do. I do because the only thing standing in the way of that would be a-- a-- a refusal by Republicans to accept that rates are going to go-- have to go up on the wealthiest Americans. And I-- I don't really see them doing that.
GREGORY: The-- the idea that they have signaled something significant for them, which is
MR. GEITHNER: What is that? What was that?
GREGORY: they are willing to put revenue on the table.
MR. GEITHNER: No, but all they have said is-- is, I mean, I agree, it's welcome that they're recognizing that revenues are going to have to go up, but they haven't told us anything about how far rates should go up, how far revenues should go up, who should pay higher taxes?
GREGORY: Well, in fact, Republicans have said that no Republican is going to vote for a tax rate increase. Do you just think they're bluffing?
MR. GEITHNER: Well, again, I can't-- I can"t tell you what they're likely to do. All I can tell you is what we think that-- that makes the most sense for the American country, American people. And, you know, we spent a lot of time talking to the business community, small business and large businesses, the last few weeks or so. The president has done that. And I think there's very broad-based support for the type of framework we've-- we've laid out, which is tough spending savings, so we can go back to living within our means, combined with modest revenue increases on to two percent of the wealthiest Americans.
GREGORY: Has anything changed in Washington?
MR. GEITHNER: Oh, yeah. I think things are changing. Again
GREGORY: But-- but how would you know that? I mean, first question I asked, your-- your answer was, well, this is just political theater. You have
MR. GEITHNER: I'm not really an expert in political theaters, as you know, but that's my sense
GREGORY: Well, right, but
GREGORY: if Republicans seem dug in, anybody watching this who says are we going to get a solution in Washington, has to ask the question whether anything has really changed? So what has changed from your point of view?
MR. GEITHNER: Well, again, I think, you-- you said it right, which is they've acknowledged for the first time in decades, I think, that revenues are going, that's good. But we need to know what they're prepared to do on rates and revenues and we need to know what they're prepared to do in the spending side. Again, we have laid out a very detailed plan of spending cuts, 600 billion dollars in spending in mandatory programs over 10 years. They phase in gradually, they build overtime. They're good policy. They make a lot of sense. On top of a trillion dollars in spending cuts in defense and other programs enacted last year, which stay in place over 10 years. And if they'd like to go beyond that or do it differently, they need to tell us what they propose and-- and we'll take a look at it.
GREGORY: But one of the things that they talk about here, you have got four times as much in new revenue as you do in spending cuts as part of this deal?
MR. GEITHNER: You know, again, they're just doing political math, not real math. We have enacted a trillion dollars in spending cuts last year together on defense and nondefense savings. Those are real savings. They are hard savings. We are living with those savings and we will be for ten years. And we proposed an additional 600 billion dollars in spending cuts, detailed reforms, very difficult reforms over time alongside that. And again, alongside those changes and the savings we get from the-- from ending the wars
GREGORY: But where are you specifying spending cuts as part of this deal that you presented in Capitol Hill?
MR. GEITHNER: Again, detailed comprehensive reforms that add up to 600 billion dollars. I'll-- I'll give you couple of examples. We are proposing to reform farm subsidies where we think we can save a lot of money. It makes a lot of sense. In healthcare, we're proposing to modestly increase premiums for high income beneficiaries of Medicare. It makes a lot of sense. We're proposing to get the government much smarter of how they buy medicine for people who are under Medicare. Those are just three examples, but there's 600 billion dollars of examples in the president's proposals. Now again, if the Republicans don't like those ideas and they want to do it differently, they want to go beyond that, then they have to tell us what makes sense to them. And then we can take a look at it. But what we can't do is try to figure out what makes sense for them.
GREGORY: In terms of tax rates, in your mind, you don't have to go back to the Clinton era tax rates for this to be a workable deal?
MR. GEITHNER: Well, I-- I think you do.
GREGORY: All the way up?
MR. GEITHNER: Again, our proposal is to let those rates go back to Clinton levels for two percent of the wealthiest Americans and combine that with tax reforms that limit deductions for the wealthiest Americans. And if-- we think if you do that alongside the spending savings, then you can put the country back on a much more responsible fiscal path.
GREGORY: Including getting rid of the mortgage interest deduction or the charitable giving deduction? Do you think those have to be on the table and looked at?
MR. GEITHNER: Again, we have proposed, and we did this four years ago, a carefully designed way to limit modestly the value of all of those deductions for the wealthiest two percent of Americans. Now, there are other ways to do it. We can take a look at those ways, but there's no way you can do this in a balanced way that restores fiscal responsibility without tax rates going up.
GREGORY: One of the things I've heard talking to Republicans today is this notion that you want to take away Congress' ability to have the authority over the increasing the debt limit, is a total nonstarter from a Republican point of view. Is that a-- is that a deal breaker from your point of view? Does that have to be in there?
MR. GEITHNER: Well, thanks. Thanks for raising this. This is very important, and let me tell you what's at stake. We are not prepared to leave the economy of the United States and the savings of Americans, the savings of investors, vulnerable to periodic threats by Republicans to default on the America's credit.
GREGORY: Well, the Democrats have made the same threats in the past, have they not, including the president when he didn't vote to raise the ceiling?
MR. GEITHNER: There's no, no-- no precedent in the many decades of history of this, of what the Republicans tried to do in the summer of 2011. You saw how damaging that was. We're not prepared to go through that again. But let me-- we made a very sensible suggestion, let me describe what that is. What we proposed to them is they extend what's called the McConnell provision. Now this was a solution Senator McConnell offered last summer, which was enacted-- summer of 2011, which was enacted into law supported by Republicans. And the way that works is the president would have the obligation periodically for requesting an increase in the debt limit, and then Congress would have the chance then to express its views on the merits of that proposal by-- by disapproving that. And then the president would have to decide if a bill came to his desk about whether to veto that or sign it. Of course, he'd veto in that context. And the virtue of that mechanism proposed by Senator McConnell, a man of impeccable conservative credentials, is to make sure that the country is not left at risk of periodic threats of default. It's a very good idea. It was a Republican idea. And we're suggesting they extend it.
GREGORY: Let me come back to the idea of, what is the pain point for Democrats here? What is the pain that Democrats are going to have to be willing to live with to get the kind of deal that you're driving with Republicans on taxes when it comes to both spending cuts, particularly spending cuts to programs like Medicare?
MR. GEITHNER: Well, I think that it's true that both sides are going to have to do things that are difficult for them, uncomfortable for them. And the American people have already been asked to adapt to a trillion dollars of spending cuts on defense and nondefense that cover comprehensively things that touch the lives of many, many Americans.
GREGORY: But you're not proposing like the sequester remaining in place on defense spending? You want to dial that back?
MR. GEITHNER: We're talking about the cuts enacted last year
MR. GEITHNER: and we want to replace the cuts in the sequester with a much more carefully designed set of spending savings in the cuts we
GREGORY: On defense? Because there's a lot of liberals who say there still should be some significant cuts to defense.
MR. GEITHNER: It's true that people say that, but-- and again, we're going to look to the-- to the Pentagon for what makes the most sense for the national security needs-- needs of the country. But again, what we proposed top of those trillion dollars in savings last year is 600 billion dollars in detailed reforms to our healthcare programs and other government programs that over ten years yield very substantial savings. Now again, David, Republicans have said that they don't like those reforms, they'd like to do more. And if that's true, then they should tell us what they'd like as an alternative or as a compliment to that. If they want to build on those they could just tell us how. But we can't react to anything until we see the details of their proposal, and we need it on the rates and revenues side as well as on the spending side. We've given them our best view of what makes sense for the country. We think our proposal will have enormous public support.
GREGORY: But Mister Secretary, is it fair to go to Republicans, many of whom were re-elected just like the president was re-elected in their own districts and say, look, we're going to get specific when it comes to the tax increases that we want, but we're going to be pretty vague when it comes to stuff that's hard for our side, which is Medicare.
MR. GEITHNER: David, that's a misperception. Again, we proposed 600 billion dollars in detailed spending savings. They're in public. People can take a careful look at them. What we haven't seen from the Republicans is a plan to raise rates and revenues. They said they're prepared to raise revenues, but they haven't said how, or how much, or who should pay, and they haven't proposed what they think they need on the spending side. Again, what we can't do is try to figure out what they need, they have to tell us. And then we have to take a look at it and see if we think it makes sense for the American people.
GREGORY: When you look at the economy overall, growth at 2.7 percent last quarter. How does the-- the economy get out of this slump? What is our economy doing well right now? What are we not doing as well as a country to deal with our economy?
MR. GEITHNER: Good question. The economy now is actually looking quite resilient. If you look at what's happening in energy, enormous boom. In agriculture, even with the drought, you're seeing incredible levels of income to farmers, which is really welcome. In manufacturing, one of the strongest periods in manufacturing revival that we've seen in almost a generation, not just in autos, and not just in high tech, but comprehensibly across that. We're showing American companies very competitive, very resilient, and companies are bringing back production from China and Mexico because this is looking like a much stronger country in which to invest and build. That's-- those are very encouraging signs for the American economy. And the people running America's businesses would say they're in the strongest position they've been in maybe a decade in terms of the ability they have to expand and grow. And if we are able to lift this threat of big tax increases on middle class Americans, lift this threat of periodic threats of default, lift this threat of badly designed deep-- the severe austerity on the spending side up front; then I think there's enormous potential for the American economy to grow faster going forward. And that's what the president heard from the leaders of America's businesses this week.
GREGORY: And if you don't, the-- the stakes, the consequences are severe?
MR. GEITHNER: Oh, yeah. To-- to go over this fiscal cliff, and because
Republicans won't raise taxes, tax rates on the wealthiest two percent of Americans, would subject the average American to big tax increase and enormous damage from the other cuts that would happen in that context. And there's-- there's just no reason why the country has to go through that and we have a chance to do something much better, not just for the long-term health of the American economy but for the immediate challenge which is getting stronger growth and more job creation.
GREGORY: But to hear the president say it today if there's no deal are you going to blame the Republicans for ruining Christmas?
MR. GEITHNER: Well, again, the only--the only thing that stands in the way of a deal right now is if a group of Republican members decide they're going to block a deal because they want to extend tax cuts that we can't afford for the wealthiest two percent of Americans.
GREGORY: The president said on election night, you voted for action, not politics as usual. You're saying what you expect from Republicans. What can we expect from the president to break that cycle of politics as usual?
MR. GEITHNER: What you can-- what you can expect from the president a willingness to sit down and explore what the best way to get through this is that's in the interest of the-- of the American people. Not just now, but for future generations. And again, we've been very clear about what investments we need, what savings we can do, how we're going to pay for that and how to make sure we're protecting the American economy from a broad tax increase on middle class Americans.
GREGORY: Mister Secretary, thank you.
MR. GEITHNER: Nice to see you.
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