Geithner: President Wants Permanent Debt Ceiling Authority
Notice how very, very eager Curious George is at the thought of cutting Social Security. Causing pain to the poor really seems to make these full-fledged Villagers feel powerful! Here's his conversation with Tim Geithner on This Week today:
STEPHANOPOULOS: Let's look at an outline of what the Republicans said they heard in the meeting, your offer. $1.6 trillion in tax increases over the next ten years. $50 billion in stimulus spending right now. $400 billion in unspecified Medicare cuts over the next ten years.
And then permanent authority to increase-- the debt limit. The president wants that authority. They look at that $1.6 trillion in revenue and say it's twice as much as you get from raising taxes on the wealthy again. And much more than Democrats would ever accept in the Senate. That's why they say this is not serious.
GEITHNER: Let me tell you what we propose, what we think makes sense. And let me start with part of what you said, which is how to make sure we're lifting the threat of default over the American economy, over the credit of the United States, over the savings of Americans. What we've proposed is to take an idea that Senator McConnell proposed last-- in the summer of 2011 and just extend that.
And what that does is, again, lift the cloud of default over the economy 'cause the president has to periodically propose an increase in the debt limit. And Congress then has a chance to express its view to disapprove that. And-- it's-- it's a very-- it was a very smart way by a senator with impeccable Republican credentials to again, lift this-- this threat, this periodic-- threat of default in the American economy. And that's an essential thing for us.
STEPHANOPOULOS: He said he never intended it to be permanent.
GEITHNER: But, you know, again, it's-- it was a good idea then, it’s a good idea going forward. And again, it came from him. It wasn't our idea. That makes a lotta sense. Now, what you said that was not quite right is what we've laid out for them is a detailed comprehensive set of $600 billion of reforms in health programs, other government programs over 10 years, which are gonna be tough, but th-- we think they make sense.
Now-- they-- they don't like all of those changes. They might wanna go beyond that, might wanna do some different things. But they have to tell us what those things are. Now, you're right on the revenue side. We're proposing to let rates go back to the Clinton levels on 2 percent on Americans. Again, that was a very good time for the American economy. We can-- that's-- that would be a good thing to do, a sensible economic policy.
And we wanna combine that with tax reforms that would limit deductions for the top 2 percent of Americans. There's no surprise in this. We've been proposing this for a very long time. The president campaigned on it. And I think that's where we're gonna end up. And I think there's gonna be very broad support from – the business community and for the-- from the American people for-- an agreement with roughly that shape.
STEPHANOPOULOS: And when you talk about limiting the deductions, there had been proposals from Governor Romney during the presidential campaign, from other Republicans to also limit deductions. Maybe a $25,000 cap on deductions. When you talk about those limitations on deductions, do you include-- the charitable deduction and the home mortgage deduction?
GEITHNER: Well, I think you're right to point out the essential problem in this, which is that if you try to limit deductions like what you said with the $25,000 cap, what you do is you end up hitting millions and millions, actually 17 million middle class Americans. A huge part of the revenue comes from that basic fact, which we're not prepared to do.
It completely eliminates the incentives for relatively wealthy Americans to give to charities. We don't think that makes sense. And if you protect charitable contributions, you lose a huge amount of additional revenue. So those proposals-- you know, they may-- may be worth considering. But if you design them carefully, they don't raise anything close to the type of revenue you need to get us back to a fiscally responsible position.
STEPHANOPOULOS: Are you saying now that charitable deductions should be off the table?
GEITHNER: What we've proposed and we think is a better way to do it, which is, we proposed to - a percentage limit on the value of all deductions and exclusions for 2 percent of Americans. And what that does is, it preserves a very significant economic incentive, financial incentives for Americans to give to charities.
And, of course, that's very important to all universities across America, all hospitals and millions and millions of non-profit entities across the country – that – depend on those giving. And we think that's a better way to do it. That-- that slightly reduces the marginal benefit of the deduction. But-- but it preserves the substantial incentive to give to charity. We think-that's a better way to do it.
STEPHANOPOULOS: I think one of the things the Republicans wanna know is if the president is still behind ideas that he has seemed to back in the past. For example-- gradually raising the eligibility age for Medicare-- this adjustment in Social Security payments, the so-called chained CPI, which would adjust the cost of living adjustments over time for people on Social Security. Is the president still behind those ideas?
GEITHNER: You know, there-- there's a lotta ideas out there, George, from Democrats and Republicans of other things we can do to help strengthen Medicare and strengthen Social Security. And you know, what I can do is to tell you the merits of the specific things we propose which, again, have very substantial savings over 10 years. $600 billion-- billions of dollars. And when Republicans come to us and say, "We'd like to do something different or beyond that," we'll tell-- take a look at how to do that. And if it meets our basic values and our tests, then we'll give it a serious consideration.
STEPHANOPOULOS: So you're even willing to consider new restrictions on Social Security, because people like Sen. –
GEITHNER: No-- no, I didn't say that. Let me clarify, that's very-- and thank you for asking me that. What the president is willing to do is to work with Democrats and Republicans to strengthen Social Security for future generations so Americans can approach retirement with dignity and with the confidence they can retire-- with a modest guaranteed benefit. But we think you have to do that in a separate process so that our seniors aren't-- don't face the concern that we're somehow gonna find savings in Social Security benefits to help reduce the other deficits—
STEPHANOPOULOS: So to be clear, that is one thing that is clearly off the table. Social Security is off the table in these negotiations?
GEITHNER: Well, we're prepared to, in a separate process, look at how to strengthen Social Security. But not as part of a process to reduce the other deficits the country faces.
So this appears to be the new strategy: Break off the most controversial pieces of the Grand Bargain and push them later. Well, that's good news. It gives us more time to organize.
STEPHANOPOULOS: OK. So that sounds like a yes to that question. Well, what on the issue of taxes-- is there any flexibility in the president's position? Does it have to go all the way back, the tax rates on the wealthy, all the way back to the Clinton rates? Or is there some kind of formula below those Clinton rates that it's still a tax rate hike that the president can accept?
GEITHNER: Well again-- George, we think the best way to do this, and this is what we've proposed, is have those tax rates go back to where they were at one of the best-- most prosperous times in recent American economic history. And then to combine that with reforms that limit deductions for the top 2 percent of Americans. We think that's the best way to do that. I'm deeply skeptical about ways to get through this-- without that mix of rates and reforms.
STEPHANOPOULOS: And if Congress doesn't agree to have those rates go up, you're comfortable with the idea of going over that cliff on January 1st?
GEITHNER: Look, there's a huge amount at stake here in this economy, George. And there's just no reason why 98 percent of Americans have to see their taxes go up because some members of Congress on the Republican side want to block tax rate increases for 2 percent of the wealthiest Americans. Remember, those tax rates, those tax cuts, cost a trillion dollars over 10 years.
There is no responsible way we can govern this country at a time of enormous threat and risk and challenge, uncertainty. Millions of Americans retiring, huge levels of poverty, inequality, huge underinvestment in education, infrastructure, with those low rates in place for future generations. Those rates are gonna have to go up. That's an essential part of any deal—
STEPHANOPOULOS: And as you know, a lot of Democrats think if the Republicans do indeed dig in on those tax rate, it is-- it is far preferable to go over the cliff than to reach a different kinda deal.
GEITHNER: I don't think that—
STEPHANOPOULOS: Do you agree?
GEITHNER: I-- I don't think that's gonna happen. It certainly doesn't need to happen. And we're gonna work very hard to make sure it doesn't happen. And what we're gonna try to do is, again, not just protect the vast bulk of Americans for that kind of tax increase and the other damage that would come from the fiscal cliff. But we're gonna try to do something good for the long term health of the country—
STEPHANOPOULOS: What would happen to the economy if we do go over the cliff?
GEITHNER: You know, it w-- it would be very damaging to average Americans. There's no doubt about it. But there's no reason why it has to happen. And again, we're gonna work very hard to prevent it. And the only reason that would happen, again, is if a small group of members of Congress decide they're gonna block an agreement because they're not prepared to see tax rates rise modestly for just 2 percent of the wealthiest Americans.
STEPHANOPOULOS: Mr. Secretary, I hear you say you're gonna work very hard. But-- boy, you listen to every Republican coming outta the meetings with you this week, they're saying you're going backwards, not forwards. So what is the specific next step to get this back on track? Is the president ready to meet, face to face with the speaker, face to face with the Republican leader in the Senate to try to nail this down?
GEITHNER: Well, of course he is. And we'll do that when it makes sense. And at this point though-- you gotta recognize that they're in a very difficult place. And they recognize they're gonna have to move on a bunch of things. But they don't know really how to do it yet.
And how to get support from the-- from the members on the Republican side. And so, what we're gonna do is continue to look for ways we can solve this problem. But ultimately, they have to come to us and tell us what they think they need. What we can't do is to keep guessing about what works for their politics.
STEPHANOPOULOS: So the ball is in their court?
GEITHNER: Oh, absolutely. Absolutely. And-- they un-- they understand that. And, you know, when they come back to us and say, "We'd like you to consider this. And we'd like you to consider that," we'll take a look at that.
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