U.S. Treasury Secretary Timothy F. Geithner said Republicans in Congress will be to blame for hurting the economy if they refuse to raise tax rates on the highest-income earners as part of a deal to avert the so-called fiscal cliff.
“There’s not going to be an agreement without rates going up,” Geithner said on CNN’s “State of the Union” airing today, according to a transcript. Republicans will “own the responsibility for the damage” if they “force higher rates on virtually all Americans because they’re unwilling to let tax rates go up on 2 percent of Americans.”
Post-election optimism expressed by Democratic President Barack Obama and Republicans about a compromise on the fiscal cliff is fading as both sides resume positions that have defined the debate over higher taxes on the top 2 percent of earners and cuts in government spending. If there’s no agreement by the end of this month, more than $600 billion in tax increases and spending cuts will start taking effect.
Geithner was scheduled to appear on five talk shows today. In the interviews, taped Nov. 30, he challenges Republicans to make a counteroffer to the Obama administration’s framework plan, according to transcripts.
The Obama plan is to trade $600 billion in cuts for $1.6 trillion in tax increases, primarily targeting families with more than $250,000 in annual income. It also includes $800 billion in assumed savings from the winding down of the wars in Iraq and Afghanistan.
“The ball really is with them now,” said Geithner, the administration’s lead negotiator on the fiscal cliff, on CNN. “They’re having a tough time trying to figure out what they can do, what they can get support from their members for.”
While the talks include “the normal political theater” of Washington, the Treasury secretary told NBC’s “Meet the Press” that he thinks a deal will be reached before Jan. 1.
Geithner defended the administration’s plan to cut spending, citing proposed savings in farm subsidies and a plan to “modestly increase premiums for high-income beneficiaries of Medicare,” according to a transcript.
Warning of “prolonged negotiations,” Obama last week urged voters to pressure congressional Republicans to pass an extension of tax cuts for middle-income Americans. That would leave decisions on reworking the tax code and cutting spending —- two Republican priorities — until next year.
Speaking on "Fox News Sunday," Geithner said “there’s no reason” the country should fall off the fiscal cliff and said, if it does, the blame will be in the hands of the Republican Party.
“The only reason why it would happen is if a group of members of Congress decide they’re going to block an agreement because they want to extend tax rates for the rich that we can’t afford,” Geithner said.
Further, he said he can’t promise the country will not go off the fiscal cliff and warned the result would be “very damaging” for the economy.
“They’re trying to figure out how to find a way to support things that they know they’re going to have to do,” he said. “What we can’t do . . . is try to figure out what works for them.”
He said the White House plan includes “very substantial additional spending reforms,” has a “two-to-one” ratio of spending cuts to tax increases and will stabilize the economy.
“We think that’s a better way to do it,” Geithner said, adding there realistically is “no alternative” to boosting tax rates on the wealthiest Americans to 39.6 percent.
“Why does it make sense for the country to force tax increases on all Americans because a small group of Republicans want to extend tax rates for 2 percent of Americans,” he said. “Why does that make any sense? That’s like the deep, tragic lesson of the last decade. We can’t afford them.”
House Speaker John Boehner, in an interview broadcast today on “Fox News Sunday,” called the administration’s plan “non- serious” and said he was “flabbergasted” when Geithner presented him the proposal last week.
“I looked at him and I said, ‘You can’t be serious.’” Boehner said the administration “actually asked for more revenue than they’ve been -- been asking for the whole entire time.”
Gene Sperling, Obama’s top economic adviser, challenged Republican congressional leaders to put an offer on the table.
“It’s for them now to come forward with their plan, with their details, so that we can start working quickly to getting an agreement,” said Sperling, director of the White House National Economic Council, on “Political Capital with Al Hunt,” airing this weekend.
Geithner today reiterated the administration’s proposal to raise taxes on the highest-income earners to the levels of Democrat Bill Clinton’s presidency. The top rate, currently 35 percent, was 39.6 percent when Clinton left office.
“Those rates are gonna have to go up,” Geithner said on ABC’s “This Week” program, according to a transcript. “That’s an essential part of any deal.” He also told ABC the administration is “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.”
Geithner, who has said he plans to leave office in mid-January, said he’s “very confident” Obama will “have somebody in place in January to succeed me.”
Geithner also repeated his case for a long-term extension of the federal debt ceiling after partisan disputes dragged out negotiations over raising the limit last year.
“We are not prepared to let the threat of default on America’s credit, on the savings of Americans, the investments of Americans, be held hostage to the political agenda of a group of people in Congress over time,” he told CBS’s “Face the Nation” program. “It’s not a responsible way to govern.”
AT&T Inc. Chief Executive Officer Randall Stephenson, who met with Obama last week, said a budget deal must be found and will require both spending cuts and tax hikes.
“Failure to address this will result in severe market disruptions, a return to negative economic growth and businesses pulling in investment,” Stephenson said in a statement last week.
Investors, in general, indicated their belief Obama and Republicans would make a deal. The Standard & Poor’s 500 Index rose a second week, the longest advance since September as investors watched developments in the budget negotiations amid better-than-anticipated economic reports.
The S&P 500 (SPX) increased 0.5 percent to 1,416.18 for the week. The benchmark measure for American equities extended its rally since Nov. 16 to 4.1 percent. The Dow Jones Industrial Average advanced 15.90 points, or 0.1 percent, to 13,025.58.
Treasuries rose for the first month since July with the benchmark 10-year note yield falling for the fifth time in the past six weeks.
The U.S. 10-year yield fell seven basis points, or 0.07 percentage point, last week to 1.62 percent in New York, according to Bloomberg Bond Trader prices. The 1.625 percent note maturing in November 2022 added 22/32, or $6.88 per $1,000 face amount, to 100 3/32. The yield touched the lowest since Nov. 19 and fell 10 basis points last month.
Amy Woods contributed to this article.