Geithner confident on debt talks

Treasury Secretary Timothy Geithner expressed confidence Wednesday that lawmakers would reach an agreement on reducing the nation’s debt and even greater certainty that Congress would agree to hike the debt limit.

However, he also jabbed at Republicans and other opponents of the administration’s financial efforts, while admitting the push to overhaul the corporate tax code will be put on the back burner as negotiations over raising the debt limit continue.

{mosads}Geithner said ongoing debt talks hosted by Vice President Joe Biden had a “quite good” prospect of yielding a deal.

“I think you’re seeing a fair amount of pragmatism [and] openness” from both camps, he said at an event hosted by Politico. “Ultimately, nothing’s going to happen unless people are overall comfortable with the basic balance, but I think we have a good chance of doing it.”

That various stakeholders agree on the need to lower the deficit by a substantial amount bodes well for the talks, he said.

“When you see that broad a consensus in the American political spectrum about what has to be done, and the debate is only about how to do it … then that has changed expectations about the probability of an outcome that’s good,” he said.

But it was clear the administration was not entertaining a proposed Medicare overhaul floated by House Republicans in Rep. Paul Ryan’s (R-Wis.) budget. Subject to much Democratic criticism, Ryan’s plan would end Medicare and convert it into a voucher-type system.

“We will not dismantle that basic commitment to seniors,” said Geithner. “It’s not going to happen. We would never support it.”

If those talks fail to yield a deal, Geithner said he still believes Congress will raise the $14.3 trillion debt limit in time to avoid a first-ever default, which he said would be a “catastrophic failure of basic governance.”

He said the Treasury has no contingency for a default, underlining the need for lawmakers to boost the limit in time.

“Our fallback plan is for Congress to pass the debt limit,” he said.

To make his point, he read from the Constitution’s 14th Amendment, emphasizing Section 4, which states “the validity of the public debt of the United States … shall not be questioned.”

However, ongoing talks between parties over what spending reforms should be tied to that debt-limit boost is slowing work on the administration’s push to overhaul the corporate tax code, according to Geithner.

While he said progress had been made with top congressional taxwriters to build a “framework” of reform options, the ongoing debt talks need to be dealt with first.

“We need to get through that before we start this [tax reform] process more formally,” he said. “We don’t want to do anything that makes those budget discussions harder, because they’re hard enough.”

Revisiting the financial crisis, Geithner touted the success of the administration’s bailout efforts. There has been a string of good news on that front recently, as Chrysler paid back its government funds and the Treasury sold its first shares of American International Group since its bailout.

While pleased with the taxpayer return on those once-reviled efforts, he also acknowledged that economic pain is still evident across the nation.

“We’re still living with the damage,” he said. “It is not possible for [the economy] to be dramatically stronger today … it takes time to work that off.”

Geithner added that reforms enacted under the Dodd-Frank financial reform law will help prevent future crises of that magnitude.

He was optimistic about the post-crisis state of the financial markets but warned of a “war of attrition” being waged by the financial industry and congressional Republicans to roll back some of Dodd-Frank’s reforms. Pushing small budgets of Wall Street regulators and blocking nominations to fill key spots were two tactics he cited.

“It’s very clear what they’re doing. They’re trying to starve the agencies of funding so they can’t enforce protections for investors,” he said. “We’re not going to let that happen.”

In fact, Geithner was dismissive of any attempt to wind down Dodd-Frank.

“Really, think of it, think of what this crisis caused,” he said. “You think people have a credible prospect of legislative reforms that would undo. … It’s not going to happen.”

He went on to blast Dodd-Frank foes for making the confirmation process “untenable” for most qualified candidates, making it difficult for the administration to fill spots.

“The reason why all those jobs are sitting empty is because they’ve raised the bar so high,” he said. “That is a mistake and irresponsible and terribly bad for the country.”

When asked which companies did the right thing during the financial crisis, Geithner spread blame far and wide.

“I don’t think any of them covered themselves in glory,” he said. “They all got caught up in a race to the bottom on care and prudence, they all got caught up in the pressures that led to more leverage, more risk-taking, and they all got caught up in a terribly damaging compensation race built on completely unrealistic expectations.

“No one distinguished themselves,” he said.