Treasury Secretary Timothy Geithner acknowledges the federal budget deficit is too high, but that the priorities now are economic growth and job creation.
Asked repeatedly on NBC’s “Meet the Press” whether this means taxes will rise, Geithner avoided giving specifics. He did say President Barack Obama is committed to dealing with deficit in a way that will not add to the tax burden of people making less than $250,000 a year.
The White House has not decided how to reduce the red ink, Geithner said in an interview broadcast Sunday.
“Right now we’re focused on getting growth back on track,” he said. “And we’re not at the point yet where we have to decide exactly what it’s going to take.”
He acknowledged that the economic recovery, while showing positive movement, has been shaky and uneven.
“A lot of damage was caused by this crisis. It’s going to take some time for us to grow out of this. It could be a little choppy,” he said. “It could be uneven. And it’s going to take awhile.”
A bright spot in the recovery identified by Geithner is the banking system, which he said is “dramatically more stable” because of the government bailout.
Geithner said that just one year ago economic activity came to a standstill as major financial institutions shut down due to lack of liquidity.
Even though 115 banks have failed so far this year, Geithner said there has been a “dramatic improvement in confidence,” with private capital back in the system. He said large businesses are now able to borrow again.
“The banking system is dramatically more stable than it was three months ago, six months ago, nine months ago, a year ago,” he said.
But Geithner said more needs to be done to assist small businesses, adding that the administration is working to help open up credit to them. These businesses, he said, “face a really tough environment on the financing side.”
After financial institutions were widely blamed for assuming too much risk and bringing the economy to the brink of collapse, Geithner said a concern now is that they might end up being too timid.
“The big risk we face now is that banks are going to overcorrect and not take enough risk,” he said. “We need them to take a chance again on the American economy. That’s going to be important to recovery.”
Geithner acknowledged the economy remains tough for many workers who have lost jobs and it’s going to be some time before the employment outlook starts to brighten for many of them.
“Unemployment is worse than almost everybody expected. But growth is back a little more quickly, a little stronger than people thought,” he said.
Unemployment hit a 26-year high of 9.8 percent in September, and the October report due in the coming week could show it topping 10 percent.
“It’s likely still rising. And it’s probably going to rise further before it starts to come down again.”
Geithner said it’s too early to decide if a second government stimulus package should be offered, though he acknowledged unemployment probably will rise even more before it starts to turn around. Economists expect to see job growth after the first of the year, probably in the first quarter, he said.
“You’re not going to see real recovery until it’s led by the private sector, by businesses,” he said.
The treasury chief added that with about half of the stimulus money left, along with tax cuts and investments ahead, “there’s a lot of force still moving its way through the system now” and that will keep providing economic support. “It’s working. It’s delivering what it should result.”
Last week, Christina Romer, who heads the president’s Council of Economic Advisers, said the government’s economic stimulus spending already had its biggest impact and probably wouldn’t contribute to significant growth next year.
Geithner also said the administration supports steps being considered by Congress like extending unemployment insurance and the homebuyer tax credit.
In addition, he complimented Obama’s pay czar, Kenneth Feinberg, for his work in reining in pay for senior executives at the top seven recipients of government bailout money. Geithner played down concerns about government interference in executive compensation and the potential for the most talented and productive executives to leave their companies.
“We were very concerned about that from the beginning. And he had to balance some very difficult kind of choices. I think he’s found a very good balance among them,” Geithner said.
Asked if he saw an exodus at those companies, he said he didn’t, but added, “I worry about this a lot.”