Geithner: U.S. Fiscal Situation 'Unsustainable'--But We Can't 'Just Cut Things'

April 4, 2012 - 4:24 PM

Treasury Secretary Timothy Geithner

U.S. Treasury Sceretary Timothy Geithner (AP photo)

(CNSNews.com) – Treasury Secretary Timothy Geithner said that the U.S. government’s long-term fiscal commitments are “unsustainable,” but that they should not be the country’s top priority, because the government still needs to “do things.”

“Our fiscal commitments are unsustainable over the long run, but we cannot put our long-run fiscal challenges above all others,” Geithner told the Economic Club of Chicago on Wednesday. “We have to be willing to do things, not just cut things.”

Geithner has called the U.S. debt burden “unsustainable” many times before, warning that, as federal debt grows exponentially, the burden of sustaining that debt will cause federal spending to skyrocket.

In his speech, Geithner said that the government must take a balanced approach of raising taxes and cutting spending in order to preserve the president’s spending priorities.

“The president has a different strategy for economic growth. He believes that while our long-term fiscal problems are formidable, we can address them over time with a balanced package of reforms that preserve room for investments that will help us grow,” he said.

However, President Obama has produced no such plan, and his most recent budget does not include anything similar to what Geithner described. In fact, Geithner himself has admitted that the administration does not have a definitive plan, telling Congress in February that the administration had no “definitive solution” to the nation’s long-term debt crisis.

“We’re not coming before you to say we have a definitive solution to our long-term problem,” Geithner told House Budget Committee Chairman Paul Ryan (R-Wis.). “What we do know is we don't like yours.”

Geithner said that the government still needs to spend money on programs like the Export-Import Bank, transportation, and welfare programs, taking direct aim at Rep. Ryan’s latest budget proposal, calling it a “dark and pessimistic vision of America.”

“Cutting government investments in education and infrastructure and basic science is not a growth strategy.  Cutting deeply into the safety net for low-income Americans is not financially necessary and cannot plausibly help strengthen economic growth. Repealing Wall Street reform will not make the economy grow faster -- it would just make us more vulnerable to another crisis.

“This strategy is a recipe to make us a declining power -- a less exceptional nation. It is a dark and pessimistic vision of America.”

Geithner said that “only” government could return the country to economic prosperity, saying that the problems facing the economy had nothing to do with business, but were centered in a lack of economic opportunity and income equality.

“The challenges facing the American economy today are not primarily about the vibrancy or efficiency of the business community. They are about the barriers to economic opportunity and economic security for many Americans and the political constraints that now stand in the way of better economic outcomes.

“These challenges can only be addressed by government action to help speed the recovery and repair the remaining damage from the crisis and reforms and investments to lay the foundation for stronger future growth.”

In order to remedy these problems, Geithner said that the government must take “action” – citing typical liberal refrains of government-led mortgage refinancing and infrastructure spending.

“This means taking action to support growth in the short-term -- such as helping Americans refinance their mortgages and investing in infrastructure projects -- so that we don’t jeopardize the gains our economy has made over the last three years,” he said.

However, the government has already created a veritable alphabet soup of mortgage refinancing programs, doing everything from paying mortgage giants Fannie Mae and Freddie Mac to refinance underwater mortgages to offering to cover the losses of private banks who help borrowers refinance into lower interest rates.

It has also spent billions on infrastructure spending, most famously on the so-called shovel ready projects funded by the 2009 stimulus spending package.

Nevertheless, Geithner said that the government would need to spend more money on these and other things -- not just cut taxes and spending.

“And it means making the investments and reforms necessary for a stronger economy in the future,” he said. “A growth strategy for the American economy requires more than promises to cut taxes and spending.”