Welcome back to MEET THE PRESS.
SEC'Y TIMOTHY GEITHNER: Good to be here.
GREGORY: So good economic news, the economy grew a little bit in the third quarter; has a lot of people thinking things are getting better. And yet the market on Friday dropped pretty sharply. Does Wall Street think the recession is over?
SEC'Y GEITHNER: I think it is a good number. It was--the growth was broad based. It was investment, exports, consumption, housing for the first time. And it shows that, you know, just five months after the president came into office we got growths restarted. But it's just the beginning and we've got a ways to go. Unemployment's high and still rising. This is a very tough economy still for huge numbers of American's businesses, so we've got a ways to go, David.
GREGORY: Do you think the recession is over?
SEC'Y GEITHNER: That's the judgment the economists will make, and they won't know until years from now. But the real test of recovery will be when we have unemployment coming down, people back to work, businesses confident to invest again.
This is a runaround way of saying No.
GREGORY: What do people have to be braced for, despite this news?
SEC'Y GEITHNER: Well, again, I think it's, it's, it's good news and it shows that when you act with force you can stabilize a crisis like this and, you know, start to repair the damage and bring things back. But this is going to be a different recovery than the past, because Americans are going to have to save more. 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, it could be uneven, and it's going to take a while. But I think, again, this is encouraging signs.
GREGORY: Difficult days still ahead?
SEC'Y GEITHNER: Well, again, I think for large numbers of Americans and businesses, small businesses in particular, it's a tough economy.
Another deflection instead of a direct answer
GREGORY: So more difficulty before it gets better.
SEC'Y GEITHNER: Well, it's getting better. It's going to be better gradually, and we're going to make sure we keep at it until we have an economy that's growing again led by the private sector, of course, ultimately.
SEC'Y GEITHNER: You know, what the government did was to step in and make sure we're providing the tax cuts and investments necessary to arrest the crisis, get credit markets starting to open up again. And we did that, that plan worked. But we've got a ways to go before...
What credit market is he talking about? Bizarro world?
GREGORY: But that's a big question, whether or not--yes, you have growth for the first time in four quarters. But is any of this growth sustainable without government intervention?
SEC'Y GEITHNER: It will be, it will be. But what the government has to do in a crisis is to provide a bridge until the economy can repair itself and businesses are confident enough to start to invest again. And again, you're starting to see it again. Businesses now, I think they'll say--you talk to people across the country, they'll say that they feel that things are more stable now and for the first time they see orders starting to pick up. And what'll happen is they'll start to invest again, they'll start to bring people back onto their payroll and this will get more momentum.
If they wanted the economy to repair itself, they would have never given TARP. I would have rather seen Gregory ask "where did the toxic assets go?"
GREGORY: But that happened hasn't yet--hasn't happened yet. We'll get into that a little bit more in just a minute.
The question about consumer spending that really drove the market down on Friday, it's off, biggest level that it's been off in nine months. Again, people are not consuming.
SEC'Y GEITHNER: There's nothing new in those numbers on Friday. They were in the GDP report. No incremental news in those numbers. So again, the overall picture for the economy is that consumers are a little more confident now, confident enough to start to spend again, investments starting to spend again. You know, there was another number on Friday that showed business confidence, in the Chicago survey, showing a little more optimism about the future, too. And--but, you know, again, this is a tough economy still, it's going to take some time. But we're committed to making sure we're reinforcing this progress we've seen.
GREGORY: A hundred and fifteen banks have failed so far this year. Is the banking system safe?
SEC'Y GEITHNER: The banking system is dramatically more stable than it was three months ago, six months ago, nine months ago, a year ago. Just remember, again, a year ago today, last year, you had for the first time in almost 75 years Americans start to wonder whether they should be taking their money out of banks. You had markets around the world come to a stop. Economic activity just stopped, came to a standstill, like flipping a switch. And right now you've had a dramatic improvement in confidence, you've had private capital come back into the system. And for large businesses, they can now borrow again and they can raise capital again, and that's very important. But small businesses, much more dependent on banks, they still face a really tough environment on the financing side, and we need to keep working to try to open up credit to them.
GREGORY: Do we need another cash for clunkers program to stimulate the economy?
SEC'Y GEITHNER: I don't think at the moment--well, let me start this way, David. About half of the money in the Recovery Act, tax cuts and investments, are still ahead of us. So there's a lot of force still moving its way through the system now, and you're going to see that continue to provide support for the economy going forward.
GREGORY: Could you have had more impact if more of that money were paid out? You still have about $500 billion of the stimulus that has not been paid out yet. How long will it take to get paid out?
SEC'Y GEITHER: Actually, I--again, it was designed to pay out over two years, because we knew it was going to take a long time to repair the damage we started with earlier this year. So it was designed to pay out over this period of time. And I think it's actually delivering better results sooner than we would expect. I think we're seeing better outcomes in the financial sector, in the economy than many of us would've thought when we sat there with the president in Chicago at the end of last year.
GREGORY: Right. Well, but that's not exactly true, because the president's team said you'd keep unemployment to 8 percent if you didn't have the stimulus, so.
SEC'Y GEITHNER: No. No, you're right, the unemployment is worse than almost everybody expected. But growth is back a little more quickly, a little stronger than people thought, and growth is a necessary condition. With growth jobs will come, but growth has to come first. But just look at the financial sector. You know, you've had banks repaying money with interest. Taxpayers are getting substantial earnings on this big investment in the financial system, and that's delivering good, good returns for the American taxpayer.
I don't buy this for a second
GREGORY: Let's talk about claims of success about jobs. The White House says 640,000 jobs have been created or saved by the $800 billion stimulus. There are Republicans who say the number is bogus, that it's just PR. John Boehner, leader of the Republicans in the House, as you well know, circulated a quote from an economist at Carnegie, Carnegie Mellon University, and I'll put it up on the screen and you can look at it: "One can search economic textbooks forever without finding a concept called `jobs saved.' It doesn't exist for good reason: how can anyone know that his or her job has been saved?" You've got a lot of experience in the economy. Is this PR or fact?
SEC'Y GEITHNER: This is fact. Again, at--when the president took office, this economy was falling at the rate of 6.5 percent at an annual rate per year, fastest rate in decades. We were losing three-quarters of a million jobs a month. Now, the pace of job loss has slowed dramatically, the economy's now growing again. It's growing not just because the effects of the Recovery Act. Many people opposed the Recovery Act, said it wasn't going to work. It's working, it's delivering what it should result--what it should, it should produce. Value of Americans' savings are up almost 35 percent since the beginning of the year. Interest rates down. These are substantially powerful returns on the Recovery Act, and they are delivering what they were designed to deliver.
GREGORY: OK. What is a saved job? How do you measure that?
SEC'Y GEITHNER: A, a saved--well...
GREGORY: It's not something an economist recognizes as an actual fact.
SEC'Y GEITHNER: Think of it this way. When a, when a school does not have to fire a teacher, when a city doesn't have to fire a fireman, when it can keep teachers in the classroom, cops on the streets, firemen in the firehouse, that's a job saved.
GREGORY: All right, but...
SEC'Y GEITHNER: When businesses cut fewer jobs, that's a job saved. When businesses add jobs, that's a job created. I think, David, what everybody would say, and nobody would contest this, is without the actions the Congress and the president took you would've seen millions more jobs lost over the life of this crisis and you would see growth cause much, much more damage to American businesses, many more businesses failing.
He's right about there being more damage. But the damage was supposed to happen to clean out the system, rid us of the BS transactions and greed out there. Nothing has been fixed. It's been delayed.
SEC'Y GEITHNER: Much more--much deeper cuts in basic services at the state and local level. So the, the basic plan the president put in place is delivering what it was expected to do. Now, it's just the beginning. It's just an early stage recovery.
GREGORY: Right. But my, but my point is that this should not be overstated, the impact of the stimulus should not be overstated. Here's the facts about how many jobs have been lost since the stimulus: 2.7 million. And you've got 14 states who have double-digit unemployment. You can look at the top five, with Michigan at the top with 15.3 percent unemployment. So you say it could've been a lot of worse.
SEC'Y GEITHNER: David...
GREGORY: A, it's still very bad, and B, the stimulus has had only a minimal effect.
SEC'Y GEITHNER: Actually--no, no, I wouldn't say that. I said actually, even those numbers understate it, because there's lots of people who are underemployed, working less they would like. So again, this is a very tough economy. It's only been three initial months of positive growth. It's going to take some time for unemployment to come down and for jobs to get created again. And that's why it's important to--for people to recognize that we have a responsibility to keep working at this so we're reinforcing the recovery.
GREGORY: How high will unemployment go, do you think?
SEC'Y GEITHNER: Don't know for sure, but it's likely still rising and it, it probably going to rise further before it starts to come down again.
GREGORY: Double digits?
It is already double digits.
SEC'Y GEITHNER: Most economists think we'll probably get there, and--but again, the economists think--and, you know, there's a lot of uncertainty in this. Economists don't know that, don't know that much about the future, David. But they say that they think we'll start to see net jobs created at the beginning of the year, sometime around the beginning of the year, in the first quarter sometime.
He cites 'most economists' instead of just answering the question.
GREGORY: What should the administration be going specifically to reduce unemployment at this point?
SEC'Y GEITHNER: The most important thing is to get growth growing again at a strong pace.
GREGORY: Right. But what can the government...
SEC'Y GEITHNER: That's the most...
GREGORY: ...what should the government be doing?
SEC'Y GEITHNER: The government's doing exactly what it should be doing. It's, it's making sure that there are tax cuts to business and families, investments in improving infrastructure, creating incentives for businesses to spend again, relief for state and local governments and getting this financial system back on its feet.
This is flat out bullshit. What the govt should have been doing was nothing. No tarp, no cash for clunkers, no stimulus.
GREGORY: But do you need more stimulus?
SEC'Y GEITHNER: I don't think we need to make that judgment yet, David. Again, there's--about half of the money committed by the Congress is still working its way through the system by design. It was designed to work over two years. So we're not in a position yet where we need to make a choice about whether it's going to take more than that...
SEC'Y GEITHNER: ...to bring growth back. And again, that's only a bridge. You're not going to get real recovery until it's led by the private sector, by businesses.
GREGORY: So I want to be clear, additional stimulus you don't think is needed right now.
SEC'Y GEITHNER: Not, not yet. Now, Congress is looking at extending unemployment insurance, some other targeted programs that would expire without additional action. You've heard Congress today--you heard--saw Congress this week start to talk about extending the first-time homebuyer tax credit, some other measures. We think those will be helpful things for the economy as a whole, and they'll also provide some added support.
GREGORY: Let me talk about the deficit and the debt. These are alarming numbers, you said they are. Let's look at the deficit since Inauguration Day: $1.2 trillion, now $1.4 trillion; it's up 17 percent. The overall debt, Inauguration Day: $10.6 trillion, now $11.9 trillion. What's it going to be a year from now?
SEC'Y GEITHNER: Well, it's going to have to come down. Now it's too high, and I think everybody understands this. You know, we've got these two central imperatives: restore growth, create jobs. But make sure people understand we're going to have to bring those fiscal deficits down as growth recovers. First growth, though. Without growth, you can't fix those long-term fiscal problems. But you're not going to have a recovery that's going to be strong enough unless people are confident we're going to have the will to go back to live within our means.
GREGORY: How do you bring it down, though? Do taxes have to go up?
SEC'Y GEITHNER: Well, we're going to have to do--we're going to have to make some hard choices. The--but we're not really at the point yet, David, we're going to know what's going to be the best path forward. The president's very committed to bring down these deficits, and he's very committed to doing so in a way that's not going to add to the burden on people, people making less than $250,000 a year.
GREGORY: But wait a minute, though, what are hard--I mean, I think a lot of people, it's fair to say, what are hard choices? I mean, what hard choices have been made so far? Are you going to raise taxes?
SEC'Y GEITHNER: We're going to have to bring our resources and our expenditures more into balance.
GREGORY: So it's possible.
SEC'Y GEITHNER: Well, again, the president's committed to make sure we get this economy back on track. We're bringing down this deficit over time. And to do so...
GREGORY: Mr. Secretary, you talked about hard choices, so why can't you give a straight answer to whether taxes have to come up...
SEC'Y GEITHNER: Because...
GREGORY: ...when you have a deficit this big?
SEC'Y GEITHNER: Because, David, right now we're focused on getting growth back on track, OK, and we're not at the point yet we have to decide exactly what it's going to take. And I just want to say this very clearly. He was committed in the campaign to make--he said in the campaign and he is committed to make sure we do this in a way that is not going to add to the burden on people making less than $250,000 a year. Now, it's going to be hard to do that, but he's committed to doing that and we can do that.
GREGORY: You can do it, but it's still a chance that you'd have to raise taxes and go back on that if you've got a debt this big.
SEC'Y GEITHNER: We're going to have to do it in a way that's going to help to meet that test, meet that commitment, the commitment he made, to do it in a way that's fair to Americans and make sure we do it in a way that's going to allow--provide for growth and recovery going forward. But we can do this. You know, this is not beyond our capacity as a country to do.
SEC'Y GEITHNER: But first things first.
SEC'Y GEITHNER: And unless we have a recovery, our long-term debts are going to be worse. Now, you didn't raise health care yet, but what's happening on health care now is very encouraging. Because if you look at what independent analysts say now, if you look at these bills moving their way through the Congress, they will make a substantial difference in reducing the rate of growth in healthcare costs over the long term and they will help bring down those long-term deficits.
GREGORY: But there is going to be a heavy burden on the middle-class through, through health care by taxes going up, by premiums going up. It will affect the middle-class.
Tax riots, protests, middle class revolts.
SEC'Y GEITHNER: You know, I, I, I don't think that's the way to look at it. The--our tax--our healthcare system today imposes enormous burdens not just on businesses, but on families. There are very high hidden costs to our current system. And the best way to add to our long-term deficits, and the best way to add to those burdens is not reform health care today.
GREGORY: But it doesn't answer the question about premiums going up with an individual mandate and taxes going up on so-called Cadillac plans and other parts of this bill as they're moving their way through the process that would increase taxes.
SEC'Y GEITHNER: Right. Again, I don't think that's the right way to think about it. I think you have to look at the entire system today and the cost that presents. And if you look at those...
GREGORY: Well, why isn't that the right way to look at it if that's the reality of what the legislation would do?
SEC'Y GEITHNER: No.
GREGORY: How else should it be looked at?
SEC'Y GEITHNER: Well...
GREGORY: Yes, there are, there are ballooning costs with the existing system, but the remedy still includes tax cuts--tax hikes, does it not?
SEC'Y GEITHNER: No. What the, what the bills moving through Congress do, and these are very important, they expand coverage, they will make care more affordable and they will reduce the rate of growth in healthcare costs. And in that sense they're going to provide a more fair system, so families are not going to live with the fear that if they lose their job they're going to lose health care, they're going to be denied healthcare coverage and they're going to be able to afford a basic package of care that's going to make sure they can provide for their families.
GREGORY: Just a couple of minutes left, I want to talk about the ways of Wall Street. And first I want to ask you about executive compensation. By capping the pay that executives get at those largest firms that got bailout money, how does that further the goal of paying the taxpayer back?
SEC'Y GEITHNER: Seven firms, very important that when we give, give these firms exceptional assistance to save them, allowed them to survive, that we're protecting the taxpayers' investments and that the resources that we gave them are not going to pay excessive compensation to their executives. That's a basic thing of fair--it's fair and just and it's necessary. And Ken Feinberg has done a very good job balancing that imperative, or the basic imperative we all have is to get our money back as quickly as possible.
GREGORY: But what if the people who are capable of stabilizing these companies and becoming profitable again leave, undermining the effort for these firms to pay the government back?
Why does a company on the brink of failure deserve any bonus?
SEC'Y GEITHNER: We'll...
GREGORY: If that happens, would these curbs be a mistake?
SEC'Y GEITHNER: We were very, 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.
GREGORY: But you have no way of knowing that.
SEC'Y GEITHNER: Well, you can't be sure.
SEC'Y GEITHNER: But, but look how..
SEC'Y GEITHNER: Think about it this way, David. Look at how the market has reacted to the news about the reforms he put in place. And I don't see any concern in how the market...
GREGORY: You don't see an exodus at these seven firms?
SEC'Y GEITHNER: No, I think...
GREGORY: You don't think people will leave?
SEC'Y GEITHNER: I, I worry about this a lot, but I think he's got the balance right.
GREGORY: Do you think a company like AIG, would you like to see it prosper, make a lot of money again and be successful?
SEC'Y GEITHNER: What I would like to see AIG do, and this is what AIG is doing, is to bring down the risk that brought that company to the edge of collapse and to restructure its business so the taxpayer can get out.
GREGORY: Would you like it to be successful?
SEC'Y GEITHNER: I'd like it to be successful enough the taxpayer can get out.
GREGORY: And then after that you don't care what happens?
SEC'Y GEITHNER: No.
GREGORY: The issue of whether AIG should pay bonuses, because they're going to pay another $200 million in bonuses next March, should they pay that?
SEC'Y GEITHNER: He's got a bunch of choices ahead for a number of firms about 2010, but I--those choices are his to make. And as I said, I think...
Answer the question, Timmy.
GREGORY: Right. Well, you spoke out against AIG when they made their last round of bonuses. So should they pay these?
SEC'Y GEITHNER: But, you know, he'll, he'll work through those things, but I leave that to him. And he's, he's showing exceptionally good judgment. He's a remarkably effective guy and he's done a very good job in a very difficult set of choices.
GREGORY: You talk about avoiding risks. My question is how can you justify a company like Goldman Sachs making so much money, as it's now doing, by taking some of the trading risks that it's taking right now after it was saved by taxpayers and while it enjoys a guarantee from the government because it's too big to fail?
SEC'Y GEITHNER: Yeah, we're not going to let the system go back to the way it was. And this was a very good few weeks for financial reform...
GREGORY: Is it not back the way it was?
SEC'Y GEITHNER: No, it's not. And it's not going to go back to the way it was. Barney Frank and Chris Dodd are moving comprehensive financial reform through both houses of Congress now. Chairman Dodd is drafting a comprehensive bill; Chairman Frank, working with the House Financial Services Committee, has passed through the committee very important reforms to give consumers better protection and to prevent kind of risk building up in the system that brought the system to the edge of collapse, that left taxpayer exposed. And I think we're making a lot of progress. I'm very encouraged by how much progress they've made.
GREGORY: But Goldman Sachs is taking huge risks now in some of the trades it makes.
SEC'Y GEITHNER: The critical...
GREGORY: True or not true?
SEC'Y GEITHNER: Well, let me just say what we're trying to achieve through reform, David, and this is why it's so important.
GREGORY: But why can't--but that's a straight-ahead question, whether they are doing things now that are risky after having been saved by the government and by having a guarantee that the government'll save them again.
SEC'Y GEITHNER: Right now what's happening the financial system is for the first time in almost 18 months the credit markets are opening up, companies are, are able to raise capital again. And the big risk we face now is not that banks are taking too much risk, the big risk we're face right now is banks are going to take too little risk after having gotten it wrong in run-up to the crisis. And that's why you see across small businesses, other parts of the country today, the kind of financial headwinds, the classic credit crunch risk that could slow recovery. The big risk we face now is that banks are going to overcorrect and not take enough risk. We need them to take a chance again on the American economy. That's going to be important to recovery.
He didn't answer the question.
GREGORY: Final question. Away from the policy, let's make it a little bit more personal to the family out there that's struggling to save, wants to send their kids to college but doesn't frankly know what to do with what money they may have left. What should they be doing with their money? What is your advice?
SEC'Y GEITHNER: You, you're seeing them do the rational thing now, David. You're seeing Americans start to save again after a long period where people were not putting enough aside again the risk of a recession or a job loss. You're seeing people start to save again, and that's a healthy, necessary adjustment. It's going to make sure that--it'll help make sure that growth is more stable and more sustainable in the future.
GREGORY: Secretary Geithner, thank you.
SEC'Y GEITHNER: Nice to see you.