Treasury secretary says economy won’t suffer
WASHINGTON – As the White House geared up for a fight to end controversial tax cuts of the last administration, Treasury Secretary Timothy Geithner said Sunday that allowing the expiration of those targeted at wealthy Americans was “the responsible thing to do” and would not deter economic growth.
The president’s plan would end tax cuts for only 2 percent or 3 percent of the highest-earning Americans, Geithner said, while sending an important message to the world about commitment to fiscal austerity.
“We think that’s the responsible thing to do,” Geithner said on ABC’s “This Week.” “We need to make sure we can show the world that we’re willing as a country now to start to make some progress bringing down our long-term deficits.”
But Republicans and even some Democrats are unsure about the wisdom of raising taxes at this point in the economic recovery. Among those affected by the increases would be business owners, bracing for the tax hit at exactly the moment when economic recovery depends heavily on whether or not they decide to create new jobs.
Enacted under President George W. Bush, the tax cuts will expire next year if Congress and the president don’t act to extend them. Republicans and some Democrats favor continuing them all, at a cost of adding at least $2 trillion to the federal deficit over the next 10 years.
Obama has supported continuing only those for lower-income and middle-class workers, which would cost slightly less. He has suggested keeping the cuts in place for individuals making less than $200,000 a year and for families earning less than $250,000.
The brewing fight is stoked by the fact that every member of the House and a third of the Senate are on the campaign trail right now.
On Sunday, Geithner took the administration’s argument to both the ABC show and to NBC’s “Meet the Press.”
“Just letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest-earning Americans in the country, expire, I do not believe it will have a negative effect on growth,” Geithner said on ABC.
But critics disputed Geithner’s predictions on Sunday about how the expiration of the tax cuts would play out across the economy and with American voters.
“Businesses with narrow margins, they’re going to go under,” said Steve Forbes, publishing magnate and two-time Republican presidential candidate, on CNN’s “State of the Union.”
“Even entrepreneurs, people who are willing to buck the tide” are “very hesitant,” he said, “because they don’t know what kind of costs they’re going to get hit with.”