Updated at 10:30 am EST
Treasury Secretary Tim Geithner, making the full rounds of the Sunday morning news talk shows, says Republicans will have to support higher tax rates for the wealthiest Americans in an agreement averting the so-called “fiscal cliff,” an agreement which is highly likely.
“There’s no path to an agreement that does not involve Republicans acknowledging that rates have to go up for the wealthiest Americans,” Geithner says in one of the taped interviews that CBS News is airing today.
Asked about the Republican approach to new revenue of eliminating some tax exemptions, he says: “You know, we’ve taken a careful look at this and we think we should limit deductions. But if you look carefully at how to do this, there is no way to raise a meaningful amount of revenue relative to the size of our fiscal challenges by just limiting the value of deductions for the wealthiest Americans. There’s just not enough room there. You can raise a lot of money if you’re prepared to raise taxes significantly on middle class families by limiting their deductions, but we don’t think that makes a lot of sense for them.”
The politics of getting there is the tough part, Geithner says.
“I do think we’re going to get there,” he says in the interview on CBS News’ “Face the Nation” with Bob Schieffer this morning. “Because, you know, the only thing that stands in the way of an agreement that’s good for the American economy is if a group of Republicans decide they’re going to block any increase in tax rates on the wealthiest Americans. I think it’s very unlikely they choose to do that, of course, because there’s so much at stake.”
House Speaker John Boehner, appearing only on FOX “News Sunday” today, says he was “flabbergasted” by the proposal that Geithner outlined in individual meetings with congressional leaders last week.
“Listen, nobody wants to go over the cliff,” the Ohio Republican says in an interview aired on FOX. “That’s why, uh, the day after the election, I tried to speed this process up by making a concession to put revenues on the table.”
Boehner says the White House should remember it must take Republican sentiment into account. “They won the election,” Boehner says, yet “they must have forgotten that Republicans continue to hold a majority in the House…The president’s idea of a negotiation is, `Roll over and do what I ask.’”
Geithner, asked about Senate Republican Leader Mitch McConnell laughing at Geithner’s presentation of the White House’s position in their personal meeting, says: “They’re in a hard position, Bob. You know, they really are in a difficult position. And they’re going to have to figure out their politics of what they do next, and they’re trying to figure that out right now. But you know we’re going to work very hard at this, and we’re going to keep talking to each other…”
“I think we have a very good chance for coming together on an agreement that not just protects 98% of Americans from a tax increase, and protects the economy from deeply damaging upfront spending cuts, and protects the economy from leaving us vulnerable to, you know, periodic threats of defaults by politicians, I think we can do better than that, than just that,” he says of the administration’s interest in addressing the approaching debt ceiling in the deal. “And do something good for the long-term future of the American economy.”
With the Bush-era tax cuts set to expire at year’s end, the administration wants to extend them for households earning less than $250,000 a year, and retire that tax relief for higher-earning Americans. The top personal income tax rate would rise from 35 percent to 39.6 percent for those top earners, about 2 percent of all taxpayers.
“We think they should go back to the Clinton levels, and combine that with some tax reforms that limit deductions for the wealthiest Americans,” Geithner tells Schieffer in the interview. “That’s an essential part of any balanced agreement to bring down the long-term deficit. Now that’s not enough — you know we think we can go beyond that and lock in some carefully designed savings that helps us go back to living within our means. And the President has laid out a very detailed, comprehensive plan for how best to do that. He’s put on the table 600 billion dollars in savings, on top of the trillion of dollars that we enacted last year. And they’re very detailed, and they’re very well designed.”
In the end, he predicts, “We’re going to have higher rates and higher revenue from just 2 percent of Americans. Ninety-eight percent of Americans do not need to see and are not going to see an increase in their marginal tax rates. That’s a very important commitment from the president in this context. But again I think we’re going to get there. The Republicans, as you’ve heard, have conceded — and this is important– that they’re prepared to raise revenues, raise taxes as part of this deal. But what haven’t they told us yet is how far they’re willing to go both on rates and other deduction limitations.”
The White House, for its part, is “absolutely” ready to accept cuts in entitlement spending as part of the deal to raise taxes. “The president is committed to that,” Geithner says. “We’ve put out detailed reforms to entitlements that total $600 billion over 1o years, that build gradually over time because they’re phased in carefully, so the outer year savings are even larger than that in that context. We think they’re very good policy… I’ll give you just a couple of examples: reforming farm subsidies, very important to do, lots of room to do sensible reforms in that context. And they can raise substantial amounts of money. In healthcare, we propose to a modest increase in premium for higher income beneficiaries, and we propose ways to make the government much smarter about how it buys medicine for Medicare beneficiaries.”
Asked why the White House is seeking another agreement to raise the debt ceiling, which will be reached again sometime this winter, Geithner says the administration wants to avoid a repeat of the last confrontation over the debt ceiling that went to the brink of the deadline and cost the U.S. its credit rating in the eyes of one rating agency.
“We are not prepared to let the threat of default on America’s credit, on the savings of Americans, the investments of Americans, be held hostage to the political agenda of a group of people in Congress over time,” he says. “That — as you saw last August, that was very damaging to the American people. It’s not a responsible way to govern.”
“Again, there’s nothing that stands in the way of that agreement except for the potential risk that a group of Republicans decide, they hold up an agreement because they want to extend tax cuts for the wealthiest Americans that we can’t afford,” Geithner says. “Just remember: to extend those tax cuts cost $1 trillion over 10 years. There is no way we can get to a balanced plan that puts us back on a path to living within our means, protects Medicare, invests in things we need, if you extend those tax rates.”