The Wall Street Journal
By: Jeffrey Sparshott
June 21, 2011
WASHINGTON--Treasury Secretary Timothy Geithner Tuesday said he is confident that the U.S. will avoid a default crisis this summer as policy makers near agreement on a broad budget framework.
"We're going to have a bipartisan, comprehensive long-term deficit reduction framework. The question is, what is going to be the shape of that framework," Mr. Geithner said at The Wall Street Journal CFO Forum.
Mr. Geithner said a bipartisan group led by Vice President Joe Biden has made "a lot of progress" so far, and he expects the final deal to include a down payment of spending overhauls as well as a debt cap that would force further cuts down the road.
In other remarks, Mr. Geithner said Europe should present a more unified front as it looks to solve Greece's financial crisis.
"I think it is very hard for people who invest in Europe--within Europe and outside Europe--to understand what [Europe's] strategy is when you have so many people talking," Mr. Geithner said.
"The simple rule of crisis management is you want to have a simple, clear, unified declarative strategy," Mr.Geithner added.
Still, the Treasury secretary said Europe has the means to avoid a short-term crisis and to preserve monetary union within the eurozone.
"They have a very substantial financial arsenal--firewall--that they have laid out. They want to make sure that is available to be deployed" to make sure banks are capitalized and that countries have a financial backstop to make financial reforms work, Mr. Geithner said.
On the U.S. economic front, Mr. Geithner said there is a broad consensus for $4 trillion to $5 trillion in savings over the coming decade, though Mr. Geithner cautioned that that could not come entirely from spending cuts.
"We're meeting every day the remainder of this week. We're making a lot of progress in fleshing out the shape of a down payment with this broader framework of constraints--a debt cap and enforcement mechanisms. We're getting closer but we need to make some progress this week," Mr. Geithner said.
Republicans in Congress say they won't increase the country's legal debt limit unless there is first an agreement that starts to rein in the country's mounting debt.
The U.S. hit its debt limit May 16, and Treasury has taken what it calls "extraordinary" measures to keep from going over the $14.294 trillion cap. Those actions only offer a short reprieve. Treasury estimates the government will exhaust its borrowing authority Aug. 2 and could then default.
Mr. Geithner has urged Congress to raise the limit well before the Aug. 2 deadline, and warned of "catastrophic" economic and market consequences if the country can't pay its bills.
The budget talks led by Mr. Biden are scheduled to resume Tuesday. The Obama administration and Congressional leaders are hoping to reach at least the broad outline of a deal by the beginning of July to give lawmakers that month to guide the package through both chambers of Congress before the Aug. 2 deadline.
Sens. Max Baucus (D., Mont.), Daniel Inouye (D., Hawaii), Jon Kyl (R., Ariz.), Majority Leader Eric Cantor (R., Va.), and Reps. Chris Van Hollen (D., Md.) and Jim Clyburn (D., S.C.) are also participating in the negotiations.
Write to Jeffrey Sparshott at firstname.lastname@example.org