Timothy Geithner: What Me Worry About Credit Downgrades?

U.S. Treasury Secretary Timothy Geithner appeared on Bloomberg Television this morning in an interview with Bloomberg’s Chief Washington correspondent Peter Cook. Geithner discussed yesterday’s S&P (NYSE:MHP) revised outlook for U.S. debt (NYSE:TLT) and international confidence in the U.S. economy.

Geithner on the revised S&P outlook for U.S. credit:

“The right thing for the economy (NYSE:SPY) now is to lock in place reforms that bring down our long-term deficits…If you listen carefully, you hear Republicans and Democrats now agreeing that’s necessary and it’s the right time to do it. We want to work with Congress over the next couple of months to lock those reforms in place.”

On the S&P outlook for U.S. debt:

“Washington is a hard place for people to read. It is not surprising that average people wonder are politicians going to get their act together. Are they going to be able to agree, given that they disagree on so many things?…I’d be reasonably confident that we have a chance to lock in what we agree on. What we agree on is the importance of putting in place strong targets for savings, for deficit reduction over a specific timeframe, with enforceable limits….I think we can do this in ways that will make the economy stronger over the long run. ”

On whether Washington lawmakers can agree on a $4 trillion deficit reduction:

“I think that is achievable. That is what we should try to do….There is emerging consensus on how much we have to do — the scope and scale and timeframe. Now, we will disagree on a lot of things. If you listen to Republicans and Democrats, there are some things that we will be far apart on. Our challenge is to make sure we take what we agree on and put that in place, ask Congress to legislate it, so Congress is going to live within those constraints.”

On whether the U.S. will see a firm commitment on deficit reduction from the administration and Congress by June:

“The more details you have, the more credible it’s going to be. We want to have details on targets for deficit reduction, targets for savings. We have to have ways to make those enforceable so people believe Congress is going to live by them. That is the challenge. If we can do that, that would be a good signal around the world. Washington is going to make sure, as we always have in the past, faced with enormous challenges, that Washington comes together and does the right thing. This is the right thing to do for the economy.”

On entitlements being part of the discussion on budget reform:

“They have to be. We have to do a balanced, comprehensive package, like what the President laid out, like what the fiscal commission has suggested…You have to do it in a balanced, comprehensive way, otherwise the burden falls too much on parts of the budget that cannot sustain it. You want to make sure you protect our capacity to invest in things that will be important to growth in the future like education, innovation — without adding to the burden on the middle class.”

On reaching a middle ground with Republicans on taxes:

“There is no way to do this without changing the tax code. Nobody who looks at the American tax system today suggests we should live with that tax code. We should do tax reform that reduces these expenditures that disproportionately go to the most fortunate Americans. Think about the alternative. Life is about alternatives. If you don’t  do that, what you’re forced to do is either cut deeply into commitments made to the seniors, the poor, the disabled or we have to borrow trillions of dollars from China and other investors around the world, which we cannot responsibly do…The only choice available to us is to do a balanced, comprehensive package with shared sacrifice for everyone…That requires that we make changes to the tax code through tax reform that will add modestly to the burden of the most fortunate–a small fraction of Americans–who benefited so much from the Bush tax cuts and the last decade of growth.”

On whether the S&P action yesterday sped up the need for a debt ceiling vote:

“I do not think so. If you look at how the world views the United States right now, you can tell two things. One, there is a lot of confidence in the capacity of this economy to grow, to make sure that we can meet commitments or obligations. You can see that in the price by which we borrow each day. But we have to earn that confidence. The other thing you know is, Washington is a hard place to read. It’s hard for people looking at Washington to look past the political rhetoric, and be confident that you will see politicians do the necessary and right thing. As I said, there is a lot of consensus emerging on the importance of doing this, on how much we have to. We have to make sure we translate that into action. Because ultimately people judge us by what we do, not just by what we say. We have an opportunity now to make some real progress on that. That is the right thing to do for the economy.”

On whether Geithner had to reassure foreign buyers of U.S. debt yesterday:

“Absolutely not. Look at the price at which we borrow. There is a lot of confidence. and that confidence is justified that America is getting stronger….We have to make sure we take on these challenges and start to address them. We have to earn that confidence every day. That’s why it’s important that the political leadership in Washington take advantage of this moment, building on what you saw the President and the fiscal commission lay out, balanced, comprehensive, multi- year targets for savings and target for deficit reduction that will help make the economy stronger.”

On whether a long-term deficit reduction plan can be in place before the 2012 election:

“Absolutely. We have a chance to make progress on that just in the next couple of months. We don’t know exactly how much is going to be possible, depends on the will of the people here in Washington. We have a good basis for doing that. We can lay some foundations now for those reforms necessary to bring down those deficits.”

On whether Elizabeth Warren is still in the running to run the Consumer Financial Protection bureau:

“Absolutely. She is doing an excellent job of bringing clearer disclosure to Americans so they can make a better choice about how to borrow so they can finance a home…She is doing a terrific job making the case for stronger consumer protection, attracting talented people at that agency. This is very important for us to do. We saw the financial crisis cause devastating damage to average Americans in part because they were not given the basic protections that government should provide. We’re going to fix that.”

Geithner on whether Greece will need to restructure:

“If you look at what the government of Greece, Ireland and many others are doing, they are doing incredibly difficult reforms to help make sure they bring their deficits down, their economics are restructured, their financial systems are stronger….Part of success requires that Europe is given the financial support for those reforms to work. The leaders of Europe, and you have to take their word on this, have said they will do whatever is necessary to make sure they can help those countries manage those challenges, get through this problem. They are making some progress.”

Don’t Miss: The Shocking S&P Downgrade to the US Credit Rating Outlook.