June 22, 2011

By Matt Cover

( – Treasury Secretary Timothy Geithner said Tuesday that a deal to raise the legal debt limit, which he expects to be completed in the next few weeks, will be only a short-term “down payment” on solving the nation’s debt problem, and that it would be “irresponsible” to reduce the massive federal deficit anticipated over the next ten years with spending cuts alone.

What is needed, he said, is a longer-term deal on a “balanced framework” that includes “revenue increases through tax reform.”

Geithner said negotiations with Congress over such a longer-term plan could be completed within the “next few months.”

In the vernacular, when the government changes the tax laws to extract more tax revenue from citizens it is called a tax increase.

“I think for it to work for the economy you need to have a balanced framework,” Geithner told a Washington, D.C. gathering of CFOs from major corporations.

“If you try to do this, the magnitude of deficit reduction we need–and we need about $4 to 5 trillion in deficit reduction over the next ten years–to try to do that only on spending cuts in parts of the budget would be irresponsible and really not achievable politically,” said Geithner. “You can’t pass the budget without that.

“So, you need a balanced plan that has modest revenue increases through tax reform as well as some near-term spending savings and long-term entitlement reforms,” he said.

“Again, I think if you look at the structure of our budget and what is driving these long-term deficits, if you look at the scale of challenges we need in terms of creating some room for investing in things that matter for long-term growth, you can’t do it through spending reductions concentrated in a very narrow slice of the government where the economy sort of depends on the government doing things that only the government can do,” said Geithner.

The national debt is now $14.34 trillion. This year, according to the Congressional Budget Office, the federal government will run a deficit of $1.4 trillion. Over the next decade, according to the CBO, the budget proposed by President Barack Obama would run up deficits totallling $9.5 trillion.

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