Geithner: Economy rebounding, but job growth lags

Published: Sunday, November 1, 2009 at 8:38 a.m.
Last Modified: Sunday, November 1, 2009 at 8:38 a.m.

WASHINGTON Treasury Secretary Timothy Geithner acknowledges the federal budget deficit is too high, but that the priorities now are economic growth and job creation.

Asked repeatedly on NBC's "Meet the Press" whether this means taxes will rise, Geithner avoided giving specifics. He did say President Barack Obama is committed to dealing with deficit in a way that will not add to the tax burden of people making less than $250,000 a year.

The White House has not decided how to reduce the red ink, Geithner said in an interview broadcast Sunday.

"Right now we're focused on getting growth back on track," he said. "And we're not at the point yet where we have to decide exactly what it's going to take."

He acknowledged that the economic recovery, while showing positive movement, has been shaky and uneven.

"A lot of damage was caused by this crisis. It's going to take some time for us to grow out of this. It could be a little choppy," he said. "It could be uneven. And it's going to take awhile."

A bright spot in the recovery identified by Geithner is the banking system, which he said is "dramatically more stable" because of the government bailout.

Geithner said that just one year ago economic activity came to a standstill as major financial institutions shut down due to lack of liquidity.

Even though 115 banks have failed so far this year, Geithner said there has been a "dramatic improvement in confidence," with private capital back in the system. He said large businesses are now able to borrow again.

But Geithner said more needs to be done to assist small businesses, adding that the administration is working to help open up credit to them.

After financial institutions were widely blamed for assuming too much risk and bringing the economy to the brink of collapse, Geithner said a concern now is that they might end up being too timid.

"The big risk we face now is that banks are going to overcorrect and not take enough risk," he said. "We need them to take a chance again on the American economy. That's going to be important to recovery."

Geithner acknowledged the economy remains tough for many workers who have lost jobs and it's going to be some time before the employment outlook starts to brighten for many of them.

"Unemployment is worse than almost everybody expected. But growth is back a little more quickly, a little stronger than people thought," he said.

Unemployment hit a 26-year high of 9.8 percent in September, and the October report due in the coming week could show it topping 10 percent.

Geithner said it's too early to decide if a second government stimulus package should be offered, though he acknowledged unemployment probably will rise even more before it starts to turn around. Economists expect to see job growth after the first of the year, probably in the first quarter, he said.

"You're not going to see real recovery until it's led by the private sector, by businesses," he said.

He said the administration supports steps being considered by Congress like extending unemployment insurance and the homebuyer tax credit.

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