Treasury Secretary Timothy F. Geithner said the U.S. needs a “credible strategy” to reduce its budget deficits over time, without moving too quickly and choking off economic recovery.
“You have to commit to bring the budget deficit down to a level that will put our overall debt burden on a declining path as a share of the economy,” Geithner said today in remarks at the Council on Foreign Relations in New York. The Obama administration wants to move onto that path by about 2015, he said.
The “biggest mistake” that countries have made coming out of a crisis is to shift too quickly rather than phasing in budget cuts over time, Geithner said.
President Barack Obama has offered the outlines of a plan to reduce the debt by $4 trillion over 12 years through a combination of spending cuts and tax increases. House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, has proposed cutting spending by $6 trillion over a decade in part by privatizing Medicare and capping Medicaid spending. Republicans reject Obama’s push for tax increases on the wealthiest Americans.
Geithner also said oil prices have become an obstacle to growth for the U.S. economy, which is otherwise set to accelerate.
“We started the year with a little less momentum,” Geithner said. “We’ve got some new headwinds.”
Growth of between 3 percent and 4 percent over the next two years is a “reasonable expectation,” he said. While unemployment remains elevated, “the economy is definitely healing.”