Treasury Secretary Timothy F. Geithner said the European debt crisis poses the greatest threat to the U.S. economy, while the so-called “fiscal cliff” also threatens growth.
Geithner, in testimony prepared for delivery to a U.S. House panel tomorrow, said European leaders should complement long-term economic reforms with short-term changes, such as strengthening the banking systems and bringing sovereign borrowing rates down, to restore fiscal stability.
“In addition to pressures from Europe and the global economic slowdown, U.S. growth has been hurt by rise in oil prices earlier this year, the ongoing reduction in spending at all levels of government, and slow rates of growth in income,” Geithner said in remarks for the House Financial Services Committee. A copy of his testimony was obtained by Bloomberg News.
U.S. lawmakers remain deadlocked over long-delayed budget decisions including the future of the George W. Bush-era income tax cuts that expire Dec. 31, automatic spending cuts set to take effect in January and raising the federal debt limit. The end-of-year tax and budget impasse has led to warnings the U.S. could careen off a “fiscal cliff” if Congress doesn’t act.
“The slowdown in U.S. growth could be exacerbated by concerns about approaching tax increases and spending cuts, and by uncertainty about the shape of the reforms to tax policy and spending that are necessary to restore fiscal responsibility,” he said.
Geithner will be testifying on the annual report of the Financial Stability Oversight Council, which seeks to prevent another financial crisis.