U.S. Treasury Secretary Jacob J. Lew expressed optimism the Obama administration and Republicans can reach a budget agreement and warned that the lack of a deal would hurt the economy and job growth.
“I actually have found it heartening that as more and more senators and congressmen look at the details, they’re finding that on many of the things there’s room for us to maybe agree,” Lew said in an interview with Peter Cook on Bloomberg Television today. While both sides see the “contours” of an agreement, “we just can’t quite figure out a way to get there.”
During a day trip to the Atlanta area, his first venture outside Washington as Treasury secretary, Lew toured a manufacturing facility of Munich-based Siemens AG and held private talks with local business people. His department announced he’ll travel to China next week for discussions with new government leaders in Beijing.
President Barack Obama’s first meeting with the House Republican conference in three years yesterday produced no agreements in the quest for a deal on debt reduction amid skepticism from lawmakers about his intentions.
Republicans, including House Speaker John Boehner, spoke of a frank and positive tone among the president and members of their caucus. Still, they voiced disappointment over Obama’s opposition to their plan to balance the U.S. budget in a decade and his insistence on another tax increase as the price for overhauling entitlement programs such as Medicare.
“With some movement on revenue, there is room for the parties to get together. Ironically, at the end of the year, beginning of the year, December-January, we were very close,” Lew said. “So we need to get back to the spirit in which just a few months ago there was a bipartisan understanding that we could broaden the base and raise” revenue, he said.
“We can get there,” Lew said. He said estimates that sequestration would cut economic growth this year by 0.5 percentage point and cost 750,000 jobs are giving politicians an incentive to act. “I think that’s why these conversations are going on,” he said. “It’s where there’s an interest on both sides.”
Congress mandated $1.2 trillion in across-the-board spending cuts, to begin this year and be spread over nine years, as part of a 2011 deal to increase the U.S. debt limit. The reductions are to be split almost evenly between defense and non-defense spending.
The spending cuts are intended to shrink the federal budget deficit, which has exceeded $1 trillion in each of the past four years. The reductions were intended to be so onerous that Congress and the president wouldn’t let them occur and would come up with a plan to replace them.
Forecasts that the cuts, known as sequestration, would hurt the economy haven’t deterred investors. The Dow Jones Industrial Average extended the longest rally since 1996 as U.S. jobless claims unexpectedly dropped. The Dow added 0.6 percent in its 10th straight gain to close at 14,539.14.
Asked about the potential for a so-called currency war among developed and emerging economies, Lew signaled little change from his predecessor’s view on exchange rates.
“It’s obviously very important that currency be determined through the market, not that we be in a place where currencies are being set in other ways,” Lew said. Recent Group of 20 statements “made clear that our position is one that’s shared, and we’re going to continue to advocate that.”
In a separate interview with CNBC, he repeated the Treasury’s stance that a strong dollar is “in America’s interest” and “will continue to be our policy.”
Lew, who had told members of Congress earlier this year that addressing China’s exchange rate would be his “top priority,” is going to Beijing next week on his first international visit as head of the Treasury.
“We have a very important relationship with the Chinese. They have a new government that’s in place now. We have many new people in our government,” Lew said today. “It’s important that we engage immediately on a broad range of issues because it’s important to each of us to have that conversation.”
During his first press conference as Treasury chief earlier today, Lew said no company is above the law and that the department will continue to implement the Dodd-Frank law designed to keep taxpayers from paying for the mistakes of financial companies.
“No one and no company is above the law, and we need to enforce our laws so that we protect the American people,” Lew told reporters at the Siemens facility in Alpharetta, Georgia. “We’re going to complete the implementation of Dodd-Frank and we will continue to implement all the laws that we have.”
Lew was responding to a question about U.S. Attorney General Eric Holder’s comments last week that the size of the largest financial institutions makes it difficult for the Justice Department to bring criminal charges when there’s wrongdoing.
Lew also met with a group of Atlanta-area executives to discuss topics including their concern over fiscal policy, the economy and immigration, said Sam Williams, president of the Metro Atlanta Chamber of Commerce.
“Business people talked about the things you have written about: From businesses’s point of view, that corporations are uncertain as to what the political future is so they are keeping their cash” and investing less, he said.
There was “a lot of discussion” of immigration, and Lew spent most of the session hearing the issues raised by the attendees, Williams said.
“The secretary was here mainly to listen. Out of the hour, he talked for maybe 10-12 minutes and he asked people to ask questions,” Williams said.