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Geithner: Economy needs more than tax cuts

U.S. Treasury Secretary Timothy F. Geithner told a group of Baltimore business leaders Thursday that the nation’s economy remains fragile and dependent on the actions of Congress, now in the throes of a raucous debate over the country’s debt ceiling, transportation funding and interest rates on student loans.

Treasury Secretary Timothy Geithner

“We can all be in favor of smarter regulation, more efficient government, lower future deficits and a more simple tax system, but these mere desires do not add up to a strategy that meets the challenge at the moment,” Geithner told a group of 400 at a breakfast meeting sponsored by the Greater Baltimore Committee at the Baltimore Marriott Waterfront hotel.

“A credible strategy for economic growth requires a willingness to do things, not just cut things,” he added.

Geithner said the Bush-era tax cuts for the wealthy, set to expire this year, are not affordable and that the cost of extending them for another decade is about $1 trillion.

“Tax cuts don’t pay for themselves. You have to pay for them,” he said. “We can’t afford to borrow the money to extend those tax cuts, and we won’t agree to cut benefits for seniors or cut investments in education to pay for those tax cuts.”

He also said that economic reforms put into place after the 2008 financial collapse are “tough enough” to confront the fallout from the trading loss of $3 billion at JPMorgan Chase, first reported last week at $2 billion.

Closer to home, Geithner said that today’s low interest rates belie the drop in Maryland housing values as many state homeowners have negative equity in their homes.

“Housing is still very tough, and still there are hundreds of thousands of people across the country today that are facing foreclosure” he said. “We can first make sure they have a job and second make sure people who are underwater have the opportunity for a loan modification. And we can try to get a larger share of the homes in the banks existing inventory into the rental market. All these things will speed up the pace.”

The secretary said the economic instability in Greece has potential to be damaging to economic growth throughout the world.

“Our advice to them, which we provide with humility and lessons from our scars from our own financial crisis, is to try to manage in a way that causes less damage to us and the rest of the world,” he said.

Overall, Geithner said, the future of the economic crisis in the 17-member eurozone should remain contained geographically.

“Europe is a very rich continent and they have resources to deal with this.”