Geithner: GOP should be open to rate hikes in fiscal deal

By Peter Schroeder - 11/13/12 05:51 PM ET

Treasury Secretary Timothy Geithner struck an optimistic tone on averting the "fiscal cliff" Tuesday, saying it would not make any sense for Republicans to oppose tax increases on the nation's wealthiest after agreeing to increased revenue as part of a deal.

The president's top economic adviser argued that tax rates on the wealthiest would have to climb to provide enough revenue for a broad fiscal deal, and that Republicans should not risk the economy by refusing to raise them. Experts on both sides have warned that the fiscal cliff, consisting of automatic spending cuts and expiring tax cuts set to take effect at the beginning of the year, could push the economy back into a recession.

"Why would you want to put the economy through that, particularly after conceding a recognition that revenues are going to have to go up … on the most fortunate Americans?" he said at the Wall Street Journal's CEO Council. "It seems deeply implausible as a strategy and it should be avoidable."

Shortly after the election, House Speaker John Boehner (R-Ohio) said that increased revenue should be part of fiscal talks, but held firm that he and congressional Republicans would not support an increase in tax rates. Meanwhile, the president has maintained his stance that rates on the nation's top earners must go up as part of deal.

Geithner said Tuesday that it was "magical thinking" to believe that Congress could drum up enough revenue merely by looking to eliminate tax deductions, preferences and credits, and rate hikes must be part of the equation.

"I don't see how you do this without higher rates. I just don't see how you feasibly, realistically do it," he said.

However, he said he was heartened to see Republicans embrace the "basic reality" that revenues have to be part of the equation.

He also suggested that the drama over raising the debt limit in the summer of 2011 would not be repeated in the early months of 2013, when the Treasury next expects it will need an increase to that ceiling.

"That has never been judged as a responsible way to govern," he said. "My view is that the people who were part of that, and they're still there, will draw the right lesson from that experience."

He also shed a bit more light on when exactly he plans to leave the Obama administration, saying he expects to end his stint as Treasury Secretary "around the inauguration."