By Peter Schroeder - 05/17/11 10:38 PM EDT
"America can do better," he said.
The comments in New York were Geithner's first since the government bumped up against the $14.3 trillion borrowing limit Tuesday, marking an official start to the debt debate that is likely to consume Capitol Hill this summer.
Geithner informed lawmakers on Monday that the Treasury was tapping into two federal employee pension funds as a first step to avoid default. Since the government was now in a "debt issuance suspension period" after bumping against the debt limit, he was reducing and redeeming some investments in those funds to free up cash for other obligations.
Geithner is the latest Washington figure to make the trek to New York City to discuss economic issues. House Speaker John Boehner (R-Ohio) started the trend last Monday, when he appeared before the Economic Club of New York and called for more than $2 trillion in cuts in return for raising the debt ceiling. House Minority Leader Nancy Pelosi (D-Calif.) made the rounds on Wall Street this week.
Both parties are holding audiences with financial experts as they work to gain leverage in the debt-limit battle.
Geithner said making changes to the tax code, like allowing the Bush-era tax rates for top earners to expire, is vital for the nation's finances — putting him directly at odds with congressional Republicans who have vowed that tax increases cannot be part of the debt-limit debate.
"The fundamental reality of our fiscal situation is that we will need to generate more revenue," he said.
Geithner, who has emerged as the leading White House voice on the debt ceiling, set his sights on several fiscal ideas being floated by Republicans.
Some conservatives are calling for broad spending caps to be paired with a debt-limit increase, but the secretary said those ideas are impractical and ineffective.
"This sounds appealing, but it has no practical value as a device for fiscal restraint," he said.
Some Republicans have proposed legislation to allow the government to hit the debt limit and avoid a default by prioritizing payments on debt service. Treasury officials say those ideas are unworkable.
"Rather than debating whether we should pay our past bills and whether default would in fact be so bad; rather than designing schemes to allow us to continue to make interest payments by breaking our commitments to seniors and veterans, we should be working together to narrow our differences on how to solve the causes of future deficits," Geithner said.
Geithner did hit some of the same notes as the GOP when it comes to the nation’s long-term fiscal problems.
The fiscal difficulties "are so pressing that they threaten to undermine the foundations of our future economic strength," Geithner said.
If America does not get its books in order, eventually investors will lose faith, according to Geithner, as reflected in part by the negative outlook rating agency Standard & Poor's recently put on the U.S. government's debt.
"We do not have the option of leaving this problem to another day, another Congress, another president," he said. "There is no way of knowing how long financial markets will give the American political system to get ahead of this problem. But it makes no sense for us to wait until they force action upon us."
He cited the market turmoil of 2008 as proof that "when confidence turns, it can turn with brutal force and with a momentum that is very difficult and costly to arrest."
"Confidence is much more expensive to recover than to keep," he added.