The U.S. economy is healing from a deep and prolonged recession, according to U.S. Treasury Secretary Timothy Geithner. Geithner struck an upbeat note on America's economic prospects, but also stressed the need to confront pressing risks to the nation's long term financial health.
Friday brought some hopeful news to the battered U.S. labor market. Although employers continue to cut jobs amid a fledgling economic recovery, the U.S. unemployment rate for January dipped below 10 percent to 9.7 percent. Treasury Secretary Timothy Geithner hailed the development on ABC's "This Week" program. "We are seeing some encouraging signs of healing. This is going to take a while, and it [the economic recovery] is going to be uneven. But there are encouraging signs in this [unemployment] report," he said.
Geithner noted that the drop in unemployment follows word that the U.S. economy expanded at an annual rate of 5.7 percent at the end of 2009. "We have an economy that was growing at almost six percent in the fourth quarter of last year -- the most rapid rate in six years. And we have the capacity as a government to reinforce that process, and help guide this economy back to the point where we are not just growing again, but we see growth translate into jobs," he said.
In its budget projections, the Obama administration is assuming that unemployment will remain stubbornly high -- above 9 percent -- well into next year. Fearing what some economists are already calling a 'jobless recovery', President Barack Obama is pressing Congress to enact financial incentives for small businesses to hire new workers.
Treasury Secretary Geithner says a jobs bill is vital, as is an overhaul of America's financial regulations to limit risk-taking by the nation's banks and major private financial institutions.
On that point, Geithner has the backing of his predecessor, former Treasury Secretary Henry Paulson, who spoke on NBC's "Meet the Press" program. "The economy is clearly recovering. Now, one of the factors that will help is more certainty with regard to actions out of Washington. For instance, certainty with regard to financial regulatory reform will help," he said.
Congress has debated financial reform ever since the financial meltdown of 2008, when major banks, investment houses, insurance giants and mortgage firms collapsed at a catastrophic rate, and credit for consumers and businesses all but evaporated. Many economists say, without far-reaching regulatory reform, the United States risks a repeat in the future.
Also appearing on "Meet the Press" was former U.S. Federal Reserve Chairman Alan Greenspan, who highlighted another long-term risk to America's economic health: its skyrocketing national debt. Greenspan said the debt will eventually constrain the U.S. economy and erode America's place on the world stage. "History tells us that great powers, when they have gotten into very significant fiscal problems, have ceased to be great powers," he said.
President Obama's budget projects federal deficits in excess of $1 trillion for this year and 2011. He has proposed a freeze on some domestic spending, and sought a bipartisan commission to craft a plan to tackle America's long-term fiscal imbalances.