Accessibility links

Breaking News

US Treasury Secretary: America Must Live Within its Means

U.S. Treasury Secretary Timothy Geithner says America's financial crisis and deep economic recession are painful, but could prove useful in the long run if they force the United States to live within its means after years of over-consumption and excessive indebtedness.

After months of relentlessly abysmal economic numbers, last week brought a few glimmers of hope from the U.S. housing industry and other sectors.

The news, combined with upbeat earnings reports from several large corporations and positive reviews of the Obama administration's plans to rescue and reform America's financial industry, sent stock markets sharply higher in the United States and elsewhere.

Treasury Secretary Timothy Geithner welcomed the positive turn of events, but cautioned against expectations for an immediate economic recovery.

"These are encouraging signs. But it is very important for people to understand that it took a long time for us to get into this mess," he said. "It is going to take us a while to get out of this. Progress is not going to be even, it is not going to be steady."

Geither was speaking on ABC's This Week program.

Appearing later on NBC's Meet the Press program, the treasury secretary said America's financial meltdown and current economic woes are unfortunate and undesirable, but could have positive effects.

"I think the adjustment to a period of excess is necessary. You never want to have a crisis to remind people of the importance of living within your means, not borrowing too much, or why regulation is important," said Geithner. "You never want to have a crisis this damaging to make that point. But we are going to emerge stronger from this. When we get through this, people are going to care less about what they make and more about what they do, what they achieve with what they make. And that will help make this country stronger."

For years, many economists have warned that Americans save too little and spend too much, collectively incurring unsustainable levels of debt in pursuit of lofty living standards. Some have argued that government policies promoting home ownership among the poor, combined with irresponsible lending practices, enabled and encouraged this behavior.

Geithner says he hopes for a sustainable economic recovery based on sound financial practices and reduced indebtedness.

But Republicans say the Obama administration is setting a poor example in that regard by proposing massive hikes in government spending. Although President Obama has pledged to cut the federal deficit in half by the end of his four-year term in office, his budget blueprint would double America's already-staggering national debt in coming years.

The man Mr. Obama defeated in last year's presidential contest, Republican Senator John McCain of Arizona, also appeared on NBC.

"We have got to get the spending under control," he said. "No nation can spend this way and get out of it without debasing the currency and returning to the period we had in the late '70s and early '80s where we had inflation, high unemployment, and higher taxes."

President Obama may hear a similar message at the G20 economic summit in London.

Last week, the president of the European Union, Czech Prime Minister Mirek Topolanek, described Mr. Obama's spending initiatives as a "road to hell."

But Treasury Secretary Geithner says, for now, the real danger is that governments do too little, not too much, to confront the economic crisis. He said the free market cannot solve today's global financial problems on its own.