As of this posting, Treasury Secretary Timothy Geithner is
speaking before the budget committee. Check out live blogging
here. Here is his prepared testimony:
Chairman Conrad, Ranking Member Gregg, and members of the Committee, thank you for providing me the opportunity to appear before you today to discuss the President’s Budget at this moment of economic crisis, but also of real possibility, for the United States.
What I propose to do in the remarks that follow is to:
Describe the economic and financial challenges that greeted us upon our arrival in
office, and discuss how we are addressing them;
Lay out the intermediate and long-term threats to our fiscal condition, and explain
how the President’s Fiscal Year 2010 Budget will return the nation to a
sustainable fiscal position; and
Explain how this Budget puts the nation on a path towards energy independence,
better educational outcomes, and a reform of health care that both lowers costs
and expands access.
Current Economic and Financial Challenges
The economy suffers from a severe lack of aggregate demand, both from families and businesses – a problem that is driven by a slumping job market, where 4.4 million jobs have been lost in just over a year – the largest number as a fraction of total employment in more than a quarter century and the largest number in absolute terms in over a half century. This problem is made worse by a contraction of demand from many of our key trading partners. Businesses, facing or projecting fewer customers for their goods and services, are laying off workers or cutting back on their hours or wages, causing families to further reduce their demand and businesses to respond with more layoffs and cutbacks.
This dynamic is made worse by a financial system that is unable to provide the credit necessary for recovery. You can see this across America as families find it difficult to get the financing they need to buy new houses and cars while businesses have trouble lining up the credit necessary to meet payroll.
The contraction in credit is causing more job losses and further declines in business activity, which, in turn, is adding more pressure on the financial system.
Both our economic and financial problems are being compounded by problems in our housing market, where a record of nearly 2.5 million families faced foreclosure last year, undercutting overall home prices, shrinking Americans’ real estate wealth by $2.8 trillion from its peak, causing further reductions in demand, more layoffs and a greater credit squeeze that threatens another round of foreclosures.
You can see the scale of the damage in the recent announcement that the Gross Domestic Product, the broadest measure of the nation’s output of goods and services, dropped at a 6.2% annual rate during the final quarter of last year. That was its worst performance in more than a quarter century, and the third worst in more than a half century.
In addition to a deepening recession and financial troubles, the Obama Administration inherited the worst fiscal situation in modern American history, with a federal budget deficit of $1.3 trillion, equal to nearly 10% of GDP – the largest that the nation has faced since World War II – not counting the economic recovery or other legislation undertaken by the Obama Administration.
And we begin our time in office after a long period in which our government was unwilling to make the long-term investments required to meet critical challenges in health care, energy and education.
This is the reality that we face today. These are the challenges that shape both the American economy and the Administration’s strategy. I want to outline for you today the President’s program for addressing these challenges.
Let me start with our immediate response to the acute problems confronting the country.
A Comprehensive Economic Recovery and Financial Stability Plan Economic Recovery Plan
Immediately upon taking office, the President and the Administration worked with Congress to enact the American Recovery and Reinvestment Act, a package of targeted investments and tax cuts designed to get Americans back to work and get the economy growing again.
Every agency of government is moving quickl y to implement the recovery plan in order to reignite economic growth. We have introduced three of the plan’s major tax provisions – the Making Work Pay tax credits of $400 a year for individuals and $800 for working families; a first-time homebuyer credit that could get up to $8,000 into the pockets of those buying homes before December 1, 2009; and a subsidy to ensure that unemployed Americans and their families can keep their health insurance.
We estimate that the plan will save or create at least 3.5 million jobs over the next two years, and will boost GDP – over where it would have been had we not acted – by almost 1% this year and more than 3.2% next year. Read the rest here.
WaPo's
live blogging:
Geithner took a little heat from Sen. Jeff Sessions (R-Ala.) who said Geithner had failed to deliver "an honest appraisal of the situation we're facing today." He said Geithner "needs to get out of campaign mode" and accused him of parroting the Democratic party line laid down by David Axelrod, a top political adviser of the president.
Geithner: Banks Still In 'Defensive' Mode
10:34 A.M.: Geithner said that recovery is being impaired by forward-looking markets examining the toxic assets on the books of financial institutions and estimating greater losses if the recession gets deeper.
This has led banks and other lending institutions to maintain a "defensive" posture.
To combat that, Geithner said a more detailed look at these toxic assets is required. "We need to look under the hood more carefully, which we're doing," he said.
