Geithner: Two plans hold basis for deficit agreement

Democrats and Republicans have separate bills.

Treasury Secretary Timothy Geithner said on Tuesday that even though congressional Republicans and Democrats have different ideas on how to bring down the deficit, there is basis for an agreement in the two recently released reduction plans. "I think if you listen carefully, people are all saying the necessary thing, which is the right thing for the economy now is to put in place reforms that put these deficits on a downward path," Geithner said on CNBC's Squawk Box. "Now, we disagree on how to do that, and we're not going to resolve all those disagreements in the next couple of months," Geithner added. "But what we can do is lock in some clear targets for deficit reduction, for savings, with a credible enforcement mechanism that'll force Washington to live within its means." Geithner's comments came after the House last week approved a GOP-drafted fiscal 2012 budget resolution that cuts $5.8 trillion from current spending levels over 10 years and restructures Medicare and Medicaid. The spending plan would also make permanent the 2001 and 2003 tax cuts for all taxpayers. Overall, the GOP budget would reduce the deficit by $4.4 trillion over 10 years. President Obama last week outlined a deficit-reduction plan that would include cuts to non-security discretionary spending-similar to what was suggested by his deficit commission-of $200 billion over 10 years on top of the spending freeze he recommended in his fiscal 2012 budget proposal in February. Obama also wants to let the tax cuts expire for upper-income earners, but he supports ending tax expenditures to lower tax rates and the deficit. Overall, the plan would reduce the deficit by $4 trillion over 12 years. Obama was in Northern Virginia on Tuesday selling his ideas on deficit reduction to the public. He will be in Palo Alto, Calif., on Wednesday and Reno, Nev., on Thursday. Obama's plan also includes what he calls a "fail-safe," which would mean automatic spending cuts if the deficit doesn't meet certain targets over the next several years. Agreement on deficit-cutting targets could also ease the way for passage of legislation to increase the debt ceiling, which Treasury has said must be passed as soon as the middle of May. Democrats want to keep action on deficit reduction separate from the debt-limit bill, but Republicans want to put significant spending cuts in place as a condition of raising the debt ceiling. "The Congress is going to pass an increase in the debt ceiling." Geithner said. "They recognize that. They know they have to do that. They've always done that. That's not really the issue." "The real challenge is to make sure we put in place... multiyear targets that put the deficit on a path that declines over time so that the debt burden starts to decline as a share of the economy," Geithner added. "That's the economic imperative. That's the important thing to do." It's not clear that deficit targets would be enough for Republicans, who have not publicly specified what they would need to back an increase of the debt ceiling. However, GOP leaders have come out strongly against raising taxes-even allowing current tax cuts to expire for upper-income earners-as a way to reduce the deficit. Geithner said he has been in recent contact with some lawmakers, including Sen. Tom Coburn, R-Okla., and House Budget Chairman Rep. Paul Ryan, R-Wis., but did not provide any details. "Look, both sides understand that if we're going to do this, we have to do it together. It's going to take Republicans and Democrats," Geithner said. "And again, you know, I talk to Republicans on the Hill a lot. I spoke to Congressman Ryan yesterday. I spoke to Tom Coburn, the senator, last Friday." But Republicans have been critical of Obama's deficit plan, and last week the 11 GOP members of the Senate Budget Committee wrote asking him to submit a new budget by May 15. "The president continues to request dramatic spending increases for next year in the only formal budget submission we have received," Senate Budget Committee ranking member Jeff Sessions, R-Ala., said in a release Tuesday. "I hope the president will work with lawmakers to dramatically reduce federal spending."