Treasury Secretary Timothy Geithner on Thursday said it was vital to get U.S. budget deficits down in order to spur private-sector growth that creates jobs and predicted it will begin happening in 2011.
But first the financial system must be stabilized.
You cannot address those long-term deficits, you cannot put the government of the United States in a position that we can go back to living within our means, unless you repair the damage done to this economy and to its revenue base, he said on CNBC television.
The budget deficit hit a record $1.4 trillion in fiscal 2009 that ended September 30 and is forecast to be in the same range next year, fostering doubt in global markets about the dollar's value because of huge U.S. borrowing needs.
Geithner said it was important for the United States to maintain a strong dollar and said he takes seriously its key position as a global reserve currency. He said the United States needs to persuade the world it will be more fiscally responsible in future.
If we can be credible and make sure the American people understand and the world understand that we're going to bring down these deficits once growth is established, we will have more ability now to do what we need to do to get jobs created, get investment going now, he said.
Sometime in 2011 we'll begin the process of getting those deficits down, Geithner added. He said current deficits were unsustainably high but said the Obama administration inherited them when it took office in January.
Geithner, who is participating in a White House conference on job creation on Thursday, said the U.S. economy was much healthier now despite some continuing problems with tight credit availability and strained housing markets.
Just 14 months ago, 15 months ago, we were at the edge of catastrophic financial collapse, the rivets were coming off the submarine, so we are in a dramatically stronger position today, he said.
But he dodged questions whether Treasury will request an extension through next October for the $700-billion Troubled
Asset Relief Program, which it would have to do by the end of December. If it does not do so, TARP will expire at year-end.
Geithner said Treasury will issue a report within days showing the government is making a positive return on the bailout money that it put into weakened banks, some of which are now repaying the money.
The Bank of America announced on Wednesday that it will repay the entire $45 billion of TARP money that it got from the government and more are expected to do so.
Geithner said that it was vital to get U.S. budget deficits down to about 3 percent of total national output. We're committed to do that and we will lay out in the president's (February) budget ways to get us on a path to get us to that objective, he pledged.
Geithner said it was important that Americans understand why it is important to have a strong currency. Given the currency's role in the global economy, the United States must show it is getting growth on a firmer foundation.
We have to take that obligation very seriously. I take it very seriously, he said. When conditions in the global economy were most fragile, people brought their money into dollars and (U.S.) Treasuries, and as fear has receded and confidence has returned somewhat, some of that has been unwound and reversed.
That should be taken as a reassuring sign of confidence in the U.S. commitment to restore growth, he said.
(additional reporting by Mark Felsenthal, Doug Palmer and Tim Ahmann)
(Reporting by Glenn Somerville; Editing by Theodore d'Afflisio)