Tim Geithner Won’t Rule Out New Taxes for Middle Class

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To get the economy back on track, will President Barack Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a “This Week” exclusive, Treasury Secretary Tim Geithner told me, "We’re going to have to do what’s necessary.”

Geithner was clear that he believes a key component of economic recovery is deficit reduction. When I gave him several opportunities to rule out a middle class tax hike, he wouldn’t do it.

“We have to bring these deficits down very dramatically,” Geithner told me. “And that’s going to require some very hard choices.”

“We will not get this economy back on track, recovery will be not strong and sustained, unless we convince the American people that we are going to have the will to bring these deficits down once recovery is firmly established,” he said.

While Geithner told me, “There are signs the recession is easing,” he warned that, “We have a ways to go.”

“I want to emphasize the basic reality that unemployment is very high in this country,” the secretary said. But, he underlined that the administration is “going to do what is necessary to bring growth back on track.”

Turning to the bank bailout, he told me it is “quite unlikely” that the U.S. Treasury will go back to Congress to ask for more funding for the financial rescue package.

"We do not plan to ask for more money and I think it’s quite unlikely that we do," Geithner said in his most blunt language to date on TARP funding. The secretary said that today the TARP has roughly $130 billion, in part due to more than $70 billion that has already come back into the government.

Geithner also strongly endorsed legislation currently pending in the House that would increase the power of the SEC and give shareholders more rights to vote on executive compensation. He insisted that Republican criticism that the government is overly involved in the financial system is unfounded.

"Everybody understands that we cannot have our financial system go back to the practices that brought this economy to the brink of collapse," he told me. "It is going to take fundamental reform."

Click HERE for the full transcript of my interview.