Treasury Secretary Timothy Geithner told Congress Tuesday that the United States was at no risk of losing its top shelf credit rating, despite its soaring long-term debt.
"There's no way that's going to happen," Geithner told the House Appropriations Committee. "There's not a chance that's going to happen to this country."
Geithner spoke in response to a warning in a report released Monday from Moody's, the credit rating agency, that the United States and three other major Western countries could face a downgrade in their AAA ratings without "fiscal adjustments of a magnitude that, in some cases, will test social cohesion."
Geithner appeared before the panel as part of the Obama administration's "troika" of economic advisers, which in addition to Geithner includes White House budget director Peter Orszag and Council of Economic Advisers chairwoman Christina Romer. He acknowledged inevitable trillion-dollar deficit forecasts in the coming years, but said that President Obama's budget plans would set the country on a more sustainable long-term path, and put the ball back in Congress' court.
"We can only propose," Geithner said. "If Congress were to act on those changes, you would bring about a dramatic, necessary, important improvement in our fiscal position."
His explanation, in response to questions from Rep. Harold Rogers, R-Ky., also gave Geithner a chance to plug the administration's fiscal commission, which aims to recommend painful changes to the country's revenue and spending programs in order to address long-term deficits.
"This is completely within our capacity as a country to solve," he said.
Rep. Frank Wolf, R-Va., however, threw cold water on the commission's prospects. Though its seats are divided 10 to 8 in favor of Democrats, Wolf said it should have been evenly split and that Congress should be compelled to vote on its eventual recommendations. As Obama's panel is currently structured, a vote is not required. If one were to happen, it would probably come after the midterm elections but before the new Congress is sworn in.
"Your bill, if it ever comes up, will be voted on by a lame duck session with probably 50, 60, 70 members who are looking for jobs on K Street," Wolf said. "Their faith will not be with the American people."
Orszag told him that a post-election vote was the best way forward given political circumstances that favor short-term gain over long-term security.
"We face a very significant fiscal problem that is not a problem right now, but we have to get ahead of it before it becomes a crisis, and we believe that this is the right way forward," he said.
Much of the hearing was a familiar recitation of talking points from Obama's fiscal 2011 budget, along with equally familiar criticism of last year's economic stimulus. But in one moment of drama, Rep. Marcy Kaptur, D-Ohio, lit into the group of senior Obama officials, calling its testimony "dismaying " and "out of touch."
"Your testimony doesn't even mention the total number of unemployed and underemployed and marginally attached in our country," she said tartly. "That number, for your information, is 25 million people."
Kaptur said an abstract discussion of the long-term fiscal picture lacked compassion for the unemployed, those behind on their mortgages and people turned away from food banks. She criticized the trio's testimony for spending five pages on the deficit and only three paragraphs on unemployment.
"We have a deficit because we have unemployment. People aren't working," she said. "You have no urgency."
Geithner responded that stimulus and bailouts, fairly or not, were an essential first step to restoring all sectors of the economy.
"There is no path to unemployment improving … that did not start with fixing the crisis and restoring growth," he said. Programs to help underwater homeowners renegotiate their mortgages were slow, he acknowledged, but improving.
"It is pitiful, sir, it is an embarrassment to the nation," Kaptur responded.
Geithner also elaborated on the conditions under which the administration would accept a new consumer regulatory body. On Monday, Sen. Christopher Dodd, D-Conn., unveiled his plan for a new regulator within the Federal Reserve. The administration had initially pushed for a separate entity that, as Geithner put it, "woke up every day and worried about one thing, which is how to protect consumers."
But the Treasury secretary said Tuesday that the administration would accept a body that had independent budget authority and a leader picked by the president and confirmed by the Senate. He added that it must be able to write and enforce rules that apply across the system, including to banks, mortgage lenders and check cashers.
"We don't want to see an outcome where you see parts of the system left out of the rules of the game with no adequate enforcement on those entities," he said.