10 Questions for Timothy F. Geithner The attacks on Treasury Secretary Timothy F. Geithner that marked the early part of the Obama administration have died down somewhat as the economy has recovered. But struggles in Europe have created new economic challenges as Mr. Geithner serves out the remaining months of Mr. Obama's first term, as the president implored him to. After touring a manufacturing plant in Clackamas, Ore., Mr. Geithner sat down Wednesday with John Harwood of The Times and CNBC to discuss the still fragile recovery and the quickening economic debate in the presidential campaign. We now know that the United Kingdom is in recession, the Euro Zone is in recession. Are we now looking at the prospect of another springtime disappointment after positive economic signs, like we experienced in 2010 and 2011? We're not an island of prosperity unto ourselves. And so we get affected by what happens beyond our shores. We saw in 2010 and 2011 as the economy was recovering, you know, we got hit by Europe, by oil, by Japan. That caused growth to slow here. But we're gradually getting stronger. And Europe is doing a better job of managing their crisis. The most likely thing you're going to see is that Europe contains the risk of a major cataclysm. They can let these reforms take some time to work. And our economy should continue to get gradually strengthened through that. Austan Goolsbee, the former chairman of the president's economic advisers, thinks odds are at least 50-50 that private forecasters are right, that we're looking at growth of 2 or 2.5 percent of G.D.P, and that if it's at that level, you can "kiss job market improvements goodbye." Is the administration helpless to do anything about that? Well, the most important thing, the most valuable thing we could do for the economy now is for Congress to act to pass some concrete things - to strengthen infrastructure, help export growth, help Americans refinance their mortgages, take advantage of lower rates, prevent student loan rates from increasing, as you heard the president talk about this week. Most private business forecasters look at the American economy, they see the economy growing between 2 percent and 3 percent. Not surprising as we dig out of this recession. But it's looking more resilient and the strength is more broad-based. The fact that the U.K. is in recession is fueling debate over whether austerity policies are at odds with recovery. The Wall Street Journal editorial page had a piece today saying that Germany had done the world a favor by rejecting advice from President Obama and you to join the global spending party. Why are they wrong? An important big debate for the United States right now. But Germany did about the same level of actual stimulus we did in 2009. And they did it for the same reason we did, which is the world was burning. It's important for everybody to recognize we're going to have to act to bring our long-term deficits down. We have to do that in a way where we phase in the reforms, so they don't damage growth. It would be a terrible mistake, economically, for the United States to lurch, prematurely, to extreme austerity, to severe austerity. That would undo a huge amount of the progress we made repairing the damage from the crisis, would push unemployment up. It would push us back into recession. There's an emerging critique from the other party that President Obama's a nice guy, well-intentioned guy, but he's in over his head. What do you say to that? It's just politics. If you look at what the president did, he didn't sit back and let this crisis burn. He didn't commission a bunch of studies. He didn't play politics with it. He acted with enormous courage, no political support from his opposition, and put together a remarkably effective rescue strategy for the American economy and the global economy. We have more than four million private industry jobs created. We should have a debate about what is going to make the economy stronger in the future. And there are big differences between the strategy the president has put in place and the strategy of his opponents. A huge part of the president's strategy is a growth strategy, designed to improve opportunity by making sure Americans can take advantage of better educational training opportunities. We're rebuilding America's infrastructure. We're investing in innovation. And we're protecting the basic safety net for low-income Americans and seniors. We can do all that and still put in a place a balanced plan to bring down our deficits over time. I'm very confident that's the right strategy for the country. It's a very different strategy than the strategy of our opponents, who are focused primarily on how to cut regulation, even in the financial sector, how to roll back health care reforms that provide health care to millions of Americans, and how to bring deficits down without asking even a modest additional burden on the top 2 percent of Americans. They argue that your plan is to raise taxes. Glenn Hubbard, dean of the Columbia Business School, wrote a piece today saying that the president's spending commitments would require an 11 percent tax increase on people under $200,000 a year. That's a completely made-up, remarkably hackish observation for an economist. The president's fiscal reform plan would bring our deficits down to below 3 percent of G.D.P. over the next four years, so that the debt burden stops growing as a share of the economy. We propose a series of tax reforms that would modestly increase the burden, but only on the top 2 percent of Americans - 98 percent of Americans would see no increase in their effective tax burden. Now the alternative strategy of our opponents asks no additional burden on even the most fortunate Americans. And as a result puts a huge burden on reducing benefits for low-income Americans, for retirees. And would completely gut and erode our capacity to support things like education and infrastructure that are absolutely essential to our capacity to grow in the future. Do you and the administration accept any responsibility for the contribution that the prospect of higher taxes and increased regulation under Dodd-Frank might play in slowing economic recovery? It is true that we are putting in place some tough reforms on the financial system, because we don't want the country to face the risk of another crisis like we've been through. You know, we're still living with the scars of the crisis. And the reasons why unemployment is so high today, why housing is still so hard, why this is still such a tough economy, is overwhelmingly because of the damage and the aftershocks of that basic crisis, which, of course, the financial sector was central to. But there is no evidence to suggest that those regulations are having a material impact on slowing the economy down. The profitability of the American business sector today is much higher than it was before the crisis. The debate we're having on taxes is just about whether 2 percent of American individuals and about 3 percent of small businesses would face a modest increase in their effective tax rates. There's no plausible argument you can make that that modest increase in such a small fraction of the American economy is having a material effect on behavior today. You're going to Beijing for the strategic economic dialogue. As you know, Mitt Romney, the, presumptive Republican nominee, has said that your administration and previous administrations have been played by the Chinese. He will fix that, negotiate more effectively, by declaring them a currency manipulator on Day 1. Why wouldn't that be a more effective strategy? By just calling them a name? Like you can solve problems in the world, a very complicated world we live in, by calling people names? It's true China presents a very complicated mix of opportunities and challenges for the American economy today. But our exports to China over the last few years have been growing very, very rapidly. China has let the exchange rate appreciate by roughly 13 percent against the dollar, in real terms, over that period of time. The competitive playing field is shifting in our direction. That's the results of a very successful and very tough strategy of the president. Mitt Romney has a record as a fairly sophisticated businessman. Why shouldn't Americans have more confidence in his ability to negotiate with China? What would happen if you named China a currency manipulator? Nothing would happen, except you would diminish the incentive they have to move. It comes with no effective sanction or action. If it had been an effective way to get change in China, then bipartisan, Democrat and Republican presidents over time would have embraced that basic strategy. But it had no merit as a basic strategy. And it does carry the risk of a trade war, which is why there's so much opposition to that basic policy. Walmart recently lost a huge proportion of its market value as a result of a controversy over potential violations of the Foreign Corrupt Practices Act. There's now an S.E.C. investigation of Hollywood into whether or not improper payments were involved in some marketing openings there. How extensive of a problem do you believe it is? If a corporate executive said to you, "Competitive world - we've got to do whatever we can to get an advantage," what would you say to them? I don't have a good feel for it, John, and don't feel I can comment on either of those two cases. I'd say: "You've got to follow the law of the land. And you've got to make sure that you're honoring the letter and the spirit of the laws that you are governed by, in that context. We're going to make sure we have strong, consistent, credible enforcement of those rules. There was a report quoting your father-in-law the other day, suggesting that the president's appointment of the president of Dartmouth to be the head of the World Bank was connected with a plan to have you become the president of Dartmouth. Do you want to become the president of Dartmouth? Was that part of the president's decision-making? Have you talked to your father-in-law about it? Completely contrived myth. Played no role in that context. He called me about it. He said, "I didn't say that."