Treasury Secretary Timothy F. Geithner leaves a meeting of the Financial… (Alex Wong, Getty Images )
CHICAGO — Treasury Secretary Timothy F. Geithner said that improvement in the economy is promising, but he warned that too much deficit cutting too quickly could undermine the recovery.
Speaking in Chicago, Geithner noted Wednesday that business investment in equipment and software is up 33% and exports have grown 24% in the last 21/2 years.
"Overall, we have done a better job than many economies in making adjustments" after the financial crisis, he said.
Geithner also commended Eurozone leaders for the safeguards they have put in place to curtail the threat of a new financial crisis.
He said he is encouraged that "manufacturing is coming back, with factory payrolls up by more than 400,000 since the start of 2010."
But he noted that unemployment remains high and that too many Americans are still facing difficulty, though they have made progress in paying down debt. "Household debt is down 17 percentage points relative to income since before the crisis," Geithner said.
But he urged political leaders to be cautious about moving too quickly with extreme deficit reduction because the lesson of past financial crises has been that cuts too early bring about new recessions.
Geithner challenged business leaders who do not like proposals for higher taxes to rally around deficit-reduction measures.
"The changes are very modest, and on the richest Americans the effective tax rate is still very low. Life is about alternatives. If you do not like the plan, you must ask: 'Where are you willing to find another $1.5 trillion?'"
He urged political leaders not to repeat last summer's fighting when it comes time later this year for Congress to extend the nation's debt ceiling. Last summer's debate, he said, was "damaging for confidence" and held the economy back.
Geithner also defended the 2010 Dodd-Frank financial overhaul law. He said that the law has reduced the risk of another financial crisis and that U.S. banks are in good shape after being required to build up capital.