Tim Geithner's "taxmageddon" planApril 27, 2012: 11:26 AM ET
Speaking at an event in San Francisco hosted by the Commonwealth Club, the Treasury Secretary explained his approach to the coming "fiscal cliff."
By Richard Nieva, contributor
FORTUNE -- In the face of the United States rapidly approaching so-called "taxmageddon," Timothy Geithner is calm. The Treasury Secretary's plan to avoid the colossal coming tax hikes, despite the end-of-days allusion popular with many in Washington, is to take things one step at a time.
Taxmageddon, also known more plainly as the "fiscal cliff," refers to a slew of tax policies that are set to expire by the end of the year. These policies, which include the Bush tax cuts, add up to about $500 billion, or roughly 3% of the nation's gross domestic product. If congress fails to act, the automatic tax hikes could upend the economic recovery's progress, sending the country back into a recession.
Stakes high, Geithner admitted that much of the heavy lifting would be done after the general election in November, giving congress roughly two months to agree on a fix. Still, Geithner doesn't seem to necessarily see the short time frame as do-or-die crunch time. "You don't need to solve all of a country's problems over the next hundred years in the six weeks after the election," he said, speaking at an event in San Francisco hosted by the Commonwealth Club, and moderated by Fortune senior editor-at-large Adam Lashinsky. "What you have to do is make sure you put in place a framework that makes some progress."
In the meantime, he says, the Obama administration has been doing a lot of "up front" work in the months leading up to the election, including the having the president go on a press whirlwind explaining how the tax reforms would work. (Geithner himself has been press friendly of late, a prelude to his trip to China next week with Secretary of State Hillary Clinton to discuss economic issues and challenges with that nation's leaders.)
Critics say doing only a little now -- like replacing the automatic tax cuts, or "sequestration," that congress put in place last summer while trying to raise the nation's debt ceiling -- means leaving a lot of work down the road. Geithner's response is working in stages -- first making tax changes and spending cuts that correspond to the sequester, "and then set in motion the process that will allow tax reform to come alongside some sensible long-term savings," he said. Among those goals would be making Medicare and Medicaid more sustainable, he said.
Geithner also put the taxmageddon situation into the context of the nation's larger fiscal landscape. "This is not the only challenge we are facing as a country," he said. "You cannot use that challenge as an excuse to do nothing for the economy now." Making changes for the future, he said, should not ravage funding in education or basic science and research.
Still, though he downplayed the situation (while also emphasizing its "importance"), he acknowledged the issue is enough of a looming threat to rouse bipartisanship with Republicans. "I think the basic reality and the basic fiscal math is going to force them to that point," he said.