Geithner in Chicago: Obama ‘prevented' a depression

Treasury Secretary Tim Geithner delivered his boss’ argument for re-election during a Chicago speech Wednesday, asserting that President Barack Obama’s policies “prevented” a depression while laying the foundation for stable growth.

Geithner said that in Obama’s first six months in office, the president presided over a large jump in economic output. He said the American economy is in better shape than those of other nations.

The treasury boss also took swipes at Republican critics who argue for deep spending cuts.

“A growth strategy for the American economy requires more than just promises to cut taxes and spending,” Geithner said. “We have to be willing to do things, not just cut things.”

His partisan broadside followed by a day Obama’s attack on Republican budget proposals. The president called them “thinly veiled social Darwinism.”

Geithner drew a distinction between Republicans who contend government deficits impede growth, and an administration that has balanced the need for budget cuts with spending that bolsters the economy. Sometimes a recession “requires government doing sensible things,” he said.

Obama moved aggressively with the Federal Reserve to contain the economic problems that greeted his arrival in the White House, Geithner said, mentioning decisions such as the federal bailout of the auto industry and the package of public works spending the president supported and signed into law early in 2009.

Within six months that year, the economy swung from an annual rate of decline of 9 percent to a growth rate of 2 percent. “So in a remarkably short period of time, we were able to not just prevent a second Great Depression, but also to begin laying a stronger foundation” for growth, Geithner said.

As a result, the economy is more productive now than before the crisis, with strong gains in investment and exports, Geithner said. He said American business continues to see broad-based improvement in energy, agriculture, manufacturing and high-tech.

Conservative critics, Geithner said, misread what’s going on. “Many have claimed that the basic foundations of American business are in crisis, critically undermined by taxes and regulation,” he said. “And yet, business profits are higher than before the crisis and have recovered much more quickly than overall growth and employment.”

He said the future demands investments in education and infrastructure plus reforms of the financial system, whereas some Republicans would slash spending so deeply as to imperil the social safety net. The conservative strategy “is a recipe to make us a declining power, a less exceptional nation, and it’s a dark and pessimistic vision of America,” Geithner said,

Geithner spoke to the Economic Club of Chicago, a business leadership group that met at the Chicago Hilton. In a question-and-answer session that followed his speech, Geithner commented that the U.S. has lagged in restructuring the mortgage system and he hopes a bipartisan deal will achieve that. Fannie Mae and Freddie Mac fell under federal control in the housing crisis and their fate is unclear.

Responding to other questions, Geithner said he isn’t worried about huge increases in student loan debt and he defended the Wall Street reforms contained in the Dodd-Frank law.

Geithner insisted Obama’s spending plan would cut $2.50 for every $1 in new revenue, and the tax hike would hit a “very small fraction” of the wealthiest Americans.

The tax hike would raise $1.5 trillion over 10 years and opponents must say which “core functions” of government they’d rather see take the hit, Geithner said.

Moderating the session was John Canning Jr., chairman of Madison Dearborn Partners. Canning is an investor in Wrapports LLC, owner of the Chicago Sun-Times.

Later Wednesday, Geithner toured the Ford Motor Co. plant on Chicago’s Southeast Side.