[By Larry Goldfarb]

The country is coming out of the deepest recession since the 1930s.  Unemployment is touching 8% and the GNP is growing at a level that cannot sustain significant job growth.  According to economists from both sides of the aisle, the last thing the economy needs is tax increases and spending cuts.  

Well, if Congress and the President do nothing over the last 6 weeks of 2012, that is exactly what is going to happen.  The Bush tax cuts will expire, and the deal that Congress and the President made last year  to avert a US Government default will automatically kick in causing major spending cuts.  Tim Geithner the current Treasury secretary spoke to the Wall Street Journal about his hopes and fears for the economy as we move toward Armageddon.

MR. WESSEL: Do you think we're going to go over the fiscal cliff?

MR. GEITHNER: There's every reason to believe this is a solvable problem. We have a lot of challenges as a country, but I think there's a lot of support for trying to do things that will help make the economy stronger in the short term. There's obviously universal support for extending the middle-class tax cuts. Doing that would remove the greatest source of anxiety and much of the greatest risk in the fiscal cliff. There's a lot of support for finding bipartisan consensus on other things that would make the economy stronger, like a set of commitments to finance a higher level of public investment in infrastructure and education.

MR. WESSEL: Are you saying if Republicans don't agree to raise top rates back to where they were when Bill Clinton left office, we're going over the fiscal cliff?

MR. GEITHNER: I think it's pretty encouraging you've seen Republican leadership recognize that we're going to have to generate modest additional revenues from high-income Americans, and that's a good recognition.

But we're just at the beginning. This is going to be tough, but it's something we have to go through. If we're going to make sure we're supporting things that will improve long-term growth prospects, we have to figure out a way to resolve the divide on these basic questions.

MR. WESSEL: What happens if we go over the cliff? What happens if Republicans can't bring themselves to raise the top rates?

MR. GEITHNER: I don't see why they would make that choice. Why would you want to put the economy through that? After conceding that revenues are going to have to go up and conceding that revenues are going to have to go up on the most fortunate Americans, why would you take the economy over the cliff?

MR. WESSEL: Why should I believe this will end any more positively than the summer of 2011?

MR. GEITHNER: You have Republican leadership acknowledging they're prepared to agree to an increase in revenues as part of an agreement that helps restore fiscal balance. You have a much greater recognition that the economy would benefit from a carefully designed agreement on fiscal reform. And if you listen carefully to what people in the business community and many politicians are saying, there's a lot of consensus on it.

To read the complete interview, please read [WSJ, 11/19/12]