Paulson, Geithner Urge Moving on US Debt Before It’s Even Harder

(Bloomberg) — Two former US Treasury secretaries urged Washington policymakers to address the country’s long-term fiscal challenges before they become insurmountable, speaking hours after the government lost its top-tier rating at Fitch Ratings.

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“Our fiscal trajectory is concerning,” Hank Paulson said Wednesday in an interview for Bloomberg Television’s Wall Street Week with David Westin. “We’re a rich country, and we’ve got time to deal with it. But we need to do some things in the next few years to change that trajectory.”

Paulson’s successor as Treasury chief, Timothy Geithner, said “you want to move the system to act before it’s late and hard.” Asked whether it would take a crisis before Washington did address its borrowing needs, he answered, “I hope not.”

The duo are co-chairs of the Aspen Economic Strategy Group, which is convening a conference this week to discuss building a more resilient US economy. Paulson and Geithner said their hope was to impress upon participants the need to address longer-term challenges, and to help catalyze ideas that might bridge partisan divides.

On the eve of the gathering, Fitch Ratings cut the US sovereign grade from AAA, citing a deteriorating fiscal outlook and concerns about governance. Current Treasury Secretary Janet Yellen blasted the move, saying it’s out of sync with a fundamentally strong US economy.

Read More: Yellen Blasts Fitch Downgrade at Odds With ‘Strong’ US Economy

“We have enormous capacity” to deal with the challenges, Geithner said. A key objective is “trying to make sure these long term challenges feel real and compelling to people” so that action will be taken.

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The Congressional Budget Office in May predicted that US budget deficits will total $20 trillion over the coming decade, with federal debt held by the public reaching 119% of gross domestic product, the highest in recorded US history.

“The longer we wait, the more painful the solution will be,” Paulson said. “It’s going to take doing things on both the spending side and the revenue side. We’re going to need more revenues. And we’re going to need to figure out how to deal with some some difficult issues in areas like the entitlements.”

Geithner invoked Winston Churchill, who “said famously that the United States in the end, after trying all the alternatives, usually does the right thing.”

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