WASHINGTON Treasury Secretary Timothy Geithner on Tuesday warned against extending all the U.S. tax breaks to give Washington additional time to broker a deficit reduction deal, saying it would create more uncertainty in the markets.
The Obama administration and Congress have seven weeks to deal with the so-called "fiscal cliff," a scenario in which hundreds of billions of dollars in tax hikes and spending cuts start to take effect next year, driving the economy into recession.
With lawmakers and the White House bickering over how to put the country on a sustainable fiscal path, a number of lawmakers and think tanks have argued for more time.
"That will leave all the uncertainty you don't like on the table," Geithner said at an event sponsored by the Wall Street Journal in his first public comments on the looming fiscal crisis since President Barack Obama won re-election last week.
Earlier, Geithner and Obama met with leaders from the country's biggest labor unions and liberal groups where Obama repeated his campaign promise to raise taxes on the wealthiest and hold tax rates down for those earning under $250,000, according to attendees.
At the Wall Street Journal event, Geithner said it was not possible to reduce the deficit over the long term without additional tax revenues.
"If you believe ... we shouldn't be asking middle-class Americans to pay more in taxes, then I don't see how you do this without higher rates," said Geithner, who is expected to stay on as Treasury Secretary into early next year to help the White House negotiate with Congress. "I just don't think there is any feasible, realistic way to do it," he said.
Geithner said the administration had proposed a fiscal reform package that would raise about another $1.5 trillion in revenues through a mix of modest rate increases and reforms that limit the value of deductions on upper-income people.
"It's true, there are other ways to do that. But there is a lot of magical thinking about how much money you can raise from tax expenditures," he said.
Tax expenditures are targeted giveaways in the tax system such as mortgage interest and charitable deductions.
Top Republican lawmaker John Boehner has said House Republicans were willing to accept new revenue under the right conditions - comments the treasury chief characterized as encouraging.
Obama has made an effort to reach out to congressional leaders since winning re-election and on Friday will meet with top Democratic and Republican lawmakers to start budget negotiations.
Geithner pointed to the administration's most recent budget proposal as a path to reduce the trillion-dollar budget deficits and said it included hundreds of billions of dollars in reforms to the healthcare system.
(Reporting by Rachelle Younglai, Editing by Prudence Crowther and Eric Walsh)