A wave of tax increases and billions of dollars in automatic spending cuts would cause "a lot of damage" to the fragile economy, Treasury Secretary Timothy Geithner said on Monday.
Tax breaks for all Americans are set to expire at the end of the year, and $100 billion in cuts to domestic and military programs are set to take effect in January if Congress does not agree on a new deficit-cutting deal.
"Many people who look at this say that, yes, you'd at least get a recession out of this," Geithner said on PBS' Charlie Rose television show. "The cumulative size of those cuts - tax increases and spending cuts - are very, very large relative to the economy," he said.
The nonpartisan Congressional Budget Office forecasts that the mix of spending cuts and tax hikes would cause the U.S. economy to contract at an annual rate of 1.3 percent for the first half of 2013 if lawmakers do not act.
The White House is pushing Congress to extend for one year tax cuts for families earning less than $250,000 a year. Taxes for those earning more than that would increase in 2013 if Congress passes legislation the Obama administration wants.
Republicans argue that all tax cuts should be extended to avoid hurting the tepid economy.
Geithner warned lawmakers that investors could not stomach a repeat of last year's debt ceiling battle that increased the U.S. Treasury's borrowing costs and stripped the United States of its top credit rating.
"You saw huge damage to consumer confidence, to business confidence, and to confidence around the world in the United States because you had people in public office threatening to default on our nation's obligations," Geithner said.
President Barack Obama said on Monday that Congress "ought to be able to come together and agree on a plan, a balanced approach" to avoid the steep automatic spending cuts.
EURO ZONE WILL STAY INTACT-GEITHNER
Geithner reiterated that the domestic fiscal problems and the European Union's economic crisis were still the biggest threats to the U.S. economy.
But he said he thought the 17-nation common currency euro zone would stay intact. "They've said, 'We will do everything it takes to hold the European Union together.' And you could say that's what they're trying to do," Geithner said.
His comments came as Moody's Investors Service cited an increased chance that Greece could leave the euro zone, which would set off a chain of financial sector shocks.
Although Geithner said European leaders had committed to do what it takes to hold their financial system together, he added they had to make that commitment credible to markets and investors.
"If you leave Europe on the edge of the abyss, if you leave it just teetering on the edge of financial disaster, it'll be much harder for this strategy to work," he said.
(Reporting By Rachelle Younglai; Editing by Peter Cooney)
@yahoonews on Twitter, become a fan on Facebook
EXPLORE RELATED CONTENT1 - 4 of 12
Play Video
White House: Pass tax cuts that we agree …
AP

Spain's Minister of Economy and Competitiveness …
Associated Press
Play Video
Obama calls for extension of tax cu …
WMUR - Manchester

Timothy Geithner speaks at the Council …
Reuters
TOP STORIES »
Sally Ride remembered: Tributes to 1st American woman in space
Colorado suspect's family stands by him
Coulson, Brooks charged over hacking
Obama warns Syria’s Assad on chemical arms
3 arrested in separate 'Dark Knight' incidents
Russian cargo spacecraft fails to dock to Space Station
MOST POPULAR
Colorado theater shooting suspect James Holmes appears dazed in court
Gun control surfaces in CT, VA Senate debates following Colorado shooting
14 dead in horrific Texas pickup truck crash
Demonstrators protest California police shooting
17-year-old sexual assault victim could face charges for tweeting names of attackers
'Seinfeld' Star Jumps Into Assault Weapon Debate
MORE POPULAR YAHOO! NEWS VIDEOS1 - 4 of 29
Play Video
Heart Yourself
Play Video
]Cleopatras Nail Polish: Ancient Manicure and the History of Nail Polish Colorin …
Play Video
Cleopatra's Nail Polish: Ancient Manicure and the History of Nail Polish Colorin …
Play Video
Woman on raft comes within yards of surfaced humpback whales
More Video »
NEWS FOR YOU
Oil falls, pressured by Spain, euro zone worries
Germany says euro zone "anchor" despite Moody's change
Russia won't dump euros: Putin
Germany: Confident in Spain's economic recovery
Assad still in Damascus and retains army's loyalty: Israel
EU tightens arms embargo on Syria
Nowhere to hide: Global economic troubles spread from Europe and US to China, India and Brazil
EU to strengthen ties with Israel despite criticism
More »


Obama, fair play, and college sports
Jeff Greenfield says the fan-in-chief ought to look at the duality in college athletics. Read now.
Get more headlines »


Tuesday in politics: Romney speaks to veterans, Obama fundraises on the West Coa …
46 mins ago
Outside money ban in Massachusetts Senate race is working, but at what price?
Are attacks on Romney’s business record working? Polls are split
Obama: Sally Ride taught girls to ‘reach for the stars’
Obama lays out ‘The Choice’ for voters in new ad
Obama defends handling of Iraq, hits Romney, as violence flares

TODAY ON YAHOO!1 - 4 of 45

Batman killing spree planned for months

Apparent violations follow coach's hiring

UFC fight lasts all of seven seconds

Victims: As old as 51, as young as 6

EDITORS' PICKS

outlink
Full coverage of Colo. massacre

slideshow
Penn St. removes Paterno statue

outlink
Obama's history of going negative
YAHOO! NEWS
Home
U.S.
World
Business
Entertainment
Sports
Tech
Politics
Science
Health
Blogs
Local
Popular
All Yahoo! News »
ALSO ON YAHOO!
Autos
Finance
Games
Groups
Health
Maps
Movies
Music
omg!
Shine
Shopping
Sports
Travel
TV
Y! News RSS
Y! News Alert
All Yahoo! »
TRENDING NOW
James Holmes Joker
'Gangster Squad' scene
Ichiro
Snooki Mets game
New iPhone
Fred Willard
Uconn gunman
Tax cut plan
Multiple sclerosis drug
Second person of interest
(c) Copyright Thomson Reuters 2012. Check for restrictions at: http://about.reuters.com/fulllegal.asp
Copyright © 2012 Yahoo! Inc. All rights reserved. | Yahoo! - ABC News Network | Help / Suggestions Privacy Policy About Our Ads Terms of Service Copyright/IP Policy