unveils his plan to trim the deficit and boost the economy. treasury secretary timothy geithner joins us to explain why it's good for the economy. it's "nightly business report" for monday, september 19th. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening everyone. tom hudson is on assignment.

president obama today unveiled a plan to cut the nation's deficit by $3.5 trillion over the next decade. almost half of that will come from tax increases, including a new tax on millionaires. we'll get analysis from two u.s. treasury secretaries, past and present-- timothy geithner and former secretary george shultz. but first, the president's latest proposal to get america's economy back on track. >> this is not class warfare, it's math. the money is going to have to come from someplace. >> one place is by closing corporate tax loopholes. the president's plan also limits the value of deductions taken by high earners and ends tax cuts for the wealthy. that adds up to $1.5 trillion in tax increases. this includes the so-called "buffett rule," named for warren buffett. the billionaire investor has argued the very rich are not

taxed enough, saying people making more than $1 million a year should pay more income taxes than middle-class families. another $1 trillion in savings would come from winding down the wars in afghanistan and iraq. and the president is proposing changes to medicare, medicaid and other programs that would reduce the deficit by $580 billion. president obama says he will veto any plan that comes at the expense of ordinary americans and any plan that relies solely on spending cuts. his proposal now goes to a congressional supercommittee that has been charged with cutting at least $1.5 trillion from the deficit. it has until november 23 to reach a deal. congress must pass it by december 23, otherwise automatic cuts will take effect in january 2013. getting the measure passed in congress will be a tough fight. here's what house speaker john boehner said today about the president's plan: "pitting one group of americans against another is not

leadership." >> susie: defending the president's plan? treasury secretary timothy geithner. he sat down with our washington bureau chief darren gersh earlier today. darren began by asking him about why the president is so focused on the buffett rule. >> mr. secretary, fisch of all, thank you very much for your time, appreciate it i want to start off y is the president focusing so much on what people are calling the buffett rule? >> well w what the president laid out today was as part of a very tough, very strong long-term fiscal reform to go back to within our means, re-- he proposed comprehensive tax reform with important broad principleses. those were the lower rates, try to clean up a lot of waste in the tax code, help contribute to deficit reduction, help improve incentives for investors in the united states so we're more competitive but also we want to make the system more fair. as part of that what he said is it's only part of it, his basic views if you make more than a million dollars a year today, that we want to

make sure you're not paying less in tax than an average middle-class family. >> well, the top 1% of taxpayers now pay about 40% of all the federal income tax in the country. so can they pay more? how much more should they pay? >> i think most people look at fairness in the design of tax policy. through the prism of what share of income do you pay in tax. and one of the really remarkableable things about the american tax system over time is that some of the most fortunate americans in the country, some of the richest people in the world pay a very small percentage of their income in taxes. there's a number from 2008 that said richest 400 taxpayers in the united states paid on average only 18% of their income in taxes. and that's a significantly lower share of income than for many average working families. >> i've already gotten an e-mail from the national association of manufacturers who are calling this a poison pill. >> that's just a political argument by a business

lobby. >> but wait, their members are manufacturers. and they say because manufacturers pay at the individual rate it would hurt job creation. so what i wanted to ask you, so if that e-mail shows up in a manufacturers in-box, what would you tell him or her? >> i think they're mistaken in terms of the substance of what the president is trying to do. what we're trying to do is propose comprehensive reforms including on the corporate side that would make it more likely for people to invest and build and create things in the united states. and as part of that the president says he wants to bring down the corporate tax rate, clean up a bunch of special loopholes in the corporate tax code so that the average manufacturing company in the united states to give you one example, we're making the economics of that business better, not worse. >> by threatening to veto a plan that cuts spending but doesn't raise revenue, the president is on a collision course with the speaker, house speaker john boehner who said he doesn't want any revenue as part of -- >> that's not what the president said. ion't get the language

perfectly right. what the president said was he would not support legislation that changed benefits for those who rely on medicare without those reforms coming with serious changes on revenues. so that the richest americans paid a better share of their income on taxes. >> but how do you come tie long-term agreement when the president is saying he wants a lot of new revenues, and republicans are saying there's no way they're going to do a lot of new revenues. >> it is a tough thing, this challenge. and governing is about making choices. we do not have unlimb thed resources. everybody believes on both sides of the american political spectrum that our deficit is unsustainable. we have to bring it down over time. you have seen republicans and democrats agree on the broad changes we need to seek. roughly $4 trillion in total deficit reduction over a decade, phased in carefully so we don't hurt the economy. we agree on the basic numbers. the question is how to do it. and if you try to do it without raising a dollar of revenues from the american economy as a whole, from the

richest americans, then you are forced to do as you saw the republicans propose in april, one more thing, then are you forced to do unacceptably deep cuts on senior citizens on medicare beneficiaries and the most vulnerable americans. we're not going to support that. >> why should anybody hearing you, and hearing the speaker, what his priorities, conclude that this committee that, this supercommittee that is supposed to come up with a trillion colors in cuts in the next couple of months is going to be anything but a failure. >> because i think if you-- people understand the reality we live in today. which is we have a overwhelming need to do more to help the economy in the near term so we get more people back to work. but we also have to figure out a way to deal with the long-term deficit. and we sit here and do nothing, and what will happen is growth will be weaker. there will be less confidence am this country, and americans will be left wondering whether their leaders in congress are up to the challenges facing the country. so there is a huge economic imperative that will force

compromise and change. >> susie: still a continue our conversation with secretary geithner and the focus turns to europe's debt crisis. a schizophrenic day in the markets. at the open, investors dumped stocks on worries that greece would default on its debts. but stocks reversed course after greece's finance minister said the country is close to a deal to receive its next installment of bailout money. here's how things looked by the close. the dow was down 108 points, bouncing back from a 250-point loss. the nasdaq lost 9.5 and the s&p 500 was down 12. as for trading volume, 907 million shares moving here on the big board and 1.9 billion on the nasdaq. another concern for investors? this week's federal reserve policy meeting. the much-anticipated two-day gathering begins tomorrow. when the meeting ends on wednesday, investors expect policymakers to announce a new plan aimed at boosting the economy. and, as suzanne pratt explains, the fed is likely to deliver a

twist in policy. >> reporter: if anyone can steal the spotlight from europe, it's ben bernanke. starting tomorrow, the federal reserve chairman presides over a regularly scheduled policy meeting. the outcome, however, could be somewhat irregular. with unemployment stuck above 9%, and the economy sputtering, investors want aggressive action from the central bank. it's likely to come in what's being called "operation twist." economist anthony chan explains how it might work. >> that, of course, would involve purchasing long-term securities while simultaneously selling short-term securities. so, it has a neutral effect, but it tends to lower long-term interest rates to sort of push financial market players into taking a little bit more risk. >> reporter: by lowering the yield on safe and secure long- term bonds, the fed is trying to eliminate the incentive to buy them. the hope is that investors, big and small, will go elsewhere for more attractive returns.

where could they go? corporate bonds, real estate and maybe the stock market. all would be nice, as they could stimulate the economy. investment strategist doug roberts says it's basically the fed's attempt at the wealth effect. >> it kind of creates what they call a virtuous circle. everybody feels a little bit better because the market is going up, so they go out and spend a little bit more. and, in turn, that kind of acts as a trigger to get the economy going again and creates a circle that repeats itself. few fed watchers think operation twist will have a big effect on growth, but financial markets are counting on it. >> the stock market has really priced much of this in, and really what they're looking for in the upcoming statement is whether operation twist is really a prelude to qe3 or at least qe2.5. >> reporter: by qe3, roberts means another round of aggressive bond-buying from the fed. some experts would love to see that come this week, but most say don't count on it. suzanne pratt, "nightly business report," new york.

>> susie: our next guest has some strong opinions on how to get the u.s. economy growing again. he's george shultz. most people remember him as the secretary of state who helped end the cold war, but he's also a well-respected economist. he got a ph.d. from m.i.t. and was dean of the university of chicago business school. he was budget director, secretary of labor and treasury under president nixon, and secretary of state for president reagan. when i talked with him earlier today, i asked him what needs to be done to fix the economy. >> susie: . >> focus on things that are permanent. people respond to changes that they regard as long-lasting. so have a plan that puts in place what's needed for long-term growth without inflation. and keep it there. >> mr. secretary, what do you think of president obama's deficit cutting plan that he announced today? >> i do think this ten-year

projection business winds up with a lot of the spending cuts, as i say, back-end loaded, coming in the latter part of the ten years. when this congress has nothing to do with that, nothing. it's a new congress. so the things that you can do something about are today, and tomorrow. so that's why i think there should be a focus on what you are doing immediately. >> susie: what do you think about this millionaire's tax that the president is proposing? will this create jobs, or will this cost jobs? >> i think it tends to cost jobs. it produces incentives for small businesses so grow and prosper. there are a high proportion of the people who wind up making an income that's relatively large, are people like that, when they have a success. and you are just reducing the incentives for them to do what they are doing. >> susie: we have jobs proposals now from president obama and speaker boehner. which one do you think is

more right on track? >> i think the speaker is on the track. and when he says that you don't raise taxes in the midst of poor times, i think he's right about that. any tax is a drawdown on the economy. you tax in order to support the government. that's the only reason. it's a subtraction from economic activity. so when things are really tough, do you want to subtract more from economic activity, no. >> susie: many people are puzzled why american businesses aren't hiring more, spending more, given that they are sitting on a pile of cash. now are you going to be addressing business leaders tonight. what are you going to tell them? >> well, obviously they need to invest in activities that they believe are going to be profitable. that's the way we get our standards of living to rise. and i think once they see a

playing field that they can count on, they will. >> susie: let's talk a little bit about europe's problem. if you got a telephone call from german chancellor merkel or french president sarkozy asking for your advice, what would you tell them to do to get out of this difficult debt situation? >> recognize reality and deal with it. it's an insolvency problem, it's not a liquidity problem. and if you keep prescribing use ferrity austerity of various kinds, it's-- get them on a path to growth. i'm sure there is a lot of spending they should cut for growth reasons. but nevertheless, if growth is the name of the game. >> susie: mr. secretary, do you know there's a crisis of confidence in the u.s. is there any lesson learned from your tenure in the reagan administration that could restore confidence today now? >> well, put the end to the

program, different from -- problems are different than they were then but have tax reform for individual taxes, in the 1986 model. do the same thing for corporate taxes. get the spending line pointing down. probably you need to say what is your aiming point. your aiming point is the amount of revenue that the tax system would produce at high employment. that's a good point to aim at. get this regulatory moreas under some control and you're in business. >> susie: mr. spec-- secretary, thank you so much. it's been a pleasure talking with you. >> thank you. those worries about greece and a default put the brakes on wall street's weeklong rally in stocks. let's take a closer look with tonight's "market focus." investors pressed the sell button today.

all of the standard & poor's sectors ended in the red. the financials, energy and material sectors were hit the hardest. the financials are already down nearly 20% this quarter. energy and materials are off more than 12%. shares of european and u.s. banks fell sharply because of the uncertainties about greece. let's start with the u.s.-traded shares of some big european banks. barclays and royal bank of scotland both off over 7%, and llyods banking group losing 4%. among the u.s. financials, morgan stanley tumbled almost 8%, citigroup down 4.5% and a 3% drop for shares of bank of america. there were some bright spots in this down market thanks to buyouts and breakups. let's start with united technologies. reportedly it's buying goodrich, the aircraft landing gear maker. the potential tie up with u-t-x lifted goodrich stock to an all- time high of $107.60. the 15% gain made it the strongest performer in the s&p

500. and then there was tyco. the stock rose almost 2.5% after the company said it will break itself into three publicly traded companies. here's how those units will be broken up: a.d.t. home security, pipes and valves, and fire protection. tyco's c.e.o. maintains the businesses are strong enough to grow individually through acquisitions. also splitting? netflix, but the stock fell on the news. the video service is breaking its business in two, one unit focused on video streaming, the other handling its once-famed d.v.d. mail-order service. the mail order business also gets a new name, qwikster. taking a look at the stock, netflix stock tumbled over 7%. it was the worst performer in the s&p 500 today. and finally, a sweet day for apple investors. the stock hit a new all-time high. apple closed the day up over $11, or almost 3%, to $411.63.

investors gobbled the stock on speculation that apple might pay a dividend. and that's tonight's "market focus." more now of our interview with treasury secretary timothy geithner. darren asked him about the risks of europe's debt problems and what they mean for the u.s. economy.

>> you're just back from europe where you met with finance ministers there. you warned them that they need to remove catastrophic risk from the market. what does that mean? >> well, i think you what see in europe now, they are dealing with terribly different set of challenges and i deeply admire what they are trying to build, a stronger europe. and i recognize how hard it is for them to do. but if you have seen markets don't respond well if you have the threat of cascading defaults hanging over or the threat of weakness hanging over an economy. they don't tend to reward that kind of risk. and the basic test of policymakers in a crisis and the most important thing governments have to do in a cries sis to remove that catastrophic risk from markets. if you do that, then you have a chance for reforms to get traction. and are you creating more incentives for investors to try to support what europe is doing rather than undermine it. >> but how long can europe kind of stagger from meeting to meeting with no kind of comprehensive plan? >> well, they're working to

build the foundation to a more forceful comprehensive approach it is difficult for them to do politically. it's not technically very difficult but it's very difficult politically and they've got a lot of countries in europe. not one country, they have 17 governments try to shape this strategy together now. and it's a tough thing to do. but they're making some progress and they recognize that they got more work to do and our hope is they do it in a more convincing way as quickly as they can. >> do you think u.s. banks can ready and can withstand a shock from europe right now? ness with the u.s. financial system because of the things we did early on, the tough things we did early on to bring much more capital not financial system, bring down leverage, make them more conservatively funded and managed means that the u.s. system is in a much stronger system to withstanded pressures we were's seeing not just from europe but around the world. and again, it helps justify why it's so important in the crisis to be as aggressive as we were and brunging more capital into the system and making the system more

stable. >> and finally, in the markets, i think many people in the country are suffering from a lack of faith in political leaders, and also in your we're seeing a lack of faith in political leaders and in business leaders. how do you address what seems to be a crisis of confidence, just a belief that people can't get their jobs done? >> generally the american economy is much stronger than our political system, much more resilient. there's just huge ongoing innovation, dynamism across the american economy, even with this political mess here. but ultimately, you need the political system in washington to demonstrate it can do a better job of solving its problems. and i agree with you that broad part of the broader confidence of the american society is whether our political system is up to the challenges. and what the president is trying to do is to try to move washington to confront these challenges in a way that will be better for growth. you know, it's tough. and these are tough reforms. the alternative choices are

unacceptable to us. the alternatives are just sitting here, and living with weaker growth and not dealing with long-term problems is unacceptable for the country. >> mr. secretary, thank you. >> good to see you. >> susie: here's what we're watching for tomorrow: we'll see how many new homes broke ground last month, with august housing starts. and as we mentioned, federal reserve officials begin a two- day meeting on interest rates. their decision is released on wednesday. so what can the fed still do? as we continue our look at fixing the economy, we'll ask paul reilly, c.e.o. of raymond james. home builders are still extremely pessimistic about the housing industry. a new survey shows confidence fell to a three-month low as prospective buyers, sales and purchase expectations declined. the market index of the national assocation of home builders fell one point, to 14, from its august level. readings below 50 mean more builders view market conditions as poor. the index has not been above 50 in more than five years.

speaking of housing, expect higher lending fees from mortgage buyers fannie mae and freddie mac. their regulator said today the government-controlled firms are expected to gradually raise the amount they charge lenders in the next year. that would reduce the companies' long-term exposure to risk. fannie and freddie do not make loans, but they buy them from lenders and package them into securities that are sold to investors. they charge a guarantee fee when they buy mortgages.

tonight's commentator says that when it comes to economic policy, our nation is at a fork in the road. here's bill rodgers, professor at rutgers university. >> today's debate about how to reignite u.s. economic growth is basically about whether we want a 1980s or 1990s economic expansion. during the 1980s, national income grew, while during the 1990s, national income not only grew, but the growth was broadly shared. policy played a key role in generating these two paths. during the 1980s, policy placed less emphasis on growing the middle class and protecting america's most vulnerable citizens. policy also began to shift the risks of job loss and social dislocation squarely to individuals and their families.

current republican economic policy is an attempt to recreate this policy environment. a return to these policies and adding draconian budget cuts on the heels of the great recession and jobless recovery would have devastating immediate and long- term impacts on economic growth and social cohesion. a move to re-create the 1980s will jeopardize the ability of americans and their families to compete in today and tomorrow's 21st century global economy. i am bill rodgers. >> susie: that's "nightly business report" for monday, september 19. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org

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