Geithner defends stimulus aid to states

WASHINGTON, Jan. 21 (UPI) -- U.S. Treasury Secretary-designate Timothy Geithner Wednesday defended proposals to send economic stimulus funds to states for use in plugging budget deficits.

Under questioning from U.S. Sen. John Kyl, R-Ariz., during his confirmation hearing before the Senate Finance Committee, Geithner said that even though stimulus funds sent to states for such programs as Medicaid wouldn't provide an immediate "return on investment," they're urgently needed to provide basic services.

"I think it is absolutely clear states will have to cut back very, very dramatically," Geithner said. "And that will raise unemployment and reduce demand for goods and services created by American businesses. And so I think it really is essential to do and should be a part of, and would -- would be I think a part of, any credible fiscal plan to help bring recovery back."

Kyl said he believed spending money from a proposed $825 billion economic stimulus bill wouldn't encourage states to cut spending or become more efficient.

But Geithner countered, "The critical priority for the country now I think is to make sure that the government is providing enough support to get growth back on track faster. And I think these aid to states provisions are a absolutely important part of that program."