GO
Loading...

Broadening Tax Base and Raising Rates Key to 'Cliff' Deal: Summers

Thursday, 6 Dec 2012 | 6:39 AM ET
Former U.S. National Economic Council Chairman Larry Summers
Andrew Harrer | Bloomberg | Getty Images
Former U.S. National Economic Council Chairman Larry Summers

The wiggle-room in the "fiscal cliff" negotiations comes down to a balanced approach on raising tax rates for wealthier Americans and broadening the tax base by closing loopholes and deductions, former Clinton Treasury Secretary Lawrence Summers told CNBC.

"The president is not signing legislation — no way — that does not raise tax rates. The president has been clear as day," Summers said Thursday on "Squawk Box."

Summers also pointed out that President Barack Obama isn't married to repealing the Bush tax cuts for the top 2 percent of wage earners all the way back to the Clinton-era tax rates of 39.6 percent. So rates might not go that high if there's sufficient revenue coming from the base-broadening side of the equation.

Hardball Game of Cliff on Capitol Hill
"The President is open to using all the tools we have available," said Lawrence Summers, Harvard University professor and former U.S. Treasury Secretary, discussing compromise among the two political parties and the implications of going over the "fiscal cliff."

On Wednesday, Treasury Secretary Tim Geithner drew a line in the sand in an interview with CNBC. He said that unless taxes increase for households making more than $250,000 a year, the White House was prepared to "absolutely" go over the fiscal cliff.

Former Romney economic policy adviser Kevin Hassett is taking the White House at its word. Obama is "ready to go over the cliff. And it's really going to be up to Republicans to either cave or go over the cliff, it seems, if things continue to go like this," Hassett, a senior fellow at the American Enterprise Institute, told "Squawk Box" on Thursday.

Protecting the Middle Class From Fiscal Fallout
Kevin Hassett, American Enterprise Institute, provides a preview of this morning's JEC hearing on the fiscal cliff and protecting the middle class.

It's looking more likely that House Speaker John Boehner will have the backing of fellow Republicans to make a compromise by year-end to avoid triggering the $600 billion in automatic spending cuts and tax increases. The New York Times and The Washington Post reported Thursday that Boehner has a growing base of support.

Summers, now a professor at Harvard University, said, "Getting to a sound fiscal position is necessary to protect the economy. If we don't do that, as this economy recovers, that recovery is going to be aborted and that's going to do damage."

Follow Matthew J. Belvedere on Twitter @Matt_SquawkCNBC

Featured

Contact Politics

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More