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