Former Treasury Secretary Larry Summers told CNBC on Friday that he believes Congress and the president will reach a deal on the "fiscal cliff" but stressed that any deal will likely have to involve higher taxes on the rich.
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"There's a shared recognition between the Congress and that president that it would be a catastrophe for the country if nothing was done and $600 billion was withdrawn from this economy," Summers said, referring to the fiscal cliff, when automatic tax hikes and spending cuts that are slated to kick in at the end of the year.
Fiscal Cliff: Complete Coverage
Summers, who served in the Obama administration, told CNBC's "Closing Bell" that a formula will be found to solve the country's fiscal problems and that the president is prepared to address entitlements. (Read More: Obama 'Open to New Ideas,' but Rich Must Pay More.)
But he said that as part of any deal the U.S. is going to need to raise more revenue.
With the country aging, piling up debt and health care costs rising, "that revenue should probably come from the people who were most fortunate over the past generation," Summers said.
Obama said Friday that he would veto any plan that extended the Bush era tax cuts for the top 2 percent of earners.
While raising tax rates on the wealthy should be part of a solution, Summers noted that broadening the tax base was the best way to raise revenue. The details of what that means will need to be worked out by the politicians, he said.
If the U.S. avoids the cliff and the potential for serious recession, Summers is optimistic the economy can grow more vigorously.
"If we can avoid distractions like the fiscal cliff, as the housing market starts to turn it's reasonable to hope that growth will accelerate and that job creation will increase," Summers said. "Vicious cycles will become virtuous circles."
