World's elite gathers for Davos 2014

Making the rich poorer isn't the American Dream: Summers

We completely avoided a depression: Summers
We completely avoided a depression: Summers

Making an impassioned social commentary that seemed to cut against fellow Democrats, Larry Summers said that making people poorer, "even the very rich," in the name of balancing the scales of income inequality in America is a destructive course of action.

"America succeeds by raising everybody up. It doesn't succeed by tearing anybody down," the former Obama economic adviser and Clinton Treasury secretary told CNBC's "Squawk Box" on Thursday at the World Economic Forum in Davos, Switzerland. "The rhetoric of envy and the rhetoric of tearing down, I don't think, is the right rhetoric for America's leaders."

"I think it's important to do something about [income] inequality," Summers said, but he argued that it's much easier to allocate a larger pie to those who are left behind than a "stagnant pie."

He added that U.S. success in the long term depends on expanding the economy. Entitlement reform and a corporate tax code overhaul are important steps toward that goal, but not as important as making sure that growth accelerates.

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"If the economy grows fast, the long-term budget will be fine," Summers said. "If the economy does not grow fast, we can do one measure or another, [but] we're still going to have rapid debt accumulation."

"The most important determinant of opportunity for my children and your children is how rapidly we grow this economy. I hope we move to a focus on more rapid growth," he said.

Summers had been the leading candidate to succeed Federal Reserve Chairman Ben Bernanke before withdrawing his name because of Democratic opposition. Janet Yellen got the job instead and is set to take over at the Fed next week.

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It'll be up to Yellen and her central banker counterparts to do what they can to boost an economy that Summers feels is "short of demand, and is likely to stay short of demand, unless more is done."

"We are 10 percent below … closer to $2 trillion below where one would have thought the economy would be at this moment," he said.

But Summers said he remains encouraged because recent economic data have turned up, and he suspects the next year is going to be "better than last year, and quite likely the more rapid year of the recovery."

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.