Summers: Tax Hikes on Wealthy Necessary to Avoid Fiscal Cliff

Sunday, 11 Nov 2012 04:29 PM

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Any solution that will successfully steer the country away from a fast-approaching fiscal cliff will have to involve raising taxes on wealthy Americans, said former Treasury Secretary Lawrence Summers.

At the end of this year, the Bush-era tax cuts and other benefits are set to expire at the same time automatic cuts to government spending are scheduled to kick in, a combination known as a fiscal cliff that could send the country sliding into a recession if left unchecked by Congress.

Republicans and Democrats have disagreed over the role taxes must play in restoring fiscal health.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

President Barack Obama has argued that fresh revenues are needed via letting the tax breaks expire for wealthy Americans, with many Republicans arguing otherwise on the grounds those wealthy Americans create jobs, and hiking taxes on them would hamper recovery.

A compromise will broaden the tax base that Republicans applaud, but will also involve raising taxes on the wealthy championed by the White House, Summers told CNBC.

"If you take the long view of this, relative to where we've been as a country, the fraction of us who are over 65 is going to nearly double. We have more debt than we used to have. Things that the government buys like healthcare — their price is going up faster than the price of other goods," Summers said.

"We're going to have to raise revenue, and that revenue should come probably from the people who have been most fortunate over the last generation." Summers added.

"That's the position the president's taking, and I think it's a reasonable one. I think there's a shared recognition between the president and the Congress that it would be a catastrophe for the country if nothing was to be done."

Some estimates see the fiscal cliff siphoning $600 billion or even more out of the economy next year alone.

The nonpartisan Congressional Budget Office has estimated that if left untreated, the fiscal cliff could contract the economy by 0.5 percent next year.

Successful navigation away from the fiscal cliff could lead the economy to a brighter 2013, Summers added.

“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 told the network.

“Vicious cycles will become virtuous circles.”

The White House has said it will veto any legislation extending tax cuts for families making $250,000 or more.

"I am not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me, making over $250,000, aren't asked to pay a dime more in taxes," President Obama said just after his reelection, as quoted by the Associated Press.

"I'm not going to do that," Obama added

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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