Larry Summers: Balanced Approach to Fiscal Cliff Includes Tax Hikes

Thursday, 06 Dec 2012 10:26 AM

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President Barack Obama is open to a balanced approach to fiscal reforms needed to steer the country away from the fiscal cliff, but any deal would involve raising tax rates on wealthy Americans, said former Treasury Secretary Lawrence Summers.

Congressional Republicans and the White House remain at odds over the role tax hikes will play to avoid the fiscal cliff, a combination of expiring tax breaks and inbound spending cuts scheduled to take effect with the close of this year.

Failure to avoid the cliff could tip the country into a recession next year, yet the White House insists fiscal reforms must include raising tax rates on the top 2 percent of U.S. earners, something Republicans have opposed, proposing instead to cap deductions and broaden the tax base.

Editor's Note: Tiny Loophole Found in 70,320 Page IRS Tax Code Could Pay $87,500

The president is open to all suggestions provided any plan comes hand in hand with tax hikes on America’s wealthy.

“Raising tax rates has been something the president’s insisted on for two years. It was a central issue in the campaign,” Summers told CNBC.

“The president’s position, as I understand it, has been that we have to raise rates, but he is certainly prepared to combine rate raising with base broadening, so he’s prepared to use both approaches to do it in a balanced way,” he added.

Treasury Secretary Tim Geithner earlier said the White House would allow the country to careen over the fiscal cliff in January unless it gets its way to hike taxes on those earning $250,000 or more, comments that quickly drew criticism from congressional Republicans.

“This is one of the most stunning and irresponsible statements I’ve heard in some time. Going over the fiscal cliff will put our economy, jobs, people’s paychecks and retirement at risk, but that is what the White House wants, according to Secretary Geithner, if they don’t get their way,” Sen. Orrin Hatch, R-Utah, said in a statement.

“The American people want us to find a reasonable path forward — not to rattle our sabers and play this dangerous game that will impact the lives of nearly every single American. It’s time for some real leadership from the president. Instead of threatening to take America over the cliff, it’s time for the White House to come to the table in a meaningful way.”

Democrats, however, remain firm.

“I think everybody gets it that the president is not signing legislation, no way, that does not raise tax rates,” Summers said.

“Base broadening alone is insufficient.”

Some lawmakers are calling for more closed-door talks, which would take the pressure off lawmakers to dig in the heels and stick over ideological differences when it comes to taxes.

“I’m not certain that volleying back and forth publicly is the way to resolve this,” said Senate Budget Committee Chairman Kent Conrad, D-N.D., according to Bloomberg.

“Everything’s on the table now, which needed to happen.”

Editor's Note: Tiny Loophole Found in 70,320 Page IRS Tax Code Could Pay $87,500

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