OTTAWA — The Globe and Mail
Published Thursday, Nov. 08 2012
Avoiding the fiscal cliff and putting U.S. finances on a sustainable path is “eminently doable,” says former U.S. Treasury Secretary Lawrence Summers.
Mr. Summers, a possible successor to Federal Reserve chief Ben Bernanke, said Thursday he’s “guardedly” optimistic Barack Obama and the U.S. Congress can reach a compromise before a $607-billion (U.S.) package of tax hikes and spending cuts kicks in Jan. 1, or soon after.
“There are no assurances it will come early or easily,” Mr. Summers said after a speech in Ottawa sponsored by the Canada 2020 think tank.
But he said he’s encouraged that leading Republicans in Congress appear “ready to support revenue-raising tax reform that broaden the base” in the wake of Tuesday’s re-election of Mr. Obama as U.S. President.
Likewise, he said Mr. Obama is “prepared to be flexible” and the Democrats are ready to address reforms to costly entitlements, including social security and Medicare.
But he warned that any precipitous withdrawal of “fiscal energy” would be a disaster for the U.S. and global economy.
Mr. Summers said that the key is to defer the cliff, and make the changes predictable and gradual. And he urged both sides to keep in place a payroll tax break, whose disappearance could make unemployment worse.