WASHINGTON – President Barack Obama’s payroll tax cut should be extended to restore economic growth, a top economist and White House insider said on Thursday.
The government needs to support employers in hiring workers and employees in taking jobs to restore the economic growth, said Lawrence Summers, the former director of Obama’s National Economic Council and the Treasury Secretary under Bill Clinton from 1999 to 2001.
Lawrence Summers, a former White House economic adviser, urges the government to think “long-term” and to look beyond the fiscal cliff.
“It’s not the right moment to repeal a payroll tax cut,” Summers said. “$120 billion puts in the hands of middle-income families is $120 billion injected into the economy.”
Summers’s view is not in line with the White House, which has not insisted on extending the tax break that is set to expire in January. Implemented in December 2010, Obama’s tax break has cut the Social Security tax from 6.2 percent to 4.2 percent.
With the fiscal cliff approaching at the end of this year, Summers cautioned the government not to let the nation run off the cliff, saying the country will be facing another recession if that happens.
“If interest rates spike, if the nation’s creditworthiness were to come into question, the consequences could make what we have been through look small,” he said.
Summers also said the U.S. is in “desperate short of public investment,” which, if improved, could drag the country out of the “great stagnation.”
“Make it an investment,” Summers said. “It doesn’t have to be a great investment. As the economy starts to grow… it would be necessary to find direct revenue means, whether it’s taxes or infrastructures to cover its costs, but it needs not be the priority right now when the economy is so deficient on demand.”
He suggested the government look beyond the soon-to-expire fiscal cliff and look in a longer term to boost the economy.
“It is important, I would dare say essential, to recognize that this is for economic growth a defense issue rather than an offense issue,” he said.
“Without rapid growth, there is no realistic prospect of alleviating the squeeze of those with middle income,” he said. “Without a rapidly expanding economy, there’s no realistic prospect of substantial improvements in our achievement of equality of opportunity.”