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Larry Summers Says Raise Taxes ‘Right Now’ to Help Battle Inflation

·2 min read
Larry Summers Says Raise Taxes ‘Right Now’ to Help Battle Inflation

(Bloomberg) -- Former Treasury Secretary Lawrence Summers said that Washington is forgoing a key tool in helping the Federal Reserve quell inflation, and urged that lawmakers look at raising taxes.

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“Fiscal policy makes a big difference,” Summers said on Bloomberg Television’s “Wall Street Week” with David Westin. “Just the right thing to do is to raise taxes right now to take some of the demand out of the economy.”

Summers said that any tax hikes shouldn’t go toward funding fresh outlays -- in contrast to the package of tax hikes and expanded social investment that President Joe Biden has sought from Congress for more than a year now.

“This is not the time for anything that’s going to be a big new spending program,” said Summers, a Harvard University professor and paid contributor to Bloomberg Television. He also rejected “stimulative” measures such as continuing the moratorium on student debt.

Talks aimed at a slimmed-down version of Biden’s economic program have stalled on Capitol Hill, as Democratic Senator Joe Manchin of West Virginia again voiced opposition.

‘Ludicrous’ Idea

Manchin indicated to reporters this month that, with consumer prices surging 9.1% in the year to June, that made him cautious about doing taxes and climate spending, since they could “inflame’ the situation.

“I sure wish we could get past this basically ludicrous economic idea that tax increases are inflationary -- it’s just not right,” Summers said.

Summers urged measures to boost corporate tax revenues, warning against any failure to follow through on US obligations in the global corporate-tax deal that Treasury Secretary Janet Yellen negotiated last year.

“We can raise substantial revenue by cutting corporate-tax loopholes,” Summers said. “If we don’t do it, we’re likely to lose what I think was a huge accomplishment for the Biden administration,” he said in reference to the global agreement.

The former Treasury chief also said that higher levies on wealthy Americans would help on the inflation front by restraining spending.

“We can generate significant revenues” by “taking some of the money out of high-income tax evaders who then go and spend the money -- and that will contribute to reduced inflation,” Summers said.

(Adds Manchin’s comments on tax and inflation in paragraph after ‘Ludicrous Idea’ subheadline.)

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