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Congress should raise taxes to fight inflation ‘immediately’

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Congress is missing a possibility to combat decades-high inflation by failing to implement tax hikes, former Clinton administration Treasury Secretary Larry Summers asserted on Friday.

Summers, a frequent critic of the federal response to inflation, argued that lawmakers should consider raising taxes as one other technique of cooling the economy — with a give attention to corporations and wealthy Americans.

“The correct thing to do is to lift taxes immediately to take a few of the demand out of the economy,” Summers told Bloomberg. “We are able to raise substantial revenue by cutting corporate tax loopholes.”

While Summers backed tax hikes on the rich — a measure also supported by President Biden and plenty of outstanding Democrats — he noted that it was “not the time for stimulative fiscal policies.”

Particularly, he said Biden mustn’t extend the lengthy pandemic-era moratorium on student loan payments or use tax proceeds to bankroll a “big latest spending program.” Biden has called for corporate tax hikes to fund a long-stalled, massive spending bill on climate and social programs.

As an alternative, Summers noted that more tax revenue would assist with “short-term deficit reduction.”

Larry Summers said Congress should hike taxes while forgoing more spending.Getty Images/Bloomberg Creative

Summers also appeared to take a dig at moderate Democratic Sen. Joe Manchin of West Virginia — who indicated last week that he wouldn’t consider supporting the inclusion of tax hikes in a spending bill without seeing more inflation data.

“We are able to generate significant revenues just by enforcing the tax law and taking a few of the money out of high-income tax evaders who then go and spend the cash, and that’ll contribute to reduced inflation as well,” Summers said.

Larry SummersLarry Summers predicted inflation’s alarming rise months before the Fed acknowledged it.Getty Images

“I sure wish we could get past this mainly ludicrous economic concept that tax increases are inflationary. It’s just not right,” he added.

Inflation surged to a four-decade high of 9.1% in June, in accordance with federal data. The Federal Reserve is widely expected to implement a larger-than-normal rate of interest hike next week in its latest bid to tame prices.

ShopperInflation hit 9.1% in June.Getty Images

The outspoken Summers, who also served as an economic adviser to President Barack Obama, has been highly critical of the Fed’s response to the inflation crisis.

Earlier this month, Summers said the central bank had “allow us to down quite badly” and was still too optimistic in its view of the present economic landscape.

Summers has also asserted that unemployment is more likely to rise sharply above its current level of three.6% within the months ahead because the economy adjusts to higher rates of interest.

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