|Former White House economic advisor Larry Summers warned Thursday that a failure to address the fiscal cliff would make things worse as the U.S. economy now is at "critical juncture", but tackling the fiscal challenge needs long-term vision on growth.
Summers said at the Center for American Progress, a Washington- based think tank, that the most important determinant of the U.S. debt-to-GDP ratio will not be an action the Congress does or does not take, but the growth the Americans are able to sustain.
"As important as fiscal consolidation is as a precautionary measure to reduce the risks of substantial damage to our economy, it can't be supposed that it independently constitutes a growth strategy going forward," Summers said.
"We need in the United States a growth strategy," he added.
In his view, increasing public infrastructure, providing incentives for employers to hire workers, as well as reforming tax code are all key elements for a long-term growth plan which could enable the United States to maintain competitiveness and achieve budget sustainability.
The Harvard University professor argued that tax revenue is not the priority right now as the nation is facing risk of great stagnation.
"It is not the right moment to repeal the payroll tax cut," Summers said. "It's 120 billion U.S. dollars injected into the economy."
The expiring payroll tax cut is one factor of the "fiscal cliff" - a series of tax increase and spending cuts which will kick in at the start of next year. Such fiscal contraction of more than 500 billion dollars would threaten the tepid growth and bring the U.S. economy back into recession.