BOB SCHIEFFER: And we begin this morning with Larry Summers. Mr. Summers, thank you for joining us.

In an ABC interview recorded yesterday, Treasury Secretary Geithner told George Stephanopoulos a smaller federal deficit is vital to sustaining an economic recovery. He said doing that is going to require what he called hard choices. He was asked directly whether he would rule out new taxes and he said, "the country must understand the administration will do," in his words, "what is necessary."

Was he laying the groundwork here for a new round of taxes?

SUMMERS: No, not at all. He was explaining what has been the president's policy. The president recognizes that his first job was to rescue the economy, that what he inherited was an economy with a trillion-dollar-plus deficit, and an economy that was in freefall and people talking about depression. And he had to change that.

And I think we have, and the statistics we have seen confirm that. People aren't talking about whether the recession is going to turn into a depression, they are talking about when it is going to end.

And that is a real accomplishment -- it is a real accomplishment for these policies.

But we also recognized -- and this is saying the president has also talked about, that in addition to rescuing the economy, we have to rebuild it on much stronger foundation, so we don't have the kind of problems that brought this expansion to an end, that led to the mess we've suffered for the last two years. And crucial to that is getting the federal deficit under control. That is going to involve difficult... SCHIEFFER: What are you going to (inaudible)...

SUMMERS: ... difficult and challenging steps.

Look, the first and most important thing for getting the federal deficit under control is substantial reform of the health care system, and that's why the president started there.

He has done something that actually is new. If you look at when Medicare was put in, if look at the George Bush's prescription drug benefit, if you look at the Iraq war, if you look at the tax cuts, if you look at the Reagan tax cuts -- we have done major things in this country without paying for them. No one is arguing with the president's central premise, and it is an important leadership of the president, that anything we do in health care is going to be paid for itself as judged by the nonpartisan independent scorekeepers.

SCHIEFFER: Let me...

SUMMERS: But the president is actually going to go further than that, because he is also insisting that we enact a set of measures that are not the kind that you can really do a bean count on and score precisely, but which we know will have effects overtime, things like encouraging...

SCHIEFFER: Let me...

SUMMERS: Things like encouraging cost effectiveness research. So health care is the first sort of ground zero...

(CROSSTALK)

SCHIEFFER: But let me just go back to this, just to make sure. You don't see another round of tax increases coming?

SUMMERS: Tax increases -- look, let's understand where we have been. Let's understand that the president put in place as part of the stimulus bill, as part of the economic recovery act, a measure he had campaigned on, the making work pay tax act that is reducing taxes by $800 for working -- for working families. That's where -- that's where the focus is.

We are going to keep working to strengthen the foundation -- the foundation...

SCHIEFFER: No tax increases for middle-income Americans.

SUMMERS: ... of this economy. There is a lot, though, there is a lot that can happen overtime. But the priority right now, so it is never a good idea to absolutely rule things -- rule things out no matter what.

But what the president has been completely clear on is that he is not going to pursue any of his priorities -- not health care, not energy, nothing -- in ways that are primarily burdening middle-class families. That is something that is not going to happen. SCHIEFFER: All right. The recession. Is it over? I mean, this cover of Newsweek magazine, it says the recession is over. But there is a little asterisk that says "good luck surviving the recovery." Is the recession over? Has it bottomed out, Mr. Summers?

SUMMERS: Most forecasters are now looking at growth and output in the GDP over the second half of this year.

SUMMERS: They're looking for it because they see that inventories are way down and businesses are going to build them up; because they see some increase in car and housing, sales, because they know that the Recovery Act is going to gain force.

But they also recognize, as we do, that it's going to take time before gains in output -- you'll never get gains in employment without gains in output, but even as output increases, it's going to take time before the number of jobs starts -- starts to grow.

So we can't be satisfied with where we are, and the economy is not going to be back to normal for quite some time. Our problems weren't made in a month or a year and they're not going to be fixed in a month or a year.

SCHIEFFER: But do you -- do you...

SUMMERS: But I come back to this. We used to be -- six months ago, when the president took office, we were talking about whether recession would become depression. Today, we are talking about when recession is going to end. That is a tribute to the strength of the policies that have been put in place and the expectation that they are going to have growing impact.

SCHIEFFER: So does that mean it's bottomed out?

SUMMERS: Out? You know, you want to reduce these things to things that are very simple. Output is likely to start increasing. The number of jobs probably has not yet bottomed out because experience suggests that it lags.

SCHIEFFER: Well that's always a likely ending, there.

SUMMERS: But we're certainly much closer to the point where it bottoms out than we were, and the crucial, necessary condition for getting jobs growing...

SCHIEFFER: Are you going to have to...

SUMMERS: ... and expectations that output will grow...

SCHIEFFER: ... extend unemployment benefits?

SUMMERS: We're going to -- we did extend unemployment in a way that was hugely important in the -- in the stimulus act, and we're going to work with Congress to make sure that the unemployment insurance benefits that are necessary for the American people are maintained.

SCHIEFFER: OK. The stimulus package: a lot of people say it hasn't had much impact lane lately. I know you make the case that it has made an impact.

But do you think it's going to take one more stimulus package to get this economy going -- I mean, to really get it coming back?

SUMMERS: I think the -- I think the stimulus has had a significant impact -- you know, tens of thousands of teachers and cops across the country, $53 billion delivered to American families, 3,000 projects under way, that the calculation suggests that its impact is only going to increase, that we're also seeing 200,000 mortgages have already been relieved. It's going to be 500,000 by November 1st.

So I think we're on the right track. We've got a lot left to execute. That's where our focus is going to be and we think it's going to have a -- a gathering impact that builds on the impact that's already happened.

SCHIEFFER: But do you think you might have to boost it a little more -- I mean, maybe some tax cuts for small businesses, other things of that nature?

SUMMERS: Right now, we're focused on carrying through and executing the program we've -- we've put the place. We just took a small but significant step in the last couple days, Bob. The so- called Cash For Clunkers...

SCHIEFFER: Yes.

SUMMERS: ... program has actually been far more successful than people expected, both in terms of the number of car sales it's generated, and, I should say, in terms of the environmental benefit. The new cars people are buying are much more fuel-efficient, $1,000 a year more fuel- efficient than the cars they're -- than the cars they're trading in.

And the Congress has just -- the House has voted to increase the funding. So there are adjustments of that kind, but, basically, we're on the right track and we need to keep going on this strategy. And, really, the priority is going to shift to giving long-run confidence. And that's why the health care bill, that will give, in the long run, greater confidence that the federal budget is under control, that employers' costs are under control.

That's going to be really a crucial priority in the fall.

SCHIEFFER: All right. We have to let it go there. Thank you so much for being with us, Mr. Summers.

SUMMERS: Thank you.