"More important than the right deficit strategy and more important than anything else is that we protect the creditworthiness of the country by raising the debt limit," he told CNBC.
"If we don't do that, it's going to be Lehman on steroids, it's going to be financial Armageddon."
The Obama administration has said it will default on its debts if Congress fails to approve lifting its spending limit by Aug. 2.
(Getty Images photo)
Talks have broken down in the past, with Congressional Republicans saying they won't approve raising the ceiling without commitments to narrow the country's deficits without raising taxes.
A group of six Senators, half Democrats and half Republican known as the Gang of Six, appear to have struck a deal that will narrow the deficit by $3.7 trillion over a decade.
Terms are still emerging and a deal has yet to be reached, although the proposal calls for slashing spending by $500 billion immediately, overhauling entitlement programs such as Medicare, reworking the tax code, and making major changes in Social Security to keep it solvent for 75 years, The Wall Street Journal reports.
"The one thing that is very clear is that not raising the ceiling makes Armageddon inevitable," Summers says.
Still, progress is progress, even if it means Republicans giving in to tax increases of some sort or Democrats giving into demand to cut spending.
"You've got to be encouraged to see both entitlements and tax reform on the table."
Still, one shouldn't estimate how tough it is to carry an agreement out.
"Having said that, I think it's a very encouraging sign," Summers says.
"But no one should suppose that this agreement on procedures in the Senate means we're there or that we can breathe easily and get rid of the knots in our stomach about the debt limit passing."
Some in the Senate are saying the proposal is growing in popularity.
"We've gone from a Gang of Six to a Mob of 50," says Sen. Joe Manchin, D-West Virginia, according to CNN.
Still, Democrats say more work lies ahead.
"It's not ready for prime time," adds Sen. Dick Durbin, an Illinois Democrat and one of the Gang of Six negotiators.
House Republicans, meanwhile, approved a "cut, cap and balance" plan that would raise the debt ceiling while capping future federal spending and making it harder to raise taxes.
"While President Obama simply talks tough about cutting spending, House Republicans are taking action," says House Speaker John Boehner, R-Ohio, according to CNN.