President Barack Obama’s re-election is a chance to improve the tax code as part of talks to resolve the looming fiscal cliff, according to two former Treasury secretaries, Paul O’Neill and Robert Rubin.
Debt talks and Democrat Obama’s win provide a “re-start” and “an opportunity for him to educate the people and lead us in the direction we need to go,” said O’Neill, Treasury secretary under Republican President George W. Bush, in an interview to air tomorrow on CNN’s “Fareed Zakaria GPS” program. O’Neill was joined by Rubin, who served under Democratic President Bill Clinton.
Obama, Treasury Secretary Tim Geithner and congressional leaders have started a new round of deficit-reduction talks in a bid to avoid the so-called fiscal cliff, the combination of $607 billion of tax increases and spending cuts that threatens to throw the country into a recession next year. House Speaker John Boehner said yesterday that Republicans are willing to discuss revenue in exchange for spending cuts, and Geithner said an agreement could be reached “within several weeks.”
A deficit deal “would increase business confidence significantly, both because right now there’s great uncertainty about future policies and future economic conditions, and because there’s a real concern about whether our government can function,” Rubin said. “It’s the single most important thing you could do.”
O’Neill, a former chief executive officer of Alcoa Inc., said Obama “shouldn’t focus at all on the Republicans. I think he ought to focus on the American people” in seeking a deficit solution.
Obama could begin by educating people about the “tax gap,” an estimated $400 billion in uncollected taxes each year, and by starting with “a blank page” in overhauling the tax code, O’Neill said. A value-added tax, which would replace corporate, individual and payroll levies, would be one possible solution, he said.
Rubin said a tax overhaul could be structured to have a short-term stimulus to the economy, making it more attractive to lawmakers and the public. Now is the time to make a deal to avoid the becoming like Europe, where debt crises in Greece, Italy and other nations are roiling markets, he said.
“What’s happened in Europe ought to be a lesson to us,” he said. “We still have time to phase this in.”
Bill Gates, chairman and co-founder of Microsoft Corp., said in a separate interview scheduled to be broadcast tomorrow on the CNN program that he thinks that “definitely for the next five years” the U.S. is going to be dealing with the aftermath of the 2008 credit crunch and the European Union, where “a fixed currency rate with different competitiveness has created a real contradiction unless they have large fiscal transfers.”