Domestic Drama, Foreign Consequences for U.S.

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Oct. 31 (Bloomberg) -- Martin Baily, senior fellow at The Brookings Institute and Abby Joseph Cohen, senior investment strategist at Goldman Sachs, discuss global perception of the United States in light of the government shutdown, economic troubles, NSA spying and examine the state of the European economy. They speak on Bloomberg Television’s “Bloomberg Surveillance.”

International relationship, how should we best proceed coming out of this financial crisis?

It has been a rocky.

-- period.

We are not putting our best face forward.

Most people perceive the united states economy as having some substantial strength.

The growth rate here seems to us to be a little slow, but is a good bit faster than in europe and japan.

We are having more growth.

People are still looking to the united states as the engine of the global economy.

We have the availability of natural gas.

Energy price him at least gas price, are lower here than overseas.

Electricity prices and so on.

And the regulatory environment -- there are still some environment -- advantages here.

We should try to streamline regulation.

We see that with the headline.

12.2% european unemployment rate.

Real risk of deflation and part of europe.

-- in part of europe.

We also look at in europe that they are not as far along in the u.s. with regard to regulatory questions.

Germany, france -- 425 times higher than in the u.s. -- 4 to 5 times higher than the u.s.. what do you think the prospects for growth are in europe?

It is obviously a mixed story.

Italy, spain, portugal, greece -- it is still kind of a basket case.

It is hard to see how they will get out of the situation they are in and restore growth.

Northern europe is much better.

The u.k. is doing much better.

Germany has continued to do well.

The nordics are recovering.

It is a two speed economy.

Heart of it are doing reasonably well.

Fairly well.

Not fast growth rates.

But maybe 1% to 2% growth.

How they're going to deal with a two speed economy and still preserve the euro, that is still a tough question.

When you look at the perception of the united states from around the world, would you hear is that the united states is still where the action is.

It is still the bright spot.

Because there are not a lot of other alternatives.

Whether the treasury market or investing in america's business.

We are the cleanest dirty shirt is the attitude.

That is not something to be proud of.

How do you change that perception?

That is a good analogy.

I have also heard the analogy of the best horse in the glue factory.

I think we are a bit better than that.

We have a lot of innovation taking place.

I think that is strong in silicon valley and other parts of the country.

The innovation machine in the united states is still going well.

As i already mentioned, the energy.

I think you can change that perception if you make the united states a friendlier place to do business.

Part of it is on taxes.

Overall, i think we will need more tax revenue to get to balanced budgets eventually.

In terms of corporate taxes, we need to rationalize and perhaps lower our rates of corporate taxation make the united states more attractive.

That is a critical question.

It is a frustration for republicans and democrats.

When do we fix our corporate tax laws so apple does not have the gdp of france abroad?

Corporate taxes in the united states -- we have the highest statutory tax rates.

You are right, many companies that are built in the united states have billions of dollars overseas.

The two parties agree that this is a problem that needs to be fixed.

The question for martin is, when we look at what can be done in the short run, the u.s. economy is below its potential gdp growth rate here at what can be done from a fiscal policy standpoint to get us moving more quickly in the short to intermediate term?

I wish we weren't in such a contractionary fiscal stage.

The budget imbalance is a serious problem and needs to be dealt with.

At the moment, government spending is declining and a lot of people support that.

I don't think it is helping us grow.

A proper kind of infrastructure program would be helpful to us that keeps the budget under control, but at the same time speaks to some of the needs.

The other thing is making sure we take advantage of the natural gas and the oil so that that is available.

On the tax side, corporate taxes.

Those would be the three big things that i would point out.

The final one is trying to improve education and skills but that is much more of a long-term issue.

Martin bailey in washington.

Thank you so much for joining us.

It is time now for the agenda.

The major stories say -- shaping the day.

The market forward.

The equity market.

How about it?

I want a number right now.

I don't do that forecast.

This text has been automatically generated. It may not be 100% accurate.

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