Tom Keene's Econo ChatBy
What have you learned from emerging markets that we can use to get our fiscal house in order?
I think we need to look not only to emerging markets but to other advanced economies. The fact of the matter is that we raise less in the form of public sector revenues than almost anyone, even when you add the states and municipalities to the federal government. So I am all for cutting waste and fraud, but I think we need and we will need in the U.S. what we euphemistically refer to as revenue enhancement.
That sounds like somebody from Berkeley. What, pray tell, is revenue enhancement?
We have to raise more taxes.
O.K., do we eliminate the Bush tax cuts? Do we try to get a value-added tax through?
Well, I think it is time to think about systematically remaking the tax system. There are many things we've inherited—including, for example, the deduction for mortgage interest payments—that if we were starting over we probably would not want to have.
If the U.S. decided to pursue fiscal austerity now, would there be a drag on the economy?
Now is not the time to cut public spending. Now is the time to develop a plan to balance the budget when the economy is growing robustly. I do not see a plan, and that is what worries me about the prospects for the dollar and, more broadly, the U.S. economy.