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Former Treasury Secretary Henry Paulson said the U.S. needs to slow the growth of entitlement programs and raise tax revenue by closing loopholes.
“We may need more revenues,” Paulson, who served under Republican President George W. Bush, said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff” airing this weekend. “This should be part of doing something with entitlements, because I think to just keep postponing entitlement reform is a big mistake.”
Paulson, a former Goldman Sachs Group Inc. chief executive officer who headed the Treasury from 2006 until 2009, also predicted the U.S. economy would grow about 3 percent this year, praised President Barack Obama’s handling of the financial crisis and said he has “great confidence” in Federal Reserve Chairman Ben S. Bernanke. China’s new leadership must reduce the government’s role in the world’s No. 2 economy, Paulson said.
He endorsed means testing for Medicare recipients, and he said overhauling the tax code will be a key to restoring U.S. competitiveness. His view on the need for more revenue puts him at odds with congressional Republicans, who say deficit and debt must be reduced only by cutting spending.
“I would eliminate essentially all deductions, you know, in the personal income tax and lower the rate,” he said. “And I would eliminate virtually all deductions or preferences when we’re dealing with corporate income taxes.”
At the same time, Paulson said the tax code shouldn’t be used to reduce income inequality.
“We need an efficient tax system that could give us the revenues we need and it needs to be progressive and the wealthy need to pay plenty of taxes, but at the end of the day, we need something that’s going to ensure that there’s opportunity for everyone.”
Paulson, 67, was optimistic about the U.S. economy, predicting it could generate about 200,000 jobs a month in 2013 as business investment picks up and housing recovers.
He said Bernanke has been “forced to do some pretty dramatic things to restore our economy, because there’s been a lot of inaction” in the executive branch and in Congress.
Paulson said President Obama handled the financial crisis “really, really well” by picking Timothy F. Geithner as Treasury secretary in his first term and sticking to bailouts of companies including Citigroup Inc. and General Motors Co.
Asked about China’s new leadership, he said restarting stalled economic reforms and restoring public faith in the Communist party are top challenges for President Xi Jinping and Premier Li Keqiang.
“The private sector is the future of the economy,” Paulson said. “So what they need to do is they need a new growth model, where there’s less reliance on exports, more on consumer-led growth, less reliance on government investment and things like infrastructure and heavy manufacturing, and more emphasis on the service sector.”
Paulson, chairman of the Chicago-based Paulson Institute, which promotes sustainable economic growth and a cleaner environment, said China must also deal with pollution.
“They’ve got huge environmental challenges,” he said. “People are very unhappy with the dirty air, the dirty water.”