Text of One Republican and One Democrat Secretary of Treasury

O'NEILL: Exactly, because I kept saying, you know, the tax code we have is proof that we're not an intelligent people, and it's worse now than it was 10 years ago, when I was singing this song. So I think the president could earn a lot of credit and could make a huge difference if he would lead the charge for fundamental tax reform.

You know, and ideally, if you think about how you get capital formation, you get fairness in the distribution of paying for public goods, if we had something simple instead of the current income tax and corporate income tax, something simple like a VAT or a consumption-based tax, I think that would give reassurance to the markets that we're coming back and we're creating the basis for capital formation and savings, as opposed to consuming everything in sight.

ZAKARIA: One of the things that you that mentioned to me in the green room which I think is striking is that one of the advantages of the VAT, or the national sales tax, is there's very efficient tax collection. You said that when you were at Treasury, the estimate was that the United States did not collect $400 billion in taxes? Is that --

O'NEILL: Per year.

ZAKARIA: Per year.

O'NEILL: Per year. And it cost us $300 billion across the society to administer the colossal mess we've got. No intelligent people would invent this if they were given a chance to create a tax system that was worthy of people who need to free up resources that are being wasted.

ZAKARIA: Bob, if you had a magic wand, what would you do to get this economy moving? People look at your tenure as secretary of Treasury, where with all the controversy, you created 22 million jobs. Now, maybe you would say that government doesn't create those jobs, and I agree. But those jobs were created on your watch.

So do you want to share the magic sauce with us?

RUBIN: Well, I'll respond to your question in the current context, but I will say this -- it was a remarkable period in the '90s, and I think President Clinton was terrific on economic policy. And I think that made a real contribution.

But let's now talk about the current context, which is quite different. Here's what I would do, Fareed. And it's been this debate that's going on right now.

I think what you I would do is I would stay on, roughly speaking, the current fiscal track, because we still have large fiscal deficits, and that does create demand, although those deficits are coming down, so you're actually reducing the demand.

ZAKARIA: So you mean you won't spend more on a second stimulus right now?

RUBIN: I wouldn't do a major second stimulus because I think -- and I think Paul said the same thing. I wouldn't do a major second stimulus because I think we run a risk that it could be counterproductive in creating a lot of additional uncertainty and undermining confidence.

But at the same time -- and what I'm about to say is easy to say and very hard to do -- at the same time, I would try over the next six months to put in place a very serious beginning of deficit reduction that would take effect at some specified time in the future. And I would guess something like two years.

So it wouldn't take effect right now, when the economy is still so vulnerable, but if you could do it and it was credible, and people believed it, and it was real, I think that could do a lot for confidence. The problem is that's very easy to say and very hard to do.

ZAKARIA: And on that note, we will be right back to speak with both of the secretaries of Treasury.
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