WASHINGTON (PNN) - April 8, 2010 - U.S. lawmakers will have to make some tough choices in the coming years to bring U.S. deficits under control, including possibly introducing a national sales tax, White House economic adviser Paul Volcker said on Tuesday.

While highly unpopular, Volker said the U.S. should consider a European-style national sales tax, also known as a value-added tax, and perhaps an energy or carbon tax.

The value-added tax "was not as toxic an idea" as it has been in the past, the former Federal Reserve chairman told the New York Historical Society, adding it may be necessary to fund entitlement costs and decrease U.S. deficits.

"If at the end of the day we need to raise taxes, we should raise taxes," he said.

The U.S. budget deficit is expected to reach $1.5 trillion in fiscal year 2010.

Volcker said that the strained fiscal situation in the U.S. will test the U.S. dollar eventually, which has lately been insulated by even greater stress facing other currencies.

For now, he said U.S. inflation remains low but urged against raising the central bank's inflation target to stimulate growth, saying "nothing could be nuttier."

Volcker's tenure atop the Federal Reserve came during a period of higher inflation, which he tamed by hiking interest rates to 20%