The former Newsnight host, 64, said that people despaired of the political process and had contempt for politicians.
The broadcaster, who has been treading the boards at the Edinburgh Festival Fringe, said that humour was "part of the answer".
He told Radio Times magazine: "It is almost impossible to exaggerate the public's contempt for politicians. But, contradictory as it sounds... they believe in voting and still have faith in the possibility of improvement."
Paxman said that humour helped people feel "reconnected with the political process they so despair of...".
"Where is the Spitting Image of today? The David Owen/David Steel puppets during the time of the Liberal-SDP Alliance were funny enough.
"Imagine the sport the show could have with Cameron and Clegg," he said.
"But I don't care whether it's puppets or cartoons or real people. Just give us some decent satire. "
Paxman said that appearing in front of a live audience in Edinburgh - where he made his festival fringe debut with a one-man show in which he tackled a range of topics - was terrifying and that he had always shunned acting.
"I have met many actors over the years, and, while some of them are luminously entertaining, far too many are precious and self-regarding, taking the speaking of words written for them by someone else as if it were as important as being a heart surgeon," he said.