Robert Rubin, Bill Clinton’s Treasury Secretary, is back — and he’s everywhere. He’s written a book. He’s delivered a paper before the prestigious American Economic Association. He’s giving loads of TV interviews. Among Democratic candidates who realize the election will turn on the economy, he’s a popular guy. His endorsement is worth more than anyone else’s — even Clinton’s. He could be the next Fed chairman.
The case he makes lately is that, because of tax cutting, the
After he left government in 1999, Rubin went to Citigroup and generally kept his head down. He surfaced on
Indeed, the deficit rose — though mainly because a recession that began under
Rubinomics, the prevailing theory in the
Still, policymakers of both parties shouldn’t flatter themselves. It’s the private sector that is responsible for prosperity. Don’t forget it.
The fixation on deficits — rather than the real problem, too much unproductive government spending — has already turned the Democrats into a party of mindless skinflints, like Republicans before
But if the government needs money, won’t it have to raise rates to attract cash from investors? Not necessarily. The U.S. Treasury is not the only borrower. There is $22 trillion in debt outstanding in the
Federal borrowing rose about $400 billion last year, but in a globalized financial market, where demand and supply come from all over, that’s less than 1 percent of total debt. A pebble in the ocean.
History also refutes Rubinomics. During the Reagan years, debt rose, but interest rates fell. During the
It’s not that deficits don’t matter — just not at these levels, or at any level that’s truly feasible. Our government debt, at about 50 percent of GDP, is far lower than that of
Certainly, all is not rosy. We need to reform Social Security and Medicare to prepare for the retirement of Baby Boomers. Now, there’s an issue for the campaign. But Democrats who want to win in November would do well to ignore Rubin’s obsession with the deficit. This time, he’s all wet.