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Exchequer

NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

Robert Rubin Is Waiting for the Deficit Fairy



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If you want to see U.S. economic policy in miniature — and see most of what is wrong with itwatch this short interview with Robert Rubin, the Wall Street Democrat and former Goldman Sachs chairman who was treasury secretary under the Clinton administration. Rubin is a very smart man and independent-minded. I would not say that he is the best we could expected from the left side of the political spectrum, but he is in the upper end of the range of my own preference curve for plausible policy expectations. Here is the low end:


It’s a wide spectrum. But there’s a reason everybody in Washington is marching the same way: toward bigger government, higher spending and higher debt. Here’s how Rubin calls it:

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.

Some things you’ll notice about that quote. It’s sober, it’s moderate, and it’s well-reasoned. There is much in it that a typical Republican would agree with. And it’s totally 100 percent pure bovine byproduct. Let me translate it into English for you: “Let’s not cut the deficit. Let’s not even plan to cut the deficit. Let’s plan to have a plan to cut the deficit. But not now. Not today — let’s kick that ten-ton can of toxic trouble on down the road a bit longer.” Or, as one S&P structured-finance guy described a deal he was working on: “Let’s just hope we are rich and retired before this house of cards comes crashing down.” Mr. Rubin is already rich and can retire when he wants.

In contrast to the vague platitudes offered above, here’s Rubin a half-minute later:

I would put an estate tax in place right now, immediately, because we have no estate tax right now. There is no supply side effect in having an estate tax. And we should fill that void. Number two, I would increase the tax on the higher brackets, those top two brackets, and bring them back up to the Clinton rate. I believe there’s no supply side effect there. We did it in 1993 people said we were going to destroy the economy, in fact we had the longest expansion . . . in American history. I would leave the middle-class tax cuts intact for a limited period because I do think that the probability is higher that we’re going to have slow and bumpy growth than vigorous growth, and I think that given the vulnerability, the high unemployment rate, one thing and another, I wouldn’t want to have that contractive effect right now.

Boom, boom, boom! Specific policy proposals (estate tax, income-tax hikes on the top two brackets) with a real time horizon (now!) and even real numbers attached (bringing things back to the Clinton-era rates). There’s a prepackaged economic rationale (no supply-side tax effects on the death tax) and a political strategy (God save the holy middle class, their tax subsidies, and their entitlements).

So, Robert Rubin wants to do something about spending, and he’s a mush-mouthed equivocator with his hands in his pockets, eyes downcast, tracing little circles on the carpet with the toe of his wing-tip. Ask him to sell America a tax hike in lieu of spending cuts (no, he did not say in lieu of, but that’s what it comes down to) and he’s got an instant agenda. Ask him to design a tax increase and he’s got numbers and firm proposals. Ask him to reduce spending and he’s waiting for the Deficit Fairy to come in flying a sortie with an auxiliary attachment of fluffy fiscal unicorns to spirit that debt off to the Island of Misfit Finance, which would be crushed under the weight of it.

Chairman of Goldman Sachs, this guy was.

Tax hikes now or fiscal discipline in the misty future: Which of those things do you think will get done?

Who would you trust to get the budget balanced? Robert Rubin?

I’ll bet on Rick Rubin first.

– Kevin D. Williamson is deputy managing editor of National Review.



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