Opinion Editorial | |
| Monday, May 17, 1999 | |
Robert Rubin's Role In The Recovery |
Last week, financial markets paid Treasury Secretary Bob Rubin the highest complement they could possibly pay a public official: they crashed on the announcement of his resignation. Within minutes after the news became known Wednesday morning, the Dow Jones Industrial Average fell 213 points. It is hard to imagine a similar reaction to the resignation of any other recent Treasury secretary.
What the markets were acknowledging is that Mr. Rubin deserves much of the credit for the economic expansion and the enormous wealth it has generated for millions of Americans. Yet, ironically, it is not for anything he has really done, but rather for the bad things that probably would have happened had Rubin not been there to stop them.
In his book, "The Agenda," Washington Post reporter Bob Woodward details the critical role played by Rubin early in the Clinton Administration, where he served on the White House staff before becoming Treasury secretary in January 1995. Clinton came into office hoping to be another LBJ, with plans for big spending programs galore. But Rubin convinced him that financial markets were very nervous about this and needed reassurance. So instead of proposing another Great Society, Clinton proposed a big deficit reduction plan. Although the plan was faulty in many ways, it did convince markets that Clinton was not another Jimmy Carter, and would not unleash the inflation genie.
Rubin also played a critical role in getting Republican Alan Greenspan reappointed as Federal Reserve chairman in 1996, and has consistently protected him from administration criticism. This has allowed Greenspan to manage monetary policy for the good of the country without having to constantly look over his shoulder for arrows fired by anonymous administration critics. The result has been the near elimination of inflation and the lowest interest rates and unemployment in a generation (see figure).
Rubin's replacement, Deputy Secretary Lawrence Summers, has big shoes to fill and he knows it. Although he has been a professor of economics at Harvard University, Summers will not have the standing Rubin has at the White House, nor the stature Rubin has in financial markets. As long as things go well in the economy, this will not be a problem. But if, for any reason, there is an economic slowdown or a financial crisis, it could bring out Clinton's bad big government instincts. Only this time Rubin won't be there to head them off.
Bob Rubin has been a great Treasury secretary, one of the all-time best. We can only hope that when Alan Greenspan retires, he may be ready for another tour in Washington.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, May 17, 1999.
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