Robert Rubin's Role In The Recovery
May 17, 1999
Last week, financial markets paid Treasury Secretary Bob Rubin the highest complement they could: they crashed on the announcement of his resignation. The markets were acknowledging that 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 he not been there to stop them.
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, it convinced 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. The result has been the near elimination of inflation and the lowest interest rates and unemployment in a generation.
Rubin's replacement, Deputy Secretary Lawrence Summers, has been a professor of economics at Harvard University, but will not have the standing as Rubin has at the White House, nor the stature Rubin has in financial markets. 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.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, May 17, 1999.
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