Money talks: Robert Rubin remembers clintonomics

The thought of Robert Rubin ever writing a memoir would have struck those of us who met him during his first weeks in Washington as far-fetched. In his debut luncheon with reporters and editors at The Washington Post, the understated former co-chairman of Goldman Sachs seemed barely able to ask for a cup of coffee without letting his young, garrulous aide Gene Sperling speak for him.

That was before federal budget battles, the Asian financial crisis, the Mexico rescue, and the roaring '90s economy turned Rubin into one of the most widely recognized U.S. Treasury secretaries ever, adorning the covers of newsweeklies and briefly (if implausibly) rumored to be a possible vice presidential candidate for Al Gore.

Now, a decade after his arrival in Washington, a more politically seasoned and somewhat less cautious Rubin has written, with the help of Slate editor Jacob Weisberg, a memoir of his days on Wall Street and his six and a half years in the Clinton administration.

In an Uncertain World: Tough Choices from Wall Street to Washington is no kiss-and-tell memoir, though it does have a few moments of humor and genuine tension. The philosophic core of the book is not profound, composed of Rubin's "fundamental view that nothing in life is certain and that, consequently, all decisions are about probabilities." He imagines "the mind as a virtual legal pad," where variables and probabilities are identified then subjected to a decision based on "instinct, experience and 'feel.'" This is Rubin's recurring theme throughout the book, and it helps explain how he got along so well with the number-crunching Republican Federal Reserve chairman Alan Greenspan.

But the book is illuminating, most of all for the light it sheds on America's current fiscal situation. Once again the nation finds itself with large structural deficits, growing international uncertainty, and gargantuan Social Security obligations of the Baby Boom generation looming ever closer. Mindful of Republican efforts to discredit the Clinton administration's economic policies, Rubin makes a spirited and largely persuasive defense of those policies while denouncing the "fiscally unsound" tax-cutting frenzy of the Bush administration.

Arrant Nonsense

When Clinton was elected in 1992, the federal government had little credibility on fiscal matters. I had been covering economic policy for the three previous years and "smoke and mirrors" had become an annual feature after the release of administration budget proposals. Taxes were taboo (or heavily disguised), because the first President Bush had sworn he would back "no new taxes." Spending would not be called spending. Democrats and Republicans used every conceivable trick to make it appear they were living up to the rules of the Gramm-Rudman Act--legislation that had been designed to force lawmakers to balance the books.

So when the Clinton administration released its first budget proposals, I instinctively started writing the "smoke and mirrors" story, until a senior editor came by to suggest that this time it might be different. And it was (mostly). Rubin and the rest of the Clinton team weren't saints ("a small puff of smoke and a little glint of a mirror," as one congressional budget expert described the first budget proposals), and many economic policy issues under their watch were, and are, open to legitimate debate. But even though the president's credibility in his personal life would be destroyed, the administration's credibility on economic issues grew. More importantly, record-breaking deficits disappeared, replaced by record-breaking surpluses, and the politics of scarcity ended. Once again Democrats and Republicans could debate what government should or should not do rather than what it simply could not do.

It has become fashionable among some people to attribute the prosperity of the Clinton era to the former president's good fortune. And while Rubin's book doesn't have any startling revelations about the economic policy decisions of the Clinton presidency, it does serve as a reminder that Clinton did indeed make some tough and potentially unpopular choices.

The first was his decision in 1993 to press for a budget package aimed at reducing the mounting federal deficit. The package--a combination of modest trims in federal spending, an inching up of the tax rates on upper-income earners, and an expansion of the Earned Income Tax Credit for the working poor--passed without Republican support. With hindsight, the administration's budget plan appears prudent. It boosted confidence in Washington's fiscal responsibility and thereby helped drive interest rates lower. Liberals at the time accused Clinton of betrayal for abandoning the middle class tax cuts he had campaigned on, but those accusations seem trivial now. Conservatives at the time predicted the deal would slow the economy. It was instead followed by the longest economic expansion in American history.