A few weeks ago Citigroup’s Robert Rubin wrote a column advising readers and policymakers on how to surmount the current economic and financial crisis.
What’s Rubin’s claim to expertise? On the face of it, his credentials are impeccable – Harvard graduate, law school at Yale. Hired by Goldman Sachs where he climbed to the top. Joined the Clinton administration as head of White House economic advisors, then appointed top dog at Treasury Department. Exited near end of Clinton’s second term to return to, yes – you guessed it, the “Street,” as in Wall Street, but this time at Citigroup.
Undoubtedly he expected to continue his storybook career at the pinnacles of power for a while longer and then retire with great public acclaim. And in retirement he would occasionally reenter the public arena to lend his “sage advice” on a problem that needed a disinterested observer.
To Rubin’s surprise, his “distinguished” career and storybook retirement took an unexpected and precipitous nosedive in October 2008, when the economy, financial markets and Citigroup melted down and threw the world into The Great Contraction that hasn’t yet been overcome.
Rubin not only presided over Citi, which only stayed afloat because of massive federal intervention (that would be enough to take the sheen off his reputation), but he was also every bit the co-architect of the new rules, new securities, new risks, and new bubbles that set the stage for the Great Meltdown.
His partner in crime (and that’s what it was – a crime) was former Federal Reserve Bank head Alan Greespan. If Greenspan was the public voice – the “oracle” according to the business press – of a deregulated financial environment, “risk-free” speculation, and “rational and efficient” markets, then Rubin, as Clinton’s treasury secretary a decade before the 2008 crash, was the behind-the-scenes guy. He, along with then-assistant Lawrence Summers, did the heavy lifting needed to scrap the regulatory structure inherited from Roosevelt’s New Deal, while giving his approval to new financial instruments like credit default swaps and collateralized debt securities that fueled the speculative bubbles in housing and other markets and, in turn, brought so much hardship to so many innocent people.
One would think that Rubin would with head bowed melt away into a quiet retirement. But not Rubin! He apparently wants redemption; he wants to clean up his record and restore his reputation; he wants to “lend his expertise” to the nation’s problems. (For those on the top tiers of our society arrogance comes easy.)
Beware of such counsel!
Case in point: in his recent article in the Financial Times, he prescribes measures that will restore business confidence and market predictability, thereby creating the environment for the business elite to re-invest the surplus capital (money acquired from the extraction of profits from the labor of working people) that it is sitting on.
His prescriptions are predictable: reductions in discretionary spending (as a salve he suggests that it be phased in), “entitlement reform,” and slowing down the rapid rise in health care costs (watch out, Medicare!).
If these measures are not taken, Rubin argues, deficits would crowd out private investment, entitlement costs and interest payments could grow to even more unsustainable levels, inflation would soar, and disruptions in bond and currency markets would become potentially “acute” – Rubin’s word.
All of which would set into motion a new financial and economic crisis, he claims, but he offers no evidence.
Moreover, implicit in Rubin’s advice is a threat to the White House, Congress and their state-level counterparts: Either roll back deficits, discretionary spending and entitlements, or transnational capital will withhold investment in plant and equipment, spike the cost of borrowing – in other words jack up interest rates much like was done in some of the European countries – and run you out of office.
We can do without Rubin, thank you.
Fixing our nation’s finances and economy doesn’t require a degree from Yale or Harvard or years on the “Street.”
Truth be told, the solutions are relatively simple: Discontinue the Bush tax cuts for the rich; repeal subsidies and tax breaks for big corporations; enact a tax on financial transactions that will generate billions in revenues and cut down short-term speculative transactions; take profit-making (and therefore inflationary pressures) out of the heath care system: lift the cap on Social Security taxes so the wealthy pay into the fund; roll back military/war spending; invest in clean energy and other green technologies; and enact a public works jobs program that will put millions back to work, rebuild crumbling infrastructure, and generate government revenues.
Photo: seanleoryan CC 2.0