Rubin: More revenues will be needed
Robert Rubin, chairman of Citigroup's executive committee and former Clinton administration treasury secretary, is spearheading the Hamilton Project, a group that advocates various new forms of social insurance to mitigate the worker dislocation and anxiety produced by globalization. Rubin spoke with Senior Writer James Pethokoukis this week after a Hamilton Project symposium in Washington, D.C.
Right now, economic growth seems solid and unemployment is low. How strong is the economy, and how much do you worry about a recession?
I really don't have a view with respect to the shorter term, whether the economy will continue at the rates it has or it will slow down. To me, the real question I focus on as an investor is not what is going to happen in the short term but rather what is going to happen over time. That is what's most relevant. On the one hand, we could do very well with all the strengths we have, but we have a lot of challenges and we are not meeting the challenges; and if we don't meet them, then I think it could lead to serious trouble--the fiscal issues, the imbalances that we are not adequately addressing.
I know you don't want to focus on the short term, but do you think the Fed needs to stop raising rates?
Actually, I don't have a view about what I would do, but I think [Federal Reserve Chairman Ben] Bernanke, who I know, is very thoughtful about these kinds of issues.
You're confident in him?
Yeah, I am. I think he was a very good choice.
Which is of greater concern to you, economists and those on Wall Street who underestimate the human costs of globalization or the people in the Democratic Party who may not fully appreciate the positives?
I think you've got it exactly right. I think there are two big concerns. One is that globalization should be married to a whole other set of policies that are aimed at promoting broad-based distribution and promoting economic security, and we're not doing that. The other concern is that with such a substantial portion of the American people feeling insecure and uncertain, there may be a move against globalization, and I think that is very much against our interests. And those two are not unrelated concerns. I think if we addressed that first set of concerns, we could reduce the level of anxiety and sense of insecurity, which would then reduce the risk of a movement against global integration.
You talk about that feeling of insecurity. Do you think that is just a perception or should people really feel insecure?
It's both. If you look at the facts, the facts are that the frequency of substantial income declines over a two-year period has increased greatly. Something like 12 percent of families had a 20 percent reduction in income in a two-year period in the 1970s, and by the time you got to the late 1990s, it got up to about 25 percent, or double that. And while I don't have any data to show this, I don't think there is any question that there has been an increase in job dislocation. So I think it's real. On the other hand, the anxiety is a multiple of the reality. People see what is going on around them and even if they themselves are doing well, it produces a sense of anxiety and insecurity, which is what President Clinton used to say: that the problem was that people who were doing well became anxious because of what they saw going on elsewhere.