Robert Rubin Against Second Stimulus

The former Treasury secretary makes a splash with Sunday comments

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Robert Rubin, Treasury secretary to Bill Clinton, came out on Fareed Zakaria GPS against further economic stimulus. The economy is "going to have slow and bumpy growth," he said, and another stimulus might harm the economy by damaging confidence and increasing uncertainty. As a major economic figure from a Democratic administration, Rubin's stance has made a bit of a splash in the blogosphere. Some writers are evaluating the political impact, some are trying to understand what, exactly, he meant, and a few economics and finance bloggers are arguing that he's just plain wrong.

  • Rubin & Co. Want to Believe This Is the Asian Crisis, argues Paul Krugman, and that the crisis, is, therefore "amenable to similar solutions." The 1997-98 crisis didn't involve much government action at all. Krugman calls himself "saddened but not really surprised" at the statement.
  • 'This Is Actually a Bit Surprising,' says Business Insider's Joe Weisenthal, though he appears to be referring in large part to the general mystery of Rubin's reasoning. Rubin, explains Weisenthal, "told CNN ... that while the economy may have some bumps and may slow, further stimulus might cause uncertainty and hit confidence. It's not clear what kind of uncertainty he meant--perhaps uncertainty on the deficit reduction scenario." Then again, muses Weisenthal, "he then went on to oppose the expiry of the Bush tax cuts, which is also a kind of stimulus, and relies on similar logic (and is also deficit negative, most likely)."
  • Bit of a Slap to Liberals  Rubin has been pretty quiet during this administration, writes The Huffington Post's Sam Stein, and, while "[h]is pushback against a second major stimulus effort doesn't necessarily have practical political impacts," not least because "Congress wouldn't write the check" anyway, "being a high-profile Democratic-affiliated figure ... Rubin's comments hurt those arguing the case that more stimulus spending is needed." That said, Rubin also expressed support for the estate tax, which should cheer liberals somewhat.
  • This Makes No Sense  "Can someone get me some of the Very Serious Person crack rock," writes liberal blogger and former economics lecturer Atrios, "so I can understand the very sophisticated economic model such that all that matters is 'confidence' and that confidence could be undermined by fiscal stimulus?"
  • If Rubin Says So, Do the Opposite, is finance blogger and former Goldman employee Yves Smith's surprisingly vehement take.
Rubin's role as a major, if not the major, architect of the crisis is Exhibit One as to why to listen to nothing he says, and unless proven otherwise, to run fast the other way: his primary allegiance is the interest of the banking classes, which is no longer that of most Americans. As we have discussed, cutting deficits now (when the private sector is deleveraging and we are running a sizeable trade deficit) is a guarantee of a further contraction, which will result in worse debt/GDP ratios, the problem this little operation was intended to fix.
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