Robert Rubin. (Artwork: Anna Weissman)
"Foreclosure Phil" Gramm and nice guy Robert Rubin put two different faces on the power players who move so easily between Wall Street and Washington.
The personification of old-fashioned, dog-eat-dog capitalism, Gramm
appears to find moral virtue in the survival of the fittest and policy
guidance in Marie Antoinette's "Let them eat cake." In his long tenure
as the Senate's top Republican on economic policy, he led the fight to
roll back state and federal regulation of the economy,
encouraging both the Enron scandal and the sub-prime lending frenzy. Gramm then left the Senate to find his reward as vice chairman of the Swiss-based UBS Investment Bank, for whom he continued to lobby Congress on housing and mortgage legislation. He also joined John McCain's presidential campaign as co-chair and senior economic adviser, until he was forced to resign last month for dismissing the chaos he did so much to create as merely "a mental recession" and the victims he left behind as "whiners."
Robert Rubin would never talk like that. The very model of a modern corporate liberal, he moved with ease from the top of Goldman Sachs to become President Bill Clinton's chief economic adviser and then secretary of the Treasury. Clinton had run as a populist on an economic platform created principally by Robert Reich, who became his labor secretary. But Rubin's Wall Street "realism" quickly trumped Reich's academic populism, and Clinton made the North American Free Trade Agreement his top priority over universal health care. He also eliminated the budget deficit left to him by the first Bush rather than rebuilding the nation's already crumbling infrastructure, and went along with the economic deregulation that Phil Gramm was pushing in the Republican-led Congress.
To Rubin's credit, eliminating the deficit helped fuel the prosperity of the Clinton years. To Rubin's shame, the Clinton free trade agreements provided no safety net for American workers whose jobs went abroad, while the newly unregulated financial markets helped create the speculative crap shoot that led directly to our current economic woes.
Dubbed by Clinton the "greatest secretary of the Treasury since Alexander Hamilton," Rubin left the administration and joined Citigroup, the nation's largest financial conglomerate, whose very existence was made legal by the deregulation measures he had convinced Clinton to accept. According to The Wall Street Journal, Citigroup has so far paid Rubin more than $100 million to serve as chairman of its executive committee, and leaves him free to serve as a key economic adviser to Barack Obama. Even more telling, Rubin's protÃ©gÃ©, Jason Furman, now heads Obama's paid economic staff and is expected to join Obama in the White House should he win in November.
Would a President Obama follow in Bill Clinton's footsteps, listening more to Rubin & Co. than to Robert Reich, labor union leaders and the growing number of economic populists in Congress? If Obama does lean toward Rubinomics, I do not expect a whole lot of change I can believe in.
Seven and a half years of George W. Bush has left a budget deficit of $482 billion and growing. Obama's talk of "a war we must win" in Afghanistan could prove an enormous financial burden. And, even if Obama raises taxes on those making over $250,000 a year, as he has promised, Team Rubin will have some very persuasive arguments. Does Obama pay off the Bush deficit, as Rubin just promised on CBS's "Face the Nation?" Or does Obama risk spooking Wall Street by investing heavily in universal health care, a renewable energy program, massive job retraining, the rebuilding of bridges and highways, and so much more?
It's a difficult balancing act, and the internal debates will be intense if Obama makes it to the Oval Office. But one much-needed change could prove decisive, and it would not cost much at all. This past March, Obama made a major economic address at New York's Cooper Union, where he urged immediate relief for homeowners hit by the housing crisis and a $30 billion stimulus package to jumpstart the economy. As important, though rarely mentioned since, he also called for a new regulatory framework to prevent future abuses and crises in the financial system.
"Under Republican and Democratic administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices," he said, in an implicit critique of Rubin and the Clintons. "We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth; a market that favors Wall Street over Main Street, but ends up hurting both."
Obama made clear that he saw free markets as "the engine of American prosperity." But, he insisted, government also has a role as umpire and as steward. "Our free market was never meant to be a free license to take whatever you can get, however you can get it," he said. "That is why we have put in place rules of the road to make competition fair, and open, and honest. We have done this not to stifle - but rather to advance prosperity and liberty."
This was the Obama for whom I voted in the primaries - insightful, incisive and to the point. Both in the campaign and in the White House, I can only hope that Robert Rubin and his friends on Wall Street let Obama be Obama, for their sake as well as for the rest of us.