The Democrats' Secret Weapon!
Jude Wanniski
November 23, 2003


Memo To: Democratic presidential contenders
From: Jude Wanniski
Re: Robert Rubin, Empty Suit

The biggest reason you fellows are not making any headway in the polls when matched against President Bush has to do with economic policy. You have him on the run with his pre-emptive war with Iraq, but you can't figure out why the economy is improving and continue to urge higher taxes. Why? The Democratic PR machine has been grinding out the news that times were good when President Clinton was at the reins because he raised taxes and balanced the budget. Worse is the idea that his Treasury Secretary Bob Rubin was the Maestro, pulling the strings to get the stock market up and the unemployment rate down. With all due respect, Mr. Rubin only got the job because he made lots of money on Wall Street for Goldman, Sachs. He never had a clue why the stock market was going up and unemployment going down. I watched him every step of the way, seeing he was mystified throughout, but his genial personality had him go with the flow.

Now I know, gentlemen and lady, you will not take my word for this, as I am known as a conservative Republican who does not have your interest at heart. So I urge you to read the review of Rubin's new book published in Sunday's Washington Post by Jamie Galbraith, son of John Kenneth Galbraith, and a certified liberal Democrat. Professor Galbraith obviously would like to see a Democrat elected President next year, but clearly does not see them getting any useful advice from Mr. Rubin. If I were you, I would sooner give Professor Galbraith a jingle and see what he would recommend. Better yet, call me.

Cashing Out

Reviewed by James K. Galbraith

Tough Choices from Wall Street to Washington
By Robert E. Rubin and Jacob Weisberg. Random House. 406 pp. $35

This book is written entirely in the first-person singular voice of Robert Rubin, but to what extent it is actually "by" him remains unclear. Jacob Weisberg, editor of Slate, is listed on the cover as the co-author. But he is not a player in the story, nor is he referenced in the dedication and author's note. He gets only fleeting notice in the acknowledgments.

And though In an Uncertain World tells Rubin's life story, it is not a memoir. By his account, his private life is pleasant, colorless and uneventful; his family has included influential grandfathers, smart children and a patient and supportive wife. He likes to fish; mercifully, if he golfs we do not learn of it. When he tells of occasional dealings with unsavory people, such as a Goldman-Sachs partner arrested for insider trading in 1987, he withholds the name. Rubin is evidently a good-humored man. But if he has a sense of humor, this, too, he conceals.

Rubin built a high reputation in Washington, and it is easy to see why. He was good to work for, and he repays subordinates here, notably Larry Summers, Gene Sperling, Caroline Atkinson, Sylvia Mathews and David Dreyer, with unstinting praise. He is respectful to politicos such as George Stephanopoulos, going out of his way to mention moments when they were right and he was wrong. He stays cool even when dealing with people who don't deserve it: "Gingrich was very friendly and so was I. But even after a few years in Washington, I couldn't relate to the idea that you shouldn't take it personally when someone calls you a liar and a thief."

Yet this is not an insider's history, such as the one Sidney Blumenthal -- the Hieronymous Bosch of our time, as Harvard's Richard Parker has called him -- has already provided of Clinton's years. It is not a celebrity history, padded with travelogue la Hillary Clinton. It is not a full account of Rubin's own policy interventions. Notably omitted is his role in the repeal of Glass-Steagall, the law that once separated investment from commercial banking. This is a point for which he comes under barbed criticism from Joseph Stiglitz in a new book, "The Roaring Nineties," and it is curious that Rubin, whose career spans banking of both types, chose to leave it out.

In an "Uncertain World" is instead a statement of public philosophy. It seems mainly intended to impart lessons for economic policy decision-making, and to do so mainly through the prism of several important case studies. These include the Clinton economic plan, the rescue of Mexico in 1995, the Asian financial crisis and the stock market bubble with which the decade ended.

What, then, are the central lessons? The great Austin ice cream parlor known as Amy's has a motto: "Life is uncertain. Eat dessert first." Rubin takes the first half, rejecting the second. His motto, if he had one, might be "Life is uncertain. Be careful." It is good advice, sober and sensible without doubt. And yet it falls curiously short of wisdom.

Rubin came to Washington from Wall Street, and he claims that he knew little of either economics or politics. It is not too difficult to believe. His economic lodestars are fiscal restraint, a high dollar, respect for the judgment of financial markets, deregulation generally and certainly free trade. He seems to have held a mild view of the Republicans in Washington until he had to work with them up close, and even after: In 1994, he writes, "I didn't begin to foresee the full consequences of a Republican-controlled Congress." Nobody who had worked in Congress would have been caught so off guard.

Faced with specific crises, Rubin was pragmatic and willing to take risks as necessary. He pushed for Clinton's tax increases because he knew that spending cuts alone could never do it all. He was prepared to lend Mexico more than it needed, in order to make a credible statement to the financial markets. In the Asian crisis he orchestrated a campaign of support for the IMF that was unpopular on all sides (and rightly so, in many respects).

And yet missing from these pages is any special insight into Rubin's great problem: how to govern the U.S. and the world economy in our time. Clinton's economic program succeeded, but it led to a bubble and bust from which we have not recovered. Are Rubin's Treasury and Greenspan's Fed, which stood idly by, blameless? Rubin thinks so. Would the same policies work now? It is unlikely, but one would not learn why from this book.

And while the Mexican rescue also worked, Treasury's policies toward Asian liberalization, and especially toward Russia, were disastrous, leading to economic and human calamity. Rubin blandly passes the buck. Markets "tend to shine a spotlight on real economic problems," he writes. But they don't cause problems. They aren't, and perhaps can't be, inherently unstable. When there is a crisis, it is always because some country out there has failed to "reform."

This is belief, not analysis. Rubin has the custodial view of an inside player, who did well in a financial game to which he was happy later to return. He is not a man to challenge the rules. But the times may require that, once in a while. And one may well ask, when the chance next arises, whether someone like Robert Rubin should again be placed in charge.

James K. Galbraith teaches at the LBJ School of Public Affairs at the University of Texas at Austin.

2003 The Washington Post Company