Saturday, October 25, 2014
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Robert Rubin Revisited

Economists and historians will long debate the contrast between the economic policies of the presidencies of Bill Clinton and George W. Bush. The Clinton administration took office with remarkably few cards, and the cards it held were dreadful: a long-term legacy of extremely slow economic growth, huge federal budget deficits created by the Ronald Reagan/George H. W. Bush administrations of 1980-1992, a relatively high "natural" rate of unemployment, and growing inflationary pressure.

By contrast, George W. Bush's administration took office with stunningly good cards: a budget in substantial surplus, a trend of rapid productivity growth as the information-technology revolution reached critical mass, and a very low "natural" rate of unemployment.

Despite its handicaps, nearly everything that the Clinton economic policy team touched turned to gold. Led by Robert Rubin, first as an Assistant to the President and later as Secretary of the Treasury, it turned the gargantuan Reagan/Bush deficits into huge surpluses; it successfully enhanced America's high-investment/high productivity growth recovery; it pursued initiatives to reduce trade barriers. The Clinton team could also take credit for the largely successful handling of the 1994 Mexican and 1997-1998 Asian financial crises.

By contrast, nearly everything that George W. Bush's economic policy team has touched has turned to, well, if not lead, at least to a state that inspires observers, both inside and outside the administration, to shake their heads and mutter about a horribly wasted opportunity. On trade, on fiscal policy, on reform of social entitlements, on almost every issue you can name, the Bush team has worsened conditions substantially.

Reading Rubin's recently published memoir In an Uncertain World , we can begin to understand this striking difference better. Begin by noting that the title page of In an Uncertain World states that its authors are Robert Rubin and Jacob Weisberg. How often does the person who crafts the prose for a memoir of a public figure get his or her name on the cover? Weisberg is not given a mere "with," but the full credit of a co-author that the word "and" delivers. This is a key facet of Robert Rubin's strength: he is a classy guy, one who believes that credit is to be shared.

What Rubin sees as most important in developing policy is the habit of "probabilistic thinking." This means a willingness to ask, "What else might happen?," "What if we're wrong?," "What could happen next?," and to look at the full range of potential outcomes--at their costs as well as their benefits--rather than assuming that results will match some fashionable ideology or favorite administration model. All forecasts, after all, turn out to be wrong in at least one vital dimension.

Pounding a table and shouting does not make unwanted facts disappear. Rubin's recognition that the world is a complicated, poorly-understood place, where lots of unexpected and surprising things happen--and where we cannot merely consult some map drawn by John Maynard Keynes or Milton Friedman or some neo-conservative pundit--seems to have been the most powerful of his secret weapons.

But in reading In an Uncertain World , you soon see that "probabilistic thinking" was not Rubin's only weapon. He also worked for a president who cared deeply about policy as well as politics--and who was willing to be convinced, at least most of the time, that good policy would turn out in the long run to be good politics.

Rubin also used the remarkable management skills that he had honed as chairman of the investment bank Goldman Sachs to great effect. I recall sitting in the back of the White House's Roosevelt Room and watching, amazed, as he guided meetings of the National Economic Council to the consensus he wanted by little more than raising his eyebrows and calling on people in the appropriate order.

All of these policymaking skills, however, would have been of little use had they not been pointed in the right direction. I think that the principal reason for Rubin's (and Clinton's) extraordinary economic policy success--all the more so in view of the weak cards the administration was dealt--was the ability to hew to the true object of government: to always keep the big picture in mind.

In his memoir, Rubin recalls a moment when he held firm on world trade: "Protecting industries is usually appealing, because the negative consequences of free trade are so visible.... In a discussion with President Clinton...I mentioned that one sector where we needed to push for reduced trade barriers was fish. Clinton remembered... seeing some poor fisherman casting their lines.... He wasn't going to do anything to hurt those vulnerable people. `But Mr. President,' I said, `to help those poor fishermen, you're going to prevent the vastly greater benefit that would come to the poor...from being able to buy cheap fish.'"

We, too, need to keep our eye on the big picture. That means that we must make it more likely in the future that people as capable and wise as Robert Rubin will find it attractive to enter public service, and that once there, they will have the power to make a difference.

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