October 06, 2016
There aren’t many people who still regard former Treasury Secretary Robert Rubin with much respect. After all, his high-dollar policy was what caused the U.S. trade deficit to explode beginning in the late 1990s. It went from just over 1.0 percent of GDP in 1996 to almost 4.0 percent by the time President Clinton left office in 2000, and eventually peaked at almost 6.0 percent of GDP ($1.1 trillion in today’s economy) in 2005. These trade deficits created enormous holes in demand which were filled by the stock bubble in the late 1990s and the housing bubble in the last decade.
In both cases, the collapse of the bubbles were really bad news for the country. The labor force didn’t get back the jobs lost from the recession following the collapse of the stock bubble until January of 2005. At the time it was the longest period without net job growth since the Great Depression. Of course, the impact of the recession following the collapse of the housing bubble was even more severe.
Given this history, most folks don’t hold Robert Rubin in high regard today, with the exception of the Washington Post. Yesterday, the paper gave Rubin the opportunity to share his wisdom in his own column. Today, it gave a column to two of the leaders of the Wall Street-funded group Third Way. The column was a warning to Hillary Clinton not to fill her cabinet with progressives. It instead argued for the importance of people who understand capital markets, with Robert Rubin topping its list as an example of the sort of person that Secretary Clinton should be looking for.
While the rest of us may not think too well of Rubin at this point, there is a sense in which it is possible to think highly of the guy. Rubin managed to walk away with over $100 million from his stint at Citigroup, a bank which was at the epicenter of the financial crisis and perhaps the bank that most directly benefitted from the deregulation that Rubin engineered as Treasury Secretary.
In this sense, just as Rudy Giuliani argued that Donald Trump was a genius for managing to avoid paying taxes for 18 years, perhaps our Third Wayers think of Rubin as a genius for being able to personally profit from an economic catastrophe. It’s good to know that we have such geniuses in both political parties.
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