Robert Rubin, the former Treasury secretary and Citigroup executive,meets Wednesday with the House DemocraticCaucus to begin educating its new members on the politically correctway to think about the economy. "Fiscal responsibility" is his standardtheme and no doubt some freshmen will want to hear his views on tradeand globalization and other large concerns.
A political friend asked me: If you were in the room, what would youask? So I gave him a list of challenging questions. These might or mightnot get passed along to House members. It seems unlikely, in any case,that freshly-elected Democrats would be so impertinent to ask them ofthe party's most esteemed economic authority.
1. Your central message is "fiscal responsibility"--balancing thefederal budget--but is it really a good idea to cut spending or, forthat matter, raise taxes now when the national economy is heading intorecession? Won't that make things worse, withdrawing economic stimulusat the very moment when more may be needed?
2. On globalization, you told TheNation magazine last summer you don't think the reform ideas of yourHamilton Project will halt the global convergence of wages that ispulling down wages and incomes in America. If that's the reality,shouldn't we be exploring stronger measures to reform the trading systemand defuse this explosive situation?
3. You blame our swollen trade deficits almost entirely on the nation'slow savings rate. Given that American families are up to their eyeballsin debt, how can you expect them to increase their savings? If that'sthe case, shouldn't you just tell people the straight truth? Theirstandard of living is going to fall. There's no way to avoid it, basedon your precriptions.
4. You suggest that balancing the federal budget will also reduce ourtrade deficits, but studies by the Federal Reserve and the IMF bothconclude the impact of fiscal balance is trivial. As the Clintonadministration balanced the federal budget in the late 1990s, the UStrade deficit was simultaneously exploding. Our current accounts deficitgrew from 1.6 percent to 4.2 percent of GDP--despite Clinton's balancedbudget. Japan ran huge budget deficits throughout the 1990s, yet itshuge trade surpluses continued regardless. Given those facts, how canyou argue the opposite?
5. Why does the business-financial establishment insist on securingelaborate rules in trade agreements to protect the rights of capital andinvestors, but claims any rules to insure the rights of labor andworkers would be "protectionist" and mess up the system? Don't we needrules for both labor and capital to create a stable, balanced tradingsystem?
6. Citigroup, Goldman Sachs and other leading financial houses aretaking major ownership positions in Chinese banks and financial firms.How does this color your advice to Congress on American economic policytoward China?
Are there other questions that might be asked? Register your comments below.