In April 2004, AFL-CIO president John Sweeney grew concerned that John Kerry was getting too much of his economic advice from the Wall Street wing of the Democratic Party. Kerry had just completed his primary sweep. In the general election, he would need the unions. Sweeney proposed a private meeting to discuss living standards as a campaign issue, and the candidate invited the labor leader to his Beacon Hill home. Sweeney arrived at the Kerry manse, bringing his policy director, Chris Owens, and Jeff Faux of the Economic Policy Institute. There, seated in the elegant living room, were Robert Rubin and two longtime lieutenants: investment banker and former Rubin deputy Roger Altman, and fellow Clinton alum Gene Sperling -- Kerry's key economic advisers.
In a three-hour conversation, the group discussed the deficit, taxes, trade, health care, unions, and living standards. The labor people urged the candidate to go after Wal-Mart's low wages. Rubin countered that a lot of people like Wal-Mart's low prices. Kerry eventually announced that the meeting needed to wrap up, because "Bob has to get back to Washington." Rubin responded that, no, he could stay as long as Kerry wanted. Sweeney and his colleagues were ushered out the door; Rubin, Altman, and Sperling remained. "Wall Street was in the room before we arrived," says Faux, "and they were there after we left."
Now, more than two years after Kerry lost a winnable election, the Democrats have taken back both chambers of Congress, running on an economic platform far more populist than Kerry's. With the strongest field in decades, they could win the presidency in 2008. Though Hillary Clinton is running as an economic centrist, a ticket led by John Edwards, Barack Obama, or Al Gore (if he gets in) would probably run a robust campaign on pocketbook issues. But if the Democrats do take back the White House, they are likely, once again, to find Bob Rubin in their living room.
Formerly co-chairman of America's top investment bank, Goldman Sachs, Rubin now chairs the executive committee of the country's leading commercial bank, Citigroup. In between, he served as head of Bill Clinton's National Economic Council, then as treasury secretary, and he continues to be the party's preeminent economic guru. Other men have stood at the pinnacle of Wall Street. No one else has simultaneously been at the pinnacle of the Democratic Party.
Of course, there have been other influential Wall Street Democrats. John J. Raskob, the party chairman and senior executive of General Motors and DuPont, was a powerfully conservatizing influence on the pre-Roosevelt Democratic Party. The treasury secretaries under Democratic presidents Roosevelt, Truman, Johnson, Kennedy, and Carter all were fiscal and regulatory conservatives, as were such Democratic Party leader-cum-lobbyist types as Bob Strauss and Tony Coelho. But none combined Rubin's power on Wall Street, his admiring press, and his broad sway over the party's economic posture.
A man of nimble intellect, self-effacing charm, and professed concern for America's downtrodden, Rubin functions as what once would have been called a power broker. But that label doesn't attach to Rubin, because he is so seemingly public-minded, so socially liberal, and so genuinely nice. David Bonior, among the most pro-labor of Democrats when he was House Democratic Whip and now John Edwards' campaign manager says, "Of all the people I dealt with in the administration, he was the most accessible, engaging, and the least arrogant. We often didn't agree, but you could always have a dialogue."
And it was a dialogue that Rubin usually won. Rubin's rise is not just personal but structural. It reflects, and reinforces, the increasing influence of finance on the American economy and polity, through both deregulated financial markets and campaign money.
Rubin's extraordinary power reflects the synergy and networking of his multiple roles -- as fund-raiser, gatekeeper, banker, certifier of fiscal soundness, and as the man reputedly responsible for the boom of the 1990s. Rubinomics, of which more shortly, is credited with balancing the budget, broadening prosperity, and redeeming the Democrats as fiscal stewards.
Rubin enjoys unparalleled reach into the overlapping worlds of corporate and Wall Street boardrooms, nonprofits, party organs, and senior Democratic politicians. The leading center-left Democratic-oriented think tank, the Center for American Progress (CAP), has Sperling as a senior fellow in economics. Despite bolder initiatives on health insurance and other issues, and some staffers to Sperling's left, CAP's core view of budget balance, regulation, and trade, are close to Rubin's. The Hamilton Project, founded by Rubin and based at the Brookings Institution, promotes free capital movements, fiscal balance, and small gestures toward greater equality. In April, Rubin will serve as honorary co-chair of the 25th anniversary gala of the Center on Budget and Policy Priorities, the most respected liberal think tank on fiscal issues. Rubin also serves as vice chair of the Council on Foreign Relations.
It was Rubin who promoted his protégé Larry Summers for president of Harvard, certified Summers' supposed new maturity, and resisted Summers' ouster. Rubin is one of only seven members of the Harvard Corporation, yet characteristically, when the Summers presidency exploded, little mud splattered on Rubin. And although he no longer raises large sums for political candidates himself, Rubin remains very close to others in the Wall Street Democratic money machine, and to its party conduits, particularly Senator Chuck Schumer, who heads the Democratic Senate Campaign Committee, and Representative Rahm Emanuel, Schumer's House counterpart in the 2006 campaign.
When the Democrats took back the House in 2006, incoming Speaker Nancy Pelosi advised the new Democratic caucus that its first two briefings would include one on defense, with three experts of differing views. On the economy, Robert Rubin would be appearing, solo.
Though widely regarded as a Wall Street liberal, Rubin has played the same fiscally conservative ideological role for more than two decades, first as a fund-raiser, then as a high public official. Rubin was one of the Wall Street donors who persuaded 1984 Democratic presidential nominee, Walter Mondale, to make his politically disastrous call for tax increases to balance the budget the centerpiece of his convention address. "I respected Bob a great deal -- still do -- and often drew on his thinking," Mondale recently confirmed to me.
As Clinton's top economic adviser, Rubin's dubious counsel included making the North American Free Trade Agreement (NAFTA) a priority over health reform (Hillary Clinton's objections notwithstanding), and pushing the budget all the way to surplus, protected from a Republican treasury raid only by a fictitious Social Security "lockbox." He did support expansion of the earned income tax credit and minor social-spending increases, but fiscal discipline was paramount. These views are not just those of a centrist policy kibitzer; they are exactly what you would expect of a leading banker.
Rubin's position as the Democrats' economic seer is unfortunate in several related respects. First, the vision Rubin is selling offers nothing for an economically stressed electorate. His theory is that budget balance, free capital markets, and low interest rates are both necessary and mostly sufficient for broad prosperity. We might like new social spending, but alas, the fiscal imperatives tie our hands. Rubin was a big supporter of pay-as-you-go-budget rules, now adopted by the Democratic congressional majority. These rules limit further Republican tax cutting, but they also hobble Democrats' ability to spend more than token sums on new initiatives.
Rubin contends that surpluses are required to prepay the coming costs of Social Security (which are in fact manageable) and of Medicare (which are not). But the absence of new public outlay in Rubin's fiscal design precludes bolder strategies, such as increasing efficiencies and containing costs by making health insurance universal. Despite soothing rhetoric, the Rubin program offers nothing to fundamentally alter the economic risk and stagnation afflicting the broad working middle class. If the Rubin doctrine again dominates the Democrats' pocketbook program, it will once again blunt the Democrats' (now resurgent) appeal as the party of the common American.
A senior liberal member of Congress told me, "It's fair to criticize Rubin on ideological grounds, but he's utterly sincere in his views." Rubin tends to get a free pass on actions that, in lesser men, would be seen as plain conflicts of interest. For example, Goldman Sachs, which Rubin left to join Clinton, was a prime underwriter of Mexican bonds both before and immediately after the passage of NAFTA, as Faux points out in his book, The Global Class War. Goldman was also the investment bank that underwrote the privatization of the Mexican national phone company, Telmex, in the late
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