Robert Rubin is on a charm offensive to save something of his tattered reputation and his outsized influence. A decade ago, many people regarded him as a financial genius. In reality, he was the prime Democratic enabler of the Republican-style deregulation that brought us the financial crisis. And much of the apparent prosperity of Rubinomics turned out to be an economic bubble financed by cheap corporate and personal debt that lasted only until inflated stock and housing prices collapsed.
Rubin has also been a champion of reining in Social Security and Medicare, and putting fiscal conservatism above social goals. His Hamilton Project, calling for a tiny bit of new spending and a large amount of budget balance has been totally overtaken by events.
When Citigroup, which paid Rubin an outlandish salary, got into big trouble for putting risky investments off balance sheet but allowing investors to redeem them at will through an arcane advice known as a "liquidity put," Rubin, like the proverbial piano player in the whorehouse, told reporters that he had never heard of a liquidity put. (So how did he earn those big bucks?) I wrote a feature piece about Rubin and his influence last year in the Prospect. It was the rare critical article.
Events have just blown away the world according to Bob Rubin. But the man has no intention of just giving it up and playing golf. And Rubin's remarkable ability to survive palpable failures makes Teflon look like Superglue.
What to do? First, place op-ed articles staking out a new position while denying a change of heart. Even better, find an impeccable progressive and write a joint op-ed. Someone like former UN Secretary General Kofi Annan, or the Economic Policy Institute's respected economist Jared Bernstein.
On Monday, Rubin and Bernstein jointly wrote an op-ed in The New York Times with the wildly misleading headline "No More Economic False Choices." Their premise is that there is no conflict between fiscal conservatism versus adequate stimulus in a recession or decent social outlay going forward. If only.
For decades, EPI, the labor movement, and progressives in Congress have been at war with the Wall Street wing of the Democratic Party that Rubin champions, and Wall Street is not exactly declaring unilateral disarmament. The whole op ed is worth a careful read, but here is a short guide for the perplexed:
There is indeed huge conflict between the fiscal conservatives and the spenders. And it will be one of the defining conflicts of the next year. The whole question is one of degree -- serious public outlay or tokenism. If Rubin seriously weighs in on the side of the spenders, I will eat my shirt.
The op-ed also grandly declares that "free trade" versus "protectionism" is another false dichotomy, but read down and you find what diplomats call a "bracketed" item -- something on which negotiators can't agree. Bernstein is for labor standards in trade agreements and Rubin isn't. So much for a grand consensus.
The op-ed includes an odd paragraph in which the authors agree that workers should have the right to join unions or not, something that has ostensibly been guaranteed since the Wagner Act of 1935. Weirdly, the authors invoke the sainted John Kenneth Galbraith's idea of countervailing power -- JKG must be whirling -- but trade unionism has been around since well before Galbraith wrote in the 1950s. The rights of the Wagner Act have of course been destroyed by bare-knuckled union-busting. And the legislation that is on the table to finally enforce the Wagner Act is the Employee Free Choice Act. But you can't find support for EFCA anywhere in the op-ed piece -- because Rubin opposes it.
There is also a wishy-washy paragraph carefully balancing support for regulation with support for markets. Again, the devil is in the details. What will the new administration do to put some teeth in the $700 billion bailout, so that banks like Citigroup, where Rubin is still a senior executive, resume lending and don't pay out the money in dividends and bonuses. Nothing in the op-ed about that, either.
Jared Bernstein is a friend of mine, and I serve on EPI's board. Bernstein has chosen to let his good reputation rub off on Rubin's bad one. The gamble is that Rubin can be moved to lend his prestige, such as it is, to progressive causes like tough regulation, union organizing, and serious public outlay. If Rubin ever does any heavy lifting on any of this, I owe Bernstein an apology and lunch.
And just to frost the cake, we have Rubin in the Financial Times on October 30, in a co-authored piece with none other than Kofi Annan and former International Monetary Fund Chief Michel Camdessus. The subject: In the global financial meltdown, do not forget the needs of the world's poor. Isn't that nice? Maybe if Rubin had not been such a perpetrator of the collapse, we wouldn't be doing such damage control now.
It is astonishing how many fingers in how many political pies Bob Rubin still has. Two of the top candidates for treasury secretary, New York Fed President Tim Geithner and former treasury secretary Larry Summers, are Rubin protégés. So is Jason Furman, the Obama campaign's economic policy chief. Expect that Rubin will get his phone calls returned, pronto, no matter how destructive his past influence.
If Obama is elected today, the goal of progressives should be less to win Rubin over, than to contain his immense backstage influence. And they should be especially wary of public relations moves masquerading as olive branches.
