I.O.U.S.A - Addison Wiggin [62]
class tax cut and the other purposes that the president wanted to accomplish. So what President Clinton decided to do was to put in place a program that would begin the process of defi cit reduction, which turned out to be very successful, and at the same time, to make room for public investment in areas that he thought were critical economically or socially. For example, a very large increase in the earned income tax credit, a program that most people know nothing about in our country, but which is really an outstandingly successful program to help low - income working people have increased incomes.
Q: Speaking of defi cits, do you think defi cits matter?
Robert Rubin : Well, I don ’ t think there ’ s any question that defi cits matter, and I think there is probably virtually no mainstream economist who doesn ’ t believe that defi cits matter. Defi cits over time — and we ’ re talking about defi cits over a period of time, not just for a little while — lead to higher interest rates, they can create the risks of market disruption, and they undermine the ability of government to engage in public investment, which is so critical economically and socially. They reduce our leverage abroad when c09.indd 128
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we try to negotiate on international economic policy issues that are important to our country.
What we found in the early 1990s, when President Clinton put in place a powerful defi cit reduction program, is that defi cits also undermine business and consumer confi dence more generally. So I don ’ t think there ’ s any question that defi cits matter. And I think it ’ s a broadly accepted view that sustained defi cits over time can have signifi cant adverse impact on jobs, on standards of living in our economy more generally.
Q: Can you explain to me what would life look like in America and our economy if the dollar declined, if people didn ’ t have the confi dence that they have now or once had?
Robert Rubin : Well, all during the Clinton years, one of the points that we made in the public discussion of economic issues was that a strong dollar is very much in our country ’ s interest. Now, that concept was the concept of a strong dollar based on strong policy.
Remember, the dollar exchange rate, the exchange rate between the dollar and foreign currencies, represents the rate at which we take the goods and services that we produce and exchange them for the goods and services that others produce and that we import. So the stronger the dollar, the more goods and services we get from foreign countries in exchange for the goods and services we give them, and that obviously improves our standard of living. Conversely, the lower the dollar, the less we ’ ll get in return for the goods and services we produce, and therefore the lower our standard of living.
So having a strong dollar based on strong policy is very much in the economic interest of our country.
Q: Can you imagine for a moment that it ’ s 1999 and you are about to leave the White House and leave the Treasury? Would you be surprised if someone told you on that day that we would have the debt levels and the defi cit spending that we have these days?
Robert Rubin : I left Treasury in July 1999. In 1998, the federal government of the United States had a fi scal surplus for the fi rst time in, roughly speaking, 30 years. And the projections forward based on the fi scal policies then in place were for continued c09.indd 129
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130 The
Interviews
surpluses for long, long into the future. And I thought that what had happened — well actually, I ’ m not going to say what I thought.
What had happened was that a political coalescence had occurred or developed around maintaining fi scal discipline, which is a very diffi cult thing to do politically because it requires