I.O.U.S.A - Addison Wiggin [63]
Unfortunately, what happened early in the next decade is that that coalescence fell apart and we got on a very different fi scal track so that we now have substantial defi cits, and very substantial defi cits are projected into the future. And I think it ’ s imperative that we reestablish that politically very diffi cult, but economically imperative coalescence around sound fi scal conditions.
Q: I ’ d like to explore further something you just said, and maybe this speaks to your experience at Treasury: How diffi cult is it to balance the budget?
Robert Rubin : The politics of sound fi scal conditions, which ultimately should result in a balanced budget, are very diffi cult because the natural inertia in the political system is toward federal programs, most of which are very useful. And therefore the inertia is toward spending on the one hand and tax cuts on the other hand. But if you ’ re going to have sound fi scal conditions, you have got to constrain your spending and you also have to provide for adequate revenues. And what ultimately is involved are very diffi cult trade - off decisions involving federal programs and what the American people want their government to do, and then providing the means to pay for it. I think what we ’ ve got to do right now is get back on a long - term path, taking into account entitlements and all else, which brings our defi cit down over time, to the point where we have a balanced budget. But at the same time, we need to provide the room for public investment in critical areas like education, health care, infrastructure, basic research, and so much else, which is a requisite if we ’ re going to have the kind of very successful economy I believe we can have if we meet these challenges.
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Q: If we aren ’ t able to get fi scal issues a priority in the next presidential campaign, what are the chances that the rising debt and the rising defi cits would threaten the status of the reserve currency? What would be the impact on the American family?
Robert Rubin : At the present time, the United States has signifi cant fi scal defi cits, and they ’ ll fl uctuate depending on short - term circumstances, but in the long - term sense, we have signifi cant defi cits — they get substantially worse over time because of entitlements. And at the same time, we have very large trade defi cits. At some point, these become a deep threat to our economy and to the global economy. Our political system is going to have to address this predominantly through putting in place a sound, long - term fi scal regime.
One of the risks, and there are many risks in this combination of imbalances, is that at some point people can lose confi dence in the dollar. And if the global community lost confi dence in the dollar, it ’ s conceivable that we would no longer be a favored reserve currency. That ’ s a very technical matter, but it could have enormous signifi cance for our country. I don ’ t believe that will happen, for a whole host of reasons. I believe we ’ ll remain a reserve currency, and I believe at some point our political system is simply going to have to address these long - term fi scal issues. But it ’ s going to be very diffi cult to do it, and it ’ s enormously in the interest of the American people that our political system address these issues before they ’ re a substantial diffi culty, rather than in response to substantial diffi culty. But our political system has a tendency to respond more in response to diffi culty than in anticipation of diffi culty. The United States has many great strengths, which put us in the position to thrive over time economically, but in order to thrive we have to address these issues, and if we don ’ t, then I think we could have serious diffi culty.
Q: What does life look like for your kids or grandkids if the fi nancial road that we ’ re on is not changed or altered?
Robert Rubin : If the fi nancial road that we ’ re on — which consists