I.O.U.S.A - Addison Wiggin [66]
And I think that if we don ’ t address this in some reasonable fashion, then the likelihood that we will do it before we have trouble is probably not as great as we would like to believe, and the likelihood that we ’ ll only do it in response to trouble is higher than we ’ d like to believe.
c09.indd 135
8/26/08 6:59:31 PM
136 The
Interviews
So I think that this belief in just - in - time politics is a comforting thought, but I suspect it may be a relatively unrealistic thought. I think there is a tremendous opportunity for whoever is the next president to really make a very big and important difference for this country by providing serious leadership on this very diffi cult set of issues.
Something else to look at is that more and more of the debt of the federal government is owned abroad because we have a combination of very large fi scal defi cits that have to be funded someplace, on top of a very low de minimis national savings rate and a large trade defi cit. And the consequence of all this is that a larger and larger percentage of the debt of the federal government is owned abroad. But does that matter? I think it probably does matter, because there ’ s a higher probability that a continuation of the current set of fi nancial conditions that we have — a low savings rate, fi scal defi cits, and large trade defi cits — will create unease abroad and in foreign capital markets, which would then translate back into higher interest rates in this country and a lower currency than would be the case if we were dealing only with our own domestic markets. But that ’ s a very complicated subject.
The bottom line is I think probably foreign ownership of debt creates a somewhat greater risk of adverse interest rate effects and currency effects than if the debt was domestically held. But it is an inevitable consequence of today ’ s fi scal conditions, savings rate, and trade defi cit, and the way to get at this is to put in place sound, long - term fi scal policy.
Q: What happens to the fi rst person who raises their voice about these fi scal imbalances and the overall fi nancial situation?
Robert Rubin : I think it is absolutely imperative that our political system address what is now a very unsound, long - term fi scal situation, and I think it ’ s going to have to act both with respect to spending, including entitlements, and we ’ re going to have to have increased revenues. If we do all that, I think we can have a very successful economy for a long time.
The problem politically, however, is that putting forth a specifi c proposal, given the very deep, long - term fi scal hole we ’ re in, c09.indd 136
8/26/08 6:59:31 PM
Robert
Rubin 137
putting forth a specifi c proposal is more likely to generate antagonistic response and a moving away from that, a criticism of that proposal, than it is any kind of constructive reaction.
And in a sense, it can lead toward that proposal being, as a consequence, taken off the table politically. Somebody described it as being like a turkey shoot. If you ’ re a bunch of turkeys, the turkey that puts its head up gets shot off. And so there is actually a nonconstructive dimension to putting forth specifi c proposals.
Therefore, what I think we have to do is have some kind of special political process outside of our normal processes, involving the president, the leaders of both Houses, and the leaders of both parties coming together to take joint political accountability for the very, very diffi cult decisions that are going to have to be made about spending and about revenues and the trade - offs amongst