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A Must Read Book That Explains Rubinomics, and Much More:

Robert Rubin and Jacob Weisberg's In An Uncertain World: Tough Choices from Wall Street to Washington


Friday, Feb. 06, 2004

The most significant accomplishment of the Clinton Administration was probably its economic policy. A (if not the) key player in that success was Robert Rubin, the Wall Street partner from Goldman Sachs who first created Clinton's National Economic Council in the White House, and then became Secretary of the Treasury.

Working with co-author Jacob Weisberg, the editor of Slate, Rubin has penned a candid and informative memoir, In An Uncertain World: Tough Choices from Wall Street to Washington. The book not only reconstructs the story behind the Clinton Administration's economic policy successes, but also gives outsiders a look behind some of Washington's closed doors.

Rubin (with Weisberg's help) guides readers through the maze of Washington's economic and fiscal policymaking miasma from an highly insightful and telling point of view. This is a first person account by Rubin of his exposure to the ways and means of government in the nation's capital. He arrived at the Clinton White House as a total government rookie, with barely a clue about how the White House operated; yet he departed government, six years later, a consummate professional.

The book is on the New York Times best-seller list, but has yet to make the top fifteen (which is the published list). It deserves more readers. It has received excellent reviews. Journals such as the Guardian and Forbes have high praise for the book. As do political commentators from the right, such as George Will, and from the left, such as Brad DeLong.

Rather than merely "review" this book, let me give you just a few good reasons why it should be a "must read."

Comparing Presidential Competence: Clinton Versus George W. Bush

As it happened, I read Ron Suskind's The Price of Loyalty: George W. Bush, the White House and the Education of Paul O'Neill before reading Rubin's book. What is striking is not the contrast between the two men who served as Treasury secretaries. Rather, it is the contrast between the Presidents they served.

Reacting to the Suskind/O'Neill work, Bush said, "Let me say something about that book. Paul said I was disengaged because he talked to me for 45 minutes and I didn't say a word. I wasn't disengaged. I was bored as hell and my mother told me never to interrupt. . . ."

Bored? I've heard Paul O'Neill called many names -- moderate, incisive, smart, blunt, outspoken -- but never boring. And if O'Neill was so boring, why was it he continued throughout his tenure to have private meetings ("face time") with Bush -- meetings where the president still did not ask any questions? Bush didn't have to meet with O'Neill, and could have ignored him, as he does most of his cabinet secretaries.

By way of comparison, Rubin reports Bill Clinton's involvement in the details of developing policy, his appreciative listening to all the alternatives, his decisionmaking, and his ability to give his staff constant guidance as to what he wanted. Clinton became involved in economic policy during the post-election transition, and his active role continued throughout his presidency.

Typical was the post-inaugural period, where Rubin reports several weeks of meetings "to set the exact levels of deficit reduction, priorities for the allocation of budgetary resources, and the specifics of our tax proposal. Clinton remained intensely involved in the specifics." With the first Clinton budget, the president became so immersed in the details that he was able to make easy and fast decisions during the subsequent years.

In Rubin's book, the Clinton team's brainpower and acumen are apparent -- whether they are devoted to policy development, or to several major economic crises, in Mexico, Russia and Asia. Even when Clinton was being battered by the investigation of Independent Counsel Ken Starr, and the Congressional impeachment drive to oust him, Rubin reports, Clinton continued to show an amazing ability to focus his intellect on problems. He was never disengaged, never bored.

For instance, Rubin notes that "at a moment when the Lewinsky problems were at their height …, [w]e all sat around the table at Blair House, and [Clinton] led the discussion [of the Russian default on its foreign debt] as if nothing else were going on in the world. It was a remarkable seminar on the many aspects of the problem."

Rubin's book makes very clear why the Clinton Administration had such a successful economic policy. It was no accident -- nor was it simply luck, as some of their political opponents would have it.

In contrast, Paul O'Neill's book clearly explains why Bush's policies are failing. When reading these books together, it becomes clear that Bush doesn't understand economic and fiscal policy. But more troubling, he doesn't care. Bush is unable to think without a script; indeed, without a script, he is unable even to ask an intelligent question. Even his cabinet meetings, as O'Neill reports, are scripted. Bush's aides claim O'Neill is lying, but he has no obvious reason to -- and, more to the point, he is hardly the first to report this fact, only the first to go into detail about Bush's deficiencies.

Another problem O'Neill raises is that of Dick Cheney's true role in the Administration. Even O'Neill, an insider, was not able "to discern where Cheney ended and the President began," and this troubled him greatly. For like Robert Rubin (and all but a few economic ideologues, including Cheney), O'Neill worried about budget deficits. And he worried, especially, because Cheney had told him, "Reagan proved deficits don't matter." So after winning control of Congress in 2002, O'Neill relates, Bush planned to push for bigger budget deficits.

Which brings me to another reason Rubin's book should be read: Its trenchant explanation of why, in fact, deficits do matter.

Rubin Explains That Deficits Do Matter

Anyone who doubts that the government can simply go on endlessly reducing taxes and spending money -- a view based, perhaps, on the fantasy that the government's finances are different from those of individuals and businesses who spend beyond their revenues -- need only read Rubin's book. He provides more than a tutorial: This book offers a highly readable treatise on the subject -- a treatise that is sophisticated without being obtuse, and informative without being didactic.

Rubin's book should be required reading for everyone in the Bush Administration having anything to do with economic and fiscal policy. And that means everybody in the Administration, because sooner or later, every government decision comes down to money. Rubin's tutorial on deficit spending is sorely needed because, especially given its conservative nature, nothing has been more surprising about the Bush and Cheney government than its lack of fiscal responsibility.

The Clinton Administration provided the incoming Bush Administration with a remarkable budget surplus that was quickly squandered. More specifically, as Rubin reports, "in January 2001, at the outset of the Bush Administration, the nonpartisan Congressional Budget Office projected a ten-year federal government surplus of $5.6 trillion. By September 2003, after two rounds of tax cuts, Goldman Sachs estimated a ten-year deficit of $5.5 trillion. That's a swing of $11.1 trillion."

And the deficit is only going to get worse, given the Bush ploy of saying whatever he needs to say to get reelected, but then doing whatever he wants to do. This week, Bush submitted his 2005 budget. It has been appropriately labeled "The Pinocchio Budget" (The New York Times), "The Fudge-it Budget" (Slate), and "The Bush Budget: Guns and Caviar" (San Diego Union-Tribune). Take your pick, among these descriptions: They all fit.

A New York Times editorial on the new budget nicely summed up Bush's situation: "Polls are beginning to show that the Republicans are losing their reputation with voters for fiscal integrity. The president's latest proposal will only feed their new image as budget buccaneers." In short, the broader public has figured out what Bush & Company are up to, and it is not responsible leadership.

I'd send President Bush a copy of Rubin's book, which lays out the basics how deficits ultimately will impact markets and the economy. But since the President doesn't read, and is bored by such matters, it's not worth the effort.

It seems that the Bush presidency's intellectual deficits are matched by its fiscal deficits. Which brings me to the last reason this book should be a must read.

Rubin Provides Insight Into Probabilistic Decision Making

Rubin's book grew out of a fascinating article Jacob Weisberg published in July 1998 in the The New York Times Magazine, entitled "Keeping The Boom From Busting." The piece centered around Rubin's thinking processes in decisionmaking.

"That story," Rubin say referring to the July Times report by Weisberg, "had at its core a discussion of my fundamental view that nothing in life is certain and that, consequently, all decisions are about probabilities." Rubin sees his decisionmaking process as analogous to a mental legal pad where one lays out the pro and con arguments, but each factor is weighed and then totaled up. This does not mean reducing decisions to a formula, however.

More is involved, Rubin explains. "Sound decisions are based on identifying relevant variables and attaching probabilities to each of them. That's an analytic process but also involves subjective judgments," he notes, adding, "The ultimate decision then reflects all of this input, but also instinct, experience, and 'feel'."

The delight of this book is watching Rubin apply this intellectual decisionmaking process, and discipline, to economic and fiscal problems confronting the government during his tenure. It is not only a good model for government, and business, but for life. And Rubin has loaded this book with nuggets of wisdom in all those areas.

Robert Rubin is a modest man, and does not take the credit he is due. When reading his memoir, I could not help but think what a fine chairman of the Federal Reserve he would make, when Alan Greenspan's term expires in 2006. It is not beyond the realm of possibility, depending on what happens in November 2004. And if voters are concerned about who Bush might place on the Supreme Court, they should be equally concerned about who he will place in Greenspan's chair.

Governors of the Federal Reserve serve fourteen-year terms, and are appointed by the president with the advice and consent of the Senate. After serving a full term -- as Greenspan will have in 2006 -- a governor cannot be reappointed. But Bush will no doubt again designate Greenspan for another four-year term as chairman, when his chairmanship term expires this summer, June 20, 2004. (Bush can do so, even though Greenspan cannot serve the full four years of a chairmanship).

But who better than Rubin to replace Greenspan? If you doubt me, you must read In An Uncertain World: Tough Choices from Wall Street to Washington.

John W. Dean, a FindLaw columnist and book reviewer, is a former Counsel to the President.

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