*It's so obvious that I can't believe that it's not well understood. Robert Rubin is controlling Obama through his many disciples. Consider three recent comments: *
* * * * *During his CNN appearance, the former Treasury Secretary did argue for some policy changes that will leave Democrats and progressives a bit more content. Asked what he would propose to help turn the ecnomy and the deficit around, Rubin replied:* *"I would put an estate tax in place right now, immediately, because we have no estate tax right now. There is no supply side effect in having an estate tax. And we should fill that void. Number two, I would increase the tax on the higher brackets, those top two brackets, and bring them back up to the Clinton rate. I believe there's no supply side effect there. We did it in 1993 people said we were going to destroy the economy, in fact we had the longest expansion...in American history. I would leave the middle-class tax cuts intact for a limited period because I do think that the probability is higher that we're going to have slow and bumpy growth than vigorous growth, and I think that given the vulnerability, the high unemployment rate, one thing and another, I wouldn't want to have that contractive effect right now."* * * * * *Tuesday, February 15, 2011* *Robert Rubin Warns New Deficits Could Result in a Crisis at Any Moment<http://www.economicpolicyjournal.com/2011/02/robert-rubin-warns-news-deficits-could.html> * Former Treasury Secretary Robert Rubin's warnings about the economy and debt situation are getting louder and louder. Speaking at CME Group’s Global Financial Leadership Conference in Naples, Fla, he warned that Federal deficits are on an unsustainable trajectory, and large state and local budget gaps must be closed. He also said<http://openmarkets.cmegroup.com/features/rubins-cube/> : I think the prospects for the United States economy for both the short term and the long term are the most complex and uncertain of my adult lifetime.That obviously creates an extremely difficult decision-making environment for investors, for business people, for policymakers and for our people... Substantial new deficits could also lead to sudden and unexpected disruptions in market psychology and, following from that, disruptions in the bond market.... He also added that a weaker dollar could lead to dangerous competitive devaluations and that those devaluations could lead to financial chaos, or restrictive trade measures elsewhere in the world. Commodity prices are already increasing as a result and could undermined the development of additional demand, he said, but the most serious problem is that the new program of quantitative easing has heightened existing concern that we might, at some point, monetize our debt to try to inflate our way out of our fiscal problems. Rubin noted the box the U.S is in given that the politics of deficit reduction are enormously difficult, because the American people do not want tax increases or spending reductions that would affect them. * * * * *America must cut its deficit but not in haste* By Robert Rubin Financial Times Published: January 24 2011 22:21 | Last updated: January 24 2011 22:21 With historic transformation in the global economy well under way, the US is at a crossroads where the choices made will define our future. Either we meet our fiscal challenges – including creating room for critical public investment – or we lose competitiveness, underperform economically and, sooner or later, are forced by duress or crisis to act far more severely and with less opportunity to make thoughtful choices. Fiscal policy deliberations will be framed by three concurrent situations. First, even with recent signs of improvement, recovery is projected to be slow <http://www.ft.com/cms/s/0/18c58556-1838-11e0-88c9-00144feab49a.html>(by post-second world war standards) to return to long-term trend, and unemployment is expected to remain stubbornly high, given the powerful headwinds facing us. Second, our structural fiscal trajectory is unsustainable with multiple, serious risks (while at the same time, our large cyclical deficits are exacerbating debt levels and interest costs). Third, serious shortfalls in public investment in education, infrastructure, research and much else critically threaten longer-term competitiveness, growth, job creation and the imperative of improved income distribution. The necessity, for both the short and long term, is a serious fiscal programme with two critical components. A strong initial phase of deficit reduction<http://www.ft.com/cms/s/0/8a25de82-2713-11e0-80d7-00144feab49a.html>should be enacted now to take effect in two or three years, to reduce deficits to the level where the debt-to-gross domestic product ratio begins to decline. At the same time, rigorous cost-benefit decisions must be made that define our public investment requisites, our national security requirements and our social safety net, and also create funding for them through better prioritisation and increased revenues. Recovery will not be sustained and strong until measures for a sound fiscal regime are enacted, because of the adverse effects on business confidence and the market risks of our current fiscal trajectory. However, we should still take highly targeted actions now that could be especially strong growth catalysts for shorter-term recovery or provide essential hardship relief. As the president’s deficit commission made clear, a sound fiscal regime will require action on all fronts: increased revenues, reductions in defence and in the non-defence discretionary area (spending other than on defence and entitlements), entitlement reform, and, most important, constraining our health system’s rapid cost increases, which drive the federal healthcare<http://www.ft.com/indepth/us-healthcare-reform>spending at the core of our long-term fiscal imbalances. These are all exceedingly difficult, but the alternative to acting preventively is waiting until markets force us to act far more stringently, and with less deliberation. Deferring implementation for two or three years, but with a date certain, will still provide the benefits of an enacted programme, but will also create the opportunity for improvement in economic conditions before the beginning of fiscal contraction. Cutting non-defence discretionary programmes right away, as ferociously advocated by some, could damage our recovery, focuses on a small portion of overall spending, risks distraction from the need to act on all fronts, and threatens programmes vital to economic success and a social safety net. The risks of our fiscal position are serious and multiple. And while these risks become more severe over time as our debt position worsens<http://www.ft.com/cms/s/0/d355454c-24c1-11e0-a919-00144feab49a.html>, all of these either have begun to materialise or could do so in the near term, so we should act now. To be specific about the risks, deficits could crowd out private investment, which could choke off a private investment recovery. Moreover, the capacity for public investment is already diminishing, and could be exacerbated by growing entitlement costs and mounting interest payments. Also, business confidence has been weakened by heightened uncertainty about future economic conditions and policy due to our fiscal situation, an uncertainty that is likely to increase as our fiscal position worsens. Resilience for addressing economic adversity through fiscal stimulus<http://www.ft.com/cms/s/0/91e4ecca-23f9-11e0-bef0-00144feab49a.html>has been lost. And, our national security capacity is under pressure – with the chairman of the joint chiefs of staff calling the deficit our greatest national security threat. Most dangerously, there is a risk of disruption to our bond and currency markets from the fear of much higher interest rates due to future imbalances or from fear of inflation because of efforts to monetise our debt. The result could be significant deficit premiums on bond market interest rates, seriously impeding private investment and growth or, worse, acute bond market declines that cause an economic crisis. This could also start in the currency markets. While the likelihood of major market disruptions is greater in the intermediate and longer term, the shorter-term risks are also real. Market psychology can change unexpectedly and dramatically – either on its own or because of some catalyst – when underlying conditions are unsound. Possible catalysts are a debt ceiling confrontation, currency market problems, and state deficits. Growing out of our fiscal morass over time without policy action would require inconceivable rates of growth. Muddling through with unexpectedly favourable developments is extremely unlikely. The strong probability is that either we make the hard decisions so vital to our future, or we will be forced at some point to act more harshly and with less time to thoughtfully set priorities. Our long history of political and economic resilience should augur well. But these decisions are extremely difficult, and the question is whether we have the political will to face up to what we must do. *The writer is a former US Treasury secretary. This is an edited version of a longer article in a special Davos magazine this weekend* Copyright <http://www.ft.com/servicestools/help/copyright> The Financial Times Limited 2011. Print a single copy of this article for personal use. Contact us <http://ftcorporate.ft.com/contact-us.html> if you wish to print more to distribute to others.
_______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
