Robert Rubin says we're in terrible shape but shouldn't change any policies.
Tuesday, November 2, 2010 at 09:28AM Robert Rubin acknowledges the worst economic downturn in 80 years and says "the prospects for the US economy are the most complex and uncertain in my adult lifetime" in this FT piece. He also acknowledges lagging middle income wages over the last 30 years, but his policy recommendations include not one thing that is different from what we've been doing more and more of during those 30 years.
For the longer term, the US has a dynamic and entrepreneurial culture, flexible labour and capital markets, the rule of law, relatively favourable demographics and other great strengths. But, in a global economy undergoing historic transformation, we must meet hugely consequential challenges to realise our potential for competitiveness and growth, and to achieve widespread income gains rather than the lagging middle income wages experienced over most of the last 30 years.
Meeting our challenges means moving from our current risk-laden fiscal trajectory to a sound fiscal regime and public investment and reform in economically critical areas, such as education, healthcare costs, infrastructure, immigration and others. Effective government to undergird a market-based economic system is not a liberal idea, but a practical imperative to meet the needs for a successful economy that markets won’t fulfil.
BTW, his reference to "flexible labour and capital markets" means US workers' wages sinking even more to a global equilibrium and big banks having freedom to keep "innovating." It's also clear he believes globalization in its present form and pace must be taken as fixed and cannot be tinkered with by government (except to adopt more free trade agreements). Nothing in Rubinomics has any potential at all to increase middle income wages, but it will continue to be good for MNCs, Wall Street, and the Davos set.
Skeptic
Felix Salmon's criticism is that Rubin doesn't really say anything at all:
The op-ed, which is written in borderline-unreadable technocratese, has a simple structure: there are headwinds in the economy. What should we do about them? Spending more might be problematic. Expansionary monetary policy likewise. So what should be done? The administration should be more business-friendly. And it should put together a “serious fiscal plan”.
. . . .
Well yes, Bob. But how do you expect the government to make tough decisions if you, a semi-retired technocrat with no public office at all, can’t even bring yourself to name them? It’s all well and good to talk about fiscal prudence in the abstract: the difficult thing is enacting it in reality. And you’re not being remotely constructive on that front.
Skeptic
Paul Krugman says Mohamed El-Arian's WaPo op ed has the same deficiency that Salmon sees in the Rubin piece--he can describe the problem but is all mealy-mouthed and useless about solutions.
