Bob Rubin, the former Clinton administration Treasury Secretary and routine foil for many progressive-minded economists, argued on Sunday against a second "major" stimulus to revive the economy.
Appearing on CNN's "Fareed Zakaria GPS," Rubin said that the president would better be served focusing his efforts on the task of long-term deficit reduction.
"I wouldn't do a major second stimulus because I think...we run a risk that it could be counterproductive in creating a lot of additional uncertainty and undermining confidence," Rubin said. "But at the same time -- and what I'm about to say is easy to say and very hard to do -- at the same time I would try over the next six months to put in place a very serious beginning of deficit reduction that would take effect at some specified time in the future. And I would guess something like two years. So it wouldn't take effect right now, when the economy is still so vulnerable, but if you could do it and it was credible and people believed it and it was real, I think that could do a lot for confidence. The problem is that's very easy to say and very hard to do."
Praised for shepherding lengthy economic growth during the Clinton years only to be bemoaned, in retrospect, for ushering in the era of deregulation that contributed to the current crisis, Rubin has been a relatively quiet voice during the Obama administration. His main impact on economic policy has been through the various disciples that he has working in key administration posts. His pushback against a second major stimulus effort doesn't necessarily have practical political impacts. But it's a viewpoint that is shared by those figures who actually affect the president's decisions.
Politics, of course, makes the debate over stimulus rather limited. Even if the White House wanted a major new spending package, Congress wouldn't write the check. Being a high-profile Democratic-affiliated figure, however, Rubin's comments hurt those arguing the case that more stimulus spending is needed.
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."