Agreeing with Rubin

Bob Rubin, former Clinton Treasury Secretary, had an opinion piece in the Financial Times on Monday that made a lot of points we certainly agree with. Some of his major points (emphasis ours):

• Targeted stimulus, importantly, “if it is tied to real, trusted and enacted long-term structural deficit reduction.” “Otherwise, a major new stimulus is likely on balance to be counterproductive, initially or over time. It could seriously increase business uncertainty about future economic conditions and policy, or change market psychology unexpectedly and dramatically, causing serious market disruptions. Or, even if a major new stimulus worked initially, it could fail to generate lasting momentum due to the headwinds, leaving us worse off than we would have been, with more debt but no greater gross domestic product.”

Yup. See here.

• “The administration and Congress should work over the next six months to enact the first phase of a serious fiscal plan, to take effect in two or three years, that must also include room for critical public investment. This first phase of deficit reduction should work towards a gradual decline in the debt/GDP ratio, not just stabilising it at a relatively high level that will inevitably ratchet up. The long-term objective, in a later phase, should be a balanced budget.”

That sounds right to us. See here.

• “Even this ‘first phase’ will be difficult. But it can buttress business confidence, reduce shorter-term market risks and start building the fiscal base for longer-term economic success. In that context, I think the 2001 and 2003 tax cuts on incomes over $250,000 should be allowed to expire, to avoid the appearance of the political system being unable to follow through on planned fiscal constraint even on what should be a relatively less difficult issue. The remaining tax cuts should be extended for two or three years, and reviewed in the ‘first phase’ fiscal plan.”

Excellent plan. See here.

A lot of good and balanced ideas. Read the entire piece here.