Robert Rubin, former managing partner of Goldman Sachs, former Treasury Secretary, and former Chairman of Citigroup, says there is more to worry about in today’s fiscal environment than at any other time in his life. “[I]t is absolutely prudent that we prepare for the worst,” Rubin told a New York TradeTech audience last month (See Ben Baris’s article in Institutional Investor, “‘Prepare for the Worst’ Say Ex-Treasury Sec Robert Rubin”).
Rubin also told the TradeTech audience that the nation’s total output of goods and services could drop by as much as 5 percent as a result of the expiration of the Bush-era tax cuts and the payroll tax holiday and with planned “sequestration” cuts to discretionary spending by the federal government. “America is at a stark crossroads with respect to the future of our economy,” he was quoted as saying.
What is most needed, and what is now lacking, according to Rubin, is cooperation and compromise in Washington to move from the U.S.’s current “dangerous” fiscal trajectory to a more sound condition. Otherwise, he expects the U.S. to be responding to fiscal crises rather than planning to avoid them, with disastrous results. The U.S. must also maintain public investment in education, scientific research and infrastructure, and reform the energy and health care sectors of our economy according to Rubin.
Failing that, says Rubin, we will drift from crisis to crisis like Europe, and “[m]arkets can’t handle this volatility.” He only gives Europe a 50-50 chance of solving its economic problems.
“The U.S. has the pieces to succeed,” Rubin said. “The dynamism of our culture, the willingness to take entrepreneurial risks, the flexibility of our labor and capital markets, and our natural resources and demographics best Europe, China and Japan, Rubin was quoted as saying.” It is political willingness to pull together and compromise for the common good that is lacking.
Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.