December 16, 2005
Nothing to be scared about?
Red Flags From Bob Rubin
Former Treasury Secretary Robert E. Rubin has a long, flowing title at Citigroup (): director and chairman of the executive committee; member, office of the chairman. But his real role is strategic thinker. In several discussions over the past weeks, Rubin talked about what he sees on America's horizon.
What are the biggest dangers facing the world economy?
The enormous global imbalances, particularly those focused on the U.S. -- the fiscal imbalances, trade imbalances, virtually [nonexistent] personal savings compared with debt. The U.S. is at a critical juncture. [It faces] a competitive challenge of historic dimensions coming from China, India, and many other emerging-market economies. India, China, Korea, and Southeast Asia will be the most robust part of the global economy and will become the center of it over the decades ahead. At some point in that period, China will likely become the world's largest economy. That is a challenge we can meet, but we are not on track to meet it today.
Given the disarray and disruption at the White House, how easy is it going to be to get things done?
The things we most powerfully need to do are difficult politically, and I don't see any movement. The projections of mainstream forecasters haven't changed: $4.5 trillion to $5 trillion of deficit over the next 10 years if the 2001-02 tax cuts are made permanent and if there is [alternative minimum tax] reform.... When you get to the middle of the next decade, the rate of growth of Medicare and Social Security all of a sudden increases rapidly because baby boomer retirements increase dramatically. The federal health-care challenges represent five or six times the problem of Social Security. Meantime, you have competition from emerging markets. Can you get things done? I suppose. But we need a vastly improved education system, basic research...and nothing is being addressed.
What is the worst-case scenario of the deficits?
[The U.S. has been] shielded from the discipline of the market because of the enormous inflows of capital. It may be that we can have good [gross domestic product] growth for many years to come, but the numbers simply don't add up. And when things don't add up, [growth] stops. It's not indefinitely sustainable to have these deficits and imbalanced accounts. If you had enormous savings rates, then maybe. But we don't have enormous savings.
I want to get a sense of what you're involved with at Citi.
Sure. I'll give you a few examples. We did two [in-depth] reviews [of our businesses] at the end of last year...one in fixed income, the other in the consumer business. I was part of both of those. It was [CEO] Chuck [Prince] and me and a few others. Right now we're looking at a possible acquisition abroad. I have no idea whether we'll do it, but a group of us went over it. It involves complicated questions, so they asked me to think it through.
What do you think of Ben Bernanke as Federal Reserve chairman?
Good choice. People who know him quite well hold him in high regard as a student of monetary policy. In a speech at the Fed retreat in Jackson Hole [Wyo.] in August, I said that I thought the next chairman, in addition to being deeply knowledgeable about macroeconomic theory and insightful about reading data, could well need the experience to deal with market disruptions, given the enormous global imbalances we have...and [Bernanke] doesn't have that experience around markets. But he is fortunate because the Fed bank of New York has a long tradition of good capability with respect to markets, so he has a lot of [experience] he can call on.
Would you have taken the job if the President asked you?
[Laughs] He would never have asked me. I was there 6 1/2 years [and have] no interest in going back to Washington. The pressure is constant. Everything you do is in the media fishbowl.