Robert Rubin Is Still Wrong And Joseph Stiglitz Is Still Right

By Zach Carter

Created 08/11/2010 - 11:46am

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Robert Rubin and Joseph Stiglitz are going public on jobs and the deficit, in what looks very much like a re-run of a major policy debate during the Clinton era. The dispute is simple—should the government focus on putting people back to work, or should it try to cut the deficit? Stiglitz wants to see more jobs [1], Rubin wants to shrink the deficit [2]. Policymakers should listen to Stiglitz.

Rubin is the Democratic Party's Alan Greenspan. In the 1990s, he was heralded as a genius for making policy calls that ultimately wrecked the economy. Rubin pushed for deficit reduction instead of a jobs policy in the Clinton years, and was the driving force in the Clinton administration's devastating moves to deregulate Wall Street. For several years, Rubin's policies looked good. Despite the focus on the deficit instead of jobs, the Clinton years saw a huge boom in employment. Wall Street profits were through the roof, and the economy was roaring.

But at the end of Clinton's second term, it was clear that all of these good times had been fueled not by sound economic policy, but by a reckless and unsustainable Wall Street bubble. Banks were backing every dot-com business plan brought their way, and when everybody figured out that Pets.com was not going to be the next Home Depot, things fell apart. The economy slipped into a mild recession, which would have been devastating had policymakers not inflated a housing bubble to "rescue" the economy from the dot-com fallout.