Strongly recommend that we all read yesterday's NYT's story on Robert Rubin's Hamilton Project.
http://www.nytimes.com/...
Robert Rubin is arguably the most successful Treasury Chief since Hamilton, and, in my opinion, it would behoove Democratic candidates to adhere to the economic policies which proved so successful for President William Jefferson Clinton and him.
What are the philosophical underpinnings of these policies?
A belief in the Power of Government.
Robert Rubin, President Clinton, Soros, and AMLO (in Mexico), all believe in free markets. But, unlike Bush in the US or Calderon in Mexico, they also realize that laissez-faire economics often fails, and when it does, it is the responsibility of government to intervene, to "cure" the market imbalances.
For example, if the distribution of income becomes too skewed, it is the responsibility of government to resolve that, partly through a more progressive tax code. In the US, President Clinton and Rubin are adamantly against Bush's tax cuts for the most affluent, as these have not only contributed to the deficit, but have also skewed income distribution. In Mexico, AMLO has railed against Calderon's proposed tax cuts for the most affluent since they would worsen an already bleak fiscal picture (Mexico collects less than 10% of GDP in taxes, compared to about 32% in the USA, and 40%+ in Europe).
I hope that Robert Rubin's Hamilton Project will attract many young successful Centrist and Progressive businesspeople who will, thanks to Rubin, be better able to defend government intervention in the economy. They may also later run for office, or if not, contribute generously to Democratic candidates.
Here's an excerpt from the NYT note that addresses this.
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http://www.nytimes.com/...
But, as Democrats hope to take over control of the House from Republicans and as an aspiring presidential class of 2008 becomes more assertive, the Hamilton Project, named after the founding father and onetime Treasury secretary Alexander Hamilton, is arguably Mr. Rubin's most overt political act since he stepped down from the Treasury in 1999. Mr. Rubin, naturally, denies any such crass intent.
Housed in the Brookings Institution, the initiative embraces a number of mainstream economic prescriptions -- like the necessity of equitable international trade agreements, the virtues of a balanced budget, and making economic growth more broad-based -- that capture Mr. Rubin's eat-your-spinach approach to policy making.
But by addressing issues like the costs to the economy of excessive litigation and regulation, Mr. Rubin intends to make the project a laboratory for the type of pragmatic, ideology-free policies that appeal to the project's Wall Street advisers while also hoping to lure Democratic presidential candidates away from populist economic positions. And with Mr. Rubin and his successor and friend Lawrence H. Summers on board, it will also be a training ground for the next crop of financiers with ambitions to shape policy in a Democratic administration.
They include those who have done so, like Roger C. Altman, the chairman of Evercore and a former deputy Treasury secretary; those who aspire to do so, like Steven Rattner of Quadrangle, the private equity firm; and, perhaps most important, younger Wall Street executives just now flirting with the idea.
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A few months ago, Rubin and Snow engaged in a debate which demonstrated two different views of economic development. The Clinton/AMLO take which calls for free markets tempered by government intervention, and the Bush/Calderon model, which calls for laissez faire economics. Below are two excerpts from notes that covered the give and take.
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http://online.wsj.com/...
The Hamilton Project, financed by Mr. Rubin and others and housed at the Brookings Institution think tank, argues that prosperity is best achieved by making economic growth broad-based, by enhancing individual economic security and by embracing a role for effective government in making needed public investment.
Mr. Snow, a fervent defender of the Bush tax cuts, criticizes that as an argument for bigger government and higher taxes. To that Mr. Rubin says, Nobody I know of who's serious about fiscal matters thinks we're going to be able to deal with the imbalances we have without a combination of spending discipline and revenue increases.
No one can know, of course, which side Hamilton would have taken. He did, however, make the case for tax increases in 1790 even though the federal government was running a surplus so that Washington could service the Revolutionary War debts of the states that it had assumed. Reasoning that import duties, the main source of revenue, were high enough, he proposed an excise tax on whiskey and other liquor. The tax led to the Whiskey Rebellion, which Hamilton helped quell.
To support the case that Hamilton would have been on their side, the Hamilton Project chose nine words from Hamilton's 1791 Report on Manufacturers in which he says the economy requires prudent aids and encouragements from government.
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http://blogs.wsj.com/...
Making clear precisely who he was targeting, Snow needled Rubin, former deputy Treasury secretary Roger Altman and other former Clinton officials for styling their new effort the Hamilton Project, after the nation's first Treasury secretary. "Based on what was said, it appears that Hamilton's name may have been misappropriated. Hamilton after all was foremost among the founding fathers in seeing that the new republic's future depended upon the vitality of commerce and the private sector while the authors of the Hamilton Project argue for a larger government role."
But the Rubin-led group argues that Hamilton "stood for sound fiscal policy, believed that broad-based opportunity for advancement would drive American economic growth and recognized that `prudent aids and encouragements on the part of government' are necessary to enhance and guide market forces." The Hamilton Project describes its strategy as "strikingly different from the theories driving current economic policy" in that it endorses fiscal discipline as well as increased public investment. -Greg Ip
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Why is this debate important? Why should we be aware of what Robert Rubin is doing with the Hamilton Project, and why should we become very familiar with his work?
Because its is our responsibility, as Centrists and Progressives, to be able to refute accusations from the RightWing press and politicians that President Clinton or AMLO are "communists" or "socialists", and that free market laissez-faire economics is the way to go. Regrettably, there are many citizens without a background in Economics or finance that actually believe this.
I'll give you an example. Since 1982, Mexico has largely followed the GOPs economic game plan. What have been the results? According to S&P, from 1982 to 2002, Mexico grew annually at a per/capita GDP rate of 0.6%. During the first five years of Fox's tenure, it grew at a rate of 0.8%. Calderon has promised to follow the same economic path. And some poor and uneducated actually believe that with these same economic policies, "growth is just around the corner." (meanwhile, the Roberto Hernandez's of Mexico realize that Calderon will ensure economic stagnation, but nonetheless support Calderon's policies, as they will ensure that he can continue to recognize capital gains without paying taxes. A few years ago he sold his bank, Banamex for over US$ 10 Billion dollars, and paid NO taxes, despite the fact that the government had bailed out his financial institution after the 94 peso debacle.)
In the US, many lower- and middle-income household actually believe that the GOP's laissez-faire economics provides a better platform for their own financial well-being, despite so much evidence to the contrary.
As Centrists and Progressives, we must become more familiar with Economics and finance, so that we can better educate the misguided citizens, whether here or abroad, that believe in GOP economics.