I am suprise noone has brought this up.. but Bob Rubin has a new book coming out and is on the interview circuit again.
it is VERY interesting to here him speak about the current economic situation and he gives some clues on how democrats should approach economy even if it is improving.
This is transcript from short interview with Paula Zahn tonight
ROBERT RUBIN, FORMER SECRETARY OF TREASURY: I think, Paula, with the enormous stimulus that's in the system right now, from the Federal Reserve Board, from homeland security, from defense spending, and an estimated maybe 15 to 20 percent, from that portion of the tax cuts that fall into this period, that it is very likely that we will have at least a few quarters of strong economic conditions.
And then either it will be self-sustaining or it will fall back into something less satisfactory. ZAHN: But it's hard to argue that things aren't better now, right?
(CROSSTALK)
ZAHN: We just saw the Dow closing. Second quarter, the country experienced the largest growth rate in some 20 years.
RUBIN: Oh, I don't think there's any question, Paula, that, with all this stimulus in the system, we're going to have -- well, I shouldn't say I don't think any question. But it's highly likely that, with all the stimulus in the system, we're going to have good times for at least some period of time, whether it lasts for six or nine months or possibly for quite a bit longer.
The question is, how did you get there? And you could have gotten there in a way that stimulated the economy now, but didn't create long-term problems. And, instead, we got there in a way that provides stimulus now by borrowing from the future to pay for the present. And the due bill for what we're borrowing in the future is going to come. And there will be a day of reckoning that I think will be very, very serious and was totally unnecessary.
ZAHN: Let's talk about those federal deficits for a moment. A lot of economists point out, if you go back to 1983, when we had the largest deficit since World War II, it was followed by the longest sustained economic boom since this country had ever seen.
RUBIN: Not exactly. The longest boom the country has had was in the '90s, which was triggered by a deficit reduction program that President Clinton put in place in '93.
ZAHN: But, nevertheless, those deficits were followed by strong economic growth.
RUBIN: You had substantial deficits through the '80s and we had growth.
But we also began to enormously increase public debt. And it led exactly and, I think inevitably, to what eventually happened, which was a slowdown in '89 and then the recession and economy morass of the very early '90s. And I think, unfortunately, we're back on the exact same track again.
ZAHN: So, if you were heading up the economic team now, one of the things obviously you said you would be doing differently, you would have just put in short-term tax cuts and not put into those tax cuts that went into the 10th year of this plan.
RUBIN: Correct.
ZAHN: What else would you be doing?
RUBIN: Yes.
What I would have done is, I would have done exactly what you just said. I would have put in place a strong short-term stimulus that was temporary in order to create the kind of power to the economy that we have now, but I would not have done anything that created long-term deficits of the kind that we now face.
If I were there right now and had to face the situation that's been created, what I would say, if we were back there again, is, I would say, Mr. President, we have unfortunately created an enormously deep hole for ourselves. And I think what we have got to do, what is imperatively in our long-term self-interests, is to bring together both parties and both houses of Congress, and to put in place a program to repair that.
And I think, politically, for the very reason you said, Paula, that can only be done by everybody holding hands together. And the situation, unfortunately...
ZAHN: But do you think that's realistic?
RUBIN: I think there's a very real possibility that it won't happen until we actually run into difficult conditions.
But the day may come sooner than you think, because this situation gets worse and worse in terms of the projected 10-year deficits, because the baby boomer retirements begin to accelerate at a very rapid rate in the very beginning of the next decade.
ZAHN: But what is it that you would want Congress to implement that would appreciably change this picture 14, 16 months down the road?
RUBIN: Well, it's not a question of 14 months down the road that worries me.
Goldman Sachs put out a report not too long ago projecting a $5.5 trillion 10-year deficit for the next 10 years. They put out a report just about a week ago, saying they now think the risk in that number is on the upside, that it is likely be worse, rather than better. And the first line of their report said that the budget is out of control.
So I think what the Congress needs to do, with the president providing leadership, is to put in a program, and it is going to have to have revenue increases. And it's going to have to have spending discipline. And there's no way around either of those. That corrects that problem. And it is going to be difficult and it is going to be painful.
ZAHN: When do you see interest rates rising again?
RUBIN: Once private demand for capital for investment becomes strong again, that is going to collide with the government's demand for capital. And it's at that point that I think that the markets are going to look down the road, focus on these enormous deficits that we now have, and, at that point -- somewhere at that point, you will begin to have these kinds of effects, in my judgment.
ZAHN: Bob Rubin, thank you very much for spending some time with us this evening.
RUBIN: Paula, I'm delighted. Very nice to be with you.
ZAHN: Thank you.
