Not Out Of The Woods

Like a patient who's been transferred out of ICU, the U.S. economy appears to be on the mend. From GDP to employment, the vital signs are improving. But Robert Rubin told NEWSWEEK's Daniel McGinn there's still cause for concern--and that the economy could remain a key issue in the presidential election. Excerpts:

MCGINN: Do you watch the Democratic debates and think "I could run circles around them"?

Rubin: I've been around presidential campaigns since 1980, and I've developed a great respect for how difficult it is to be a candidate. It's an art form unto itself. I think there are enormously important issues to be debated in this election, and whoever the candidate is will have a lot of material to work with.

With the economy improving, will it be a big election issue?

It depends on what economic conditions are like next year. We had remarkable economic conditions in the '90s, and it's inevitable when you have extended good times, you develop imbalances that lead to a period of difficulty. But the policy response to that was far, far from optimal. A different set of tax cuts could have accomplished whatever level of stimulus without long-term adverse fiscal effects, and could have been much better targeted to lower- and middle-income families with the highest propensity to spend. You could have had greater jobs impact if more of that stimulus had been in the form of state and local assistance for projects already on the drawing boards, like school construction. Virtually all economists think we're going to have strong economic conditions through the middle of next year because of massive stimulus in the system. But when the stimulus peters out, the question is whether we continue to have a sustained recovery or we lapse back into more sluggish conditions.

Can Democrats win votes by talking about the deficit?

It's very difficult. When times are relatively good, no one has found a way to explain it to the public in a way that creates much political energy.

You've managed through crises in both Washington and Wall Street. Which is harder?

They're both difficult. People talk a lot about what the government can learn from the private sector. I actually think it goes in the other direction probably just as strongly. There's an awful lot you can learn in public life about dealing with crisis, in terms of dealing with the media, dealing with the politics of difficult situations. In dealing with crises, there are more similarities than differences.