Former Treas Sec Rubin opposes Bush tax cut-NY
Times
NEW YORK, Feb 11 (Reuters) - Former U.S. Treasury Secretary Robert Rubin on
Sunday said President George W. Bush's $1.6 trillion tax cut plan was a serious mistake in economic policy and put years of
government spending discipline at risk.
``I feel so strongly that a tax cut of the magnitude proposed is a serious error in economic policy,'' Rubin, now the chairman of
the executive committee of financial services giant Citigroup Inc. (NYSE:C - news), wrote in the New York Times.
A tax cut of the size proposed by Bush runs the risk of returning the nation to the budget deficits of the 1980s and early 1990s
when the national debt quadrupled in 12 years and the economy eventually slid into recession, Rubin said.
``The proposed tax cut ... would substantially diminish the fiscal position of the federal government, and would create a serious
threat of deficits,'' he wrote.
Rubin said that budget deficits would likely increase interest rates and lead to a deterioration of business and consumer
confidence -- the very confidence that had underpinned the near-decade long U.S. economic expansion.
The views of the former Treasury secretary, who served from 1995 to 1999 under President Clinton and won rave reviews
from Wall Street, also put him at odds with his one-time ally, Federal Reserve Chairman Alan Greenspan.
Greenspan told lawmakers last month that tax cuts could ensure growing surpluses did not force public acquisition of private
assets. He testifies again before Congress on Tuesday.
Rubin's long op-ed essay, carried in the Sunday edition of the influential daily, comes several days after the new U.S. Treasury
Secretary Paul O'Neill courted backing from senior Wall Street financiers in a round of meetings in New York. Among those at
a breakfast session O'Neill held last Wednesday was Rubin's boss -- Sandy Weill, head of Citigroup, who participants said
expressed strong support for tax cuts.
Rubin wrote repeated that prudence was the best course of action in the face of mounting projected surpluses and a slowing
economy.
``We should avoid committing ourselves to dramatic courses of action that are hard to reverse in the face of the inherent
uncertainties of any projections,'' he wrote.
Rubin said the true cost of the tax cut was around $2 trillion because by slashing taxes, the administration would have to also
pay $400 billion of interest on debt that could otherwise have been retired.
He said policymakers should wait longer to see if projected surpluses materialized before fretting about how to best use them.
In the meantime, the best way to use the surplus would be to pay down debt, enact a more moderate tax cut favoring middle
and lower income people, and increase spending on health and education, he said. |
