Rubin Rethinks

Back in June of 2007, when President Clinton's Treasury secretary, Robert Rubin, spoke in Washington, it was to advocate a tax increase on the earnings of hedge fund managers. In an editorial at the time, "Robert Rubin's Rates," we noted that the taxation of hedge fund managers was an issue that Mr. Rubin failed to tackle when he had a chance to do so as Treasury secretary, and we noted that the returns earned by the hedge fund managers for their clients had been better, in many cases, than the results Mr. Rubin had brought in for the shareholders of Citigroup, where Mr. Rubin is chairman of the executive committee.

Well, what a difference six months makes. In the intervening period Citigroup has let it be known that it has lost billions of dollars on mortgages and structured investment vehicles, the bank's chief executive has been replaced, and Mr. Rubin has been running all over the world trying to get various foreign potentates to bail out the bank. And to top it all off, Mr. Rubin showed up in Washington yesterday, not to reiterate his call for a tax increase but to plump for a $100 billion tax cut cloaked as a "stimulus" to combat a potential recession.

Some of the economists Mr. Rubin appeared with yesterday at the Brookings Institution preferred refundable tax credits to rate reductions. Others, such as the Harvard economist and Reagan administration official Martin Feldstein, supported an extension of the Bush tax cuts, which are scheduled to expire at the end of the decade. "If you tell me that in 2011 my tax bill is going to go up a lot, I'm going to feel poorer today and I will spend less today," Mr. Feldstein was quoted by the Dow Jones news wire as saying.

Mr. Rubin took care to stress that his support for a "stimulus" was "independent" of his concern for the structural, long-term fiscal condition of the federal budget. No doubt it is. Other economists stressed that any stimulus should be "temporary." The fact remains, though, that Mr. Rubin has gone from publicly campaigning for tax increases to publicly campaigning for, in effect, tax cuts. Too bad it has taken a deterioration in American economic conditions and his own bank to get him to that point.