Commentary: Triumph of an Eat-Your-Spinach Secretary

The Treasury Dept. is littered with the legacies of Wall Street titans who couldn't figure out how to succeed on Pennsylvania Avenue. Consider Merrill Lynch & Co. boss Donald T. Regan, done in by his enormous ego, and Dillon Read chief Nicholas F. Brady, who unwisely picked a fight he couldn't win with the Fed.

So there were plenty of folks in Washington waiting for Robert E. Rubin to fall on his face, too, when he left Goldman, Sachs & Co. in 1993 to become President Clinton's top economic adviser and, two years later, Treasury Secretary.

But Rubin fooled his detractors by refusing to play the usual Washington game, where personality cults and power grabs often count more than thoughtful policy. This cultural rebellion explains why Rubin is walking away from the job with a record that few Treasury chiefs could match. ''Bob Rubin will go down as the most effective Secretary since Alexander Hamilton,'' raves current Goldman CEO Henry M. Paulson Jr.

RARE BIGWIG. How has Rubin been different? He's that rare Potomac bigwig who never craved the spotlight, yearned to make it big on the social circuit, or needed to prove his importance by pushing a bold agenda. Rather, his efficacy came from quietly saying ''no'' when Bill Clinton was itching to do something big, bold--and risky.

Rubin told BUSINESS WEEK on May 12 that his proudest achievements include ''imposing fiscal discipline'' on the federal budget. That meant scrapping Clinton's plan to spur the economy as it emerged from recession with big spending programs and tax cuts. He instead pushed an eat-your-spinach deficit-reduction plan. The markets, he said, would respond favorably by lowering long-term interest rates, and that would boost the economy a lot more than fiscal stimulus from Washington. Boy was he right.

Rubin's other big coup was saying ''no'' to Fed-bashing, cultivating instead a close partnership with Federal Reserve Chairman Alan Greenspan. By keeping his mouth shut--and convincing Clinton to do the same--when the Fed hiked rates in 1994, he reaffirmed the Fed's independence from political meddling. That has made it easier for Greenspan to resist pressure from Fed hawks to raise rates over the past two years. The result: an expansion that's exceeded even Rubin's expectations.

In his 6 1/2 years in the Administration, Rubin also helped expand global trade by saying ''no'' to protectionist policies. He refused to manipulate the dollar for trade policy. And he privately said ''no'' to Clinton's big-government plan for fixing health care. Too bad Clinton didn't listen.

Rubin's instinct to resist action hasn't always worked. He was slow to respond to the international financial crisis that erupted in 1997. He showed no interest in reforming a tax code that has now become more complex than ever. Just this spring, he said ''no'' to a deal to get China into the World Trade Organization, a squandered chance.

But these lapses pale compared with the legacy the departing Treasury boss is bequeathing to his successor, Deputy Secretary Lawrence H. Summers, and to the country. Robert Rubin is living proof that small steps and a soft voice can have a big impact.

By Owen Ullmann

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It's Summers Time

TABLE: Summers vs. Rubin on the Issues

TABLE: Who Is Larry Summers?

Commentary: Triumph of an Eat-Your-Spinach Secretary

TABLE: Mr. Rubin Went to Washington

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