LOS ANGELES TIMES INTERVIEW : Robert Rubin : Roger Altman : When Worlds Collide: Wall Street Meets Populism in the White House

It may seem odd, given the populist tone of Bill Clinton’s campaign, but two of the most powerful economic policy-makers of his Administration hail directly from Wall Street, from two of the bluest chips on the block. The two are old friends--Robert E. Rubin, 54, the former head of the Goldman Sachs investment house and Roger Altman, 46, a successful Wall Street consultant affiliated with the Blackstone Group.

Their Wall Street ties have raised some eyebrows--Rubin, in particular, received criticism several weeks ago for a letter he wrote to former clients urging them to stay in touch with him in his new job, a letter he dismisses as merely a courtesy. But both men have close ties Clinton. Rubin served as one of his chief fund-raisers during the 1992 campaign, while Altman has known him since they were at Georgetown University together in the mid-1960s. Both Rubin and Altman were leading economic advisers to the campaign.

Today, Rubin serves as head of the National Economic Council, the newly created White House office that Clinton set up to coordinate government economic policy-making. This is supposed to mirror the role of the National Security Council, under the national-security adviser--but without the foreign-policy friction. Altman serves as deputy secretary of the Treasury, the department’s No. 2 position.

Wednesday, as their boss worked on final details of his speech to Congress outlining the economic plan they had helped write, the two men sat in Rubin’s office, just upstairs from the Oval Office, surrounded by papers and notes that testified to the long hours of work finally completed. In the manner of an old married couple who finish each other’s sentences, they sat and talked about economics and policy-making in the new Administration.

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Question: You are going about the process of economic policy-making very differently from the last few administrations. How did you go about putting this together and how do you envision your role?

Rubin: Our role is really a coordinating role. We work very closely with Treasury and with OMB (the Office of Management and Budget) and the CEA (the Council of Economic Advisers) and the other agencies of the government involved in economic policy.

Every administration has had to figure out some way of coordinating the economic-policy function. It’s been done different ways in different administrations, and this President decided to use the National Security Council as his analogy and to set up something in the White House to be an honest broker. That’s what we do.

We have a small staff, and we work with the agencies and try to help coordinate their activities. The Treasury secretary, as you know, is the chief economic official of the United States government, and the President’s chief economic spokesman.

Q: What’s it been like for you coming into this process from the private sector?

Rubin: I’ve thought a lot about that, and Roger and I have talked some about that, talked to other people about it. That’s a complicated question. . . . There are a lot of differences and similarities. I think the people who have worked for the government have been terrific--an exceedingly capable group of people, much like you’d find in the best private-sector organization.

I think the numbers of bases that you have to touch and the complexity of the system are vastly greater in government David Lauter covers the White House for The Times. Jim Risen covers economic policy and the Treasury Department for The Times. than it is in the private sector.

I think there’s been a teamwork spirit in this Administration so far which has been terrific, and which, I’m told, has not always been the case in Washington.

I think the intensity and the hours have been unbelievable.

Q: Even compared with Goldman Sachs?

Rubin: Even compared with Goldman Sachs. And that, hopefully, will regularize at some point.

Altman: If you’re interested in working three times as hard and earning a lot less, it’s a great opportunity. (Laughter)

I think the thing that strikes me the most is the collegiality. We must have spent 50 hours together as a group forging this plan, I mean group to group. Most of that with the President. Originally in Little Rock, a couple of times here. I can’t remember a bitter moment. I can’t remember a real conflict. And it’s been very enjoyable. It’s been hard, but it’s been immensely stimulating.

Q: What’s been the hardest thing in putting together this economic plan?

Altman: I think the hardest aspect is not really what was involved in putting it together, I think it’s the following:

The country--and Washington, too--is so used to fiscal irresponsibility that there’s a shock aspect to the idea that we’re actually going to rein in the nation’s finances. And it’s really not easy to persuade people that we should do it, that it’s important to do it.

A lot of people think of deficit reduction in the abstract: “We ought to reduce the deficit because an economic textbook would tell you to do so.” It’s difficult, but absolutely necessary to explain to people what it means to them in their own lives. Particularly for so many Americans who are experiencing stagnating incomes or falling incomes. After all, median family income is flat over many years now. It’s critical, but not easy, to explain to people that the deficit is the biggest reason why it’s harder for them to make ends meet--to buy a home, send their kids to college, renovate the home or whatever.

Q: Recognizing that he was going to have to tax the middle class was obviously a key point for the President. How difficult was that for him and for you all to wrestle with?

Rubin: To go back a little bit on the premise of the question. The tax increase on the middle class is really extraordinarily small. Somebody with an income of $75,000 next year will have a total tax impact of about $180. That’s direct and indirect. To use Roger’s phrase, “It’s the tax plus the effect of the tax on the cost of your corn flakes.” That goes up to, by 1997, about $500.

Now, the exchange for that--what you get--is lower interest rates, improved capacity in the economy and, hopefully, over the long run, substantially better economic conditions. This really is a tax program aimed at getting the middle class back on its feet again.

Altman: Let me give you a practical example that might be helpful. A family earning $60,000, as Bob just said, is going to pay about $11 a month more in direct energy costs. For elderly families in that income class, they’ll also have a higher portion of Social Security income subject to taxation, and that’s $5 or $6 a month.

For families with mortgages or other borrowings of consequence, the interest-rate reductions that have already occurred since the election, as the program began to take some shape, are worth about $30 a month if you have a $50,000 mortgage, and about $60 a month if you have $100,000 mortgage. So people in this income category, they’re already about 2-1 to the good--$2 better off for every $1 more they’re going to pay. They are, as we would say in the financial world, “cash in pocket.”

Obviously, not every family has a mortgage. But if they have consumer borrowings or auto loans or small-business borrowings, those same benefits are going to affect them.

Q: Of course the upper-income households will be paying a good deal more. I wonder whether you’ve started hearing from people you used to work with, or from friends in New York, who call up and say, “Rubin, what are you doing?”

Rubin: Well, I haven’t had two minutes to get back to New York since I’ve been here, so I’ve been shielded from that. But, I think, if somebody were to say that to me, I think I would say to them that we’re doing exactly what they should want us to do--which is to create a healthier economy in the long run. . . . Let me just turn that around and put it the other way. They’re not going to do well if there is a small group of people--taxes are somewhat lower--but they’re living in the midst of a mediocre economy and a failing middle class is doing the work for them.

Q: You worked on Wall Street, and President Clinton essentially campaigned against Wall Street. You’ve crossed two worlds. What do you think, as you’ve gone from that to this?

Rubin: No, I don’t think that the President campaigned against Wall Street. I think he felt there were some excesses. I don’t think there are many people who would disagree with that. But my thoughts haven’t changed (about) the kind of thing I just said about the wealthy, and that they are better off if you have a healthy economy and a growing middle class, a vibrant middle class. The inner cities--I don’t think we’re a healthy country without dealing with the problems of the inner cities. I just don’t think it can work.

Q: You’ve known Bill Clinton for a long time, going back to college.

Altman: Right

Q: What have you learned about him in the past few weeks watching him in this new role?

Altman: First of all, I hope the presidency doesn’t change Clinton, because his strength and his qualities are what will make him a successful President. But the most noteworthy thing about Bill--which was evident in college, but nothing like it is today--is his truly unique . . . grasp of issues.

He went through every line in regard to those 150 or 200 program changes that are involved in this plan, and he knew such an astonishing amount, and wanted to know even more about every single one of them, that it was just amazing. I was sitting there in the Roosevelt Room thinking to myself how many Presidents ever did this, or could have done it? I suspect, at least in my lifetime, the answer is none.

That alone will not make him a great President. But from the point of view of knowledge, and knowing what really is important to people about all these different programs--they’re not just lines on a page.

Q: How will you react if Congress fails to do the spending cuts? Will any of the other aspects of the program be scaled back?

Rubin: I think the President’s case is going to be that this program should be viewed as a whole, and he hopes to get it adopted as a whole. He doesn’t want to speculate on anything short of that.

Q: That was clearly one of the problems with Reagan’s and Bush’s budgets over the years. They never pushed hard enough on the spending side.

Altman: But we had divided government then; now we don’t have divided government. I’m convinced that if the public demonstrates that it wants the program, then Congress will support the program, because it will be too disappointing to the public for Congress not to do so. And too disappointing to demonstrate the drift and deadlock and so forth that the American public is so obviously fed up with. I don’t think Congress will do that if the public shows they want the program.

Q: You have known each other for a long time and worked together for a long time. How does that relationship work now?

Altman: That’s always been the same. Bob’s the boss, I’m the servant. (Laughter)

Rubin: Roger represents an exceeding powerful agency and we very humbly attempt to work with it in an effective fashion. (Laughter)

Altman: Actually, we both work for Lloyd Bentsen.

Q: How does it feel to walk into the White House and go to work every day?

Rubin: I guess I don’t think of it, it’s interesting. I don’t quite think of it that way. I come here, and it’s the office, and I came because I felt this was something that could be useful. But the fact it’s the White House doesn’t particularly strike me that much one way or the other. What you’re coming to do, I think, sometimes does strike me--you’re really coming to try to have an effect on the economic health of this country. Sometimes, you’re sitting back and you’re working on this and you think about the impact of what you’re doing. That does strike me, but not the White House, per se.

Q: You took some heat earlier this year about the letter you wrote to former clients at Goldman Sachs. Has that been a problem?

Altman: I was very unhappy I didn’t get one.

Rubin: You weren’t a client. That seemed to have been a one-day story. It was my trying to be gracious to the people that I wasn’t--

Altman: That was the most amazing non-story I ever read. Right at the top, all- time non-story. Maybe I’ve read 742 million stories, that was No. 1.