Oct. 30 (Bloomberg) -- Former Treasury Secretary Robert Rubin said relying on a falling currency to stoke exports isn't a ``sound approach'' and urged economic policy changes that would strengthen the dollar.

``The lower the exchange rate, the less that we receive in exchange for what we produce, and that lowers our standard of living,'' Rubin said in an interview after attending a conference in Washington. ``Our objective ought to be to have a strong currency based on sound policy.''

Policy makers aren't pursuing solutions to the country's economic deficiencies and looming budget deficits, said Rubin, who served under Bill Clinton, a Democrat. By contrast, Treasury Secretary Henry Paulson and other Republicans have lauded the U.S. economy as ``healthy'' and hailed demand for American exports as a boon for growth.

Policies should be focused on curbing government spending, raising revenue and addressing the soaring cost of government programs such as Social Security and Medicare, said Rubin, now chairman of Citigroup Inc.'s executive committee. Improving education, research and infrastructure are critical to increase productivity, he said.

``You put it all together and I think we can do very well economically and then we can have a strong currency,'' said Rubin, who served as the chief economic adviser to President Bill Clinton. ``We're certainly not on those policy tracks right now.''

Inflation Concern

The dollar traded at $1.4438 per euro at 3:24 p.m. in New York, after dropping as low as $1.4438 yesterday, the weakest since the European currency's debut in January 1999.

The slide ``seems to have helped with respect to exports,'' Rubin said. At the same time, ``a much weaker dollar'' could have ``inflationary effects,'' he said, while declining to predict the U.S. currency's direction.

The dollar has declined in four of the past five years, and is down 7.5 percent so far in 2007 against a broad index of world currencies. During Rubin's tenure at the Treasury from 1995 to 1999, the same index increased 24 percent.

Record exports helped trade contribute 1.3 percentage points to economic growth in the second quarter, outweighing the impact of the decline in home construction.

Treasury Secretary Henry Paulson earlier today reiterated his support for a ``strong'' U.S. currency during a trip in India. ``I am strongly committed to a strong dollar,'' he said.

`Soft Landing'

Rubin, like Paulson a former chief executive officer of Goldman Sachs Group Inc., adopted a ``strong-dollar'' policy after taking office in 1995.

Rubin said the drop in housing prices, and its possible effect on consumer spending, has left the economy ``in a particularly uncertain time now.''

Asked about the risk of recession, Rubin said ``the most likely scenario'' is ``basically a soft landing and avoiding serious difficulty.''

``But there's always the possibility that conditions could be more difficult than that and for that reason I think that it's very important for policy makers to be engaged in various ways,'' Rubin said.

To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net; Sophie Caronello in Washington at Scaronello@bloomberg.net

Last Updated: October 30, 2007 15:58 EDT