When President Clinton journeyed to Capitol Hill on Feb. 11 for a budget summit, his Republican hosts counted the chairs with special care. "We made sure there were only the exact number at the table" for Clinton, Vice-President Al Gore, and congressional leaders, smirks a GOP aide. The target of the snub: Treasury Secretary Robert E. Rubin, who was forced to sit with lowly staffers. The missing-chair stunt was a symbol of frustration with Rubin, whom Republicans view increasingly as the chief hurdle to a host of GOP priorities--from the balanced-budget amendment to a broad capital-gains tax cut.
No matter. Wherever he sits, Rubin, 58, has a power aura that comes from being first among equals in the Cabinet and top dog on the President's economic team. The millionaire investment banker, an influential player from the start of the Administration, has more clout than ever in the second term. A key reason: Powerful advisers such as Chief of Staff Leon E. Panetta and political aide George R. Stephanopoulos are gone and officials with close ties to Rubin are now in key policy posts. "There's no doubt that Bob reigns supreme," observes one senior Administration official.
Case in point: Rubin's role in blunting the GOP drive for a balanced-budget amendment. The measure, which once looked like it might pass both houses, now faces an uphill struggle, largely because the Treasury chief stiffened Clinton's resistance. Last November the President gave Senate Majority Leader Trent Lott (R-Miss.) the impression that he could live with the amendment if it included more spending flexibility during recessions. But Rubin scuttled that, arguing that the amendment could force a cutoff of Social Security checks. Furious, Lott blasted Rubin's views as the "hysterical" hectoring of a "Chicken Little."
That flap could be a mere skirmish compared with the protracted battle looming over an agreement to balance the budget by 2002. The key to sealing the deal may be a significant capital-gains tax cut: Republicans are intent on enacting an across-the-board reduction in the current 28% top rate. But despite his former role as co-chair of Goldman, Sachs & Co., Rubin blasts that idea as a needless giveaway that won't boost growth. "Are you getting an economic effect that's worth the cost?" Rubin asks. "My answer is no."
SIDESTEPPING RUBIN. Republicans have picked up some Democratic support for a broader capital-gains tax cut. And with Clinton's history of wobbling all over on the subject, GOP leaders are convinced that they could sell him--if they can sidestep Rubin. "If we can get the staff and Secretary out of the way," Lott said on Feb. 12, "maybe we [will] have something to agree about."
But Republicans would be wrong to figure that by going around Rubin they could easily find a sympathetic ear in the Administration. "It would be a big mistake to assume Bob's a sole actor," says a former top White House adviser. Rubin has key allies in the new Chief of Staff, Erskine B. Bowles, and Budget Director Franklin D. Raines. Though former investment bankers themselves, they share Rubin's dislike for a costly capital-gains cut.
Rubin may eventually agree to a rate cut that gives richer rewards to investors who hold assets longer. But he's not yet tipping his hand. "Bob is used to ruthless negotiating on Wall Street," says a Rubin adviser. "It's not time to reveal his bottom line." For now, he's pushing Clinton's modest proposal to provide capital-gains relief for home sellers.
Republicans can attest to Rubin's effectiveness. The Secretary first got in trouble with conservative GOP leaders when he engineered an end run around Congress to bail out Mexico during the 1995 peso crisis. He angered Republicans again during last winter's budget standoff by using creative accounting to prevent a default on Treasury securities. That defanged the GOP strategy for forcing Clinton to buy their budget cuts and set some GOP freshmen muttering about impeaching Rubin.
It's not just Rubin's tactics that conservatives object to. They hate his politics, too. Rubin wants to spend more to fight urban poverty and opposes plans to overhaul the tax code. Rubin, says House Majority Leader Richard K. Armey (R-Tex.), "is more liberal than I'd expect a Treasury Secretary to be."
While Rubin's maneuvering may cause heartburn among GOP leaders, financial markets applaud the moderation he brings to the Administration's economic policies. "Wall Street finds Rubin reassuring," says a lobbyist for a major brokerage house. "He's the only adult in the Administration."
That view is echoed by Hill Democrats, even though some think his approach too free-market. One example: In March, Rubin is expected to issue a report urging the end of Depression-era curbs on banks. That would permit, for example, Merrill Lynch & Co. and Citicorp Inc. to merge. Even liberals who decry such deregulation admire Rubin's clout. Says one Democratic Senate staffer: "Just like papal infallibility, there's Rubin infallibility in the Administration."
Well, not really. He has had his share of setbacks. In 1993, as White House economic counselor, he couldn't derail Hillary Rodham Clinton's health-care plan. And in crafting Clinton's reelection agenda, political advisers overrode Rubin's objections to a 2002 balanced-budget deadline, capping welfare benefits, and proposing tax breaks for tuition and home sales.
WINNING STREAK. But on most major issues, Rubin has prevailed. In 1993, he squelched a big stimulus plan in favor of deficit reduction. He has stifled Fed-bashing by Clinton aides, shepherded the dollar's rise from historic lows, and pushed to normalize trade relations with China.
Now, he's likely to extend his winning streak--in part because Rubin people are everywhere. Former aide de camp Sylvia M. Mathews is now White House deputy chief of staff. Another protege, Eugene Sperling, heads the National Economic Council. Deputy Treasury Secretary Lawrence H. Summers has de facto control of all international economic issues. And Rubin plucked Janet L. Yellen from the Federal Reserve to chair the Council of Economic Advisers.
Rubin's team is gearing up for fights on several major issues. He wants to stop efforts to invest Social Security surpluses in the stock market. And administration sources say Rubin will seek to defuse the explosive issue of limiting cost-of-living increases. He rejects the claim that the Consumer Price Index overstates inflation by 1.1 percentage points, but may settle for a 0.5-point cola trim for Social Security and taxes. To head off GOP attacks on the Internal Revenue Service, Rubin is looking for a new commissioner with the managerial savvy to restore order at the chaotic agency.
The irs mess could give Republicans a way to get at Rubin. Angry GOP leaders hope to tar the Treasury chief with the agency's chronic disarray. And they plan to embarrass Rubin by pointing out that he and his top bank regulator attended one of the infamous fund-raising coffees at the heart of Donorgate.
For now, Rubin is not worrying about the partisan shots. He's too busy trying to get Clinton and Congress to cut a budget deal this fall. "In the final analysis," he predicts serenely, "an agreement will be reached." A bipartisan glow may ensue, and Republicans might shed some of their resentment of the Treasury Secretary. And who knows? If dealmaker Rubin sweetens the pot with a broad capital-gains cut, Republicans might even learn to like him--a bit.