Richard Whalen

In speeches and news conferences, Clinton this week began offering specific proposals from Rubin’s program, such as tax rebates for all federal tax filers; $30 billion in accelerated federal aid to states and cities; extension of federal unemployment benefits, and easing of eligibility for food stamps. His proposals were quickly endorsed by two Democratic state governors: Jon Corzine of New Jersey and Jennifer Granholm of Michigan.

Among the specific proposals being discussed by Rubin within Hillary’s inner policy circle are the temporary suspension of federal payroll withholding taxes targeted to middle-income wage earners that would cause a quick and sustained injection of consumer spending into the slowing economy. Over the past five years, real (inflation-adjusted) wages have grown barely 2 percent before taxes.

Rubin’s plan calls for an intensive effort to shore up and replace the capital of banks forced to write off billions of dollars of losses in the “subprime” mortgage lending scandal. Citigroup and Merrill Lynch alone were forced to write off $19.1 billion and cut costs by dismissing several thousand employees. Directly or indirectly, perhaps through a revived Resolution Trust Corp (RTC), the federal government would stand behind the shaky banks and maintain their ability to continue lending to businesses and individuals.

For months, the economy has been the main concern of voters but candidates, up until now, have not been eager to address issues such as the consumer credit collapse and the mortgage banking crisis. Now, taking their cue from President Bush who on Friday proposed a temporary broad-based tax relief package aimed at spurring the economy, candidates will be expected to announce their own economic stimulus proposals.

Bob Rubin might prove again that brains, not bucks, makes a campaign credible.