In something of a blast from the past, two former Treasury secretaries from different parties who dealt with radically different circumstances agree the U.S. probably will avoid the so-called fiscal cliff.
The alternative, Henry Paulson and Robert Rubin agreed, is dire consequences for a country already battered by financial crisis, according to CNBC's coverage of the "Delivering Alpha" conference it sponsored with Institutional Investor last week.
Paulson (left), who served under President George W. Bush, was Treasury secretary during the 2008 economic crisis, the country’s worst since the Great Depression. Rubin, who enjoyed popularity during the economic expansion under the Clinton presidency, has since seen his reputation sour on accusations from certain quarters he helped foster the “easy money” bubble that eventually burst.
Paulson said Congress at some point will avoid the “worst-case scenario” by addressing the deficit reduction.
"The question is, do you do it before the crisis or after the crisis?" Paulson said. "A crisis sure does focus minds. There's some evidence to indicate that it takes a crisis to get a difficult thing done. There's some reason for optimism right now."
Rubin said policy solutions would be elusive for what essentially is a political crisis, the network reports.
"In a financial crisis you could respond with stimulus and with monetary policy. Obviously with a fiscal crisis you can't respond with the same tools," he said. "I hope at some point our political system comes together to deal with this before it becomes a crisis."
Both Rubin and Paulson said that not only does the crisis need to be avoided, but the nation's leaders also need to start talking about the issues that will be pivotal to future growth.
Rubin said domestic policy needs to focus on three areas: a "sound fiscal regime" entailing responsible budgeting; more government spending on education and infrastructure; and reform in health care, immigration and other areas.
"In the longer term I think we could have a very successful economy in this country," he said. "If our government functions well enough to fit the challenges I described, I think we have tremendous advantages. There really has been a maldistribution of income of tremendous magnitude."
Paulson, though, said the presidential campaign between President Obama and his Republican challenger, Mitt Romney, has come up short so far in addressing key issues, CNBC reported.
"It's going to take bipartisan action to (accomplish) the things he talked about," Paulson said, referring to Rubin. "It's not rocket science. But these things aren't being debated in the campaign. They're just not being discussed."