 From The Connection's archives: Robert Rubin on his new book (In an Uncertain World) and the economic well-being of the US. Worth the time spent to listen to it.
With the deficit near $500 b this year, there is a risk of a financial melt-down in the long term (ie. due to a lack of job growth, historically high short term interest rates, etc. and exacerbated by baby boomer retirements). However, the real problem is uncertainty in the short term.
Risk can be projected and compensated for (if you do get burned by risk, it's your fault). Uncertainty can't be quantified or analyzed. It can only guarded against by not placing yourself in a position where it can't topple you easily. We are in a position where uncertainty can put us into a crunch situation in very short order.
For example, uncertainty is an event like 9/11 and the subsequent invasion of Iraq. This sequence of events were unanticipatable, in any reasonable way, but they have had a major impact on our financial status. Some other uncertainties that we have on our plate include a series of major terrorist attacks on US soil that negatively impact regional economies and confidence, a failure/quagmire in Iraq that drags on for years at an escalating cost and a global loss of confidence, and full war with North Korea. Any of these events could cause the budget deficit to surge to unsustainable levels over an extended period, cause the US to lose its safe harbor status, and turn the rest of the world against us (not willing to help us when we are in crisis).
This is exactly how we could convert (through our lack of preparedness) the risk of long-term financial crisis into a short term crisis. Given this, why isn't fiscal responsibility a National Security issue??? If our economy collapses due to external uncertainties becoming real events, we would be hard pressed to defend ourselves. We wouldn't be able to afford it.
5:28:01 PM 
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