DEFINITION of Rubinomics

Rubinomics is an economics discipline founded by Robert Rubin that focuses on the impact of a balanced budget on long-term rates of interest. It is a combination of the words "Rubin" and "economics. Robert Rubin was the Secretary of the Treasury under former President Bill Clinton from 1995-1999. His primary focus was balancing the U.S. budget and its effect on long-term interest rates. This approach tends be concerned with the effect that deficits have on inflation over the long term.


Rubinomics gained traction during the 1990s as long-term interest rates remained high despite the actions of the Federal Reserve to lower the Federal Funds Rate. The Federal Funds Rate is the rate at which lending institutions such as banks will lend each other money overnight. A lower fed funds rate encourages this lending, which can increase the money supply and lead to an easier monetary policy. In order to account for the lack of responsiveness of long-term rates to overnight lending rates, Greenspan and other experts attributed this to an inflation premium that was built into long-term bond prices. Rubin suggested that the government concentrate on reducing the deficit instead of spending money on infrastructure, which displeased some of his more liberal economic advisors.