ROBERT RUBIN

By Adam Zagorin

In years past, when the rest of the world talked about the U.S. economy, the focus was usually on Federal Reserve Chairman Alan Greenspan. This year, thanks largely to Greenspan's prudence, the conversation is almost certain to change. As the U.S. rate of inflation idles under 3%, the debate in Washington is shifting back to the fiscal side of the ledger. Enter Treasury Secretary Robert Rubin, first among equals on President Clinton's economic team and one of the few faces in the Administration that Wall Street considers one of its own.

Rubin's priority is seeking a balanced federal budget by 2002. To reach that goal, the White House must compromise with Congress while protecting such Clinton promises as education incentives and measures to safeguard the environment. Along the way, Rubin will have to fend off the Republican opposition's shibboleth: a proposed constitutional amendment to mandate a permanently balanced budget. The idea, which enjoys support among a smattering of Democrats, is opposed not only by Rubin and the President but also by Greenspan. They point to the rigidity of the notion in the event of an economic downturn, and argue that it is inappropriate in the Constitution. "As strongly as I favor fiscal responsibility," says Rubin, "I oppose a balanced-budget amendment, because of the real risks it poses."

Rubin's other domestic priority is unusual for a Treasury Secretary: lifting the blight from America's desperate inner cities. He has made a point of visiting New York City's troubled South Bronx and crumbling areas of Chicago and Los Angeles to underscore his belief that extra capital and market incentives can bring rejuvenation. "It's sort of a Nixon-going-to-China approach," he explains. Specifically, Rubin wants to increase funding to a network of community-development banks across the nation, expand their inner-city small-loan programs and reach out to roughly 10 million low-income Americans who have no bank accounts by incorporating them in the mainstream financial system.

Rubin came to high finance by way of the Yale law school, and practiced briefly before heading to Goldman Sachs & Co., where he ran the arbitrage department and, later, the entire firm. A Democratic fund raiser in Wall Street's Republican bastion, Rubin served as the first head of Clinton's National Economic Council before taking the top Treasury job.

Besides making his mark on domestic economic policy, Rubin successfully engineered a $12.5 billion emergency loan to Mexico two years ago. On Jan. 15, he stood on the sidelines smiling as Mexico's ambassador to Washington announced that his government was paying the loan back three years early. Rubin won't be on the sidelines in 1997.

--By Adam Zagorin