A Tough Act to Follow for the Well-Schooled Summers

WASHINGTON — There was a time in Washington when the great power game was the exclusive domain of the secretary of State and the national security advisor, while the Treasury secretary was relegated to lesser pursuits.

No more.

In a post-Cold War world where the market is king and America’s prosperity depends as much on events in Osaka as in Omaha, the job of being America’s finance minister has been elevated to a status that only a Henry Kissinger or a George Kennan could truly appreciate.

For almost seven years, Robert E. Rubin, with one foot planted firmly in New York and the other in Washington, has helped bring the nation extraordinary prosperity and pull global markets back from the financial brink.

With Rubin’s resignation from the top Treasury job Wednesday, the burden of maintaining that record falls squarely on President Clinton’s choice to succeed him, former Harvard economist Lawrence H. Summers.

As Rubin’s deputy since 1995, Summers has hewed to a course that has left no light between the two. But that hardly means the new secretary will simply be a caretaker for his predecessor’s policies.

“The idea that anyone can serve in that job from mid-1999 to 2001 without facing a major financial crisis he’ll have to solve himself doesn’t make sense,” said Roger C. Altman, like Summers a former deputy Treasury secretary who is now a New York investment banker.

Although the U.S. economy continues to roar along and the world seems to have quieted after a near-panic last fall, some analysts said the improvement was in large part a tribute to the crisis-management skills of Rubin and Federal Reserve Chairman Alan Greenspan and not necessarily a measure of renewed stability.

“There are a lot of things that can go wrong,” said Gary C. Hufbauer, a former official with the Council on Foreign Relations and an economist with the Institute for International Economics in Washington.

Among the global possibilities on most analysts’ lists: A stall or reversal of the tentative Asian recovery could be triggered by a currency devaluation in China, a deepening economic slump in Japan, or both; and a nasty fight over leadership of the World Trade Organization could derail a major summit and new round of global trade negotiations scheduled for this fall in Seattle.

And looming on the domestic front are growing protectionism as a result of the nation’s ballooning trade deficit and growing hostility toward China, and a struggle between the Democratic administration and the Republican-controlled Congress over what to do with the growing federal budget surplus.

In tackling these problems, analysts said Summers would start with two serious drawbacks.

He does not have Rubin’s skills as a diplomat. “Summers can make people mad with the same message Rubin uses to charm them,” Hufbauer said.

And unlike Rubin, who spent 26 years as a rising star and eventually co-chairman of the prestigious investment house of Goldman, Sachs & Co., he is still considered an unknown quantity on Wall Street.

“The markets will have to be convinced he can do the job. Until they are, there will be more volatility in prices and interest rates,” said David M. Jones, vice chairman of the New York bond house of Aurbey G. Lanston & Co.

But if Summers comes to the new job with deficiencies, analysts said that he also arrives with several distinct advantages. Chief among them: his intelligence, his experience at Treasury (he has been in the department in one capacity or another for more than six years) and his long tutoring by Rubin.

The outgoing secretary is believed to have masterminded a publicity blitz that culminated in a February Time magazine cover that portrayed Rubin, Summers and Greenspan as apparent co-equals in what Time called “The Committee to Save the World.”

Perhaps as important is a mystique that has come to surround the job of Treasury secretary that was until recently the sole province of foreign policy leaders and national security officials.

“The national security crowd had us hypnotized for most of the Cold War and simply dismissed economic issues,” said J. Bradford DeLong, a former Treasury official who now teaches economic history at UC Berkeley.

As an example, DeLong cited Kissinger’s reaction to the 1973 Arab oil embargo, which pushed the United States and much of the rest of the world into recession. The former national security advisor and secretary of State is said to have concluded that on balance the embargo was “a good thing” because it meant the shah of Iran would have more money to buy weapons to defend U.S. interests in the Middle East.

“Now we can see things a little more clearly,” said DeLong, “and it’s apparent the real bosses are the Treasury secretary and the Fed chairman.”