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Treasury Department's chief deputy optimistic about economy, debt, inflation, Congress

Sarah Bloom Raskin says signs point to a strengthening recovery.
Sarah Bloom Raskin says signs point to a strengthening recovery.
Published Nov. 8, 2014

TAMPA — U.S. Deputy Secretary of the Treasury Sarah Bloom Raskin packed plenty of sunshiny optimism for her visit to the Sunshine State last week.

She's confident the country is "in a good place" in its economic recovery, does not see a huge risk of inflation and rejects the notion that the nation's debt will be an economic millstone.

She's even optimistic that Democrats and Republicans in Washington will find ways to work together.

Coming off a midterm election in which Republicans wrested control of the Senate to go with their control of the House, Raskin echoed an Obama administration theme of finding common ground with Republican foes.

"Higher education, I think, is absolutely an area where we can do a lot with this Congress," Raskin, 53, said in an interview with the Tampa Bay Times. "There are issues of trade, tax reform. We've been at this for a while. Our noses have been to the grindstone on these. So we're going to continue."

Raskin was confirmed in March to her post as second-in-charge at the Treasury, the highest-ranking woman ever in the department.

A former Federal Reserve governor, Raskin is intimately familiar with the Fed's $4 trillion bond-buying program — now being phased out — to prop up the ailing financial system. In her current role, she's tasked with promoting jobs and fighting threats to the country's financial system.

She came to Tampa to give a keynote speech Thursday at the annual Consumer Rights Litigation Conference sponsored by the National Consumer Law Center. Raskin's topic of the day: finding ways to improve servicing of $1.3 trillion in student loan debt, a troubled industry in which nearly 14 percent of borrowers default within three years.

Afterward, she spoke with the Times. Here are excerpts:

You oversee quite a few areas. How do you prioritize?

We have tons going on at Treasury. … We have all the sanctions work. … We have all the work with financial stabilization (and) reform. … Then we have tax policy. We have economic policy. We have the Bureau of Engraving and Printing, the (U.S.) Mint. It's vast. And there's only one deputy.

The good news is we have really strong undersecretaries and assistant secretaries. They can handle quite a bit and they do, and do a fantastic job. It makes it a little bit easier for me. What I try to focus on are things that could be in the crevices. … Student loans is one of those kinds of issues. Another … is cybersecurity.

Obviously, the cybersecurity battle has been going on awhile and keeps getting ratcheted up. Are we winning the war?

What I try to focus on is not so much who's winning the war, but are we effectively protecting people's information and are we keeping institutions from becoming unstable? I have been putting a lot of focus on institutions and consumers themselves so I can make sure they have the right protections in place. It's a defensive game. The offensive game is being played somewhere else. I'm working on the defensive side and think it's going to go on for a while.

Shifting to the economy … where are we in the recovery stage?

We're in a very good place in the recovery. … The unemployment rate has come down significantly; we're seeing good growth numbers; we're not fearing a recession anymore; we're not fearing tipping back into one. The macro indicators are all pointed in the right direction.

How much concern do you have about income inequality?

I started looking at this back when I was at the Fed. I think this is a big trend. It's not something you can put on any particular administration or political party. These are trends that have been under way for a long time.

I'm interested in policies that do try to lift the bottom. Things like increasing the minimum wage, which our administration has been very vocal on. Earned income tax credit — figuring out how to expand that. It's a way of moving people up from the bottom.

Now that the Fed is ending bond buying, there's speculation we'll see interest rates rising. How fast do you see that happening, and what impact will it have on the economy?

As somebody who was at the Fed when the large-scale asset program was launched, I'm very familiar with it. I think it was successful. … And actually, it is partially responsible for our recovery.

When the economy recovers, when we have sufficient aggregate demand returning to the economy, you will see interest rates go up. That is a good thing. That is a return to a more robust economy. So I think the Fed is very smart in watching that without trying to interfere with it.

As the economy starts to grow steadily, is it time to look at reducing the national debt, at tackling the deficit?

If you look at the debt as a percentage of GDP, it has come down significantly. … My own sense is that the deficit and the debt are in a place where it's a great place to be. I think our numbers are really good as a percentage of GDP.

You're not concerned about the sheer size of debt?

Doesn't it matter as a percentage of GDP? Isn't that what's relevant? … Look at some of the risks of austerity. You've seen that quite a bit in Europe. … When you do austerity at a time when the economy is not growing, it can make things much worse.

I think we're in a good place. I think the administration showed tremendous leadership in moving us out of the crisis. Another component is financial reform. … We're at a stage now where our financial institutions are much better capitalized than ever. Supervision is stronger and risk taking is reduced.

With Republican control of Congress now, what does that mean for financial regulations like Dodd-Frank? Do you think some of the regulations will be loosened now?

When we engage in dialogue … over what these reforms were meant to do, I'm optimistic that enlightened people understand why, actually, they put in place these reforms to begin with; why they were necessary; why they continue to be necessary.