Rubenstein: Markets Expect No Cliff

Photograph by Victor J. Blue/Bloomberg

David Rubenstein, co-chief executive officer of Carlyle Group LP.

Written with Jason Kelly

What would David Rubenstein do?

That was the question posed to the private-equity tycoon and former Carter administration policy wonk today in Washington, as the town stares down a so-called fiscal cliff that, if breached, would probably throw the country back into recession.

“The election results change everything,” Rubenstein, co-founder and co-CEO of Washington-based Carlyle Group, said in a lunchtime discussion with Jason Kelly, managing editor for Bloomberg Link, at Bloomberg Government’s offices in the capital. “Once the election was over, I think Republicans recognized that the president had more ability to persuade members of Congress that his way was more likely to be the prevailing way.”

A lifelong Democrat who served as deputy assistant for domestic policy to President Jimmy Carter, Rubenstein said he sees four elements of revenue increases in an eventual fiscal bargain: higher marginal tax rates — “though probably not as high as 39 percent,” a bump in the capital gains tax to 20 percent, a dividend tax rate between 20 percent and 25 percent and a higher estate tax.

Spending cuts, Rubenstein said, will probably be negotiated “down the road.”

As the chief fundraiser for Carlyle, which oversees $157 billion, Rubenstein travels to about 50 countries a year. Everywhere he goes, he said, the first question people ask him is not about Carlyle, but about the fiscal cliff.

“The markets would be in chaos” if the U.S. failed to resolve the $607 billion of spending cuts and tax increases that are set to start in January unless Congress acts to avoid them, Rubenstein said.

Still, according to the global investor, “people have taken the view that this will get resolved. The markets believe a deal will get done.”

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