In 1975, Alice Rivlin became the founding director of the Congressional Budget Office. Over the years, she has served as the director of the Office of Budget and Management and as vice chair of the Federal Reserve Bank. She is an expert on budget, fiscal, monetary and social policy and is currently serving on the board of directors of the New York Stock Exchange. She sat down with THE HOYA to discuss the current financial crisis, the changing economy and the future of the U.S. economy under President-elect Barack Obama.What is your opinion on the current financial crisis? How long will it take for the U.S. financial sector to recover?y opinion is that it is a very serious financial crisis. We haven’t seen anything like this in many years and we still don’t know how it will come out. The danger is that quite a few financial institutions will fail and we’ll have a serious worldwide recession. Now the authorities of the central banks, treasuries and finance ministries of the world have been working very hard to prevent a financial meltdown and it may work, but we’re not sure yet.So we don’t really have an answer to the question, “How long will it last?” I think optimistically, one might think the worst is over and gradually the banks will begin lending again and we won’t have any more unexpected failures. We will certainly have some consolidation in the financial services industry.You were director of the Office of Budget and Management during the Clinton administration and amazingly the Clinton administration balanced the budget and reduced the deficit; do you think President-elect Barack Obama, with his proposed plans, will be able to balance the budget during his administration?Probably not, and it’s not entirely his fault. He inherits a very large deficit and a recession. [At] the end of the Clinton administration, we had a very large surplus in the budget and that surplus is gone. [This was] partly because of higher spending, [but] more importantly [because of the] deep tax cuts during the Bush administration and slower growth in the economy. Now we are in a deficit situation, [and] the recession will make the deficit worse.We will also increase the deficit deliberately to try to reduce the impact of the recession. That’s the right thing to do in the short run, but in the long run the U.S. budget is in a precarious position because if you look at the long run projections over the next couple of decades we will have very rapidly increasing spending. [This will increase] mostly for the health care programs Medicare and Medicaid and partly for social security and those will rise faster than taxes at any set of tax rates. Even if we raise tax rates, we couldn’t raise them enough to pay for the promises that have been made under those programs.So we have a very serious problem looming at us over the next couple of decades. The problem for President Obama and the new congress will be to keep two things in their mind at once. One is the short-run need to stimulate the economy that will increase the deficit and it should. The other is the long-run need to bring the budget deficit down. These are opposite things and we need to do both.Thomas Friedman stressed that fact that “the world is flat.” Is the world truly flat or just slightly more interconnected?Well, this was a metaphor for the interconnectedness of the world. Thomas Friedman is absolutely right, the world has become much more interconnected over a long time, but it has accelerated in the last couple of decades with the electronic revolution and the Internet and so forth. We see it in the financial markets. We see it in the extreme interconnectedness that goes on in our financial markets and in the rest of the world.You would not have thought that a housing bubble in the United States would have brought down the entire world financial structure, not only causing wild gyrations in the markets but serious threat of recession in countries that were doing quite well a couple years ago and didn’t do anything wrong. Their economies were doing quite well, but now that we have had this financial crisis, the major financial institutions have become very reluctant to lend to anybody and credit for perfectly worthy enterprises in other parts of the world has been cut off.How have you seen the economy change during the years you have worked in government?Well, I’ve worked a lot of years in government and in and out of government. But I think the most important things are the things we’ve just been taking about. The economies of the world are more interconnected than they used to be. I think we have seen positive developments in the U.S. economy [like] increases in productivity and flexibility. The ’90s were a very good decade for the U.S. economy. This past one has been somewhat less good, but there have still been advances in productivity and we have a flexible, innovative economy and we can deal with shocks quite well in this country.But we also, gradually over the years, have become much too oriented toward consumption and borrowing too much at a household level, at a business level and at a government level. So we are, as you pointed out, the world’s largest debtor nation – and that is putting us in a very vulnerable position. That’s been a big change over the years.What was your favorite place to work: the NYSE, the Congressional Budget Office or the Federal Reserve?The job that I enjoyed the most of my whole career was the Congressional Budget Office because I was the first director of the CBO. I was the founding director and I got to start a new organization and watch it grow and prosper and I’m very proud of the CBO.I enjoyed the Federal Reserve. It is a different kind of organization. I came there from being director of Office of Budget and Management. That was extremely stressful – quite exciting but very stressful. The Fed[eral Reserve] was a little less stressful and more focused on monetary policy and bank regulation. That was a new area for me. [I] hadn’t worked on that. I had worked on budgets but not on monetary policy so I enjoyed that.I have been on a number of corporate boards and the one I’m on now is the NYSE. You know, I’m a board member; I’m not there full time. We meet six times a year. It is very interesting because the world of stock exchanges is so international now.Economics is a highly male-dominated field. Has it been difficult at times or have you faced obstacles because you are a woman?Oh, I did when I was young because it was a very different world then, but I haven’t been very conscious of it in the last few years. The world has changed quite a lot. It is not as difficult for women to get to the table or the microphone as it used to be.- Interview by Joanne Rodrigues”