Rubenstein Says U.S. Inequality Rising as Congress Flounders

May 15, 2014 1:08 pm ET

(Updates with Rubenstein comment in second paragraph.)

May 15 (Bloomberg) -- David Rubenstein, co-founder of Carlyle Group LP, said the U.S. is in “reasonable shape” even as inequality worsens and the political system struggles.

“The U.S. is in better shape than a few years ago,” he said at the SkyBridge Alternatives Conference in Las Vegas today. While economic growth rates are not what people expected, Rubenstein said he doesn’t see a recession happening “anytime soon.”

Rubenstein, a billionaire who founded Washington-based Carlyle after working for President Jimmy Carter, joins other money managers and former politicians raising the issue of income disparity in the U.S. at this year’s SALT Conference, its sixth year. While the unemployment rate is moving in the right direction, inequality is worsening, Rubenstein said.

“The U.S. is suffering from a political system that is not working as well as the founding fathers would have wanted,” said the 64-year-old, who this week celebrated the reopening of the Washington Monument after helping fund repairs.

Rubenstein, whose firm oversees $199 billion in assets such as private equity and real estate, said China is the most attractive place to invest outside of the U.S.

“It’s more capitalistic,” he said, adding that when he meets Chinese government officials, they have a greater knowledge of how capitalism works compared with members of the U.S. Congress. Long-term investors will do well there because of China’s economic growth rates and ability to sell products to its billion-plus population , he said.

Abandoned Europe

Rubenstein said investors had abandoned Europe “prematurely” and that growth will resume in the next few years after asset prices were “beaten down.”

“Prices are more attractive there than in the U.S. Things are in pretty good shape in Europe,” he said, describing the region as the world’s largest emerging market. “There is not as much competition there as there used to be.”

Rubenstein said it’s difficult to find deals in the U.S. currently because the market isn’t cheap. With low interest rates “it’s tempting to take inexpensive debt and buy companies,” he said. “There is a bit of frothiness.”

Still, deals being done by private-equity firms are cheap compared to those in the tech industry, such as Facebook Inc.’s purchase of text-messaging service WhatsApp Inc. for $19 billion this year, he said.