Wolf Blitzer Reports

Stock Markets Plunge Amid Fears About Corporate Profits and the U.S. Economy's Strength

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, HOST: Tonight, the clock spins backward on Wall Street. A year after the tech-heavy Nasdaq hits 5,000, it drops below 2,000.

As markets plunge, President Bush pitches his tax cut plan in Florida. We'll have an update.

And I'll speak live with former Clinton labor secretary Robert Reich.

Another tragic mistake for the U.S. Navy: A carrier-based jet misses its target in Kuwait.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We lost some servicemen today in Kuwait in a training accident.

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BLITZER: Census figures show the U.S. is becoming much more diverse, led by a soaring Hispanic population. We'll take a look at the changing face of America.

Good evening. I'm Wolf Blitzer, reporting tonight from Washington.

What a difference a year makes. At this time last year, the bulls were out in force, pushing up the stock markets and your investments. But since then, the Nasdaq has dropped 62 percent and the Dow Jones Industrial Average is down 13 percent from its high in January of last year.

At stake, your money, whether you're a big or small investor, and that's our top story.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): For the Dow, it was the fifth-worst one- day point drop, 436 points. And for the tech-heavy Nasdaq, a drop of 129 points; the first time it fell below 2,000 since November 1998.

Contributing to the downturn, new worries about corporate profits. In particular, lower earnings forecast for technology big- hitter Cisco, the same company that helped the Nasdaq rise to historic highs just one year ago. Mobile phone-maker Ericsson, warning of potential half-a-billion dollar losses; and leading chip-maker Intel issuing a sales warning.

Analysts don't know if the worst is over yet.

PAUL JUDGE, "FAST COMPANY" MAGAZINE: There's been way too much easy money and too much value created that isn't enduring, and the hangover that we're going through now is creating a serious headache.

BLITZER: All this is shaping up to be one big challenge for President Bush, who repeated his theme that tax relief is the answer to the slowing economy.

BUSH: Let people have money as quickly as possible that otherwise would go to government to provide a second wind to an economy that's slowing down.

BLITZER: Mr. Bush hit the road, this time in Florida, selling his $1.6 trillion across-the-board tax cut, urging his audience to e- mail their senators to vote for it. But all this market volatility is raising questions about another of Mr. Bush's controversial plans, allowing people to invest a small portion of their Social Security dollars in the stock market.

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BLITZER: And with the markets in a time warp, let's turn to financial editor Myron Kandel. He's at the CNN financial desk in New York.

Mike, tell us what's going on?

MYRON KANDEL, CNNFN FINANCIAL EDITOR: Well, Wolf, today represented a combinations of circumstances: Nervousness about the economy. Is the economy really going to recover in the second half of the year as most people expected? The warning from Cisco on Friday cast some doubt about that.

Second, disappointment that the Fed doesn't appear to be pro- active in cutting rates some more even before its meeting next week on March 20th. Put that all together and the fact the blue chips, which in the Dow which have done relatively well compared to Nasdaq, really fell out of bed Friday and today, put that all together and that's what accounted for today's sharp drop.

BLITZER: Let's take look at some specific stocks, companies I mentioned in my report. I'll put them up in the screen right now. Look, a year ago, Intel was at 60. Now it's 28. Cisco was at 68. Now, it's at 19. Ericsson was at 25. Now, it's at 6. Sun Microsystems was at 47. Now, it's at 17.

Are these bargains right now or can they go down even further?

KANDEL: Well, some people think they are bargains, Wolf, but they could go down further. The fact is they were way overpriced when they hit those highs compared to traditional standards. Now, the question is are they way underpriced and Wall Street is wondering whether this is the time to snap up some bargains. On the other hand, there are those who feel that there's more to go on the downside, Wolf.

BLITZER: OK, Myron Kandel in New York. Thank you very much for some added perspective on the markets and the state of the U.S. economy.

Joining me now live from Boston is Robert Reich. He's the former labor secretary in the Clinton administration and author of a new book, "The Future of Success," which looks at the turbulent new economy and its impact on society.

Professor Reich, thanks for joining us. President Bush says his $1.6 trillion tax cut is precisely what the country needs right now to stimulate the economy. You disagree with him. Why?

ROBERT REICH, FORMER LABOR SECRETARY: Wolf, I think what the country needs right now to stimulate the economy more than anything else is a rate cut by the Federal Reserve Board. Ideally before March 20th, but if it has to be March 20th, then at least 75 basis point and three-quarters of a point. That's the most direct stimulus the economy can possibly get.

BLITZER: Well, You know, the latest CNN/"USA Today"/Gallup poll asked the American people if they think the tax cut would help. Look at these numbers: 68 percent said, yes, it would help the economy. Only 28 percent said no. And whether it would help them personally: 62 percent of the American public thinks it would help them. Only 37 percent say no. Those are the kinds of numbers, as you well know, politicians look at.

REICH: Oh, absolutely, Wolf, and I think it's -- you know, a tax cuts, in terms of stimulating the economy, if the tax cut is done quickly, it it's retroactive -- now that's going to make it much more expensive -- it possibly could stimulate, not nearly as effectively and efficiently as the Federal Reserve Board cutting rates.

But there again, if you're going to have a tax cut, at least make sure the tax cut goes to people who are working class, middle class, who are relatively poor. They are the ones, after all, who are going to spend the tax cut. If it goes to people who are rich, they are not going to spend that tax cut. They're just going to accumulate more of that income and wealth.

BLITZER: You wrote an article that appeared on the op-ed edge page of "The Washington Post" yesterday that's generating a lot of buzz, especially here inside the Beltway.

Let me read an excerpt for our viewers, who may have missed it: "I know a dead party when I see one. Just consider the past eight years: lost the presidency, both houses of Congress, almost all its majorities in state legislatures, most governorships. The Democratic Party is stone dead. Dead as a doornail." Professor Reich, this is your party you're writing about. Those are extremely strong words.

REICH: Well, they are pretty strong words, Wolf, but I think it's very important for the Democratic Party to revive itself, and we're talking about lack of vitality, lack of energy, a kind of extraordinary timidity with regard to all kinds of issues before the public right now.

For example, let's take the issue we were just talking about: What do you do with the surplus? There are 45 million Americans, million Americans without health insurance now, and average working people, even if they have health insurance, are paying more for premiums and co-payments and deductibles. There is almost no discussion. That whole health insurance discussion is off the table and child care and all sorts of things that working people need.

We are spending $300 billion a year on the military, and now George W. Bush wants to have a missile defense system. Where are the voices that say this is crazy in a post-Cold War world to spend this kind of money.

We could go on. There is a huge agenda here, Wolf, and the point is that there's -- the silence is deafening.

BLITZER: But you know, there's a lot of Democrats, especially moderate Democrats, so-called new Democrats, the centrists, who argue that if the party were listen to you, they'd be in even worse shape than they're in right now.

Listen, for example, to what Senator John Breaux of Louisiana told me yesterday on "LATE EDITION." Listen to this.

(BEGIN VIDEO CLIP)

SEN. JOHN BREAUX (D), LOUISIANA: He proclaimed us dead and buried, and I think he's very premature. I think that most of the people in the country, Wolf, are what I would classify as moderates, and that is not a disparaging term, even if "The Wall Street Journal" says it so.

(END VIDEO CLIP)

REICH: Well, Wolf, I think centrism and moderateness and moderation are terms that we all like. I mean, everybody wants to be a centrist. Everybody wants to be a moderate. The problem is that the political center of gravity continues to move to the right.

Most Americans, in terms of most issues, they are not paying a great deal of attention. They care about things not so much whether it's called liberal or conservative or centrist, they care about things that affect them as working people. They care about health care. They care about getting a tax cut that really helps them rather than perhaps somebody who is at the top of the heap. They care about child care. They're concerned about this economy right now, as it starts to declining, what's going to happen to their jobs? What's going to happen to their incomes? And these are the issues, let's put aside the political labels, these are the issues that Democrats can right now be talking about. This is a great opportunity for Democrats.

BLITZER: OK, Robert Reich in Boston. That's all the time we have. Thanks so much for joining us.

REICH: Thanks, Wolf.

BLITZER: Thank you, and in other news, a little more than month after a U.S. submarine struck and sank a Japanese vessel, a Navy jet today dropped a stray bomb at a Kuwaiti desert training range, killing six people, including Americans.

We get more now from CNN national security correspondent David Ensor.

(BEGIN VIDEOTAPE)

DAVID ENSOR, CNN CORRESPONDENT (voice-over): The accident involved a Navy F-18 Hornet. The plane took off from the aircraft carrier the Harry S. Truman in the Gulf off Kuwait. As part of an air support training exercise, the plane dropped a 500-pound bomb at the Udairi training range near the Iraqi border shortly after dark.

The bomb landed near some military personnel at an observation post on the range. The dead include five American servicemen, four from the Army, one from the Air Force and another soldier from New Zealand.

It is not yet clear why the accident occurred, whether pilot error, or a mistake by air controllers, or whether for example, the personnel were ordered into the wrong area.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We were reminded today of how dangerous service can be. We lost some servicemen today in Kuwait in a training accident. I hope you will join me in a moment of silence for those soldiers and their families.

ENSOR: The accident is more bad news for U.S. Navy officials, still investigating who should be blamed for the collision off Hawaii of a submarine, the USS Greeneville and a Japanese fishing training craft.

The accident sank the Japanese ship, killing nine. Navy officials are also trying to assess why most of the satellite-guided precision bombs fired against Iraq February 16th missed their targets.

(on camera): While Pentagon officials will want to get to the bottom of this, why it happened, live ammunition exercises in the region are not likely to be canceled. U.S. officials say they are needed, because U.S. and allied war planes regularly patrol the northern and southern no-fly zones over Iraq, and find themselves fired on by the Iraqis. They are under orders to retaliate. David Ensor, CNN, the Pentagon.

(END VIDEOTAPE)

BLITZER: And up next: led by Hispanics, minorities scores big games in the latest U.S. head count, as the census lets Americans paint themselves in more than one color.

We'll look at the changing face of this nation. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. In many parts of the United States, it's no secret: we as a country look a lot different than we did only a few years ago.

Today, numbers from the 2000 census confirm this. While those who identify themselves as white still make up the largest group, at 75 percent, just over 12 percent say they're black or African- American, and 3.6 percent identify themselves as Asian.

(BEGIN VIDEO CLIP)

JORGE DEL PINAL, CENSUS BUREAU: The nation is much more diverse in the year 2000 than it was in 1990, and that diversity is much more complex than we've ever measured before.

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BLITZER: One of America's fastest growing groups, Hispanics, wasn't shown in our earlier breakdown, because it's an ethnic group that can come from any race.

In 1990, Hispanics made up about 9 percent of the population. In 2000, 13 percent of the population identified itself as Hispanic. That's a 58 percent increase, and puts the number of Hispanics just ahead of the number of people who identify themselves as African- American.

The 2000 census gave respondents more choices than ever to describe themselves, including 63 racial categories. And for the first time, it let them choose more than one option: 2.4 percent of the population did so, reflecting the growing, multi-racial look of America.

(BEGIN VIDEOTAPE)

BLITZER (voice-over): Twenty-nine-year-old Amy Nakamura (ph) gets a lot of questions about the way she looks. The daughter of a Japanese father and a Caucasian mother, she's among a growing number of mixed-race people in the United States.

AMY NAKAMURA: Ever since I can remember, people automatically feel like they're allowed to come up and say, what are you?

BLITZER: Since 1960, the number of interracial marriages in the U.S. has grown nine-fold to about 1.3 million. While they still represent a small percentage of all marriages, they and the roughly three million children they've produced are blurring the color lines and challenging long-held notions of race. The Jackson family is Italian and black.

UNIDENTIFIED FEMALE: I think a lot of times people get -- I don't know -- they want to pigeonhole you. That's all. They want to classify you, and I don't think people should do that.

GREGORY RODRIGUEZ, NEW AMERICA FOUNDATION: The American racial tradition has been black and white. It has been this dichotomous view of the world, that you are either or. And I think what's happening is that the multiplicity of combinations now, it really breaks down that either or sense. You can actually be both at one time.

BLITZER: Despite growing recognition and visibility, thanks to multiracial celebrities like Tiger Woods and Mariah Carey, people of mixed race often feel torn between cultures, not fully accepted by any.

Tanya Bowers (ph) is black and European Jewish.

TANYA BOWERS: I noticed when I was interested in white boys who were Jewish, that if they didn't know that my mother was Jewish, they sort of discounted me.

Chinese and Caucasian, Jen Chau (ph) found acceptance within her family difficult.

JEN CHAU: I remember playing with my cousins, and having them -- it was funny -- we were all really young, and they came to the realization that they had the same last name, Chau. And I said, oh, yeah, that's my last name too. And they said, yeah, but you're different.

BLITZER: As the parents of two biracial children, Richard and Toni Eisendorf (ph) work hard to find a balance between cultures.

RICHARD EISENDORF: We want them to be sure of their identity, not feel like they need to choose between one side or the other. And we've made the decision that we would recognize them as black and as Jewish. Simply that.

BLITZER: Matt Kelley, who is Korean and Caucasian, wants to give a greater voice to people of mixed race with a new magazine called "Mavin."

MATT KELLEY, "MAVIN" MAGAZINE: The reason why we started it was because there weren't any resources available that address the exploding population of mixed-race people in this country.

BLITZER: But the melding of the races is not happening evenly across all groups. The rate of interracial marriages involving blacks is much lower than for Asians, Hispanics and Native Americans.

RODERICK HARRISON, CENTER FOR POLITICAL AND ECONOMIC STUDIES: The issue of race relations, the issue of full and equal social acceptability in the society, the stigma, is greater for blacks than it is for other minorities.

BLITZER: Some worry this stigma is helping to create a new dichotomy.

RODRIGUEZ: The great danger of all this mixing is that we have a world that becomes beige and black, that if blacks remained separate, and if Asians and Latinos and Anglos are mixing, that could be a future divide that we have to be wary of.

BLITZER: Still, there is a sense of progress, of barriers broken.

RODRIGUEZ: The children of inter-marriages are really the living and breathing answers to racial tensions. The more that number grows, the more the number of interracial and interethnic children grows, it helps erode the solid lines between groups.

(END VIDEOTAPE)

BLITZER: And this footnote: the new census numbers will be put to use right away as state legislatures around the country begin to draw the district lines for next year's congressional elections.

After the break, a labor dispute between one of the nation's largest airlines and its employees intensifies just in time for spring travel.

And we'll have an exclusive look at the destruction of historic, priceless icons in Afghanistan. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Let's look at some other stories we're covering tonight, beginning with airline travel. Mechanics for Northwest picketed outside the White House today, criticizing President Bush for intervening in their labor dispute. Northwest and its mechanics weren't able to reach a contract agreement by last night's deadline. However, an order signed by the president Friday prevents mechanics from walking off the job for 60 days.

American Airlines now has the go-ahead from a federal judge to purchase Transworld Airlines. The judge today said he'll accept the $742 million bid for the assets of the bankrupt TWA. Under the deal, TWA's name eventually would disappear and its employees would fold into American Airlines. The Justice Department still must approve the purchase.

Rejecting pleas from the international community, Afghanistan's ruling Taliban militia have destroyed two priceless Buddha statues. CNN obtained this exclusive photograph of the destruction.

The statues were carved more than 1,500 years ago, when Afghanistan was a center of Buddhist culture. The Taliban regarded the statues as false idols and ordered their destruction last month. Tonight on "The Leading Edge": crewmembers aboard Space Shuttle Discovery are preparing for a late-night space walk, the second and final of this mission. Today, the astronauts used the robotic arm to attach an Italian-made module to the international space station, which was packed with five tons of laboratory and medical supplies.

A new survey finds the cost and frequency of computer security breaches are skyrocketing. Of more than 500 U.S. businesses and government agencies questioned, 85 percent say they detected breaches over the past year. A majority of those cited the Internet as a frequent point of attack.

Up next, I'll open our mailbag. Many of you have very strong feelings about the life sentence given to that 14-year-old boy in Florida on Friday. I'll share some of them with you next.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Time now to open our mailbag. We received lots of reaction to the life sentence given Friday to a 14- year-old boy.

Jory's comments were representative of many of our viewers: "It's not right to sentence a child committing a violent crime to life. That is destroying another life also. Two wrongs don't make a right."

Charlie writes: "I would bet had Lionel Tate been a small cute blond boy with a sorry face painted on him he would not have received such an inhumane sentence."

But Stephen has a different view: "This isn't as easy as it looks. Most people are on one side or the other. I say wait and see. Let the verdict stand, wait 10 years, and see what kind of young man he becomes. If he deserves it, then get him clemency then."

And Rachael writes: "He murdered a child. Murder is inherently wrong whether one is 14 or 40."

Remember, you can e-mail me at wolf@cnn.com. I just might read your comments on the air.

And you can sign up for my free daily e-mail previewing our nightly programs by going to our WOLF BLITZER REPORTS Web site: cnn.com/wolf.

Please stay with CNN throughout the night. The mother of 14- year-old Lionel Tate, who was sentenced to life in prison for murder, is among Larry King's guests at the top of the hour.

Up next, Greta Van Susteren. She's standing by to tell us what she has -- Greta.

GRETA VAN SUSTEREN, HOST, CNN'S "THE POINT": Wolf, we're going to continue right where your e-mailers left off. We're going to talk about Lionel Tate. He has now spent three days as part of his life sentence. We're going to tell you what it's like. He's in a solitary cell right now. He has no sheets. He has simply a blanket on a slab and 24 hours of light. We'll give you more details during the show -- Wolf.

BLITZER: OK, Greta, we'll be watching. Tomorrow night, we'll take a closer look at the concessions President Bush might be willing to make to get his tax cut plan through the Senate.

Until then, thanks very much for watching. I'm Wolf Blitzer in Washington. "THE POINT WITH GRETA VAN SUSTEREN" begins right now.

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