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American Morning

Minding Your Business: Bushonomics 101

Aired January 07, 2003 - 07:46   ET

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

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


PAULA ZAHN, CNN ANCHOR: President Bush is getting ready to announce his $600 billion plan to boost the economy. So, how does it break down? It seems like we know probably all of the details we need to know in advance of his speech.
ANDY SERWER, "FORTUNE" MAGAZINE: Yes.

ZAHN: Let's turn to Andy Serwer, who is going to give us a quick lesson in Bushonomics 101.

Good morning.

SERWER: Yes, good morning to you. A little dividend analysis here.

First, let's talk about the markets. Wall Street -- excuse me -- applauding the Bush plan, obviously. Yesterday, the stock market was up a banner day. The Dow up 171 points -- look at that -- 34 points over on the Nasdaq. Now, the market is up 5.2 percent over the first three trading days of the year. One of the best starts to the year ever. You've got to go back to 1938, apparently...

ZAHN: Really?

SERWER: ... to find a better first three days. Wall Street likes it. Dividends coming tax-free perhaps, if the Bush plan is approved.

Let's break it down a little bit and talk exactly about what dividends are. First of all, some people may know this, but dividends are a portion of net income paid to investors. They can be cash or stock. Usually cash, of course, paid by bigger and mature companies. You know this if you're a shareholder of a company like AT&T, Coca- Cola or IBM.

Seventy percent of big American companies, those big names like we just mentioned, do pay them, companies like Cisco and IBM -- I mean, Cisco and Microsoft, I should say, do not pay dividends. Those tech companies like to reinvest the money to help grow businesses.

ZAHN: All right, so how many people are really affected by this? Because there is a statistic out there that only one-fifth of the households in America actually hold stocks outside of their retirement account.

SERWER: Right. Right, about 50 percent of American households own stock, but the majority of them through their 401(k) plans. ZAHN: So, does this have much of effect on...

(CROSSTALK)

SERWER: Well, the Democrats have said that the people who own stock in 401(k) accounts won't benefit, because they're not paying taxes on those dividends; 401(k)s being tax-free accounts.

But, the fact that this plan might incentivize companies to pay more dividends to make their stocks more compelling means that people who have 401(k) accounts would get more dividends. So, in that sense, it's good for everyone who owns stock, I think.

ZAHN: That's interesting. I haven't heard anybody argue that.

SERWER: Well, I mean, it's pretty obvious to me. You saw yesterday, Paula, stocks of companies that paid big dividends went up a lot.

ZAHN: Sure.

SERWER: In other words, they become more attractive. And the companies I just mentioned, like Cisco and Microsoft, may feel more pressure to begin paying dividends.

ZAHN: I don't want you to completely steal the president's thunder from later today, but he will also announce that he's going to give a one-time check of $3,000 to people looking for jobs. Now, you find a little wrinkle in this plan.

SERWER: Yes.

ZAHN: What is it? What's wrong with it?

SERWER: Well, these are called reemployment accounts, and let's take a look at them very quickly. It's a $3,000 check that you would get for a job search. You get a bonus for finding work. And if you find a job in 13 weeks, you get to keep the balance of the money. In other words, of the $3,000, a portion of it is doled out weekly, and you get to keep the balance.

ZAHN: And you're allowed to pay for child care out of it...

SERWER: Yes.

ZAHN: ... moving expenses. So, what's wrong with that?

SERWER: Well, I want to rate this thing right now on the Andy econ-o-meter. I am saying that this thing is a little bit chilly, not one of my favorite plans here.

ZAHN: Why?

SERWER: Let's drop it. The reason is that...

ZAHN: (UNINTELLIGIBLE) a job. SERWER: Yes, well, listen, the point I think here is that it suggests that people aren't out looking for jobs. In other words, you have to pay me to look for a job? I think people who are unemployed are incentivized enough to go out and find a job. I don't think they need additional money to spur them to get off the couch, right? I mean, it just seems like a misplaced priority to me.

ZAHN: I don't know if you're reading their minds right.

SERWER: You mean people...

ZAHN: And what do you say...

(CROSSTALK)

SERWER: So, in other words, if someone is standing...

ZAHN: ... an unemployed person...

SERWER: Right, they need...

ZAHN: ... who needs to take care of child care expenses.

SERWER: Right.

ZAHN: What's wrong with how...

(CROSSTALK)

SERWER: Well, I think -- yes. I just believe that the money would be better spent elsewhere. In other words, I think if someone wants to find a job, they're going to go out and get it. I also think this could be a bureaucratic nightmare. Can you imagine actually administering this thing and paying out $600 here, $750 here? I mean, I think that could be a real problem.

ZAHN: Yes, and actually determining whether the paperwork is accurate or not.

SERWER: Right yes. Bureaucracy is not supposed to be what the Republican Party is all about, but they're going to spell it out this afternoon.

ZAHN: Thanks for the preview, Andy.

SERWER: OK.

ZAHN: See you a little bit later on this morning.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.







Aired January 7, 2003 - 07:46   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: President Bush is getting ready to announce his $600 billion plan to boost the economy. So, how does it break down? It seems like we know probably all of the details we need to know in advance of his speech.
ANDY SERWER, "FORTUNE" MAGAZINE: Yes.

ZAHN: Let's turn to Andy Serwer, who is going to give us a quick lesson in Bushonomics 101.

Good morning.

SERWER: Yes, good morning to you. A little dividend analysis here.

First, let's talk about the markets. Wall Street -- excuse me -- applauding the Bush plan, obviously. Yesterday, the stock market was up a banner day. The Dow up 171 points -- look at that -- 34 points over on the Nasdaq. Now, the market is up 5.2 percent over the first three trading days of the year. One of the best starts to the year ever. You've got to go back to 1938, apparently...

ZAHN: Really?

SERWER: ... to find a better first three days. Wall Street likes it. Dividends coming tax-free perhaps, if the Bush plan is approved.

Let's break it down a little bit and talk exactly about what dividends are. First of all, some people may know this, but dividends are a portion of net income paid to investors. They can be cash or stock. Usually cash, of course, paid by bigger and mature companies. You know this if you're a shareholder of a company like AT&T, Coca- Cola or IBM.

Seventy percent of big American companies, those big names like we just mentioned, do pay them, companies like Cisco and IBM -- I mean, Cisco and Microsoft, I should say, do not pay dividends. Those tech companies like to reinvest the money to help grow businesses.

ZAHN: All right, so how many people are really affected by this? Because there is a statistic out there that only one-fifth of the households in America actually hold stocks outside of their retirement account.

SERWER: Right. Right, about 50 percent of American households own stock, but the majority of them through their 401(k) plans. ZAHN: So, does this have much of effect on...

(CROSSTALK)

SERWER: Well, the Democrats have said that the people who own stock in 401(k) accounts won't benefit, because they're not paying taxes on those dividends; 401(k)s being tax-free accounts.

But, the fact that this plan might incentivize companies to pay more dividends to make their stocks more compelling means that people who have 401(k) accounts would get more dividends. So, in that sense, it's good for everyone who owns stock, I think.

ZAHN: That's interesting. I haven't heard anybody argue that.

SERWER: Well, I mean, it's pretty obvious to me. You saw yesterday, Paula, stocks of companies that paid big dividends went up a lot.

ZAHN: Sure.

SERWER: In other words, they become more attractive. And the companies I just mentioned, like Cisco and Microsoft, may feel more pressure to begin paying dividends.

ZAHN: I don't want you to completely steal the president's thunder from later today, but he will also announce that he's going to give a one-time check of $3,000 to people looking for jobs. Now, you find a little wrinkle in this plan.

SERWER: Yes.

ZAHN: What is it? What's wrong with it?

SERWER: Well, these are called reemployment accounts, and let's take a look at them very quickly. It's a $3,000 check that you would get for a job search. You get a bonus for finding work. And if you find a job in 13 weeks, you get to keep the balance of the money. In other words, of the $3,000, a portion of it is doled out weekly, and you get to keep the balance.

ZAHN: And you're allowed to pay for child care out of it...

SERWER: Yes.

ZAHN: ... moving expenses. So, what's wrong with that?

SERWER: Well, I want to rate this thing right now on the Andy econ-o-meter. I am saying that this thing is a little bit chilly, not one of my favorite plans here.

ZAHN: Why?

SERWER: Let's drop it. The reason is that...

ZAHN: (UNINTELLIGIBLE) a job. SERWER: Yes, well, listen, the point I think here is that it suggests that people aren't out looking for jobs. In other words, you have to pay me to look for a job? I think people who are unemployed are incentivized enough to go out and find a job. I don't think they need additional money to spur them to get off the couch, right? I mean, it just seems like a misplaced priority to me.

ZAHN: I don't know if you're reading their minds right.

SERWER: You mean people...

ZAHN: And what do you say...

(CROSSTALK)

SERWER: So, in other words, if someone is standing...

ZAHN: ... an unemployed person...

SERWER: Right, they need...

ZAHN: ... who needs to take care of child care expenses.

SERWER: Right.

ZAHN: What's wrong with how...

(CROSSTALK)

SERWER: Well, I think -- yes. I just believe that the money would be better spent elsewhere. In other words, I think if someone wants to find a job, they're going to go out and get it. I also think this could be a bureaucratic nightmare. Can you imagine actually administering this thing and paying out $600 here, $750 here? I mean, I think that could be a real problem.

ZAHN: Yes, and actually determining whether the paperwork is accurate or not.

SERWER: Right yes. Bureaucracy is not supposed to be what the Republican Party is all about, but they're going to spell it out this afternoon.

ZAHN: Thanks for the preview, Andy.

SERWER: OK.

ZAHN: See you a little bit later on this morning.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.