Return to Transcripts main page

Your Money

How well did John Kerry do at the Democratic Convention?

Aired July 31, 2004 - 13:00   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.


FREDRICKA WHITFIELD: And here are the headlines. Battleground, Pennsylvania. Democratic presidential nominee John Kerry and his running mate John Edwards are expected to attend a rally in Greenburg within the hour. We'll bring that to you live as it happens. It's one of the first stops on their two-week bus tour. It will take them through nearly two dozen states from coast to coast.
Next on the campaign trail, the Democrats travel from Pennsylvania to West Virginia and Ohio. Kerry and Edwards will almost cross paths with President Bush. A busy schedule will bring them within 25 miles of each other later on today. Earlier the president compared and contrasted Vice President Dick Cheney with Edwards.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I mentioned my running mate. I admit he's not the prettiest on the ticket. That's not why I picked him. I picked him because he's strong, he's steady, and he gets the job done.

(END VIDEO CLIP)

WHITFIELD: The president made those comments at a rally in Canton, Ohio. And soon he will be off to Cambridge, Ohio, and he'll be campaigning in Pittsburgh, Pennsylvania later on today. CNN's Kathleen Koch will have a live report from the campaign travel at the top of the hour.

The National Archives confirms to CNN that no original documents reviewed by former National Security Adviser Sandy Berger are missing. And the 9/11 Commission says it had access to all the material Berger saw. The Justice Department has been investigating reports that Berger removed classified documents as he prepared for his 9/11 Commission testimony. But he faces no charges.

In the West Bank, more violence. Militants from the Al-Aqsa Martyrs brigade burned the governor's office in Jenin and nearby offices of the Palestinian intelligence services. Militants say they did it because they were being followed and feared their whereabouts would be passed on to Israeli military officials.

A Senate committee is taking a hard look at how the charity overseeing the statue of liberty spends its money. Among the questionable expenses, $45,000 a year for a dog to chase geese away. Next week the monument reopens to the public for the first time since the September 11th attacks. Keeping you informed, CNN, the most trusted name in news.

I'm Fredricka Whitfield at the CNN center in Atlanta. More news at the bottom of the hour. Time now for IN THE MONEY.

JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, the long hello: Boston, John Kerry's big chance to get America's attention. We'll look at whether the convention helped him or the competition.

Plus, ladies first. We'll look at the feisty politically savvy and very wealthy women, some of them, who have turned being first lady into a real job. We'll look at it in the context of first lady possibly Teresa Heinz Kerry.

And how to speak volumes with just a single word. From politics to show business and everyday life, cursing is losing its taboo status. We're going to take a look at what that says about our country today.

Joining me, a couple of the IN THE MONEY veterans, CNN correspondent Susan Lisovicz and "Fortune" magazine editor at large Andy Serwer. So the Democratic convention came off pretty smoothly, pretty well choreographed. Everybody gives it pretty high marks. The race is extremely tight as we get closer now to the campaign going full speed. The Republicans will be in town here in New York to have their convention in four or five weeks.

History suggests that the small number of undecided voters who remain undecided late in the campaign tend to break for the challenger. Given the fact that this race right now, according to almost any report you look at is extremely tight and there is a significant amount of undecided voters out there, the question is, is President Bush conceivably in trouble here?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, I think there's no question he's in trouble right now. If the election were held today, he might lose it. But that's the whole point that we're talking about today. The election is not until November. He's behind in Michigan. Surprisingly though, southwestern states that used to be in a Republican stronghold no longer are, Arizona, Nevada and New Mexico. He does lead I think in Florida and Ohio depending on how you look at it. I think the election's going to be decided by political events, something happening perchance and the debates I think are going to be critical.

SUSAN LISOVICZ, CNN CORRESPONDENT: And to your point on the debates, that's where you've seen it won in the last few elections. Al Gore, the expectations were that it was his to win coming on the peace and prosperity of the Clinton years, the expectations were this governor from Texas really couldn't handle all that intellect, a man who had been groomed for president. The debates proved otherwise. Likewise with his father and the debate, looking at his watch. There are telltale signs. Like, I'm bored.

SERWER: Time to get out of here. CAFFERTY: I do that around here sometimes.

LISOVICZ: You do that often.

CAFFERTY: Yes.

LISOVICZ: But in any case, there's still a lot of time for voters to make up their minds.

CAFFERTY: How does Bush match up against Kerry in a debate? An interesting

SERWER: I think it could be difficult for the president. I think the military service thing, I think you're going to see Kerry saying when I was in Vietnam, when I was at war, when I was leading troops, he might say that over and over again.

LISOVICZ: On the other hand, he again, he voted for that war.

CAFFERTY: Based on information that proved to be later inaccurate.

LISOVICZ: Right. So there could be an Achilles heel for both of them.

CAFFERTY: It will be interesting. On to other things. There's a problem with party conventions like the one in Boston this week. Even before they start, we all know how they're going to end unlike the old days when there was some actual drama and news associated with these things. But fortunately for us, they have got real live humans on the stage which means that there's always a chance that somebody will rip up the script and do something worth watching.

With that in mind, take a bow Al Sharpton, take a bow, Teresa Heinz Kerry. But the real question is, whether you'll remember John Kerry and more importantly will you vote for him? To help us figure out whether Boston gave George W. Bush a reason to lose some sleep, we're joined now by Ron Brownstein of the "Los Angeles Times," CNN political analyst joining us from Boston. Ron, nice to see you.

RON BROWNSTEIN, CNN POLITICAL ANALYST: Good morning, Jack.

CAFFERTY: Mercifully it's over. Only one more to go.

BROWNSTEIN: I don't know about George Bush, but I've certainly lost some sleep this past week.

CAFFERTY: In what way?

BROWNSTEIN: Just being up. These conventions are a rough grind.

CAFFERTY: The big moment came last night, actually, we're taping this, so it came on Thursday night when John Kerry gave his speech. The Democrats were quick to call it a home run, say he hit it out of Fenway Park, unlike the opening ball that he dribbled up to home plate at Fenway Park. On a scale of one to 10, if 10 is that home run, rank the speech. How did he do?

BROWNSTEIN: I'm giving it somewhere around a nine. I thought he did very well. Look, John Kerry is never going to be warm and cuddly. He's not folksy and empathetic the way Bill Clinton is. But the big question to me was, could he wear the suit they have been stitching for him all week? All week, they're portraying him as this cool courageous leader under fire. Hillary Clinton said a serious man for a serious job and a serious time and I think he basically inhabited that portrayal. I think he came across as authoritative, presidential and above all, strong.

One thing that was really striking about this speech was the extent to which it challenged Bush on the terrain that the White House assumed had assumed would be their strongest: values, integrity, honesty and above all, management of national security and the war on terror. I thought it was a very forceful portrayal and one that would serve him well.

LISOVICZ: You talk about the forceful, of course, the retired generals being trotted out on stage and the Vietnam veterans who can remember his bravery during Vietnam of course didn't hurt. You say the gold standard of a convention speech is connecting the biography with the agenda. The humanity, the fuzzy, the gentler John Kerry with what he'll do as a tough leader. Did he succeed in this area?

BROWNSTEIN: I thought he succeeded on one sense and perhaps not so much on the other. First of all, the general, the focus on military strength in this convention was extraordinary. Have we ever seen a Democratic convention where there were more generals than teachers on the stage? It was really dramatic. I think what John Kerry did very effectively last night was basically say that my compass as a wartime commander in chief that would guide me in making decisions about sending young men and women into battle was my own experience in Vietnam. You can trust me to be strong he would say, but you can also trust me to be judicious. I thought he did that very well.

Less effective on explaining really what his domestic priorities are and really less effective in showing how the experience in Vietnam has affected his public life after. What the White House sees as one of the big vulnerabilities in this speech and this whole week indeed is that Kerry did very little to define or defend his record in the Senate. They argue that -- the Democrats argue the essence of what you need to know about Kerry is found in Vietnam where he was resolute under fire.

The Republicans argue that what you need to know about John Kerry has been found in the Senate where often they maintain he's been on both sides of different issues. If you were watching this campaign, you might have thought that John Kerry had been abducted by aliens in Vietnam and came back, you know, sort of reappeared last year in an Iowa cornfield running for president. So I think there's going to be -- you're going to hear a lot from the Republicans that the real John Kerry isn't the guy standing on the bridge under fire. It's the guy voting against various weapons systems and taking what they argue are flip-flopping positions. SERWER: Ron, a lot of people are suggesting the Democrats did an excellent job of imitating a Republican convention, what with all the flags and the military people and whatnot. But I want to ask you more about this notion of Republicans attacking John Forbes Kerry. You talked about the Senate record. How vulnerable is that, though, if they start really going into the tick tock of that?

BROWNSTEIN: I think in talking to their strategist, they see three obvious vulnerabilities that Kerry didn't really close the door on after the speech. First of all, the Senate record. That has been Andy, as you know, the principal focus of their advertising campaign. They spent over $80 million in ads. A lot of it has been around the argument that Kerry was weak on defense in the Senate and also a flip- flopper.

Secondly, John Kerry said I know what to do in Iraq, but he didn't really tell us what he knows about what he would do. They are going to argue that he is being kind of vague on whether he thinks the war was a mistake and not really offering a clear alternative on how to move forward. Third, how to pay for it all, something you guys I'm sure have talked about many times on this show. He does have an expansive domestic agenda. He does have some ideas on how to pay for it. But I think a lot of people listening to the various things he talked about in health and education, wonder can you really make all that -- can you really fund all that simply by rescinding tax cuts for people at $200,000 or above. Probably not. So those are some areas where they want to go at him.

CAFFERTY: What is it Ron about politicians having an allergic reaction to specifics? They're not vague by accident. They're vague on purpose. They get up there in front of the country and they intentionally say nothing very specific. Why?

BROWNSTEIN: Well, first of all, yes I think you're right. I mean this was a speech that was, look, I thought that what they were trying to do much more was to project values than explain programs. I think they felt that the overwhelming goal here was, first of all, for the whole week was to show this as someone who was strong who you could trust to be commander in chief and that was done as you suggest more through biography than policy. In fairness to John Kerry, there are a lot of specific policies that he laid out. He told people to go look on his Web site. He will talk about them probably ad nauseum between now and November. They are there. Last night they decided it was not the place to do that. It was more to introduce him and give people a sense of trust in him as a person, especially as a respected commander in chief.

LISOVICZ: Ron, what can President Bush do now? We've got GDP numbers, that's the mother of all economic reports showing the second quarter slowing more than we expected. You have his popularity down. You always have Iraq lurking. You always have the fears of terrorism. What should he be doing right now?

BROWNSTEIN: First of all, it is a very serious situation he's in. I mean if you look at the numbers on a variety of measures, there is some evidence that there is a slight majority of the country, at least open to the idea of changing direction. And so he really has to, I think above all, restore trust in his leadership. They've put most of their emphasis through the spring on trying to disqualify John Kerry in the eyes of the voter. I think that's going to be very hard to do, inherently given the main pieces of Kerry's biography that he's been in Vietnam and he's been in the Senate. He's a sort of a credible figure more so after last night. I think job one for George Bush is to give people more confidence that he has a direction that will lead to more prosperity at home and more stability and success in Iraq. If he doesn't do that, I don't believe after last night he can make Kerry so unacceptable, that Bush can still win with an approval rating of 46, 47, 48. I don't see it. I think that he is going to have to sell himself more than make a case against John Kerry.

CAFFERTY: How interesting are these debates going to be?

BROWNSTEIN: Oh, very, very. (UNINTELLIGIBLE)

CAFFERTY: That's appointment television when that comes around. Ron, thanks. Good to have you with us.

BROWNSTEIN: Thank you.

CAFFERTY: Ron Brownstein, he writes a column for the "Los Angeles Times" and works as a political analyst for CNN. You're watching IN THE MONEY. All business some of the time. Coming up, tough cookies. Tradition says the first lady's America's homemaker in chief. We'll look at women who pushed the job to its limits.

Plus, pardon our French, more and more public figures are using potty mouth language that used to be off limits in polite company. We'll look at what's behind the rise in naughty talk.

Plus hold the phone. Find out why outsourcing might not be as good as it looks for American companies. Back after this.

(COMMERCIAL BREAK)

CAFFERTY: It's been called the toughest job in America. I absolutely disagree that it is, although I've never been the first lady. We're not talking the president. We're talking about the first lady of the United States, the wife of the most powerful man in Washington. She goes into the job with no clear-cut political role, although she's clearly expected to play one as the president's term goes on.

At the convention this week, a lot of speculation about the kind of first lady Teresa Heinz Kerry would make. Unless you've been living under a rock, you know that Ms. Heinz Kerry is both outgoing and outspoken. What kind of first lady would she be? Joining us to talk about that idea is Myra Gutin, who's professor of communications at Rider University. She's written extensively about America's first ladies. Welcome to the program. It's nice to have you here.

MYRA GUTIN, RIDER UNIVERSITY: Thank you. Nice to be with you.

CAFFERTY: Love her or hate her, Ms. Kerry certainly got everybody's attention earlier this week at the convention telling that reporter to shove it. When you visualize her at 1600 Pennsylvania Avenue, what do you see?

GUTIN: I think she will be a very good first lady. I think she'll be an activist first lady. She already has a well developed resume. She's been active in a number of issues. I think she'll hold up very well.

LISOVICZ: Myra, what is the big deal? Let's face it, women are half of the work force. There have been activists first ladies since Eleanor Roosevelt who's widely considered to be one of the best first ladies ever. So what in particular is bugging people about Teresa Heinz Kerry?

GUTIN: Well, I think that first, the fact that she's a little bit different than anything we've seen potentially coming into the White House. She's come from very affluent circumstances. She's been educated outside of our country. She was not born in our country. If she became first lady, she would only be the second foreign-born first lady to serve. And it seems that her candidness and sometimes hip- shooter style tends to rub some people the wrong way.

SERWER: Myra, quickly, who was the first foreign-born first lady?

GUTIN: It was Louisa Adams, the wife of John Quincy Adams, who had been born in London.

SERWER: OK. I want to ask you, don't we make too much of this whole thing anyway? They aren't elected officials. They're not appointed. They're not approved by Congress. I thought Bill Clinton made a huge mistake when he handed off health care to his wife Hillary. They're just married to the president. They're just wives, after all, aren't they?

GUTIN: Certainly. But now historically, they've been taking on more and different roles. Jacqueline Kennedy was our first first lady to decide to take on a project, to refurbish the White House. Lady Bird Johnson took on the environment. So they've certainly become more visible. They've played political roles, and as you point out, in the case of Mrs. Clinton, very active in public policy.

CAFFERTY: What about the visceral reaction that comes from a certain segment of the population to a woman who is worth close to $1 billion and is accountable virtually to no one and who is aggressive enough to walk over to a reporter and say, you were trying to put words in my mouth, so you can shove it and turn around and walk away with cameras rolling while her husband is trying to get elected to the highest office in the land. That just scares the hell out of some people, doesn't it?

GUTIN: Sure, it does. Affluent first ladies are not new to the White House. Eleanor Roosevelt was a wealthy woman, the same for lady bird Johnson, the same for Jacqueline Kennedy, of course, no one on the par with Teresa Heinz Kerry. But I think that people do feel, as I mentioned a little earlier, that she's a very breezy hip-shooter kind of person. I think perhaps that's what concerns them.

LISOVICZ: You know, Myra, I like the fact that she had the prenup to protect her $500 million fortune. But on another matter, she is often described as exotic. The fact that she is foreign born, speaks five languages, in this day and age where we are in a global community, whether we're talking about the environment or talking about foreign policy, you can't escape it. Isn't that an asset that this woman has lived elsewhere and perhaps sees things with a different perspective?

GUTIN: It is in my view. I think the fact that she does have that global sense about her is going to be very valuable in the White House. And once again, that she's had such diverse experiences and is no stranger to philanthropy, no stranger to dealing with various issues.

SERWER: Myra, aren't these women really sort of damned if they do and damned if they don't? I mean they are in a difficult position. The only thing worse is being a first kid. Can you imagine going through your adolescence in the White House? I really feel sorry for some of them. But if they come on too mushy, they're just sort of fru fru, if they're too hard-edged, what are you doing, lady, you're not supposed to be taking on this policy kind of stuff. So aren't they just in a no-win situation?

GUTIN: Absolutely. And I go along with you completely on the idea of damned if you do, damned if you don't. If you're an activist, then people raise questions about your accountability. If you spend more time focusing on the ceremonial aspects of the White House, then you're asked, why are you just back there serving tea? Why aren't you using the White House podium? But my sense, too, is that most first ladies are as close as you'll get to political professionals because no one gets to the White House these days without having served a fairly long presidential -- an internship, a political internship, so I think that they also understand what they're getting into.

CAFFERTY: As you observe the Kerry's as a couple, who would you guess wears the pants in that family?

GUTIN: I couldn't even begin to...

SERWER: Jack, Jack.

LISOVICZ: You heard about pant suits, haven't you Jack?

CAFFERTY: I don't think anybody else can either at this point either. Thank you very much.

SERWER: All right. We're going to have to leave it there. Myra Gutin, the author of "The President's Partner: The First Lady in the 20th Century," professor at Rider University, thank you very much.

GUTIN: Thank you.

SERWER: We're going to take a short break. But there's a lot more show to go. Coming up, a jukebox that doesn't eat quarters. As apple rolls out an iPod that's easier on your wallet, see if Wall Street is listening.

And later on, leave the passport at home, please. We'll look at a study that found U.S. companies may not be getting what they expect when they send jobs overseas.

Plus, identity crisis, see if you can guess the face behind the facial hair on our fun site of the week.

(COMMERCIAL BREAK)

LISOVICZ: Now let's take a look at the week's top stories in our money minute. The web search engine Google got lots of attention this week and it wasn't all good. The company did announce its upcoming IPO will be worth a healthy $108 to $135 a share. But on the same day of that announcement, the mighty Google was also the victim of a computer virus that killed the search for most users for hours.

2003 was truly a great year if you were a CEO. A new study says CEO raises at the nation's largest companies more than doubled from the year before. The median raise given to the top executives for S&P 500 companies was more than 22 percent. But for everyone else, things weren't so good. At least in 2001 and 2002, our friends at the Internal Revenue Service say the average Americans' income declined in both those years and that's the first time that's happened since the end of World War II.

SERWER: It wouldn't be a stretch to say that Apple's iPod and iTunes systems are creating a revolution in the music business. The company's finally proving that downloadable music can be a source of profit instead of piracy. And this month, Apple introduced a new iPod that offers a longer battery life. So far, Apple is getting the lion's share of that profit but now another online services or other online services are offering downloadable music that you can still play on the iPod, and that's crushing Apple's dreams of a virtual monopoly.

Meanwhile, Apple shares are trading near their 52-week high. That makes Apple Computer our stock of the week. You know the man Apple of course is Steve Jobs and you know how I feel about this guy. He really is a genius, revolutionized the PC business, revolutionized Hollywood through Pixar which he also is the CEO of and now he's revolutionizing the music business. The one problem is, with Apple and the iPod, it's a closed system. He really likes to keep it that way. That's the reason why Apple's computers only have a 5 percent market share. Could the same thing happen, could he be marginalized in the music business as well?

LISOVICZ: And that's what you're talking about with Real Networks, it's nasty executive fight this week and not only because he wants to protect the iPod, that's got the share of the digital music market, but it's also the tunes which is I think 15 percent of Apple's overall revenue but that would -- one would have to think would grow. CAFFERTY: The stock near its 52-week high and potential competition in the downloading sector, is this the time you buy Apple stock or not?

SERWER: I think it's had a pretty good run, Jack. This stock has doubled over the past two years. And here's a little thing, Steve Jobs, I'm sure is well aware of this, Apple stock has outperformed Microsoft over the past three months, six months, one year, two years and five years. Are you listening Bill Gates? The stock has really come a long way and iPod has everything to do with that. They're now selling about $1 billion of these little babies a year. But I really think that other people are going to come in -- Steve Jobs has to work very quickly to get money from agreements whereby he licenses to these other companies rather than just come in and stealing the business.

CAFFERTY: And nibble away at what he's got.

LISOVICZ: And does Apple do dividends? I really don't know, dividends, buy-backs, I guess they wouldn't have to do a buy-back now.

SERWER: Yes, it wouldn't have to do one now. And the iTune store is a whole lot of fun. We've got to get Jack an iPod, 100 million songs downloaded off. I mean they really are the cool thing. That's another thing about Apple. They have the coolest designed stuff. I mean it really is a consumer item that people love. Again, Jack, we're going to have to convert you.

LISOVICZ: Remember, Jack doesn't even have a cell phone.

CAFFERTY: I have a record player in my house.

SERWER: We've got a list of things to buy Jack. We're going to give him a phone, a pager, a blackberry, an iPod.

LISOVICZ: Jack does have a car.

CAFFERTY: Technological mutant would be the way to describe me.

LISOVICZ: But that's one of the great things about Apple. It makes it easy. It's user friendly. You would like Apple.

SERWER: And big challenges ahead for that company, though.

All right. Coming up on IN THE MONEY" instead of sending jobs to Asia, companies may do better by heading to the blurbs. We'll check the bottom line on outsourcing and from shove it to the "F" word. We're hearing a lot more foul language in public these days. Find out what that means about us. And buzz makes the man, don't I know it. Our fun site of the week asks you to name that beard. You'll get your chance to guess just ahead.

(COMMERCIAL BREAK)

WHITFIELD: Hello. I'm Fredricka Whitfield at the CNN center in Atlanta. More of IN THE MONEY in a moment, but first, here's what's making news right now. The two Democrats who want to run the White House are campaigning in western Pennsylvania at this hour. John Kerry and vice presidential running mate John Edwards are wooing voters in Greensburg. Pennsylvania is a battle ground state. The Democratic ticket is expected to focus a lot of attention on the Keystone state between now and November. When John Kerry, as you see right there behind John Edwards, when he takes the stand to speak we'll be bringing that to you live.

Well, just down the road, President Bush is campaigning in Ohio today. His bus tour is expected to pull right into Pittsburgh, Pennsylvania, later on this afternoon. Political analysts say Bush is trying to deflate some of John Kerry's post-Democratic convention bounds. Bush is reminding supporters of the obstacles they have overcome.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We've come through a recession. We've come through terrorist attacks. We've come through a stock market decline. We've come through corporate scandals. Yet this nation has overcome all these obstacles.

(APPLAUSE)

We have overcome the obstacles because we've got great workers in America.

(END VIDEO CLIP)

WHITFIELD: President Bush is expected to speak in Cambridge, Ohio any minute now and when that happens, CNN will bring you his comments live.

A militant group linked to al Qaeda is claiming responsibility for yesterday's assassination attempt on Pakistan's new prime minister designate. The group posted the message online warning Pakistan to stop cooperating with the U.S. or face more attacks. Nine people were killed in yesterday's blast.

I'll have all the day's news at the top of the hour. Now, back to more of IN THE MONEY.

LISOVICZ: The promise of cheap labor has led hundreds of American companies to send U.S. jobs overseas. But our next guest says setting up shop in India or China can cost companies more than they think. Howard Rubin is a professor emeritus of computer science at Hunter College and he joins us today to talk about his recent study of outsourcing by some of New York City's biggest public companies. Welcome.

HOWARD RUBIN, PROF. EMERITUS, CUNY: Happy to be here.

LISOVICZ: So you found that there were cost savings but not as great as companies might expect especially when you're talking about taking that labor outside of the biggest cities in the U.S.

RUBIN: Yes, most definitely. On average, from the study, we found companies were saving 40 percent, sometimes as little as 20 percent. But most of the time they were benchmarking their savings against urban salaries and not salaries in the non-urban areas of the state. So the gap closes very quickly and very often they don't consider all the costs that they should.

SERWER: What are those hidden costs, though, Howard? I mean, if so many companies are supposedly doing this -- and I say supposedly, because I've looked into this a lot and it's very hard to get hard data. How many companies have sent jobs overseas, which ones, for how long? How much money are they making? Can you get into that, please?

RUBIN: Sure, a couple of things. In terms of just looking at New York City, about seven out of 10 of the largest firms there today are doing offshore outsourcing. And probably in two years, they're looking at about nine out of 10 and that covers the world of technology and the business process. But when you get under the covers and you look at the true costs, the true cost is not the raw labor differential. These firms have to figure out what's the cost of planning, finding the vendors, dealing with the telecommunications, the training, the remote management, the security, the legal issues, the tax issues and everything else. And suddenly a worker that seems to cost $20,000 offshore, the costs quickly ramp up to around $45,000, $50,000 which is in shooting range of places like Buffalo, Syracuse, Utica, upstate New York.

CAFFERTY: Why is this continuing to be a growing phenomenon if some of these companies as you suggest are not realizing the gains that perhaps they thought they would, or maybe even that they should? Why are so many still rushing to do this?

RUBIN: Some of it is in the cost accounting. Usually they understand the labor. The telecommunications costs going to another budget. They don't get the visibility or the transparency of the costs. And number two, it looked like under the pressures of the economy that going offshore was a good way to save money. In many cases it is. In many cases it's inevitable, but the real issue is, you know, comparing urban versus low-cost India, Philippines, versus the varying upstate areas, where the salaries are much more reasonable with a high quality of life. So it's really the benchmark gap and understanding the true costs that make the difference.

CAFFERTY: What about the caliber of the employee in those two areas that you're talking about?

RUBIN: Yes, it's really interesting. Again, just taking a look at upstate areas that were rich in engineering, innovation and manufacturing going into again, I keep picking on like a Rochester, going into eastern Europe, going into India. I mean we have strong universities. We have strong technical training here. We have lots of onshore resources that just aren't being tapped. And we have people with the skills that aren't being retrained. So we have a real opportunity here. That's the real story.

LISOVICZ: Another real story is that outsourcing is a hot political issue this year. How about that? John Kerry in his speech in Boston, in his acceptance speech said he'd slow outsourcing down, using incentives to keep jobs in the U.S. How realistic is this after a decade of all these trade agreements, not only NAFTA, but then you have the African trade agreement. You have China, part of the WTO. Wasn't this all about getting cheap labor and making it more competitive?

RUBIN: Yes, a bit part of it was becoming part of the global economy and opening the doors to that. But number two, it seems...

(INTERUPTED BY A LIVE EVENT)

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 July 31, 2004 - 13:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD: And here are the headlines. Battleground, Pennsylvania. Democratic presidential nominee John Kerry and his running mate John Edwards are expected to attend a rally in Greenburg within the hour. We'll bring that to you live as it happens. It's one of the first stops on their two-week bus tour. It will take them through nearly two dozen states from coast to coast.
Next on the campaign trail, the Democrats travel from Pennsylvania to West Virginia and Ohio. Kerry and Edwards will almost cross paths with President Bush. A busy schedule will bring them within 25 miles of each other later on today. Earlier the president compared and contrasted Vice President Dick Cheney with Edwards.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I mentioned my running mate. I admit he's not the prettiest on the ticket. That's not why I picked him. I picked him because he's strong, he's steady, and he gets the job done.

(END VIDEO CLIP)

WHITFIELD: The president made those comments at a rally in Canton, Ohio. And soon he will be off to Cambridge, Ohio, and he'll be campaigning in Pittsburgh, Pennsylvania later on today. CNN's Kathleen Koch will have a live report from the campaign travel at the top of the hour.

The National Archives confirms to CNN that no original documents reviewed by former National Security Adviser Sandy Berger are missing. And the 9/11 Commission says it had access to all the material Berger saw. The Justice Department has been investigating reports that Berger removed classified documents as he prepared for his 9/11 Commission testimony. But he faces no charges.

In the West Bank, more violence. Militants from the Al-Aqsa Martyrs brigade burned the governor's office in Jenin and nearby offices of the Palestinian intelligence services. Militants say they did it because they were being followed and feared their whereabouts would be passed on to Israeli military officials.

A Senate committee is taking a hard look at how the charity overseeing the statue of liberty spends its money. Among the questionable expenses, $45,000 a year for a dog to chase geese away. Next week the monument reopens to the public for the first time since the September 11th attacks. Keeping you informed, CNN, the most trusted name in news.

I'm Fredricka Whitfield at the CNN center in Atlanta. More news at the bottom of the hour. Time now for IN THE MONEY.

JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, the long hello: Boston, John Kerry's big chance to get America's attention. We'll look at whether the convention helped him or the competition.

Plus, ladies first. We'll look at the feisty politically savvy and very wealthy women, some of them, who have turned being first lady into a real job. We'll look at it in the context of first lady possibly Teresa Heinz Kerry.

And how to speak volumes with just a single word. From politics to show business and everyday life, cursing is losing its taboo status. We're going to take a look at what that says about our country today.

Joining me, a couple of the IN THE MONEY veterans, CNN correspondent Susan Lisovicz and "Fortune" magazine editor at large Andy Serwer. So the Democratic convention came off pretty smoothly, pretty well choreographed. Everybody gives it pretty high marks. The race is extremely tight as we get closer now to the campaign going full speed. The Republicans will be in town here in New York to have their convention in four or five weeks.

History suggests that the small number of undecided voters who remain undecided late in the campaign tend to break for the challenger. Given the fact that this race right now, according to almost any report you look at is extremely tight and there is a significant amount of undecided voters out there, the question is, is President Bush conceivably in trouble here?

ANDY SERWER, "FORTUNE" MAGAZINE: Well, I think there's no question he's in trouble right now. If the election were held today, he might lose it. But that's the whole point that we're talking about today. The election is not until November. He's behind in Michigan. Surprisingly though, southwestern states that used to be in a Republican stronghold no longer are, Arizona, Nevada and New Mexico. He does lead I think in Florida and Ohio depending on how you look at it. I think the election's going to be decided by political events, something happening perchance and the debates I think are going to be critical.

SUSAN LISOVICZ, CNN CORRESPONDENT: And to your point on the debates, that's where you've seen it won in the last few elections. Al Gore, the expectations were that it was his to win coming on the peace and prosperity of the Clinton years, the expectations were this governor from Texas really couldn't handle all that intellect, a man who had been groomed for president. The debates proved otherwise. Likewise with his father and the debate, looking at his watch. There are telltale signs. Like, I'm bored.

SERWER: Time to get out of here. CAFFERTY: I do that around here sometimes.

LISOVICZ: You do that often.

CAFFERTY: Yes.

LISOVICZ: But in any case, there's still a lot of time for voters to make up their minds.

CAFFERTY: How does Bush match up against Kerry in a debate? An interesting

SERWER: I think it could be difficult for the president. I think the military service thing, I think you're going to see Kerry saying when I was in Vietnam, when I was at war, when I was leading troops, he might say that over and over again.

LISOVICZ: On the other hand, he again, he voted for that war.

CAFFERTY: Based on information that proved to be later inaccurate.

LISOVICZ: Right. So there could be an Achilles heel for both of them.

CAFFERTY: It will be interesting. On to other things. There's a problem with party conventions like the one in Boston this week. Even before they start, we all know how they're going to end unlike the old days when there was some actual drama and news associated with these things. But fortunately for us, they have got real live humans on the stage which means that there's always a chance that somebody will rip up the script and do something worth watching.

With that in mind, take a bow Al Sharpton, take a bow, Teresa Heinz Kerry. But the real question is, whether you'll remember John Kerry and more importantly will you vote for him? To help us figure out whether Boston gave George W. Bush a reason to lose some sleep, we're joined now by Ron Brownstein of the "Los Angeles Times," CNN political analyst joining us from Boston. Ron, nice to see you.

RON BROWNSTEIN, CNN POLITICAL ANALYST: Good morning, Jack.

CAFFERTY: Mercifully it's over. Only one more to go.

BROWNSTEIN: I don't know about George Bush, but I've certainly lost some sleep this past week.

CAFFERTY: In what way?

BROWNSTEIN: Just being up. These conventions are a rough grind.

CAFFERTY: The big moment came last night, actually, we're taping this, so it came on Thursday night when John Kerry gave his speech. The Democrats were quick to call it a home run, say he hit it out of Fenway Park, unlike the opening ball that he dribbled up to home plate at Fenway Park. On a scale of one to 10, if 10 is that home run, rank the speech. How did he do?

BROWNSTEIN: I'm giving it somewhere around a nine. I thought he did very well. Look, John Kerry is never going to be warm and cuddly. He's not folksy and empathetic the way Bill Clinton is. But the big question to me was, could he wear the suit they have been stitching for him all week? All week, they're portraying him as this cool courageous leader under fire. Hillary Clinton said a serious man for a serious job and a serious time and I think he basically inhabited that portrayal. I think he came across as authoritative, presidential and above all, strong.

One thing that was really striking about this speech was the extent to which it challenged Bush on the terrain that the White House assumed had assumed would be their strongest: values, integrity, honesty and above all, management of national security and the war on terror. I thought it was a very forceful portrayal and one that would serve him well.

LISOVICZ: You talk about the forceful, of course, the retired generals being trotted out on stage and the Vietnam veterans who can remember his bravery during Vietnam of course didn't hurt. You say the gold standard of a convention speech is connecting the biography with the agenda. The humanity, the fuzzy, the gentler John Kerry with what he'll do as a tough leader. Did he succeed in this area?

BROWNSTEIN: I thought he succeeded on one sense and perhaps not so much on the other. First of all, the general, the focus on military strength in this convention was extraordinary. Have we ever seen a Democratic convention where there were more generals than teachers on the stage? It was really dramatic. I think what John Kerry did very effectively last night was basically say that my compass as a wartime commander in chief that would guide me in making decisions about sending young men and women into battle was my own experience in Vietnam. You can trust me to be strong he would say, but you can also trust me to be judicious. I thought he did that very well.

Less effective on explaining really what his domestic priorities are and really less effective in showing how the experience in Vietnam has affected his public life after. What the White House sees as one of the big vulnerabilities in this speech and this whole week indeed is that Kerry did very little to define or defend his record in the Senate. They argue that -- the Democrats argue the essence of what you need to know about Kerry is found in Vietnam where he was resolute under fire.

The Republicans argue that what you need to know about John Kerry has been found in the Senate where often they maintain he's been on both sides of different issues. If you were watching this campaign, you might have thought that John Kerry had been abducted by aliens in Vietnam and came back, you know, sort of reappeared last year in an Iowa cornfield running for president. So I think there's going to be -- you're going to hear a lot from the Republicans that the real John Kerry isn't the guy standing on the bridge under fire. It's the guy voting against various weapons systems and taking what they argue are flip-flopping positions. SERWER: Ron, a lot of people are suggesting the Democrats did an excellent job of imitating a Republican convention, what with all the flags and the military people and whatnot. But I want to ask you more about this notion of Republicans attacking John Forbes Kerry. You talked about the Senate record. How vulnerable is that, though, if they start really going into the tick tock of that?

BROWNSTEIN: I think in talking to their strategist, they see three obvious vulnerabilities that Kerry didn't really close the door on after the speech. First of all, the Senate record. That has been Andy, as you know, the principal focus of their advertising campaign. They spent over $80 million in ads. A lot of it has been around the argument that Kerry was weak on defense in the Senate and also a flip- flopper.

Secondly, John Kerry said I know what to do in Iraq, but he didn't really tell us what he knows about what he would do. They are going to argue that he is being kind of vague on whether he thinks the war was a mistake and not really offering a clear alternative on how to move forward. Third, how to pay for it all, something you guys I'm sure have talked about many times on this show. He does have an expansive domestic agenda. He does have some ideas on how to pay for it. But I think a lot of people listening to the various things he talked about in health and education, wonder can you really make all that -- can you really fund all that simply by rescinding tax cuts for people at $200,000 or above. Probably not. So those are some areas where they want to go at him.

CAFFERTY: What is it Ron about politicians having an allergic reaction to specifics? They're not vague by accident. They're vague on purpose. They get up there in front of the country and they intentionally say nothing very specific. Why?

BROWNSTEIN: Well, first of all, yes I think you're right. I mean this was a speech that was, look, I thought that what they were trying to do much more was to project values than explain programs. I think they felt that the overwhelming goal here was, first of all, for the whole week was to show this as someone who was strong who you could trust to be commander in chief and that was done as you suggest more through biography than policy. In fairness to John Kerry, there are a lot of specific policies that he laid out. He told people to go look on his Web site. He will talk about them probably ad nauseum between now and November. They are there. Last night they decided it was not the place to do that. It was more to introduce him and give people a sense of trust in him as a person, especially as a respected commander in chief.

LISOVICZ: Ron, what can President Bush do now? We've got GDP numbers, that's the mother of all economic reports showing the second quarter slowing more than we expected. You have his popularity down. You always have Iraq lurking. You always have the fears of terrorism. What should he be doing right now?

BROWNSTEIN: First of all, it is a very serious situation he's in. I mean if you look at the numbers on a variety of measures, there is some evidence that there is a slight majority of the country, at least open to the idea of changing direction. And so he really has to, I think above all, restore trust in his leadership. They've put most of their emphasis through the spring on trying to disqualify John Kerry in the eyes of the voter. I think that's going to be very hard to do, inherently given the main pieces of Kerry's biography that he's been in Vietnam and he's been in the Senate. He's a sort of a credible figure more so after last night. I think job one for George Bush is to give people more confidence that he has a direction that will lead to more prosperity at home and more stability and success in Iraq. If he doesn't do that, I don't believe after last night he can make Kerry so unacceptable, that Bush can still win with an approval rating of 46, 47, 48. I don't see it. I think that he is going to have to sell himself more than make a case against John Kerry.

CAFFERTY: How interesting are these debates going to be?

BROWNSTEIN: Oh, very, very. (UNINTELLIGIBLE)

CAFFERTY: That's appointment television when that comes around. Ron, thanks. Good to have you with us.

BROWNSTEIN: Thank you.

CAFFERTY: Ron Brownstein, he writes a column for the "Los Angeles Times" and works as a political analyst for CNN. You're watching IN THE MONEY. All business some of the time. Coming up, tough cookies. Tradition says the first lady's America's homemaker in chief. We'll look at women who pushed the job to its limits.

Plus, pardon our French, more and more public figures are using potty mouth language that used to be off limits in polite company. We'll look at what's behind the rise in naughty talk.

Plus hold the phone. Find out why outsourcing might not be as good as it looks for American companies. Back after this.

(COMMERCIAL BREAK)

CAFFERTY: It's been called the toughest job in America. I absolutely disagree that it is, although I've never been the first lady. We're not talking the president. We're talking about the first lady of the United States, the wife of the most powerful man in Washington. She goes into the job with no clear-cut political role, although she's clearly expected to play one as the president's term goes on.

At the convention this week, a lot of speculation about the kind of first lady Teresa Heinz Kerry would make. Unless you've been living under a rock, you know that Ms. Heinz Kerry is both outgoing and outspoken. What kind of first lady would she be? Joining us to talk about that idea is Myra Gutin, who's professor of communications at Rider University. She's written extensively about America's first ladies. Welcome to the program. It's nice to have you here.

MYRA GUTIN, RIDER UNIVERSITY: Thank you. Nice to be with you.

CAFFERTY: Love her or hate her, Ms. Kerry certainly got everybody's attention earlier this week at the convention telling that reporter to shove it. When you visualize her at 1600 Pennsylvania Avenue, what do you see?

GUTIN: I think she will be a very good first lady. I think she'll be an activist first lady. She already has a well developed resume. She's been active in a number of issues. I think she'll hold up very well.

LISOVICZ: Myra, what is the big deal? Let's face it, women are half of the work force. There have been activists first ladies since Eleanor Roosevelt who's widely considered to be one of the best first ladies ever. So what in particular is bugging people about Teresa Heinz Kerry?

GUTIN: Well, I think that first, the fact that she's a little bit different than anything we've seen potentially coming into the White House. She's come from very affluent circumstances. She's been educated outside of our country. She was not born in our country. If she became first lady, she would only be the second foreign-born first lady to serve. And it seems that her candidness and sometimes hip- shooter style tends to rub some people the wrong way.

SERWER: Myra, quickly, who was the first foreign-born first lady?

GUTIN: It was Louisa Adams, the wife of John Quincy Adams, who had been born in London.

SERWER: OK. I want to ask you, don't we make too much of this whole thing anyway? They aren't elected officials. They're not appointed. They're not approved by Congress. I thought Bill Clinton made a huge mistake when he handed off health care to his wife Hillary. They're just married to the president. They're just wives, after all, aren't they?

GUTIN: Certainly. But now historically, they've been taking on more and different roles. Jacqueline Kennedy was our first first lady to decide to take on a project, to refurbish the White House. Lady Bird Johnson took on the environment. So they've certainly become more visible. They've played political roles, and as you point out, in the case of Mrs. Clinton, very active in public policy.

CAFFERTY: What about the visceral reaction that comes from a certain segment of the population to a woman who is worth close to $1 billion and is accountable virtually to no one and who is aggressive enough to walk over to a reporter and say, you were trying to put words in my mouth, so you can shove it and turn around and walk away with cameras rolling while her husband is trying to get elected to the highest office in the land. That just scares the hell out of some people, doesn't it?

GUTIN: Sure, it does. Affluent first ladies are not new to the White House. Eleanor Roosevelt was a wealthy woman, the same for lady bird Johnson, the same for Jacqueline Kennedy, of course, no one on the par with Teresa Heinz Kerry. But I think that people do feel, as I mentioned a little earlier, that she's a very breezy hip-shooter kind of person. I think perhaps that's what concerns them.

LISOVICZ: You know, Myra, I like the fact that she had the prenup to protect her $500 million fortune. But on another matter, she is often described as exotic. The fact that she is foreign born, speaks five languages, in this day and age where we are in a global community, whether we're talking about the environment or talking about foreign policy, you can't escape it. Isn't that an asset that this woman has lived elsewhere and perhaps sees things with a different perspective?

GUTIN: It is in my view. I think the fact that she does have that global sense about her is going to be very valuable in the White House. And once again, that she's had such diverse experiences and is no stranger to philanthropy, no stranger to dealing with various issues.

SERWER: Myra, aren't these women really sort of damned if they do and damned if they don't? I mean they are in a difficult position. The only thing worse is being a first kid. Can you imagine going through your adolescence in the White House? I really feel sorry for some of them. But if they come on too mushy, they're just sort of fru fru, if they're too hard-edged, what are you doing, lady, you're not supposed to be taking on this policy kind of stuff. So aren't they just in a no-win situation?

GUTIN: Absolutely. And I go along with you completely on the idea of damned if you do, damned if you don't. If you're an activist, then people raise questions about your accountability. If you spend more time focusing on the ceremonial aspects of the White House, then you're asked, why are you just back there serving tea? Why aren't you using the White House podium? But my sense, too, is that most first ladies are as close as you'll get to political professionals because no one gets to the White House these days without having served a fairly long presidential -- an internship, a political internship, so I think that they also understand what they're getting into.

CAFFERTY: As you observe the Kerry's as a couple, who would you guess wears the pants in that family?

GUTIN: I couldn't even begin to...

SERWER: Jack, Jack.

LISOVICZ: You heard about pant suits, haven't you Jack?

CAFFERTY: I don't think anybody else can either at this point either. Thank you very much.

SERWER: All right. We're going to have to leave it there. Myra Gutin, the author of "The President's Partner: The First Lady in the 20th Century," professor at Rider University, thank you very much.

GUTIN: Thank you.

SERWER: We're going to take a short break. But there's a lot more show to go. Coming up, a jukebox that doesn't eat quarters. As apple rolls out an iPod that's easier on your wallet, see if Wall Street is listening.

And later on, leave the passport at home, please. We'll look at a study that found U.S. companies may not be getting what they expect when they send jobs overseas.

Plus, identity crisis, see if you can guess the face behind the facial hair on our fun site of the week.

(COMMERCIAL BREAK)

LISOVICZ: Now let's take a look at the week's top stories in our money minute. The web search engine Google got lots of attention this week and it wasn't all good. The company did announce its upcoming IPO will be worth a healthy $108 to $135 a share. But on the same day of that announcement, the mighty Google was also the victim of a computer virus that killed the search for most users for hours.

2003 was truly a great year if you were a CEO. A new study says CEO raises at the nation's largest companies more than doubled from the year before. The median raise given to the top executives for S&P 500 companies was more than 22 percent. But for everyone else, things weren't so good. At least in 2001 and 2002, our friends at the Internal Revenue Service say the average Americans' income declined in both those years and that's the first time that's happened since the end of World War II.

SERWER: It wouldn't be a stretch to say that Apple's iPod and iTunes systems are creating a revolution in the music business. The company's finally proving that downloadable music can be a source of profit instead of piracy. And this month, Apple introduced a new iPod that offers a longer battery life. So far, Apple is getting the lion's share of that profit but now another online services or other online services are offering downloadable music that you can still play on the iPod, and that's crushing Apple's dreams of a virtual monopoly.

Meanwhile, Apple shares are trading near their 52-week high. That makes Apple Computer our stock of the week. You know the man Apple of course is Steve Jobs and you know how I feel about this guy. He really is a genius, revolutionized the PC business, revolutionized Hollywood through Pixar which he also is the CEO of and now he's revolutionizing the music business. The one problem is, with Apple and the iPod, it's a closed system. He really likes to keep it that way. That's the reason why Apple's computers only have a 5 percent market share. Could the same thing happen, could he be marginalized in the music business as well?

LISOVICZ: And that's what you're talking about with Real Networks, it's nasty executive fight this week and not only because he wants to protect the iPod, that's got the share of the digital music market, but it's also the tunes which is I think 15 percent of Apple's overall revenue but that would -- one would have to think would grow. CAFFERTY: The stock near its 52-week high and potential competition in the downloading sector, is this the time you buy Apple stock or not?

SERWER: I think it's had a pretty good run, Jack. This stock has doubled over the past two years. And here's a little thing, Steve Jobs, I'm sure is well aware of this, Apple stock has outperformed Microsoft over the past three months, six months, one year, two years and five years. Are you listening Bill Gates? The stock has really come a long way and iPod has everything to do with that. They're now selling about $1 billion of these little babies a year. But I really think that other people are going to come in -- Steve Jobs has to work very quickly to get money from agreements whereby he licenses to these other companies rather than just come in and stealing the business.

CAFFERTY: And nibble away at what he's got.

LISOVICZ: And does Apple do dividends? I really don't know, dividends, buy-backs, I guess they wouldn't have to do a buy-back now.

SERWER: Yes, it wouldn't have to do one now. And the iTune store is a whole lot of fun. We've got to get Jack an iPod, 100 million songs downloaded off. I mean they really are the cool thing. That's another thing about Apple. They have the coolest designed stuff. I mean it really is a consumer item that people love. Again, Jack, we're going to have to convert you.

LISOVICZ: Remember, Jack doesn't even have a cell phone.

CAFFERTY: I have a record player in my house.

SERWER: We've got a list of things to buy Jack. We're going to give him a phone, a pager, a blackberry, an iPod.

LISOVICZ: Jack does have a car.

CAFFERTY: Technological mutant would be the way to describe me.

LISOVICZ: But that's one of the great things about Apple. It makes it easy. It's user friendly. You would like Apple.

SERWER: And big challenges ahead for that company, though.

All right. Coming up on IN THE MONEY" instead of sending jobs to Asia, companies may do better by heading to the blurbs. We'll check the bottom line on outsourcing and from shove it to the "F" word. We're hearing a lot more foul language in public these days. Find out what that means about us. And buzz makes the man, don't I know it. Our fun site of the week asks you to name that beard. You'll get your chance to guess just ahead.

(COMMERCIAL BREAK)

WHITFIELD: Hello. I'm Fredricka Whitfield at the CNN center in Atlanta. More of IN THE MONEY in a moment, but first, here's what's making news right now. The two Democrats who want to run the White House are campaigning in western Pennsylvania at this hour. John Kerry and vice presidential running mate John Edwards are wooing voters in Greensburg. Pennsylvania is a battle ground state. The Democratic ticket is expected to focus a lot of attention on the Keystone state between now and November. When John Kerry, as you see right there behind John Edwards, when he takes the stand to speak we'll be bringing that to you live.

Well, just down the road, President Bush is campaigning in Ohio today. His bus tour is expected to pull right into Pittsburgh, Pennsylvania, later on this afternoon. Political analysts say Bush is trying to deflate some of John Kerry's post-Democratic convention bounds. Bush is reminding supporters of the obstacles they have overcome.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We've come through a recession. We've come through terrorist attacks. We've come through a stock market decline. We've come through corporate scandals. Yet this nation has overcome all these obstacles.

(APPLAUSE)

We have overcome the obstacles because we've got great workers in America.

(END VIDEO CLIP)

WHITFIELD: President Bush is expected to speak in Cambridge, Ohio any minute now and when that happens, CNN will bring you his comments live.

A militant group linked to al Qaeda is claiming responsibility for yesterday's assassination attempt on Pakistan's new prime minister designate. The group posted the message online warning Pakistan to stop cooperating with the U.S. or face more attacks. Nine people were killed in yesterday's blast.

I'll have all the day's news at the top of the hour. Now, back to more of IN THE MONEY.

LISOVICZ: The promise of cheap labor has led hundreds of American companies to send U.S. jobs overseas. But our next guest says setting up shop in India or China can cost companies more than they think. Howard Rubin is a professor emeritus of computer science at Hunter College and he joins us today to talk about his recent study of outsourcing by some of New York City's biggest public companies. Welcome.

HOWARD RUBIN, PROF. EMERITUS, CUNY: Happy to be here.

LISOVICZ: So you found that there were cost savings but not as great as companies might expect especially when you're talking about taking that labor outside of the biggest cities in the U.S.

RUBIN: Yes, most definitely. On average, from the study, we found companies were saving 40 percent, sometimes as little as 20 percent. But most of the time they were benchmarking their savings against urban salaries and not salaries in the non-urban areas of the state. So the gap closes very quickly and very often they don't consider all the costs that they should.

SERWER: What are those hidden costs, though, Howard? I mean, if so many companies are supposedly doing this -- and I say supposedly, because I've looked into this a lot and it's very hard to get hard data. How many companies have sent jobs overseas, which ones, for how long? How much money are they making? Can you get into that, please?

RUBIN: Sure, a couple of things. In terms of just looking at New York City, about seven out of 10 of the largest firms there today are doing offshore outsourcing. And probably in two years, they're looking at about nine out of 10 and that covers the world of technology and the business process. But when you get under the covers and you look at the true costs, the true cost is not the raw labor differential. These firms have to figure out what's the cost of planning, finding the vendors, dealing with the telecommunications, the training, the remote management, the security, the legal issues, the tax issues and everything else. And suddenly a worker that seems to cost $20,000 offshore, the costs quickly ramp up to around $45,000, $50,000 which is in shooting range of places like Buffalo, Syracuse, Utica, upstate New York.

CAFFERTY: Why is this continuing to be a growing phenomenon if some of these companies as you suggest are not realizing the gains that perhaps they thought they would, or maybe even that they should? Why are so many still rushing to do this?

RUBIN: Some of it is in the cost accounting. Usually they understand the labor. The telecommunications costs going to another budget. They don't get the visibility or the transparency of the costs. And number two, it looked like under the pressures of the economy that going offshore was a good way to save money. In many cases it is. In many cases it's inevitable, but the real issue is, you know, comparing urban versus low-cost India, Philippines, versus the varying upstate areas, where the salaries are much more reasonable with a high quality of life. So it's really the benchmark gap and understanding the true costs that make the difference.

CAFFERTY: What about the caliber of the employee in those two areas that you're talking about?

RUBIN: Yes, it's really interesting. Again, just taking a look at upstate areas that were rich in engineering, innovation and manufacturing going into again, I keep picking on like a Rochester, going into eastern Europe, going into India. I mean we have strong universities. We have strong technical training here. We have lots of onshore resources that just aren't being tapped. And we have people with the skills that aren't being retrained. So we have a real opportunity here. That's the real story.

LISOVICZ: Another real story is that outsourcing is a hot political issue this year. How about that? John Kerry in his speech in Boston, in his acceptance speech said he'd slow outsourcing down, using incentives to keep jobs in the U.S. How realistic is this after a decade of all these trade agreements, not only NAFTA, but then you have the African trade agreement. You have China, part of the WTO. Wasn't this all about getting cheap labor and making it more competitive?

RUBIN: Yes, a bit part of it was becoming part of the global economy and opening the doors to that. But number two, it seems...

(INTERUPTED BY A LIVE EVENT)

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