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John Bolton Goes To Full Senate Vote; Detroit Considers Tax On Fast Food; Interview with Robert Kennedy Jr.
Aired May 15, 2005 - 15:00 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.
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ANNOUNCER: From New York City, America's financial capital, this is IN THE MONEY.
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JACK CAFFERTY, HOST: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY:
A fast food weight loss plan for your wallet: Detroit is considering a tax on all those burgers and fries. See if that's an idea your town ought to be thinking about.
And the hot car you can feel good about: Hybrid cars are part gas guzzler and part clean machine. We'll look at which ones are worth the sticker shock. They are more expensive.
And defending planet earth: Robert F. Kennedy Jr. is chasing General Electric over water pollution for years. See if he's backing off now that GE announced it is going green.
Joining me today, a couple of IN THE MONEY veterans, CNN correspondent, Susan Lisovicz; "Fortune" magazine editor at large Andy Serwer.
So the senate foreign relations committee voted to send John Bolton's name to the full Senate as the U.S. ambassador to the United Nations. Some of the senators saying, you know, I really don't like this guy, but I'll vote for him any way. What do you make of this guy? Sharp elbows which works very well inside the beltway, might not work so well over here on the East River with the oil for food gang.
ANDY SERWER, "FORTUNE": I think there have been two criticisms of Bolton. One is that he's abrasive. So what? You know.
CAFFERTY: Yeah.
SERWER: And two is that he's so critical of the United Nations, or has been, that the Bush administration is intentionally antagonizing the United Nations and its members. And if that's the signal, you know, that really probably is not something I think we want to do. I mean, if he's just a bad guy or nasty guy so what.
SUSAN LISOVICZ, CNN CORRESPONDENT: But you know, critics would argue that John Bolton is just the right kind of guy to take over the U.N. because he made these comments like, look, if you took out 10 floors of the U.N. secretariat building, so what, who would notice? And when you think about some of the pressing issues facing the U.N., where have they been, whether it was genocide in the Sudan, whether it was oil for food, whether -- whether China and Cuba and Sudan and Saudi Arabia have a right to be on the human rights commission at the U.N....
CAFFERTY: I mean, that's a joke.
LISOVICZ: So maybe someone should be outspoken, but the point is he has been raked over the coals as being a bad boss over the last few days.
CAFFERTY: Well, yeah, but he also has been raked over the coals for being a bad boss because he treated government employees harshly.
SERWER: Hmm, kid-gloves?
CAFFERTY: Been to the post office lately? More to come.
Detroit's mayor is calling for a tax on fast food. Not to slim down the citizenry but to fatten up the city's coffers. Detroit officials predict the two percent tax would raise $17 million over the next year and given that Detroit's $300 million in the hole it could use the money. Then again, what if you want to levy a fast food tax to change the way people eat? Kelly Brownell's going to help us look at that. He's a professor and chair of psychology at Yale University, also the director of the Yale Center for Eating and Weight Disorders.
Professor Brownell, nice to have you with us.
KELLY BROWNELL, YALE UNIVERSITY: Thank you for having me.
CAFFERTY: What about the critics who say this is a regressive tax and will hit people at the low end of the income scale the hardest, lower and middle income people if you start taxing fast food.
BROWNELL: I agree with that especially in a city like Detroit. I think a tax on food is justifiable under certain circumstances. The most important of which is that the money that it generates goes back to improving nutrition, especially toward underprivileged populations because that's where the prevalence of obesity is highest, but there's no such plan in Detroit. So, I think it's a pretty hard tax to justify under those circumstances.
LISOVICZ: And in fact, Detroit has been ranked, unfortunately, as one of the most obese cities in the country. But that aside Kelly, hasn't it been proven that so-called sin taxes against tobacco and alcohol have cut -- reduced consumption?
BROWNELL: My understanding is that the single most powerful tactic to driving down tobacco use in the population are high cigarette taxes. And so food taxes may work in the same way. So, you could conceptualize taxes into -- one of two things. One is you could have a very high tax that would discourage people from eating the taxed foods. The other would be to use a smaller tax where the revenue generated was the main issue, and -- but it has to be earmarked for nutrition related programs or else you run into the regressive nature of the tax.
SERWER: Kelly, one problem, I think, you've pointed to is that healthy food is too expensive and unhealthy food is too cheap in this country. But how would we ever address that?
BROWNELL: It's an important problem that you point out. If you were setting up conditions in to order maximally promote obesity you would want the food environment to be pretty much like it is now where the food that you'd like people to eat more of is more expensive and the opposite is true of the unhealthy foods. So, you can change those conditions either by driving up the price of the healthy foods or driving down the price -- I mean, driving up the price of unhealthy ones and driving down the price of healthy foods and this would be the first object. To subdies healthy foods, but where would you get the money? And that's where a food tax might come into play.
CAFFERTY: You know, this country of ours is pretty good at mass communications. We've got labels on everything to tell you this is good for you, this is why, it has this many grams of whatchamacallit in it. We have taxes on everything now except my dinner and I'm not so sure I'm for the government deciding they wanting to tax what I eat. But, there's study out, and it's fairly recent, as I read the other day, that people eat this stuff because they like it in this country. It tastes good. We are a nation of instant gratification. We're spoiled. We're used to having what we want and when we want it, regardless of the consequences, look at the credit card debt, etcetera. Is this an area where the government ought to be messing around with ideas about taxing us?
BROWNELL: We don't know, because we're not sure how taxes would work. But, if you say that the national diet is an emergency, which I think it probably is given how poor American children are eating, especially, then you may want to do something. And if you look at the main factors that affect eating, price is one, taste is another, convenience, accessibility, and how much a food is promoted, and all of those things are lined up on the side of the ledger that promotes an unhealthy diet. So, if you wish to switch those around, it's going to take big change. Tinkering around the edges by educating people is not going to get the job done.
LISOVICZ: But Kelly, isn't there some change. I did see the documentary "Super Size Me." Of course we're well aware of the suit that was filed by the mother of a teenager, here in New York City, for making her children or her child obese and having health problems. There is a sort of grassroots movement against the terrible consequences of eating too much fast food. And McDonald's for one, the world's biggest restaurant, has made some healthy, it would seem, changes.
BROWNELL: Right. Those are worth applauding, by the way. I believe those are good moves. But, the question is whether a few good moves like that can begin to make up for the tidal wave of unhealthy inducements to eat. So, McDonald's might spend a little money on promoting salads, but their big sellers are the other foods, in all likelihood. So, something really pretty heroic has to be done and we're just not doing it. But, I love the fact that you mentioned a grassroots, by the way, because the federal government is very slow to react to the problem of obesity and poor diet, in general, I believe because they don't want to tangle with the food industry. And as a consequence the real action is happening in local communities and at the state levels.
SERWER: Kelly, wouldn't, from a practical standpoint, this be extremely difficult? I mean, a lot of Chinese food is worse for you than McDonald's they have salads at McDonald's, as Susan indicated. Is pizza bad for you? How would you practically do this?
BROWNELL: It would be hard if you go food by food, just as you said. The one way to do it would be to take classes of foods that research shows might be related to unhealthy diets, in general, or obesity, in particular, and put a tax on them. Soft drinks and fast foods would probably be the most likely candidates. And by the way there are a number of states, now, that do have taxes already on soft drinks, for example. They tend to be small taxes, but the money goes to building roads or litter control or things unrelated to nutrition. So, the public will accept small taxes on these classes of foods.
CAFFERTY: But, is it the right thing for the government to be doing this kind of stuff?
BROWNELL: We don't know. We don't have evidence to know whether a tax like this would affect the American diet or not. If a tax is attempted, we can then collect information to see whether it affects diet, then people out there in the country can decide whether it's worth the government intrusion and taxes and things like that, given the payoff.
CAFFERTY: All right, we're going to have to leave it there. Professor Kelly Brownell is a professor in child psychology and the director of the Yale Center for Eating Weight Disorders. Thank you for your insight, it's been a pleasure.
BROWNELL: Thank you.
CAFFERTY: All right. When we come back on IN THE MONEY:
I sing the car body electric: Well, not really. When you buy a hybrid there's a lot at stake than just planet earth. We'll look at which models deliver the most buzz for your buck. Who wrote that?
SERWER: Yeah.
CAFFERTY: Also ahead, network news: We'll tell you about Cisco's new quarterly results. See how Wall Street reacted to the numbers.
And getting kids on track to do well in school: We'll talk to an economist who's crunched numbers.
(COMMERCIAL BREAK) CAFFERTY: So you've decided to get rid of the gas guzzler and get "green," as they say. Well, there's a whole host of hybrid cars out there for you to choose from. David Welsh, Detroit bureau chief of "BusinessWeek" magazine is going to give us a little quick course on hybrids. What they cost, what the best ones are.
But more importantly David, and welcome to the show, by the way, are oil and gasoline prices high enough yet to cause hybrid cars to break through and become a significant part of the American automobile market? They sell a -- an infinitesimally small percentage of the vehicles in this country.
DAVID WELSH, "BUSINESSWEEK": Probably not just yet. Gasoline prices are high enough for a lot of people to take note and get interested in them. The fact of the matter is take a hybrid Honda Accord, for example, and even at $2.60 a gallon, which is what some people pay on West coast, it takes six years for to recoup the cost for the car in gasoline prices...
SERWER: All right...
WELSH: So the straight up economics don't really work just yet.
SERWER: Excuse me Dave, one thing I wanted to ask you about is the high-end market. I mean the fact that Lexus has one of these vehicles. Talk about that a little bit.
WELSH: Sure, Lexus has actually -- they're going to come out with a couple of them. The first one will be their hybrid RX330 or hybrid version of the RX330 which they'll call the RX400H. And it's basically their luxury SUV it'll be faster than the regular RX330 AND it will get better fuel economy. They're saying north of 30 miles per gallon when it hits the street. It's got a couple of things that people may like. It's kind of your guilt-free SUV. People can drive it around without some kind stigma of pollutive and it's supposed faster car.
The other one after that is a hybrid version of their ZS430 sedan. And that's supposed to be a really fast car. They're going to use that hybrid technology almost like a performance enhancer, like a turbocharger or something like that. So, you'll get better fuel economy there and it's supposed to be a real boulevard burner.
LISOVICZ: Hey David, I think that's one of the misconceptions about hybrids is they really don't have a lot of kick and they actually might even have more. Can you talk about the Honda Accord hybrid. That's a new one that's coming out, right?
WELSH: Right, it's actually already out and, you know, it's selling pretty well. It is faster than the regular Accord. I think it goes zero to 60 one second faster than your typical Honda accord would, in a bout six-and-a-half seconds or seven, somewhere in there, is what they're saying. And it gives you more horsepower and the fuel economy is better.
CAFFERTY: Toyota, of course, has got the lion's share of the hybrid market. And we're sitting here, once again, talking about Honda and Toyota. These are not American car companies. Where is Detroit? Why aren't they in this game?
WELSH: Well, Ford is. Ford has the hybrid Escape out and it's selling pretty well. And a hybrid SUV is a good idea. Other than that, you're right, the Chrysler group is, you know, it's basically controlled by the Germans now and because, you know, the Germans sell so many diesel cars in their home market, they're a believer that diesel is the way to go. GM has kind of sat on the sidelines. They've been developing systems, they sell some hybrid buses, but they have kind of, you know, made the argument that since the economics don't work for consumers it is tough for them to justify going to market with it. But Toyota's...
SERWER: Yeah boy, it reminds you of what they were saying about economy cars back in the 1970's. We'll keep building these big whales, don't worry about it. Aren't they looking -- isn't GM looking at hydrogen, sort of, they're looking to skip this skep, this step, excuse me, and going on to the next one? Isn't that what their rationale, as well?
WELSH: That was originally their rationale. They've been dragged into the hybrid game because Toyota has been so successful with it. And the Prius is now selling 10,000 a month, which in April was more than GM sold of its Pontiac G6. So, they've been pulled into it, but they are looking at hybrid long-term. And GM is saying that end of this decade or beginning of next they'll have a hydrogen fuel cell powered car that meets all of the retirements that people would want. It will be very expensive for someone to buy, but they're saying the technology will be ready for primetime.
LISOVICZ: David, do you go by those projections that even by the year 2010 that hybrids will still remain a tiny, tiny, single digit fraction of the entire U.S. car market?
WELSH: For the most part, I do and it's not because they won't have demand. There are supply issues still with batteries, and you have to look at how many hybrids are actually coming to market. There will be a number of them by the end of next decade, but many production plants that the automakers have are still pretty modest. I mean you can't sell them if you don't build them. JD Power forecasted hybrids will be about three percent of the market at the end of the decade. They could be wrong, it could a little more than that, but I'd be surprised if it was much more than, say, five percent.
CAFFERTY: Why aren't -- why aren't they doing better? What is it about this country that won't let go of the land cruisers and the hummers and these gas guzzling things when we get bombarded with stories day after day after day about the finite supply of crude oil, the shortage of refinery capacity, yadda, yadda, yadda yadda, yadda? We just don't let go of this stuff. Why not?
WELSH: Well, you know, part of it is maybe just American psychology. You know, we tend to not really change until something really hurts us. Nobody really started going away from big cars, you know, the oil shocks in the 70's and early 80's until there was an availability problem. You're starting to see it on the margin. You know, large SUV sales are down and there are a number of factors contributing to that, but one of them is, you know, clearly the price of gasoline is warding some people away. But Americans won't really change, I don't think, until it gets so expensive or there are shortages and it really, you know, hits them in the pocketbook or they're sitting in gas lines or something like that.
SERWER: Yeah, I think $3 a gallon gasoline would have a lot to do with that, as well. All right, David Welsh, the Detroit bureau chief for "BusinessWeek" magazine. Thank you, for coming on the program.
WELSH: Thank you.
SERWER: Coming up after the break:
Building a bigger pipeline: Networking equipment is hot and that's affecting Cisco's quarterly results. Find out how Wall Street likes the news.
Also ahead, pat the bunny, take 579: Never mind. We'll look at whether reading to your kids can help them do better in school.
And should you call in sick: Trust your feelings young Skywalker. With the new "Star Wars" movie coming out, see how the last two put a dent in office productivity.
(COMMERCIAL BREAK)
LISOVICZ: Now let's take a look at the week's top stories in our "Money Minute." It looks like more Americans are being shy about shopping. April retail sales showed the biggest increase in seven months. Sales of new cars played a big part in the increase thanks to new incentive programs. And clothing stores posted their best showing in two-and-a-half years.
The real estate market is showing no signs of cooling off. Last week applications for new mortgages showed their biggest increase since January. And a National Association of Realtors survey of 136 metropolitan areas showed that a record 66 of them saw double-digit jumps in home prices over the past year; all of this despite rising mortgage rates.
And call it the "Hard Sell": That's the title of a new look by a former Pfizer sales rep that exposes the gifts and favors drug companies give doctors in return for prescribing their drugs. If you don't have time to read, you're still in luck. Author Jamie Reidy is negotiating the movie rights with Hollywood producers.
SERWER: Cisco Systems helped ease some fear about the tech sector this week with a solid earnings report, but the company that makes the technology that keeps the internet running is cautious about the future. At the same time, Cisco is looking to pioneer a new way to expend stock options in a more upfront way. Well.
Cisco shares are trading near their year low and are down about 15 percent over the past 12 months. That makes Cisco Systems our "Stock of the Week."
And, you know, of course, Cisco was one of the banner stocks of the tech bubble, or the tech boom. In fact, at one point around the year 2000 it was the most valuable company in the world, had the biggest market capitalization, bigger than GE, bigger than anybody. It'll be a long time before the stock ever gets to those heights again.
CAFFERTY: The stock never goes up. Cisco stock never goes up.
SERWER: No, it just flat lines for ever.
CAFFERTY: It just went down and it stay -- and never goes up. They had a good earnings report, but then they issue a little cautionary tale about -- but they -- that stock just can't get up.
SERWER: Well, that's because it was so expensive back then. It probably had a PE of seven zillion. So right now, right now...
CAFFERTY: That's a lot.
SERWER: It just has a PE of about 26 -- you know, it's still -- it's still an expensive stock. It still has great growth prospects, but that was mania back then.
CAFFERTY: Sure.
LISOVICZ: Yeah, and one, let's face it, in terms of the options, that's how a lot of people in Silicon Valley became millionaires overnight. And so it's interesting, I don't really quite understand it yet and maybe Cisco just hasn't been forthcoming about this vehicle for pricing stock options, but we all know that tech companies were reluctant to -- yeah, yeah, add them to their expenses.
CAFFERTY: Because it would cause those loft share prices to come down a little bit. It's a much more transparent look at the company's financial situation, sure.
LISOVICZ: That's right and some of them have been eliminating stock options as an incentive now.
SERWER: And John Chambers, the CEO of Cisco, was adamant and upfront about fighting expensive stock options. A lot of people in the markets thought he was a very bad guy for doing that because it really is a little bit of smoke and mirrors, because to say that a stock option doesn't have a cost, then why would an employee want it?
CAFFERTY: Of course.
SERWER: I mean, think about it. Turn it on its head. So there is a cost to it. You saw Bill Gates bite the bullet and do it. Other companies now have to do it and he's fighting it to the end, is one way to look at that, I think.
CAFFERTY: All right. SERWER: And one other thing to talk about, just very quickly, with them, is that they are big in this voice over internet protocol. Internet telephone is something that could be really big for Cisco, I think.
CAFFERTY: Might move the stock up a bit.
SERWER: Yes. That's definitely down the road.
LISOVICZ: You sound hopeful, Jack.
CAFFERTY: Hope springs eternal.
SERWER: Indeed. All right, coming up on IN THE MONEY:
High art for the short pants crowd: If you think taking your kids to museums will make them better students, you better think twice. We'll hear from an economist who says he knows about what really counts.
Also ahead, new waves: GE has faced years of criticism over pollution in New York's Hudson River. We'll look at whether there's a sea change this week.
And no, you can't accessorize a business suit with a lightsaber. Find out whether you're a "Star Wars" geek on our "Fun Site of the Week."
(COMMERCIAL BREAK)
LISOVICZ: If you think a helping of Mozart at dinner or Shakespeare at bedtime will put your kid on the fast track to Harvard guess again. All this culture cramming does not influence a child's development, at least not according to our next guest. Stephen Dubner is coauthor of the new book, "Freakonomiacs." Welcome.
STEPHEN DUBNER, CO-AUTHOR, "FREAKONOMICS:" Hi.
LISOVICZ: You know I'm for one am relieved because I was not playing the violins by the time I was 3, I was not speaking two languages by the time I was 4, I wasn't --
SERWER: Look where you ended up.
LISOVICZ: Working weekends.
SERWER: Yes right.
LISOVICZ: I mean beside the obvious, food, shelter, love, what really matters in a child's development?
DUBNER: Well you know really the basis of the study -- this was a department of education study. What we try to do in "Freakonomics" is take real data and try to make sense of it, and have it tell story not quite what you want it say and not what you think it might say, but what it actually says about what's going on. It turns out what really matters most are kind of who you are as a parent and not what you do.
So if you are -- if you've taken the time to get some education yourself and to build a career yourself and if you've built a family where education is considered an important thing and you kind of set that example you're probably -- your kids are probably going to do pretty well. All the culture-cramming, though -- on the other hand, on the other end of things, TV-watching doesn't seem to turn a kid's brain into mush either. So there's a lot of surprising stuff in the data.
SERWER: Wow, I mean, listen Stephen, I am the father of two elementary-aged kids and, boy, this fight with the TV and IMing on the Internet and all that, I just forget it, I just turn on the TV and let them go.
DUBNER: Just give them a beanbag chair and TV and they're fine.
SERWER: Don't tempt me.
DUBNER: We don't mean to say that, you know, you should let your kids do what they want when they want and so on. There's just a lot you can learn from looking at the data. All we're talking about is how these different factors affect child -- children's early school performance. We're not talking about, like the character of a child. It may be if you like to bring your kids to the museum you know twice a week, twice a month what ever and you like to play baby Mozart in the womb and you like that and that's part of your culture and whom you are, that's great. The point is that parents should love their kids, they should encourage their kids but they shouldn't drive their kid crazy or themselves by thinking that culture cramming is the answer to making smart kids.
CAFFERTY: Where did this idea come from? New York City has taken it to an absolute illogical extreme. I mean we have got people here on staff here at CNN, they are all over the city who race to get their 3- year-old to the best preschool which cost $20,000 a year so they can immediately start translating from the eloign (ph) from Greek to Chinese. It's absurd. And it's not real. The parents of these kids don't live that way. We're talking about a genuineness of who the human being that's raising the child really is. How did we get on this track of culture cramming for want of a better word?
DUBNER: Well, I think that -- you know, what we would call it in "Freanonimics" is kind of two things. One is obsessive parenting and the other is competitive parenting. I think we all see all the time. I'm as guilty of it as anybody. My partner, Steve Web, my writing partner in "Freakonomics" who is an actual economist, he's been looking that the data for a long time. He's smart about it. He now knows and started to convince me. On the other hand, I'm not going to stop doing what I love to do with my kids.
But let me give you a for instance, you take two statistically equivalent children and one of them has 100 kids books in the home and the other has zero. The kid with a whole lot of kid books tends to do better in school than the one with zero books. So we think that makes sense because the kid is being read to by his parents. But then you take two kids, both of whom have a lot of books but one never gets read to by the parents and the other all the time. The one that doesn't get read to doesn't seem to suffer. I say, are these books performing some kind of magic osmosis on the brain? What's going on? Here is the thing those books are not a cause of the intelligence they're an indicator. They indicate that the kinds of parents who have a lot of books in the home probably are smart parents to begin with. They probably got a lot of education themselves to begin with.
LISOVICZ: So you're basically saying you don't have to play the Mozart in utero, right? Basically it's in the DNA, two smart people may well produce a smart child?
DUBNER: Well, that's a lot of truth in that, certainly. As anyone who has ever studied genetic and IQ certainly knows that. I don't think any of us are comfortable saying that's the whole picture. We certainly don't say that either. The point is that the smaller pieces that a lot of modern parents are trying to do -- here's the thing. There's a big privilege gap for sure between well-educated high-income parents and poorly educated lower-income parents. And that gap is real and that shows up in the data.
There's another gap that's really imagined. That's what we're saying. If you're a pretty well set family, you know, you've got some education, got a good solid home and so on, to think that you're going to shove the kid up into the upper echelons by doing these, you know, smaller things that seem to make a big difference, you're probably mistaken.
On the other extreme, spanking is something we might consider an unenlightened thing and if a parent does spanking, that will reflect on the kid's scores, too the study shows that's also not the case. It is really kind of about the environment, the family, the education, and kind of the desire, much less than the actual -- the bottom line is parenting technique seems to be highly overrated when it comes to childhood test scores.
SERWER: I asked the pre K a couple years ago, and I asked this kid's mother whether the little girl wants to have a play date with my daughter and she said no, she has to go to German lessons. I thought that was hysterical. So it is about value and hereditary, is that it?
DUBNER: Values and hereditary. Heredity is certainly a big part it, values I would say is a good word for it. I think that's really it's about accepting the fact that a lot of our outcomes in life are determined by things that have -- are not so obvious. So to think that, like, if I play the baby Mozart while the baby is in utero, that's going to somehow flip a switch in the brain that will shoot the reading and math scores through the roof, that's not the case. You have to think a little bit more complicated, a little bit more long term. The good news is by the time most parents pick up a parenting book, it's too late. Most of what you need to do you've already done and you are a good parent in all likelihood.
LISOVICZ: And that gives confirmation to my parents, they taught me by example and let they me watch a fair amount of TV.
SERWER: Look where you ended up.
LISOVICZ: With Jack and Andy, I've made it. Stephen Dubner co- author of "Freakonomics." Thank you for joining us.
DUBNER: Thank you.
LISOVICZ: There's much more to come on IN THE MONEY. Up next, small world, big money. Find out what makes a corporation decide to care about the planet as well as the bottom line. We'll speak with environmental campaigner Robert F. Kennedy Jr.
And the mysterious illness that makes you sit in a dark room and look at spaceships. See how many workers are expected to call in sick, quote/unquote, when the new "Star Wars" movie comes out.
(COMMERCIAL BREAK)
SERWER: Even though the Bush administration has not been pushing a green agenda, environmentalists say Corporate America is beginning to come over to their side. Banking giant J.P. Morgan recently said it will restrict lending practices to projects that will contribute to global warming. And this week, CEO Jeffrey Immelt took the lead, announcing his company, GE, will double its research budget for energy and environmental technologies to $1.5 billion.
So why have some companies decided to go green? Is it about doing the right thing, profits, or pr? Joining us to talk more about this is Robert F. Kennedy Jr., who's dedicated much of his legal career to protecting his environment. He's a senior attorney at the Natural Resources Defense Counsel and a founder of the Stopglobalwarming.org. Welcome.
ROBERT F. KENNEDY JR, ATTORNEY, NATURAL RESOURCES DEFENSE COUNSEL: Thanks for having me.
SERWER: Yes, let me ask you, Robert, I mean you've been very critical of GE over the years. And I'm just wondering if you think they've gotten religion to an extent now.
KENNEDY: I think Jeffrey Immelt, like many CEOs today, is recognizing what we've long recognized, which is good environmental policy is 100 percent of the time is identical to good economic policy if we want to measure our economy and this is how we ought to be measuring it, based upon how it produces jobs and the dignity of jobs over the generations and how it preserves the value of the asset of our community. If the only way of doing things was to say, let's treat the planet as if it were a business and liquidation. Let's convert our natural resource to cash as quickly as possible and have a few years pollution-based prosperity, and you can do that, you can generate an instantaneous cash flow, but our children are going to pay for our joy ride.
The problem is that there's a lot of money to be made in pollution and pollution is a way of stealing resources that belong to other people, stealing the common, sort of privatizing the commons. What government need to do is to incentives good behavior in the marketplace and I think that's what Mr. Immelt and many of these other companies recognize that no matter what the Bush administration does, that those rules are coming down the road and the companies that survive in the marketplace are going to be the companies that are prepared to take advantage of those new rules.
LISOVICZ: Robert, so the government thing is one whole separate issue. But just with GE, the fact that GE says it's going to use its technology, it's going to be introducing new products every year, the fact that GE makes everything from jet engines to light bulbs, the fact that it's the most highly valued public company in the world. Would you say that they -- a threshold has been reached at this point, that truly, despite your battles with GE and the Hudson River, that this is a good step?
KENNEDY: This is definitely a good step. And Mr. Immelt should be commended for it. It's something that's caused a lot of excitement in the environmental community. We've seen other large corporations take this same kind of stand publicly, BP, the British Petroleum producer actually changed its name from BP to Beyond Petroleum a couple years ago and has been saying all the right things and I think General Electric, this goes beyond rhetoric. Mr. Immelt is making a commitment for his company producing green technology because he sees that as a good economic choice for the company. It's not philanthropy; it's a good economic choice.
CAFFERTY: You the signs of global warming are just becoming too numerous to ignore anymore. The polar ice caps are melting. Certain species of wildlife being adversely affected. The hydrocarbons in the air are taking their toll. Are we to late to get to this game? Are we on a slippery slope from which we eventually will not recover? Or can this thing be turned around? It seems like such a massive undertaking.
KENNEDY: Well, we're going to have some global warming, but the -- you know, the projections -- there's a wide range of projections. And if the -- at the wider range at the most destructive range, it's really catastrophic. It's the apocalypse. At the least destructive, it's something we can live with. And that's what I think, you know, our governments and the governments of all the world have to start recognizing, we have a responsibility in this generation to take -- start taking real steps and to encourage our industries to take real steps.
And, you know this is free market capitalism. The environmental groups want the free market to work. But pollution is a subsidy. When you show me a polluter, I'll show you a fat cat, using political clout to escape the discipline of the free market and shift his cost to somebody else. That's what all pollution is. It's a way of corporations trying to shift their cost to somebody -- to people outside of their corporations. And what we need are rules that require actors in the marketplace to pay the true cost of bringing their product to market. That's all the environmental laws are meant to do. They're really meant to restore free market capitalism in America.
SERWER: Robert, let me just ask you quickly, you mentioned BP. Is there really a difference between BP, supposed to be a green oil company, and Exxon, which is supposed to not be one? KENNEDY: There's a huge difference. You'll see this one every industry. You know, BP is genuinely -- and you no this isn't saying that BP doesn't have problems because anybody who produces that much oil or any kind of energy is going to impose some kind of environmental cause. But if you look at the institutional culture within the company, you know, Exxon is out there, still, funding think tanks in Washington, these phony scientists -- we call them biaustitutes who stand up there and say there's no such thing as global warming and all this kind of nonsense. That's where their PR is going.
That's what the attitude of the company is, is that we are going to deny this, just like the tobacco companies did about cigarettes, rather than saying -- which is what Synergy, the big coal company, you know, and utility company, and what BP have done, is said, look, we are producing a commodity that is critical to the world economy but it is causing huge problem, catastrophic problems in long run, and what we need to do is figure out ways to burn energy and to provide and to generate a prosperous economy, but at the same time, to reduce our impacts. And I think that's where the environmental community wants to see the business community go. What we need is the business community demanding standards from government. Because if you have good actors in the marketplace like BP, they're going to penalized when there's Exxons out there that racing to bottom, that are dragging down -- you know that take the low-hanging fruit, that are dragging everybody down. It penalizes the good actors, if you allow bad actors to compete against them in the marketplace, using bad practices that lower their costs when the good guy is trying to do the right thing.
LISOVICZ: Robert F. Kennedy Jr., founder of Stopglobalwarming.org, senior attorney with the National Resources Defense Counsel, thanks for joining us.
KENNEDY: Thanks for having me.
LISOVICZ: Up next on IN THE MONEY. May the force be a little less with you? Find out if your fascination with "Star Wars" is getting out hand on our fun site of the week.
And if you can still type while you're wearing the wookie costume, drop us an e-mail. The address is INTHEMONEY@cnn.com.
(COMMERCIAL BREAK)
CAFFERTY: The final installment of the "Star Wars" movie saga is coming out in the middle of this coming week. And I am so excited. That has lots of experts believing lots Americans will ditch work to go see this thing. Our web master Allen Wastler has more on that and a "Star Wars" fun site of the week. I guess when the first editions of this thing came out, productivity measurably in this country declined. Didn't it?
ALLEN WASTLER, MONEY.COM: Well yes in the latest trilogy, when you look at what happened with the first episode and the second episode, yes you saw a little dip. Of course our favorites, Challenger, Gray & Christmas, they always run the numbers on each event. They do it sort of tongue in cheek a little bit. They figure this one may cost the country $620 million. That's estimating they'll get close to 10 million people going in the first two days the movie's available, Thursday and Friday. Half of those are working people. They came up with that number figuring OK, the average working person makes $130 a day. So, you know, you can argue with that number a lot. Up and down, sideways. And I did a little polling around on the Internet just to see what the buzz was like. There's already a line up the street, ready to go, you know? And still a few days away. They've got their own Website dedicated to it. You're seeing that fanatic buzz --
SERWER: All the "Star Wars" nerds are productive to begin with, because the average --
WASTLER: Hey, can you survive without e-mail and tech support?
SERWER: Say no more. Say no more. My bad, my bad.
WASTLER: I've talked to some fans, though, that said they've been burn by George Lucas twice now. While they'll go and see the move they are not going to do the opening craziness, get dressed up and all that.
SERWER: What was that character that no one liked in the last one?
WASTLER: Jar Jar Binks.
SERWER: Jar Jar Binks, yes.
WASTLER: And the Website's dedicated to his death.
SERWER: Jar Jar Binks.
LISOVICZ: Get a life! Get a life.
WASTLER: Figure, you know, this -- Hollywood needs a hit and they're hoping this will be the hit. Because the movie receipts have been down this year, and they need it to go up. And the franchise, get this, the franchise for all its silliness, over $12 billion it's produced.
CAFFERTY: I have never seen a "Star Wars" movie.
SERWER: Why are we not surprised by that?
WASTLER: Jack, we can help you out with that.
SERWER: Kind of looks like a wookie, doesn't he?
CAFFERTY: I made it to 62 and I'm doing OK.
SERWER: He looks like a wookie?
CAFFERTY: Fun site of the week?
WASTLER: Fun site "Star Wars"-related, OK? You know you're a "Star Wars" geek when --
CAFFERTY: OK.
WASTLER: Let's check this out -- you pass out while trying to move a pencil across desk with the force. You often get your head stuck in a bucket pretending you're Darth Vader. You listen for Obi- Wan's guidance while attempting to parallel park. Those and many more, cute little Website.
SERWER: Do you get those jokes?
CAFFERTY: Yes, I get the last one. Because I have four teenaged daughters who have learned how to parallel park without -- and the results have been mixed.
Coming up next on IN THE MONEY, thanks Allen. A time to hear from you as we read some of your e-mails from the past week. You can send us an email right now if you are so inclined, we are at INTHEMONEY@cnn.com. Back after this.
(COMMERCIAL BREAK)
CAFFERTY: It's time now to read your answers to our question of the week, about whether you have a contingency plan should you get laid off in the coming months.
One viewer wrote this, " The best contingency plan is to stop working for a company as soon as you can. I'm ready to be self- employed and so should all of your viewer because American companies see their employees as replaceable components."
Dave wrote, "I've been living my contingency plan for the last seven years but it's not working out so well. Since I was forced into early retirement, we've had Enron, 9/11, and now gas prices through the roof. I thought I was bulletproof but I may have to try to find work again.
And Charlie wrote this, "I'm sure most Americans are like me and have no plan to survive if they suddenly are out of a job and can't find work again. It's a good thing President Bush is putting a lot of money into faith-based programs because I really wouldn't have a prayer otherwise."
SERWER: Oh good. Clever.
CAFFERTY: Time now for next week's e-mail question of the week. It's this, will you consider buying a hybrid car in the future? Send your answers to us at INTHEMONEY@cnn.com. And you should also visit our show page at Money.com/inthemoney. That is where you will find the address of our fun site of the week. Take the test; find out if you're a "Star Wars" geek.
Thank you for joining us for this edition of the program. My thanks to CNN correspondent Susan Lisovicz, "Fortune" magazine editor at large Andy Serwer and Money.com managing editor Allen Wastler.
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Aired May 15, 2005 - 15:00 ET
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(BEGIN VIDEOTAPE)
ANNOUNCER: From New York City, America's financial capital, this is IN THE MONEY.
(END VIDEOTAPE)
JACK CAFFERTY, HOST: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY:
A fast food weight loss plan for your wallet: Detroit is considering a tax on all those burgers and fries. See if that's an idea your town ought to be thinking about.
And the hot car you can feel good about: Hybrid cars are part gas guzzler and part clean machine. We'll look at which ones are worth the sticker shock. They are more expensive.
And defending planet earth: Robert F. Kennedy Jr. is chasing General Electric over water pollution for years. See if he's backing off now that GE announced it is going green.
Joining me today, a couple of IN THE MONEY veterans, CNN correspondent, Susan Lisovicz; "Fortune" magazine editor at large Andy Serwer.
So the senate foreign relations committee voted to send John Bolton's name to the full Senate as the U.S. ambassador to the United Nations. Some of the senators saying, you know, I really don't like this guy, but I'll vote for him any way. What do you make of this guy? Sharp elbows which works very well inside the beltway, might not work so well over here on the East River with the oil for food gang.
ANDY SERWER, "FORTUNE": I think there have been two criticisms of Bolton. One is that he's abrasive. So what? You know.
CAFFERTY: Yeah.
SERWER: And two is that he's so critical of the United Nations, or has been, that the Bush administration is intentionally antagonizing the United Nations and its members. And if that's the signal, you know, that really probably is not something I think we want to do. I mean, if he's just a bad guy or nasty guy so what.
SUSAN LISOVICZ, CNN CORRESPONDENT: But you know, critics would argue that John Bolton is just the right kind of guy to take over the U.N. because he made these comments like, look, if you took out 10 floors of the U.N. secretariat building, so what, who would notice? And when you think about some of the pressing issues facing the U.N., where have they been, whether it was genocide in the Sudan, whether it was oil for food, whether -- whether China and Cuba and Sudan and Saudi Arabia have a right to be on the human rights commission at the U.N....
CAFFERTY: I mean, that's a joke.
LISOVICZ: So maybe someone should be outspoken, but the point is he has been raked over the coals as being a bad boss over the last few days.
CAFFERTY: Well, yeah, but he also has been raked over the coals for being a bad boss because he treated government employees harshly.
SERWER: Hmm, kid-gloves?
CAFFERTY: Been to the post office lately? More to come.
Detroit's mayor is calling for a tax on fast food. Not to slim down the citizenry but to fatten up the city's coffers. Detroit officials predict the two percent tax would raise $17 million over the next year and given that Detroit's $300 million in the hole it could use the money. Then again, what if you want to levy a fast food tax to change the way people eat? Kelly Brownell's going to help us look at that. He's a professor and chair of psychology at Yale University, also the director of the Yale Center for Eating and Weight Disorders.
Professor Brownell, nice to have you with us.
KELLY BROWNELL, YALE UNIVERSITY: Thank you for having me.
CAFFERTY: What about the critics who say this is a regressive tax and will hit people at the low end of the income scale the hardest, lower and middle income people if you start taxing fast food.
BROWNELL: I agree with that especially in a city like Detroit. I think a tax on food is justifiable under certain circumstances. The most important of which is that the money that it generates goes back to improving nutrition, especially toward underprivileged populations because that's where the prevalence of obesity is highest, but there's no such plan in Detroit. So, I think it's a pretty hard tax to justify under those circumstances.
LISOVICZ: And in fact, Detroit has been ranked, unfortunately, as one of the most obese cities in the country. But that aside Kelly, hasn't it been proven that so-called sin taxes against tobacco and alcohol have cut -- reduced consumption?
BROWNELL: My understanding is that the single most powerful tactic to driving down tobacco use in the population are high cigarette taxes. And so food taxes may work in the same way. So, you could conceptualize taxes into -- one of two things. One is you could have a very high tax that would discourage people from eating the taxed foods. The other would be to use a smaller tax where the revenue generated was the main issue, and -- but it has to be earmarked for nutrition related programs or else you run into the regressive nature of the tax.
SERWER: Kelly, one problem, I think, you've pointed to is that healthy food is too expensive and unhealthy food is too cheap in this country. But how would we ever address that?
BROWNELL: It's an important problem that you point out. If you were setting up conditions in to order maximally promote obesity you would want the food environment to be pretty much like it is now where the food that you'd like people to eat more of is more expensive and the opposite is true of the unhealthy foods. So, you can change those conditions either by driving up the price of the healthy foods or driving down the price -- I mean, driving up the price of unhealthy ones and driving down the price of healthy foods and this would be the first object. To subdies healthy foods, but where would you get the money? And that's where a food tax might come into play.
CAFFERTY: You know, this country of ours is pretty good at mass communications. We've got labels on everything to tell you this is good for you, this is why, it has this many grams of whatchamacallit in it. We have taxes on everything now except my dinner and I'm not so sure I'm for the government deciding they wanting to tax what I eat. But, there's study out, and it's fairly recent, as I read the other day, that people eat this stuff because they like it in this country. It tastes good. We are a nation of instant gratification. We're spoiled. We're used to having what we want and when we want it, regardless of the consequences, look at the credit card debt, etcetera. Is this an area where the government ought to be messing around with ideas about taxing us?
BROWNELL: We don't know, because we're not sure how taxes would work. But, if you say that the national diet is an emergency, which I think it probably is given how poor American children are eating, especially, then you may want to do something. And if you look at the main factors that affect eating, price is one, taste is another, convenience, accessibility, and how much a food is promoted, and all of those things are lined up on the side of the ledger that promotes an unhealthy diet. So, if you wish to switch those around, it's going to take big change. Tinkering around the edges by educating people is not going to get the job done.
LISOVICZ: But Kelly, isn't there some change. I did see the documentary "Super Size Me." Of course we're well aware of the suit that was filed by the mother of a teenager, here in New York City, for making her children or her child obese and having health problems. There is a sort of grassroots movement against the terrible consequences of eating too much fast food. And McDonald's for one, the world's biggest restaurant, has made some healthy, it would seem, changes.
BROWNELL: Right. Those are worth applauding, by the way. I believe those are good moves. But, the question is whether a few good moves like that can begin to make up for the tidal wave of unhealthy inducements to eat. So, McDonald's might spend a little money on promoting salads, but their big sellers are the other foods, in all likelihood. So, something really pretty heroic has to be done and we're just not doing it. But, I love the fact that you mentioned a grassroots, by the way, because the federal government is very slow to react to the problem of obesity and poor diet, in general, I believe because they don't want to tangle with the food industry. And as a consequence the real action is happening in local communities and at the state levels.
SERWER: Kelly, wouldn't, from a practical standpoint, this be extremely difficult? I mean, a lot of Chinese food is worse for you than McDonald's they have salads at McDonald's, as Susan indicated. Is pizza bad for you? How would you practically do this?
BROWNELL: It would be hard if you go food by food, just as you said. The one way to do it would be to take classes of foods that research shows might be related to unhealthy diets, in general, or obesity, in particular, and put a tax on them. Soft drinks and fast foods would probably be the most likely candidates. And by the way there are a number of states, now, that do have taxes already on soft drinks, for example. They tend to be small taxes, but the money goes to building roads or litter control or things unrelated to nutrition. So, the public will accept small taxes on these classes of foods.
CAFFERTY: But, is it the right thing for the government to be doing this kind of stuff?
BROWNELL: We don't know. We don't have evidence to know whether a tax like this would affect the American diet or not. If a tax is attempted, we can then collect information to see whether it affects diet, then people out there in the country can decide whether it's worth the government intrusion and taxes and things like that, given the payoff.
CAFFERTY: All right, we're going to have to leave it there. Professor Kelly Brownell is a professor in child psychology and the director of the Yale Center for Eating Weight Disorders. Thank you for your insight, it's been a pleasure.
BROWNELL: Thank you.
CAFFERTY: All right. When we come back on IN THE MONEY:
I sing the car body electric: Well, not really. When you buy a hybrid there's a lot at stake than just planet earth. We'll look at which models deliver the most buzz for your buck. Who wrote that?
SERWER: Yeah.
CAFFERTY: Also ahead, network news: We'll tell you about Cisco's new quarterly results. See how Wall Street reacted to the numbers.
And getting kids on track to do well in school: We'll talk to an economist who's crunched numbers.
(COMMERCIAL BREAK) CAFFERTY: So you've decided to get rid of the gas guzzler and get "green," as they say. Well, there's a whole host of hybrid cars out there for you to choose from. David Welsh, Detroit bureau chief of "BusinessWeek" magazine is going to give us a little quick course on hybrids. What they cost, what the best ones are.
But more importantly David, and welcome to the show, by the way, are oil and gasoline prices high enough yet to cause hybrid cars to break through and become a significant part of the American automobile market? They sell a -- an infinitesimally small percentage of the vehicles in this country.
DAVID WELSH, "BUSINESSWEEK": Probably not just yet. Gasoline prices are high enough for a lot of people to take note and get interested in them. The fact of the matter is take a hybrid Honda Accord, for example, and even at $2.60 a gallon, which is what some people pay on West coast, it takes six years for to recoup the cost for the car in gasoline prices...
SERWER: All right...
WELSH: So the straight up economics don't really work just yet.
SERWER: Excuse me Dave, one thing I wanted to ask you about is the high-end market. I mean the fact that Lexus has one of these vehicles. Talk about that a little bit.
WELSH: Sure, Lexus has actually -- they're going to come out with a couple of them. The first one will be their hybrid RX330 or hybrid version of the RX330 which they'll call the RX400H. And it's basically their luxury SUV it'll be faster than the regular RX330 AND it will get better fuel economy. They're saying north of 30 miles per gallon when it hits the street. It's got a couple of things that people may like. It's kind of your guilt-free SUV. People can drive it around without some kind stigma of pollutive and it's supposed faster car.
The other one after that is a hybrid version of their ZS430 sedan. And that's supposed to be a really fast car. They're going to use that hybrid technology almost like a performance enhancer, like a turbocharger or something like that. So, you'll get better fuel economy there and it's supposed to be a real boulevard burner.
LISOVICZ: Hey David, I think that's one of the misconceptions about hybrids is they really don't have a lot of kick and they actually might even have more. Can you talk about the Honda Accord hybrid. That's a new one that's coming out, right?
WELSH: Right, it's actually already out and, you know, it's selling pretty well. It is faster than the regular Accord. I think it goes zero to 60 one second faster than your typical Honda accord would, in a bout six-and-a-half seconds or seven, somewhere in there, is what they're saying. And it gives you more horsepower and the fuel economy is better.
CAFFERTY: Toyota, of course, has got the lion's share of the hybrid market. And we're sitting here, once again, talking about Honda and Toyota. These are not American car companies. Where is Detroit? Why aren't they in this game?
WELSH: Well, Ford is. Ford has the hybrid Escape out and it's selling pretty well. And a hybrid SUV is a good idea. Other than that, you're right, the Chrysler group is, you know, it's basically controlled by the Germans now and because, you know, the Germans sell so many diesel cars in their home market, they're a believer that diesel is the way to go. GM has kind of sat on the sidelines. They've been developing systems, they sell some hybrid buses, but they have kind of, you know, made the argument that since the economics don't work for consumers it is tough for them to justify going to market with it. But Toyota's...
SERWER: Yeah boy, it reminds you of what they were saying about economy cars back in the 1970's. We'll keep building these big whales, don't worry about it. Aren't they looking -- isn't GM looking at hydrogen, sort of, they're looking to skip this skep, this step, excuse me, and going on to the next one? Isn't that what their rationale, as well?
WELSH: That was originally their rationale. They've been dragged into the hybrid game because Toyota has been so successful with it. And the Prius is now selling 10,000 a month, which in April was more than GM sold of its Pontiac G6. So, they've been pulled into it, but they are looking at hybrid long-term. And GM is saying that end of this decade or beginning of next they'll have a hydrogen fuel cell powered car that meets all of the retirements that people would want. It will be very expensive for someone to buy, but they're saying the technology will be ready for primetime.
LISOVICZ: David, do you go by those projections that even by the year 2010 that hybrids will still remain a tiny, tiny, single digit fraction of the entire U.S. car market?
WELSH: For the most part, I do and it's not because they won't have demand. There are supply issues still with batteries, and you have to look at how many hybrids are actually coming to market. There will be a number of them by the end of next decade, but many production plants that the automakers have are still pretty modest. I mean you can't sell them if you don't build them. JD Power forecasted hybrids will be about three percent of the market at the end of the decade. They could be wrong, it could a little more than that, but I'd be surprised if it was much more than, say, five percent.
CAFFERTY: Why aren't -- why aren't they doing better? What is it about this country that won't let go of the land cruisers and the hummers and these gas guzzling things when we get bombarded with stories day after day after day about the finite supply of crude oil, the shortage of refinery capacity, yadda, yadda, yadda yadda, yadda? We just don't let go of this stuff. Why not?
WELSH: Well, you know, part of it is maybe just American psychology. You know, we tend to not really change until something really hurts us. Nobody really started going away from big cars, you know, the oil shocks in the 70's and early 80's until there was an availability problem. You're starting to see it on the margin. You know, large SUV sales are down and there are a number of factors contributing to that, but one of them is, you know, clearly the price of gasoline is warding some people away. But Americans won't really change, I don't think, until it gets so expensive or there are shortages and it really, you know, hits them in the pocketbook or they're sitting in gas lines or something like that.
SERWER: Yeah, I think $3 a gallon gasoline would have a lot to do with that, as well. All right, David Welsh, the Detroit bureau chief for "BusinessWeek" magazine. Thank you, for coming on the program.
WELSH: Thank you.
SERWER: Coming up after the break:
Building a bigger pipeline: Networking equipment is hot and that's affecting Cisco's quarterly results. Find out how Wall Street likes the news.
Also ahead, pat the bunny, take 579: Never mind. We'll look at whether reading to your kids can help them do better in school.
And should you call in sick: Trust your feelings young Skywalker. With the new "Star Wars" movie coming out, see how the last two put a dent in office productivity.
(COMMERCIAL BREAK)
LISOVICZ: Now let's take a look at the week's top stories in our "Money Minute." It looks like more Americans are being shy about shopping. April retail sales showed the biggest increase in seven months. Sales of new cars played a big part in the increase thanks to new incentive programs. And clothing stores posted their best showing in two-and-a-half years.
The real estate market is showing no signs of cooling off. Last week applications for new mortgages showed their biggest increase since January. And a National Association of Realtors survey of 136 metropolitan areas showed that a record 66 of them saw double-digit jumps in home prices over the past year; all of this despite rising mortgage rates.
And call it the "Hard Sell": That's the title of a new look by a former Pfizer sales rep that exposes the gifts and favors drug companies give doctors in return for prescribing their drugs. If you don't have time to read, you're still in luck. Author Jamie Reidy is negotiating the movie rights with Hollywood producers.
SERWER: Cisco Systems helped ease some fear about the tech sector this week with a solid earnings report, but the company that makes the technology that keeps the internet running is cautious about the future. At the same time, Cisco is looking to pioneer a new way to expend stock options in a more upfront way. Well.
Cisco shares are trading near their year low and are down about 15 percent over the past 12 months. That makes Cisco Systems our "Stock of the Week."
And, you know, of course, Cisco was one of the banner stocks of the tech bubble, or the tech boom. In fact, at one point around the year 2000 it was the most valuable company in the world, had the biggest market capitalization, bigger than GE, bigger than anybody. It'll be a long time before the stock ever gets to those heights again.
CAFFERTY: The stock never goes up. Cisco stock never goes up.
SERWER: No, it just flat lines for ever.
CAFFERTY: It just went down and it stay -- and never goes up. They had a good earnings report, but then they issue a little cautionary tale about -- but they -- that stock just can't get up.
SERWER: Well, that's because it was so expensive back then. It probably had a PE of seven zillion. So right now, right now...
CAFFERTY: That's a lot.
SERWER: It just has a PE of about 26 -- you know, it's still -- it's still an expensive stock. It still has great growth prospects, but that was mania back then.
CAFFERTY: Sure.
LISOVICZ: Yeah, and one, let's face it, in terms of the options, that's how a lot of people in Silicon Valley became millionaires overnight. And so it's interesting, I don't really quite understand it yet and maybe Cisco just hasn't been forthcoming about this vehicle for pricing stock options, but we all know that tech companies were reluctant to -- yeah, yeah, add them to their expenses.
CAFFERTY: Because it would cause those loft share prices to come down a little bit. It's a much more transparent look at the company's financial situation, sure.
LISOVICZ: That's right and some of them have been eliminating stock options as an incentive now.
SERWER: And John Chambers, the CEO of Cisco, was adamant and upfront about fighting expensive stock options. A lot of people in the markets thought he was a very bad guy for doing that because it really is a little bit of smoke and mirrors, because to say that a stock option doesn't have a cost, then why would an employee want it?
CAFFERTY: Of course.
SERWER: I mean, think about it. Turn it on its head. So there is a cost to it. You saw Bill Gates bite the bullet and do it. Other companies now have to do it and he's fighting it to the end, is one way to look at that, I think.
CAFFERTY: All right. SERWER: And one other thing to talk about, just very quickly, with them, is that they are big in this voice over internet protocol. Internet telephone is something that could be really big for Cisco, I think.
CAFFERTY: Might move the stock up a bit.
SERWER: Yes. That's definitely down the road.
LISOVICZ: You sound hopeful, Jack.
CAFFERTY: Hope springs eternal.
SERWER: Indeed. All right, coming up on IN THE MONEY:
High art for the short pants crowd: If you think taking your kids to museums will make them better students, you better think twice. We'll hear from an economist who says he knows about what really counts.
Also ahead, new waves: GE has faced years of criticism over pollution in New York's Hudson River. We'll look at whether there's a sea change this week.
And no, you can't accessorize a business suit with a lightsaber. Find out whether you're a "Star Wars" geek on our "Fun Site of the Week."
(COMMERCIAL BREAK)
LISOVICZ: If you think a helping of Mozart at dinner or Shakespeare at bedtime will put your kid on the fast track to Harvard guess again. All this culture cramming does not influence a child's development, at least not according to our next guest. Stephen Dubner is coauthor of the new book, "Freakonomiacs." Welcome.
STEPHEN DUBNER, CO-AUTHOR, "FREAKONOMICS:" Hi.
LISOVICZ: You know I'm for one am relieved because I was not playing the violins by the time I was 3, I was not speaking two languages by the time I was 4, I wasn't --
SERWER: Look where you ended up.
LISOVICZ: Working weekends.
SERWER: Yes right.
LISOVICZ: I mean beside the obvious, food, shelter, love, what really matters in a child's development?
DUBNER: Well you know really the basis of the study -- this was a department of education study. What we try to do in "Freakonomics" is take real data and try to make sense of it, and have it tell story not quite what you want it say and not what you think it might say, but what it actually says about what's going on. It turns out what really matters most are kind of who you are as a parent and not what you do.
So if you are -- if you've taken the time to get some education yourself and to build a career yourself and if you've built a family where education is considered an important thing and you kind of set that example you're probably -- your kids are probably going to do pretty well. All the culture-cramming, though -- on the other hand, on the other end of things, TV-watching doesn't seem to turn a kid's brain into mush either. So there's a lot of surprising stuff in the data.
SERWER: Wow, I mean, listen Stephen, I am the father of two elementary-aged kids and, boy, this fight with the TV and IMing on the Internet and all that, I just forget it, I just turn on the TV and let them go.
DUBNER: Just give them a beanbag chair and TV and they're fine.
SERWER: Don't tempt me.
DUBNER: We don't mean to say that, you know, you should let your kids do what they want when they want and so on. There's just a lot you can learn from looking at the data. All we're talking about is how these different factors affect child -- children's early school performance. We're not talking about, like the character of a child. It may be if you like to bring your kids to the museum you know twice a week, twice a month what ever and you like to play baby Mozart in the womb and you like that and that's part of your culture and whom you are, that's great. The point is that parents should love their kids, they should encourage their kids but they shouldn't drive their kid crazy or themselves by thinking that culture cramming is the answer to making smart kids.
CAFFERTY: Where did this idea come from? New York City has taken it to an absolute illogical extreme. I mean we have got people here on staff here at CNN, they are all over the city who race to get their 3- year-old to the best preschool which cost $20,000 a year so they can immediately start translating from the eloign (ph) from Greek to Chinese. It's absurd. And it's not real. The parents of these kids don't live that way. We're talking about a genuineness of who the human being that's raising the child really is. How did we get on this track of culture cramming for want of a better word?
DUBNER: Well, I think that -- you know, what we would call it in "Freanonimics" is kind of two things. One is obsessive parenting and the other is competitive parenting. I think we all see all the time. I'm as guilty of it as anybody. My partner, Steve Web, my writing partner in "Freakonomics" who is an actual economist, he's been looking that the data for a long time. He's smart about it. He now knows and started to convince me. On the other hand, I'm not going to stop doing what I love to do with my kids.
But let me give you a for instance, you take two statistically equivalent children and one of them has 100 kids books in the home and the other has zero. The kid with a whole lot of kid books tends to do better in school than the one with zero books. So we think that makes sense because the kid is being read to by his parents. But then you take two kids, both of whom have a lot of books but one never gets read to by the parents and the other all the time. The one that doesn't get read to doesn't seem to suffer. I say, are these books performing some kind of magic osmosis on the brain? What's going on? Here is the thing those books are not a cause of the intelligence they're an indicator. They indicate that the kinds of parents who have a lot of books in the home probably are smart parents to begin with. They probably got a lot of education themselves to begin with.
LISOVICZ: So you're basically saying you don't have to play the Mozart in utero, right? Basically it's in the DNA, two smart people may well produce a smart child?
DUBNER: Well, that's a lot of truth in that, certainly. As anyone who has ever studied genetic and IQ certainly knows that. I don't think any of us are comfortable saying that's the whole picture. We certainly don't say that either. The point is that the smaller pieces that a lot of modern parents are trying to do -- here's the thing. There's a big privilege gap for sure between well-educated high-income parents and poorly educated lower-income parents. And that gap is real and that shows up in the data.
There's another gap that's really imagined. That's what we're saying. If you're a pretty well set family, you know, you've got some education, got a good solid home and so on, to think that you're going to shove the kid up into the upper echelons by doing these, you know, smaller things that seem to make a big difference, you're probably mistaken.
On the other extreme, spanking is something we might consider an unenlightened thing and if a parent does spanking, that will reflect on the kid's scores, too the study shows that's also not the case. It is really kind of about the environment, the family, the education, and kind of the desire, much less than the actual -- the bottom line is parenting technique seems to be highly overrated when it comes to childhood test scores.
SERWER: I asked the pre K a couple years ago, and I asked this kid's mother whether the little girl wants to have a play date with my daughter and she said no, she has to go to German lessons. I thought that was hysterical. So it is about value and hereditary, is that it?
DUBNER: Values and hereditary. Heredity is certainly a big part it, values I would say is a good word for it. I think that's really it's about accepting the fact that a lot of our outcomes in life are determined by things that have -- are not so obvious. So to think that, like, if I play the baby Mozart while the baby is in utero, that's going to somehow flip a switch in the brain that will shoot the reading and math scores through the roof, that's not the case. You have to think a little bit more complicated, a little bit more long term. The good news is by the time most parents pick up a parenting book, it's too late. Most of what you need to do you've already done and you are a good parent in all likelihood.
LISOVICZ: And that gives confirmation to my parents, they taught me by example and let they me watch a fair amount of TV.
SERWER: Look where you ended up.
LISOVICZ: With Jack and Andy, I've made it. Stephen Dubner co- author of "Freakonomics." Thank you for joining us.
DUBNER: Thank you.
LISOVICZ: There's much more to come on IN THE MONEY. Up next, small world, big money. Find out what makes a corporation decide to care about the planet as well as the bottom line. We'll speak with environmental campaigner Robert F. Kennedy Jr.
And the mysterious illness that makes you sit in a dark room and look at spaceships. See how many workers are expected to call in sick, quote/unquote, when the new "Star Wars" movie comes out.
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SERWER: Even though the Bush administration has not been pushing a green agenda, environmentalists say Corporate America is beginning to come over to their side. Banking giant J.P. Morgan recently said it will restrict lending practices to projects that will contribute to global warming. And this week, CEO Jeffrey Immelt took the lead, announcing his company, GE, will double its research budget for energy and environmental technologies to $1.5 billion.
So why have some companies decided to go green? Is it about doing the right thing, profits, or pr? Joining us to talk more about this is Robert F. Kennedy Jr., who's dedicated much of his legal career to protecting his environment. He's a senior attorney at the Natural Resources Defense Counsel and a founder of the Stopglobalwarming.org. Welcome.
ROBERT F. KENNEDY JR, ATTORNEY, NATURAL RESOURCES DEFENSE COUNSEL: Thanks for having me.
SERWER: Yes, let me ask you, Robert, I mean you've been very critical of GE over the years. And I'm just wondering if you think they've gotten religion to an extent now.
KENNEDY: I think Jeffrey Immelt, like many CEOs today, is recognizing what we've long recognized, which is good environmental policy is 100 percent of the time is identical to good economic policy if we want to measure our economy and this is how we ought to be measuring it, based upon how it produces jobs and the dignity of jobs over the generations and how it preserves the value of the asset of our community. If the only way of doing things was to say, let's treat the planet as if it were a business and liquidation. Let's convert our natural resource to cash as quickly as possible and have a few years pollution-based prosperity, and you can do that, you can generate an instantaneous cash flow, but our children are going to pay for our joy ride.
The problem is that there's a lot of money to be made in pollution and pollution is a way of stealing resources that belong to other people, stealing the common, sort of privatizing the commons. What government need to do is to incentives good behavior in the marketplace and I think that's what Mr. Immelt and many of these other companies recognize that no matter what the Bush administration does, that those rules are coming down the road and the companies that survive in the marketplace are going to be the companies that are prepared to take advantage of those new rules.
LISOVICZ: Robert, so the government thing is one whole separate issue. But just with GE, the fact that GE says it's going to use its technology, it's going to be introducing new products every year, the fact that GE makes everything from jet engines to light bulbs, the fact that it's the most highly valued public company in the world. Would you say that they -- a threshold has been reached at this point, that truly, despite your battles with GE and the Hudson River, that this is a good step?
KENNEDY: This is definitely a good step. And Mr. Immelt should be commended for it. It's something that's caused a lot of excitement in the environmental community. We've seen other large corporations take this same kind of stand publicly, BP, the British Petroleum producer actually changed its name from BP to Beyond Petroleum a couple years ago and has been saying all the right things and I think General Electric, this goes beyond rhetoric. Mr. Immelt is making a commitment for his company producing green technology because he sees that as a good economic choice for the company. It's not philanthropy; it's a good economic choice.
CAFFERTY: You the signs of global warming are just becoming too numerous to ignore anymore. The polar ice caps are melting. Certain species of wildlife being adversely affected. The hydrocarbons in the air are taking their toll. Are we to late to get to this game? Are we on a slippery slope from which we eventually will not recover? Or can this thing be turned around? It seems like such a massive undertaking.
KENNEDY: Well, we're going to have some global warming, but the -- you know, the projections -- there's a wide range of projections. And if the -- at the wider range at the most destructive range, it's really catastrophic. It's the apocalypse. At the least destructive, it's something we can live with. And that's what I think, you know, our governments and the governments of all the world have to start recognizing, we have a responsibility in this generation to take -- start taking real steps and to encourage our industries to take real steps.
And, you know this is free market capitalism. The environmental groups want the free market to work. But pollution is a subsidy. When you show me a polluter, I'll show you a fat cat, using political clout to escape the discipline of the free market and shift his cost to somebody else. That's what all pollution is. It's a way of corporations trying to shift their cost to somebody -- to people outside of their corporations. And what we need are rules that require actors in the marketplace to pay the true cost of bringing their product to market. That's all the environmental laws are meant to do. They're really meant to restore free market capitalism in America.
SERWER: Robert, let me just ask you quickly, you mentioned BP. Is there really a difference between BP, supposed to be a green oil company, and Exxon, which is supposed to not be one? KENNEDY: There's a huge difference. You'll see this one every industry. You know, BP is genuinely -- and you no this isn't saying that BP doesn't have problems because anybody who produces that much oil or any kind of energy is going to impose some kind of environmental cause. But if you look at the institutional culture within the company, you know, Exxon is out there, still, funding think tanks in Washington, these phony scientists -- we call them biaustitutes who stand up there and say there's no such thing as global warming and all this kind of nonsense. That's where their PR is going.
That's what the attitude of the company is, is that we are going to deny this, just like the tobacco companies did about cigarettes, rather than saying -- which is what Synergy, the big coal company, you know, and utility company, and what BP have done, is said, look, we are producing a commodity that is critical to the world economy but it is causing huge problem, catastrophic problems in long run, and what we need to do is figure out ways to burn energy and to provide and to generate a prosperous economy, but at the same time, to reduce our impacts. And I think that's where the environmental community wants to see the business community go. What we need is the business community demanding standards from government. Because if you have good actors in the marketplace like BP, they're going to penalized when there's Exxons out there that racing to bottom, that are dragging down -- you know that take the low-hanging fruit, that are dragging everybody down. It penalizes the good actors, if you allow bad actors to compete against them in the marketplace, using bad practices that lower their costs when the good guy is trying to do the right thing.
LISOVICZ: Robert F. Kennedy Jr., founder of Stopglobalwarming.org, senior attorney with the National Resources Defense Counsel, thanks for joining us.
KENNEDY: Thanks for having me.
LISOVICZ: Up next on IN THE MONEY. May the force be a little less with you? Find out if your fascination with "Star Wars" is getting out hand on our fun site of the week.
And if you can still type while you're wearing the wookie costume, drop us an e-mail. The address is INTHEMONEY@cnn.com.
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CAFFERTY: The final installment of the "Star Wars" movie saga is coming out in the middle of this coming week. And I am so excited. That has lots of experts believing lots Americans will ditch work to go see this thing. Our web master Allen Wastler has more on that and a "Star Wars" fun site of the week. I guess when the first editions of this thing came out, productivity measurably in this country declined. Didn't it?
ALLEN WASTLER, MONEY.COM: Well yes in the latest trilogy, when you look at what happened with the first episode and the second episode, yes you saw a little dip. Of course our favorites, Challenger, Gray & Christmas, they always run the numbers on each event. They do it sort of tongue in cheek a little bit. They figure this one may cost the country $620 million. That's estimating they'll get close to 10 million people going in the first two days the movie's available, Thursday and Friday. Half of those are working people. They came up with that number figuring OK, the average working person makes $130 a day. So, you know, you can argue with that number a lot. Up and down, sideways. And I did a little polling around on the Internet just to see what the buzz was like. There's already a line up the street, ready to go, you know? And still a few days away. They've got their own Website dedicated to it. You're seeing that fanatic buzz --
SERWER: All the "Star Wars" nerds are productive to begin with, because the average --
WASTLER: Hey, can you survive without e-mail and tech support?
SERWER: Say no more. Say no more. My bad, my bad.
WASTLER: I've talked to some fans, though, that said they've been burn by George Lucas twice now. While they'll go and see the move they are not going to do the opening craziness, get dressed up and all that.
SERWER: What was that character that no one liked in the last one?
WASTLER: Jar Jar Binks.
SERWER: Jar Jar Binks, yes.
WASTLER: And the Website's dedicated to his death.
SERWER: Jar Jar Binks.
LISOVICZ: Get a life! Get a life.
WASTLER: Figure, you know, this -- Hollywood needs a hit and they're hoping this will be the hit. Because the movie receipts have been down this year, and they need it to go up. And the franchise, get this, the franchise for all its silliness, over $12 billion it's produced.
CAFFERTY: I have never seen a "Star Wars" movie.
SERWER: Why are we not surprised by that?
WASTLER: Jack, we can help you out with that.
SERWER: Kind of looks like a wookie, doesn't he?
CAFFERTY: I made it to 62 and I'm doing OK.
SERWER: He looks like a wookie?
CAFFERTY: Fun site of the week?
WASTLER: Fun site "Star Wars"-related, OK? You know you're a "Star Wars" geek when --
CAFFERTY: OK.
WASTLER: Let's check this out -- you pass out while trying to move a pencil across desk with the force. You often get your head stuck in a bucket pretending you're Darth Vader. You listen for Obi- Wan's guidance while attempting to parallel park. Those and many more, cute little Website.
SERWER: Do you get those jokes?
CAFFERTY: Yes, I get the last one. Because I have four teenaged daughters who have learned how to parallel park without -- and the results have been mixed.
Coming up next on IN THE MONEY, thanks Allen. A time to hear from you as we read some of your e-mails from the past week. You can send us an email right now if you are so inclined, we are at INTHEMONEY@cnn.com. Back after this.
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CAFFERTY: It's time now to read your answers to our question of the week, about whether you have a contingency plan should you get laid off in the coming months.
One viewer wrote this, " The best contingency plan is to stop working for a company as soon as you can. I'm ready to be self- employed and so should all of your viewer because American companies see their employees as replaceable components."
Dave wrote, "I've been living my contingency plan for the last seven years but it's not working out so well. Since I was forced into early retirement, we've had Enron, 9/11, and now gas prices through the roof. I thought I was bulletproof but I may have to try to find work again.
And Charlie wrote this, "I'm sure most Americans are like me and have no plan to survive if they suddenly are out of a job and can't find work again. It's a good thing President Bush is putting a lot of money into faith-based programs because I really wouldn't have a prayer otherwise."
SERWER: Oh good. Clever.
CAFFERTY: Time now for next week's e-mail question of the week. It's this, will you consider buying a hybrid car in the future? Send your answers to us at INTHEMONEY@cnn.com. And you should also visit our show page at Money.com/inthemoney. That is where you will find the address of our fun site of the week. Take the test; find out if you're a "Star Wars" geek.
Thank you for joining us for this edition of the program. My thanks to CNN correspondent Susan Lisovicz, "Fortune" magazine editor at large Andy Serwer and Money.com managing editor Allen Wastler.
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