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Your World Today
President Bush Pushes Tax Cuts, Rebates to Jump-start Sputtering Economy; How Effective are Economic Stimulus Plans?; Interview With Commerce Secretary Carlos Gutierrez; Airstrikes In Gaza; Engines Failed In Heathrow Crash
Aired January 18, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
COLLEEN MCEDWARDS, CNN INTERNATIONAL ANCHOR: The check's not in the mail yet. The U.S. president pushes tax cuts and rebates to jump- start the sputtering economy.
JIM CLANCY, CNN INTERNATIONAL ANCHOR: Those who want to be the next president agree that something needs to be done, but they have very different plans.
MCEDWARDS: The Israelis carry out a pair of punishing attacks in Gaza. Both target Hamas, but civilians also pay the price.
CLANCY: And this Italian writer says garbage isn't the only thing that stinks in Naples. He says the mob is behind the mess.
It is 12:00 noon in Washington, 7:00 p.m. in Gaza City.
Hello and welcome to our report seen around the globe.
I'm Jim Clancy.
MCEDWARDS: And I'm Colleen McEdwards.
From Naples to Nablus, wherever you are watching, this is YOUR WORLD TODAY.
CLANCY: When times get tough, people often tuck away their cash. Well, now the U.S. government wants Americans to go out and start spending in hopes of staving off a recession.
MCEDWARDS: President George W. Bush just gave his ideas of how to stimulate the economy and stop the troubling downturn that is sending markets into a tailspin these days. Mr. Bush outlined some broad proposals in a speech at the White House, leaning heavily on tax relief as the best way to boost short-term growth. He didn't give a lot of specifics, as negotiations with Congress are still ongoing, on exactly what to do in this stimulus package.
Brianna Keilar is covering the story for us from the White House and joins us now with more.
Not a lot of specifics, Brianna, but a lot of big-picture guidance, saying this has got to be big enough, it's got to be quick, and it's got to hit business as well as consumers. BRIANNA KEILAR, CNN CORRESPONDENT: That's right. These were being called guidance, really, by the White House, not getting too specific. That was certainly intentional on the part of the president, but he was optimistic still about the economy.
He acknowledged there is a slowdown, and he said there are fears that things can get worse. But he emphasized broad-based tax relief, as you said. He said the total stimulus package must be about one percent of the GDP, and he sort of outlined some of the things he would like to see in an economic stimulus package.
Let's listen to some of his suggestions.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This growth package must be temporary and take effect right away so we can get help to our economy when it needs it most. And this growth package must not include any tax increases. Specifically, this growth package should bolster both business investment and consumer spending, which are critical to economic growth.
(END VIDEO CLIP)
KEILAR: Now, everything that you just heard President Bush say right there, those are areas where it seems that Democrats and Republicans and the White House overlap. There is agreement to some degree.
It seems like they can get along on those issues, but there is a concern about something else the president said, and that was that he said he didn't really want to see spending projects. Now, one of the things Democrats have put out there is something -- an idea they are throwing around, is spending projects, increasing unemployment benefits and food stamps. So, coming up here, we're going to be seeing a lot of reaction from Democrats on the Hill, and probably they'll comment specifically on that point -- Colleen.
MCEDWARDS: All right. Brianna Keilar there for us with the story from the White House there.
Appreciate it.
And we're going to hear much more shortly on this. Treasury Secretary Henry Paulson is going to be the president's point man on all of this when it comes to the plan that goes before Congress. Paulson is scheduled to speak just about 10 minutes from now.
That's going to be interesting. We'll have it live. The remarks scheduled for 12:15 Eastern. That's 17:15 GMT -- Jim.
CLANCY: All right. Let's take a look at the Big Board now so you can gauge some of the reaction there. This is the New York Stock Exchange.
You can see the Dow there down 67 points. It's been down more than that, but it's also been up about 150, a little bit earlier in the session.
Investors nervous. One of the top guidance people on Wall Street, if you want to call him that, that manages one of those funds, urging people what to do with their investments, is today telling them all -- get it out, put it in cash.
Well, all of the talk coming out of Washington and from the presidential candidates raises questions. Just how well do economic stimulus plans work? And how will this one work?
We want to explore that now with Daniel Gross. He's business columnist for "Newsweek" magazine.
What did you think, Daniel?
DANIEL GROSS, "NEWSWEEK" BUSINESS COLUMNIST: I would say underwhelmed was my reaction, as was the market. You know, it fell about 100 points during the time he was talking. I think people were perhaps hoping for some more specifics, even though he had said that he was only giving principles.
CLANCY: Is this $150 billion going to help?
GROSS: Well, can't hurt. And if there's one thing Democrats and Republicans should be able to agree upon, even in this contentious year, it's giving money to American consumers.
Yes, 1 percent of GDP, it can't hurt. If you give cash rebates to people or send checks to Americans, by and large, they will spend it. We saw that in 2001 when we had that rebate. It actually worked pretty well in that regard.
The larger issue is, you know, this is treating one of the symptoms, which is the consumer, which has slowed down. But the biggest threat both to the markets and to the economy are these credit issues that involve consumers on the one hand, but also companies.
You know, all the Wall Street firms that have taken these huge writedowns, concerns about these bond insurers going bankrupt, the stimulus package really can't do anything for them. That's something that still has to be sorted out.
CLANCY: The rest of the world is looking on, and we are seen around the globe today. And they're probably wondering just where this economy is headed.
Does this really change anything in the scheme of things, where we were going yesterday, where we'll be going tomorrow?
GROSS: No, I don't think so. You know, one of the fascinating things about this slowdown versus ones in the past is that the U.S., while we are still the largest economy in the world, the biggest customer of all these economies around the globe, we're not quite as big as we used to be.
We're about 26 percent of the globe's economy. We used to be 32, 33 percent. And other economies are still growing quite strong.
You know, economists talk about the concept of decoupling, asking whether the global economy, everybody trading with each other, is decoupling from the United States. And I think in the coming months we're going to see some real tests to that.
CLANCY: All right. Daniel Gross, business columnist for "Newsweek" magazine.
I want to thank you very much for being with us -- Colleen.
GROSS: Thank you.
MCEDWARDS: Thanks, Jim.
And joining us now, Carlos Gutierrez, secretary of the U.S. Department of Commerce, joining us now for more on this.
Mr. Secretary, you know, if you watched what the Dow did in the moments just after the president spoke, it headed on down. We just had an analyst on our air saying this was underwhelming.
CARLOS GUTIERREZ, COMMERCE SECRETARY: Well, I think what the president announced is a broad sense of principles that I think give people a sense of direction and the scope of what he is thinking about. He said 1 percent of GDP, so that needs to be big, it needs to have an impact.
He also talked about it needs to be broad-based, have a benefit on the largest number of people as possible. And also importantly, he talked about the fact that it needs to be temporary and quick. We need to get something out quickly and not have something that dribbles out over time.
Finally, the other thing he said is absolutely no tax increases, and talked about we need to have a stimulus for businesses, and also a way to get cash into consumers' hands through tax relief. I think that is very good direction. And now the details will be sorted out with Congress.
MCEDWARDS: Well, and that's the key, isn't it? The details have to be sorted out. And there are many different views on how this should go about. Let's pick apart a couple of them.
Should there be spending projects, Mr. Secretary? Because that's something that the Republicans and the Democrats disagree a bit on.
GUTIERREZ: Well, again, let's go back to the guidelines. If we say, you know, it has to be temporary and it has to be quick, and we want to do something that goes directly into consumers' hands, the problem with those types of projects would be, how do they fit that? You know, it's not as temporary as we would like, and projects can dribble out over time and not have the impact that we want this to have.
MCEDWARDS: Still though, Mr. Secretary, if you put money directly into the hands of consumers, there is no guarantee that they'll go out and spend it.
GUTIERREZ: Well, what we have seen in the past is that when you have a -- put cash in the hands of consumers through tax relief, that there is a very good probability that they will go out and spend it, and they can spend it on different ways that they decide -- something they may need to do, something they may be holding off on. But we've seen in the past that these types of programs are more effective than spending programs that have an indirect effect.
MCEDWARDS: The president's tax cuts are another bone of contention. They expire in about three years. Some people say they should be permanent, some people say they should not.
What do you think?
GUTIERREZ: Well, I think we've got to look at it realistically and the way it is. If we do not make the president's tax cuts permanent, we are essentially raising taxes. The last thing our economy needs is a tax increase, whether it is today or in 2010.
This is all about being competitive and putting more hands -- more money into the hands of people who invest it or who spend it. So, that -- those taxes need -- the tax cuts need to remain permanent because, if not, we're raising taxes on the American people. And nobody wants that.
MCEDWARDS: Secretary Gutierrez, just characterize, if you would for me, the state of the U.S. economy right now. Where do you see it being at?
GUTIERREZ: Well, you know, as the president said, we've got a solid foundation. This is a very diverse economy, it's very resilient, and we've seen it be resilient throughout the last six, seven years.
MCEDWARDS: How close to a recession? How close?
GUTIERREZ: We are looking at growth. I mean, we have 5 percent unemployment, which is below the average of the last three decades. You know, that's -- we've got to start there. Our experts are strong, business investment is strong.
So, as the president said, we're going to see growth, but it's going to be a reduced rate of growth. We don't want to see it get any worse.
So, preemptively, we're acting now, and he would like to work with Congress to get out a package, a growth package that gets cash into the hands of consumers through tax relief. And also...
MCEDWARDS: Quickly, Secretary Gutierrez, how quickly do you want to see Congress get that package out?
GUTIERREZ: Well, as quickly as possible. The president wants to move now.
MCEDWARDS: Weeks? Months?
GUTIERREZ: As quickly as possible. And it really now all depends on how quickly the president and Congress, through Secretary Paulson, come to an agreement. But this is all about time and doing it at the right time, and doing it quickly, and getting relief into consumers' hands, getting businesses to invest so that we can -- we can prevent the economy from going into the kind of direction that we don't want to see.
MCEDWARDS: Secretary of the U.S. Department of Commerce, Carlos Gutierrez, thank you for talking to us. Appreciate it.
GUTIERREZ: Thank you.
CLANCY: All right. Well, being an election year, Colleen, it could be very quick, indeed.
MCEDWARDS: Yes. Chances may be better.
CLANCY: As Democrats and Republicans alike could see that inaction would cast them in a bad light.
MCEDWARDS: What is the best medicine for the ailing U.S. economy?
CLANCY: Still ahead, the treasury secretary is going to weigh in on that subject during live remarks from Washington.
We'll bring that to you.
MCEDWARDS: Yes, those will be quite telling.
Also, details on the latest salvo between the Israeli military and Palestinians in Gaza.
That and more coming up.
(COMMERCIAL BREAK)
CLANCY: We're going to take you live right now to the White House, where the Treasury secretary, Henry Paulson, is speaking.
Let's listen in.
(JOINED IN PROGRESS)
HENRY PAULSON, TREASURY SECRETARY: ... knowledgeable people in all parts of the economy and reviewed the data with our economic team, and we regularly reported our thinking to the president while he was traveling. When he returned, he made the decision that we need to act quickly to support the economy in the short term.
The long-term fundamentals of our economy are strong, and I believe that our economy will continue to grow. At the same time, the U.S. economy is experiencing a significant housing correction. This correction was inevitable after years of unsustainable home price appreciation, and it is exacting a penalty on our economic growth. We are taking steps to minimize impact on homeowners and the real economy, and we will continue to work with Congress to do more on housing.
The housing correction, capital market turmoil, and high oil prices together have caused our economy to slow materially in recent weeks. While I am confident in our long-term economic strength, the short-term risks are clearly to the downside and the potential cost of not acting has become too high. We must act now to support our economy this year.
The president laid out today clear principles that should guide the creation of an effective growth package. We are focused on working with Congress to quickly reach consensus on a plan that gets cash to consumers and gives businesses incentives to invest, to grow, and to hire. We know from experience that these policies work to stimulate growth in the short term. The package should be robust enough to make an impact this year and should be temporary so that it doesn't significantly impact our long-term fiscal position.
Over the last few weeks, I have consulted the leaders in Congress and a broad group of members of both parties to gather their views. I heard from them the same thing the president heard from them yesterday -- our economy is growing slower than expected, and that means we need to act quickly to put together a package that is temporary, simple enough to get enacted quickly, effective at boosting growth and job creation this year, and large enough to make a difference.
I am confident that the principles the president outlined today are a solid foundation on which to build. They reflect the principles members of Congress have advocated publicly and have discussed with me privately in recent weeks. I look forward to engaging the congressional leaders immediately to support our economy this year.
Thank you. And now we'll take your questions.
QUESTION: Can you talk about the amount of rebate and incentives that the White House (INAUDIBLE)? Would any cash go to people who don't pay taxes?
PAULSON: Well, again, what has been put out is -- are broad and important principles. And a significant part of this is going to be tax relief that will go to consumers.
And we've been talking about a package that is -- that is 1 percent of GDP, so that's in the neighborhood of, you know, $140 billion to $150 billion. And we've been thinking that the biggest portion of this package should be aimed at consumers, taxpayers, and providing them relief.
QUESTION: Can you be any more specific than that?
PAULSON: I think I shouldn't be more specific here. The president intentionally put out guidelines, broad principles, because we're looking to be collaborative in working with Congress here. QUESTION: But folks on the Hill are saying that the White House already has something in mind -- $800 for individuals, $1,600 for families.
PAULSON: As I said, we've done a lot of work, but the president felt, and we strongly agree, that there is strong bipartisan support. And there is a lot of agreement, and it's really -- the areas of agreement are huge.
When you can get leaders on both sides to agree that we should be focusing on something that's temporary, there are a lot of important long-term priorities, differences in long-term priorities. But when they say we want to focus on something that's temporary and something that will be a stimulant, will help growth this year and will work quickly, that's -- those are very, very important areas.
And so what we're doing now -- and I'm not looking to emphasize differences. And we intentionally don't want to be overly specific, because again, we're looking to be collaborative, and there is a lot of bipartisan agreement.
(CROSSTALK)
PAULSON: What?
QUESTION: When you say you want broad-based tax relief, does that mean that you're not open to targeting it towards the middle class or low income people? And also, are you open to things like unemployment insurance extensions, some of these things the Democrats want, aid to the states?
PAULSON: Again, let me say -- and I was expecting questions like this, they are natural questions. I think it's not my job to negotiate this package in this room.
Obviously, I've heard a lot of ideas, and there are a lot of ideas, and those are things I hear discussed. But again, what we are -- what we're focused on is, again, tax relief, quick tax relief to consumers, and then encouraging business, incentivizing business to grow and to hire.
(CROSSTALK)
UNIDENTIFIED MALE: Excuse me. Just to add to that, there are two major parts of the economy that we have to deal with, the consumption side and the investment side.
Consumption is important, of course, because it is the major component of GDP. It's 70 percent of GDP. But in addition to that, investment is extremely important, not only because it is a significant part of GDP, but also because investment is the way that we create demand for labor, and demand for labor means more jobs and more wages. And that's the reason that we have to focus on that side as well.
QUESTION: (OFF-MIKE) broad-based tax relief means for everybody, or can you just explain what that term means?
PAULSON: Well, the -- again, the president, again, is focused on broad-based tax relief for those who are paying taxes. And that's -- that was the principle he laid out. This is something that has worked well before, has worked in 2001, worked in 2003 -- get to consumers, put money in the hands of people, letting them spend it rather than the government spend it.
Yes. Let me get -- I don't want to get all the front row.
(CROSSTALK)
QUESTION: Can you just say the neighborhood of $800 that's coming from the Hill? I know you don't want to be specific, but does that sound like something in the neighborhood you might find reasonable?
PAULSON: I don't want to play is it bigger than a bread box or whatever.
QUESTION: Well, you know...
PAULSON: I know that -- I would just simply say, I heard the rumors out there. I know those numbers are out there.
The -- what the president said today is he laid out guidelines. And again, what we're trying to do is we want to be open, collaborative, not have too much specificity while we're working on a collaborative basis with Congress to work out the details.
(CROSSTALK)
QUESTION: ... Social Security as a form of payment, a $250 check for Social Security, one time? Are you guys looking at anything like something for elderly people on fixed incomes?
PAULSON: We've looked at a lot of things. We believe that there's a great benefit to being simple.
You know, the Christmas season has come and gone. We're not trying to decorate a Christmas tree here.
A huge part of this is going to be speed. It is going to be getting money out quickly. And we'll make a difference. And if we can stay broad-based and simple, we'll be able to be quicker and be able to have a bigger impact on the economy sooner.
UNIDENTIFIED MALE: Can I just add to that?
Excuse me. May I just add to that?
There are many noble goals, and there are many things that we want the government to do, many programs that have been important and effective. But remember that the goal that we are thinking about right now is to ensure that the economy does not slow significantly. We're trying to make sure that growth is enhanced, and that people who would not otherwise be working will be working. So our primary focus is on that, and not on thinking about ways to distribute and take care of different needs, albeit those needs, perhaps, particularly important. We believe this is what we are talking about right now, and that's growth.
PAULSON: I have to -- Corbett (ph). I have to recognize one of my own.
QUESTION: Thank you.
I just wanted to ask you, you said the goal seems to be about speed. And I'm wondering -- there seems to be a love fest here in Washington which is pretty rare over this stimulus package. But what are your thoughts about when it gets to the Senate?
Senator Reid is not quite maybe on the same page as everybody else. And if you're worried about it slowing down once it gets to the Senate.
And secondly, without getting into the specifics, the principles mean that you want everybody to get a tax cut? I mean, tax rebate? Excuse me. That was very important for the president in 2001.
PAULSON: First of all, Corbett (ph), I would say that I had talked before the call yesterday with all of the leaders. I talked with them after the call.
What I heard before the call, during the call, and after the call was an emphasis of the things we agree on, wanting to be collaborative from every one of them, wanting to work together in a bipartisan fashion. Everyone recognizing that the most important need were the American people, the economy, the need to do something quickly, and sticking to the principles we talked about. So I would say that.
And in terms of the other question, I've answered that several times.
QUESTION: Yes, Mr. Secretary, how confident are you that this is actually going to make that much difference in the economy at this stage of the game? You know there's economists out there that point to the track record, historical track record of the fiscal stimulus in question. These kinds of principles will make that much difference in a $14 trillion economy?
PAULSON: I'm going to go to Ed in a minute, but I just want to say that's why the president wants to do something that's meaningful, that's robust, that will make a difference this year.
There are no silver bullets. There's nothing that's perfect. But to be quick and to focus on the areas we've mentioned, to give money to consumers -- there's plenty of evidence, you give money to people quickly, they're going to spend it. And they're going to spend a reasonable percentage of that. We've got good basis for that looking at 2001 and 2003. And of course, when you look at putting incentives in place for businesses to invest quickly, and grow and hire people, that will work.
So the -- remember, what this focus is, is to boost the economy, support the economy this year, give us growth this year, give us more jobs this year. It's -- it won't be perfect, but again, the key in my mind is being simple and being quick.
UNIDENTIFIED MALE: I would just to add to that, that's the main reason why we feel that it's very important to focus on those components that are growth-related rather than other goal-related.
We've looked at this. We've done some scoring. Obviously, this depends on what the actual program looks like, and that will evolve as negotiations go through.
But some of the things that we've looked at we believe will be quite significant, both in terms of the historical perspective and also in terms of the number of jobs that we will create relative to what would have been the case in the absence of these programs. That's the most important thing.
QUESTION: (OFF-MIKE)
PAULSON: I've never seen so many (INAUDIBLE).
OK. The lady in the back.
QUESTION: In terms of...
PAULSON: This is almost like India, where they were...
QUESTION: I have a question on India.
(LAUGHTER)
PAULSON: It's a great country.
QUESTION: In terms of long-term growth, a lot of people are saying it's because the manufacturing base is gone. Where do you see in the next two to three years long-term growth, what sectors in this economy?
PAULSON: Well, let me start -- I want to give you more detail than you want on the manufacturing base, because I would say it's fascinating when you look at it. You may not know it, but who is the largest manufacturer in the world? The U.S., by a lot.
It's fascinating. And when I've looked at the data, in 1950, we had about 30 million -- manufacturing jobs in the U.S. were about -- were about 30 percent of the country then, and there were about 15 million manufacturing jobs. OK?
Today, we've got the same 15 million manufacturing jobs, and there are about 10 percent. But the output has gone up seven (ph) times over that period, and our manufacturing base is two and a half larger than China, it's bigger than Japan, it's bigger than Germany. This is a story about automation.
And I would say to you, we have a broad-based, diverse economy in the U.S. And when people think of services, they very often think, well, gee, those are low-quality jobs, et cetera. There are many high-quality, high-paying service jobs in many sectors. So our economy is more diverse, stronger, more -- you know, I've traveled all around the world, and I will tell you, the more I'm outside of the country, the more I see that even though we've got our problems, I would put us up against any country in the world in terms of our economy and our ability to compete.
QUESTION: But what areas do you see the growth?
PAULSON: Well, areas to grow, well, first of all, exports are growing -- growing very quickly right now -- I mean, growing faster than imports for some time. So that is an area that's growing.
And again, there are good -- we have growth. When you look at our economy, we grew at almost five percent in the third quarter. And we've had a headwind in terms of housing for some time. We've got a headwind now in terms of energy prices. We're concerned and we're looking at the risk to the down side and we're all over it. But again, this economy, in my judgment, is going to continue to grow, albeit at a slower rate. And that's what we're focusing on.
QUESTION: How many jobs would this stimulosus create? How many jobs? You've got an estimate.
PAULSON: Well, we sure looked at numbers. It depends on which one. But the kinds of numbers we were looking at was half a million jobs more or less this year and then carrying over into next year.
EDWARD LAZEAR, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: Let me just qualify that. That's half a million jobs more than would be the case were we not to enact these kinds of programs.
PAULSON: That's right.
QUESTION: None of this addresses housing, which you keep saying is the most significant downwind. What other steps are you considering taking to help troubled borrowers? What other steps does that include? Modifying the standards from Freddie Mac, Fannie Mae? What else are you going to do for the housing sector?
PAULSON: Just let me be clear on that because this is something that the president directed us to get going on a long time ago. And we have a very important program that put out, I think, some very encouraging data today, which is a (INAUDIBLE).
So that program, which brings together the industry to deal with the subprime mortgages, whose rates are being reset, and there's going to be 1.8 million mortgages where their rates will be reset over the next two years. We have a big effort there to prevent a market failure essentially and avoid preventable foreclosures. And you're going to see -- continue to see data and metrics as we come out as to how we're doing there. Now that's one.
Now, second of all, as our president said today, that we have a proposal, FHA modernization. The Senate's passed it. The House has passed it. Now we need to get it out of conference and so the president can sign it. That's one.
Another proposal we have is that we would like to, on a temporary basis, raise the conforming loan limit for the GSEs, Fannie, Freddie and so on so that they can be active and securitizing in the jumbo market. But we want to do this as a part of fundamental reform for those agencies because they need a strong, independent regulator.
We also have a legislative proposal to raise the limits on the amount of tax-exempt financing states and localities can use to help this industry and help in the mortgage area. And so we'd like to do that and give them more flexibility. The current law only lets them use their powers for first-time homeowners. So we've got those.
But, the key part of your question really is the biggest -- the biggest issue we have in our economy is housing and consequently why is it that what you're talking about is a broad-based, general growth plan, not something that is aimed more directly at housing. And the reason is, is we've been open to any good idea we've heard. And we just haven't -- we're focused on what we think are the right ideas.
This market needs to correct. We've had unsustainable growth for some period of time. We're not trying to prolong that. It needs to correct. So what we're trying to do is to provide help to the rest of the economy and to the economy more broadly to help it better withstand and weather the effects that are coming about largely as a result of this decline in housing prices and the housing slump.
CLANCY: All right, Henry Paulson, the Treasury secretary there, alongside Edward Lazear, the chief of the Council of Economic Advisers there from the White House. A basic message supporting what we heard from President Bush a little bit earlier, and that is, whatever you're going to do with the economy, do it soon, do it quickly. A message to lawmakers.
But we've got a broad outline of the plan. And it would look as though rebates or cash checks to taxpayers might certainly be in the offing. What it exactly means, well, that's going to be decide by the lawmakers on Capitol Hill.
Take a look at what 2001 looked like. There were $300, $600 tax rebate checks that were sent out. Twenty to 40 percent of the checks were spent within a matter of days. Consumers saved about a third of the money they received in those rebates. And also, two-thirds of the rebates entered the economy within two quarters.
Now they're not just talking about rebates. They're also talking about incentives for business, tax relief for business. But the shape of that far less clear -- Colleen.
MCEDWARDS: All right. Let's see how the markets are reading this. Susan Lisovicz is standing by. Susan, you hearing anything yet from people there? What do they think?
SUSAN LISOVICZ, CNN CORRESPONDENT: Well, I happened to be standing on the trading floor when the president first spoke about his economic stimulus plan. And I'm not going to say that it was a direct response to it, but the market did start selling off. And I say that it might not -- that may have just been a coincidence because the rally had been fading already.
I think what you can certainly take away from it is that he certainly didn't -- his comments, brief and pretty broad -- I mean there wasn't a whole lot of detail there -- didn't bolster the economy or bolster the market sentiment. The market sentiment clearly is decidedly negative. Check it out right now. The Dow Industrials have come back from their lows.
And perhaps one reason why is that the Treasury secretary, Hank Paulson, is somebody who should understand the economy pretty well. He used to work right down the street from the New York Stock Exchange as head of Goldman Sachs, the bank that has best survived this credit crisis. And he provided a lot more details. But the fact is, is that sentiment overall is decidedly negative.
And I just want to mention one thing that's come out in the last hour. That is a "Fortune" magazine poll. That is one of our corporate cousins. And it did a survey just this week and it said that more than three out of four Americans this week said that the U.S. economy is in a recession or will go into a recession this year. And more than half of those polled said they've cut back on their spending.
And that's the worst part of that. Because if Americans cut back on their spending, the perception becomes reality. The fact is, the U.S. economy needs consumers to continue their spending. That is the engine of the world's biggest economy. And all this bad news that we are reporting, understandably, can contribute to their sentiment as well. But that's why the government is talking about rebates and tax cuts and so on, to keep the economy going.
MCEDWARDS: Yes. They've got to be quick and they've got to be big. So we'll see what happens.
Susan Lisovicz, thanks for that reaction there. Appreciate it -- Jim.
CLANCY: All right. We're going to continue to cover the economy for you, but we want to bring you up to date on another headline story this day developing right now in Gaza. Bloodshed and border action. Israel retaliating for Hamas rocket fire into their territory. The Israeli foreign ministry is confirming now there were two air strikes carried out in Gaza and more measures were taken at border crossings.
Let's get details by going live to Jerusalem and our own Ben Wedeman -- Ben.
BEN WEDEMAN, CNN SENIOR CORRESPONDENT: Yes, Jim.
There was a massive air strike on a building, apparently formally used by the interior ministry in Gaza City. In that case, approximately 60 people were injured, according to Palestinian medical sources, including children. In addition, one woman in her 50s was also killed.
There were other air strikes around Gaza today. And this is really the culmination of a week of mounting violence between Israel and the Gaza Strip. Israel says the reason for these operations, the reason for these air strikes, is to stop the firing of missiles from Gaza into Israel. More than 200 missiles and mortars have been fired from Gaza into communities -- Israeli communities around Gaza since last Tuesday. And we see that the pressure, the political pressure, is mounting on the Israeli government to take dramatic action to stop the firing of these missiles.
What they did do earlier today, earlier Friday, was announce that all the crossings from Israel into Gaza would be closed. That means people and humanitarian goods will no longer be allowed to leave Israel, to go into Gaza. Approximately 80 percent of the population of Gaza, 1.5 million people, are dependent on food aid, international food aid.
Now Israel says this measure will be in effect until further notice. The U.N. in Gaza tells us that they have enough supplies to feed Gaza for the next two months. But, obviously, this is just the latest measure by Israel to try to pressure Gaza to stop these rockets from being fired from Gaza into Israel -- Jim.
CLANCY: Under all of that pressure, Hamas. Your own outlook, Ben, will it work? Will it stop the missiles?
WEDEMAN: Well certainly we've seen in the past, Jim, that there have been instances where Hamas and other militants in Gaza have fired lots of rockets into Israel. Israel has responded with a sort of dramatic operation. And eventually it reaches the point where both sides agree, not on paper, but an unwritten -- in the sense unspoken agreement -- that they will halt operations. That Hamas and other militants in Gaza will stop the firing of the missiles if Israel stops these retaliatory operations.
It happened in November 2006. It lasted for a few months. And the expectation is that the current round of attack and counterattack may well end with a similar sort of arrangement. But certainly the problem is that the political dynamic is such that the pressure is mounting on the government here to do something.
And there's a lot of talk. There's been quite a lot of talk in recent months about the inevitability of a major Israeli incursion into Gaza. But there's hesitation on both sides because there's a realization that there will be very high casualties on both sides if such an operation is mounted -- Jim.
CLANCY: All right. Ben Wedeman with some analysis there for us. An explanation of what's going on, on the ground. What's behind it. Ben, as always, thank you.
MCEDWARDS: We have got some new information we're getting in, new reports right now that we want to bring to you right away on the investigation into that crash landing of this British Airways jetliner, a 777. The British Press Association is reporting that the two engines on this plane failed to respond to an increase thrust a couple miles out from landing. That the pilots tried to increase thrust, the two engines did not respond.
Again, this is according to the British Press Association. The association is quoting from an initial report from the air accident investigation branch, the branch that's looking into what happened here. We heard earlier, you know, that they had ruled out any kind of pilot error. And we, in fact, heard from the pilot a short time ago talking about how well the crew responded to this.
Clearly the focus on any kind of mechanical issues and our first indication of that coming from the P.A. wire say that the two engines on this 777 did not respond. There are a lot of these planes in the sky. So, of course, this is going to be something interesting and it will be interesting to see how much more detail we get on this. So keep it right here on CNN. We'll have more as soon as we get it.
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CLANCY: Hello, everyone, and welcome back to YOUR WORLD TODAY.
We continue to follow yesterday's very disturbing crash of a 777 Boeing jetliner at Britain's Heathrow Airport. CNN has now confirmed details that indicate that this jetliner came down from about two miles out on approach for a landing. The pilots tried to increase the fuel, the thrust, to its engines. The engines failed to respond.
That was the beginning of what turned out to be a crash in which miraculously no one was killed. There were some minor injuries though. We're going to have a live report coming up here in a matter of minutes to bring you all the details of that -- Colleen.
MCEDWARDS: And we have been covering economic issues as well because we've heard from the president, we've heard from the Treasury secretary on the troubling U.S. economy. And, you know, it is very much on the minds of American voters this presidential election season as well.
Candidates on the campaign trail focusing more and more on this subject and they are coming up with their own ideas to try to stimulate the economy. Let's take an example now of economic proposals put out by the top three Democratic candidates.
Hillary Clinton's idea is to offer $40 billion in tax rebates to individuals, provide assistance for home heating costs, and give money to states and cities hurt by the housing crisis. Barack Obama would also provide housing assistance, but also give about a $250 tax cut for 150 million workers and another $250 to senior citizens by way of Social Security. Now, John Edwards, for his part, he would extend unemployment benefits, he would invest in clean energy, he would also provide assistance for homeowners who are facing foreclosures. Each plan would cost between $100 billion and $120 billion.
CLANCY: All right. The economy, also a hot topic on the Republican side. As Dana Bash reports, John McCain now unveiling his own economic stimulus plan. And he isn't alone.
(BEGIN VIDEOTAPE)
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT, (voice over): Just before this South Carolina primary he needs to win, it's clear what John McCain learned from the Michigan primary he lost focus on the economy.
SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: Obviously we're seeing the news. We're seeing the concerns that people have out there.
BASH: Unveiling a new economic stimulus plan.
MCCAIN: I will cut your taxes. I will encourage the growth. I will eliminate the wasteful and unnecessary spending.
BASH: Specifically, McCain says he would lower the corporate tax rate, allow a tax write-off for equipment and technology investments, establish a new tax credit for research and development. McCain has stopped warning voters that lost jobs are not coming back. That didn't work in Michigan. Now, it's optimism.
MCCAIN: This is still the most powerful and greatest nation on earth. We are the greatest innovator, the greatest exporter, the greatest importer, the strongest economy.
MITT ROMNEY, (R) PRESIDENTIAL CANDIDATE: I will be releasing soon my economic stimulus plan to give the economy a short-term boost.
BASH: In a hurried appearance before he left South Carolina for Nevada, Mitt Romney promised he'll soon announce an economic plan of his own.
ROMNEY: I do believe it makes sense for Congress to take immediate action. The consequence of the economy falling into recession is one which can be calculated in large numbers for the government, but in very important, heart-felt changes for the families of America.
MIKE HUCKABEE, (R) PRESIDENTIAL CANDIDATE: I want to say to you, I was probably the one candidate, particularly in my party, who started saying that we had some economic challenges.
BASH: As for Mike Huckabee, no talk of stimulus, just "I told you so."
HUCKABEE: Now, a few months later, all of them are saying, boy, we've got some economic challenges. Well they'd have known that a little bit ago if they'd have gotten out of Washington and out of the ivory towers.
BASH: As for Senator McCain's economic stimulus plan, his campaign says it would ultimately cost at least $50 billion. When asked how he would pay for it, Senator McCain said he would cut pork barrel spending. No surprise there since he's been trying to woo conservatives, especially here in South Carolina, by preaching fiscal restraint.
Dana Bash, CNN, Columbia, South Carolina.
(END VIDEOTAPE)
MCEDWARDS: Much more to come here on YOUR WORLD TODAY. We are following some major developments into the investigation of that crash at Heathrow.
CLANCY: We'll have a report in just a moment. Stay with CNN.
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MCEDWARDS: Back now to another breaking story. We are covering some new information about what may have caused that crash of the airplane at Heathrow Airport. Phil Black was there earlier. He's on his way back, actually, but we've caught him on the way.
Phil, what's the latest on this?
PHIL BLACK, CNN CORRESPONDENT: Hello, Colleen.
Yes, Britain's air accident investigation branch has released its preliminary report into the accident at Heathrow Airport Thursday afternoon that saw a British Airways Flight 38, that Boeing 777, slam into the ground just short of the airport's southern runway. And it fills us in, gives us a few more details of what happened in those few seconds before that strong impact.
According to this report, it says that Flight 38 was lined up for landing on that southern runway. It was flying with auto pilot and auto throttle at about 600 feet, approximately two miles out from the airport. That auto throttle asked for an increase in thrust from both engines. It didn't happen.
Further attempt to bring on thrust manually from the crew on board the flight by using the lever, that didn't work either. And, as a result, the plane descended very, very quickly. Eventually striking the ground just within the perimeter there, within Heathrow Airport, just short of that southern runway.
Now this fits roughly with the reports and with witness reports from what they have seen. They say that the aircraft was traveling very low. We understand that the pilot said that he lost power on that final approach.
And now the big question is, how and why did this happen. The investigative branch says that it is looking at the cockpit voice recorders, the black box flight data recorders, examining that information (ph), as well as recording information from other systems within the aircraft that could, in some way, have influenced the engines' ability to thrust, to bring on that extra power that that aircraft needed there -- Colleen.
MCEDWARDS: All right. Phil Black bringing us the latest there. Again, CNN confirming this. Phil Black confirming the preliminary report is out. It indicates there was a lack of response to the engines being asked to thrust, to bring more power to those engines, and that is what led to this crash. And we'll bring you more information just as soon as we get it -- Jim.
CLANCY: Well, surveying the news from the economy, to what's happening right now in Gaza, to Heathrow Airport, not a lot of good news today. But might be worth noting here at the end of our report that humor is going to be playing an important part of the Sundance Film Festival this year. At least that's the word from the festival's founder, you know him, actor/director Robert Redford. The 10-day event is going on right now in Park City, Utah.
Let's go there. We're joined by entertainment correspondent Brooke Anderson. Cheer us up a little bit. The news hasn't been good.
BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT: I know. Well, I'll try to do that. It's a winter wonderland here, Jim.
I'm at the Treasure Mountain Inn in Park City, Utah, for the Sundance Film Festival. It's really considered the premier festival for showcasing independent film making. Quentin Tarantino, Kevin Smith, also Michael Moore launched their careers here. And as you mentioned, yes, Robert Redford has led the effort for more than two decades here.
I spoke with him and he told me that the writers strike that's currently going on could benefit Sundance this year due to the halt in Hollywood production with more film acquisitions here. Listen to this.
(BEGIN VIDEO CLIP)
ROBERT REDFORD, FESTIVAL FOUNDER: You know, you just don't know what's going to happen. And that's the part I like. It is very, very unpredictable. It's full of surprises. But I think -- I guess, theoretically, yes, I would imagine because of the strike, because of the climate, because of the nature of our business right now, that it would be probably something of a buyer's market.
(END VIDEO CLIP)
ANDERSON: And a number of films have already been picked up for distribution. We're only in day two of the Sundance Film Festival. One of those movies is "The Black List" from former "New York Times" movie critic Elvis Mitchell.
Now the film that opened the festival last night is called "In Bruges" staring Colin Farrell and Brendan Gleeson as two hit men who take a break in Bruges, Belgium. I'll be speaking with them live in the next hour on CNN.
Another movie here that's getting a lot of buzz is the documentary "Where in the World Is Osama Bin Laden?" This humerus film documents filmmaker Morgan Spurlock's journey as he tries to find Osama bin Laden. I spoke with him and I asked him how he lightened up such a heavy topic. Listen to this.
(BEGIN VIDEO CLIP)
MORGAN SPURLOCK, DIRECTOR: That's a good question. Because I'd like to think that, you know, "Where in the World Is Osama Bin Laden" is the funniest movie ever made about terrorism. But we'll see. The jury's still out on that.
You know I think that, you know, for me, I just went into this whole journey, this whole trip of making this film, just trying to be myself and to try and really find real people and have real conversations with people and funny things come out of those situation. Funny things usually come out of the worst situation.
(END VIDEO CLIP)
ANDERSON: And Spurlock was here four years ago with his acclaimed documentary "Super Size Me." You may remember that. Jim, I'll have more with Spurlock on "THE SITUATION ROOM" with Wolf Blitzer later today.
CLANCY: All right. Brooke Anderson there in Park City, Utah, thank you very much.
A little bit of humor injected there.
MCEDWARDS: Yes.
That's it for this hour. I'm Colleen McEdwards.
CLANCY: I'm Jim Clancy. Don't go away.
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