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CNN Live Saturday
Interview With Jason Pontin
Aired November 03, 2001 - 17:15 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.
LEON HARRIS, CNN ANCHOR: More signs of economic problems in the U.S. cropped up this week, with word that the jobless rate hit its lowest level in 20 years. Now, some market watchers believe the Federal Reserve Bank may cut interest rates again when it meets next week. But where will the economy bottom out? That is the question.
CNN's Brooks Jackson talked with some laid-off workers who think they know.
(BEGIN VIDEOTAPE)
TEMP HILL, UNEMPLOYED WORKER: How are you doing?
BROOKS JACKSON, CNN CORRESPONDENT (voice-over): Meet yet another victim of September 11: Chicago food service worker Temp Hill was laid off after the attacks, and though he'd worked for the same employer for more than eight months, and though that employer paid unemployment insurance premiums for him the whole time, Hill got zero benefits.
HILL: It hurt, you know? I couldn't believe that I had just fell through the cracks.
JACKSON: Like many states, Illinois doesn't count wages earned during the quarter in which a worker is laid off or in the previous quarter when calculating eligibility. So nearly six months of Hill's earnings weren't counted, and he fell $41.95 short of qualifying for an unemployment check.
HILL: I was denied all the time that I had worked as if it were for nothing.
JACKSON (on camera): Experts say there are hundreds of thousands of jobless workers like Hill getting no benefits because all their wages were not counted. And hundreds of thousands more have been out of work so long their allotted six months of benefits are about to run out, just as the economic downturn promises to get even worse.
(voice-over): Workers like Linda Woods, of Philadelphia, who lost her printing job last may. Her benefits run out in a month.
LINDA WOODS, UNEMPLOYED WORKER: It's tough. I have been looking for a job everywhere.
JACKSON: Congressional Democrats have been pushing to expand benefits: raising payments 15 percent; adding another three months to the time unemployed workers can draw benefits, for a total of nine months; and expanding eligibility to people like Temp Hill by requiring states to count recent earnings. That, they say, is just a matter of fairness.
REP. BEN CARDIN (D), MARYLAND: If you've earned the wages, if you have paid the unemployment insurance fees, you should use the most recent information to see whether you qualify for benefits.
JACKSON: And advocates say expanding unemployment insurance, UI, is one of the quickest, surest ways to stimulate the economy.
ALAN KREUGER, ECONOMIST: Unemployment insurance, over the years, has been very successful in smoothing out the rough edges of the business cycle, and that's another reason why the holes in the safety net need to be shored up.
JACKSON: Business representatives fear expanding benefits now will lead to increasing insurance premiums, which are really business taxes, later.
ERIC J. OXFELD, BUSINESS CONSULTANT: Employers pay 100 percent of the cost of unemployment insurance, and many of the industries that would be hardest hit by higher costs are the ones who are laying people off -- the hospitality industry, the restaurant industry, for example. Those are the industries where there have been significant job losses.
JACKSON (on camera): A showdown could come in the Senate next week, where Democrats propose to put $20 billion to $25 billion of additional benefits into the hands of laid-off workers in the coming year and Republicans favor tax cuts for corporations and high-income taxpayers.
Brooks Jackson, CNN, Washington.
(END VIDEOTAPE)
CATHERINE CALLAWAY, CNN ANCHOR: We're going to take a look now at where the nation's recovery effort stands. And joining us to discuss the economy is Jason Pontin. He's the editor of Red Herring Magazine. He's joining us from San Francisco. Thanks for being with us today.
JASON PONTIN, EDITOR, "RED HERRING" MAGAZINE: Thank you Catherine.
CALLAWAY: Well, we just saw Brooks Jackson's piece. Certainly it would be difficult to argue that we're not in a recession now, wouldn't it?
PONTIN: Well, classical economists say it's a recession if you have two consecutive negative quarters. And we've only had one so far. But I don't think there's a single responsible economist who wouldn't say that the next quarter's going to be even worse. Certainly the unemployment figures are just dreadful; 415,000 people laid off last month. And that's the worst since 1980, as you heard. But it's even worse than that at some levels.
Last month was the first month since 1976 where there wasn't a single initial public offering on the public markets. And there were no venture capital deals last month either. It really couldn't look worse in some ways.
CALLAWAY: Yes, but Jason everyone's saying that it will be.
PONTIN: Well, it's going to get even worse than this. And I think there's a crucial reason to understand this. It's that the American economy really is driven by consumer confidence and consumer spending. It's not a manufacturing-based economy anymore in that sense. And an economy that's already in a dreadful state of disarray, after September 11, has become even worse.
Now, I don't know when consumers are going to feel confident enough to go out and start spending again. At the moment, everyone seems to be hunkered up at home, waiting to see what will happen.
CALLAWAY: So Jason, what to do? You know, we just heard Brooks talking about the possibility of the unemployment benefits in Congress. We're talking about some tax breaks. Is this enough?
PONTIN: Well, I don't think so. I don't think that an additional tax cut is going to go and increase spending. I'm uncertain, to be honest, whether or not cutting interest rates is going to improve things. I think all we can do, I'm afraid, is hunker down for what's going to be a cyclical period.
Now, there are some things we have to do. yes, we have to drop interest rates. Yes, we have to go and put some sort of stimulus package together. But until the American public feels able to go out and buy some new stuff -- and people are trying. There are a lot of zero financing car deals out there -- but you know, it's going to take a while, I'm afraid.
CALLAWAY: And, indeed, we could see interest rates drop next week as we also heard in that piece.
With Christmas around the corner here, holidays coming around, certainly consumer confidence has got to increase a little bit for the holidays?
PONTIN: I don't know. I mean if I -- as I think of myself as a consumer, or I think of my friends, a lot of people are uncertain they're even going to have jobs next month.
In times like this though, you may go out and buy presents, you're going to spend as little as you possibly can. So I don't think the Christmas season is going to go and see the great injection of health that people are expecting.
CALLAWAY: All right Jason, we're running out of time here; but you know, normal recessions last what? Six months? What do you think we could see with this recession?
PONTIN: Oh, gosh. This is deeper than most recent recessions have been. And in the sector with which we are very much involved in the "Red Herring," the technology sector, it even looks like a depression.
I think you're looking through 2002 being at least flat, and perhaps recovery in the early part of 2003.
CALLAWAY: All right, Jason Pontin than you very much for joining us today.
JASON PONTIN: Thank you.
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