Return to Transcripts main page

CNN Live At Daybreak

Economy's Ebb and Flow Impacts Rural America

Aired September 03, 2001 - 07:23   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.
VINCE CELLINI, CNN ANCHOR: Well, after a dismal week on Wall Street, many are hoping stocks will rise after a dark summer.

As CNN's Brooks Jackson explains, the ebb and flow of the economy has a real impact on grassroots America.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): President John F. Kennedy said it in 1962.

JOHN F. KENNEDY: FORMER PRESIDENT OF THE UNITED STATES: A rising tide lifts all the boats.

JACKSON: Kennedy meant that an expanding economy, the rising tide, is good for everybody, for rowboats and rich yachts alike. That view lost favor in the '70s and '80s, as runaway inflation and double digit unemployment gave way to high times on Wall Street while incomes for many workers stagnated. For many, the rich seemed to get richer and the poor poorer. And then came the roaring '90s, the longest economic boom in history.

And now the rising tide theory is looking good again, or so Princeton economist Alan Krueger says in a scholarly paper written with two colleagues.

ALAN KRUEGER, PRINCETON UNIVERSITY: As we suspected from the past, when the economy is expanding, a rising tide seems to lift all boats. It seems to help the disadvantage at least as much as the advantaged.

JACKSON: The rising tide of the '90s lifted millions out of poverty. The official rate declined to the lowest in 20 years and maybe the lowest ever when the year 2000 rate is reported in September. And since the last recession, the unemployment rate has dropped even faster for high school dropouts than for college grads. Rowboats gained more.

Wage rates gained rapidly at the low end, too, as one might expect. But a surprising finding it this. With booming sales and fatter paychecks generating more tax money, governments became more generous with social spending, even as fewer people needed help.

KRUEGER: What we do tend to find is that even social welfare spending, spending on public hospitals and so forth, tends to rise when the economy is expanding and that helps people who are out of the labor market. It helps people who are not participating.

JACKSON: Example, this North Carolina daycare center, where one third of parents now get state aid that was not available before 1993. State and local government welfare spending of all sorts was up 25 percent between 1992 and 1996, the latest Census figures available. Spending for hospitals and health rose 26 percent, faster than spending for everything else, including highways, education, police.

The tide still flows unevenly. The author's own evidence shows some boats rose more than others. In the bottom fifth of households, workers saw incomes go up 15 percent after inflation. But those at the top gained 25 percent. The yachts rose faster.

And the same is true of a very unconventional economic measure, violent crime. Rapes, robberies and assaults dropped sharply as jobs became plentiful and incomes rose. During the boom, the violent crime victimization rate dropped 29 percent in the lowest income households. But crimes against the highest income households dropped even more rapidly, down 46 percent. Yachts did better again.

(on camera): Now that the economy is struggling some boats are leaking. Since last year, low wage workers in the hardest hit states have not kept up with inflation, reason enough to hope the slack tide starts rising again soon.

Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

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