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Lou Dobbs Tonight
Independents Day: Awakening the American Spirit
Aired January 22, 2008 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is a special edition of LOU DOBBS TONIGHT, "Independents Day: Awakening the American Spirit."
Live from New York, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening, everybody.
Independent voters concerned about our slowing economy and looking for political leadership, they will play a critical role in this presidential election. The Bush administration presenting a plan for an economic stimulus package, at least the broad outline of a plan, and the Federal Reserve today cutting key interest rates by three-quarters of a percentage point. That is the biggest cut in interest rates by the Fed in nearly a quarter century.
Presidential candidates offering their own proposals to help this economy move ahead, but none of the candidates, Democratic or Republican, has so far presented a plan to tackle the root causes of our economic crisis. We will have extensive coverage tonight throughout this broadcast.
We begin with Christine Romans.
(BEGIN VIDEOTAPE)
CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): It was a stark admission the economy is in trouble, the most dramatic action from the Federal Reserve since 1984, a rare emergency rate cut, the first since the terrorist attacks of September 11, 2001.
The treasury secretary called it a signal to the rest of the world.
HENRY PAULSON, U.S. TREASURY SECRETARY: Our central bank is nimble and is able to move quickly to respond to market conditions. And I think that should that should be a confidence builder.
ROMANS: The Fed explained its action with a foreboding list of challenges, a weakening of the economic outlook, increasing downside risks to growth, a deepening of the housing contraction, softening in labor markets.
UNIDENTIFIED MALE: The Federal Reserve did not really know just how severe the economic crisis was in this country.
ROMANS: Economist Bernard Baumohl says, for too long, policy- makers ignored that this is no garden variety recession, instead a rapid deterioration of the international financial system, something that apparently caught the Fed by surprise.
Federal Reserve Chairman Ben Bernanke last May:
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We do not expect significant spillovers from the subprime market to the rest of the economy or the financial system.
ROMANS: But that proved wrong. Credit markets have frozen up. And bad subprime bets have cost the banks some $100 billion.
Meanwhile, the president remains a cheerleader on the economy, even as he pushes for fiscal stimulus soon.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I believe we can find common ground to get something done that's big enough and effective enough so that an economy that is inherently strong gets a boost.
ROMANS: The president most of last year called the economy vibrant and strong, before noting storm clouds just a few weeks ago.
(END VIDEOTAPE)
ROMANS: Today, the president's chief economic adviser said the White House is not forecasting a recession. But the market is not so convinced. It is predicting another rate cut by the Fed when it has its official meeting next week at least another quarter percent age point. Those markets, Lou, are reflecting many more rate cuts, in fact.
DOBBS: And in point of fact, those -- the stock market as well as the bond market also indicating a significant slowdown in this economy, without question.
ROMANS: That's right.
DOBBS: Christine, thank you very much -- Christine Romans.
Presidential candidates of both parties quick to present their own ideas to solve this nation's worsening economic problems and to avoid a possible recession. But none of the candidates is offering a solution to the long-term structural problems that face this economy.
And, as Casey Wian now reports, that could be one more reason for an independent presidential candidate to join in this campaign.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): Democratic presidential candidates wasted no time blaming President Bush for the nation's economic turmoil.
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: We have not made the kind of progress that we need in having a balanced economy. And George Bush has made it worse. SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: We're in danger of seeing millions of Americans become basically homeless and losing the American dream.
JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: The rich are getting richer and we have added five million people to the poverty rolls in just over the course of the last seven years.
WIAN: Republicans, however, are sparing the president and trumpeting their own credentials.
RUDOLPH GIULIANI (R), PRESIDENTIAL CANDIDATE: Of all the people running for president of the United States, I have had the most experience in turning around a government and in turning around an economy.
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We have got to restrain spending. Otherwise, we will continue to have to borrow money from the Chinese.
MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: When things like this occur, it points out just how important it is to have a president who actually has had a job in the private sector becoming our next president.
WIAN: That argument may work in the primaries, but it will be a tough sell in November's general election.
JOHN GEER, PROFESSOR, VANDERBILT UNIVERSITY: It will give a huge advantage to the Democrats if the economy continues to struggle. Just think back to 1980 and what Ronald Reagan was able to do against Jimmy Carter. It's a big plus for the out party if the economy is in trouble.
WIAN: A recent CNN/Opinion Research poll shows the economy is the most important issue in this year's election. Most candidates are proposing short-term economic stimulus plans, which is part of the problem, says New York City Mayor Michael Bloomberg, who is considering an independent presidential run.
MICHAEL BLOOMBERG (R), MAYOR OF NEW YORK: In politics, winning elections and protecting a party majority is more important than solving problems. And short-term pork invariably wins over long-term investing and special interests win over the rest of us.
WIAN: Come November, Bloomberg's independent message of job creation and economic growth through infrastructure investments could attract voters weary of traditional party politics.
(END VIDEOTAPE)
WIAN: And weary of traditional solutions to complex economic problems, such as trade and budget deficits, jittery financial markets and more and more Americans afraid of losing their jobs and their homes -- Lou.
DOBBS: And that number, unfortunately, is rising each and every day.
Casey, thank you very much -- Casey Wian reporting.
Joining me now, three of the country's best political analysts, CNN contributor radio talk show host Roland Martin, with me here in New York.
Roland, good to have you here.
ROLAND MARTIN, CNN CONTRIBUTOR: Glad to be here.
DOBBS: CNN contributor Democratic strategist Donna Brazile.
Donna, thank you for being with us.
And Gloria Borger, CNN political analyst.
Gloria, thank you.
Let's turn, if I may, first to you, Gloria.
The idea that this president and the leaders, the Democratic leaders of the House and Senate, sitting down to -- kind of shoulder to shoulder to say we're going to get comfortable and wrap our arms around an economic stimulus package, is this the kind of leadership that's playing into the hands of these presidential candidates?
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, in fact, congressional leaders and the president are doing this in their own self-interests, Lou, of course, because they know that their approval ratings are way low. Congress' approval rating has been as low as 11 percent or 13 percent. And the president is somewhere in the 30 percent range.
It's in their interests to let the American public know that they can actually work together to get something done. But, if you're a Democratic presidential candidate, you may want to do more than comes out of any compromise with this president. And if you're a Republican presidential candidate, you may want to do less.
DOBBS: But, Donna, the fact is, the president came out with the highest price tag for a stimulus package than any of the candidates. What's going on?
DONNA BRAZILE, CNN POLITICAL ANALYST: Well, that's because I think the president recognized that this is long overdue.
Look, Lou, low-income, middle-income families have been hurting for years under this president's watch. And I think what the president is trying to do is to put the biggest package on the table that he can get through the Congress, knowing that the Democrats will embrace it, if it's of course timely and targeted toward those who need it most.
And I think what the president will have to do in working with the Democrats is to ensure that these rebates of $650, $800 -- I have heard both -- that they are able to go to people who may not earn $25,000 or more, but yet they are struggling to make ends meet and pay for the rise in fuel costs.
DOBBS: Roland Martin is shaking his head here in New York, Donna.
MARTIN: This is a perfect example of why you have no leadership. They wait for the last moment. There is no coincidence this is happening in election season. We know what the game is.
The bottom line is, the economy has been going towards this direction for quite some time. And they have all ignored it. They passed the buck. And, as usual, they will until the tail end and say, hey, let's try to do something right now, so we can look good.
BORGER: Can we just say that Washington is a lagging indicator? OK?
(LAUGHTER)
BORGER: That is true.
DOBBS: It's not only a lagging indicator. It's also a dragging indicator, in my experience. And the reality is that, at least in my judgment -- I better say this -- in my judgment, the fact is that these candidates, both parties, are not coming up with prescription, but in that, for long-term solutions to our economy.
We're talking about trade. We're talking about faith-based trade policies. We're talking about a failure to regulate our markets and financial institutions. We're talking about a failure to invest in our public infrastructure, to invest in our children, in public education. And the fact of the matter is, these folks aren't talking about a plan to take care of it.
(CROSSTALK)
MARTIN: And, unfortunately, you get penalized when you're really too honest.
John McCain learned that in Michigan. He was honest when he said, these jobs are not coming back. Mitt Romney says, I am going to fight to bring those jobs back. And people said, that's what I want to hear.
McCain knew the truth. But we want that hopeful Wizard of Oz in that somehow is going to end up being perfect. And when you're so truthful, the voters tend to penalize you. So, they have to dance around the issues.
BRAZILE: But let me also say that Senator Clinton has called for a moratorium on home foreclosures...
DOBBS: Right.
BRAZILE: ... a rate freeze on interest rates. John McCain -- I mean, John Edwards is talking about investing in a green economy. And Obama is also talking about helping those on fixed incomes.
So, I think Democrats have been talking about this for a long time. Perhaps the country hasn't been paying attention. But they all have plans on trade. They all talk about moving away from the NAFTA- type trade deals of the past. So, I think the Democrats are really prepared to make this stimulus package work. But again it depends on the president working with Democratic leaders.
(CROSSTALK)
DOBBS: Gloria, I am going to have to interrupt you. We're going to come back to you first.
BORGER: OK.
DOBBS: And you can straighten all the rest of us out...
(LAUGHTER)
DOBBS: ... when we continue with our panel here next.
And elected officials in Washington rushing to help our beleaguered middle class? Oh, yeah? We will have that report and a great deal more.
We're coming right back.
(COMMERCIAL BREAK)
DOBBS: We're back with three of the country's best political analysts, CNN contributor radio talk show host Roland Martin, here with me in New York, CNN senior political analyst Gloria Borger, and CNN contributor Democratic strategist Donna Brazile.
Donna, let's talk about the issue of truth in advertising here. This president hasn't been truthful about the state of this economy. This Federal Reserve hasn't been truthful about the state of this economy. Wall Street certainly hasn't been. And corporate America can't find its voice. It talks to the Chamber of Commerce and the Business Roundtable.
What in the world are the American people supposed to believe here? These candidates for president?
(CROSSTALK)
BRAZILE: Lou, we have been operating on borrowed money for a long, long time.
And now you see all these overseas investors coming here and just picking their way through the American economy because of the dollar value at this point.
DOBBS: Yes.
BRAZILE: Look, I think it takes real leadership.
And hopefully what we will see a year from today is another president taking the oath of office who will promise to help the middle class and the working poor in this country and put the American people first, not corporate interests, not special interests. But people are really tired of this back and forth, back and forth. And, meanwhile, they're at home suffering trying to figure out if they can pay their fuel bill and also if they can keep their homes.
MARTIN: I really laugh, Lou, when I watch Wall Street screw up, then ask for a handout.
DOBBS: Yes.
MARTIN: And the same people criticize those who accept welfare.
DOBBS: Right.
MARTIN: It's real interesting how we dog people on welfare, and you're getting a handout, but what did they demand? The Fed cut, cut, cut, because we screwed up.
DOBBS: And, also, they need a $100 billion superfund to get them through the subprime mortgage.
MARTIN: Right.
DOBBS: Gloria, you were trying to say something.
(CROSSTALK)
BORGER: Well, I was trying -- it's sort of interesting to me. I think, sometimes, in politics, we get the leaders we deserve, because we, as voters, don't want to hear that we have got to take some tough steps.
MARTIN: Right.
(CROSSTALK)
BORGER: I will say that George Bush did try to do something on Social Security. You may not have liked his proposal, but he did try to get something done. These are intractable issues that we seem unable to solve in this country.
MARTIN: Well...
BORGER: And that's because of our partisan politics.
DOBBS: Right. OK, Gloria, I think you're right. The president at least had the guts to bring it up.
BORGER: Yes. DOBBS: He also was foolish enough to attach it to private accounts. Now, those accounts would be doing what in this market right now?
BORGER: Tanking, yes.
DOBBS: Second, we have unfunded liabilities that in far greater and more immediate and urgent need of resolution in both Medicare and Medicaid in this country. And what did he do there? He attached the biggest spending bill in terms of expanding entitlements since the Great Society 40 years ago.
(CROSSTALK)
BRAZILE: Let's not forget the war. Let's not forget what this war in Iraq is costing the American economy...
DOBBS: Right.
MARTIN: Very true.
BRAZILE: ... as well as our reputation in the world.
We're -- basically, we're digging ourselves deeper into debt right now. And I don't believe the stimulus package -- although it's very much needed to try to revive or jump-start the economy, I don't believe the stimulus package is going to do the trick, because this is structural problems now we're dealing with.
MARTIN: And, Lou, here is one thing I would love to see.
I would love to see some folks in the congressional districts, thousands of people literally go to their member of Congress and say, give it back. If we really care about...
DOBBS: The earmarks.
MARTIN: Right, the earmarks.
DOBBS: Yes.
MARTIN: If we really care about our budget and they say let's re-look at what our district is getting; let's give it back, because again the people do have the power to do so.
But I wonder if the people are willing to actually say, give something back. I don't think they want to do that. I want to see somebody do it.
(CROSSTALK)
DOBBS: You want to watch everyone start squealing? Instead of just the earmarks, let's say the entitlements programs in this country are simply unsustainable.
MARTIN: Right. Right. DOBBS: Folks, this is just the truth. You're going to hate me for saying this. They're not sustainable.
MARTIN: Right.
DOBBS: We are going to have to roll back Medicaid and Medicare and Social Security. Folks, that's just the fact. The truth is, you're not going to get elected speaking those words.
(CROSSTALK)
MARTIN: On my radio show, Lou, whenever we talk about tax cuts, or when people say, we're going to raise taxes, I tell my listeners, two things are going to happen, guys. Either you're going to raise taxes or you're going to have stop asking for more and more.
I'm sorry. You can't ask for more and then say, but don't raise my taxes. Somebody else will pay for it.
DOBBS: Well, you will see the Democratic candidates -- if history is any indicator, you will see the Democratic candidates offering everybody at least $5,000 in their pocket. And you will see the Republican candidates will offer every wealthy person and every corporation in the country $5 million in extra tax benefits.
(CROSSTALK)
MARTIN: Precisely.
(CROSSTALK)
DOBBS: These are the cartoons that these partisan parties have become.
BORGER: Well, and I think you're 100 percent right about that, which is why, when you hear some candidates talk about a post-partisan environment, you know, John McCain is excoriated in the Republican Party, as you well know, Lou, because he works across the aisle.
And that's a problem, when, just because you work with Democrats sometimes, if you're a Republican, that you get in trouble. And it didn't always used to be that way. I'm old enough to remember the first fix on Social Security, when Tip O'Neill worked with Ronald Reagan to try and get it done. And guess what? They did. But it happened after an election. And I think that's the right time.
DOBBS: Yes. Well, it also happened with a fellow by the name of Alan Greenspan in 1983 with real, real, as you suggest, bipartisan direction and support.
(CROSSTALK)
BORGER: Exactly. Exactly.
DOBBS: But we saw them try to do this just a few years ago. And it caved in from the left and the right. (CROSSTALK)
BRAZILE: Well, not to bring back the '90s -- I don't want to bring back the '90s, because I don't want to sound like I'm a mouthpiece for one of the candidates, but, look, you have got to admit, Lou, that the Democrats took this problem head on back in the 1990s, and wrestled this budget, got it in good shape, and we balanced the budget, and brought about fiscal prosperity for all Americans.
What we saw over the last seven years with the Bush administration, working with a Republican-controlled Congress, is that they gave away money to those who least needed it and then, of course, we began to borrow our way through the war and everything else. I think we need common sense leaders back in office to help us, not just grow this economy, but fix some of the structural problems that exist now in our economy.
(CROSSTALK)
MARTIN: Where is Ross Perot when we need him?
(LAUGHTER)
DOBBS: Well, you know what?
(CROSSTALK)
DOBBS: You know, you say this about Ross Perot.
But the reality is that Ross Perot challenging and destroying George H.W. Bush's reelection in 1992...
MARTIN: Right.
DOBBS: ... and focusing national attention on that budget deficit, by the way, spurred the Democratic Party and the Democratic Leadership Council to balance that budget in 1993.
(CROSSTALK)
DOBBS: Donna Brazile is exactly right. So, you know, everybody played a part there, partner.
(CROSSTALK)
(LAUGHTER)
BORGER: I agree.
MARTIN: Well, he is from Texas.
DOBBS: He is from Texas.
BRAZILE: That is what we need now, a year from now. We need a new president and a new spirit about taking care of our own here in this country. BORGER: OK. I nominate Donna. OK.
BRAZILE: No, not me. I'm not qualified, remember?
(LAUGHTER)
DOBBS: Let me say that...
BRAZILE: I'm too young, Lou.
DOBBS: Well, I understand that. I know the feeling.
BRAZILE: I'm not tested.
(LAUGHTER)
(CROSSTALK)
MARTIN: You haven't been vetted.
BRAZILE: And, besides, I eat boudin for breakfast sometimes.
DOBBS: But, from day one, you will be ready. I know that, Donna Brazile.
(LAUGHTER)
(CROSSTALK)
BRAZILE: And, Lou, you will be in my Cabinet, trust me.
DOBBS: Bless your heart. I appreciate it.
BRAZILE: Thank you.
DOBBS: And, Roland Martin, thank you. Appreciate it.
MARTIN: Appreciate it.
DOBBS: Up next: the Federal Reserve giving a gigantic boost to Wall Street this morning, staving off real market disaster, cutting interest rates dramatically and by a serious, serious size.
But Congress has done nothing yet to help middle-class Americans. Neither has the president. We will have that in-depth report and a startling success story, one public school system where student grades are going up, instead of down, more students graduating, instead of fewer, an American success story, a story that should be replicated across the nation.
We will be right back. Stay with us.
(COMMERCIAL BREAK)
DOBBS: In Washington today, President Bush meeting with congressional leaders trying to help this ailing economy and to help out the American public.
Louise Schiavone reports now on what our elected officials are doing to rescue middle-class Americans caught in this economic downturn.
(BEGIN VIDEOTAPE)
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): There is no agreement on the specifics, but there is agreement on timing.
BUSH: Everybody wants to get something done quickly.
SEN. HARRY REID (D-NV), MAJORITY LEADER: We have four weeks. We must do it during this four-week work period.
UNIDENTIFIED MALE: Because, if we dither, we run a real risk of tipping into recession.
SCHIAVONE: The sense of urgency may be bipartisan but the immediate approaches are not. Democrats are talking about extending unemployment benefits, raising food stamp payments and sending tax rebate checks to consumers as soon as possible, including segments of the population whose income is so low, they pay no income taxes at all.
SEN. MAX BAUCUS (D), MONTANA: Fiscal stimulus should be well targeted. Stimulus should be targeted on those who most need the help and stimulus should be targeted on those who will spend the money quickest.
SCHIAVONE: Several Republicans question the strategy of boosting consumer spending power.
SEN. JUDD GREGG (R), NEW HAMPSHIRE: So much of the product that we buy in America today, that we consume in America today is produced outside the United States. Maybe it stimulates the Chinese economy. But I'm not so sure it stimulates our economy.
SCHIAVONE: The GOP approach is shaping up as principally business targeted, price tag, about $150 billion, designed to boost spending power for business with a variety of tax credits, with the overall goal of expanding business capital.
REP. ERIC CANTOR (R), VIRGINIA: Because, at the end of the day, a job is real stimulus. And that's what we ought to be about, is getting to those individuals and businesses the tools and incentives necessary that they continue to invest capital in our economy and continue to create jobs.
(END VIDEOTAPE)
SCHIAVONE: Lou, Treasury Secretary Henry Paulson says there are no silver bullets. And a University of Michigan study of the 2002 rebate shows that these checks are not always used as anticipated. Six years ago, Lou, less than a quarter of the rebate money was used on outright spending. Most of it went to debt payments and savings -- Lou.
DOBBS: Which are also very important for those families who needed that money. It's sort of fascinating to see a Republican, Judd Gregg, Senator Gregg, realizing that maybe those free trade policies that have been pursued relentlessly by this administration and previous administrations, probably, they weren't such a good idea, as the chairman of the Fed is suggesting, that we buy domestically produced goods.
SCHIAVONE: Right. The question is, when you spend that money, who's it really going to?
DOBBS: Well, I think there are a lot of people who behave rather foolishly in terms of public policy in Washington who are about to have an awakening. Unfortunately, the price of that awakening will be paid by working men and women in this country and their families.
Louise, thank you very much -- Louise Schiavone.
Time now to look at some of your thoughts.
Catherine in North Carolina said; "I wish these candidates would stop promising change. They cannot change a thing. It takes Congress and the Senate and the president working together to change something. Damn it, the candidates from both parties can't even get along with each other. How in the Sam Hill are they going to get along with Congress and the Senate to change anything? Do they really think the American people are so stupid as to believe their hogwash?"
The short answer is, yes, they do.
Nat wrote in about the president's economic stimulus plan: "Dear Lou, it seems to me that handing out money is only temporary. But the problem won't go away. Stopping the outflow of jobs and industries and making free trade fair trade would have a long-term effect. Keep hammering away, and maybe Congress will listen, Lou."
We will keep trying.
And Bill in California: "Dear Lou, it is time to change from GNP, gross national product, to GIP, gross imported product. That would say it all."
You know what? That's a terrific idea. We thank you for it. And we're going to try to work that in here from time to time.
We love hearing from you. Send us your thoughts at loudobbs.com. Each of you whose e-mail is read here receives a copy of my new book, "Independents Day: Awakening the American Spirit."
Up next: the Federal Reserve cutting interest rates by the largest amount in a quarter century. Will that interest rate cut help middle-class Americans? Will it turn this economy around? Will it stop recession? The answer is no, but no one in politics wants to be that adult about it. We will tell you what's going on. And most American public schools, well, many of them have failed an entire generation of our students, but one school district has had stunning success. We are going to share that success story with you.
We will have all of that, much more, next. Stay with us. We're coming right back.
(COMMERCIAL BREAK)
DOBBS: The markets welcomed today's dramatic interest rate cuts by the Federal Reserve, but there are concerns lower interest rates won't do enough to help our financially strapped middle-class families and working men and women in this country. As Bill Tucker now reports, interest rate cuts can't make up for rising inflation and the worsening personal debt that burden American consumers across the country.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice-over): Balanced against the good news that interest rates are falling is the sobering reality of $900 billion in credit card debt and $14 trillion in home mortgage debt. Buried in that debt, Americans are now having to face the fact that the equity in their primary asset, their homes being stripped away. And banks socked with losses of their own and real estate are looking to the middle class for profits.
ROBERT MANNING, ROCHESTER INST. OF TECHNOLOGY: The real problem for the most distressed households in America today is the banks have lost a fortune on their subprime mortgage or fixed equity divisions. They're not making money on repackaging these loans with their underwriting divisions, which means they're squeezing the credit card divisions for every dollar they can get out of them.
TUCKER: Meanwhile, the economy is applying its own squeeze. Inflation in 2007 edged 4.1 percent higher, the highest since 1990. In key categories, price increases outstripped the overall rate. According to the labor department, food costs rose 4.8 percent. The price of health care insurance rose 10.1 percent. Gasoline rose eight percent for the year, but by 30 percent in the last quarter. College tuition, up more than six percent.
And adding to the misery, wages have not kept pace. Rising less than a percent last year, a paycheck just doesn't go as far. Many economists believe cutting interest rates is a welcome action --
ROBERT KUTTNER, AUTHOR, "THE SQUANDERING OF AMERICA": But if you have this long-term problem of insecure employment, rising health costs, rising tuition costs, rising energy costs, people losing the equity in their home, it doesn't matter very much if you cut interest rates. It doesn't fix what's broken.
TUCKER: And rising job insecurity is only making a bad situation worse.
(END VIDEOTAPE) TUCKER: In over the past decades as factories closed and jobs were shipped overseas, Americans coped with the prospect of having their jobs exported to cheap markets overseas. Now, there is the added uncertainty of what will happen if there is a recession. Will they lose their jobs, possibly their homes? And that concerns economists, Lou, who say, it means Americans are much more likely to be conservative, sharply curtail their spending and possibly exacerbate any potential slowdown, Lou.
DOBBS: Bill, thank you very much. Bill Tucker.
Well, joining me now from Philadelphia is Jeremy Siegel, professor of finance at the Wharton School University of Pennsylvania, one of the country's leading authorities on financial markets. It's good to have you with us, Professor. Here in New York with we, Robert Kuttner, co-editor of "The American Prospect," the author of the book, the important book, "The Squandering of America." Robert, good to have you with us.
ROBERT KUTTNER, CO-EDITOR, "THE AMERICAN PROSPECT": Thank you.
DOBBS: Let's go to one issue first, and that is the three quarters of a point interest rate cut dramatically announced by the Fed this morning. Could there be a clearer statement that these markets are in severe, severe trouble?
KUTTNER: Obviously not. I mean, the Fed doesn't have emergency meetings unless the Fed thinks things are dire.
DOBBS: Professor Siegel?
PROF. JEREMY SIEGEL, UNIVERSITY OF PENNSYLVANIA: Absolutely. I mean, the last one was 9/11. This is the biggest decline in interest rates in a quarter century. Not on the U.S. but the world economies are in danger, and Bernanke recognized it.
DOBBS: Bernanke recognized it, but we should also point out Bernanke last May also said that the subprime meltdown would not go much further, certainly would not expand to the economy at large. That turned out to be a rather optimistic and certainly incorrect assessment.
Professor Siegel, this market right now is rolling back. And we're watching world markets fall precipitously. But many Americans are not aware that the Chinese market, the Shanghai market, has basically quadrupled in three years. The Bombay, the Mumbai market has tripled in three years. Hong Kong and South Korea have doubled in three years. While we're watching these dramatic sell-offs overseas, this has been obscene what we've seen happen with emerging markets. This is a bubble on world equity markets, is it not?
SIEGEL: Well, I would agree with you on China, but there's been remarkable advances in those emerging markets. I don't know if you've been to China and India and seen some of the progress there. I have. And it's quite impressive. I mean, these economies are going from being the poorest on earth to a rising middle class that's actually outstripping the U.S. now.
DOBBS: Robert?
KUTTNER: Well, it's a rising middle class but the average Chinese worker still makes under a buck a day. And this is not exactly what you'd call fair competition. If they were buying more of our products, it wouldn't hurt so much that they were taking some of our jobs because we'd have jobs created to export to them. It's a totally imbalanced situation.
DOBBS: And Ben Bernanke, since we're dealing with the Fed right now, Ben Bernanke, Robert Kuttner said, you know, with this -- whatever the package is, he wants people to spend it on domestically produced goods, as he put it. Where in the heck is an American family going to find domestically produced goods to spend that money on?
KUTTNER: It's really startling. And Greenspan's memoir kind of back into the same ship (ph), I should mention. That he said one of the reasons that inflation has been held down is that all of these overseas jobs that pay workers a pittance have held down American wages, and that's why inflation was so well behaved. So even the big dogs are starting to admit what's really been going on.
DOBBS: And some of us, Robert, you and I can go shoulder to shoulder on this.
KUTTNER: Yes.
DOBBS: We've been talking about and warning about this very issue for years.
KUTTNER: Right.
DOBBS: Jeremy Siegel has not. He has been a cheerleader for this market and has made a lot of money doing so. But the reality is here, Professor, we're in a heck of a mess. We have not been regulating our markets. We have not been regulating the financial institutions that are lending. We have not been investing in public infrastructure. We've not been investing in public education. And we're about to get handed our heads, are we not?
SIEGEL: There are failures, certainly. But, you know, Lou, you have to remember -- you know, still over 80 percent of our spending is on domestic goods. And our net trade deficit is still only five percent of GDP. Now, you could argue we should get that lower. But I mean --
DOBBS: No, no, no, Professor. Our current account deficit right now is right at six percent of GDP.
SIEGEL: Right.
DOBBS: As you know, the Federal Reserve five years ago, the Dallas Federal Reserve did a study showing that we have to -- one of two things will happen when you reach the level of deficit that we've reached in this country. One is, we'll either have to adjust our economic policies in this financial system, or we will suffer a significant market adjustment, which may be what we're undergoing right now.
KUTTNER: You know, Lou, there's all this talk about the stimulus leaking out to buy imports. There's a very good way to prevent that from happening. Our infrastructure in this country is just a disgrace. If you put some public money into rebuilding infrastructure, whether it's schools or roads or rail or energy, developing energy independence, 100 cents on the dollar gets spent domestically.
DOBBS: Right. And I think that's a terrific idea. And the reality is that we have right now a corporate America, a Wall Street. Where are their voices, Professor Siegel? Robert Kuttner? Where are the heads of Bank of America, Citigroup, talking about these markets?
Instead, we've seen corporate America and Wall Street basically subordinate themselves to the U.S. Chamber of Commerce and the business roundtable and in a crisis like this, they hide like children.
KUTTNER: They want more deregulation, you know.
DOBBS: Professor, you get the last word.
SIEGEL: One thing I would say that what's different here is savings and loan, they handed the bill right to the U.S. taxpayer. At least Citigroup, Merrill and all those dumb companies that bought those loans, they're taking the hard knocks, which I think is some measure of justice there.
DOBBS: That's justice for them, but not for the two million people being foreclosed upon. And let's reserve a special place in hell for all of those geniuses on Wall Street who ran amuck with the opportunity that this administration, this Congress, the previous administrations and Congress provided them.
Robert Kuttner, thank you very much.
KUTTNER: Thank you.
DOBBS: Professor Jeremy Siegel, as always, good to have you with us.
Up next, we'll introduce you to a woman behind one of this country's most successful school systems. It's a great story. And later, what are these presidential candidates saying about fixing this economy? We'll take a look at some of the proposals with three of the best political analysts in the nation. Stay with us. We're coming right back.
(COMMERCIAL BREAK)
DOBBS: Coming up at the top of the hour, "LARRY KING LIVE." Larry, what do you have for us tonight? LARRY KING, HOST, "LARRY KING LIVE": My man, Lou. The entertainment world reeling tonight from the shocking death of actor Heath Ledger. We'll have all the latest. Hey, remember Dr. Jan Adams? He walked out of our studio and our interview in November? He is back. We'll ask him about Kanye West's mother, her death after he operated on her and the autopsy results, I think. We hope he sticks around to answer.
And, of course, we'll talk money, your game. Why were the world's financial markets in such a mess today? It's scaring a lot of people. If you've got questions, concerns, worries, stay tuned. "LARRY KING LIVE" at the top of the hour. Now, back to my man, Mr. D.
DOBBS: Larry, thank you very much. Looking forward to it. Thank you.
This nation's public school systems are under fire for failing to educate our students. It could be argued successfully, I believe, that an entire generation of Americans has been failed by our public schools. Last week, we brought you good news about Cincinnati's school system, a school system that is now succeeding where others failed.
Principal Sharon Johnson of Withrow University High School is one of the driving forces behind that school system's remarkable, incredible turnaround, and she joins us tonight from Cincinnati. Great to have you with us.
SHARON JOHNSON, PRINCIPAL, WITHROW UNIVERSITY HIGH SCHOOL: Thank you, Lou.
DOBBS: Let's talk about what you have done. I mean, you've taken a system that less than 10 years ago was an abject failure and turned it into a remarkable success. How did you do it?
JOHNSON: Well, Lou, you know, when thinking about the success of schools and looking around the nation and realized there are great, successful schools, going into a school like Withrow that was once a failing school, the dreams that I had were that it could become an excellent school.
Now, what is excellent? Excellent is having people on board who have the same philosophy as believing that all children can succeed in spite of their economic background. We have a great team of teachers who came in the door, believing that concept.
DOBBS: Let me ask you this, Sharon. The idea, as I talked to educational experts around the country, one of the suggestions they make, one of the really screaming demands they want to see implemented, is that school classroom sizes be reduced significantly. Does that play an important part in what you've managed to do there?
JOHNSON: Lou, in urban education, having smaller class sizes is always helpful. But the key to a great education is having a highly qualified teacher who believes that all children can succeed. DOBBS: Well, that -- you know, that makes all the sense in the world. And let me ask you, you know, I can't tell you how many people have talked to me about you and how you're a no nonsense, straight ahead person, idealistic as you can be, but if I can put it this way, hell bent on succeeding with those young minds and spirits. How do you do it?
DOBBS: Well, Lou, I believe that it begins with not accepting excuses. I believe that it takes teachers who understand, if a child says to you, I can't, and we will say, you can. If a child says to a teacher, I won't, and we say that you will. We believe that the teachers in our school at Withrow University High School believe that it doesn't matter when a child says they can't do something. We feel that it's the responsibility of the teacher and the whole staff to help make this child smart.
We believe in accountability at Withrow University High School, accountability for teachers, accountability for administration, accountability for the entire staff.
DOBBS: You know what everybody is saying right now, Sharon? Where in the world are the teachers' unions, and how did they let you do that?
JOHNSON: Well, the teachers' union agreed for us to have -- to increase the number of schools to be achieving. It was wonderful to have the union to work with our district to say, we need to create better schools for our children.
DOBBS: Any reason that that can't be replicated all across the country?
JOHNSON: Oh, absolutely. This can be replicated across the country. All you need is collaboration, cooperation and hard work, commitment and dedication in turning this thing around.
DOBBS: Principal Sharon Johnson, it is a delight to have you here. I hope you will come back, and we can have some more discussions about not only your own success, but importantly about spreading that success around the country, giving some folks who really want to do the right thing by our young people some sense of how to get -- to further advance that educational opportunity.
JOHNSON: I would love to join you, Lou. And I appreciate you.
DOBBS: Thank you. And my congratulations to you and Cincinnati and your school system for getting it done.
JOHNSON: Thank you very much.
DOBBS: Up next here, all the presidential candidates planning to jump start this economy. We'll tell you what they're saying whether their plans can work. What in the world are the elected officials we have doing?
And there goes that so-called truce between Senators Clinton and Obama. I'll be joined by three of the best political analysts here, next. Stay with us. We're coming right back.
(COMMERCIAL BREAK)
DOBBS: Joining me now, three of the best and my favorite political analysts here in New York, Errol Louis, columnist for "New York Daily News", syndicated columnist Miguel Perez, Democratic Strategist Hank Sheinkopf. Thanks for being here, gentlemen.
Let me start, Miguel, with you. Is the Democratic Party just decided that perhaps there is no role for the leadership of the party? That you should just simply have race-based petty fights between your candidates and see what you can do to destroy a party?
MIGUEL PEREZ, SYNDICATED COLUMNIST: I really enjoyed last night's debate. I thought it was -- I thought it was really good.
DOBBS: What?
PEREZ: I mean, except for the first half hour when they got down and dirty and it was really, you know, totally unnecessary. But they really -- they were -- I think it's good when they argue over the issues. And they were arguing over the issues at some point.
When they argue about personal, personal petty stuff, then it turns everybody off. The winner yesterday, the winner yesterday, two Johns.
DOBBS: Yes.
PEREZ: John McCain and John Edwards.
DOBBS: And it's an interesting way to put it. And, by the way, turning people off, let me throw this additional fact out there. That was the highest rated presidential debate on cable television last night in history. What do you make of that?
HANK SHEINKOPF, DEMOCRATIC STRATEGIST: Economics finally kicking in.
DOBBS: Yes.
SHEINKOPF: People finally saying let's wake up, guys. We've been talking about on this program for a year, predicting frankly that the economy, not Iraq, would be the problem. And it is the problem. And Americans want to hear some straight talk. That is the issue. They're not getting it. And if they don't start getting it, we're going to see some terrible things happen.
DOBBS: Now, I want to say, I give Edwards credit. He has been talking about this economy, whether in the terms one likes or doesn't like, much of it I happen to like. Senator Obama has as well. Senator Clinton without question. But nothing they're saying seems to have relevance to the crisis we're facing here, Errol.
ERROL LOUIS, NEW YORK DAILY NEWS: Well, that's right. They came -- all of them frankly came late to the subprime debacle. I mean, this was months in the making. There were hearings. There were warnings. There were articles. They didn't really come up with anything tangible. And so what? Six weeks ago?
DOBBS: Yes.
LOUIS: Eight weeks ago?
DOBBS: We should point out that neither did this administration or the Federal Reserve come earlier.
LOUIS: Very true. On the other hand, you know, they're not the ones who are trying to be the next president. These folks, I think, have belatedly come to this. And we're in a situation where politics is always going to come first and that's why they had to go through all of that craziness in the first 45 minutes before they settle into any discussion about issues.
DOBBS: Is there sufficient maturity in this country for these candidates, for our elected officials, our president, the leaders, the Democratic leaders and the House and Senate to actually stand up before the American people and say, you know, this is very serious and it's very likely we're in recession? And let's all be adults and not sit here and be squeamish about the quote unquote "r" word, recession. It's cyclical. It's part of the nature of economies and certainly this one. What do you think, Miguel?
PEREZ: I agree. But what they should be saying is that look, you know, we have these plans that are, you know, two years away. What we should be dealing with is the urgency of the problem. And, you know, some of these guys are still in congress the last time I looked. A lot of these candidates are senators. What they should be encouraging is for the Congress to finally do something for the American people.
We have a stagnant legislature, and we have a stagnant executive branch and they really need to -- this is their last chance. This is Bush's last chance to do something for the American people.
DOBBS: I think this chance --
PEREZ: And so is this congress.
DOBBS: Yes.
PEREZ: If they really don't do something about this emergency that we have right now, I don't know when they will.
SHEINKOPF: Bush is history. This emergency has been going on for some time. No one's going to like the truth, but it's time to tell the truth. And the truth will make the special interests that provide the money that runs the politics in this country very uncomfortable. So it will take a tremendous amount of courage, Lou, for someone to stand up and tell the truth.
DOBBS: Hank, are you suggesting that both political parties, the Democrats and Republicans and their candidates, are dominated by corporate America and special interests?
SHEINKOPF: Dwight Eisenhower was not the most exciting person in the history of the world, but he said something on the way out the door. He said beware of the military industrial complex. Beware of the financial industrial complex, which is what it has become. And, frankly, if you put in those words, he was exactly right more than 40 years ago, and he's right today.
DOBBS: The Republicans and the Democrats in the two previous -- in this administration and the previous, the Congresses, Republican and Democrat, over the course of the past almost two decades, handed over the keys to these markets, to the financial institutions, and pushed back against regulation, opened it up and they have literally raped and pillaged.
(CROSSTALK)
Hold down literally, but it figures --
LOUIS: I mean, it's -- well -- look, it's startling. This Bush administration stood in the way when something like 49 of the 50 attorneys general tried to get a hold legislatively and through lawsuits over local financial institutions to do something about predatory lending, to do something about payday lending. They very specifically out of Washington told the banking institutions not to cooperate, told them to switch to federal charters and helped create this mess in a really profound kind of way.
DOBBS: We're going to be back with our panel in just one moment. Stay with us.
(COMMERCIAL BREAK)
DOBBS: We're back with Errol Louis, Miguel Perez, Hank Sheinkopf. Miguel, we're talking about a situation in which the economics are uncertain. At best, we know they're not going to be very pleasant. But the idea that Democratic Congress, House and Senate and a Republican White House can't get together and make this happen pretty quickly. And now, they're talking about it by the middle of next month, perhaps. What's taking so long?
PEREZ: Middle of March. Middle of March. And when I hear that, I'm saying what do they have to do between now? Are they that busy that they can't take care of this emergency? I mean, what are they doing the next couple of weeks?
DOBBS: Because they're not talking about the war in Iraq. And I can't think of anything but this economy and that war in Iraq as the two primary issues.
LOUIS: Well, there is --
DOBBS: Not only for this nation but for the political candidates.
LOUIS: Well, I was going to say there is this election business that's going on. I mean, look, February 5th is national primary. Unprecedented. You know, there's going to be what? 22 states that are up for grabs?
DOBBS: Correct.
LOUIS: That's going to be -- that's going to take everybody's attention. So there's your --
(CROSSTALK)
DOBBS: It's about half the --
LOUIS: That's your first answer. Yes. And then, you know, between then and March, maybe the dust will start to settle. But, you know this is --
DOBBS: Are you excited about any one of these candidates having the capacity? Let's assume the worst here. That this economic, this financial crisis is as bad as is feared on both sides of the Atlantic and around the pacific rim and many of the markets. Any one of these candidates give you great confidence in terms of economic leadership, understanding of international markets, the capacity to come up with a vision to resolve what could be some very, some horrific days ahead?
LOUIS: The interesting thing and this is why I'm in the business. I think you, too, in a way, is that you don't know who's going to rise to the occasion. A year from now when the new president is sworn in, whoever he or she may be, they're going to have challenges that we have scarcely imagined at this point, I think, when it comes to management of the economy. And the question for them will be, for their career, for their administration, for their lives really is, will they rise to the occasion? Will they develop the courage and the creativity and the skills and the alliances that it will take to put together a system that is unraveling before our very eyes.
DOBBS: Hank?
SHEINKOPF: I'm an optimist sometimes and a pessimist other times. I can tell you I'm waiting for people to come up with a rhetoric that matters, a rhetoric that will tell people, that will tell the American public to believe in something very strongly again like recovery, and to be able to put this country together in a way that makes some sense. I haven't heard it yet.
DOBBS: Now, the leadership in this country right now, it's peculiar. As I was talking about Professor Siegel and Robert Kuttner, two very distinguished economic observers, the idea that we have not had direct discussion from our -- from Wall Street, from corporate America, for the leaders is troubling. And it's one of the changes in our society, in our economy that is, I think, extremely unfortunate, particularly faced with crisis as we are today.
Miguel Perez, thank you very much, sir. As always, good to have you here. Errol Louis, thank you, sir. Appreciate it. Hank Sheinkopf, thank you, sir. And thanks for being with us tonight. Please join us here tomorrow. For all of us here, we thank you for watching. Good night from New York. "LARRY KING LIVE" starts right now.
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