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Interview With William Dudley
Aired July 03, 2003 - 15:02 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.
JUDY WOODRUFF, CNN ANCHOR: As President Bush campaigns to keep his job, the government reports more Americans having lost their jobs, a splash of cold water on some recent optimism about the economy.
The nation's unemployment rate shot up to 6.4 percent in June. That is the highest level in more than nine years. Businesses slashed 30,000 jobs for the fifth straight month. The White House calls the jobless data a, quote, "lagging indicator of the economy." Administration officials say they are still confident that new tax cuts will help create jobs and spur economic growth.
(BEGIN VIDEO CLIP)
ELAINE CHAO, LABOR SECRETARY: As the economy gains steam and as people gain confidence about their job prospects, they will declare themselves back in the job market, and therefore the unemployment rate may increase. And that's, I think, is what we're seeing today.
(END VIDEO CLIP)
WOODRUFF: But some Democrats are charging the president's economic strategy and his tax cuts are a bust. Senator and presidential candidate John Edwards says, quote, "It's clear that the president's tax cuts for the wealthy are failing the rest of the country."
But for many Americans, economic picture is not so clear-cut. I asked Goldman Sachs economist William Dudley what people should make of the fact that both the jobless rate and stock prices have gone up.
(BEGIN VIDEOTAPE)
WILLIAM DUDLEY, ECONOMIST, GOLDMAN SACHS: Well, the unemployment rate rose sharply this month because of a big increase in the labor force. So it's probably not as disturbing as it looks on the surface.
I think the stock market is responding to the fact that expectations are that the economy's going to do better in the second half of the year and that corporate profits are going to increase. At the same time, the Federal Reserve had made it very clear they're going to keep rates low for a long time. So that's basically pushing people into the stock market.
WOODRUFF: So let me pull out what you said, part of what you said there. What do you think is going to happen for the rest of this year and into next year?
DUDLEY: Well, I think that the economy is going to do better. I think the pace of improvement is slower than what we would have liked to have seen at this point.
But, you know, remember, we have big tax cuts coming, starting really this week, with the reduction in withholding tax rates. By our calculations, consumers are going to get about $122 billion in tax cuts over the next four quarters. So that should help support the economy.
WOODRUFF: So when the White House Spokesman Ari Fleischer says today, We've been through a short and shallow recession, and president's concerned about the jobs, but he knows his tax cuts are going to kick in and create jobs, you agree with that?
DUDLEY: Well, I think that it's definitely going to help. I think the problems of the economy, though, are a little bit more severe than that shortened shell recession might suggest. We did have a mild recession, but we've also had a very subpar recovery. This is a jobless recovery, probably getting to the point of being even worse than what happened in 1992 -- 1991, '92.
So, you know, it's helpful to have the fiscal (UNINTELLIGIBLE) things are going to look better. But unfortunately the balance sheet adjustments because caused by the bursting of the stock market bubble I don't think are over quite yet.
WOODRUFF: So to be real specific here, the president is counting on these tax cuts, boosting consumer spending, boosting investment, translating that into wiping out a lot of this job loss. But you say to that what?
DUDLEY: Well, I think that the fiscal stimulus is going to provide some support. I think the real question is what happens after that? I think for next three or four quarters things are going to get better because you have this big fiscal stimulus. But what happens after that? I think what's going to happen is the economy is going to start to slow down again later next year.
It's sort of the situation that we saw in Japan in the 1990s. When the fiscal packages are unveil and leashed, the economy looks better for a while. And then their influence starts to fade, the economy starts to have trouble again.
WOODRUFF: All right. It's hard to ask anybody to be dispassionate about this or apolitical, if you will, but looking at it as coldly and objectively as you can, this president's been in office over two years, over 2 million jobs have been lost. How much of that is his -- is the responsibility of him and his policies?
DUDLEY: Well, I think initially very little. I think that the president inherited an economy that was, you know, entering a post- bubble period, a stock market bubble, an investment boon that was turning to bust. So I certainly wouldn't give him much responsibility for what's happened early in the administration. But obviously, as this goes on longer and longer, the responsibility does shift to the administration.
The biggest criticism I would have with the administration is not the fact that they've cut taxes. Cutting taxes is exactly what the economy needs. I think the biggest criticism might would be the form of the tax cuts. You probably would have gotten more bang for buck in terms of supporting the economy if you made these tax cuts more oriented towards low and moderate-income households.
WOODRUFF: But that's not the way it worked out.
DUDLEY: That is not the way it worked out. Obviously, you know, if you cut taxes for wealthier people, more of the taxes are going to be saved rather than spent. And if you're trying to stimulate spending, that's probably not going to give you as much bang for buck as you could have had.
(END VIDEOTAPE)
WOODRUFF: William Dudley is the chief economist at Goldman Sachs.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired July 3, 2003 - 15:02 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: As President Bush campaigns to keep his job, the government reports more Americans having lost their jobs, a splash of cold water on some recent optimism about the economy.
The nation's unemployment rate shot up to 6.4 percent in June. That is the highest level in more than nine years. Businesses slashed 30,000 jobs for the fifth straight month. The White House calls the jobless data a, quote, "lagging indicator of the economy." Administration officials say they are still confident that new tax cuts will help create jobs and spur economic growth.
(BEGIN VIDEO CLIP)
ELAINE CHAO, LABOR SECRETARY: As the economy gains steam and as people gain confidence about their job prospects, they will declare themselves back in the job market, and therefore the unemployment rate may increase. And that's, I think, is what we're seeing today.
(END VIDEO CLIP)
WOODRUFF: But some Democrats are charging the president's economic strategy and his tax cuts are a bust. Senator and presidential candidate John Edwards says, quote, "It's clear that the president's tax cuts for the wealthy are failing the rest of the country."
But for many Americans, economic picture is not so clear-cut. I asked Goldman Sachs economist William Dudley what people should make of the fact that both the jobless rate and stock prices have gone up.
(BEGIN VIDEOTAPE)
WILLIAM DUDLEY, ECONOMIST, GOLDMAN SACHS: Well, the unemployment rate rose sharply this month because of a big increase in the labor force. So it's probably not as disturbing as it looks on the surface.
I think the stock market is responding to the fact that expectations are that the economy's going to do better in the second half of the year and that corporate profits are going to increase. At the same time, the Federal Reserve had made it very clear they're going to keep rates low for a long time. So that's basically pushing people into the stock market.
WOODRUFF: So let me pull out what you said, part of what you said there. What do you think is going to happen for the rest of this year and into next year?
DUDLEY: Well, I think that the economy is going to do better. I think the pace of improvement is slower than what we would have liked to have seen at this point.
But, you know, remember, we have big tax cuts coming, starting really this week, with the reduction in withholding tax rates. By our calculations, consumers are going to get about $122 billion in tax cuts over the next four quarters. So that should help support the economy.
WOODRUFF: So when the White House Spokesman Ari Fleischer says today, We've been through a short and shallow recession, and president's concerned about the jobs, but he knows his tax cuts are going to kick in and create jobs, you agree with that?
DUDLEY: Well, I think that it's definitely going to help. I think the problems of the economy, though, are a little bit more severe than that shortened shell recession might suggest. We did have a mild recession, but we've also had a very subpar recovery. This is a jobless recovery, probably getting to the point of being even worse than what happened in 1992 -- 1991, '92.
So, you know, it's helpful to have the fiscal (UNINTELLIGIBLE) things are going to look better. But unfortunately the balance sheet adjustments because caused by the bursting of the stock market bubble I don't think are over quite yet.
WOODRUFF: So to be real specific here, the president is counting on these tax cuts, boosting consumer spending, boosting investment, translating that into wiping out a lot of this job loss. But you say to that what?
DUDLEY: Well, I think that the fiscal stimulus is going to provide some support. I think the real question is what happens after that? I think for next three or four quarters things are going to get better because you have this big fiscal stimulus. But what happens after that? I think what's going to happen is the economy is going to start to slow down again later next year.
It's sort of the situation that we saw in Japan in the 1990s. When the fiscal packages are unveil and leashed, the economy looks better for a while. And then their influence starts to fade, the economy starts to have trouble again.
WOODRUFF: All right. It's hard to ask anybody to be dispassionate about this or apolitical, if you will, but looking at it as coldly and objectively as you can, this president's been in office over two years, over 2 million jobs have been lost. How much of that is his -- is the responsibility of him and his policies?
DUDLEY: Well, I think initially very little. I think that the president inherited an economy that was, you know, entering a post- bubble period, a stock market bubble, an investment boon that was turning to bust. So I certainly wouldn't give him much responsibility for what's happened early in the administration. But obviously, as this goes on longer and longer, the responsibility does shift to the administration.
The biggest criticism I would have with the administration is not the fact that they've cut taxes. Cutting taxes is exactly what the economy needs. I think the biggest criticism might would be the form of the tax cuts. You probably would have gotten more bang for buck in terms of supporting the economy if you made these tax cuts more oriented towards low and moderate-income households.
WOODRUFF: But that's not the way it worked out.
DUDLEY: That is not the way it worked out. Obviously, you know, if you cut taxes for wealthier people, more of the taxes are going to be saved rather than spent. And if you're trying to stimulate spending, that's probably not going to give you as much bang for buck as you could have had.
(END VIDEOTAPE)
WOODRUFF: William Dudley is the chief economist at Goldman Sachs.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
