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American Morning

Discussion With Larry Lindsey

Aired August 13, 2002 - 08:07   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

PAULA ZAHN, CNN ANCHOR: We're going to go to Waco, Texas, where it's also hot this morning. That is where President Bush is holding an economic summit. More than 250 people will attend the gathering at Baylor University.
The White House says it's an opportunity to meet with those on the front lines of the American economy at a time when there are new signs the economy may not be doing all that well at all. Critics are calling the meeting a publicity stunt.

And Larry Lindsey, director of the president's National Economic Council, joins us from Waco this morning.

Good to see you, Larry. Welcome.

LARRY LINDSEY, ASSISTANT TO THE PRESIDENT: Good to be here, Paula.

Thanks for having me.

ZAHN: First off, the "Washington Post" is reporting this morning that the president will likely announce that he's going to reject some $5.1 billion in spending that Congress has approved. Is that true? LINDSEY: That's correct. The president asked for an emergency supplemental. That was money for homeland defense, to fight the war in Afghanistan. The Congress added to that money that was not an emergency. One of the programs in there, for example, was to improve the worm collection at the Smithsonian. That's not an emergency. It may or may not be a good scientific research, but we certainly don't need it as part of an emergency supplemental.

So the president is saying no thank you, we don't need this money.

ZAHN: We are also led to believe that Treasury Secretary Paul O'Neill will tell those gathered today in Texas that he doesn't see any signs of the U.S. economy going into a recession. What do you say to folks out there who have been predicting for weeks now that we are, in fact, going into a double dip recession? LINDSEY: Well, I respectfully disagree with them. I don't see the evidence of that in the data. The key number to look at is what's happening to people's incomes. That incomes after inflation, after taxes. Last quarter, that grew at a 3.8 percent annual rate. That's enough for people both to increase their spending and also to save a little bit more. Savings hit a four year high last quarter.

So I think that as long as real income is growing, I think we're going to be fine.

ZAHN: I know there's going to be a lot of debate surrounding this about the tax cut and how effective it was. And I know that the administration's getting some advice that perhaps you should consider actually accelerating the rate at which this tax cut will be implemented for low income groups.

Is that something you're taking seriously right now? Might that happen? LINDSEY: Well, you're correct. I mean across the political spectrum, economists from all stripes said that this was the best timed tax cut ever. The tax cut was very effective in helping to stabilize the economy last year.

Now, we have some parts of the tax cut that have not been made permanent, some parts, in fact, the whole tax cut is not permanent. It expires in 10 years. And it would probably be a good idea in an ideal world if it were made permanent. We tried to have that happen in the Senate this year and it failed.

ZAHN: Well, you're getting a lot of spears thrown your way from the head of the DNC right now, Terry McAuliffe, who has long argued that these tax cuts are irresponsible. Let me put up on the screen what he's saying in particular about this economic forum.

He said, "The problem is no Democrats are invited to Waco. You have no members of Congress invited to Waco. If you want to have a serious discussion about our economy and the problems in the economy, we need a bipartisan summit to bring, and let's bring legislators in who have to put together the legislation that's going to help get this economy moving again."

Why weren't more Democrats invited to the party? LINDSEY: Well, the fact is we didn't check people's political affiliations. What we wanted was people on the front lines of the American economy. Now, there are people here who are heads of major labor unions, not normally people you think of as Republicans. I don't know what their party affiliation is, but they're more likely to be Democrats. There are people representing small investors, small business, corporate CEOs from all political parties, people from Wall Street.

We're trying to get the information that you can't get inside the Beltway.

You know, politicians talk to each other all the time in Washington. Now is the time to go out there and get a reality check outside the Beltway, and that's what this is all about.

ZAHN: Well, if you want a reality check from a member of your own party -- at least he's calling it a reality check -- look what Chuck Hagel had to say, of Nebraska, the senator. He said, when talking about your economic team and the president, "He obviously has not been very effective. People knew when they listened to Clinton that there was something behind him. There was Bob Rubin. There was an economic team. I don't think the markets see anything behind this president's words."

Now, when you've got a member of your own party out there -- LINDSEY: Well...

ZAHN: ... how -- saying that -- how tough is it to restore confidence in the economy and the markets? LINDSEY: Well, I think if you look at the record, the president has been leading all along. During the campaign he said, you know, there's a good chance that the good times might be ending. In fact, they already had ended. We just didn't know it at the time.

He had a tax cut to help stabilize the economy in 2001. Back in March, he led with the Corporate Responsibility Bill. We dealt with the aftermath of 9/11 on the economic front as well as the foreign policy front very well. People forget exactly what the world was like economically on 9/12. It was pretty rough. We came through well.

We're doing, in spite of the biggest wealth loss starting in 2000 that we've had since the '30s, the first attack on America since the '40s, this economy has now been growing for three straight quarters. I think that's a pretty good record.

ZAHN: So what's your message to Senator Chuck Hagel? LINDSEY: Well, I think, again, I would repeat what I just said. If you...

ZAHN: So you're not going to go so far as to say that he's misinformed or confused or...

LINDSEY: I would say...

ZAHN: He obviously isn't buying what you've just said. LINDSEY: Well, I don't know. I haven't heard that from Senator Hagel. I get along with him very well and he's never said that to me.

ZAHN: All right, well, he's said it to a lot of other folks with open mikes.

We appreciate your responding to that and telling us a little bit more about the summit. LINDSEY: OK.

ZAHN: Thank you, Larry Lindsey. We very much appreciate your time. LINDSEY: My pleasure.

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