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CNN Sunday Morning
How the Terrorist Strikes Will Affect the U.S. Economy?
Aired September 23, 2001 - 11:13 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.
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: One of the discussions over the past 12 days, just how devastating would all this be on the U.S. economy? A tough week on Wall Street last week. And one of the things politicians, from the New York mayor to the president of the United States, urging consumers to get out and spend more money. Already, the president has signed a bail out for the airline industry. They want to try to get a broader perspective of (a) the short-term impact and (b) what lies ahead.
We're joined here in Washington, this morning, by Knight Kiplinger, editor-in-chief, CEO of the Kiplinger Organization, publisher of a personal finance newsletter and other publications.
Sir, help us understand this horrible week for Wall Street last week. Consumer spending, is that the engine here?
KNIGHT KIPLINGER, EDITOR, THE KIPLINGER LETTER: The consumer has been the only thing keeping the U.S. economy from recession over the last year with capital investment by business way off, with exports softening. The consumer has been the whole show. The big question is whether the consumer will be distracted and worried by this that they will cut back on the normal spending and consumption that they can be counted upon.
I think the odds are pretty good that the U.S. economy is headed for a recession of some duration, not terribly deep, not very long. But it's very clear that it's tipping towards the negative, a real recession.
KING: Now, I read your work here. You think it's time not only for the consumer to waive the flag but perhaps for corporate America.
KIPLINGER: We've been hearing a lot about patriotic shopping, patriotic investing. I think it's time for business to take a look at its own employment practices. Maybe it's time for a patriotic deferral of some layoffs and downsizing not by businesses that are in desperate straight but by businesses that have some discretion. They have capitol reserves. They have lines of credit they can draw on.
I think the cutting of payrolls should be the last thing business does at this particular moment of crisis.
KING: And what about the government? You know the debate going on. Should there be a capital gains cut? Should the government increase spending? Should the government, after bailing out airline industry, help the tourism industry, help the victims, help the families? What is the government's role here and any sense in your mind that this could get excessive?
KIPLINGER: The government has always been a consumer of last resort. When demand in other sectors is flagging, the government steps in. It's very transient and transient stimulus is back. Nobody is talking about maintaining a budget surplus. Everybody is talking about doing whatever the government can do to keep the economy from contracting unduly in the months ahead.
And I think the $40 billion spending package that was announced the other day is just the beginning. I think we'll see another 40 billion to come.
KING: Now, Federal Reserve chairman, Alan Greenspan, in negotiations with key members of Congress and the president about this, said, slow down; let's take a few weeks. By then, two, three weeks from now, we'll have some statistics and data in. We'll have a better sense of what's going on, the short-term impact anyway.
What should consumers look for? What should government look for? What are the key indicators that we will see in the days and weeks ahead?
KIPLINGER: Greenspan is correct, that a lot of stimulus is in the pipeline. It hasn't kicked in yet - the affect of the tax cuts, the new government spending, lower interest rates being driven to historically low levels. We have to watch consumer spending, reports from the malls, new home sales, auto sales very closely in the weeks ahead.
Greenspan might be correct that the stimulus already in place will be enough and it'll kick in early in the new year and probably keep the recession fairly brief.
KING: And even before this, fears, the slowing U.S. economy might contribute to a global slowdown. Tell us what has the reaction in the global markets over the past 12 days indicated to you.
KIPLINGER: Global markets have been spooked by this as well. Now, for the long-term investor, the message quite simply is buy. Any time you can buy the vitality and the productivity, the U.S. economy, for 14 percent less than a week ago, for 37 percent less than a year ago. For the long-term investor, that's a screaming buy signal. And I think we'll see buyers coming back into the market in the coming week.
KING: Knight Kiplinger, thank you for your thoughts this morning.
Knight Kiplinger, the editor-in-chief and the CEO of the Kiplinger Organization. We'll continue to follow the economic impact of all this in the days, weeks and perhaps months and years ahead.
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