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CNN Sunday Morning
Economy has Split-Personality
Aired January 27, 2002 - 07:36 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.
MILES O'BRIEN, CNN ANCHOR: It's been nearly a year since the economy stalled and spiraled into a recession. But as CNN's senior White House correspondent John King explains, this economy has a split personality.
(BEGIN VIDEOTAPE)
JOHN KING, CNN CORRESPONDENT (voice-over): Not the sound or look of your average recession. But look beyond the strength of the housing sector, and it is clear the state of the economy is not so good. The nation's unemployment rate is 5.8 percent, up from 4.2 percent when President Bush took office a year ago.
Big layoffs generate big headlines. Ford workers the latest to test the realities of the new economy.
BOB LAPOINT, PRESIDENT, UAW, LOCAL: You cannot go out and find jobs that'll pay you the salary and the hourly rate that you make in an auto industry.
KING: There are no auto plants in Washington, but there is an election year ripple effect. A slower economy also means lower tax receipts. The surplus of a year ago now but a memory. The debate these days over whether Mr. Bush is to blame for the return of deficit spending.
DIANE SWONK, ECONOMIST: We don't know how bad it's going to be yet, because a lot of those decisions will depend -- a lot of those outcomes will depend on decisions that are made this year.
KING: The president will frame the economy as a major state of the union challenge. Mr. Bush wants Congress to try again to strike a short-term economic stimulus deal, leave his big 10-year tax cut in place, expand his powers to negotiate trade deals and pass his controversial energy plan.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: That national energy plan will help us conserve more and produce more. It will make us less reliant upon foreign sources of energy. And it will help us create more jobs.
KING: So far, the slow economy has not translated into a political problem for the president. BILL MCINTURFF, GOP POLLSTER: When you ask people what his job, I mean, what should the president do? What they say is look, his job is to make sure we're safe at home. No more tax in this country. And his job is to prosecute the war on terrorism around the world.
KING: And this scene could be a sign the worst is over.
(on camera): In most recessions, the housing industry is among the hardest hit sectors of the economy. But one trademark of this slowdown is that while businesses have cut back dramatically on spending, consumers have not shied away from buying big ticket items like new homes.
(voice-over): Builder Gary Garczynski sees a strong year ahead.
GARY GARCZYINSKI, NAT'L ASSN. OF HOME BUILDERS: And all the factors for a continuation of housing leading the economy, hopefully out of the recession are in place. We have historically low interest rates. We have great demand because of those rates.
KING: Even those optimistic about the economy's future say the recession has changed the political debate for the worst.
SWONK: What ever happened to the lock box talk and talk about Social Security? Nobody's talking about the real large issues that this economy's going to face over the longer term here. And it's a longer term that's getting closer and closer by the year.
KING: And the unemployment rate is likely to rise in the months ahead, even if business takes a turn for the better. That complicates the politics of the economy.
TOM GALLAGHER, POLITICAL ECONOMIST: So the markets -- an economist may say the recovery is here, but if voters use the unemployment rate as a measure of whether or not the recession is over, they may grow more discontented with the economy over the course of the year.
KING: Democrats view the economy and budget as the major battlegrounds in this year's congressional elections. And Republicans hope Mr. Bush uses his war time popularity and his state of the union platform to frame things their way.
John King, CNN, the White House.
(END VIDEOTAPE)
O'BRIEN: Deficit spending when the U.S. is at war. That's another topic altogether. And one John King will cover in the hour ahead. So stay tuned for that.
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