Return to Transcripts main page

CNN Saturday Morning News

Publisher of "U.S. News and World Report" Discusses Economy

Aired October 06, 2001 - 09:51   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: The debate in Washington over just what the federal government should do to try to give the economy a big of a jolt being closely followed around the country, of course, in the business community. Those who have a stake joining us now to discuss this further, Mort Zuckerman, CEO and founder of Boston Properties, also the editor and publisher of "U.S. News and World Report."

Good morning to you, sir.

MORT ZUCKERMAN, EDITOR, "U.S. NEWS AND WORLD REPORT": Good morning.

KING: Joins us from New York. So are you optimistic or pessimistic? You hear the president, the stimulus package, somewhere $60 to $75 billion, this on top of the tax cut already in the economy, the Federal Reserve has cut rates again. Is there a rebound on the horizon, in your view?

ZUCKERMAN: Well, it all depends how you define "horizon." I don't think this economy was weak going into what happened on September 11. The only part of the economy that was holding it up was the consumer expenditures, and I think the consumer has been badly shaken by what happened on September 11. Unemployment is going up, the stock market is going down, the consumer was just barely holding his own anyhow, or her own.

And so I think we now are looking at a year in which you have capital spending going down, exports going down, the consumer expenditures at best being flat and probably going down, and government expenditures are the only issue here as to whether or not through federal budget cuts or budget expenditures, you can stimulate the economy.

Of course, that's going to be offset by reduced tax revenues at the state and local level, so that state and local expenditures will be going down.

And I also am not confident that the money that will be given in the form of tax rebates will be spent by the consumer. Thirty-eight billion dollars was sent out this year, and only 18 to 20 percent of it was spent.

So I think we're going to be faced with a very difficult time in the year 2002, and I don't think we're going to come out of the recession until at the very earliest the latter part of 2002, even if there is a $60 to $75 billion federal stimulus package.

KING: We talk about that package, and we debate, should it be a mix of spending, a mix of tax cuts? Exactly what should that ratio be? But as you know, a great deal of this is psychology. If consumers don't spend that money, the economy doesn't get the jolt. What is your sense, your own personal sense and the sense of colleagues in the business community, are the signals from Washington now reassuring in the sense that the government is acting, or confusing, in that we do see a debate over just what to do?

ZUCKERMAN: Well, I mean, I think there is an appreciation for the efforts of the federal government to try and give the economy a jolt when it has clearly fallen off the tracks. The question is, is there anything that works? After all, monetary policy has been in a very aggressive easing stance for the last nine months. It's had very little effect on the economy. The fiscal stimulus that we've tried to date has had very little effect.

So the question is, what can the government do that will be effective? There is a constraint on what the government can do, because if you unravel the surplus, long-term interest rates will go up and not down. If the surplus disappears, if you have what they call a structural deficit so that the federal government is always borrowing money in the longer term, long-term interest rates go up.

And it is important that long-term interest rates go down, because that is the single most important factor to influence capital spending and mortgage spending in the economy.

So you have a real constraint on what you can do.

KING: And sir, I want to take you back a little bit to some prior experience in your life. You are a prominent businessman in New York, a resident of that city, a proud resident of that city, also the former associate professor of city and regional planning at the Harvard Graduate School of Design.

As you look at the tragic sight of the World Trade Center, what are your personal thoughts on how much it will cost to rebuild there, and just what should the city of New York and the -- in cooperation with the federal government do at that site?

ZUCKERMAN: Well, I do think it's -- we were just talking about it before we went on air. And when you see it there, when you actually go down there, it's unbelievable. You know, there's an old line about reading about being kicked by a mule is different from being kicked by a mule. When you're there, you're kicked by the mule right in the gut. You can't believe how horrific that huge, huge collapse is.

Nevertheless, I think the city has really come back remarkably well, certainly in terms of its willingness and interest and commitment to rebuild this area. I think the area should be rebuilt. I think that it is a natural location for office space. But for that to happen, two things have to be in place. One is, a whole plan has to be approved, and of course you're not going to build 110-story buildings again.

And two is, you have to have the tenant demand. What has happened since the September 11 terrorist attack is, a lot of companies have felt uneasy about being downtown, and so a lot of them are moving to midtown, and some of them are even moving out of town.

So the city's going to have to make for a much more attractive business environment over the next several years to make sure that companies stay in town and do not leave the town. This is going to cost probably somewhere between $60 and $80 billion just in the downtown area. New York City and New York State are both going to have huge revenue shortfalls, and the money for this is going to have to come from two sources, one from the federal government and the other from insurance.

KING: Mort Zuckerman, CEO and founder of Boston Properties, also editor and publisher of "U.S. News and World Report," we thank you for your thoughts on this Saturday morning on the very many challenges facing New York City and the federal government in the days and months ahead assessing the economy impact of these deadly strikes of September 11.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com