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CNN Saturday Morning News

How Can the Economy be Helped?

Aired January 05, 2002 - 11:38   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.
KYRA PHILLIPS, CNN ANCHOR: Now to where the economy hits home: your personal finances. Our guest this morning will be taking your phone calls and answering your e-mail questions.

MARTIN SAVIDGE, CNN ANCHOR: We have David Brancaccio. He's the host and senior editor of the radio program "Marketplace" and he joins us from Los Angeles.

PHILLIPS: And not far from there, in Ontario, California our Kelly Wallace joins us. She's following the President as he gets ready for a town hall meeting today.

Hi, guys.

DAVID BRANCACCIO, RADIO HOST: Good morning. Good to talk to you.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Good morning.

SAVIDGE: It's good to see both of you there. You look really good out there on the West Coast. All right, let's start off by looking at our first e-mail actually because we may as well jump into getting our viewers. And here it is -- no. I just saw it for a moment. It disappeared.

PHILLIPS: There we go. Here we go, Mike.

SAVIDGE: It's coming, but we're missing the top part of it. But -- well this is just such a tease. "Do economists have an opinion of which philosophy is best to stimulate the economy, Democrat or Republican, or are both proposals filled with partisan riders that prevent a stimulus package from being enacted?" Wow, that was written like a public relations person. Mike from Los Angeles, I believe. David, why don't you -- we'll open the day up with you.

BRANCACCIO: OK, well if Mike is in Los Angeles, we should have brought him in to talk about this. He knew more about it than I did. Is politics bound up in this discussion of how to stimulate the economy?

SAVIDGE: What a concept.

BRANCACCIO: Oh, I think so really. Congress was unable to pass an economic stimulus plan before the holidays, which seems rather amazing to many Americans, given the recession, exacerbated by what happened in September on September 11. Of course, it's bound up in politics.

Now the republicans have been talking about hoping that the tax cut that we saw this summer finally percolating into the economy. Democrats would like to spend more to boost jobs, and the question is where does the money go? Does it go to companies? Does it go to more affluent individuals? Does it go to working folks? We'll let the politicians handle that.

Two other things are really playing out in the economy perhaps even more than what Congress does or doesn't do. Number one is low oil prices. Folks out here in California have been seeing gasoline for 95 cents a gallon. That's not across the country, but folks across the country have been seeing generally lower prices.

That's like a big interest rate cut, because our monthly bill, when you actually look at our budget, we're not paying as much for fuel. We can use that to buy other things. That can actually stimulate the economy even more perhaps than Alan Greenspan lowering interest rates maybe one more time in the next few weeks.

PHILLIPS: Kelly, I've got an e-mail for you but do you want to pipe in on that before I move on?

WALLACE: Well no, just following on what David is saying you know, a lot of economists have factored in a stimulus package in their projections for growth this year. But also, many thought that a stimulus package was needed months ago, and if the economy starts to rebound as many economists think it is doing, some might say that there might not be a need for such a stimulus package.

And so, politics may be more at work. Of course, it is the 2002 elections, where control of the Congress is at stake. We saw the Senate Democratic leader Tom Daschle out yesterday, the President out today, talking to laid off workers, saying he's got a plan, but democrats are standing in the way.

So right now, it looks like a lot of political posturing. Economists say if the economy is rebounding now, maybe that stimulus package won't even be needed at all.

PHILLIPS: You're talking about that political posturing; Morton has this question pretty much the same. "There seems to be a great deal of debate over whether President Bush's trillion dollar tax cut has hurt our economy by removing the financial safety net months before 9/11. Is there truth to this charge, or is it political smoke and mirrors?" Kelly.

WALLACE: Well, Kyra, of course it depends on whom you ask. If you ask democrats that question, they would say that tax cut took the money away, much needed money from the Federal budget surplus to deal with other priorities, to deal with the terrorist attacks, to deal with the recession.

But republicans and White House advisers say that's absolutely not the case. They say the tax cut helped stop the slowdown from getting even worse. They say the best thing to get the economy going, to stimulate the slowdown is a tax cut. So they say that democrats are really playing politics here, desperate to get control of the economic message. So they say democrats are all wrong on that one.

SAVIDGE: Let's go to Oklahoma to get some insight. Jamie's on the telephone, I'm sure ready with a good question. Jamie.

CALLER: Yes, it's Janie.

SAVIDGE: Oh, thank you. I'm sorry.

CALLER: That's OK. What I would like to know is, it seems like President Bush's stimulus package is on the same thing as Reagan's was, and I would like to know how President Bush's economic stimulus plan differs from Ronald Reagan's, and also why can't we just do this one year at a time and see how the economy does? Thank you.

SAVIDGE: All right, David, there you go.

BRANCACCIO: It's a very interesting point. It is a supply side approach, cutting taxes hoping that percolates into the economy. As for why don't we do this one year at a time, this gets to this whole notion of the crazy Washington budgeting process that goes over ten years.

I mean just a year ago they were talking about surpluses. Fast forward 12 months, look at us, predicting even a few months ahead is often very difficult and to have this budget process that pretends to be able to tell us what the economy might be doing in the year 2011.

I don't think so. A lot of these questions really are surrounding who do we blame for getting us in this mess. I prefer to look at what do we do to get out of this mess, and I'm seeing some signs of life out there, as we saw in that package a few moments ago.

The folks who do the ordering at factories, these are some of the folks who see economic activity before the rest of us. They are reporting that they're doing a little bit more ordering. They're getting a little bit more aggressive. Still, manufacturing contracting, according to the latest index there, but almost at sea level.

I also prefer to play the home version of economic prognostication that really any viewer can do. Ask around. Ask folks. Ask people you know, how are things doing? Do you know people who have lost jobs?

I called a pal that I have who lives in the very population center of the United States, which is the town of Cuba, Missouri, according to the 1990 Census. He runs a truck stop and he has this theory that if you look at trucking traffic, you can use that to predict the economy. Truck traffic turned down early last year. That was a leading indicator of the recession that we saw beginning in March. I called him the other day. His name is Dave Voss in Cuba, Missouri. I said, "Dave, what do you see?" He said "look the data isn't fully in, but I'm thinking it's not getting worse and maybe in the next few weeks, I could see an upturn."

Does that mean the green shoots of recovery in the spring for the U.S. economy? I don't know. I'd rather believe Dave than some of these government numbers that come off the ticker headed our way.

SAVIDGE: That would be the 18-wheeler index, I believe. The 18- wheeler index indeed.

PHILLIPS: We just named it. Another call from Minnesota, Ralph's on the line. Go ahead, Ralph.

CALLER: Thank you. Thank you for taking my call.

PHILLIPS: You bet. What's your question?

CALLER: What area of the market do your guests think will have the best recovery this year?

PHILLIPS: David, do you want to start?

BRANCACCIO: Well, I'll tell you what, the area of the markets that you should invest in are companies that you understand and the reason I'm making this point now, which seems like such basic personal investment advice, is that a lot of folks invested in a company based in Houston called Enron, the large energy broker, hearing that it was a good idea.

But it turned out that very few folks knew exactly what was going on within that company, including apparently the company's own accountants. And now everyone's scratching their heads about how this could have happened. This is because folks tend to invest blindly on hearsay, without doing their research.

One of the places that had been a dead sector for investing until about 10 minutes ago, had been frankly telecommunications and telephones and telephone equipment. What did we find out yesterday? That a company, Corning, that makes fiber-optic cables for telecommunications, is going to turn back on two factories in North Carolina, rehire some workers there.

What do they know that the rest of us don't? Is it possible that that's a downtrodden sector that might be worth some attention? Put some attention in. Do some diligence before investing, of course, but that's one area that I'm looking at.

PHILLIPS: Definitely, and also in Fortune Magazine, a big cover story on Enron, David. You bring up a good point.

SAVIDGE: We got another e-mail here.

PHILLIPS: That's right, number two. We're going to forward this one on to Kelly. This comes from Bob in Oklahoma. "Where did the money come from to pay the Federal bailout of the airlines, lost souls, and the aid to the city of New York? And how about the funds to fight the terrorist war? Could this have devoured the surplus money?" Kelly.

WALLACE: Well, Bob raises a couple of very good points. You know, the White House says that the terrorist attacks and the slowdown, the main factors for reducing much of that Federal budget surplus.

It was projected to be in the area of like $300 billion last year, more than $200 billion coming or getting reduced by the terrorist attacks, the slowdown, and Federal spending.

And obviously there was $15 billion to help bailout the airlines, $40 billion also, Bob, as you're noting to go to New York, to go to Virginia, to go to Pennsylvania, to help those communities deal with after the terrorist attacks.

So obviously, there is not as much money there. So you have the President and republicans saying we need fiscal responsibility. They want tax cuts. They want to get more money into the hands of people and businesses to give the economy a boost.

But you have democrats saying that is part of the problem here, that the President's tax cut last year took a lot of money away, money needed for Homeland Security, money needed to address some other domestic issues.

So democrats, Bob, are definitely going to be addressing this issue very, very much during this election year, saying that the President and the republicans took a lot of money away that was needed now to deal with the post-September 11 realities now in the country.

Republicans will say if you just get that economy going again, there will be money, that surpluses don't create growth in the words of White House advisers, that tax cuts create surpluses. So again, a big political discussion here, but just not as much money to spend to divide up between much needed domestic priorities.

BRANCACCIO: Bob.

SAVIDGE: Go ahead.

BRANCACCIO: Bob, the short answer to the question, where did the money come from for added airport security in New York is we borrowed a lot of it. The U.S. Government borrowed a lot of it and Congress says that we can't borrow more than about $6 trillion, and we're about to bump up against that ceiling. It could happen as early as next month.

The first time that's happened since 1997, and the U.S. Treasury Secretary had to put out the word this week that if we don't, bad things could happen. America could run out of money to pay its obligations, which will never happen, but it's begun a big debate, a debate that we haven't seen during the last couple years of surplus.

SAVIDGE: It's funny, I have the same rule in my house. You can't borrow more than $6 trillion.

BRANCACCIO: Yes, you don't want to get too much into debt, especially with the "T" there at the beginning, billions are OK.

SAVIDGE: Let's get Mary, she is calling from New York, obviously a state that suffered both in tragedy and economically after September 11 -- Mary.

CALLER: Hi, how are you doing?

SAVIDGE: Good, thank you. Nice to have you.

CALLER: Thank you. I just wanted to ask, as Americans, is there a way that we can donate our money back to the government, like the Red Cross, like people donated to the Firemen Fund? If all the families donated a little bit back...

SAVIDGE: Right.

CALLER: ... it could certainly help.

SAVIDGE: That's an interesting question.

PHILLIPS: Very.

SAVIDGE: If you wanted to give money back to help the government, where would you send it?

BRANCACCIO: Actually, this is what you could do. Now some say this encourages profligate spending by the government, but you can go online to the U.S. Treasury Department's web site and buy some bonds. They make it very easy.

You can buy U.S. Government Treasuries, and in a sense that eases America's ability to get money. In some bizarre little way, it could -- it adds liquidity to the system, even $10 or $20. Actually if you're buying bonds, you'll have to have a couple thousand dollars. But in that way, you can contribute to this. Buy some bonds.

PHILLIPS: There you go. Kelly, final thoughts?

WALLACE: Well, that's a very good point David's raising. Another possibility, just continue to contribute to those charities, lots of them out there, money to go to the victim's families. The more money that's going to those families, the less possibly the government will have to shell out to help those families in need. So that's another way. Keep giving.

You know, we have heard the President and others say that a lot of people have been giving a lot, post September 11, but donations have sort of dripped down or slipped a little bit closer to the holidays. So people should keep giving if they have it to help those in need.

SAVIDGE: Because the expenses go on for years. They're still paying for family needs after Oklahoma City. PHILLIPS: Yes, it's long gone, then the two. Our Kelly Wallace following the President in Ontario, California. We'll be checking in with you. I know you'll be following his town hall meeting. And David Brancaccio, host and senior editor of the radio program "Marketplace." Thank you so much to both of you this morning.

SAVIDGE: Nice to see you.

BRANCACCIO: Great to be here.

WALLACE: Good to be with you.

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