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CNN Saturday Morning News

Interview With Rajeev Dhawan

Aired April 26, 2003 - 11:17   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.


KELLI ARENA, CNN ANCHOR: Just what kind of shape is the economy in, especially of the light of the short war in Iraq? Here with me to talk about it is Rajeev Dhawan, he is with the Economic Forecasting Center at Georgia State University. Thanks for joining us.
RAJEEV DHAWAN, ECONOMIST: Good morning, Kelli.

ARENA: Well, we saw the GDP come in the first quarter at 1.6 percent, we see increase in consumer positive sentiment, some strong news from the house housing sector is the worst behind us?

DHAWAN: To some extent, yes. The economy was lackluster the last few months and we dodged the war bullet, you know? Before the war started we were always say, well, we don't know how bad the economy would be, it would depend upon the length of the war. So, the war was mercifully very shot, but going forward ,is there any kick or spikes or (UNINTELLIGIBLE) left in the economy, that's the issue. And the answer, unfortunately, over there is that, not much. It's going to be a slow and steady progress. Perhaps by the end of the year, things will start to look up like the way we used to think.

ARENA: What about SARS? I mean, I know that sounds crazy to talk about SARS in this economy, but obviously going to cost some money, going to have an impact on the economy. What's your projection?

DHAWAN: SARS is a threatening thing. It's not good news for the Asian economy, especially the travel and tourism, and also for our export sectors. This is on the assumption that nothing gets quarantined, but right now we have this travel advisory to Toronto, and we are getting a little bit nervous, because one quarter of our trade is with Canada and the other one quarter is with those Asian countries, so it's an important issue. It's a drag on the growth. It's something that we didn't want to deal with, especially the airlines. You know, they're having one shock after the other and then they get this one.

ARENA: Well, when the Fed meets, Federal Reserve meets, in a few weeks, do you believe that we'll see another cut in interest rates, or are we pretty much at the low point?

DHAWAN: We are pretty much at the low point, because the rate cuts by the Fed usually signify that they want the upper end of the rates to come down, especially for the mortgage rates, and they are already very low. They can't go any lower. So the rate cuts would not make any difference even if they do it. I am thinking that they must hold back, look for the problems. If in summer, for some reason that slow process has not begun, then they will think about cutting the rates to give a signal that they mean to do something.

ARENA: Moving to fiscal policy. We see that incredibly shrinking tax cut. Now, Wall Street loves tax cuts, but you do have those deficit hawks out there that say, wait a minute, we have a ever growing budget deficit. Where do you stand? Will tax cuts help the economy?

DHAWAN: Tax cuts do help the economy, depends on the type they are. This tax cut of dividend tax cuts and the other stuff will help the future growth, that's for certain. But what we need is something right now in the next six months, and the only thing that does that really quickly is, remember in 2001, we got those rebate checks? That's something that is going to jump start the economy.

ARENA: Got mine!

DHAWAN: So, instead of getting those $300, $400, if we get a couple more zeros after it, maybe one more zero, maybe $3,000, then that will really jump-start the consumer side, which at this point very shaky.

ARENA: Well, consumer, you know, sentiment and spending accounts for two-thirds of the economy's growth. The big issue here is jobs.

DHAWAN: Right.

ARENA: Jobless claims went up a great deal. I mean, is that really the key here?

DHAWAN: Yes. Jobs are the key, and that's what I'm talking about. By the end of the year, the companies will begin confident enough to start hiring people, and that's what the problem is right now. The refinancing and the other stuff kept some money into the economy because consumers kept on spending, but we are done to some extent. We can maintain it, but we can't grow anymore, and that's what the issue is.

ARENA: Well, thank you so much for joining us, I hoped you had had better news.

DHAWAN: Thank you.

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







Aired April 26, 2003 - 11:17   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KELLI ARENA, CNN ANCHOR: Just what kind of shape is the economy in, especially of the light of the short war in Iraq? Here with me to talk about it is Rajeev Dhawan, he is with the Economic Forecasting Center at Georgia State University. Thanks for joining us.
RAJEEV DHAWAN, ECONOMIST: Good morning, Kelli.

ARENA: Well, we saw the GDP come in the first quarter at 1.6 percent, we see increase in consumer positive sentiment, some strong news from the house housing sector is the worst behind us?

DHAWAN: To some extent, yes. The economy was lackluster the last few months and we dodged the war bullet, you know? Before the war started we were always say, well, we don't know how bad the economy would be, it would depend upon the length of the war. So, the war was mercifully very shot, but going forward ,is there any kick or spikes or (UNINTELLIGIBLE) left in the economy, that's the issue. And the answer, unfortunately, over there is that, not much. It's going to be a slow and steady progress. Perhaps by the end of the year, things will start to look up like the way we used to think.

ARENA: What about SARS? I mean, I know that sounds crazy to talk about SARS in this economy, but obviously going to cost some money, going to have an impact on the economy. What's your projection?

DHAWAN: SARS is a threatening thing. It's not good news for the Asian economy, especially the travel and tourism, and also for our export sectors. This is on the assumption that nothing gets quarantined, but right now we have this travel advisory to Toronto, and we are getting a little bit nervous, because one quarter of our trade is with Canada and the other one quarter is with those Asian countries, so it's an important issue. It's a drag on the growth. It's something that we didn't want to deal with, especially the airlines. You know, they're having one shock after the other and then they get this one.

ARENA: Well, when the Fed meets, Federal Reserve meets, in a few weeks, do you believe that we'll see another cut in interest rates, or are we pretty much at the low point?

DHAWAN: We are pretty much at the low point, because the rate cuts by the Fed usually signify that they want the upper end of the rates to come down, especially for the mortgage rates, and they are already very low. They can't go any lower. So the rate cuts would not make any difference even if they do it. I am thinking that they must hold back, look for the problems. If in summer, for some reason that slow process has not begun, then they will think about cutting the rates to give a signal that they mean to do something.

ARENA: Moving to fiscal policy. We see that incredibly shrinking tax cut. Now, Wall Street loves tax cuts, but you do have those deficit hawks out there that say, wait a minute, we have a ever growing budget deficit. Where do you stand? Will tax cuts help the economy?

DHAWAN: Tax cuts do help the economy, depends on the type they are. This tax cut of dividend tax cuts and the other stuff will help the future growth, that's for certain. But what we need is something right now in the next six months, and the only thing that does that really quickly is, remember in 2001, we got those rebate checks? That's something that is going to jump start the economy.

ARENA: Got mine!

DHAWAN: So, instead of getting those $300, $400, if we get a couple more zeros after it, maybe one more zero, maybe $3,000, then that will really jump-start the consumer side, which at this point very shaky.

ARENA: Well, consumer, you know, sentiment and spending accounts for two-thirds of the economy's growth. The big issue here is jobs.

DHAWAN: Right.

ARENA: Jobless claims went up a great deal. I mean, is that really the key here?

DHAWAN: Yes. Jobs are the key, and that's what I'm talking about. By the end of the year, the companies will begin confident enough to start hiring people, and that's what the problem is right now. The refinancing and the other stuff kept some money into the economy because consumers kept on spending, but we are done to some extent. We can maintain it, but we can't grow anymore, and that's what the issue is.

ARENA: Well, thank you so much for joining us, I hoped you had had better news.

DHAWAN: Thank you.

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