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CNN Live Sunday
Interview With Rajeev Dhawan
Aired December 30, 2001 - 15:45 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.
DARYN KAGAN, CNN ANCHOR: We're talking more about what is ahead for the economy. And joining us with his insights, Rajeev Dhawan. He is director of Georgia State's University Economic Forecasting Center.
Basically, it's your job to look into that crystal ball and help those of us that don't see it as clearly?
RAJEEV DHAWAN, GEORGIA STATE UNIV.: I try to do my best job.
KAGAN: Very good. Well, we're going to leave all that heavy economic jargon for the business channel. And we just want to talk about something very basic that folks want to know. Are things turning around? And we're hearing about a possible recession ending already?
DHAWAN: Well, there's some good signs right now. You know, consumer confidence up a little bit. And people are feeling a little bit better because the stock market is doing a bit better.
KAGAN: But everything's not positive?
DHAWAN: No.
KAGAN: I mean...
DHAWAN: The real side, this lack of orders for, as I call, for the businesses. You know, they're waiting for clear signs of demand from the consumers, which means that you and me are holding back.
KAGAN: That we are, hoarding cash.
DHAWAN: And also, the CEOs are also holding back. They don't want to do anymore new products or new campaigns and stuff like that, which means that they just want to hold -- in a holding pattern, which means they're not going to add more jobs.
KAGAN: But you have a radical idea. You want to sit there and look forward. You have a solution on what you think -- how things could turn around?
DHAWAN: I need one thing before my solution.
KAGAN: OK. DHAWAN: I need the resolution on this war on terror, some kind of a resolution, where you and me feel more safe and secure about doing our normal day-to-day activity.
KAGAN: Well, that's pretty hard in this environment, where one day you think everything's OK and you're encouraged to go out, shop and travel. And the next day, the government comes out and says, "Something bad's going to happen. We're not going to tell you what, but it's going to be bad." It's hard to get back into your normal routine.
DHAWAN: It's hard to get back. But suppose the war doesn't spill over too much to the other states.
KAGAN: Well, we heard President Bush on Friday say, you know what? This war in Afghanistan's going to go on for some time. So that's not going to help you. So you have to come up with your idea outside of that.
DHAWAN: What I mean is that the war doesn't become like a seven nation, 10 nation war or something. It just remains a little bit level. But then even after that, I need like a catalyst to spark the demand. And instead of the government talking about, you know, tax breaks for the businesses, which is like rewarding the businesses for the past performance, what the businesses are waiting for are the clear signs of demand.
So how do you do that?
KAGAN: You came up with this idea that no one's supposed to pay taxes for a month?
DHAWAN: Right.
KAGAN: I don't think that's going to go over big in Washington.
DHAWAN: No, it's not going to go very big with the, you know, right wingers or left wingers or whatever you want to call it. But the thing is that if you and me get that money in our hand, you and me are the ones who are going to be putting that demand in front of the firms. And that's what's going to spark the recovery.
So if the cost is the same and you and me get the check back, and we just either spend it or hold...
KAGAN: Can we counter that though? Most of us have already gotten $300 or $600 in our pockets. And that hasn't done enough to turn around the economy. So why do even more? That just seems it's going to hurt even more?
DHAWAN: No, it's -- I need another zero in front of that $300.
KAGAN: You want to have $3,000?
DHAWAN: Right.
KAGAN: OK, that's still in someone's pocketbook. And what doesn't get paid for with the government?
DHAWAN: No, the thing is that you spend it now. It becomes a tax base later. So you got to (UNINTELLIGIBLE).
KAGAN: The old trickle down?
DHAWAN: Yes.
KAGAN: You know, there's people who don't agree with that?
DHAWAN: Not trickle down, but I call is like, you know, more activity down the road means more tax collection.
KAGAN: Right. Some people might take that and put it in the stock market. A lot of people think the stock market, and this is looking at the end of 2001, going into 2002, has been unjustifiably strong. What are you looking at for the head of 2002?
DHAWAN: I think in the stock market, you have two things going on. One, if the people feel better, they like to invest in the market. And the market goes up. Also historically, stock markets tend to recover three to six months before an actual recovery.
So if you follow the history, which is very difficult over here.
KAGAN: Yes.
DHAWAN: If you follow the history, then this is not too bad. But at the same time, if you follow the reality from the CEO thinking side, which says that I don't want to spend anymore on capital investments, I don't want to start anymore new campaign, I don't want to hire people, then why are (UNINTELLIGIBLE)? So the same hand that this rally looks a little bit...
KAGAN: It's funky.
DHAWAN: Funky.
KAGAN: I know you economists don't come up with words like "funky," but I mean the Dow finishing over 10,000. The Nasdaq probably finishing over 2,000 for the year. A lot people just think that's not a true reflection -- on especially like what you're saying, all those orders that haven't been placed.
DHAWAN: Well, I like to put it this way, that at least the damage hasn't been as bad as would be thought after September 11, to some extent. You know, the oil prices are down. That means we're getting cheaper gasoline. We also are having a little...
KAGAN: OPEC announced a cutback. So those prices are going to go back up. Yes.
DHAWAN: Actually went back up a few days ago, but the issue is that if we open a war front with Iraq in other places, then definitely these prices are going to go away from this $22 a barrel to like almost $30 plus. And that's going to be bad, you know, both for the businesses, as well as for us.
So let's hope that doesn't happen.
KAGAN: Yes, actually for people like you, it's good because it puts a lot of questions and it keeps you in business to continue forecasting.
OK. We'll let you go and have you come back and then give us more forecasts in the future.
DHAWAN: Thank you, Daryn.
KAGAN: Rajeev Dhawan from Georgia State. Thanks for stopping by. Happy holidays to you, by the way.
DHAWAN: You, too.
KAGAN: A happy and a healthy and a safe New Year.
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