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CNN Worldview

Energy Policy Overhaul

Aired May 28, 2001 - 18:00   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.
ANNOUNCER: From the hear of New York City, this is LOU DOBBS MONEYLINE for Monday, May 28th, 2001. Here now, Lou Dobbs.

LOU DOBBS, CNN ANCHOR: Good evening and welcome to this special Memorial Day edition of MONEYLINE. Tonight we'll take an in-depth look at the most important issues affecting our economy: A dramatic overhaul in energy policy is under way, tension with China and the impact on trade, the Federal Reserve's bid to keep this country's longest economic boom from going bust, and how corporate America is faring in the sudden economic slowdown.

We'll hear from IBM CEO Lou Gerstner, a longtime dot-com skeptic proven right and a proven business leader -- Gerstner's view on business conditions now and the man he's apparently chosen to succeed him.

(BEGIN VIDEO CLIP)

LOUIS GERSTNER, CHAIRMAN & CEO, IBM: Sam Palmisano, our president and chief operating officer, he's emerging as the leader of that new team.

(END VIDEO CLIP)

DOBBS: The vice president on the Bush energy plan, a plan that has outraged some environmentalists -- why conservation alone isn't the solution to America's energy crunch.

(BEGIN VIDEO CLIP)

c DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: It's not enough to close the gap.

(END VIDEO CLIP)

DOBBS: And two of the world's most powerful media executives, how AOL Time Warner and Disney are coping with the advertising slump.

(BEGIN VIDEO CLIP)

GERALD LEVIN, CEO, AOL TIME WARNER: For our company, there is no downturn.

(END VIDEO CLIP) (BEGIN VIDEO CLIP)

MICHAEL EISNER, CEO, DISNEY: The floor has not fallen away.

(END VIDEO CLIP)

DOBBS: And the man who fulfilled a lifelong dream hundreds of miles above Earth.

(BEGIN VIDEO CLIP)

DENNIS TITO, SPACE TOURIST: I can't describe how great it was. It went well beyond my expectations.

(END VIDEO CLIP)

DOBBS: But we begin with the man in charge of the world's biggest technology company: an interview with IBM CEO Lou Gerstner, his vision and his succession -- next.

(COMMERCIAL BREAK)

DOBBS: It is one of corporate America's greatest turnaround stories: Lou Gerstner has led the world's largest technology company to earnings growth when nearly every other technology company is now issuing earnings warnings. It's a testament to IBM's resilience and its leadership, yet another achievement for Lou Gerstner, who brought IBM out of the dark days of the early '90s to today's prominence.

But with that achievement comes anxiety for some investors: Gerstner is planning to retire and speculation has been intense as to who might some day succeed him as CEO.

When I sat down with Gerstner, he talked for the first time about succession. He also gave me his view on the dot-com bubble and his outlook on business conditions today.

(BEGIN VIDEOTAPE)

GERSTNER: I would say the economy has clearly slowed, there is no question about that. But keep in mind the economy has slowed from a rate that was so torrid a year ago, that people were saying, gee, the risk is we are growing too fast. So now we see the deceleration, and everybody starts to really panic.

But in fact, yes, we have slowed but we are growing at a 1 1/2 to 2 percent GDP growth. We're getting a lot of excesses out of the economy, inflation is still low, so I still think the U.S. economy is in pretty good shape, and we are probably going through a very useful correction.

DOBBS: Nearly every technology company in this country, around the world had a very difficult first quarter, to say the least. IBM continues to drive ahead. You've recently said that you're standing by your guidance in the current quarter. Give us your judgment about the future here for IBM. GERSTNER: Well, first of all, we have to put the technology decline in perspective. We had a bubble. An extraordinary bubble, called the dot-com bubble and it burst. It was predictable, it happened. And so a lot of what you see in tech sector is just a lot of hot air coming out of the system.

The underlying demand, the demand for information technology, remains strong in the U.S. and around the world. IBM, fortunately, never chased the dot-com phenomenon very hard, and so we missed it. We missed it on the upside and thank goodness we missed it on the downside. We have stayed true to our focus which is that e-business and the Internet is about real business. It is not about simply putting up a Web site. It is about transactions, it is about transforming your enterprise, and those expenditures are still going on in enterprises. And that is why we feel good about the outlook.

DOBBS: In the first quarter we saw productivity decline for the first time in six years. Again, causing some analysts to suggest that we have overstated the benefits of technology in terms of ramping up productivity. Your thought?

GERSTNER: My thought is that we have this tendency to take a quarter and create an age, a century. I mean, for 10 years people said there was no productivity from information technology, then we got the productivity coming through in the statistics. We have one quarter where it doesn't show up and people are back saying there's no productivity from information technology.

Look, it's a very, very strong instrument for productivity gain. But you've got to apply it correctly, you've got to use it correctly. And if you look at individual companies, and look at how more productive they've gotten through information technology, you'd never have this argument again. When you get to the macro-level and you're trying to look at country-wide statistics, national statistics you're always going to see these blips quarter to quarter.

(END VIDEOTAPE)

DOBBS: Gerstner is cautiously optimistic about productivity, but he was still one of the earliest and most forceful opponents of new economy froth. Two years ago, just as the Internet craze was at its height, Gerstner told analysts he thought most dot-coms were -- quote -- "fireflies before the storm." He was right.

Coming up next, more with Lou Gerstner. He helped save IBM at the end of the 20th century. Who succeeds him in the 21st? A candid talk about succession, when MONEYLINE continues. Stay with us.

(COMMERCIAL BREAK)

DOBBS: When Lou Gerstner took over IBM in chairman of IBM in 1993 as chairman and CEO, he was taken to task by some analysts after he said there is no need for a vision for a vision now for IBM.

But IBM of course went on to achieve unprecedented levels of performance. I asked Gerstner how he accomplished that without something called vision.

(BEGIN VIDEOTAPE)

GERSTNER: Well, Lou, I am really glad you asked that question because I have wanted to answer this question in a forum like this for some time. Some of the pundits and media people seem to not be able to handle a 10-word sentence. Because what I said at that time is: "The last thing IBM needs right now is a vision."

So many people dropped out the "right now," and said: Gerstner is saying IBM doesn't need a vision. Of course we need a vision! Every institution needs a vision. But what I found in IBM was a company frozen. I mean, it was like a huge, huge super tanker frozen in the ice in the Arctic. And for me to say "go there," when we couldn't even get people moving -- people were unable to think about the future, because they had crashed.

DOBBS: All right.

GERSTNER: And so, getting people to feel like there was a hope for IBM, there was a future for IBM, that we were going to change, and we were doing to lead again, was far more important than getting them focused on some long-term objective.

Of course, we built a vision. We built that over the last five years. But the cultural changes were far more important in that first year than the strategic.

DOBBS: Your strategy, your vision for IBM going forward from here?

GERSTNER: Well, our strategy, in a broad sense, is to lead the new technological revolution that's going on, as the world moves from a PC-centric world to a network-centric world.

Every time the computer industry makes one of these shifts, new technology leaders emerge. We were the leader in the host, or centralized, computer phase. Microsoft, Intel and a few others led in the PC space. We intend to lead in the network world space with the technology we build for ourselves and that we sell to others.

The other part of our strategy is to lead in the services end of the business, where customers are saying more and more: "Hey, this stuff is too hard to integrate." You need to put it together, you need to make it work for me, you need to turn technology into a solution, and that is the fastest growing and most important part of the industry today, just helping companies apply the technology.

DOBBS: In terms of running a business, how long will Lou Gerstner be running this business?

GERSTNER: Well, Lou, that is another question I have gotten fairly regularly recently. Let me try to answer it. I have been working on management development at IBM, along with my board, for about five years. We take it very seriously. Now, there are a lot of companies in this industry that believe in management by potentate. Put a potentate in place, and everybody else marches behind. I have never believed in it, and it's certainly not appropriate for IBM. I mean, we are too big, we are too complex and we are too integrated.

So, IBM needs a world-class team. And for the last 24 months, we have been putting in place a new team of leaders that are going to take IBM to the future, beginning in a very short period of time. They are our future leaders.

Now, Sam Palmisano, our president and chief operating officer, he's emerging as the leader of that new team. And when that team is ready, and when the board feels that team is ready, and when I feel that team is ready, I'm ready to go.

I'm very optimistic right now. It is a great team, it's the best team in the industry, and they are very, very talented people.

DOBBS: And you expect that decision to come -- what time period?

GERSTNER: When the board decides it is ready to make it, Lou.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

DOBBS: It is perhaps the most explosive issue facing the Bush administration. Certainly the most critical now facing the economy: energy.

Earlier this month, the White House released its energy strategy, calling for increased oil exploration, the construction of more than 1300 power plants. The proposal also puts a renewed focus on an industry that conjures up frightening images for some environmentalists. Nuclear power.

And many environmental critics say the plan does too little to promote conservation. I talked with Vice President Cheney, the president's point man on energy, ahead of that plan's release.

I asked him about the controversies surrounding nuclear power and conservation.

(BEGIN VIDEOTAPE)

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: Conservation is an important part of satisfying the problem, the requirement, new technologies of various kinds.

But we still -- at the same time, it's not enough to close the gap. We still have to produce additional supplies. And when we look at electricity, there are really only three basic ways that we can count on for the foreseeable future, and that's coal, which is 52 percent of our consumption today; it is natural gas, which is about 14 or 15 percent -- but growing; and it's nuclear, which is about 20 percent today, and some of it's made of hydro and so forth, but that won't change much.

So, nuclear power is a good technology, it's a safe technology, it's gotten better all the time, and we already use it for 20 percent of our electricity. And if we go forward -- we're concerned about things like carbon dioxide emissions, for example -- nuclear power offers us some real bright prospects.

(END VIDEOTAPE)

DOBBS: The vice president's view on the safety of nuclear power is still a matter of intense debate. The industry argues that advances in technology should erase the memories of Chernobyl and Three Mile Island. But is "safe" nuclear power still a contradiction in terms?

Steve Young has our report.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): America's biggest nuclear plant operator, Exelon, buys and sells electricity on its trading floor outside Philadelphia. It hopes to introduce something new to the American scene: power from a so-called pebble bed reactor.

It uses hundreds of thousands of enriched uranium spheres, each about the size of a tennis ball. They're placed into the top and slowly drift down, producing heat, to generate power. The reactor is cooled by helium gas instead of water.

Exelon says its tennis ball fuel would be too weak at the end of a life cycle and too securely packaged to be of any use to terrorists. The company also says if an accident led to a loss of coolant gas, no problem. The reactor would automatically, safely shut down.

EDWARD SPROAT, EXELON GENERATION: By design the reactor so can only reach certain temperature, you completely eliminate the potential of a meltdown.

YOUNG (on camera): You said a meltdown isn't impossible, so I presume you say this is not safe, or this is safe?

SPROAT: This is safe.

YOUNG, (voice-over): But is it foolproof? Though it concedes the design may make a meltdown impossible, the Union of Concerned Scientists, one of the most persistent nuclear energy critics, is worried dangerous radioactivity could escape into the air. That's because, to save money, Exelon wants to enclose the reactor in a barrier building less expensive and less sturdy than current ones.

A second design has been developed by Westinghouse, the company that built about half the world's nuclear reactors, which the company also calls foolproof. It has fewer parts, no pumps, and uses gravity to release cooling water if the core should overheat.

HOWARD BRUSCHI, WESTINGHOUSE: That operator can just freeze, because nature will take over. As long as gravity works, that water will flow from tanks into a place that needs water.

YOUNG: But government inspectors discovered a cooling system in a Michigan plant that was partially dependent on gravity might not have worked for five years, because workers mistakenly plugged up some holes.

DAVID LOCHBAUM, UNION OF CONCERNED SCIENTISTS: The vacuum inside the tank kept the water in there, much like if you have a glass of water you turned upside down over a card, and you removed the card, the water stays inside the glass, because there is a vacuum above the water. Gravity can be defeated.

YOUNG: Even if the proposed technology is foolproof, it will produce high-level nuclear waste that would stay lethal for 10,000 years. And the debate about where to dig a nuclear graveyard for that waste drags on.

Steve Young, CNN Financial News, Kenneth Square, Pennsylvania.

(END VIDEOTAPE)

DOBBS: As we've said, nuclear power has a threatening ring to many of us, but a recent CNN-"USA Today"-Gallup Poll finds that a full 48 percent of those surveyed say we should embrace the use of nuclear power as a major source of energy, 44 percent do not. And other polls have suggested that support for nuclear power is even higher.

Developing nuclear power and increasing the supply of energy is just one step in solving the energy crunch. The next step is to revamp how that supply is distributed. The White House plan also stresses the need to update the nation's infrastructure, to clear up bottlenecks. As Peter Viles now reports, pipelines and refineries in the United States have not kept pace with economic growth.

(BEGIN VIDEOTAPE)

PETER VILES, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): The nation's electrical grid: in theory, a huge system that moves power from one region to another. In truth, it does not exist. Four separate regional grids are barely linked and near capacity. The Bush energy report warns of price pressures and reliability problems this summer in California, Long Island, the Great Lakes, the Southeast and New England.

CRAIG GOODMAN, PRESIDENT, NATIONAL ENERGY MARKETERS ASSOCIATION: Right now, we have very, very localized grids. We are forming regional grids which will be a big step forward, but we need to have a national grid, no question about it.

VILES: The president's recommendation: new government power to take land for new transmission lines and study the idea of creating a true national grid.

Another bottleneck: oil and gas pipelines.

(on camera): The pipeline problem is the proliferation of so- called boutique gasolines. This complex in northern New Jersey is served by a single pipeline that starts in Houston, and that one pipeline has to carry up to 30 different kinds of gasoline and up to 60 different petroleum products.

(voice-over): And that pipeline supplies 20 percent of the East Coast's petroleum products.

TOM GUZIKOWSKI, G.M. OPERATIONS, COLONIAL PIPELINE: The heating oil season in the winter is a concern for us. Aviation kerosene to airports along the East Coast has been a focus for Colonial to increase our capacity, and then the gasoline during the driving season in the summertime.

VILES: The Bush policy: speed up the permitting process and push for natural gas pipelines from Canada and Alaska.

A third bottleneck: at the nation's refineries. No new refinery has been built in 25 years. Capacity lags peak summer demand. The Bush policy: streamline permitting and environmental regulations.

The president today ordered federal agencies to expedite reviews of energy projects. Now the fight against all these proposals boils down to the same four words: not in my backyard.

Peter Viles, CNN Financial News, Linden, New Jersey.

(END VIDEOTAPE)

DOBBS: Energy policy has been the biggest domestic challenge facing this new White House, and China has been the biggest foreign policy challenge. Next up: we'll hear from former Secretary of State Madeleine Albright, her first public comments on how the Bush team is handling the relationship with China.

(COMMERCIAL BREAK)

DOBBS: The past months have seen a rise in the tension between the United States and China: the spy plane incident, the recent U.S. visit by Taiwan's president has complicated the relationship the administration has described as one of strategic competitors. I've talked recently with former Secretary of State Madeleine Albright and asked her about the significance of the Taiwanese president's visit.

(BEGIN VIDEOTAPE)

MADELEINE ALBRIGHT, FORMER SECRETARY OF STATE: Well, I think that we have to understand the complexity of our relationship with China, and what it is that I think and others think is in the best interests of the United States. I think that the important point here, that is China is a major power, will continue to be a major power. The United States needs to engage in it. We have a one-China policy, and I think that it is an important policy that has been in existence for the last 40 years -- 35 -- and it should be pursued.

And I think that we did, in fact, the Clinton Administration, did give visas and as you reported we tried to limit the visit. I think that it is important to do this in a measured way. I think maybe this visit is a little long and a little extensive in its kind of state aspects of it. So, I think I would have recommended something more measured.

DOBBS: And of course, the Bush administration to this point seems to be taking a stronger position, vis-a-vis Taiwan, than did the Clinton Administration. You were talking about measured responses, do you think the Bush administration is following the correct course in terms of its policy stance?

ALBRIGHT: Well, I think that -- what I'm concerned about is that there is more of an emphasis being put now on having some confrontations with the Chinese, rather than looking for ways to engage them while making very clear what our policies are.

I don't think the United States gains in a confrontational stance with the Chinese. I think that we have to be very clear about human rights. We have to be clear about the fact that we would like to see a peaceful resolution of the issue between Taiwan and the mainland. And inflaming the situation in one way or another, I don't think in the long run serves American national interests.

DOBBS: And the initiatives by the Bush administration announced by Secretary Powell to further engage in the Mideast peace process in relation to the Palestinians and the Israelis, do you think the administration has been too slow to act here?

ALBRIGHT: Well, I think that there has been a sense that they could deal with it all themselves, and that the U.S. role was one that had to be in the background. We believed that it is, again, in U.S. national interests to make sure that a situation in the Middle East does not spin out of control, and I'm very glad that they are more engaged now.

I met with Secretary Powell, obviously, during the transition, and I said that it was impossible for a secretary of State to stay out of the Middle East issue. Previous secretaries, my predecessors and his, and I myself thought that you didn't have to be there, but you do. And the role of the United States is essential, and I'm glad that Secretary Powell is now taking in more direct interest.

DOBBS: And of course, you and the Clinton administration more aggressive in terms of the peacekeeping forces, particularly in Bosnia. Defense Secretary Rumsfeld was quoted recently saying that it -- that it was putting a strain on the U.S. military, that he planned to do something about it. Your reaction.

ALBRIGHT: Well, I think it was the most unfortunate statement. I think great success that the United States had in supporting change in the Balkans, we managed now also -- Milosevic who was the cause of the problem is now under arrest -- and the story in the Balkans is not one that can be dealt with overnight.

Our allies are carrying a major burden, both in Bosnia and Kosovo. I think it's essential that we stay there and finish the job. The American military that I met with when I was there, they understood why they were there, and understood the value of peacekeeping, and so I think that what Secretary Rumsfeld said was most unhelpful and quite different from something that Secretary Powell has said on his last visit to the region.

DOBBS: Secretary Albright, let me ask you this, we've got about 15 seconds. You are now back in the private sector. Where -- what are your interests and what are you doing?

ALBRIGHT: Well, what I'm interested in is working on what I call post-euphoria democracies, where we have been celebrating with them, but a couple of years later when there is not a dividend for democracy, we are not paying attention. I think it is important to try to create a middle class in those countries, and so I'm going to be working in a business to try to advise a way to develop the infrastructure in those countries.

(END VIDEOTAPE)

DOBBS: Coming up next on MONEYLINE, two of the most powerful executives in the media business. We'll hear from Disney chief Michael Eisner on why optimism still reigns in the magic kingdom, and Gerald Levin, CEO of CNN parent AOL Time Warner, on his views on how corporate America's biggest merger ever is working.

(COMMERCIAL BREAK)

DOBBS: Perhaps no industry was hit as suddenly by the economic slowdown as the media business -- top companies grappling with a serious advertising slump. And I talked with the CEOs of both Disney and AOL -- CNN's parent -- to see how their companies are faring.

We begin with Michael Eisner of Disney. This is a big holiday weekend for Disney, which debuts the film "Pearl Harbor." It cost a staggering $135 million to produce. I asked Eisner how optimistic he is about an advertising turnaround.

(BEGIN VIDEOTAPE)

EISNER: I think it's a little early to tell. I think the companies like ABC are showing a lot of discipline. I think that -- we just -- I just came from our presentation of our fall schedule. I guess I think this way every year, but I definitely think this way today. It's fabulous. I think we have a lot of good shows. I think we have a lot of strength, and I think there's a lot of excitement in the room. Whether that translates to an up-front that's as big as last year, I don't know. I certainly hope it will be bigger than the year before last, which I think it will. So we're OK. It's not -- the floor has not fallen away.

DOBBS: Let me ask you. In terms of the overall business that you run, also critical, of course, theme parks, theme parks related, obviously, to consumer confidence. Are you seeing good and positive things there?

EISNER: I think there's an uptick, generally, in consumer confidence. I just came from a business counsel meeting with about 200 other CEOs, and my sense is there is optimism, certainly for next year. Optimism going in after the summer is over, more optimism than I thought there would be.

The theme parks -- the bookings are good, particularly Florida. Outside the United States, I think there's a little bit of a wait-see in California. Energy crisis and all that kind of stuff. There's been -- it's usually not as bad as people think, or even as good as people think. I think we're right in the middle, and it's a waiting period.

DOBBS: Well, your record, in terms of theme parks, and now with California Adventure, which you have just brought to the market -- I can remember how you were severely second-guessed in terms of Tokyo, in terms of Paris. You turned out to be pretty wise. What's your judgment right now on California Adventure?

EISNER: Well, it's the best reviewed park we have. It's a great compliment to Disneyland. "I know it's going to work," he said optimistically. The problem is, is a power paranoia, because it's not as bad as people think. Is it going to be as difficult as, say, a riot or an earthquake, and have people nervous about coming to California? I don't think it's as bad as that. There is a little apprehension on that.

But as far as the product, the creative product, and the cost that we spent on it, we're in good shape. But we've been there before. I mean, we've been there when Europe, as you mentioned, Disney-MGM Studios, Epcot originally. But I'm hopeful.

(END VIDEOTAPE)

DOBBS: And now Eisner's arch rival, Gerald Levin. The CEO of AOL Time Warner, CNN's parent, Levin is one of the men who helped bridge together old and new media into the top company in the industry. I asked Levin how the merger, the integration has progressed.

(BEGIN VIDEOTAPE)

LEVIN: Actually, I'm very comfortable. You know, we had a year and a day to get ready for this, because it took a little while to get through, and so we dealt with all of the issues, put the organization in place. We really hit the ground running, particularly with our first quarter.

DOBBS: Right. In that first quarter, impressive cash-flow results, impressive revenue results, and this against a backdrop of very severe downturn in advertising. Is this a sustainable rate?

LEVIN: Absolutely. You know, for example, AOL's advertising e- commerce was up 37 percent in the first quarter.

DOBBS: Right.

LEVIN: The company overall is riding a different track than measured media, normal advertising for two reasons: one, subscriptions...

DOBBS: Right.

LEVIN: We have 133 million subscriptions, and it's an annuity- like form of revenue -- invested in the consumers' habit structure. At the same time, we're dealing with the direct marketing side of what companies are trying to do. So it's a totally different activity.

DOBBS: And when you talk about an annuity style form of revenue, you're really talking about cable, and well, combined in terms of subscription.

LEVIN: AOL and cable are definitely drivers for this company, but you know, we have HBO subscriptions, we have all these magazine subscriptions. And they're, in this environment, you have unit growth, you have lots of flexibility, and it's a totally different business formula.

DOBBS: I think there is probably a number of media CEOs out there scratching their head right now, Jerry, probably with some envy, because as confident as you are in the earnings results and the revenue results in this advertising downturn, I am sure they would like to be able to be as bullish. Do you see an end to this downturn?

LEVIN: Well, for our company, there is no downturn, because we're riding above. I also think -- I'm very optimistic about the economy. Essentially, we've taken a lot of the excesses out. There's a lot of new product introduction taking place. And the consumer is really there. And there are a lot of these companies that shouldn't have been financed in the first place.

So I view this as beneficial. We have a multiple-layer economy.

But from our point of view, we're where the consumer is.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

DOBBS: "Harry Potter," one of the most eagerly awaited films -- I'm going to give you a chance to promote diligently here. Is it -- does it appear to be as good as everyone is both hoping and expecting?

LEVIN: Oh, yes. This is Chris Columbus, who's done this with an extraordinary cast. It's a -- it's a phenomenon. What J.K. Rowling has created is something we've never seen because you have teenagers around the world really entranced by this story. So on November the 16th, we're quite confident that this will be the highest-grossing film in the history of Warner Brothers.

(END VIDEOTAPE)

DOBBS: Next here on MONEYLINE, has Alan Greenspan gone overboard in slashing interest rates? We'll take a look at that and the effect the biggest tax cut in decades would have on our economy. Stay with us. (COMMERCIAL BREAK)

DOBBS: This year's chief concern, stretching from Main Street to Wall Street, is an economy slowing. I recently talked with two prominent names about the effect of tax cuts and interest rates on this economy, Wharton finance professor Jeremy Siegel, "New York Times" columnist Paul Krugman.

We begin with professor Siegel who correctly predicted the sharp downturn in technology stocks. I asked him if the Fed has moved too far too fast in cutting interest rates five times in less than five months.

(BEGIN VIDEOTAPE)

JEREMY SIEGEL, WHARTON SCHOOL OF BUSINESS: No, I think that they actually should have eased faster than they did. I mean, we have a faster-moving economy. Greenspan has mentioned that. I think they should have brought the Fed funds rate down where it is right now back in January and February. I would still like it to go down another point. I would like to see 3 percent, just like '92-'93.

DOBBS: Wow!

SIEGEL: Yeah. Given the slowdown that we have, you really want to spark the economy -- I think you need to work some more magic there.

DOBBS: Well, you've got to be encouraged by the fact that the Fed put forward a decided bias toward the possibility of further rate cuts then.

SIEGEL: Yes, they did not foreclose that, and I think at first Wall Street looked at that and said, "Oh, is the Fed worried?" and they didn't react. But then, when they saw, hey, there could be more down the road, rates are really going down to 3, 4 percent, they're saying, you know, where else are you going to go but equities, and that pushed the money in.

DOBBS: So you feel we're at a bottom in terms of this market, you feel that the Fed has more room in which to cut, and the economy, if we take the market as a forecaster, you're suggesting that the economy is turning around as well?

SIEGEL: My studies have shown that there's about a five-month lag between the bottom of the market and the bottom of the economic cycle. So what the market is telling me is we're going to hit bottom in September. That -- it might not be quite that early. So I still think there's going to be earnings disappointments, but they're going to be offset by the fact that again with lower interest rates people are going to say, "Where else am I going to put my money?"

So, I don't think this year is going to be a big surge year. I'm waiting for 2002, but it looks like those March-April levels will mark the lows.

(END VIDEOTAPE)

DOBBS: Some advocates of the Bush tax cut plan believe it will help the markets and the economy. "New York Times" columnist and economist Paul Krugman says, no way. I asked him what's wrong with the government giving back some money to us, poor taxpayers.

(BEGIN VIDEOTAPE)

PAUL KRUGMAN, "NEW YORK TIMES": What's wrong is that -- what's wrong is that I and my generation are going to retire not too far away, I hope, if I can.

(LAUGHTER)

And basically, what this does, the tax cut is undermining any effort to make realistic provisions for that impending event.

DOBBS: May we put up a couple quotes from both your column and the book? The first one, if we could see that please. There it is.

"The White House has radically understated the cost of their plan while overstating the money available to pay that cost?" What does that mean?

KRUGMAN: A couple things. One is that there are land mines sort of built in to this. The biggest is the alternative minimum tax. I personally know that I'm going to get no tax cut under this, because I'm going to run straight into this thing called the alternative minimum tax. But since they're going to be about 30 million other people like me, they're going to have to change that, and that right away adds 400 billion to this -- to the tax number.

The other thing is that surplus projections are really a joke. If you really start to look into them, you discover that there are hundreds of billions, quite possibly a trillion, of necessary expenditures, expenditures that everybody in both parties is going to want that are not counted in. And...

DOBBS: Your next quote: "The White House has falsely sold the plan as an appropriate answer to the short-run economic slowdown when it is almost perfectly designed not to deal with that problem."

KRUGMAN: Most of the tax cut comes second half of the decade.

DOBBS: The back-end loading thing.

KRUGMAN: That's right. And in fact, now there's a hundred billion, supposedly, of front-end stuff, which the Republicans were dragged into kicking and screaming. As you may recall, there was an attempt just a couple of weeks ago to welsh on the deal and take that hundred billion of immediate tax relief away so that you could keep the full tax cuts for the top marginal bracket.

DOBBS: You know, with your criticism of this -- and I take your point, entirely -- it is -- it has to be stunning to you to see this move into law, because it was only three or four months ago that nearly, you know, every Democrat, some Republicans were saying, "Tax cuts?" and George W. Bush was in many places ridiculed during the campaign for even suggesting such a thing.

KRUGMAN: Well, you know, partly it's Alan Greenspan bears some responsibility, I have to say, as one of those people still a little bit riled. You know, we used to say the Fed stood above politics, just like the Supreme Court, and now we're 0 for 2. But...

DOBBS: Was that some partisanship I heard slip in there, Paul?

KRUGMAN: Yeah, a little. But no, I mean, the real thing is this is -- the timing -- this is the sweet spot. Right now is exactly the moment when we have the delusion that there's lots of money for the tax cut.

DOBBS: Right.

KRUGMAN: Even one year from now, certainly two years from now, we're going to be looking back and saying, my God, what did we do? But right now, just given the peculiar way in which budgets are made, it looks like we can afford this. And George Bush is lucky and somebody -- maybe him -- is very smart.

DOBBS: Well, it was, was it not, a Democratic administration who did a projection 10 years out to $5 trillion out there? Wasn't that...

KRUGMAN: Well, that's right. But the...

(LAUGHTER)

DOBBS: Some responsibility has to (UNINTELLIGIBLE) surely for that rosy scenario.

KRUGMAN: The trick is the 10 years, which is, you know, it's the worst possible horizon. It's long enough so that it's all science fiction and short enough so that you don't get the retirement of the baby boomers in there. Perfect.

DOBBS: Well, the fact is, this economy, do you believe, as we wrap this up, irrespective of tax cut, which is assured, irrespective of the budget condition, which are dependent upon economic conditions, do you believe that we're going into recession?

KRUGMAN: I think not, though if anybody -- anyone who's confident doesn't know what he's talking about, right? But looks as if we may be skating just above a technical recession.

DOBBS: Well, it's -- and you'd give how much credit to Alan Greenspan?

KRUGMAN: Oh, to the Fed in general? Lots, and Greenspan is certainly doing that job.

DOBBS: Forgiving him his partisan foray down into the...

KRUGMAN: That's right. He does his proper job very, very well.

(END VIDEOTAPE)

DOBBS: Up next on this special Memorial Day edition of MONEYLINE, the next frontier, as we talk to the world's first space tourist Dennis Tito about his trip and his plans, now that he has returned to Earth.

(COMMERCIAL BREAK)

DOBBS: In 40 years of human space flight, we've taken off in the name of science, exploration, learning. But only one of us has gone into space as a tourist: Dennis Tito is the man who holds the honor.

Last month, Tito took off in a Russian spacecraft on a trip to the International Space Station, and he did so over the objections of NASA. Tito spent six days aboard the space station, reportedly paying the Russian space agency $20 million for his trip.

Back here on Earth, Tito said his goal is to make space tourism a reality.

(BEGIN VIDEO CLIP)

TITO: I think I can play a role as an intermediary between Wall Street and the space agencies in getting that done, and hopefully I'll be successful.

(END VIDEO CLIP)

DOBBS: My first question of Dennis Tito was: Just what kind of trip was it?

(BEGIN VIDEOTAPE)

TITO: I -- I can't describe how great it was. It went well beyond my expectations. I thought it would be difficult. It turned out it was quite easy and the experience was unbelievable.

DOBBS: How many Gs did you experience in blasting off?

TITO: That was 3 1/2, which was nominal and not very difficult.

DOBBS: Just about a half G more than the shuttle itself, which is...

TITO: Right. It was on the descent that we had the higher G- load.

DOBBS: And what were those?

TITO: Well, normally, we have a 4 1/2 G-load, and during the descent I felt, gee, this seems to be a little stronger than we did in the centrifuge, and I felt like 5 1/2 Gs. And I said, well, it's probably because I'm used to weightlessness and maybe they ought to change the simulator. But it turned out it was a 5 1/2 Gs, because the profile was a little different than planned.

DOBBS: And would you do it again?

TITO: No. And not because I wouldn't want to, but I think it's time for other people to follow their dream and I'd like to work on that.

DOBBS: Well, in following your dream, watching those pictures of you up there with that grin on your face and absolutely enjoying yourself, the astronauts with whom I've had the pleasure and the privilege of talking have all talked to me, many of them, about, first of all, becoming physically ill. Did you experience that from the outset?

TITO: Actually, just a small point at the beginning of the flight while we were in the Soyuz. And I adapted right after that, and it wasn't being sick all the time. It was just feeling nauseous and then, of course, getting it over with.

DOBBS: As you know, your -- your visit to Station Alpha was heartily opposed by NASA. How did that you feel? You're an American, you're training with your Russian cosmonauts. NASA is saying, we don't think this is a great idea, we think point in point of fact he may break some of the china. What was your reaction?

TITO: Well, I was a little surprised by it, because around January we were getting some feedback from NASA that was, you know, not strongly against, not greatly in favor of it. And Mr. Goldin was quoted actually in a couple of articles saying that the Russians could use the money and he'd be behind that. So it was surprising to me, because I knew that this flight would publicize the station and it would really be a good thing for NASA.

DOBBS: And the public reaction?

TITO: Amazing. Amazing. Not only in the U.S., but also in Russia. I was surprised to see such a very positive reaction.

DOBBS: And now, Dennis Tito's role, are you going to be promoting space flight and space tourism?

TITO: Well, I would like to. But at first, I want to find out is there really a market here.

DOBBS: Right.

TITO: And I want to look at it as a businessman and determine is there a business opportunity here. If there is, I want to put together a business plan, raise the capital and get the job done.

DOBBS: Terrific. I would guess that at some point to make this a very sustainable business the price point will have to drop somewhere below $20 million.

TITO: Definitely.

(END VIDEOTAPE)

DOBBS: And Dennis Tito recently testified before a Senate panel about a citizens in space program. Tito stressed the importance of opening up space travel to the ordinary citizens, not just the wealthy.

Up next here, "Ahead of the Curve." Stay with us.

(COMMERCIAL BREAK)

DOBBS: An important report on the economy will come out tomorrow: consumer confidence for the month of May. Economists expect that number to rise. Also watch for personal income and spending for the month of April.

And that's it for this special Memorial Day holiday edition of MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Good night from New York.

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