Treasury Secretary O'Neill on the Bush stimulus plan
(CNN) -- President George Bush said Wednesday his administration will seek a package of measures worth as much as $75 billion to help boost the U.S. economy after last month's terrorist attacks. CNN anchor Paula Zahn talked with Secretary of the Treasury Paul O'Neill about the president's plan.
PAULA ZAHN, CNN ANCHOR: Good to have you join us.
PAUL O'NEILL, TREASURY SECRETARY: Nice to be with you.
ZAHN: All right, let's very quickly talk about the president's plan. He obviously is urging Congress to spend some $75 billion right now to help prop up what he calls a faltering economy. If that doesn't happen, what will be the consequences of it, because you do have some conservatives in the Republican Party that are opposed to this increased spending?
O'NEILL: Yesterday I testified before the Senate Finance Committee and I tell you, I found what I think is a spirit of cooperation that prevails since the events of September the 11th. I'm convinced that we're going to be able to do this, we're going to be able to do it with very, very large majorities in both the House and the Senate.
People are following President Bush and believing President Bush. He's listened to lots of advisers and decided that we should put another $60 billion to $75 billion into the economy now to help consumers, to help with investment in the business sector and to be sure that we take care of those that were directly affected by the events of September the 11th.
And, you know, I didn't find anybody disputing the fact that we need to do these things. There's some disagreement about what the parts should be, but it's up to me to figure out how we can put it together in a way that's true to what the president's asked for, a short-term stimulus that doesn't do long-term damage to the economy and raise long-term interest rates. And I'm convinced we can do this. We're going to do it in the next three or four weeks.
ZAHN: But even you acknowledged in the Wall Street Journal yesterday, "Our growth rate in the third quarter is going to be negative." So really what would the impact be if you get this package passed, as you'd like?
O'NEILL: Well, you know what I said is, in fact, before September the 11th our economy was continuing to grow, albeit at a very low rate, but we were on the path to something like the growth rates we've had in the last two years. And there's no doubt, when you shut down the U.S. airways for five days and hotels don't have any business and restaurants don't have any business, there's almost no way that an economy like ours can escape negative growth when you have that kind of a shutdown in the economy.
There is encouraging news, Paula. If you look at what happened with credit card sales right after September the 11th, they plummeted to minus 26 percent. By last weekend, we were even with year-ago rates of credit card consumption. So, you know, I see the American economy as moving back and the president's decided we need to put this additional stimulus in for the short term and that we'll quickly move back to rates of growth that we liked.
ZAHN: I know you have been loathe to use the "R" word, the recession word, and yet a number of noted economists say, you know, forget the standard definition of what a recession is, we are, in fact, in a recession. What do you say to them?
O'NEILL: I say look at the data. No one knows where we are right now because we don't have real-time data about the economy. What I said to you about the third quarter, I think almost no one would dispute it. If you shut down the economy for five days in any quarter, you're probably going to have negative growth rates. How fast we rebound depends on how fast we can restore confidence and, you know, an important aspect of that is people getting comfortable again that we can live our lives something like we did before September the 11th.
Here in Washington today, we've got the first planes taking off again. This is a really crucial thing to demonstrate to ourselves that we can do it, that we're not going to let the terrorists bring us to our knees.
Over the weekend I spent a few hours in shopping centers as part of moving into Washington. I have to tell you, I found it very comforting to find I had to wait for a parking space and when I saw people coming out of the shopping mall they had their hands full. You know, it's a sample of one, but the American people are fabulous. We're going to get back on our feet and the stimulus the president has proposed will help to accelerate our return to good growth rates.
ZAHN: Unfortunately, tomorrow you have to deal with the cold hard reality of the new unemployment numbers coming out. Do you, can you give us a preview of what those numbers will show?
O'NEILL: I won't give you a preview but I'll tell you what the direction is going to be. It will ...
ZAHN: Is it going to be above 5 percent?
O'NEILL: We're going to have, well, I don't know, we'll see. We're going to have unemployment rates that are going to track higher for some period of time. You know, the data that we're going to get tomorrow is a reference from the first 10 or 12 days of September. And so it's not going to include the fallout from the September 11 events yet.
There's no doubt about it, before September 11, we still were seeing a movement to higher unemployment levels. People should not be surprised to see October numbers not be good and November numbers will probably be a little worse and December. And that's the important reason the president said let's put this stimulus in now on the front end -- we can slow down the rate of increase in unemployment rates and get our economy moving forward again.
But the data that we're going to see in unemployment is always a trailing number. People should not forget that. And the correction we were going through before September the 11th hadn't completely showed up in the unemployment data yet. So we're going to see that. What we should look at is what's happening to consumption, what's happening to housing, what's happening to big sectors like autos. And, you know, the auto data, frankly much to my gratification, was a lot higher than what the pundits said it was going to be. I thought it was going to be better. I turned out to be right, I'm glad to say.
This is going to be probably the third-best year ever in sales of cars and light trucks. You know, so I'm not a doomsayer. There are a lot of people who seem to find negative in everything. You know, I think the American people are great. We're going to get back on our feet. The president's stimulus proposal is going to get enacted in the next three or four weeks. We're going to get moving.
ZAHN: I know you said you're hopeful Congress will pass this economic stimulus package. What are your thoughts about unemployment benefits actually being extended another 13 weeks from the 26-week period now?
O'NEILL: Well, you know the president said ...
ZAHN: Is that going to happen?
O'NEILL: The president said from the very beginning in all that we do we should put compassion first and it's a compassionate thing to recognize that people may have a longer duration of unemployment. Of course we ought to do something about providing an extension of unemployment benefits. It'll be a component of this total package that will also have support for consumer spending and investment spending and, you know, I think we're going to get there. People are going to continue to put the people first and watch the smoke as we get better.
ZAHN: Secretary O'Neill, good of you to join us.
O'NEILL: Glad to be with you. Thank you.
ZAHN: Happy to have you with us this morning.
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