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CNN Today

Dunham: Bush's 'Biggest Risk' is to Play Politics with the Economy

Aired December 28, 2000 - 4:23 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: President Clinton issued a thinly-veiled challenge today to the incoming Bush administration. Mr. Clinton presented new numbers that show the budget surplus continue to increase, and he said, if the new administration makes certain choices, the country can bolster Medicare, have a targeted tax cut, and pay off the national debt.

(BEGIN VIDEO CLIP)

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: Obviously, it is for the incoming administration and the new Congress to decide exactly which priorities to address and in what manner.

But these new projections mean that a fiscally responsible approach that includes new investments similar to the ones I describe would still permit us to make America debt free by the end of the decade.

(END VIDEO CLIP)

WATERS: Bush campaigned, as you know, for a 10-year tax cut of $1.3 trillion. He'll have a chance to issue his own budget projections after he takes office in January.

Joining us now from Washington, Rick Dunham of "Business Week" magazine. Rick covers the White House.

One reporter indicated today that it appeared the president was making his remarks to the incoming administration and advising them what should be done in the incoming budget. Was that your impression?

RICK DUNHAM, "BUSINESS WEEK": Yeah, that seemed likely. The audience was not the people in the briefing room, and was not the American people directly. It was specifically the transition office and the president-elect.

WATERS: And he seemed to be saying for the past year, eight years, we've had a conservative economic plan, we would like to see it continued in that manner, while acknowledging that the new administration can make its own decisions, of course.

DUNHAM: Right. I think the main signal is that there's not that much more money for everything that the Bush administration has promised during the campaign: the big tax cut, $1.3 to $1.6 trillion, and a lot of money for the Pentagon, for education, for health care, for Social Security.

WATERS: He seemed to put the emphasis on Social Security.

DUNHAM: Right.

WATERS: Acknowledging that it's unrealistic to assume that future administrations won't be all paying down the debt until it's erased by 2010 by his projections, if certain measures are followed.

Is Social Security going to be the number-one bit of business in the upcoming administration?

DUNHAM: Well, I think it's going to be one of the top priorities of President-elect Bush. He said that.

The biggest problem he face is that Social Security has just been taken off of the budget in the past two years. It had -- before had taken money out of -- out of the -- out of the amount that was available for new spending. And if they spend too much on Social Security, then they are really going to have a limited amount for the other priorities.

WATERS: How risky is it to play surplus politics?

DUNHAM: Well, right now, it's not that risky for the incoming team. The biggest risk is to play politics with the situation with the economy. Because if the president-elect keeps talking about how the economy is going bad, how we might face a recession, well, consumer confidence could decrease, business confidence could decrease, and new spending, new hiring, and we could have a self- fulfilling prophecy. So I think that is the biggest risk right now.

WATERS: What do you make of those charges that the talk is a self-fulfilling prophecy?

DUNHAM: Well, it is certainly not the case right now. But it's clear, in the last few months, the report that you just had on a few minutes ago about consumer confidence. There has been a change among the American people, and there has been a change in the business community, and it's very important for the new president and the Federal Reserve Board to try to maintain consumer confidence.

Right now the biggest thing we have to fear is fear itself.

WATERS: The whole object of raising the interest rates over the past year was to slowdown the economy, which has been accomplished. Is the debate now over how -- how much has been slowed down? Some characterize what is going on now as a light landing; others characterize it as a near recession. Just where are we?

DUNHAM: Well, I think we are at a period where there is slower growth. But, in the first Bush administration, and President George H.W. Bush, the growth rate now is greater than he had for his four years as president. So it would have been considered good growth 10 years ago. So I think it's just compared to what we have seen over the last few years that growth in the range of 2 percent is considered slow.

WATERS: Would you expect a rate cut by the Fed in January?

DUNHAM: I think it's a pretty good prediction that we are going to see rate cuts next year. I would say it's slightly more than 50/50 that we would see it in January. It's not certain. I think the Fed is going to wait and see what the signals are over the next few weeks.

WATERS: All right, Rick Dunham, "Business Week" magazine, from Washington, thanks.

DUNHAM: Thank you.

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