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Deficit Will be Bigger Than Expected
Aired July 15, 2003 - 19:18 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN ANCHOR: The White House's announcement that the federal deficit will be bigger than expected sure touched off a new round of political debate.
But what's the real impact of the deficit announcement? Want to check in with Andy Serwer of "Fortune" magazine.
Andy, thanks for being with us.
ANDY SERWER, "FORTUNE" MAGAZINE: Hi, Anderson.
COOPER: $450 billion.
SERWER: Yes. How did that happen?
It's a tremendous amount of money. But think, Anderson, about what we've been through for the past three years.
First of all, sharp economic downturn. That, of course, means less tax money coming in; 9/11, huge expenditures there. The war in Iraq, huge expenditures there. Then also, of course, the tax cuts. That's also money flowing out. So, of course, you see the deficit growing because of that.
But it's really amazing how quickly we've turned around because in 2000 we had a very significant tax surplus and then we've gone down. One thing we should make clear, though, is that relative to the deficit in the Reagan years, this is actually smaller if you compare it to the overall size of the economy. Deficits bigger back in the '80s.
COOPER: Well, the previous record was, like, 1992, I think, for deficit. This is way over.
SERWER: That's right. It was $290 billion back then. Now we're at $450 billion. It's a lot more money, even adjusted for inflation.
COOPER: What does it mean for people's wallets?
SERWER: Well, you know, it's a big thing. And actually, where you really feel the impact, of course, is at a state level because that's where you really feel the pinch.
The states are the ones that need the money because they look for Washington to get money. Washington is saying, "We don't have money to give you guys." So states have been doing all kinds of things. They don't like to cut taxes -- or raise taxes, excuse me, right away on these kinds of things because there's such resistance to that. New York, of course, is raising something. What they do is cut programs. You're seeing in Oregon for instance they're ending schools early.
You can see here some of the things that states are doing. Across the board cuts, laying off employees, offering early retirement. And you know, reorganizing. What does that mean? Cutting people.
COOPER: They're taxing travelers a lot.
SERWER: Yes. This is a really ingenuous method I like to call this. Because what states are doing here is they're taxing people who are coming into their states so it's citizens of other states.
COOPER: People renting a car or staying in a hotel?
SERWER: Exactly. Look at a new hotel taxes in New Jersey. They've got a car tax, look at this, Rhode Island, they're got a tax on restaurants. And what are they supposed to do, stay at home? I guess that's what they're trying to tell you. If you don't want to pay more taxes eat macaroni and cheese and watch CNN.
COOPER: I'm all for that.
Andy Serwer, thanks a lot.
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