Wall Street Week with Louis Rukeyser; 2617; Forbes on the Election

Iraq. No. For more than a quarter century America's most popular program about the economy people and their money Wall Street Week With the way through Kaiser is made possible by the Corporation for Public Broadcasting. And by the annual financial support from viewers like you by Prudential Securities with more than 50 600 financial advisers nationwide preventions securities can help you invest your money wisely by A.G. Edwards committed professionals providing a full range of financial services and investment

advice. A.G. Edwards trusted advice exceptional service and by Oppenheimer Funds because solid investment performance and sound financial planning go hand in hand. Produced Friday October 25th. Our panelists are Alan Bond. Allison beans and Mary Farrell. Tonight's special guest is Steve Forbes president and editor in chief Forbes magazine. Believe me I'm Louis Rukeyser the Wall Street Week. Welcome back. Well this was the week when Pope John Paul the second. Declared that there was no religious objection to the theory that humans may physically have evolved from monkeys. And as if to prove the pope right. America's politicians spent most of the week demonstrating that the gap between the species may be smaller than previously

assumed. Bob Dole made a splendid monkey of himself by making a foreign appeal for support to Ross Perot. Thereby helping Dole Not a bit but enabling Perot who had almost disappeared from the evolutionary screen of this election to re-emerge disdainfully at the top of page one. Meanwhile a sordid alleged bits of monkey business on the part of Bill Clinton were proving so unfastened ating to the public that he is now clearly performing not as the Teflon president but as the boomerang president no matter what charges are hurled at him. They appear not just to fail to stick but actually to bounce right back at the hurlers who are perceived as being beastly to the chief executive and not living up to what the public has been led to believe or the normal election year standards of gracious teatime deportment in the chimpanzee's tea party at the London Zoo. Wall Street for its part occasionally went a bit ape as it began to contemplate the

possibility of a Democratic sweep of Congress as well as the White House which it interpreted as increasing the likelihood of returning the nation to a less disciplined federal spending under old style committee chairman who might not fully share the president's discovery this year. That the era of big government is over. By week's end however the bond market had steadied having concluded that whatever the outcome next month the weight of the evidence suggested that the economy was already slowing significantly which cheer the bond ghouls and allay their inflation fears. Even though the same conclusion cause some nervous sell offs in the stock market which actually hopes that the economy will not be totally trampled by orangutans. We tonight will talk about the campaign that might have been with an old friend of this program who this past year turned presidential candidate himself. Steve Forbes the Republican whose candidacy was endorsed by Jack Kemp. And later was instrumental in

tilting Dole toward tax cuts a tilt that so far seems not to have been working. Well they asked him why he thinks this is so and since he was a winning forecaster before he became a losing politician what he thinks really lies ahead for the economy and for his own ambitions. After the ballots are counted but first let's check out the behavior of the unevolved loons in Wall Street in the week. Yes past the Dow Jones Industrial Average ended last week at its 30 first record high of the year. But some second thoughts this week produce profit taking that gave the blue chip index its worst week since August off more than 87 points at six thousand seven point zero to still higher that it ever closed before last week and there were similar pullbacks in all the broader averages and continued very heavy trading. I don't know if it's the election or what. But nothing seems to excite our Ells. Not a one has budged in seven weeks. And this week only two

RV guys and a merry fowl get the Halos for having been right. That is bullish. Three months ago. At week's end sluggish reports on home sales and most big ticket purchases contrasting sharply with the glowing view of the state of the economy being promulgated from Washington. But what the heck it is an election year. Help push long term interest rates back to within a hair of where they were seven days ago just above six point eight percent. In a slightly stronger week for both the dollar and precious metals the feeling of detachment from normal the earthly concerns was enhanced by a team of NASA's scientists that vigorously defended its theory that a meteorite from Mars shows evidence of ancient life on that planet. Since there was so little evidence of evolutionary progress here on Earth this week no one seemed to care. It's very foul if the economy is slowing down. Why should anyone continue to buy stocks.

I think there's plenty of life in the market even in a slow economy. I think what we've seen the worst impacts of that slowdown on corporate earnings in the second and third quarter and the fourth quarter is an easier comparison and next year I think we'll see some solid eight to 10 percent gains. So even though it's not one of those robust recovery's we've got used to in the post-World War 2 period it's a good solid one that we can expect. So your scenario shows at least no recession no recession I think we're going to come through this with a soft landing soft recovery a much more muted business cycle and I think that's fairly healthy very healthy for the market. Some of the worst hit stocks this week with a recently high flying technology stocks. Obviously there's always an evolving market. What do you avoid in these days when where you're looking. Being risk averse It is very hard to play in the technology arena. On the one hand it's a true growth area of the market on the other hand you see the risk. I would avoid I would avoid the technologies that I think are going to be most sensitive to this kind of economy some of the semiconductor stocks that will be hit hurt by the slowdown. But I think I'd also be very wary of some of the

traditional cyclical companies because it is a soft recovery I think a lot of analysts are looking to these classic old line businesses to have their sharp recovery and they won't have the support of the economy. So does that include for example the auto companies. No actually the auto companies I think have a particularly Ford over in with their European exposure could have a nice boost here but I think those are ones I'd watch carefully because of that economic slowdown slow growth. And what are some bad cyclicals that cyclicals would be like the classic gold Caterpillar's you know the companies that have traditionally been the most tied to the economy. ALAN BOND What do you think is going to happen if they count the ballots. Well I think Lou that the market will probably waffle a little bit. We might get a minor selloff but I think you know it will probably finish a year with a market up somewhere between 15 and 20 percent. So a lot of the gain has already taken place but you know even with this market where we've seen some profit taking there are a lot of opportunities I think still where you're fighting opportunities. Why I think the oil stocks for example look fairly attractive and in fact with oil up over 20 percent this

year not so much because of shortages domestically but internationally I think companies that are highly leveraged. Oil prices like Texaco look very appealing here. All stocks have already started to show some strength. I don't think it's too late to get out. And I think it's too late I think you know as we start to enter the winter months on the East Coast that there still are some opportunities there. But I would also point out that India for example long distance area. I think you're going to see money shift out of AT&T which was in the news heavily this week and into some of the other smaller long distance companies like WorldCom by AT&T appoint a new number to eventually to be number one in the market and much like with choice. How important is that kind of thing for the company's long range future that kind of thing is very important for the company's long range future and I think right now Wall Street is trying to judge whether you know this company which is now trying to establish a new corporate culture now has a new leader at the helm. You know it's going to be a show me stock for some time and you'll see money as we're seeing in this market shifting from sector to sector looking for the next bright idea. It's not as if the existing leadership of AT&T had done a brilliant job for the stockholders and we should yes

certainly not in recent years and not just for this year but you've seen a lot of investors as a company was split apart and shift their money into for example Lucent which looks very appealing and reported earnings this week that were better than expected. I think that one also looks very attractive. That's the stock response from AT&T. That's right. So you is carefully selective as these people are you say it's all or nothing on pretty carefully selected also. I'm not convinced of the economy slowing as much as the market thinks right now I actually think third quarter will be slow but the fourth quarter economic growth will be very robust. And if you look at all the job growth how low unemployment is that would suggest that consumers probably will be spending more and the corporations are doing relatively well. So you would be a buyer of bonds if that's your view in the economy. No I would not be aggressively out buying bonds right now. I do wonder unemployment is low that usually bodes poorly for inflation because it means people are going to start spending more. But it looks the corporations are having a tough time passing on any cost increases down into pricing levels. So it might not be inflationary but it might put a lot of pressure on profit margins for

corporations and that might just put some pressure on certain stocks or the stock market in general. Would you expect the market to behave differently depending on the results on November 5th. I think so. I would you expect that change. I think if you have an all Democratic sweep both Congress as well as at present I think the markets are pretty poorly if its status quo the market will probably act all right and its all Republicans which seems highly unlikely the market might act relatively positive. They might have to run a drug test on the posters. All right well the other two things that you shouldnt forget. First it is your duty as a citizen. However distasteful actually to vote for one of those guys November 5th. And second if there are any of us needs that they still haven't met the place to write us is Wall Street Week Owings Mills Maryland 2 1 1 1 7 or fax your deepest desires to us at 4 1 0 5 8 1 0 9 8 0. And now let's go right over and meet tonight's special guest Steve

Forbes. Welcome back. Good to see you Lou. Pleasure to see you in any incarnation. In these previous four appearances of my television guest Steve Forbes was on the outside looking in on the American political scene following in the footsteps of his grandfather and father as president and editor in chief of Forbes magazine. Now though he retains those titles and he's a true insider as well having campaigned himself for the Republican presidential nomination this year on a platform that advocated a flat rate of income tax and assorted other dramatic changes in the way Uncle Sam does business. Stiff tax cuts normally are political magic but one of the most striking features of this fall's campaign is how much public skepticism is needed Bob Dole's tax cut proposals. What's he doing wrong. Well the key when you make a proposal like that is to recognize that voters are initially going to be extremely skeptical unless you prove that you really mean what you say. And you

look at history. Reagan had to go overcome skepticism. Engler in Michigan Whitman in New Jersey Pataki in New York Mike Harris in Ontario and Dole has been good on the stump on the issue. But his TV ads are all over the place. And if people don't see consistency they're going to say just another thing on the laundry list. They're not going to believe it. When you advocated tax cuts people believed you because you'd always advocated tax cuts when Jack Kemp advocated tax cuts. People believe him because he's always advocated tax cuts. Bob goes sometimes into a bit of tax cut of about seven minutes. Is he convinced himself that he's got the right program. I think he has. When I ended my campaign last spring he had asked for a meeting with me. We were both on our best behavior after a tough contest but he made it very clear that he recognized we had to have more growth in the economy. Taxes had to be cut. We had a tax simplification even though he wouldn't agree with some of the specifics I proposed. He was serious about it and he did make that tax cut proposal he brought Jack on the ticket. And as I

say on the stump he's pretty good on the issue. He comes across with passion. But the TV ads and I don't understand it go all over the place. They the people don't see it consistently. They're not going to believe it. Many people say of those TV ads that they are too negative. Do you share that view in the sense of bringing up issues. No. But his task is to convince people he means what he says intends to deliver on tax cuts and tax simplification after 24 months if he's elected. And if you don't hammer home on your paid media it's not going to come across. In fairness to Ollie certainly the conventional wisdom about American politics is that to beat an incumbent president in peacetime. With the economy appearing to be in reasonably good shape is a very difficult task. All that's the reason right all the more reason you have to come across as somebody who's going to do something bold even though people may be a little better off than they were four years ago. They're not that much better off. They're still a lot of anxiety there. And the blunt

truth is two incomes in a family still can't provide the way one income could in previous generations. And the biggest villain is the tax code. And that's what he's got to hit that this is going to be a bold change if it's just small change people are going to go with it in the search for boldness even if you was not willing to go as far as you did. Why did he not advocate rolling back repealing both the tax increases of the 1990s. Well some of us had advocated that in the internal debates when he came up with this proposal some wanted to do the 15 percent of the business thought repealing 1993 by the way the Congress should have done that a year ago and it would have been much better shape today. But I was sort of excited by the debate that Bob Dole would be debating two major tax cuts. So when he chose the 15 percent. I was a little disappointed by I thought boy that's progress from what we have had a couple of years ago so I wasn't too disappointed. Bill Clinton doesn't seem to want to cut marginal rates at all. And this is where Bill Clinton should be hit. The status quo is indefensible.

The IRS has got to go it's got to be those initials IRS should be turned into R.I.P. rest in peace. And so here he is giving us a huge issue defending an indefensible status quo and we haven't exploited it. We should have been all over him on that. Well let's now look at it from the point of view of what Bill Clinton is saying. Bill Clinton says the last time we cut taxes under Ronald Reagan it exploded the deficit in in his rhetoric and it led to the enormous problem that Ross Perot for one keeps harping on. What's the response to that. Oh very simple. Every time we reduce the burden on the American people not only as America prospered but government revenues have gone up. Income tax revenues even though the rates were cut dramatically in the 80s increased by two hundred billion dollars a year. The problem was the Washington culture spent the money and then spent some more because if you got a $10000 raise you went out and spent 20000. That's a spending problem not an income problem. And so if you can make the point that with a Congress that just shows a

little bit of restraint on spending the deficit is going to go. You call for boldness and certainly we've had two fairly timid contenders in the economic area. Would you as a presidential candidate have taken on Social Security. I did in the primaries and I touched the third rail now I'm still alive. All young people know the elderly know too that the system is going to be in trouble in the next century and we have time still keep the current system for those who are on it keep it for those are going to go on in the next 12 or 15 years. But let's start where we have time. A new system for young people or part of their payroll tax would go to their own individual savings or retirement account they couldn't touch until a certain age like an IRA. But that way it's out of the hands of the Washington politicians. The money is invested in the real American economy so America comes out ahead. Young people come out ahead. And I think it's a way to phase it in. And if you just take a 20 year old making 10000 a year and deposit that payroll tax into it was so normal investment returns each year. By the time that

person reaches 65 or 70 he or she will have an account over half a million dollars they'll do better in retirement than they did working. How do you assess the state of the economy right now. Sluggish not bad but it's like walking pneumonia. I think we're capable of doing far far better. We had for example in the early sixties five straight years of 5 percent real growth rates. We had far higher growth rates and falling inflation in the 1980s. We've got to get these berries out of the way. If you look at what we've done in investment since the early 80s manufacturing America is now world class again high tech we're leading the world. I think we should be doing much better than 2.3 or 2.5 percent. Put on your old economic journalist's hat and tell us what you see for the economy next year. Unfortunately again performing subpar not a recession but sluggishness. It's like the Atlanta Braves or the New York Yankees finishing in the middle instead of at the top. Bill Clinton would spend it is a great miracle if you were manager. That's not the world series we're going to play in right now. Do you see a recession going.

No. But it's like walking pneumonia. You know we could be far healthier. What would you expect to happen with interest rates. I think interest rates if it wasn't for the uncertainty about the elections and Bill Clinton's behavior what's going to happen in the foreign arena. I think interest rates are high. There's no reason why we kid couldn't have today what we had briefly in 93 five five and a half percent long bond short rates are far higher I'm surprised we didn't hit the Democrats on that when they said we brought interest rates down. You look at the short bond rate went from 3 to 5 percent and long rates aren't much lower than when they Bill Clinton took office. Did you ever think that you would see an incumbent Democratic president claiming the budget deficit issue as his. Well it was the Republicans who gave it to him by killing the stimulus package killing his attempt to nationalize the health care system and garbage like that saved him from his own folly. And he takes credit for it. But that's politics. That's what we call the myth of simultaneity if you're president anything good happens in the country you get the credit and bad the blame.

And by the way incomes most income gains have come from the top five percent of income earners the top 20 percent. The other 80 percent are still struggling. So Bill Clinton may talk like a Democrat but he's behaving like those nefarious Republicans results. I'm sure that he'd be a shame to hear that. Let me let me turn you out to exult our nonpartisan panel. Nothing has changed. Right now if you have someone who's bridge the world of business PDA and now politics how would you rate the average reporter for their ability to interpret and report the economic issues in the campaign. Well on the political side and Gretchen Morgenson who works at Forbes magazine and was my press secretary during the campaign did a piece for The Wall Street Journal. Unfortunately political reporters are not interested in economics they're not interested in learning more about it they see everything through a short term political lens. And so I think they miss a lot of good stories. They're still in the cave. They're not even first grade yet some of them on. And it would make them better reporters but they don't sign up for the summit or should learn more about these things.

Steve there are a lot of concerns that voter turnout may be somewhat small in this election. What do you think would be the impact of that. And what are your expectations. I think we'll get a little better turnout but it is a danger to danger for Republicans in 1994 as you know low Democratic turnout helped give the Republicans the Congress. Republican voters get discouraged it's going to hurt us on these local races. So I don't think it's going to be as robust as it was in 98 in 92 and I think people will drag themselves to the polls and will pull those levers. If you look on the surface unemployment is very low. We've had economic growth for several years now in a lower deficit. What would you tell people who are probably thinking Clinton isn't doing such a bad job one we can do better. We do need dramatic changes to really fulfill our potential. Starting with the tax code. It is a dead weight on American life. We do need other changes. Education changes regulatory changes. So I give the fun of giving the fundamentals we should be doing far better than we are today instead we have to accept the sluggishness. And I think people realize we can be doing a little

better if you look at our growth rates this is the worst recovery we've had in history. And also we can double those rates without increasing inflation. It's good monetary good fiscal policy that so I say it's like the Braves and the Yankees finishing the middle or last place. We were we were capable of winning the World Series of economics. Steve do you think it was smart to put a paper bag over Newt Gingrich's head and pretend he was even a Republican this year. I think it was and I think he should have played less with the animals on the TV shows and say I didn't explain these policies well and admit that he may not have been a star performer the way Bill Clinton is but he can't shed a tear on the way Bill Clinton does. We have good policies to get America moving. Don't be defensive. Set the agenda in your own terms. Our party lost its nerve for a while. We're paying the price for it. There's a sense in the country that the Republican agenda that seems so popular two years ago is now unpopular the people aren't even interested in tax cuts that rate pretty low in the polls.

I think partially it's lower expectations that it can't be done that it won't be done. And I think in states like New Jersey New York Michigan and other parts of the country have shown that when people take leadership and advocate not only good things but deliver on them. Voters respond positively. They become cynical their expectations have been lowered. That's helped Clinton. What's the most striking thing you learned as a candidate that you hadn't realized coming in and other candidates over the years. About other candidates what do you what did you learn about actually being in the arena. Actually it sounds like a civic textbook. But it's true. Voters are interested in a genuine discussion about genuine issues. They asked better questions often than the press did. And I think the political culture doesn't a disservice by not engaging in those debates. People are interested. It would be fair to say that your conclusion is that this may not have been your last hurrah. I'm going to stay involved one way or the other. And I was there for diplomatic answer. But now I'm going to ask the question that if you answered I'll be astonished what's going to happen a member of it

I think and I'm an eternal optimist but I think if Dole hits the tax issue in this last week he's going to do better than expected and I think the GOP will keep the Congress. I think we can still pull an upset. Thanks very much Steve Forbes actually for our panel and I hope you'll be back with us later tonight on most of these PBS stations for a very special hour I think you'll enjoy and find especially worthwhile. It's Louis Rukeyser 1996 election guide. And in it we look back on the sounds and the scenes of the past century of presidential campaigns focusing on five of the liveliest and most influential. As we see how the economy affected them and how they affected the economy it all provide surprising clues on what really to expect after the 1996 election. And I'll be questioning key advisers to Bill Clinton and Bob Dole about that. So for a fascinating insight into your own economic future I hope you'll join me for Louis Rukeyser is a 1996 election guide. And since some stations had special scheduling problems Tonight here are

the times this very special program will actually be shown in a number of major markets. Check for your area and if you don't see it check with your local station as to precisely when you'll get to see this fast paced and often surprising hour. And of course we'll be back at the same old stand next Friday when we'll be getting pre-election insights on what lies ahead after the ballots are counted from three of the most powerful figures in the American media. Mort Zuckerman William O'Neill and Michael Bloomberg. I hope you'll vote to join us for both. And while there's been Wall Street Week on the issue of God that night. Wall Street Week With Louis Rukeyser is a production of Maryland Public Television made possible by the Corporation for Public Broadcasting. And by the annual financial support from viewers like you by provincial securities with more than 50 600 financial advisors nationwide credential securities can help you invest your

money wisely by A.G. Edwards providing a full range of personalized financial retirement and estate planning. A.G. Edwards trusted advice exceptional service and by Oppenheimer Funds because of solid investment performance and sound financial planning go hand in hand with. No more rigid transcript of this program. Send $5 to transcripts wall street Greek with the Israel geyser Owings Mills Maryland 2 1 1 1 7 0. Transcripts are also available to subscribers of the Dow Jones news retrieval service. This was PBS.