CNN LOU DOBBS TONIGHT Aired September 17, 2008 - 19:00 ET
LOU DOBBS, CNN ANCHOR: Joining me now are three people who I think are amongst the sharpest of minds in this country in the issues of economics and finance. David Cay Johnston is here with me in New York. He's a Pulitzer Prize winning journalists, best-selling author of a new book "Free Lunch, How the Wealthiest Americans Enrich Themselves at Government Expense." David, it's great to have you here. From Washington, D.C., the former controller general, David Walker. He's now president of the Peter G. Peterson Foundation. And Huron, Ohio, Peter Morici; he's professor at the Smith School of Business at the University of Maryland and I know you have a busy schedule, and I appreciate you taking time to be with us.
I want to turn, if I may, first, to David. We just heard two spokesmen of these candidates. How impressed are you with their recommendations and philosophy on this crisis?
DAVID CAY JOHNSTON, AUTHOR, "FREE LUNCH": It didn't give me any sense at all they're going to do anything serious to address what needs to be done. It took a long time to get into the mess, and it's going to take a lot of time to get out of it. Regulations on spending is good for you sometimes. If you just have cotton candy, your teeth will rot.
DOBBS: When I looked at this I'm sort of reminded of the attacks I receive personally when I talk about free trade, when I've talked about outsourcing, the idea that I must be a protectionist and an isolationist. I hear people say you're anti-business. Why can't people in this country in a public policy debate, Professor Morici, hold competing ideas in their minds. You can be pro business, you can be pro labor, simultaneously and it works out for the good of the country.
PROF. PETER MORICI, ROBERT H. SMITH SCHOOL OF BUSINESS: Absolutely. We have to have a balance between free trade and regulation, but you know I was very discouraged by what the candidates said today. Obama says, gee, we need to regulate the banks if they want support. The banks are already regulated. The problem is oversight for the regulation is in congress. The Democrats control that right now. They're getting lots of campaign contributions on Wall Street. It's one of their favorite places to harvest contributions.
DOBBS: Tell me that's wrong. Tell me that's wrong, that the Democrats aren't receiving contributions and donations and money from Wall Street?
MORICI: In my mind, Wall Street owns the senate and they're on the way to buying a president. Obama's just harvesting contributions up there better than a dairy farmer slicing hay.
DOBBS: I've got to ask you this. Is there any prospect here? We have had a do-nothing administration. We had a do-nothing congress the 109th, this is a do-even-less for the past two years. Is there any prospect that the American people's interest, the middle class, the foundation of the country, where do they turn for representation of their interests and their well-being?
MORICI: Not to these two candidates, I'll tell you that. I mean McCain wants more free trade, and so does Obama. His principle adviser, the guy behind his adviser, is Bob Ruben. They're both going to go easy on illegal immigrants. We're going to be these two guys, we're going to be knee deep with illegal immigrants that have driver's licenses and chest deep with broken banks on subsidies. It was not a promising performance the last couple days.
DOBBS: David Walker, let me ask you, with your perspective, your knowledge on all you have done as the controller general for years, why in the world I mean, can't people come to terms with the reality, this is a watershed moment in our history. We're watching unprecedented, unparalleled government intervention in our markets and institutions and it seems to me that things are never going to be the same. Am I wrong?
DAVID WALKER, PETER G. PETERSON FDN.: We're at a critical crossroads. There's no question. You have to keep in mind that Washington is a lag indicator. Typically, it doesn't act until it's a crisis, and then sometimes it overreacts. I stopped believing in the theory a long time ago. There was inadequate regulation and virtually no oversight. We need to do something in the short-term problem, but they have the same problem some of the major institutions have. We have to start dealing with that, too.
DOBBS: I have to ask, we have people listening to you three gentlemen, and they work hard, they are responsible. They're raising families. They're clothing their families and feeding them. And they're watching this, and saying not only do they not trust their government or either one of the parties, but they're watching their institutions fall apart in front of them and the government support them instead of individuals.
JOHNSTON: This hasn't hit a lot of ordinary people yet. This is abstract, Wall Street. Even if you say to people, the bailout of AIG is about $750 per family. It doesn't come out of their pocket at this moment, so they don't get it yet. But as we see the practice of spending the future, we're now at the point where not in actual dollars, but in the equivalent of it, all the income taxes that come out of your paycheck in January, February, March, April, and the first two weeks of May go to pay interest on the national debt.
DOBBS: Think about that 4 1/2 months.
JOHNSTON: 40 percent. Remember we were promised in 1980, when President Reagan started this, promised balanced budgets. These debts have built up enormously. We see lay-offs, credit card debts which are signature debt being written off by the banks, you see a lot higher unemployment rate, then you're going to get the reaction and the change.
DOBBS: In the midst of all this, a friend brought over to our house last night, she decided to save during the midst of the crisis in the past month, she saved all of the solicitations pre-approved credit. She had a bag about ten inches by six inches filled with these offers, Professor. I mean, is anybody awakening to there is a new reality at hand?
MORICI: No, I don't think so. Listen to both campaigns. They think it's fine to have a trade deficit five percent of GDP. It cost us $50 million a month. Basically what we do is the Chinese invest in the bond market. The New York banks process the money. They give it back to us to spend. We now owe the world $7 trillion. The interest on that is $200 for every working American every year. If we could reduce the trade deficit by half, we could increase the GDP by $300 billion and increase the income of every worker in America by $2,000 a year. No one wants to take hold of that. Instead, it's OK to import all we want, have all those coffee makers at Wal-Mart and we'll process all the money through New York. It turns out the processors in New York aren't doing their jobs. We have given how much money to the New York banks? $800 million? 5 percent of GDP between the trade deficit and the banks. I would give that to the people.
DOBBS: David Walker, you get the last word here. Your thoughts going forward?
WALKER: Lou, you know, the federal government and too many Americans are addicted to debt. You know, it's time for leadership and tough love in Washington. We are at a critical crossroads in this country. We've got to get our act together. The clock is ticking and time is working against us.
MORICI: Absolutely.
JOHNSTON: Absolutely.
DOBBS: All right. Thank you very much, David Cay Johnston. David Walker, thank you, Professor Peter Morici, thank you.
