PBS NewsHour - 2008-10-24
Channel: malgent
Transcript
Language: English (original, YouTube automatic captions)
[0:09] Good evening. I'm Jim Lara. On the
[0:12] NewsHour Tonight, the news of this
[0:13] Friday, then a look at the signs of a
[0:15] global recession as world markets
[0:18] plummet again. The conclusion of our
[0:20] Blueprint [music] America series with
[0:22] looks at Boston's big dig and at funding
[0:25] infrastructure projects. [music]
[0:27] A today report on the presidential
[0:29] campaign with John McCain in Colorado
[0:32] and Michelle Obama substituting for her
[0:34] husband in Ohio. [music]
[0:36] Plus, the analysis of Mark Shields and
[0:38] David Brooks.
[0:41] Major funding for the NewsHour with Jim
[0:44] Lara is provided [music] by
[0:53] with hard work and careful planning.
[0:56] Pacific Life can help you retire the way
[0:58] you want to with mutual funds and life
[1:01] insurance [music]
[1:02] and with annuities that can guarantee an
[1:04] income for the rest of your life. Your
[1:07] financial [music] professional at
[1:09] Pacific Life can help you reach your
[1:11] retirement goals. Pacific Life, the
[1:14] power to help you succeed. With soaring
[1:18] energy prices and global climate change,
[1:20] there are good reasons for believing in
[1:22] wind. Wind [music] energy is clean and
[1:25] plentiful and it answers the call for
[1:27] sustainable ways to create the
[1:29] electricity we need. We know because our
[1:32] sole focus is developing technology that
[1:35] uses the energy of the wind to generate
[1:37] [music] electricity. America has some of
[1:40] the world's most abundant wind resources
[1:42] and Vestus is here to help harness
[1:45] [music] them.
[1:48] Grant Thornton,
[1:52] Chevron,
[1:57] the Atlantic Philanthropies, [music]
[2:01] and with the ongoing support of these
[2:03] institutions [music]
[2:04] and foundations.
[2:09] And
[2:10] >> this program was made possible by the
[2:12] Corporation for Public Broadcasting
[2:15] and by contributions to your PBS station
[2:18] from viewers like you. Thank you.
[2:24] >> Another rush to sell hit the stock
[2:26] market today. It was driven by growing
[2:29] gloom over economic growth. Hedge funds
[2:32] and other major investors dumped shares
[2:34] to cut potential losses and to build up
[2:37] cash reserves. The Dow Jones Industrial
[2:40] Average lost 312 points to close just
[2:43] below 8379.
[2:45] The Nasdaq fell more than 51 points to
[2:48] close at 1552. For the week, the Dow
[2:51] lost more than 5%. The Nasdaq fell 9%.
[2:55] Around the world today, key indexes were
[2:58] down nearly 10% in Japan and as much as
[3:01] 5% in Europe. An economist at a London
[3:04] firm said, "We are getting used to wild
[3:06] swings in the markets, but today's moves
[3:09] verge on the bizarre." And a trader in
[3:12] Frankfurt summed up the general despair
[3:14] as he watched Germany's benchmark index
[3:17] plunge.
[3:20] Now we are under the important 4,300
[3:22] point mark. Important because that was
[3:24] the low of October 10th when it stopped
[3:27] going down. And now there is no stopping
[3:29] it anymore. 4,000 3,000. There could be
[3:32] big steps down now and it could go very
[3:34] ugly in the next few days.
[3:36] >> Stocks in Brazil also fell sharply and
[3:39] the two major exchanges in Russia closed
[3:42] until Tuesday after heavy losses. And
[3:45] Britain reported today it's on the brink
[3:47] of recession for the first time since
[3:49] 1991. New data showed the British
[3:52] economy shrank in the third quarter. The
[3:55] price of oil took another steep dive
[3:56] today despite action by OPEC. The cartel
[3:59] announced it will cut output by 1 and a
[4:02] half million barrels a day starting in
[4:04] November, but the market ignored that
[4:07] news. Oil tumbled 5%, ending near $64 a
[4:11] barrel in New York trading. Industry
[4:14] experts in New York said prices will
[4:16] keep falling on expectations of a global
[4:18] recession.
[4:20] >> Demand is completely dried up and not
[4:21] only in the US, but really all over the
[4:24] world. I mean, you have lower economic
[4:25] growth in China, lower economic growth
[4:27] in India. certainly no growth in this
[4:29] country uh and in the European Union. So
[4:32] really it's all about demand at this
[4:34] point. Um and without any demand, I
[4:36] could see oil washing out back down to
[4:38] the $50 level where we started this from
[4:41] uh two years ago.
[4:42] >> Oil's decline kept gasoline prices
[4:45] heading lower as well. For the first
[4:47] time this year, gas now costs less than
[4:49] it did in 2007. As of today, the AAA
[4:53] Auto Club reported a national average
[4:56] price of $2.78 a gallon for regular
[5:00] unled gas. Chrysler confirmed a new
[5:03] round of job cuts today. Starting next
[5:05] month, 25% of the salaried workforce
[5:08] will get the axe. That's about 5,000
[5:11] people. Company president Tom Lorta said
[5:14] it's also likely more factory closures
[5:16] are coming as well. Chrysler remains in
[5:19] buyout talks with General Motors and
[5:21] others. The US housing industry had a
[5:24] bit of good news today. The National
[5:26] Association of Realtors reported sales
[5:28] of existing homes rose 5.5% in
[5:31] September. That's the most in five
[5:34] years. At the same time, the median sale
[5:36] price fell below $192,000,
[5:40] down 9% in the last year. The US
[5:44] Treasury was set today to buy stakes in
[5:46] another 20 banks. It was widely reported
[5:48] the action could happen this weekend as
[5:50] part of the $700 billion rescue plan.
[5:53] The goal is to give the banks new
[5:55] capital to get them lending again. One
[5:58] such bank, PNC Financial Services,
[6:01] announced it's buying National City Bank
[6:03] for more than $5 billion.
[6:06] A number of emerging nations including
[6:08] India, Thailand, and Indonesia struggled
[6:11] again today. Many investors have fled
[6:14] those markets to cut exposure to risky
[6:16] assets. That flight has put pressure on
[6:19] national budgets and currencies. The
[6:22] International Monetary Fund moved today
[6:24] to help Iceland survive its financial
[6:26] crisis. The hard-hit island nation
[6:28] announced the agency will lend it $2
[6:30] billion over two years to help shore up
[6:33] the banking system. Earlier this week,
[6:36] the government of Pakistan also asked
[6:38] the IMF for emergency help to avoid
[6:41] defaulting on loans. We have a report on
[6:43] the situation there from Nick Payton
[6:46] Walsh of Independent Television News.
[6:50] >> Electricity shortages turn out the
[6:51] lights regularly, not just in this
[6:53] market, but across Pakistan.
[6:57] >> So in Karachi, they're burning, not
[6:59] paying their bills. The outages are up,
[7:01] but so are prices here for life's
[7:03] basics. Inflation's 25%. Food prices are
[7:07] rocketing, forcing a third of people to
[7:09] eat less. Fighting these problems has
[7:11] left the government broke, too. This is
[7:14] subsidized bread the government helps
[7:16] pay for the flour. And this baker sells
[7:18] each roti at great demand for two
[7:21] rupees. That's less than a penny.
[7:25] Now more people are coming here than in
[7:27] the past. They used to buy flour to cook
[7:29] at home, but now they come here as it's
[7:31] cheaper.
[7:34] State subsidies on food and utilities
[7:36] have helped get Pakistan into this mess.
[7:38] It's left the state strapped for cash
[7:40] and needing to pay off foreign loans.
[7:42] Now they need 4 billion at least. The
[7:46] poorest 3 million will get emergency aid
[7:49] in the name of slain politician Benazir
[7:52] Bhau. Hopefully
[7:53] >> this is a danger in these kind of
[7:55] programs that the bottom 3 to 4% always
[7:59] get left out. They are the class of
[8:01] people as far as the state is concerned
[8:03] they don't exist. There's a marked
[8:06] increase in suicides.
[8:08] There are a lot of women committing
[8:09] suicides. Some of them have killed their
[8:10] children and then killed themselves.
[8:12] Before this crisis, Pakistan's poor,
[8:15] desperately needed aid and reform
[8:17] [snorts] to keep them away from the
[8:18] cause of the militants. But now that's
[8:20] on hold as the country rushes to prevent
[8:23] an economic collapse looming in the
[8:25] middle of the worst civil violence of
[8:27] its history. Pakistani authorities today
[8:31] arrested four men in last month's hotel
[8:33] bombing. The suicide attack killed 54
[8:36] people at the Marriott Hotel in
[8:38] Islamabad. Police said the four men are
[8:41] suspected of indirect involvement. In
[8:44] the US presidential campaign today, with
[8:46] 11 days to go, Democrat Barack Obama
[8:49] took time off to visit his seriously ill
[8:52] grandmother in Hawaii. His wife Michelle
[8:55] campaigned in Columbus, Ohio. She told
[8:57] supporters her husband will be an
[8:59] extraordinary president. But in Denver,
[9:02] Republican John McCain warned the middle
[9:04] class are going to be put through the
[9:05] ringer if Democrats control the White
[9:07] House and Congress. We'll have more on
[9:10] the campaign later in the program
[9:12] tonight. Republican vice presidential
[9:14] candidate Sarah Palin interrupted her
[9:16] campaigning for a time today. The Alaska
[9:19] governor gave a deposition in the firing
[9:21] of the state public safety commissioner.
[9:23] He resisted pressure to fire Palin's
[9:26] former brother-in-law, a state trooper.
[9:28] A legislative investigation found Palin
[9:31] violated ethics laws. The judge in the
[9:34] federal corruption trial of Senator Ted
[9:36] Stevens sent the jury home today. He
[9:38] postponed deliberations to accommodate a
[9:40] juror whose father died. It was the
[9:43] latest twist in the case after reports
[9:45] of violent outbursts by another member
[9:48] of the jury. Stevens, an Alaska
[9:50] Republican, is charged with lying about
[9:52] home renovations and other gifts. And
[9:55] that's it for the news summary tonight.
[9:57] Now, the endangered global economy,
[10:00] Boston's big dig and spending on
[10:02] infrastructure today in the presidential
[10:04] campaign and Shields and Brooks.
[10:10] [music]
[10:15] The latest on the financial crisis here
[10:17] and around the world. Jeffrey Brown has
[10:19] our coverage. Another huge hit on global
[10:22] markets. Another volatile day on Wall
[10:25] Street. more nations looking for help
[10:27] and new steps taken by the US Treasury.
[10:29] We catch up on all this at week's end
[10:31] now with Simon Johnson, former chief
[10:34] economist at the International Monetary
[10:35] Fund. He's now a professor at the MIT
[10:38] Sloan School of Management and a senior
[10:40] fellow at the Peterson Institute for
[10:41] International Economics. Jim Ellis,
[10:44] assistant managing editor of Business
[10:45] Week magazine. And Beyaminian Applebomb,
[10:48] a financial reporter at the Washington
[10:50] Post who covers the Treasury Department.
[10:52] Well, Simon Johnson, the story overseas
[10:55] just gets worse. What jumps out at you
[10:58] today?
[10:59] >> Well, today I I think it's it's three
[11:01] things. Increasing pressure on Eurozone
[11:03] countries, so rich uh industrialized
[11:05] countries, Greece, uh Ireland, even
[11:07] Italy under under question. Uh according
[11:10] to the market, um oil prices continue to
[11:12] fall despite OPEC's actions. And of
[11:15] course, currencies have moved in a very
[11:16] big way. The dollar is appreciating,
[11:18] which has some good sides, but also some
[11:20] really difficult sides. Well, explain
[11:22] that to us. The dollar, this is after
[11:24] years of the dollar dropping, is
[11:25] suddenly, and this has been creeping up
[11:27] over the last few days, is quite strong.
[11:29] Now, why? What does that what does that
[11:31] tell us?
[11:32] >> Well, it tells us that things are get
[11:34] becoming even more turbulent. The dollar
[11:35] has been declining, roughly speaking,
[11:37] since 2002. All of a sudden, people are
[11:39] seeing it as as the ultimate, perhaps
[11:41] the only safe haven, partly because the
[11:43] Euro zone uh the European countries that
[11:45] share the euro looks increasingly shaky.
[11:47] So there's a flight into dollars uh and
[11:50] that is is really potentially
[11:51] destabilizing the situation further a
[11:53] little bit.
[11:54] >> Wait a minute. But it's a good sign in
[11:55] the sense that it shows confidence in
[11:57] the US markets but destabilizing for
[11:59] other countries.
[12:00] >> It shows confidence in the US
[12:01] government. They're coming into US
[12:02] treasuries. It doesn't prevent the US
[12:04] stock market from falling obviously and
[12:05] it absolutely shows a lack of confidence
[12:07] elsewhere in the world. No one believes
[12:09] in anything right now apart from US
[12:11] treasuries. That that's a that's a big
[12:12] change. That's a big problem for for
[12:14] everyone else in the world
[12:15] >> and particularly for uh emerging
[12:17] markets.
[12:17] >> The emerging markets have a lot of debt
[12:19] denominated in dollars particularly the
[12:20] private sectors. They borrow to do
[12:21] productive things with it but they owe
[12:23] money in dollars. Now the currencies are
[12:25] depreciating against the dollar. It's
[12:26] harder and harder to pay that back.
[12:27] Their governments have reserves quite a
[12:29] lot of reserves but nowhere near enough
[12:30] to deal with the current situation.
[12:32] >> Uh Jim Ellis Simon Johnson just
[12:34] mentioned one of the things he mentioned
[12:35] was this dramatic drop in oil prices.
[12:37] Now
[12:39] how do we explain that? Today, OPEC
[12:41] tried to uh drop the production to drive
[12:43] the price back up. That didn't seem to
[12:45] have any effect. How do you how do you
[12:46] explain what's going on there? How
[12:48] should we think about it?
[12:49] >> I think that investors are saying that,
[12:51] you know, we're in store for a very,
[12:54] very bad worldwide recession. And what
[12:56] that means is that even if uh you know,
[12:59] OPEC tries to restrict the amount of oil
[13:01] that's out there, um there's not going
[13:03] to be enough demand to really um you
[13:06] know, sort of force the prices to stay
[13:08] up. I think that that's sort of shocked
[13:09] a lot of investors today and that was
[13:11] one of the reasons that the markets you
[13:13] know reacted so badly to what was going
[13:15] on. They thought okay worldwide
[13:17] recession they also said that even
[13:19] places that hadn't seen recession in
[13:21] quite a long time like Great Britain,
[13:23] you know, was on the verge of recession
[13:24] which it hasn't seen since 1999.
[13:28] I mean things are bad out there and
[13:30] they've gotten a lot farther away from a
[13:32] a housing sort of downturn in the US
[13:35] into a fullscale global meltdown. So
[13:37] it's a bad sign. But on the other hand,
[13:39] at least in the short term, doesn't the
[13:40] drop in prices help us consumers?
[13:45] >> It can help us consumers in a way. The
[13:47] problem is that there are much greater
[13:49] stresses on US consumers. The biggest
[13:51] one being employment. I mean, we spent a
[13:53] lot of time worrying about sort of
[13:55] shoring up the banking system and we
[13:57] sort of forgot that even before the
[13:58] credit markets began to seize up in
[14:00] September that employment, you know, was
[14:03] becoming a bigger problem. Unemployment
[14:04] was rising. uh job losses throughout the
[14:07] US have come up to about a you know
[14:09] 750,000 and we haven't seen the worst of
[14:12] that yet. We are basically looking at
[14:15] consumers pulling back their spending
[14:17] which is a good thing in the long r term
[14:19] because it means we'll have more
[14:20] savings. The big problem now is that if
[14:23] they don't spend that means that
[14:24] companies don't get enough revenue
[14:25] coming in. They'll have to cut back on
[14:28] the number of people they hire and that
[14:30] means that more people will be out of
[14:32] work. More people won't be spending.
[14:34] more companies then will have to cut
[14:35] back and you get into this sort of
[14:37] downward spiral.
[14:38] >> Now Byamin Apple bomb in the meantime
[14:40] the US the reports today of the US
[14:42] Treasury taking some new steps to inject
[14:45] funds into at least another 20 banks and
[14:47] and and reportedly insurance companies.
[14:49] Now what can you tell us? Start with the
[14:50] banks. What can you tell us so far?
[14:52] >> Well, the Treasury actually backed off
[14:54] its plans to announce the names of those
[14:56] 20 banks. We understand that it's
[14:57] concerned that if it announces 20 names,
[15:00] people will start speculating about
[15:01] names that aren't on the list and
[15:03] investors may drive down their shares.
[15:05] So, the Treasury is just going to let
[15:06] those names trickle out. One of the ones
[15:08] we already know is PNC Bank, which got
[15:10] about $7 billion from the government to
[15:13] buy a weaker bank, uh, National City of
[15:16] Cleveland, which was actually denied
[15:17] funding by the government. So the
[15:19] government's now picking winners and
[15:20] losers in the banking industry, hoping
[15:22] to merge weaker companies with stronger
[15:25] ones and starting to figure out which
[15:27] companies may survive this.
[15:28] >> And you're saying they they have to be
[15:30] careful about announcing the names
[15:32] because that suggests winners and
[15:34] possible winners and losers or status of
[15:36] banks.
[15:37] >> The government has put itself in the
[15:38] position of sort of giving a seal of
[15:40] good health to banks. If it invests in
[15:42] them, it means that the government
[15:44] believes they're going to survive.
[15:45] Conversely, if it refuses to invest in a
[15:48] bank, investors may take that as uh a
[15:50] bad sign about the bank's health.
[15:52] >> And what about this uh notion of
[15:54] expanding the program to insurance
[15:55] companies?
[15:56] >> This is really big. Uh this is our real
[15:58] first indication that the problems in
[15:59] the insurance industry are bad enough
[16:01] that the government is going to attempt
[16:03] something similar to what it's already
[16:05] said it will do in the banking industry.
[16:07] It's going to buy stakes in a large
[16:09] number of insurance companies as a means
[16:11] of shoring up the health of that
[16:12] industry. It's as if we've learned all
[16:14] of a sudden that the problems we already
[16:16] knew existed in the banking industry uh
[16:18] are apparently bad enough in the
[16:19] insurance industry that the government
[16:21] needs to take action.
[16:22] >> Simon Johnson, what do you make of that?
[16:24] I mean, we we we we knew that in a
[16:25] sense, right?
[16:27] >> Uh yes, we did. Uh
[16:28] >> so it's not that's not news, but it is
[16:30] news that we're now taking some action.
[16:32] >> I think it's very good. It shows that
[16:33] Treasury is being flexible and Treasury
[16:34] is updating. market has been probably
[16:36] pricing in quite a high probability of
[16:38] default for insurance companies for at
[16:40] least two weeks which in this market is
[16:42] an eternity. I think the the Treasury is
[16:44] is moving to address that and I suspect
[16:46] that as other cracks appear in the
[16:48] financial system they'll be more and
[16:49] more willing to recapitalize as
[16:51] appropriate.
[16:52] >> Jim Ellis uh you know we keep um it's
[16:54] like we're adjusting our expectations
[16:57] every day. I read a uh I this morning
[17:00] when the market started off so badly, I
[17:02] saw a uh someone at an investment house
[17:05] saying that if it's only a 3% drop today
[17:08] in the US markets, the quote was we will
[17:11] have had a very good day.
[17:13] >> So that's amazing
[17:14] >> and it ended up 3.6. So
[17:17] >> what do we make of this?
[17:19] >> Well, I mean basically the the market is
[17:22] repricing risk. It's repricing what
[17:24] values really are. One of the things
[17:26] that was a a great thing during the
[17:28] runup is that people started to
[17:30] extrapolate, you know, past performance,
[17:32] you sort of far out into the future that
[17:34] bit up all sorts of prices of assets,
[17:36] whether they were stocks, whether they
[17:37] were houses, whether they were whatever.
[17:40] And we all benefited from that.
[17:41] Unfortunately, now we're seeing the
[17:42] mirror image of that is people suddenly
[17:44] say, "We're not going to have that kind
[17:46] of growth in households, household
[17:49] wealth, and therefore houses households
[17:51] will have less to spend." all of a
[17:53] sudden they're dialing everything back
[17:54] and they're trying to figure out what is
[17:56] the value. It turns out that there's no
[17:58] intrinsic value here. The value is what
[18:00] somebody's willing to pay today. And if
[18:02] they're spooked, they're willing to pay
[18:03] even less. So therefore, um, you know,
[18:06] if we can get some of this volatility
[18:07] out of the market and not have these 5%,
[18:10] you know, moves, 6% moves, we'll think a
[18:12] 3% move down isn't such a bad thing.
[18:15] Now, Binyamuin Applebomb, the other talk
[18:17] in Washington the past couple of days
[18:19] was about trying to come up with some
[18:21] kind of program to help uh stem the tide
[18:24] of foreclosures in the mortgage market.
[18:26] What what what can you tell us about
[18:28] that and how close we are to some kind
[18:30] of new announcement?
[18:31] >> We're getting closer. The Federal
[18:33] Deposit Insurance Corp and and the
[18:35] Treasury are talking about a program
[18:37] that would uh basically help banks uh to
[18:40] modify loans by guaranteeing modified
[18:42] loans against default. So the government
[18:44] would promise to pay back the bank if
[18:46] the borrower didn't. In exchange, the
[18:48] bank would have to reduce the amount
[18:49] that the borrower owed or reduce the
[18:51] interest rate, basically help the
[18:53] borrower in some way. Uh it's an attempt
[18:55] that a lot of people would like to see
[18:56] to help borrowers. Uh we've seen a
[18:59] number of large programs to help the
[19:00] industry and there's increasing concern
[19:02] both about getting at the root of the
[19:03] problems and at helping homeowners
[19:05] directly.
[19:05] >> But there was resistance to such a thing
[19:07] for quite for for a while here. So you
[19:09] think there's a consensus building now
[19:11] that something needs to be done? I think
[19:13] there is I think we will see some form
[19:14] of program coming out of Treasury. We've
[19:16] already seen several efforts to address
[19:18] this in various ways through the Federal
[19:20] Housing Administration, through industry
[19:22] cooperative efforts, but the government
[19:24] seems to think that it's now time to go
[19:26] ahead and and uh take another step on
[19:28] this
[19:28] >> and and maybe we can finish back on the
[19:30] international scene. Simon, the in the
[19:32] what next category, you have the IMF
[19:35] preparing a a big package, it sounds
[19:37] like for a lot of these uh a lot of
[19:38] countries. Well, the IMF is is stepping
[19:41] up with ready money for four or five or
[19:43] six countries uh in the very near term.
[19:46] They're also preparing some sort of
[19:47] enlarged facility or easier access uh to
[19:50] money probably for a broader set of
[19:52] emerging markets. We don't yet know the
[19:53] details. We don't know exactly how much
[19:55] money is on the table. If it's in the 10
[19:56] to20 billion range, I think it's going
[19:58] to be like OPEC production cuts. The
[20:00] market's not going to notice. If it's a
[20:01] hundred to 200 billion, if they can
[20:03] bring the Japanese on board, Japanese
[20:04] have a trillion dollars in reserves. The
[20:06] Chinese have $2 trillion in reserves. if
[20:08] they could make something with with
[20:10] these big deep pocketed investors on
[20:12] board and other rich countries too, then
[20:14] that could really make a difference and
[20:15] turn the tide. So, wait and see. We
[20:17] should know early next week uh the
[20:19] details.
[20:19] >> And do we look for any possible further
[20:22] action from the G7, the the richest
[20:24] nations on, for example, the currency
[20:26] issue or any any step they could take?
[20:28] >> Well, the G7 has exactly had a
[20:30] responsibility in the past for currency
[20:32] currency intervention when the markets
[20:33] become disorderly. Early this morning,
[20:35] it seemed like we might have been on the
[20:36] verge of that. It could be back as early
[20:38] as Monday or Tuesday of next week. I
[20:40] think this week the G7 will put its
[20:41] heads together and deciding under
[20:42] exactly what circumstances they want to
[20:44] come in and show people that the dollar
[20:46] is not a one-way bet. It can it can go
[20:48] up, it can go down. It's very important
[20:49] that the market understand that again.
[20:51] >> All right, Simon Johnson, Jim Ellis,
[20:53] Benjamin Apple. Thank you all very much.
[20:58] [music]
[21:04] Now, the conclusion of our
[21:06] infrastructure series, Blueprint
[21:08] America, produced with WNET in New York.
[21:11] Tonight, Ray Suarez looks at the broader
[21:14] impact and economic trade-offs,
[21:16] beginning with the story of Boston's Big
[21:18] Dig.
[21:21] After decades of planning, building
[21:23] related disruption, and billions of
[21:26] dollars spent, Boston's famous or
[21:28] infamous big dig is being put to the
[21:31] test of the real world.
[21:34] With the bridges and tunnels
[21:35] operational, the Massachusetts Turnpike
[21:38] Authority reports dramatically improved
[21:40] travel times through downtown.
[21:44] And the pleasant public spaces of the
[21:47] Rose Kennedy Greenway, where an elevated
[21:49] highway known as the central artery once
[21:52] blocked out the sky, demonstrate the
[21:54] remarkable physical transformation
[21:56] that's taken place. There used to be six
[21:59] lanes of choked expressway overhead. Now
[22:03] there's a modern interstate under my
[22:05] feet. Across the decades, downtown
[22:07] Boston had adjusted to the existence of
[22:10] an elevated highway, basically by
[22:12] turning its back on it. But since the
[22:15] completion of the Big Dig, builders,
[22:17] architects, and planners have started to
[22:19] reorient to this street, taking
[22:21] advantage of the open space and light
[22:23] and reconnecting with Boston's historic
[22:26] harbor. Balconies have sprouted,
[22:28] overlooking what was once an eyesore.
[22:32] Former state transportation secretary
[22:34] Fred Salvuchi is sometimes known as the
[22:37] father of the big dig for his tireless
[22:39] promotion of the project. He was an
[22:41] early backer of the radical plan to get
[22:44] rid of the chronically congested central
[22:46] artery by sending I93 underground.
[22:50] >> I'm delighted that this ugly thing is
[22:51] done and we got a nice park here. Uh,
[22:54] but this project is about a lot more
[22:57] than the urban aesthetics. It's about an
[22:59] economy that can grow in a sustainable
[23:01] way, and you got to have the transit
[23:03] piece of it.
[23:04] >> Boston's oldest neighborhood, the
[23:06] historic North End, has benefited
[23:08] economically and aesthetically. The
[23:11] area's flavor remains heavily influenced
[23:13] by the immigrants who turned it into the
[23:15] city's little Italy. For decades, the
[23:18] North End was hemmed in by the central
[23:20] artery. Outsiders were discouraged from
[23:23] entering by the dark and dirty spaces
[23:25] beneath what locals dubbed the green
[23:28] monster.
[23:30] But with that green monster banished,
[23:32] the north end is a more welcoming place
[23:34] for the tourists who come to see
[23:37] historic attractions like the Paul
[23:38] Rivere Mall.
[23:41] >> The first thing we saw when they took it
[23:43] down was how bright cross street was. We
[23:46] actually had to go back inside and get
[23:47] our sunglasses. For Nancy Caruso, who
[23:50] stood up for the neighborhood before,
[23:52] during, and after construction, the
[23:55] project has been a mixed blessing.
[23:57] >> We getting a tremendous influx of
[24:01] visitors, tourists, bus loads. We are
[24:05] now jammed with humanity. Well, the
[24:08] neighbor has changed to the point where
[24:09] we can't afford it. We can't afford to
[24:11] live here unless you own your building.
[24:13] Boston's waterfront, which had also been
[24:16] trapped on the wrong side of the dreaded
[24:18] central artery, has also witnessed a
[24:20] renaissance.
[24:22] The city also picked up a striking new
[24:25] landmark in the form of the Leonard P.
[24:27] Zum Bunker Hill Bridge over the Charles
[24:30] River, completed in 2002. Remarkable
[24:33] engineering feats aside, the big dig
[24:35] will also be remembered for some of the
[24:37] problems that plagued the technically
[24:39] challenging project. They include
[24:42] widespread leaks and the death of an
[24:44] automobile passenger in a tunnel ceiling
[24:46] collapse in 2006.
[24:49] A lack of effective oversight is also on
[24:52] the long list of criticisms, nor are the
[24:54] problems all in the past. There's the
[24:57] issue of unfulfilled promises.
[25:01] Some nearby municipalities are still
[25:03] waiting for Massachusetts to deliver on
[25:05] mass transit commitments designed to
[25:08] mitigate the environmental impact of the
[25:10] big dig. Nearly 20 years after
[25:12] committing to the northward expansion of
[25:14] the Green Line light rail as part of a
[25:17] legal settlement over air quality, the
[25:19] state is moving ahead with those plans.
[25:23] That's considered long overdue in the
[25:25] densely populated city of Somerville
[25:27] bordering Boston. The region did what a
[25:30] lot of America did right after the war.
[25:32] It punched an expressway through
[25:34] Somerville and tore out its street car
[25:36] lines. That left this close-in suburb
[25:39] oddly isolated from the big city and
[25:42] yearning for a rail line.
[25:44] >> Because people will get out of cars,
[25:45] we'll have less traffic and it'll reduce
[25:48] some of the local uh pollution that we
[25:50] have in in the neighborhoods. The other
[25:52] thing that this will do is this will
[25:54] give us an opportunity to do some really
[25:56] important economic development. Yet, for
[25:57] all it did and has yet to do for the
[26:00] people in the Boston region, the Big
[26:02] Dig's lasting legacy may prove to be on
[26:04] the funding and management front.
[26:07] Richard Demino heads a nonprofit
[26:09] organization that worked with the
[26:10] business community in Boston to build
[26:13] support for the project. when we
[26:15] unfortunately had the newspapers exposed
[26:19] uh to us that there was an over or a $1
[26:21] billion cost overrun that had
[26:23] reverberations that went all the way to
[26:25] DC rightly so uh and a cap on federal
[26:29] funds in this project uh didn't need to
[26:32] happen uh that was a bad a bad thing so
[26:35] transparency is one of the lessons
[26:37] learned
[26:37] >> originally estimated to cost less than
[26:39] $3 billion the numbers have continued to
[26:43] rise in July By this year, the Boston
[26:45] Globe reported that with interest, the
[26:47] debt had spiraled to $22 billion and
[26:51] wouldn't be paid until 2038.
[26:55] >> Fred Salvuchi is now a senior lecturer
[26:57] at MIT. He expresses frustration with
[27:00] the way the cost issue is often
[27:02] presented.
[27:03] >> There's a myth out there that the rest
[27:05] of the country paid for these cost
[27:06] increases. The cost increases were uh
[27:09] unwarranted. Uh the inflation was
[27:11] outrageous caused by unwarranted delays.
[27:15] The additional highway elements,
[27:17] billions of dollars I think were unwise,
[27:19] but the money spent and now the bill has
[27:21] to be paid and that bill is being paid
[27:23] by the people of Massachusetts, not by
[27:25] everyone else in America. Salvuchi says
[27:27] the big dig should be seen as a symbol
[27:29] of success, not wild spending. But in an
[27:33] era of shrinking tax revenues and
[27:35] conflicting spending priorities, the
[27:37] question is, can taxpayers anywhere
[27:39] afford the bill?
[27:42] Now, we get some perspective on the
[27:44] questions raised in this series and what
[27:45] challenges lie ahead. It comes from
[27:47] Chris Edwards, director of fiscal policy
[27:50] studies at the Kato Institute, a
[27:52] libertarian policy research foundation
[27:54] in Washington DC, and Michael Gallas. He
[27:57] heads a consulting firm in North
[27:58] Carolina that advises federal, state,
[28:01] and local governments as well as private
[28:03] companies on urban and regional
[28:04] development strategies. He joins us from
[28:07] Charlotte. And Michael Gallas, uh, let's
[28:09] begin with the question we ended on. Can
[28:12] governments at every level afford to pay
[28:16] the bills that are piling up?
[28:19] >> Well, I think the uh the big dig is not
[28:22] the best example to think of
[28:24] transportation investments in this
[28:26] country. I think we have to put it a
[28:28] little uh different context. Uh we were
[28:31] just talking in an earlier segment on
[28:33] the show about the global economy and we
[28:36] have to realize that the US in the
[28:39] global economy is the island nation, not
[28:42] England, but the US. We're separated by
[28:45] two oceans from 75%
[28:48] of the world economy. The only way to
[28:51] get there is by air and sea. And our
[28:53] roads and rails is what's going to take
[28:55] our products and goods, our people and
[28:57] services to world markets and bring
[29:00] world markets to us. We have to
[29:02] understand that the efficiency and
[29:05] quality of our infrastructure is going
[29:07] to be fundamental to our ability to
[29:09] compete in a global age.
[29:12] >> And Chris Edwards, who pays the bill
[29:14] then? I think uh the bill should be paid
[29:17] by a combination of uh both government
[29:19] infrastructure where private
[29:20] infrastructure is not possible but
[29:22] increasingly I think the bill should be
[29:24] paid uh by private companies building uh
[29:27] highways for example. We've got many
[29:29] examples uh now around the world of
[29:31] private toll highways. Uh in Northern
[29:33] Virginia where I live there's a 14mi
[29:35] private toll highway that's been
[29:37] operating for over a decade. Uh airports
[29:39] have been privatized around the world.
[29:41] London, Vienna, uh airports in Australia
[29:43] have been privatized. Even even infra
[29:46] infrastructure such as air traffic
[29:47] control has been privatized successfully
[29:49] in Canada. So, uh state and local
[29:51] governments uh are spending actually a
[29:54] pretty good uh chunk of money now on
[29:56] capital investment. Uh capital
[29:57] investment uh at the state and local
[30:00] level is now about 2.5% of GDP. That's
[30:03] actually up from the average during the
[30:05] 80s and 90s. However, our roads and
[30:07] airports are still very congested. I
[30:10] think the answer is innovative financing
[30:12] going to private sector for uh building
[30:16] new highways uh expanding airports and
[30:18] that sort of infrastructure.
[30:20] >> Michael Gallas Midway Airport on the
[30:22] south side of Chicago. Um for a time it
[30:25] was speculated that uh the Pennsylvania
[30:28] Turnpike was going to be taken over by a
[30:30] foreign consortium. Is private money the
[30:33] way to go when there's this much unmet
[30:35] need?
[30:36] Well, I think the issue of public and
[30:38] private finance is going to be key to
[30:40] the future. But let's remember who pays
[30:43] to build it is going to be different
[30:45] than who actually pays the cost of the
[30:49] infrastructure because when we have
[30:51] private investment and we were just
[30:53] discussing this segment in Northern uh
[30:55] Virginia and that is going to be paid
[30:58] through tolls and fees and the investors
[31:02] 90% of that investment was from foreign
[31:04] countries. Now, the way that deal was
[31:07] set up, if one were to go into all the
[31:09] contracts that the users of that segment
[31:12] of freeway are actually going to pay
[31:14] more than if the government had financed
[31:16] it, and the money that is going to it is
[31:19] going to end up in a foreign country.
[31:21] So, I think we need to think a lot more
[31:24] and more seriously and in greater depth
[31:26] about the issue of how to structure
[31:28] these deals and make sure that we're not
[31:30] just shoving the cost off to uh the
[31:35] users and we're going to end up paying
[31:36] more for it. Well, take Michael Gallas's
[31:38] point that it's a different question
[31:40] when you're talking about fixing things
[31:42] that have been built before and are
[31:43] already publicly owned versus new
[31:46] investment, new development, new
[31:48] capital. Uh are there two different
[31:51] tracks on which America's infrastructure
[31:53] challenges now run?
[31:54] >> No, I think America ought to use uh the
[31:56] best examples from around the world uh
[31:58] in privatization and in new using new
[32:01] technologies such as uh uh toll highway
[32:04] technologies. Foreign companies are
[32:06] often the most advanced in this
[32:08] technology and I think America uh ought
[32:10] to learn the lessons from abroad. Uh
[32:12] it's true that infrastructure is
[32:14] crucially important uh in the future for
[32:16] America's competitiveness and a lot of
[32:18] our infrastructure now frankly is not up
[32:20] to world standards. Our seapports for
[32:22] example lag behind seapports in Hong
[32:24] Kong and Singapore and Roderdam. Uh I
[32:27] think the reason is partly because
[32:29] they're governmentowned. Uh seapports
[32:31] abroad uh in places like Britain uh and
[32:34] Hong Kong are privately owned and
[32:36] operated. And I think that is an area we
[32:38] we need to look at. Recently, economists
[32:40] have been weighing in on the proposal
[32:42] for a second economic stimulus package,
[32:45] and some of them have said, "Oh, don't
[32:47] just send people a check. Put it in
[32:50] bridges, in roads, in ports." Is that a
[32:53] way to go?
[32:54] >> I I don't think we should be looking at
[32:56] this as a short-term stimulus. Frankly,
[32:57] I don't think the the government at any
[32:59] level controls the cyclical ups and
[33:02] downs in the economy. Uh, frankly, if
[33:04] governments did control recessions and
[33:05] could prevent recessions with stimulus
[33:07] bills, we'd never have recessions
[33:09] because that's what they'd be doing
[33:10] every time. So, I think we should be
[33:12] thinking about this in terms of
[33:13] long-term competitiveness and long-term
[33:15] investment, uh, not trying to change the
[33:17] ups and downs in the economy.
[33:19] >> Michael Gallas, what do you make of that
[33:20] suggestion to take a a New Deal approach
[33:22] toward reinvigorating American
[33:24] infrastructure spending? Well, I was uh
[33:27] very frustrated by the first stimulus
[33:29] package because essentially what it was
[33:31] was a glorified uh welfare program and
[33:35] the challenges and I would echo um what
[33:38] was just said. Um we've got to worry in
[33:41] this country about building our
[33:43] competitiveness and there is no question
[33:45] that the uh greatest growth of GDP since
[33:48] the end of World War II was from 60 to
[33:50] 70 in uh uh what they call chain
[33:54] dollars, $2,000. When we were building
[33:56] infrastructure in this country, there
[33:58] were two things. It it paid for
[34:00] infrastructure, but it also was a huge
[34:03] stimulus to the growth of the national
[34:05] economy. I think um we have to think
[34:08] beyond just handing out glorified
[34:10] welfare checks and calling it a stimulus
[34:12] package. I think we have to really worry
[34:14] about how to build the competitiveness
[34:16] of this country in the 21st century
[34:18] global economy. I think we can't just
[34:20] live off our inheritance anymore. We
[34:23] have to begin to think about what does
[34:24] this country really need to compete
[34:26] effectively in a world where we have
[34:28] gigantic competitors like China, like
[34:31] the Gulf States. Uh, everybody knows the
[34:33] game today. Uh, it's about time we woke
[34:36] up and started investing in our future.
[34:38] >> But Michael Gallas, aren't we talking
[34:40] about figures that are so huge? The
[34:42] American Society of Civil Engineers says
[34:44] $1.6 trillion of infrastructure spending
[34:47] is needed pretty soon. Aren't we talking
[34:50] about such large figures that the
[34:51] incentive is to kick the can down the
[34:54] road uh the ne into the next political
[34:56] term or after the next campaign?
[34:58] >> Well, that that's been what's going on
[35:00] for the last 20 years. But, you know,
[35:02] we're kicking around numbers like $700
[35:04] billion bail out of a financial industry
[35:07] that was acting irresponsibly.
[35:10] and instead of making responsible
[35:11] investments, you know, here we are stuck
[35:13] bailing out um u a group of hooligans
[35:16] who should have never been allowed to
[35:18] make the decisions that they did. Um I
[35:21] think the number the size of the number
[35:24] is not the problem. The issue is how to
[35:25] structure it, how to put it together
[35:27] over time. And I think as uh we heard
[35:30] from Kato Institute, the issue is how to
[35:32] put together public and private finance
[35:34] that makes sense that the American
[35:36] public could benefit from.
[35:38] >> Can we do that? Yeah, I think uh
[35:40] Michael's absolutely right.
[35:41] Competitiveness is the issue here. Um I
[35:43] mean a recent World Bank report, for
[35:45] example, showed that United States only
[35:47] is 14th ranked in the world in terms of
[35:50] the our infrastructure for trading and
[35:52] logistics um and that sort of thing.
[35:55] We're behind countries like Canada and
[35:57] Germany on our international trade
[35:59] infrastructure. We ought to be number
[36:00] one. Hey, we're America. We ought to be
[36:02] number one. And I think we can be by
[36:04] learning the best lessons from abroad
[36:06] and using some of these innovative
[36:08] approaches like privatization of
[36:09] seapports and airports and that sort of
[36:11] thing.
[36:11] >> But is there enough consensus on this
[36:13] issue to do something quickly?
[36:17] >> I think you know we've seen a lot of
[36:18] action in the highway area. I mean both
[36:20] Republican and Democratic governors in a
[36:22] lot of states are looking at private
[36:24] toll highways in places like Indiana and
[36:26] Virginia. Um so you know I think you
[36:29] know governments um they're always
[36:30] saying that they're short of money. Here
[36:32] is a way for them, frankly, to raise
[36:33] some money for infrastructure that I
[36:35] think will benefit everybody.
[36:36] >> Chris Edwards, Michael Gallas,
[36:38] gentlemen, thanks a lot.
[36:38] >> Thank you.
[36:39] >> Thank you.
[36:40] >> You can watch all of Ray's previous
[36:42] stories in this series online. Just go
[36:44] to pbs.org and then scroll down to
[36:47] NewsHour Reports.
[36:52] [music]
[36:55] And now, today in the presidential
[36:57] campaign, Judy Woodruff reports.
[37:02] Michelle Obama stepped in for her
[37:04] husband at a rally in Columbus, Ohio
[37:07] today while the Democratic presidential
[37:09] nominee was in Hawaii, visiting his
[37:12] gravely ill grandmother. Obama gave the
[37:15] crowd an update on the woman her husband
[37:18] refers to as Toot, short for tutu, the
[37:21] Hawaiian word for grandparent.
[37:24] >> As many of you may know, um Barack is
[37:27] off the campaign trail today. Um he flew
[37:30] to Hawaii last night um to see his
[37:33] grandmother who we call Toot. She's
[37:35] doing okay. Um and
[37:39] >> she then turned her attention to the
[37:41] campaign.
[37:42] >> There are still people who are undecided
[37:44] people figuring it out. And for me I I
[37:47] know I'm biased,
[37:49] but I THINK THAT THE CHOICE IS CLEAR.
[37:52] And I am speaking not as the wife, but
[37:54] as the mother, as the daughter, as the
[37:56] worker, as the citizen, the choice IS
[37:58] CLEAR.
[37:59] SEE, BECAUSE THERE'S ONLY ONE candidate
[38:02] in this race WHO IS TALKING AT ALL ABOUT
[38:05] A PLAN THAT seems to get it, that
[38:07] understands that an economic policy has
[38:09] to be built around middle class folks,
[38:12] creating tax cuts for 95% of families
[38:15] that are hurting out here. [applause]
[38:17] >> Republican vice presidential nominee
[38:20] Sarah Palin began her day in the
[38:22] neighboring state of Pennsylvania, where
[38:24] she delivered her first major policy
[38:27] address. detailing the McCain campaign's
[38:30] special needs agenda. Palin said the
[38:33] issue was a personal one for her because
[38:36] her six-month-old son Trigg was born
[38:38] with Down syndrome. I want to put a new
[38:41] face on this issue. And I would ask too,
[38:44] those advocates who have you've you've
[38:47] worked on this issue a lot longer than I
[38:50] have, more than the decade that I have
[38:52] worked on it. Your heart has been in
[38:53] this also. I I want you to know
[38:56] families, caregivers who have that gift
[38:59] of working with special needs uh
[39:02] students, children, adults, I want them
[39:05] to know and children all across this
[39:06] country that yes, John McCain and I do
[39:09] have a message for you, for your
[39:10] advocates, for you families that I
[39:13] realize that for years you sought to
[39:15] make America a more welcoming place for
[39:18] your sons and daughters. and I pledge to
[39:20] you that if we're elected, you will have
[39:22] a friend and an advocate in the White
[39:25] House.
[39:26] >> John McCain, meanwhile, focused on the
[39:28] battleground state of Colorado. At a
[39:31] morning rally in Denver, he challenged
[39:33] the Bush administration's handling of
[39:35] the economic crisis. While Washington
[39:38] has been bailing out banks, I've been
[39:41] arguing that we need to focus on fixing
[39:43] the underlying problem, foreclosures, on
[39:46] bad mortgages, and the collapse of our
[39:48] housing market. We need to allow
[39:51] Americans to realize the American dream
[39:54] of owning their own home and staying in
[39:56] their homes.
[39:58] [cheering]
[39:59] So, without fixing this fundamental
[40:02] problem, our economy will not get back
[40:04] on track. Yesterday, we learned that the
[40:07] number of foreclosures spiked by 71%
[40:11] last quarter. And finally, finally, the
[40:14] Congress and the administration are
[40:16] putting together a plan to address the
[40:18] problem. Let me say, it's about time.
[40:23] Barack Obama's running mate, Joe Biden,
[40:26] campaigned this morning in Charleston,
[40:28] West Virginia. He said it was
[40:30] disingenuous for McCain to distance
[40:33] himself from the president's economic
[40:35] policies.
[40:36] >> John McCain voted with George Bush as he
[40:39] proudly pointed out 90% of the time.
[40:42] >> And until recently, he used to brag
[40:44] about that. Literally, you remember when
[40:47] he was that's how he got the nomination,
[40:49] the Republican nomination, saying that
[40:51] he was closest to George W. Bush. And he
[40:55] said as recently as September 15th as
[40:58] the market was falling out, collapsing
[41:00] in America, he said, quote, "We've made
[41:04] great economic progress under the Bush
[41:07] administration, that the fundamentals of
[41:09] our economy are sound."
[41:12] Well, look, I know Halloween is coming,
[41:17] but John McCain as a candidate to
[41:19] change. Whoa, come on.
[41:22] John McCain and change. He needs a
[41:24] costume for that,
[41:27] folks. The American people aren't going
[41:29] to buy this. [cheering]
[41:31] They're not going to buy this.
[41:33] >> Biden will campaign in Virginia
[41:35] tomorrow. Obama returns to the trail in
[41:38] Nevada. McCain stumps in New Mexico
[41:42] while Palin holds events in Iowa.
[41:45] >> And that brings us to Shields and
[41:47] Brooks. Syndicated columnist Mark
[41:49] Shields, New York Times columnist David
[41:51] Brooks. David, the experts say it's
[41:53] still volatile out there in the
[41:55] presidential campaign. What does that
[41:57] mean?
[41:58] >> Do the experts say that?
[41:59] >> Yeah, they do.
[41:59] >> I'm an expert. I don't say that.
[42:01] >> Okay.
[42:01] >> What do you say?
[42:02] >> I don't think it's volatile.
[42:03] >> You don't think it is at all?
[42:04] >> I I I really don't. I mean, if you look
[42:06] at the average of a whole number of
[42:07] polls, uh Obama has a at least a
[42:10] seven-point lead up to a 10 or 14 point
[42:12] lead. If you look at the swing states,
[42:13] the not even the swing states, the red
[42:15] states, the North Carolina, the Ohio's,
[42:17] the Florida, Obama's leading in most of
[42:20] those. Uh, and you know, I'm I'm we we
[42:23] pay attention to the day-to-day movement
[42:24] in the polls, the day-to-day tactics,
[42:26] the campaign. That's
[42:27] >> Yeah. The campaigns are driven by who's
[42:29] won the day.
[42:31] >> Well, forget about that. Look at the
[42:32] fundamentals. If you ask people, who do
[42:35] you trust in the economy? Well, Obama
[42:37] has a 21-point lead. Who do you trust on
[42:39] taxes? Obama has a 14-point lead. These
[42:42] are built into the structure of the race
[42:43] based on things that are happened over
[42:45] the last 10 years. There's a fundamental
[42:47] structure to this race and it took
[42:49] people a while I think to come to Obama
[42:51] because they were not comfortable with
[42:53] him. But when the debates happened at
[42:55] the same time as the economic crisis,
[42:57] the people who wanted change began to
[42:59] feel comfortable with him. They moved
[43:00] over to him. And I I personally think
[43:02] that's quite solidly baked in.
[43:05] >> So it's over, Mark.
[43:07] >> No, it isn't over.
[43:08] >> So it's volatile. [laughter]
[43:09] >> No, it isn't. It isn't volatile then.
[43:12] There's a second option. Uh the the the
[43:14] the reality is as David described it,
[43:17] what what has happened in and great one
[43:20] of the great ironies is that John McCain
[43:22] who everybody conceded
[43:25] alone among the Republican candidates in
[43:27] a very difficult year had the best
[43:29] chance of reaching independents uh
[43:32] moderates and disaffected Democrats uh
[43:36] for reasons that he'll probably wrestle
[43:39] with for the rest of his life. not only
[43:41] moved to secure the base of his party uh
[43:44] and to resolve all problems with them,
[43:46] but stayed there with the choice of
[43:48] Sarah Palin, but then stayed there. And
[43:51] only now is he publicly doing in sort of
[43:54] an awkward fashion uh removing himself
[43:57] from extricating himself from President
[44:00] Bush, which he could have done quite
[44:02] easily on substance last spring.
[44:04] >> I was going to ask you about that. Why
[44:06] is he doing it now? Why didn't he do
[44:07] that before? I I think
[44:09] >> because he did well just to for people
[44:10] who may have missed it, he he did a
[44:12] really tough interview with Washington
[44:14] Times and he said
[44:16] >> he basically went through a litany Jim
[44:18] of criticisms of President Bush that
[44:20] sounded like a keynote address at a
[44:22] Democratic convention. I mean that
[44:23] doubling the indebtedness of the country
[44:25] in being beholden to China uh to
[44:29] avoiding global warming uh to the
[44:32] Medicare the budget being broken uh
[44:34] fiscal irresponsibility you you name it.
[44:37] I mean uh to executive grab of power. I
[44:40] mean it was just there was every
[44:42] possible grounds that which the
[44:43] Democrats have criticized George Bush.
[44:45] He did it. I I think he did it probably
[44:47] some degree out of frustration, some
[44:49] degree uh you know just kind of
[44:53] declaration of independence of of who
[44:55] John McCain wants to be and has always
[44:57] felt himself to be.
[44:59] >> Too late to do anything like that do you
[45:00] think?
[45:01] >> I think so. I think what he had to do
[45:02] and I I'm glad he finally did this and I
[45:04] think there's real substance behind
[45:05] that. I mean, he is not George Bush, but
[45:07] what he had to do was scope out a
[45:09] different Republican vision for the
[45:11] country. And, you know, the party is
[45:13] very unpopular. It's 15 points behind in
[45:15] party ID. They've lost people under 30
[45:17] in droves. So, he had to show something
[45:20] different. And I always thought the
[45:21] potential for him to do that was there.
[45:23] He's always considered himself a fan of
[45:25] Teddy Roosevelt, which and that sort of
[45:27] progressive Republicanism is very
[45:29] different than what George Bush was
[45:30] offering. Frankly, it's different than
[45:32] what Tom Delay and N. Gingrich were
[45:34] offering. And that has always been
[45:35] within him to offer that kind of
[45:37] different Republican vision. Remember
[45:39] George Bush said, "I'm not N. Gingrich."
[45:41] He had compassionate conservatism to
[45:42] define himself as not N. Gingrich.
[45:44] You've got to reform your own party
[45:46] before people trust you to reform the
[45:48] country. And he, for reasons having to
[45:50] do with internals in the campaign, I
[45:52] believe, never took that step away from
[45:54] the straight jacket of the Republican
[45:56] brand and really reformed the own his
[45:58] own party. He had to have done that
[45:59] probably months ago.
[46:00] >> So, what do we look forward to? We've
[46:02] got uh 11 days before the election mark.
[46:04] What happens in the next 11 days?
[46:06] >> Well, I mean, I think uh Obama is
[46:09] obviously about reassuring
[46:11] uh continuing that reassurance, which he
[46:14] has done quite well in the last, I'd
[46:15] say, five weeks. Uh he's made people
[46:18] more comfortable with him, not only on
[46:20] the issues that David described, but
[46:22] comfortable with him as
[46:23] commander-in-chief that his values are
[46:24] are people's values. Um he's got to stay
[46:27] positive in his his own heavy
[46:29] advertising. And I think this is this is
[46:32] something that for some reason has gone
[46:34] unremarked upon by many in the press. Uh
[46:37] and that is the enormous financial
[46:39] advantage that Obama has had and what it
[46:42] gives as a strategic advantage in the
[46:44] campaign. Explain that. Well, he's he
[46:47] raised Obama reneged on his pledge to
[46:50] negotiate with John McCain uh which he
[46:53] made earlier earlier in the year on
[46:56] working out public finance. But what
[46:58] does it mean to have this?
[46:59] >> Okay, so he that means that means that
[47:01] he is not limited in his spending. But
[47:03] it translates into this, Jim. You don't
[47:05] have to make hard choices. It means you
[47:08] can run an advertising campaign that is
[47:11] positive, which he has done about his
[47:12] own tax plan, for example. 95% of people
[47:15] getting tax cuts to the point where it
[47:17] does have an impact on people's
[47:19] attitudes toward Obama on taxes where at
[47:23] the same time he doesn't have to make
[47:25] choices on what state he goes into and
[47:27] it always lets him stay on the offense.
[47:30] Uh he can go into North Dakota if North
[47:32] Dakota looks encouraging. He can expand
[47:34] and open up headquarters in Georgia. He
[47:36] can do the same thing in Indiana, run a
[47:38] full-fledged campaign. McCain, who was
[47:41] limited by the public financing amount
[47:43] he took, has to ration this money uh
[47:46] over several states and is always
[47:48] playing defense. He's outspent on
[47:50] television. He's outspent in
[47:52] organizational. Obama has the enthusiasm
[47:54] thing. But the point I want to make is
[47:56] this is not a one-time thing. Anybody
[47:59] who thinks the genie is not out of the
[48:01] bottle when it comes to money in
[48:02] American politics, politics is the most
[48:05] imitative of all human activities. The
[48:07] next time out, it won't be nice little
[48:09] people writing checks on the internet,
[48:12] you know, or sweet mothers and
[48:13] grandmothers. There's going to be a lot
[48:15] of people with a lot of money, and we're
[48:16] looking at a trillion dollar
[48:17] >> that way even now. I mean, Obama's
[48:19] raised hundreds of millions of dollars.
[48:20] There was a story in the Washington Post
[48:21] pointing out that if you take the people
[48:23] who have who've contributed to him $200
[48:25] or less, the small donors, George Bush
[48:28] had a larger percentage than Barack
[48:29] Obama.
[48:30] >> He's now I mean, he had those people.
[48:32] There are a lot of people giving small
[48:33] donations.
[48:34] >> Absolutely. But there also a lot of big
[48:35] money donors. And so the the campaign is
[48:38] now this huge operation. And you know,
[48:40] Mike Allen sends out this daily email
[48:43] for political junkies on what's going on
[48:45] with the campaign. And one day a couple
[48:46] weeks ago, he said in the certain
[48:48] period, I think in a week in Northern
[48:49] Virginia, Obama had,400 ads and McCain
[48:51] had eight.
[48:52] >> Now, that that's had television ads. But
[48:55] I happen the television stations in
[48:57] Washington, they have nothing but Obama
[48:59] ads. That's true. But that's Northern
[49:01] Virginia. I happen to think that I don't
[49:02] know if Mark agrees and he knows this
[49:04] better than I, but I happen to think the
[49:06] the get out the vote operations, the the
[49:08] headquarters, the number of offices you
[49:10] can open up in the state, it may be more
[49:12] effective in actually affecting voter
[49:14] outcomes,
[49:15] >> right? Is that you agree with that?
[49:17] >> I I think we'll we'll know that. I I
[49:18] don't think there's any question. It's
[49:19] generated enormous activity, enthus and
[49:22] and make no mistake about it, Barack
[49:24] Obama is a superb candidate. He had the
[49:26] issues going with him. He's run a superb
[49:28] campaign. Um Charlie Cook, the political
[49:31] analyst, describes him politically as a
[49:34] as a mountain goat. Uh that is that, you
[49:36] know, he is so sure-footed even in the
[49:38] narrow rocky crevices of the of the
[49:41] highest peaks that he's made one
[49:42] mistake. So I I I'm not saying he's
[49:44] winning because of the money. I'm simply
[49:46] saying the money does give you an
[49:48] enormous strategic advantage.
[49:50] >> Speaking of money, another subject,
[49:52] David, uh Alan Greenspan's testimony
[49:54] this this day before yesterday in before
[49:58] Congress. What did you think of that?
[49:59] >> Well, first of all, I admired him for
[50:00] saying that. Uh we often are in a
[50:03] political culture where nobody admits a
[50:04] mistake and he admitted a mistake. And
[50:06] the question is why? What did he get
[50:08] wrong about the economy? And I think
[50:10] what he got wrong is Paul Solomon had a
[50:12] guy named Nasim Taleb on the show uh not
[50:15] long ago who got it right. Who picked
[50:16] Fanny May? Who talked about the banking
[50:18] collapse? And the difference between the
[50:20] world the two worldviews is Greenspan
[50:22] relied on quantitative models of risk
[50:24] analysis where Talb is a product of
[50:26] behavioral econ economics which talks
[50:28] about the psychology of perception and
[50:31] the perception of risks and the biases
[50:33] we make in assuming the future will be
[50:35] basically like the past and the way we
[50:37] look for evidence that confirms our
[50:38] prejudices. And if you looked at the
[50:40] risk analysis through the frailty of
[50:42] human perception as Talib did, you can
[50:45] say this risk was out of control. people
[50:47] did not understand what was happening
[50:49] and all these bogus economic models that
[50:51] the quantifying people uh believed in
[50:54] just were bogus and I think that's the
[50:56] two mental frameworks that allowed some
[50:58] people to understand what was going to
[50:59] happen and so many so many experts not
[51:02] get it
[51:02] >> all right
[51:03] >> I was struck by the bluntness of his
[51:05] economic philosophy that uh relying on
[51:07] the uh the self-interest of companies
[51:10] and corporations uh to to protect their
[51:14] stockholders that there there really
[51:16] wasn't uh a larger it struck me I mean
[51:19] he's very faithful to that philosophy
[51:21] and that that that that was that by
[51:23] itself denied any uh need really for
[51:27] regulation. I think there there are two
[51:29] people, two individuals, Jim, who really
[51:31] have gone unheralded uh who did warn us
[51:35] about this and I'm not faulting German
[51:37] Greenspan any more than other people
[51:39] involved in it, including many in the
[51:41] press. But Ned Graham was a Federal
[51:44] Reserve governor and uh who died too
[51:47] early, University of Michigan economist
[51:49] and and scholar who wrote a book on the
[51:52] subject of what subprimes did and and
[51:54] sounded the warning and and Alan
[51:56] Greenspan's been quite candley Bourne
[51:59] who was the chairman of the the
[52:01] commodities future trading commission in
[52:03] the Clinton administration took on uh
[52:06] not only the Federal Reserve chairman
[52:08] but also the Clinton administration's
[52:10] Treasury Department and the White house.
[52:11] She wanted to she wanted greater
[52:13] regulation. Uh so I mean and and John
[52:16] Dingle, the senior member of the house
[52:18] when the when the wall came down between
[52:21] banks going into securities and he voted
[52:23] against it in 1998 predicted exactly
[52:26] what would happen 10 years later. So
[52:28] there were some voices. Um and uh you
[52:31] know it it was David's right. Alan
[52:33] Greenspan was candid and in admitting
[52:35] and and didn't dodge and duck like so
[52:37] many of the corporate types up there
[52:39] have.
[52:40] >> Yeah. and he he what did you think of
[52:42] his explanation as to what not not his
[52:44] part of it too but the rest of uh the
[52:47] other other parties who were involved in
[52:49] this terrible terrible tragedy
[52:51] >> well everyone was thinking along the
[52:52] same way I mean there there was group
[52:54] think I mean and to be fair it's it's
[52:56] one of the things that economists rarely
[52:58] do is think of human beings in a web of
[53:00] relationships they think of us as
[53:02] individualistic risk calculators but we
[53:04] get in these these webs look at risk the
[53:08] same way we look at the culture of debt
[53:10] the same way. And to me, it's not only
[53:12] Wall Street. People took out these
[53:13] loans. People assumed house prices were
[53:15] going up. It's a contagion all across
[53:17] the world. Highly regulated economies in
[53:20] Europe, less regulated economies here.
[53:22] And to me, it's this social contagion
[53:25] that uh has sort of transcended all the
[53:27] other barriers.
[53:28] >> Well, as Alice Rivlin said on this
[53:29] program the other night, what nobody
[53:31] counted on was the possibility even that
[53:33] that home prices wouldn't wouldn't
[53:36] always go up. They would eventually go
[53:39] down. Nobody considered that as a
[53:41] possibility.
[53:41] >> Well, I mean, remember this. I mean, and
[53:44] I think we're, you know, we're now on
[53:46] the cusp of a a very serious economic
[53:48] recession. Uh 26 years. Uh we had from
[53:52] 1982 forward, we had low uh low
[53:55] unemployment, low inflation, and pretty
[53:57] good economic times. A lot of people
[53:58] were hurting, but uh you know, so there
[54:00] was that reason, that expectation that
[54:02] things were going to get better.
[54:03] >> Home values were always going up. Yeah.
[54:04] Okay, gentlemen. Thank you both [music]
[54:06] very much.
[54:12] >> [music]
[54:15] >> And again, the major developments of the
[54:17] day. Another rush to sell hit the stock
[54:19] market. The Dow Jones Industrial Average
[54:21] lost 312 points and the price of oil
[54:24] tumbled 5% ending near $64 a barrel
[54:28] despite word that OPEC will cut
[54:30] production. Washington Week can be seen
[54:32] later this evening on most PBS stations.
[54:34] We'll see you online and again here
[54:36] Monday evening. Have a nice weekend. I'm
[54:38] Jim Lara. Thank you and good night.
[54:46] Major funding for the NewsHour with Jim
[54:48] Lara is provided by
[54:52] oil, energy, the environment. Where are
[54:56] the answers? This isn't a liberal or
[54:59] conservative issue. It's a human issue.
[55:02] As an energy company, Chevron has a
[55:04] great responsibility.
[55:06] So, we've improved our own energy
[55:08] efficiency [music] 27% since 1992. And
[55:11] now we ask you to join us in one of the
[55:13] most important [music] efforts of our
[55:15] time, using less. Will you join us?
[55:19] Chevron human energy.
[55:23] Pacific Life
[55:26] [music]
[55:28] Vestus.
[55:31] Wear a cowboy outfit.
[55:32] >> I did.
[55:33] >> Not those cowboys. Besides, why would
[55:35] you wear a football uniform for Buster's
[55:37] commercial?
[55:38] >> It's football season, Buster.
[55:40] >> So, nothing makes people hungrier for
[55:43] delicious and tender hand rubbed [music]
[55:44] slows smoked Texas style barbecue than
[55:46] hard-hitten pig skin action.
[55:48] >> Pigkin action.
[55:49] >> Busters baby back spare ribs, pull pork,
[55:51] and links.
[55:52] >> That does sound good. Tell them where to
[55:54] go.
[55:54] >> Busters Barbecue.
[55:58] >> Pacific Office Automation, the West's
[56:00] [music] number one office technology
[56:02] dealer. Over 30 years of award-winning
[56:05] sales, service, and customer support,
[56:07] featuring the most respected [music]
[56:09] names in state-of-the-art office
[56:10] technology. Whether your company is
[56:13] small or large, Pacific Office
[56:15] Automation is the name [music] to trust
[56:17] for all your document imaging needs,
[56:20] locallyowned, [music] nationally
[56:22] recognized, the one name to remember.
[56:24] Pacific Office Automation.
[56:30] >> [bell]
[56:37] [music]
[56:42] >> Grace is power. [music]
[56:45] Introducing the allnew TL, the most
[56:48] powerful Acura ever built.
[56:52] >> Visit acura.com to locate your nearest
[56:55] Acura dealer.
[56:57] K2 News [music] first at 4 weekday
[57:00] afternoons.