• This is a partial transcript from Your World with Neil Cavuto, September 29, 2003, that was edited for clarity.

    Watch Your World w/Cavuto weekdays at 4 p.m. and 1 a.m. ET.

    TERRY KEENAN, GUEST HOST: Well, what might be very good news for you and your wallet could mean some very big trouble for the Democratic presidential candidates. I’m not going to bore you here, but the Gross Domestic Product (search) is expected to see a 5-percent pop in the next quarter. That’s a pretty strong number.

    So as the Democrats continue to beat on Bush about the economy, what if the economy isn’t even an issue next year? Well, that would put the Democrats at a huge disadvantage, or would it?

    Linda Chavez says you bet it would. She is president of the Center for Equal Opportunity (search) and a Fox News Channel contributor. But Robert Reich disagrees. He is the former labor secretary under President Clinton (search).

    And, Secretary Reich, let’s start with you. We may be putting the cart before the horse here, but if the economy improves significantly, won’t that really change the calculus next year?

    ROBERT REICH, FMR. LABOR SECRETARY: Terry, it may very well change the calculus, but I think the real question mark is, if jobs don’t come back in a big way, is George W. Bush toast? And I think not only are Democrats concerned about that, but obviously we all ought to be concerned about the state of economy.

    It’s jobs; that is the big issue. It is not economic growth; it is not the Gross Domestic Product. It is jobs.

    KEENAN: And, you know, Linda, the latest poll numbers do show that economy and jobs…our Fox News poll, 40 percent of Americans say that is their number one priority, triple the number of people who say national security is the top priority.

    LINDA CHAVEZ, PRESIDENT, CENTER FOR EQUAL OPPORTUNITY: Well, of course that is not surprising. And particularly if you happen to be one of those people who have lost a job during this somewhat anemic recovery that’s finally pick up now, it’s going to matter to you. But the fact is the reason we are not creating jobs at the same rate is actually some good news in terms of productivity.

    American productivity is booming right now. We’ve got 6 percent increases in productivity. And that means that we can produce as much as we could in the past, but with fewer people actually doing the work.

    KEENAN: Is that because we are shipping a lot of those jobs over to China?

    CHAVEZ: No. It is because we are making productivity increases here at home. It means that we are finally taking advantage of technology. We are doing things better, we are doing things smarter. And that in the long run will be good for everybody.

    And there will be job growth, but it takes about a year after you see the big increases in domestic product, Gross Domestic Product, that you are going to see those increases in jobs. So we should be seeing that early next year. And you will have more jobs being created then, will be just in time for the elections. And then I don’t know what the Democrats are going to do for an issue.

    KEENAN: Yes, just in time. Robert Reich, if you can take your partisan hat off here for just a minute or two, we’re about two and a half years into the period when the Fed began to cut interest rates aggressively. That is typically the time that the economy really starts to gather steam.

    Do you see some positives on the horizon?

    REICH: Well, there are positive, undoubtedly, Terry, in terms of Gross Domestic Product and economic growth, housing starts. There are many positives, but the point is, from a political standpoint, and also from the standpoint of average working people, there is nothing as important as jobs.

    And we have seen the administration…and, again, whether you want to blame this administration or not is beside the point. But during this term of office, this president has a very good chance of being the first president since Herbert Hoover (search) presiding over an economy that has actually lost jobs, even though American population has expanded.

    So if you are in danger of losing a job, or if you have lost a job, or if you’re working part time and you’d rather be working full time, or if you are in any way worried or your relatives are worried about a job, this is not a good economy. This is a very long, prolonged anemic recovery. It is not even a jobless recovery; it is a job loss recovery.

    KEENAN: Yes. Linda Chavez, the electorate and the poll numbers reflect…show that Americans have been pretty forgiving of this president and do realize that the recession was handed to him and began before he took office. Do you think that sentiment will continue into next year?

    CHAVEZ: Well, I think it depends. If we continue to see the kind of growth rates, we will see more jobs being created. And I think that will help.

    But you have to remember, we are just in the middle of a war. We just concluded the actual fighting stage in Iraq. We’ve had terrorism, which struck a terrible blow to the U.S. economy. We are not in a normal situation now.

    And I think most Americans understand that, and they understand how important it is to be able to fight this war on terrorism. And I think that the Democrats really are looking for bad news, both in the foreign policy and defense front. I mean, the best thing that could happen to the Democrats is things go badly in Iraq. Similarly, the best thing that could happen is for there not to be jobs created and for the economy to move slowly.

    So the Democrats are all about bad news. And I think that’s too bad for them, because it means they don’t have something to argue in terms of a positive program for America.

    KEENAN: Robert Reich, what happens if the bad news starts to disappear and we start to get those 200,000, 300,000 job growth numbers per month that you would expect if the economy is growing at five percent?

    REICH: Terry, I think that...

    KEENAN: Go ahead.

    REICH: I think that everybody…everybody who is reasonable, everybody who cares about this country is going to celebrate the fact that, if we get those kinds of job numbers again, that people are more secure in their jobs. And everybody who cares about this country will delight in the fact, if it comes about, that we are more secure with a stable Middle East.

    The problem is, neither of those are reality today. And Linda Chavez, the big problem that the first Bush administration ran into is they were seeing the praises of the economy, they were saying there is really no problem at all, when in fact most Americans knew that the economy in 1990, 1991, even 1992 was in deep trouble. That lack of clarity, that lack of understanding of what average working Americans are going through, is something that could jeopardize this future administration...

    KEENAN: Do you think the current president...

    REICH: ... and jeopardize a second term.

    KEENAN: Robert Reich, do you think the current president is conveying that same impression? Because this White House has gone out of its way to do the opposite, it seems.

    REICH: No. This White House has not gone out of its way to say to Americans this is a recovery that is unusual in terms of the duration, and it is also unusual in terms of the number of jobs lost. And, also...

    CHAVEZ: Oh, I think they have.

    REICH: But, Linda, you yourself have said just now that one of the reasons that we have to be optimistic is productivity has gone up. But if you look behind the productivity figures, you will see that one of the reasons productivity has gone up is because businesses have been slashing employment as readily as they have.

    The major source of productivity improvements right now are automation and outsourcing. Those don’t build jobs; they destroy jobs.

    KEENAN: Go ahead, Linda.

    CHAVEZ: Well, first of all, Bob, I think one of the things that you have to remember is that the media has a lot to say about how things are perceived by the American public. And all we see, if you look at The Washington Post, The New York Times, most of the major newspapers in the country or most of the broadcast networks, is very bad news on the economy. And this is a self-fulfilling prophecy. People then begin to feel that things are going worse than they are.

    And I think that the difference between this Bush White House and the previous Bush White House is this Bush White House is more focused on that, and they need to be more focused on it. They need to try to turn the mood around. And the president has been very clear that he is not happy with recovery as long there are not jobs being created. He says that every opportunity, and he needs to keep saying it.

    KEENAN: All right. Bob Reich...