NEIL CAVUTO, HOST OF “YOUR WORLD”: Would todays sell-off; meanwhile, have been so deep if the nation’s unemployment rate simply were not so high?
My next guest says jobs need to be the focus of the economy, not just here, pretty much everywhere. His company on track for the biggest hiring year ever.
With us now exclusively is Google executive chairman Eric Schmidt.
Eric, very good do have you.
ERIC SCHMIDT, EXECUTIVE CHAIRMAN, GOOGLE: Thanks for having me back.
CAVUTO: Big-picture questions first. What the heck is going on with the world?
SCHMIDT: Well, the government had this big food fight over money that they don’t have to spend.
And business wants stability. Business wants predictable policies. The private sector in America is amazingly creative. There’s every reason to think that we can create the jobs, we can create the markets. The dollar is weak. We have these huge export opportunities before us. The Internet of course is changing everything. We had a huge, huge event in Texas for small businesses, getting them online. So, there’s reasons to be optimistic. The government needs to get its act together.
CAVUTO: I was noticing, in looking at your stock, that it’s held up very, very well in the face of most technology issues that are well into bear market territory right now, the major market averages within, what, I think a few percentage points of a bear market, in other words, close to 20 percent off their highs.
Is this another recession? Worse? What?
SCHMIDT: Well, no one knows whether we’re going into another recession. Anybody who says they can predict a recession, well, we’d like to get to meet them a little bit better.
The fact of the matter is that global economic continues outside of Asia are basically zero, one, two percent growth. And the problem of Western joblessness has not been solved in any of these countries. It is a problem here. It’s a very significant problem in Europe, as you saw.
Asia has a different model. And, somehow, they are growing much faster. So I think what’s really going on here is we’re seeing, can we grapple with the long-term structural economic problems of the United States?
They’ve been well-articulated to your viewers and to everyone by the deficit commission and so forth. It’s primarily this long-term increase in expenses related to Medicare and Medicaid and the aging of America. And private sector’s job is to go create jobs, create businesses, create shareholder value. We can do that.
The government’s got to figure out how to spend less money or figure out where they want to put it.
CAVUTO: Well, they have a hard time deciding how to do that.
SCHMIDT: That’s right.
CAVUTO: And I guess what S&P had effectively said is, you’re not doing enough of it. And when you do go about it, you fight like crazy doing it.
So, I guess what I’d like to ask you, as one of the most respected business leaders on the planet, is, does this get in the way of you wanting to hire? In other words, I talked to a number of CEOs last week, Eric, who said, why would I in this environment? Why would I?
SCHMIDT: Well, we hire because people come into our company to invent new products that hopefully change the world. And along the way, we make money from them. So, we’re going to invest when we see the opportunities.
The issue around credit rating is really for businesses that are very interest rate-sensitive, where they are heavily dependent upon bank financing and small businesses.
SCHMIDT: There’s a real problem in America around access to capital for small business. It’s been true since 2008. This could affect that. And that’s a real loss from all the shenanigans that have been going on.
CAVUTO: So, if you were on the verge -- now, Google’s a little different case, because you’re successful and all, but if you were on the verge of saying, all right, I have cut my expenses, I’ve retooled, refocused, I’m firing on all proverbial cylinders now, I’m ready to hire, would last week’s development through today give you pause?
SCHMIDT: Probably not.
In our case, our business is strong enough that we use hopefully good judgment as to how many people we hire in a quarter. We’re on our way to yet another record year of hiring. We’re very optimistic about the benefits of the Internet economy both in the United States and globally.
But we have some benefit. We have a very large cash position. We’re not as credit rate-sensitive at some of these other businesses.
(CROSSTALK) CAVUTO: By the way, do you think credit rates and -- and interest rates in general are going to move up a lot?
SCHMIDT: Well, a bank downgrade changes the cost of capital for all of the businesses. So if it ripples through the economy, which everyone’s very worried about, then it’s a problem.
CAVUTO: Were you surprised it didn’t happen today?
SCHMIDT: I was surprised it didn’t happen in 2008...
SCHMIDT: ... when -- when the markets were in a very different situation.
So, rather than looking at a specific downgrade, let’s look at the overall issue. Let’s look at the fundamental problem that the government is spending way too much money and the projections are that it’s out of control. This is a problem primarily with Congress. It’s been true for thirty years. It’s not a new -- not a new problem. It’s been true for both parties.
And the way to solve this is to have a real conversation about how much overspending we want. It’s OK to overspend a little bit. A little bit of a deficit spending appears to be simulative under most economic assumptions. We are way out of those areas...
CAVUTO: Way out of those.
SCHMIDT: ... way, way out of those areas.
CAVUTO: You make a lot of sense and, in Washington these days, probably too much sense.
But I’m probably going to put you in a delicate position here. There’s been a great deal of criticism of Tim Geithner, the treasury secretary that they have to change the team. Your name always comes up among a small group of elite executives who the White House could turn to in a variety of economic roles. And the rumors have been you’ve never, ever been interested.