Paul O'Neill, Treasury Secretary

This is a partial transcript from Your World with Neil Cavuto, March 13, 2002. Click here for complete access to all of Neil Cavuto's CEO interviews.

NEIL CAVUTO, HOST: With us right now, a special guest, the Treasury secretary of the United States, Paul O'Neill. Mr. Secretary, always good seeing you.


CAVUTO: The president made it clear that this war on terrorism, multi-year effort. He referred to the fact that Americans have to understand, and I think he was making a reference as well to Democrats, as well. Is that registering?

O'NEILL: Well, I think so. It's certainly registering out there the world. Last week, I spent the whole week in the Middle East, in the Gulf countries. And, for sure, they understand we've got to work together and I found a really cooperative spirit and understanding there that we have got to mount and have an effective war on terrorist financings as well as prosecuting the military war.

CAVUTO: What did you think — I know this isn't your department — but this INS revelations, where all of the sudden, six months after the fact, we're getting the visas where two of the terrorists involved, including the lead terrorist?

O'NEILL: When I saw the story, I just shook my head. It is almost beyond belief that these kind of papers could come spewing out and create this kind of terrible sensation.

CAVUTO: How does that happen? Just when we thought we had this security issue put to bed...

O'NEILL: Again, honestly I cannot imagine what process delivered those papers. But I'm sure the attorney general is on the case, as the president said. He was pretty hot when he saw it in the paper this morning. I'm sure the attorney general is feeling the heat and he will take some corrective action.

CAVUTO: Speaking of heat, Mr. Secretary, you got some when you took a look at the bad numbers we were having in the early part of last year, continuing through all the year, that it wasn't as bad as it appeared. It now looks like you might have been right. Technically, we didn't have a recession, by the traditional definition as you know from your Alcoa days of two back-to-back negative quarters. We only had one. Do you think the president can say there wasn't a recession on my watch?

O'NEILL: Well I don't know. You know, I am not a great fan of looking in the rearview mirror, I really don't care very much. You know, when we were going through this slow period, I said, I thought for sure we were in a slow period. And when the third quarter numbers came out, I was not surprised because of the shock we took with September the 11th.

CAVUTO: But apparently, within just weeks of that, people were buying again. They were...

O'NEILL: I said then, and it's nice to be right, I thought we would recover quickly. As I talk to people to people that I know around the U.S. economy, even though they were all mouthing the same things about things are terrible, when I asked them about their own business that I heard were facts that gave me conviction that we could have a positive fourth quarter, they were telling me there were no inventories, which was a really good sign. They were taking corrective action to make sure that they didn't put things in warehouses. And the strength of autos and housing was still going on, and so I had a lot of conviction that we could have a positive fourth quarter. And, as I say, it's nice to be right.

CAVUTO: You're being modest, because the fact of the matter is, and I recounted your remarks right after September 11, you said the economy would come back and the markets would come back. The economy came back. The markets came back. And you took a lot of guff for that. In retrospect, do you tempted to say I told you so?

O'NEILL: Not really. But it's kind of nice to see once in a while somebody go back and look at the record for the last 14 months and say, well, he said this and that was right and he said this and that was right and he said this and that was right.

You know, I guess it is like building a house or something. It is one board at a time or one brick at a time. And as long as the president says keep doing what you're doing, that's what I'm going to do.

CAVUTO: Let's talk about the expense of what he has to do right now. And, of course, his military budget is not — the budget in general is not yet approved. Obviously, he wants $48 billion more for that. The president saying that there's no need for a draft right now. But we are kind of pushing this, expense-wise, aren't we? I mean, you need money and soon for some of these grand military plans, right?

O'NEILL: I tell you what, again, what I look members of the Congress in the eye, I can't find anyone who has any interest in saying they are going to deny the president what he believes we need to prosecute the war on terrorism.

CAVUTO: So why is it taking so long?

O'NEILL: Well, by congressional standard, this is fast.

CAVUTO: Does that bug you though? You're a corporate CEO by training. I mean, when you look at the pace that Washington moves, now with the INS stuff, now the approval of the budget.

O'NEILL: A little hard to understand.

CAVUTO: Yes. Frustrating?

O'NEILL: It need not be this way, but I think in order for it to be quicker, we need to import into governmental processes the ideas that have given us the kind of productivity growth that we've had in the private sector. The 5.2 percent productivity growth in the fourth quarter was absolutely wonderful.

I think we're going to see a continuation of that because our private sector, the individuals out there who make up our private sector, millions of small businesses and big businesses, have got the right notion that what we have got to do is create value. If we could create that notion of value creation and improvement every day in what the government does, then our national productivity grows to be seven percent. And some of the...

CAVUTO: Yes. But all of a sudden, you have people like Alan Greenspan coming out today, sir, saying, you know, I'm paraphrasing here because I have to be very careful when I quote Greenspan, that coming out of the this, since it was a shallow recession or slowdown, whatever you want to call it, it will be a shallow recovery. Do you buy that?

O'NEILL: Well, I don't know. I guess I'm somewhat more hopeful that that's exactly what Alan said. I'm a little more hopeful than what your characterization...

CAVUTO: He kind of low-keyed it today. In his speech to bankers, he kind of low-keyed it.

O'NEILL: I tell you what I think. I think the fourth quarter will probably be the bottom of the profit slowdown. And as we go forward, we'll see increments to corporate profits in the first quarter and more growth in the second quarter as demand improves. And then we're going to get the kick-in from the stimulus bill that the president approved with 30-percent rapid depreciation. That will help to put cash into the hands of companies who are making business investment.

And the key to sustained growth going into the last half of the year and into next year is for business investment to pick up. I think it will because I think there are lots of corporations and small businesses sitting around with potential projects, with 30 percent rates of return. And as they see that there's real demand for their product, they will make those investments and we'll get the pull-through effect.

CAVUTO: You think the markets will be higher by year end, real fast, than where we are now?

O'NEILL: I'm not supposed to comment.


You know, I'm a great believer in the strength of our economy and I think the market reflects our economy.

CAVUTO: All right. The Treasury secretary.

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