Peter Fisher, Pamela Olson, Richard Clarida, U.S. Treasury Undersecretaries

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This is a partial transcript from Your World with Neil Cavuto, March 12, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: You might just call them the three amigos, the president's point men to sell that huge tax cut that he wants. And in a FOX exclusive, they decided to make their pitch here on Your World, Treasury heavyweights all, who say the president will get what he wants.


PETER FISHER, U.S. TREASURY UNDERSECRETARY: One of the things that the president has taught me is that the way you get things done in Washington is you say what you believe, mean what you say, and you fight as hard as you can to get it. And I think is he convincing some people internationally and domestically if you look at what we did getting the first tax package through, that you say what you want to accomplish, and you keep fighting. And that is how you maximize the likelihood you get all the things. And that is what we are doing.

CAVUTO: Well, Secretary Olson, here is the problem I have, that apparently a lot of Republicans have problems with this in the Senate, no one doubts that this package will have much difficulty going through the House. It is in the Senate that there is a problem. And Susan Collins, Republican of Maine, said, I am increasingly thinking the right decision may be not be to support any plan until the fiscal situation is clear. So she is essentially saying no deal until it is.

PAMELA OLSON, U.S. TREASURY UNDERSECRETARY: Well, we think that is backwards, perhaps. One thing that is clear is that we need growth in the economy in order to take care of the fiscal situation. And what the president has proposed is something that is intended to raise economic growth in the economy. So we think we need to do this first and then fiscal situation follows (ph).

CAVUTO: But you are not calling it a stimulus package?

OLSON: No, we are not calling it a stimulus package because this really is about supporting long-term growth in the economy. Even though we are not calling it a stimulus package it still does deliver a lot of tax benefits to the economy in this year.

CAVUTO: Here is - and you guys are the experts on this, with Secretary Clarida, we will raise it with you, would it have been better at the outset, just playing the PR game, for to you call it a stimulus package and to force the point that this would have an immediate benefit to the economy in the eyes of skeptical congressmen and women who aren't so sure of that?

RICHARD CLARIDA, U.S. TREASURY UNDERSECRETARY: Well, no. We think that it is a growth package because of the way it will be implemented, it will real and tangible benefits to the economy this year. We think that by.

CAVUTO: How real and how tangible?

CLARIDA: Well, we think.



CAVUTO: ...using that as a....

CLARIDA: By the end next year, we believe there will be 1.5 million additional jobs with this package than without it, GDP will be almost 2 percentage points higher. And more importantly, Neil, those gains will be enduring for years to come because this is not a one-shot stimulus to the economy. It is enduring growth at the right time.

CAVUTO: Here's the rap against it, that it's going to cost too much money, and that we don't have that money. Senator Breaux, of course, who is one of the swing votes last time for the original tax package, is on record against this one unless we cheapen it down. Are you for cheapening it down?

FISHER: No, we are for making sure we grow the economy. That really is where federal revenues came from. We would like to get back to surplus.  We know deficits matter. We would rather not be running deficits but the right way to back to bringing deficits down and moving towards surplus is to grow the economy, grow the revenues. And that really is the right answer to the fiscal dilemma.

CAVUTO: But you know, the Democrats and some moderate Republicans are raising these deficits as a big issue. Are you folks worried that that is going to be an issue, that we are looking at $500 billion or better deficits going forward?

CLARIDA: Let me just say about that, obviously deficits are not desirable. But in this context they're understandable. The president inherited an economy in recession. It's growing but not growing rapidly enough. The world economy is in a slump. Even with this package the deficits will be small by both international and historical standards.

CAVUTO: You mean a percentage.

CLARIDA: As a percentage of GDP, and they will be declining as...

CAVUTO: Did you buy the Congressional Budget Office numbers that they were talking well over a trillion dollars?

CLARIDA: Well, you know, Neil, the bottom line of those CBO numbers is that over a five-year window, their estimates were very similar to the OMB numbers, which is that the deficits will be declining as a share of GDP.

CAVUTO: And by the way, they're not very accurate, are they? I mean, they're not really worth the paper they're printed on?

CLARIDA: Well, forecasting fiscal position is - which is what Mr. Fisher does for a living, is a real challenge the further out you go.

CAVUTO: Well, let me ask you. One of the issues that was raised when I was amongst some economic reporters who had a chance to sit down with the president a couple of weeks ago, he seemed to imply, and I don't want to put words in his mouth, that the 100 percent cut in the dividend tax was a non-negotiating position. In other words, he wasn't going to debate that.  It is either all or nothing. Did I read that right?

OLSON: Well, the president firmly believes that this is an important principle. What we need to do is align our tax system with our best economic interest. And right now.

CAVUTO: But does that mean not even entertaining, or let's make it 50 percent?

OLSON: Well, we are definitely not talking about that right now.  What we are trying to do is get to the right answer. And the right answer is to tax that dollar of income once, and only once. And so that is the principle that the president has laid down and what we are trying to push through. There is no principle basis for taxing that dollar of income 1 1/2 times or.

CAVUTO: I know the principle is...but you know how Washington works, you guys are good numbers-crunchers.

FISHER: The impact, we are just not going to get half the impact for doing half the change.

CAVUTO: What about half.

FISHER: . the total cost?

CAVUTO: I know you specifically don't look at this as a cost, and many agree with you by the way, but if moderate Republicans and Democrats have their way, they want to make this 350 or $360 billion over the 10 years rather, about half of what the president is looking for, would you be open to that?

FISHER: What we want to do is have an impact on the economy. Now these are big numbers. They are certainly big numbers for families and for individuals, but if you look at the size of our economy, over the next 10 years, this is - you would have to do something around $750 billion to have an impact on an economy the size of ours, this is a big economy. It's.

CAVUTO: Here's what I've heard from some of the Democrats, and you guys are free to dismiss what they are saying, but one idea was, why don't we take the upper income tax issue, the marginal rate, and rather than speed it up, keep it on its existing timetable. Is that something in the back of your minds that the White House is open to?

CLARIDA: I don't think that would be good economics, and.

CAVUTO: Even though they are going to play the class warfare.

CLARIDA: And the reason, Neil, is simply because to have an impact on the economy, it is important that those tax cuts be permanent, that's both common sense and economics. Pam will tell you about the fact that there are tens and millions of small businesses that pay taxes at the individual rate. So this is a tax cut for investment and job creation in small business, which is why the president put it in the package.

CAVUTO: But is there a sense here that the wind is ultimately going to be at your back? You guys all have these kind of Cheshire Cat grins on your face that methinks that you're aware of something, maybe that we could have a good outcome with the war, with the Usama bin Laden issue, everything sort of comes together. And that's going to be the wind at your back for pushing a package that right now looks dicey.

FISHER: I think that we hope we get some more wind at our back. But I think the real wind at our back is that we want to do something balanced for the economy, between consumption and investment. We look around at other countries, and the problems, the growth in the rest of the world, short-term stimulus doesn't work. Japan tried that in the early `90s. One more short-term stimulus package after another, year after year, and growth just kept slipping and slipping. We are focused and the president is focused on growth over the coming decade, balanced between consumption, doing something on the rates and on investment which is about that top marginal rate for the small business. And it's eliminating the double taxation.

CAVUTO: But did Treasury Secretary Snow step in it mistakenly when he said that president gets his way, it is potentially a 20 percent boom to the stock market?

CLARIDA: Well, I think, Neil, there are a range of estimates out there. And what the secretary was doing was just quoting from the private estimates that he has seen from a low of 4 or 5.

CAVUTO: Do you buy that?

CLARIDA: . some as high as 20 percent.

CAVUTO: That we could go 20 percent higher in the market?

CLARIDA: Well, I think what we buy is that if this package is passed, that on balance it will be good for equities.

CAVUTO: Twenty percent?

CLARIDA: There is not an official administration forecast.

OLSON: But one of the things that Secretary Snow brings to the table is his experience in the corporate boardroom. And I think that his view from what he has seen in the corporate boardroom over the years is that this is going to have a more dramatic impact than some of the economists think, because he sees the potential for it transforming behavior in a very positive way.

CAVUTO: But normally Treasury secretaries or under secretaries, or deputy secretaries, don't talk about the markets. Now his predecessor, Paul O'Neill, did and got into a heap of trouble after September 11 essentially saying that. Is there a risk when you guys talk about the stock market?

CLARIDA: Well, again, I think there is a wide body of academic research and Wall Street experience that agrees that this will be a positive for the markets. And all we have done is to assemble the range of private estimates.

FISHER: It's about growing the economy. I think when we talk about markets, whether the exchange markets or equity markets or bond markets, when we are talking about what we want to do, what our action is going to be focused on, is on the economy, growing the economy. A strong economy is going to be good for those asset markets. That is what we are talking about.

CAVUTO: You're talking about assets, what's gotten to be kind of a pain in the assets for a lot of people is this notion of class war.

CAVUTO: I mean, I personally get offended by it when I keep hearing it. But how do you get past that hump?

OLSON: Well, given our current tax structure, people who want to play that class warfare game have a leg up on us because we have taken the lower and moderate income folks off of the tax rolls. But the president.

CAVUTO: Yeah. And that gets no press. That is odd, huh?

OLSON: Yes. The president's package does still deliver benefits to those folks by virtue of the fact that we are increasing the refunds that they will get. So what we have got is a package that delivers on a percentage basis a higher percentage of benefits to the lower and moderate income folks...

FISHER: It's amazing...The New York Times editor (ph).

CAVUTO: You will be respectfully declining.

FISHER: The other thing is what we want to do on the investment side, we don't want shareholders who get more dividends just to turn that into consumption. Some of it may flow into consumption, but it's about speeding up the investment process. We want that money invested back in the economy. That is not about consumption, it's about investment.


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