Effect on President Bush's Deficit Decisions
FREDRICKA WHITFIELD, CNN ANCHOR: IN THE MONEY is coming up straight up first a look at the top stories. Democratic Senator Barack Obama is now officially in the race for the White House. He spoke from the old state capital in Springfield, Illinois where he served as state Senator. Abraham Lincoln served there in the Legislator as well, before becoming president himself. In Iraq, General David Petraeus is the new commander of U.S. forces. He says the country is doomed to continued violence if U.S. forces and Iraqi forces fail to work together. The U.S. military in Iraq may produce evidence that Iran is giving weapons to Iraqi insurgents. Pentagon officials say a briefing could be held tomorrow. The Bush administration has long accused Iran of aiding insurgents. We will update the top stories at the bottom of the hour. Now time for</s>IN THE MONEY. ALLEN WASTLER, MANAGING EDITOR, CNNMONEY.COM: Welcome to IN THE MONEY, I'm Allen Wastler. Coming up on today's program, the buck starts here. See how President Bush's deficit decisions today could play out down the road. Plus, reading between the signs. Find out what really counts when you are trying to figure out the housing market. And honey, you shouldn't have. We will look at why so many guys blow it when they buy a Valentine's Day gift. Joining me today, Jennifer Westhoven and Jen Rogers. Jen and Jen welcome. Everybody is jumping into the presidential pool. Everybody wants a shot at the big White House, you know. It is going to be open in a year and a half. I did a quick count, over 16 candidates all of sudden sort of jumping in or playing in the water saying I'm thinking about it. You know. I figure it is about two things one name recognition, because a lot of these folks, you never heard of them. Two, money they say it is over $500 million now.</s>JEN ROGERS, CNN CORRESPONDENT: It is launching a new drug. You have to raise so much money.</s>JENNIFER WESTHOVEN, "HEADLINE NEWS" CORRESPONDENT: That's just to win the nomination. Let alone the presidency. A huge amount of money that they have to raise. I noticed did you see that Mitt Romney has already raised more than $1 million on the Internet in a month, now that's a drop in the bucket compared to $500 million, but that could be a new trend.</s>ROGERS: Not as heavy lifting as having to shake the hands and pick up the phones. My strategy would be for 2012, if you go in now, you get your money and then maybe put it in the market. That could make your job easier when you get to 2011.</s>WASTLER: Announce now and play around. One quick thing when John Kerry said he wasn't look how quick they gobbled up his money.</s>ROGERS: It is a land grab.</s>WASTLER: It is big. Now, President Bush unveiled his $2.9 trillion budget for 2008 this week. With more than $200 billion of the plan to go toward the wars in Iraq and Afghanistan. Tom Foreman has a look at what the money being put toward war there could pay for here in the U.S.</s>TOM FOREMAN, CNN CORRESPONDENT (voice over): If you study Iraq in purely financial terms and say, "show me the money," it is quite a show. This is how much American taxpayers are paying for the war more than $350 billion and still climbing. Based on government records, compiled and computed by a progressive think tank, the National Priority Project. Ken Pollack is with the Brookings Institution.</s>KEN POLLACK, BROOKINGS INSTITUTION: One of the great tragedies of Iraq is that the administration has mismanaged this war so badly that it has wound up costing the taxpayer far more than it might have had things been handled otherwise.</s>FOREMAN: How much money has been spent on Iraq? The Priorities Project estimates it is enough to hire more than six million teachers. Enough to build more than 700 new elementary schools in each state, eight million police officers could be hired or six million cargo inspectors for ports or we figure every American driver could get free gasoline for a year. In the complex world of government budgets, the total estimate can be fairly questioned but it's a lot more than the White House is suggesting.</s>GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Today I'm sending the Congress a wartime supplemental appropriations request of $74.7 billion. To fund needs directly arising from the Iraqi conflict and our global war against terror.</s>FOREMAN: Government investigators say billions have been lost to fraud, mismanagement, or bad bookkeeping. The spending won't end when the fighting does. American troops and equipment have held up well. MAJ. GEN. DON SHEPPERD, U.S. AIR FORCE</s>FOREMAN: Plenty of people argue that establishing democracy anywhere is worth whatever it takes. And, of course, no one can put a value on all the brave young lives lost or calculate the cost of leaving. But the price tag of the war so far is impressive. In the time it took you to watch this story, Iraq cost America almost $500 million more. Tom Foreman, CNN, Washington.</s>WASTLER: If all those big numbers didn't shock you maybe this will. They may not add up to all that much in the long run and the long run is what our first guest is thinking about. Justin Fox is a business and economics columnist at "Time" Magazine. Very familiar with his work. Justin, welcome.</s>JUSTIN FOX, ECONOMICS COLUMNIST, "TIME" MAGAZINE: Thanks.</s>WASTLER: Before we start talking about the long-run problem, let's talk about the short run. We are talking about budgets and cost of war these days. Is that worrying you or not?</s>FOX: Well, what's interesting about the budget right now is if it weren't for this cost of the war there would not be a deficit. We would have a budget in balance right now, which is kind of an interesting thought.</s>WESTHOVEN: When you look at how much we are spending on Iraq, though, and you adjust for inflation and the percentage, gross domestic product, how does this compare with other wars like World War II and Vietnam?</s>FOX: Tiny. We are just -- we have a massive economy now. Our GDP is something like - I don't have my GDP numbers memorized but it is about $13 trillion a year right now. And so you look at it over time. Obviously if we kept doing this every year for infinity, that's really expensive. But assuming that wars end which Vietnam and World War II did, this is a small chunk of our overall economy going towards this.</s>ROGERS: President Bush says that the deficit is actually shrinking. That seems like good news. Does he get credit for that?</s>FOX: Except there was not a deficit when he took over. That's sort of the issue. He has his new budget calls for the budget being in balance by 2012 once he's gone. It is shrinking because the economy has been strong the last few years. It is not because of any really significant spending restraints so far by the Federal government.</s>ROGERS: Is the economy strong because of tax cuts, does he get credit for that?</s>FOX: Part of the credit. In general, the U.S. economy these days is just this amazingly resilient thing. And I -- who knows with the tax cuts. I think they helped some but if you hadn't had the tax cuts you probably would have had a deeper recession a couple of years ago but I think things would be going OK now and you wouldn't have a budget deficit.</s>WASTLER: Let's talk about the budget right now that he put forward before Congress. That thing is four volumes; it is a big honking budget.</s>FOX: I only printed out about 30 pages. That was too much for me.</s>WASTLER: It's basically a starting point where they are going to start dickering. He has a Democratic Congress to dicker with. What's your outlook on that?</s>FOX: One of the really interesting things is that the issue in the first few years of the Bush administration is he would present his budget and then go to Congress and get even bigger. And he wouldn't veto it because they were all Republicans and they were all friends. And you look back in history and that's been -- that's what happened in the 1960s and Lyndon Johnson and a Democratic Congress. When you have the President and the Congress in the hands of the same party the president's budget gets bigger and keeps going. When you have different parties, they are going to fight over it and it might be better for our fiscal policy going forward.</s>ROGERS: You think that there's any hope that there's going to be something on the horizon in the near term that can help solve that Medicare crunch?</s>FOX: I haven't heard -- I mean, that's one interesting thing. You can't be too hard on Bush for this. Because I haven't heard anything from either the Democrats or the Republicans to really say OK here is how we fix this. It is too uncertain.</s>ROGERS: No one knows.</s>FOX: No one knows. It is tied up in bigger questions of how we organize our health care system in this country. And I don't think anybody has figured that out yet. I think we will figure it out. But it is going to be ugly and they are going to be really, really hard decisions to make down the road.</s>WASTLER: Ugly, hard decisions. Thank you for cheering me up there, Justin.</s>ROGERS: When we come back, how to spot the next job, see what a company needs to look for if it wants a leader who delivers. Also ahead, forget macro. Think micro. Find out why your local housing market might make more sense to look at than the national one. Sleeping on the job, we will tell you about an outfit that wants to help you catch some Zs on company time.