Greenspan Hints that Tax Cut Could Benefit Economy
LOU WATERS, CNN ANCHOR: Well, does Wall Street have an attitude about talk of both a tax cut and debt reduction? Let's join CNNFN's Myron Kandel at the financial desk in New York. First, the markets, Mike -- have they reacted to any of this talk today?</s>MYRON KANDEL, CNN CORRESPONDENT: Well, not very sharply, Lou. You know, Greenspan talks in what we call "Greenspanese," which is sometimes hard to decipher. But you put your fingers on it -- Natalie did, in the sense that he now says a tax cut is preferable to cutting the deficit for two reasons: one is that the surplus -- cutting the debt, rather -- that the surplus has gotten so big, we have to deal with that and, indeed, the economy is slowing. So what happened on Wall Street is the markets generally greeted it with a big yawn. The Dow is up more than 100 points; the Nasdaq is down. But for more structural reasons for stocks, rather than Greenspan, they were watching what Greenspan was saying to see for any sign about interest-rate cuts. The Fed meets next week to decide whether to cut interest rates again. Greenspan did suggest -- he hinted -- he never speaks about that directly, but he definitely hinted there will be another cut in interest rates. Wall Street isn't sure whether it's going to be a quarter of a point or a half a point. But in that sense, Wall Street liked what it heard, but not enough to send the Nasdaq into the plus column. The Dow, however, is up solidly, Lou.</s>WATERS: Take it down to Main Street, if you will, Mike; how are mom and pop -- how are all of us supposed to absorb this latest economic news: the massive layoffs going on in a number of companies, including our own; the talk of the tax cut; Greenspan today saying growth near zero; 401(k)s taking a big hit in the fourth quarter. Where are we?</s>KANDEL: Well, that growth near zero indicates the economy really is slowing. It had a really gangbuster's pace last year, and it has slowed considerably. He never used the word recession; in fact, he suggested that that may not be happening. But certainly, the economy is slowing. What this means is the Fed is indeed -- I'm certain, going to cut interest rates more. Whether -- how much are they going to do it and how fast, we won't know until next week. But lower interest rates are good for consumers. They mean lower mortgage rates, lower interest rates on credit card debt, et cetera; and that should help give the economy a boost -- won't happen overnight, but may very well avert a lasting slowdown, and that's what economists are hoping for.</s>WATERS: Not such good news for those who live off interest rates.</s>KANDEL: Well, that's the other side of the coin, Lou. If -- you know, if you live on fixed income returns, those interest rates will go down. But also, the other piece of good news is inflation doesn't seem to be worrying Greenspan at this point. You know, he's the inflation fighter, and that's not on his radar screen right now, Lou.</s>WATERS: And a slowing economy isn't necessarily a bad thing, is it -- when that was the intention of raising the interest rates to begin with?</s>KANDEL: Exactly; but we didn't want it to -- no one wanted it to slow this much. It seems to have slowed more than the Fed expected. And that's why we had that big, unexpected half-point move earlier this month, and another one that looks like it's going to come next week.</s>WATERS: All right, CNNFN's Myron Kandel. As always, thanks, Mike.