(00:00:00) Support for this program is provided by national public radio member stations and the NPR news and information fund contributors include the William T Grant Foundation Waste Management Incorporated providing comprehensive Waste Services worldwide Carnegie Corporation of New York and governing the new monthly magazine about state and local government. (00:00:26) From National Public Radio. This is an American form part of an occasional series of programs from the American University in Washington DC. I'm Judith Dougherty. The American forms our panel discussions of critical issues in journalism and public affairs in this program covering the crisis the media and the markets journalist Scholars and politicians debate the causes of the October stock market crash compare the recent Black Monday to the crash in 1929 and propose solutions to current US economic problems. But before we hear from the panelists Safford ogre the American University and former host of NPR's All Things Considered will make a brief (00:01:07) introduction. Good evening. I'm Sanford Uncle Dean of the school of communication. Our topic for this evening is you know is covering the crash the media and the markets welcome this audience also the audience that we listing on national public radio and the voice of America. We have a particularly distinguished panel this evening for a very Lively and contentious subject the recent events in the financial markets beginning at my right is Barry Bosworth senior fellow in the economic studies program of the Brookings institution from nineteen sixty seventy nine until the present. He was previously director of the Council on wage and price stability in the Carter Administration and has worked in the field of Economics since getting his degrees in that field at the University of Michigan. Next is Rose Gutfeld. Whoo, it says here has worked for the Wall Street Journal ever since graduating from Cornell University in 1978 and has been an editor and a reporter for the journal covers economic issues and including tax reform act last year trade problems and Federal Reserve board and has been very involved in covering a resource recent financial news to my immediate right is Congressman Dan Glickman Democrat of Kansas from the fourth district, Wichita, Kansas, his background includes a stint 1969-70 as a trial attorney for the US Securities and Exchange Commission. He's been attorney in Wichita was elected to congress in 1976 is now an assistant majority. Whip in the house in the always difficult to understand ways of Congress country Glickman. It's not difficult to understand why would be member of the agriculture committee, but it might be difficult to understand why the agriculture committee has jurisdiction over the Futures markets and that is why most men Glickman has been particularly active. In the recent furor over the stock market's to my left is senator Frank murkowski Republican of Alaska elected to the US Senate in 1980 and re-elected in 1986. The summaries of Senator murkowski is first term say that he was while other members of the 1980 class were grabbing headlines. He was working quietly on seal hunting Timber exports and other issues of concern to alaskans. He has led trade delegations to the Pacific Rim countries has offered legislation to impose a 20% surcharge on Japanese Goods coming to this country and I think part of his involvement in these issues comes from the fact that except for three years in state government and since he's been elected to the Senate he spent his entire adult life in the field of banking to Senator murkowski. He's left his bill Plante who is senior White House correspondent for CBS News. Known to all of you. I'm sure for covering Ronald Reagan beginning with the 1980 campaign presidents 1984 re-election campaign Bill previously worked for the network in Chicago and has been in the Washington Bureau since 1976 among his other assignments. He has covered a company President Reagan and covered him at economic Summits in Versailles, Canada, London Tokyo and bond and five economic Summit sounds like something to survive to his left is Charles almond editor of growth stock Outlook the largest investment service in the country specializing in America's fastest growing companies. Mr. Almond has been an editor of National Geographic and holds the distinguished service award from the National Association of investment clubs. He has pointed out to us this evening that in August at the time when the stock market reached its peak it. Mr. Almond had most of the money in his growth fund in cash not the stock market and Acted then in August that the market would plunge by thirty five to fifty percent. So not surprisingly. We all asked him before we begin for some investment tips and he suggested that the wisest investment was his own fun. I wanted to Begin the evening by just telling you a little bit about a survey that has been done by students in the graduate program in Public Communication here in the school of communication American University following up on similar poles National polls done by some of the news magazines and Survey organizations are graduate students in the past past week did a survey in the Washington area science scientific survey in the Washington area trying to get some information about public attitudes public understanding of the stock market crash and came up with some interesting results. They'll be available in more detail later on but just briefly now, I might summarize that among the people they asked the this is based on 382 phone interviews. They asked whether the record decline in stock prices on October 19th indicated that the economy was heading for a depression or a serious recession or just a serious downward trend 53% of the And instead it would be a recession but not necessarily serious only 11 percent expected a depression. When asked whose policies were the most important cause of the recent stock market crash 32% said the financial Community including stockbrokers and big volume Traders 27% Senator murkowski said Ronald Reagan and 21% said foreign governments to percent blame Jimmy Carter, when asked whether whether these groups would be especially hard hit by recent events in the stock market people said 55% said that wealthy people would not be hurt 52% said the poor people would 63% said young people who've recently made a lot of money and 86% said that people who borrowed a lot of money might be hurt those obviously add up to much more than a hundred but people could and answered on each one. And last Point as of today, when asked where do we where do people think is the best place for people like themselves to put their money? They did not list your fun. Mr. Almond, but 31% said long-term savings certificates 20% said savings accounts 18% said money market funds 11% said mutual funds are pretty conservative answers and only 3% said stocks 8% by the way said gold and silver. So that's it seems to me an interesting reflection attitudes in this in this community. I thought we might begin since that's what people are doing. Anyway by asking our panelists this evening from their varied Vantage points whom they would hold responsible for the dramatic events in the stock markets in the financial markets in the in this recent period my start with you senator murkowski. When your constituents ask you, what went wrong whom do you say whom do you blame? Well, obviously you can look at the overpriced stocks and reflect on the merits of whether or not they were True Values or whether they were inflated values, but I happen to feel that the primary cause is an accumulation accumulation of debt to the point where the confidence in the economy and the ability of government to reflect on that increasing debt was severely questioned by the general public. I always recall when I came in the Congress in 1981 went out and bought a padlock and that particular year. I'd been to a budget meeting and I think the total debt of the country the accumulated debt was seven hundred fifty seven billion dollars. I can't buy a padlock with one trillion a 300 billion for the tumblers on it obviously, but that gives you some reflection of the tremendous increase in debt in a relatively short period of time. I think we're spending 15 or 16 cents out of every dollar on interest on that debt. I think the confidence was shaken over the Ultimate Reality that government was not facing up to that debt. The fact that gramm-rudman-hollings was going to come into reality as it will be the end of this week. When we either going to do something about it or sequestration will become a reality because when Glickman how about you from other side of the Capitol and the other side of the of the political fence? Whom do you hold responsible? Well as HL Mencken one set for every complicated problem. There is a simple and a wrong solution and there is certainly no simple answer but I would make in addition to budget and trade deficits which are Certainly a government responsibility. I think that stocks were overpriced and we were look at living in a very consumption oriented speculative era the era of what I call Ronald Reagan where the sky's the limit and whatever feels good do and don't save and spend borrow. I think that there were some short-term reasons why it was as bad as it was one was a Federal Reserve board tightened money. I think it a very improper time period and caused great fear in the market that interest rates were going to go up and people began to get scared. I think that issues involved in the Persian Gulf were great precipitator. I do think it's worth knowing however that many of the reforms that were passed during the New Deal save this country from experiencing the first far worse problem the margin requirements on the stock exchanges basically prevented desperation the FDIC being there for Banks in this country prevented financial institution failures of the type that we had during the Depression. So even though the market went down fast, it was almost as if too many people wanted to get out through a very small door and they call couldn't crowd as quickly as they could have were very fortunate that the structure of the regulatory structure prevent a catastrophe happening Rose Gutfeld. What is your impression on the basis of your reporting during this period of time? Well, I'd agree (00:11:34) that it was a loss of investor confidence in the government's ability to do anything about the huge trade and budget deficits. But in addition the idea that we're extremely dependent on foreigners to keep financing those deficits and there was nervousness in the markets. There (00:11:52) is some indication that (00:11:53) foreigners weren't as willing to finance our deficits all of this year at especially just before the crash is they had been and I think that contributed to a huge loss of investor confidence that the government could handle its problems. (00:12:07) Bill Plante you cover President Reagan daily and particularly his attempts to explain the problems the market. What is your impression of the real reason the president's immediate reaction was it they're going to correction in the market. It was quite a correction. He still emphasizes the fact that the economic underpinnings and fundamentals are said and he doesn't say too much about the trade or budget deficits acceptable for them. But he does not of course acknowledge that his policies had anything to do with putting them where they are today. I think the White House understands that there is a psychology of fear, which drove the market down whatever was responsible for the incident, whatever the proximate cause may have been and they're trying very hard to boost it back up. What they do may have less to do with where the market goes in the short term than what the FED does but they're trying very hard to bring the dollar down. I think that was And what secretary Baker did last week even though of course, they do not admit that they talk the dollar down but there is I would have to say no overall plan that I can discern for dealing with the economy or with the after-effects of the crash. Mr. Ulman. Where do you place the blame? (00:13:30) Well, I don't think that you can pin this down Sanford on any one particular reason you we've had a marvelous Joy right here the stock market for five years anyone willing to think and you know years ago. Somebody said what a mankind great to shortcomings is that he'll do anything to avoid the traffic Pains of thinking nobody was looking at Value in the stock market you've had forecasters who telling you the David L. Joyce is going to 3,700 and everybody believed them. This was nonsensical. She were looking at Value if you Can't value you were looking at the Dow Jones in August that dividend yield of 2.5% about 2.6 times Book value. These were extremes never seen before in the 91 history your history of the Dow Jones if I were to pick out four or five and we managed well over 400 million dollars and we haven't lost our shirt at all. And I had stated a longest 23rd to in New York Times that I thought this Market was going off 35 to 50 percent. Four five or six major reasons in my opinion number one. Perhaps the program trading help to accelerate the downside this so card portfolio insurance which to me is an illusion. It's anything else but insurance just ask the fellows who are playing it Senator just mentioned the enormous debt out there. You can buy Peruvian sovereign debt at two cents in the dollar when you see country Romania Yugoslavia having a better bigger better risk than Brazil. There's something cockeyed the debt I think is a major problem the enormous evaluation of put on the stock market by money managers, and of course, I'm major money manager myself. They're looking up at performance and what the congressman from Kansas. There was a former SEC attorney and I think you can appreciate what I'm talking about when I'm talking about performance fees by money managers who were then encouraged to take higher risk in the stock market and this also had an impact but I think you need I can you need a catalyst to set this thing off in a downside you had a Congregation of negative factors. They're just waiting for a catalyst if I was to pick out one factor as a catalyst, I would say tax fright. I think there was a tax Panic out there. You've seen what's going on down there Capitol Hill right now the pulling and tugging back and forth. If anything that they stock market doesn't like it's a tax increase. We don't know how big the tax increase is going to be in 87. How big is going to be an 88 and especially how big is it going to be a 1989 so I don't think you can pin this down to any one thing. We've been on a marvelous Joyride. For many for five years. This thing has taken quite a spill my own personal feeling is that is not over yet. We still have a long way to go as far as the comparisons with 1929 are concerned listing all these comments here and all the comments. I've been able to read and I've been reading everything in sight the last four or five weeks. This looks like a carbon copy of 1929 the comments you're seeing today are almost exactly what they were saying then but the most amazing thing to me was when the President Reagan came on and said well the stock market was due for a correction. My immediate reaction was if this is a correction, I was sure hate to see a bear Market (00:17:13) very Bosworth. I think I go along with all of the above. There doesn't seem to be any shortage of explanations of why the market was down in the past. I guess I'm always struck by one thing about I think there's a degree of Truth and all these things and it's not one but it is striking when asked everybody only talks about situation here in the United States yet. The most startling aspect of stock market decline was that it was a world market decline and the magnitudes of stock market collapse here in the US were in many cases not as big as the decline of the countries that always leaves me very spectacular. It's doubtful about explanations, like investors were afraid of the ten billion dollar tax increase on Capitol Hill. I don't think anybody in Germany cared but the German Market went down or Australia or others. I think we look for a common thing. It is the general theme that's come up here tonight as a loss of confidence. The United States which a lot of people think take the primary leading role in the world economy. There's a real question about who's in charge anymore. Anybody is in the United States and I think the new triggering point is like has been mentioned. Fears that interest rates were going up and interest rates is bad news for the stock market. So get out get into stocks. Then why those Screwballs went off then Panic to the magnitude they did. I don't think anybody has an explanation for it. Hire a psychiatrist by death. We didn't have a psychiatrist on the panel. It's maybe we're missing. (00:18:51) It's interesting very you (00:18:52) said that the you pointed out that nobody mentioned this as an international phenomenon. I wonder what the what the significance of that is. I mean is that is that part of the problem that Americans are are only looking inward on this and are not looking at it as an international phenomenon. Well, I think one of the great problems that we as a country have it have right now trying to come to grips with our economic problems is that we now live in an international Capital Market, and if someone said we're a debtor nation and when you're a debtor Nation you dance to the tune of your creditors, I think individuals are familiar with that Latin American countries are familiar with that. And now that's the situation United States finds itself in you have to be responsive to what those Foreigner. Stretch thick because they're the people who are holding all the pieces of paper that enable Americans to consume at this tremendously high level. I wonder I mean really there are two questions here how well do government officials in the executive branch and in Congress how well do they deal with this to explain it to the public or to help the public understand and how well do the media do in covering this? I mean it there are some people who will say that the media made the recent crisis worse that there was a sense of panic in the Daily Press and on television in particular which caused people to rush out and sell their stocks. Do you think that the media are partly to blame there are always people some people who will say that the media is to blame that is nothing new. It goes back a couple of thousand years to the tendency of Kings to shoot the messengers when they brought bad news. I really although hardly a financial expert they have to decline on behalf of most media the responsibility for spreading the Penning people are not that stupid. They can see that there is no particular direction or leadership coming out of either Wall Street or Washington. They see that there's General sense of panic and unease and they draw their own conclusions have to share with you. Senator murkowski is coming when you said that build it may be thousands of years old the technique of shooting a messenger, but as he put it it still works. Very Bosworth. What was the quality of public understanding particularly through the media in this crisis in your view. I would normally be quite critical media coverage particularly television coverage of economic events because of the need to get question Mike from to get a picture but I thought I would agree with Bill pump this time that I think the media coverage of this particular event and answering people's questions was very good that this was a better performance than usual. I say when the stock market goes down trying to get a list of what are the five or six questions that immediately come to mind and getting an answer out. I thought the coverage of the stock market decline was well done. This I think was a They did try to get the administration. For example, what is it going to do? What's its economic policies and I didn't see any Scare Tactics as far as markets perform. As long as the information is not false. It helps markets to let information out. We don't want to keep things secret markets don't work. Well when their secrets and some individuals can profit from information that a blue available to others. So I think the widest possible dissemination of what the President says he's going to do what secretary Baker says he's going to do is good. Why should just a few inside people who happen to know somebody who work for them? They the only one that gets their views on these things. I think it is the task of the media to get government officials to publicly not a high spokesman but publicly say what it is they intend to do in these circumstances. I thought it was quite well done this time. I don't remember any television show or he's or newspaper stories that I thought from an economic point of view were inaccurate. I just would say never since I've been in Congress have I found an issue at home in Kansas that has captivated the interest of people average folk as this issue. I spoke at a union meeting of International Association of machinists have a large Boeing facility in my district and the numbers of people who came up to me and ask me questions about the market the economy. It was like higher than just about any issue that I've seen it was higher than Jim and Tammy Bakker and that's about one of the highest issues that I'd seen before that, you know, in terms of interest because people knew it made a difference to them the other thing I think it's important again to realize that even with the 508 Point drop in the Dow which was higher in any one day than we've ever had before there was still basic confidence that our country was not going down the tubes tomorrow and that I think that's again largely because the post 1929 efforts created a regulatory structure in this country that Another crash depression Real Crash real depression from happening that gave us a reprieve I think not any kind of final protection, but people understood that what we had done over the last 50 years did keep this country from going through utter and total hell (00:24:34) immediately and I think that was widely reported. I know I was involved in stories. I think you were quoted in the story in the Wall Street on the front page of the Wall Street Journal the day after the crash pointing out that this isn't 1929 that there are safeguards in place and that the FED policy is changed. There's various differences. I mean that was the day after the crash and I know there is another Journal story on the front page about the Silver Lining some of the good things that are happening such as the drop in interest rates the seeming progress on the budget deficit on Capitol Hill and I think the Press hasn't written exclusively negative stories about the disaster in the coming recession by any means (00:25:15) Miss Drummond, I sense that you wanted to say something about (00:25:17) this. Yes. Well with with hundreds of millions of dollars at stake. I'm concerned. What is down the road the 508 Point drop the crash in the stock market that's ancient history thing. I must ask myself. What is down the road? What is 1989 going to hold? I suppose Senator Bradley doesn't want to run because he doesn't want to be annexed Herbert Hoover. We must look at some of the foreign elements that we have which we have absolutely no control. For example, the Japanese stock market my own feeling is not the Japanese stock market could drop 45 to 85% When you stop to think that Japan is 3% of this science (00:25:54) open. Now if anyone wants to go and sell before that ever (00:25:57) happens, well, we're we're 81 percent. Okay, so I can't get too badly hurt. Japan is 3% of the size me and I had to steak yet. They land of value in Japan is approximately eight trillion dollars eight trillion dollars. Now that's estimated to be just about double that these two Land value of the United States now that is absolutely absurd. Now. The Japanese of course are borrowing money on this highly inflated real estate to play their stock market on margin just like we were doing in the night in 1929 if that Japanese Market starts to go into the tank. I assure you that it's going to unhinge the US bond market suddenly temporarily if not for a long period of time and certainly going to do some of the US Stock Market into the tank. I was speaking to troit on October 16th Martha Seeger made a comment the member of the Federal Reserve board. She said that 40 percent of all trading on the New York Stock Exchange for the first nine months of 1987 was for and buying this means primarily the Japanese and Germany some from Switzerland some from Britain. But primarily the Japanese at the Japanese have to suck this money back out of the United States in a hurry. I would not want to be holding many Common Stocks know what I want to be holding bonds. The only place I would want to be would be a 90-day us treasury bills. We are sitting right now and over well over 300 million dollars in cash. We have absolutely no plans to jump back into this Market because nobody knows what the future is going to hold. We have a political scene, which is not unlike 1928. We have the possibility of protections legislation coming on which is one of the great mistakes of this country which prolong the big depression for many many years the 1930s and I remember remember that so well because I can recall so easy picking having to pick strawberries for two and a half cents a quart. This is the sort of thing that you don't forget. So this this whole debt structure is this thing going to hold together my own opinion of the New York banks. For example, I was on record in Barron's last February that I thought JP Morgan was the Morgan was the only solvent Bank in New York City. You can have all the others when you look at this. Death of this debt was mark-to-market hundred cents on the dollar for what it's worth today what they can sell it for and not a hundred cents on the dollar most of those big New York City mutters Money Center Banks would be broke (00:28:25) but it is someone mentioned that we needed a psychiatrist on the panel before I wonder if psychological factors aren't always neglecting this it if we all talk about the fact that a recession is coming long enough and hard enough. Doesn't that help produce the recession Senator murkowski. I mean, do you worry about that at all? Is it is it now just assumed politically that there's going to be a recession and what can you do about it if there if it well, it's a little good news a little bad news. I think it's fair to say the media in the United States traditionally has a herd mentality and they have an instinct to go in where the action is and that's as it should be because that's the we have an extraordinary medium. In the United States and we have a public that has accessibility that so there's a tremendous amount of information these young people are out here today the information that they're that they've had at their age compared to what we had. You know, it's an entirely different that's as it should be but what I'm saying here is if you look at at the crisis that were in and there's no question about it. It is a very very significant crisis. It's not all black employment is relatively good shape. What is it somewhere, excuse me, five six percent lowest unemployment rate. I believe in seven or eight years. I don't know how many of you recall the interest rates in December of 1980 prior to the change of the administration. The prime rate in this country was 20 and a half percent is too high now certainly but you know, it's within a substantial range in comparison inflation was 12 percent in December of 1980 at the end of The Carter. What's inflation running somewhere around four percent now, that's the good news one can say well certainly we put put reforms in in 29 as a consequence of the crash. We learned lessons we have margin requirements one wonders where we'd be today. If we put a balanced budget resolution in to mandate in 1929 a balanced budget, I would venture to say that we would not have this accumulated debtor. We would have had to change the law. I think we'd get right down. The accumulated debt is what's undermined the confidence and that's what we've got to relate to we've got to do it. Now we have to do with some very positive means that people can understand because no magic out there you either generate more revenues or you reduce spending us. Those are the only two Alternatives you have because to continue to add to the deficit people are going to buy that anymore what happens if for money is pulled out of the market and the Federal Reserve is forced to pump in enormous amounts of You did send what happens inflation goes sky-high. Yeah, but you know our foreign money comes the United States because it comes for the highest return in the least risk, and that's the United States and that's where it comes that could be why of leaves? Well, I hadn't left yet, but I'm not suggesting that it couldn't. (00:31:26) We're going up before the crash partly because of fears that foreigners weren't willing to were demanding a better return to continue to buy you a security to continue to finance the (00:31:37) deficit. Yeah, but the other the other qualifying Factor, we haven't talked about a hope you'll get a chance to and that is that the United States does not provide an incentive for savings. We have the lowest savings rate any Western Nation? I don't know. It's 40% terribly. I think you know what we do with savings. We penalize Savers. What do we do with your interest off your savings account? You have to pay taxes on it. We gave reward you for debt because you can charge off you two. It's absolutely backwards until we have laws that encourage savings. We're never going to really reflect on turning this thing around because if you have savings you can have money to go into the market you're going to have lower interest rates are going to have available capital and you've got to have incentives to say is that snow? Incentives up that mean you would reduce taxes you would take the taxes off the interest on savings account. Although I might even look at doing away with the income tax and putting a value added tax and doing with the income tax altogether I think of us think about what would you say every person out there and have 25% more walking around money, which if you talk about that true duelist what aren't you do it you could save it or you could spend it if you spend it you're taxed on the purchase. Very very interesting Senator. It's a very interesting thought the United States private savings rate has not its low compared to other countries. It has got nothing to do with the current crisis. It has not declined. It's been an absolute constant and the United States since way before the income tax was ever put in place. There have been numerous studies finding that there's no International correlation between income tax rates and savings rates and among countries in 1980. This country embarked on an enormous experiment to try to stimulate private savings to the tax system. We gave people IRAs. I mean paying taxes on savings at all and nothing happened to the private settings, right? We spent a hundred and billion dollars a year in the tax program designed to try to stimulate private savings and all people did was they move their savings from their savings account to their Ira it had a big effect on where they put it but it didn't change the private savings rate in this country. The private savings rate failed to rise in the 1980s in response to these measures but more fundamental is what sense does it make to increase private Savings in a country by cutting taxes at a time that the government borrows two-thirds of all the private savings to finance the budget deficit. I mean of all the Absurd policies we've been engaged in we cut your taxes to encourage you to save see your government could turn around borrowed from you. That doesn't help anything. Instead the lesson that Americans have to get across. Without getting into the politics of what the car taxes you have to pay for what you (00:34:43) get. (00:34:45) And what we hear is we got to reduce the budget deficit, but worse than a budget deficit would be a tax increase or worse than a budget deficit would be a cut my favorite expenditure program. And so we got a president and a Congress and American public by the way, that disagrees that budget deficits are terrible, but worse than a budget deficit would be my having to pay a tax increase or my having to give up an expenditure program. What we get is a list of I know how to finance the budget deficit cut the other guys expenditure program and we've heard this discussion now in the United States for eight years and nothing has happened. And we're just hearing it from the president the Congress again. There's always budget deficits bad, but And this always in the but that the action is (00:35:38) very why would you what would you say causes the low savings rate of this country, but perhaps the lowest of any major country in the (00:35:46) world. Mainly the reason for that. I think there's about two and a half percent biggest one of all is cultural Americans and the way we have our pattern of savings and have had all through our lifetime. We take out a lot of debt when we're young but notice one thing we all manage to pay it off by the time we die Americans borrow at a very young age compared to other cut societies and then save in their middle age to pay it back again. It's been going on for a long time. It is an American sort of faith in the future so that I people's explanation again, I don't know exactly what the cultural things are. Except that when we look at economic differences among countries. You don't find any correlation that countries that have high savings rates had low taxes or low anything else. You mentioned. Germany is one of the most heavily taxed countries in the world on Capital Income. It has the second highest savings rate use private sector German Save-A-Lot. I don't know why Japan has a very low tax rate and it has very high savings rate in the 1980s. We after-tax doubled the rate of return that you could earn on Savings in the United States. It's a fantastic after tax rate of return. It was negative and the 1970s could try to say the private savings rate in the 1980s has been a little bit lower than the private state is great with 70s. (00:37:15) Well, then what should we do? Is there anything we can do besides waiting for the efi's to grow up? Why don't we worry if we (00:37:20) want to increase our national savings rate? There's a very easy way to do it. Quit dis saving in the government sector. I mean if we want a higher National savings rate, we could either do it private saving or public saying right now, we got a fairly low private savings rate, but nothing different than we've had in the past but a terribly negative public savings rate. If you really wanted to increase National savings, you would vote to reduce the budget deficit with a tax increase or an expenditure reduction. And that would immediately raise the national savings rate people can speculate G if I spent $1 of tax cuts, maybe I would get an effect on private sector. I don't know we could argue father you cut the federal government budget deficit by $1. You got one dollar of additional National savings available to finance Capital formation. It's one borrow a dollar more. You don't have to borrow overseas. There's no ifs or buts that this whole talk about tax incentives for private saving is nothing more than a camouflage for a refusal to face up to the problem of financing government programs in this country Americans want the programs, but they don't want to pay for your crimes. You can blame the Congress you can blame the president, but you can look at the last public opinion poll and find the 85% of Americans are opposed to any form of tax increase. (00:38:44) It's a country that just wants to (00:38:46) consume. I don't know why but it's not a consumption binge doesn't want to finance any tax increases and it's politicians supported in that same belief very well. I would if I may just add one more Factor. I'm not sure that it's quite as cut and dried as as Barry said because but I would say this one of the disturbing Trends which goes to the issue of confidence. Is that our political system seems to be unable to reach consensus. And this wasn't really a very serious problem. We were able to muddle through the economy during the 50s and 60s and 70s when Congress and the president could basically get together on major public policy issues, but when it cut let's come to the economy of the 1980s quite frankly. I think that what you have is you have something that the founding fathers never intended which was a president and a congress who went their separate ways on major public policy issues and it is made it so difficult to come up with constructive Solutions when you're really fighting each other all the time. It's not meant to kick the president in the rear end. Although from a personal perspective. I think he substantially at fault although we in Congress share this some of the responsibilities our political system was based on consensus not on confrontation. That's what Madison talked about in The Federalist Papers. What would make America a stable society and the basic issues were talking about Coming up with reduction in spending or increase in taxes are doing the kinds of difficult things we have to do have always been done before in this country and this decade it's just far more difficult to do it. But how do you how do you return to a consensus on economic issues? How do you bring that about you need rational people to sit down together to do it. I mean that's as simple as it is, we're all human beings in this government and it takes people who basically want to preserve the system. It's primarily a free enterprise private sector can decentralized system with some government involvement where necessary to get things done and it's hard choices human beings get together and and compromise consensus. This government is based on the art of the possible and quite frankly. We've been going down the road the last eight or ten years where the it's been a very very dramatic and turn in One Direction and I don't think that the American people or the Congress have been pulled in the same direction and so it is it Wires that kind of consensus and hopefully the next president. I did States Republican or Democrat together with a Cooperative Congress and hopefully we'll have long enough to get that together and I think we will will be able to pull together again and make those consensus decisions. If we don't we're going to have serious long-term problems in America. I wanted to turn to one point that often bothers. A lot of people it is routine practice in the media to explain why the stock market goes up or down on any given day and actually we've done some of the same thing tonight and to State it as if it were the results of some scientific survey of people in the floor of the New York Stock Exchange or or something to say, well, you know the stock market closed up today because of nervousness over the Persian Gulf. I mean, how do we ever know? That investors we Rose can um in the Wall Street Journal maybe one of the not any worse the perpetrator than anyone else on this score. But how does anyone ever know really why the stock market goes up or down? (00:42:25) I always laugh at sort of the all-purpose answer when you don't know why you know at least before October 19th. If you don't know why the market declined you say profit-taking and I always wonder why when the market goes up and you don't know why people don't say profit giving but that sort of the all-purpose Solution on the new service its (00:42:43) profit taking it makes it go down but that's not what what happened on October 19th. It wasn't profit-taking it was mass hysteria, but right so what's the difference? I mean, how do we how do we know when it crosses from one to the other I guess with by the volume of the decline? Yeah. I mean, I think you don't know and you do just talk to traitors and other economists other people who know but keeping in mind that they don't really know either but you know politicians don't know any better than Then the Press knows what makes the market go down. I mean do you when you read the paper Senator murkowski and it tells you that the market went down because of concern over military spending or whatever. I do believe it. Do you have your own resources? Do you have the market ferrets out the best information available? And the media communicates that there's combination between the market the media and obviously an Insider has other information that may be more relevant more accurate and that moves out through various various sources, but I don't know that you know, that's going to get us anywhere. I think you know, this group is reflecting on our comments on the problem and analyzing whether there's anything concrete that we've discussed that we're doing about the problem, you know talk is very cheap. We spent an awful lot of time in the Congress talking. We have a tremendous problem with partisanship the realities that were going to face another presidential election. We have both houses controlled by one party and obviously another party in power in the White House. But to suggest that suddenly has a consequence of an election. We're going to have more clear thinking in a cohesive response. I think is a bit wishful thinking we there's no reason to believe that we've necessarily shown that the past their statesmanship there's a lack of it. There's always room for more of it. But when you get into this area now, if you talk about one specific thing such as the depth and if you believe that the debt is of significance to be a very real part of the economic crisis and the reason that our stock market fell and various other things and you have to reflect what's going to do about it. You can only do one or two things you can increase revenues or the other is obvious you have to reduce spending and that's where you know, the congressman and I the rest of us reflect in great debates as to What do you want what we are obliged to provide what defense capability and on and on and on I think will conclude the discussion. I want to point out. There's a reception afterwards brief reception on the third floor of Mary Graydon Center just outside room 301. Thank everybody in the audience and our panelists for being here. (00:45:48) I'm listening to an American Forum covering the crisis the media and the markets. This program is part of an occasional series from the American University in Washington DC form panelists included Barry Bosworth of the Brookings institution representative Dan Glickman a Democrat from Kansas Rose Gutfeld of the Wall Street Journal. Senator, Frank murkowski a republican from Alaska and Bill Plante of CBS News and Charles almond editor of growth stock Outlook. This program was originally recorded on November 16th 1987 for National Public Radio. I'm Judas Doherty (00:46:26) support for this program is provided by NPR member stations and the NPR news and information fund contributors include the Robert Wood Johnson foundation for coverage of Health Care issues Psychology today, a magazine devoted to the fascinating world of human nature for southern reporting the Mary Reynolds Babcock foundation and the William Bingham Foundation. This is Is NPR National Public Radio?