Press Briefing by Secretary of Treasury Paul O'Neill and Secretary of Commerce Don Evans

Student Life Center

Baylor University

Waco, Texas

2:35 P.M. CDT

MS. BUCHAN: Hello again. We're ready to begin our next off-camera, on-the-record briefing with Secretary of the Treasury Paul O'Neill, and Secretary of Commerce Don Evans.

SECRETARY O'NEILL: I understand no cameras, but we're very happy to take any questions you might have.

I'd just do one piece of characterization. I thought this was a really high-energy meeting. The session that I chaired was full of people who obviously had spent a lot of time thinking about how to express themselves succinctly and directly. They were respectful of each other's time. And I think the reporter for our session, Phyllis Hill Slater, I hope you all got to see her. She did a great job of representing what went on in our panel. And then I thought the President's engagement with the people was first rate.

And let me have Secretary Evans say a few words and then we'll do your questions.

SECRETARY EVANS: I would just echo what Secretary O'Neill said. I thought it was an extraordinary morning. I was in the corporate responsibility section. The President did stop by. There was a lot of engagement.

There was, again, as Secretary O'Neill said, I think the people that were here obviously spent a lot of time thinking about what it is they would say and how they would say it and what was on their heart. And I think it was a very constructive session that we will continue to build on, just like we've been trying to build on the strong foundation of this economy for the last 18 months. This is another step, this is another part of the process of how you continue to strengthen the economy. This isn't a one -- you know, this was a very important day. It's not the only day. But we will gain a lot from this.

We will review all of the comments that were made during the course of the morning. I know the President is looking very much forward to doing that, since he was not able to attend every session. But he will look at the reports from every session and we will no doubt learn a lot and gain a lot from this very constructive day.

Questions?

Q: Secretary O'Neill, I don't know if you saw, but the stock market and the dollar both declined after the Fed's announcement this afternoon, which suggests that people aren't as optimistic as you seem to be about the -- about the outlook for the economy.

I wonder, do you think -- why do you think there's such a gap in the administration's view and the administration's forecast, and what we're seeing from the central bank and investors?

SECRETARY O'NEILL: I haven't seen what the Fed said this afternoon. And I think that, as I understand, they issued one of their usual reports, which indicates whether they're neutral or leaning on the positive or minus sign side of the equation. I didn't see anything indicating that they had knocked down what I believe was their forecast of the economy, running someplace in the 3 percent to 3.5 percent range. I think that's the last official testimony of Chairman Greenspan, which is consistent with what we've been seeing and what we continue to say.

In our session this morning, we heard some differences of opinion about growth. But we heard some very positive things from small businesspeople, including people who sell automobiles for a living to the chairman of International Paper, who talked about seeing improvement in his worldwide market the last couple of months, to hearing a fellow from -- the CEO from Albertsons saying that he was talking to his customers on a regular basis and that they were concerned and they were talking to him about corporate responsibility and the uncertainty that all of that created for them. So we did hear a variety of views.

But if I were to cast a net over it, I would say it was generally -- the tone of what we were told today is consistent with a continuation of real growth, which we've now had for three quarters in a row. If you look at the second quarter of growth statistics, you see that about 1.8 percent of GDP was taken away by the level of imports that we have in the second quarter. Most of us expect that the relationship between imports and exports will rebalance in the third quarter and that we will see a higher rate of real growth in the third quarter. So I think that we're moving along in a way that we expect. It's kind of a sawtooth fashion, but not unexampled in recovery periods.

Q: Could you please talk about the impact of the American Airlines layoffs announced today?

SECRETARY EVANS: Any time -- as the President says, any time there's one person that wants a job, needs a job and does not have a job, we're not going to rest, we're not going to relax until we grow this economy to -- so that that person will be employed, that person will have a job.

The airline industry is going through a very difficult period right now. It was going through a somewhat tough period before September 11th. And September 11th obviously dealt a very serious blow to that industry, which -- and in some part, it has recovered from, but they have costs that have gone up rather dramatically because of not only the increased security that now must be dealt with -- some of those costs in indirect ways are borne by the airline industry -- but also in a very direct way, just terrorism insurance that they now have to carry has gone up some 12- or 14-fold.

And so their cost structure has changed quite significantly. And because of the somewhat lower passenger miles, or somewhat lower traffic, they have been unable to pass on these additional costs to their passengers.

So look, you've just got an industry that's going through a very tough period right now. And as you know, USAir had applied for a loan, and the government indicated that that might be available if they met certain conditions, which have not been met yet. But they obviously were going through some negotiations with their unions and getting some concessions. And that's what you do when you go through difficult periods. Everybody has to sit down and see where there's opportunity to have some give and take and cut costs and figure out a way to survive this tough period and being to regrow again.

And that's what this -- the airline industry will be going through. My heart goes out to those 7,000 employees that were laid off at American Airlines. As part of this stimulus bill late last fall, we did increase unemployment insurance, and so there are a few other safety net benefits out there today that weren't out there nine months ago or a year ago. But still, that's not what that person wants. That person wants a job, and that's what this President says, we're going to keep fighting to grow this economy until that individual that wants a job has a job.

Q: Sir, to what extent will these layoffs have an impact on the rest of the economy and the recovery?

SECRETARY EVANS: Well, the economy -- we continue to -- we continue to add jobs to this economy, not in large numbers, but we're adding jobs. And so, no, I think as Secretary O'Neill said, I think most, including the Federal Reserve are talking about growth this year in the 3.25 to 3.5 percent kind of range. That should translate into adding jobs. And we're confident it will translate into adding jobs -- adding net jobs.

Q: What do you all think of Charles Schwab's idea about investment losses? It was in your session, right, Secretary Evans?

SECRETARY EVANS: No, it was not in my session. Are you talking about Charles Schwab, Chuck Schawb?

Q: Yes.

SECRETARY EVANS: I think you may be -- where he may be on capital losses, he's saying write those off at a higher level or all --

Q: 3,000 to 20,000.

SECRETARY EVANS: It's one of the many ideas that we'll take home and think about and discuss and make a decision.

SECRETARY O'NEILL: In that same vein, we heard lots of really challenging, interesting ideas today. We had several people in my session tell us that not only should we make the tax cuts permanent, but we ought to accelerate the ones that are delayed. One thing I never heard from a single person today was that we ought to raise taxes.

Q: One quick question. Today I heard several of the sessions, and I heard the President got to hear a lot of the participants say, I agree with you on that, I think you've got a great idea, and they sort of launched into a thing, why don't you repeal the death tax or some of the other policy priorities for the Bush administration. But I didn't hear anybody really say anything where the President or you came out and said, no, you're wrong. Is that a coincidence?

SECRETARY O'NEILL: Well, you know, I think people were polite, which is nice. But I heard people have differences of opinion about what ought to be done. They were just polite about it. So it's not to give a broad-banded everything-is-perfect endorsement from the participants. I certainly didn't get that sense from the people that were in my session, that they have strong ideas, they have strong concerns. I think they share the concern of the President that they would like to see a more rapid growth because, you know, we heard in my session from employers who are concerned about being able to sustain their employment.

I heard from -- over lunch from the woman who represents small and medium-sized women -- businesses headed by women, a concern that she has about how they sustain themselves. And she told me a story about one of her members having to go to part work weeks. And she had some ideas she shared with me about things that she thought we ought to consider.

And so I think, you know, we got a variety of expressions of views and a sense of what we ought to be doing. But again, I would say to you because I thought it was kind of striking, and no one said we should raise taxes, in my hearing at least. And no one said we should -- we should cut back on spending for military purposes or for homeland security.

You know so, frankly, it's not a surprise to me, because I think this group was very representative of people in the American society. One of the two speakers that I asked to kick off my session was the head of the Carpenters and Joiners Union, and I was really interested in hearing his views, because building homes and remodeling homes is an important part of our economy. And he went out of his way to say how important it was to him and to people who are carpenters and joiners to get the Congress to pass the terrorist risk insurance. We heard it over and over today from people who labor for a living or represent people who labor for a living. The Congress needs to act so we can build projects that have been waiting. The President said $8 billion worth of construction is going begging because we haven't been able to get the Congress to act on terrorist risk insurance.

So I thought we had a pretty fulsome discussion, and again think people were clear in what they said, they were polite about it.

END 2:50 P.M. CDT