Zogby poll discussion
KAREN GIBBS: With the Presidential election less than 5 months away, the candidates are scrambling to figure out what's really important to voters. Despite events in Iraq and ongoing fears about terrorism, poll after poll tells us that it's still the economy.
But it's not as simple as that. We're now a nation of investors, as we know all too well. What's good for the market and what's good for the individual investor is not always the same. As part of PBS' By The People coverage, we've asked top political pollster John Zogby to find out what's on the minds of voters and investors
John, welcome.
JOHN ZOGBY: Hi, Karen.
GIBBS: Well, John, when you asked investors what would make them change their portfolio, 67 percent said personal events. What do you make of that?
ZOGBY: This is the investor next door, people like you and me. These aren't risk managers, these aren't Wall Street types. These are people that are in it for the long haul, and essentially personal things matter much more than the global or the external factors.
GIBBS: And it was very interesting that when you asked about, investors if they lost health care, 39 percent said that they would exit the stock market and look for safer investments.
ZOGBY: Absolutely. That is cataclysmic. You've got 1 in 3 voters who are afraid of losing their health benefits in the next 12 years. Losing part or all of their health care benefits is deemed the most dramatic of any of the situations that we've tested.
GIBBS: But when you suggest a really positive event, such as the capturing of Osama bin Laden, only 22 percent would be willing to increase their risk.
ZOGBY: And it's important -- and it's 1 in 5, 22 percent -- and yet the personal trumps the global in every one of these cases that we tested.
GIBBS: Among the three presidential candidates running -- Bush, Kerry and Nader -- 47 percent said that they would vote for Bush today. Does that surprise you?
ZOGBY: No, it doesn't. A couple of months ago it was Kerry by a couple of points. It's very close, but Bush has the edge among investors, but nothing he can really go to the bank with yet. Investors should be with the incumbent.
GIBBS: Is it just the incumbent, or is it that Wall Street and investors are perceived as mostly Republican?
ZOGBY: They are, and in our sample we have 3 points more Republicans who are investors than are Democrats, and that's the exact opposite of what all voters are in the universe.
GIBBS: And it's also very interesting that 43 percent say they would be better off with President Bush, while 34 percent say they'd be better off financially under Kerry. But there's a huge 23 percent that's not sure.
ZOGBY: Isn't that really interesting? More say they're better off with Bush than Kerry, yet they're voting for Bush by even more, it's at 47 percent. But the 23 percent who are not sure, that's not a good sign. It's a red flag for the incumbent.
GIBBS: Is there a way for either candidate to take advantage of that number?
ZOGBY: Well, for Bush, obviously the economy has to be perceived as doing better. It has to be perceived as doing personally better for voters. We're not there yet. Average voters don't look at the economy and economic growth in terms of billions and trillions. They look at in terms of thousands. What's it mean for me and my family and my neighborhood?
For Kerry, Kerry can take advantage of the fact that optimism about the near future is not quite there yet with a majority of voters.
GIBBS: You also have a story, a question that you asked investors. Which company would they rather invest in? A company with a strong stock market performance and poor worker relations, or mediocre stock performance and fair work relations? And a surprising 73 percent chose the latter.
 ZOGBY: This is the investor next door, and basically that includes people who are in unions, it includes people who make modest sums of income, and includes you and me, my neighbor behind the curtains next door and across the street. Basically do unto others as you would have them do unto yourself. And so essentially these voters are saying, "I care about my neighbor." A good company is the kind of company that takes care of its workers, takes care of the environment, takes care of all the other kinds of situations that we've tested in our poll.
GIBBS: One company that struggles with the issue of pleasing employees versus the demands of Wall Street is Costco. I visited this retailing giant to see why the employees are so happy.
(Video package begins)
In many ways Lyndsey Davis is just like millions of other retail employees: A college student working full time to pay her tuition. But in other ways she's very different. Lyndsey commutes 60 miles a day to work as a Costco cashier and take advantage of the company's phenomenal benefits.
(Speaking to Davis) You got benefits working part time? What did you think about that?
LYNDSEY DAVIS: Highly unusual, highly unusual.
Being a student it's hard to find jobs that allow me -- I used to manage retail, but they couldn't always offer me what I needed, as far as being a person who needs to go see the doctor if I get sick. And Costco with their benefits program allowed me that as a part-time employee and now as a full time employee.
Medical, dental, vision -- anything I need, I have it with Costco.
GIBBS: Benefits and wages also have Costco employees sticking around. The company has an employee retention rate double its closest competitor. Costco's chairman says the company is looking at a longer-term strategy for growing their franchise.
JEFF BROTMAN, Costco chairman: Well, we have a very simple formula. We pay them very well, we give them great benefits, and we have what we call an employee agreement that's written in plain English that lays out for them what their rights and their responsibilities are.
GIBBS: Wall Street seems to hold you accountable, almost punish you, for being generous to your employees in terms of benefits and the way you treat them. How do you respond to that?
BROTMAN: With respect to Wall Street, they are judged themselves on a very short-term basis, quarterly, and they only have one thing in mind, that is to raise the price of the stock and to reward them and their investors. And we don't have the luxury of that simplicity, because we have so many stakeholders. We have to, and want to be, good to our employees.
GIBBS: But it's Costco's generous benefits that have Wall Street concerned. Costco pays 92 percent of its employees' health-insurance premiums, much higher than competitors like Wal-Mart. Costco part-timers also get coverage in six months; at Wal-Mart it's two years.
All those perks have created a happy workforce, but Wall Street has extracted a price from the company, saying it's too generous with employees. Analyst Mark Miller says he thinks Costco has a strong and loyal customer base, but he's got the stock rated as an underperform and he's worried about the retailer's expenses.
MARK MILLER, William Blair & Co.: I think that Costco needs to have its other expenses as trim as possible. I would say that their ability to manage costs as well as some other retailers like Wal-Mart (is) still unproven. The challenge is to deliver higher margins and a higher stock price for investors.
(Note: William Blair & Co. has a financial relationship with Costco)
GIBBS: What do you say to an analyst that says that you would rather be a member of Costco than a shareholder?
JAMES SINEGAL, CEO, Costco: I guess I would say that if you're taking care of your customers and you're taking care of your employees, you can't be that far off the mark, and it's going to generate a profitable business for you.
(video package ends
GIBBS: Well, John, using Costco as an example, it seems investors are saying, "Do as I say, not as I do."
ZOGBY: Yeah, it really does. There are so many variables that are involved in making investments. You know, half of the investors out there tell us they do it themselves, but we don't know what kind of due diligence they make. And then the other half tell us that they use a financial planner or a broker, and to be sure the broker or the planner's responsibility is to find the most profitable earnings for the investor, and that's why the disconnect. But it really is intriguing that Wall Street and Main Street aren't necessarily on the same page in terms of values.
GIBBS: John, another issue that has really grabbed the attention of Main Street is offshoring, the loss of jobs to overseas. But the Bureau of Labor Statistics says that only 2 percent have lost jobs due to off-shoring. What does your poll find?
ZOGBY: We find 8 percent of investors who say that they've lost jobs due to offshoring. The reality is that we've tracked about 220,000 to 225,000 jobs that have been offshored, and yet these are white collar jobs. This is new. These aren't manufacturing jobs that we've been accustomed to.
What's happened is what I call a PCB effect. It only takes a few drops of PCB to contaminate an entire river. In this instance, those 220,000 jobs have caused a scare among white collar workers and among high-income earners, those over $75,000 a year or more. It's a big issue. Eight percent feel that way. This is 8 percent of investors. Remember anything that moves a few thousand votes one way or another in Ohio or Missouri or West Virginia -- wow; that can change the course of this election.
GIBBS: You've done pioneering work on the investor class. Who are they, and why has this class declined?
ZOGBY: That's a group that says "I'm a member of the investor class," regardless of their income, whether or not they belong to a union, regardless of the size of their portfolio. A few years ago, almost half of all voters said "I'm a member of the investor class." That was good news for Republicans. That was a group of people then, almost half, who were saying "I'm looking to the future, the present is good, I'm looking to the future, I'm part of this opportunity society."
The fact that it has declined so dramatically, down to below 30 percent, suggests that there is some bad news for Republicans. The bubble seems to have burst. One in four people who said "I used to be a member of the investor class, but I'm not today" told us they changed their definition because the bubble burst. Another quarter, 23 percent, told us that they lost their 401 (k) or a significant portion of the value of their investments. So one of the things that we're going to be tracking monthly here at Wall $treet Week with FORTUNE is this self-identified investor class.
If we see those who say "I'm a member of the investor class" start to climb back up, start seeing some good news for President Bush and for Republicans. If we see that number go down, bad news for the Republicans.
GIBBS: John Zogby, thanks for joining us.
ZOGBY: Thank you, Karen.
Economic advisers disagree
COLVIN: How do George Bush and John Kerry plan to win the support of America's investor class and other crucial undecided voters? And will Americans believe either one of them when their views of the economy clash so strongly that they seem to be talking about different countries?
Roger Altman is an economic adviser to the Kerry campaign, formerly a deputy Treasury secretary under President Clinton, before that an investment banker, as he is today as well. He joins us from New York.
Tim Adams is economic adviser to the Bush campaign, formerly Treasury Department chief of staff under President Bush.
Mr. Adams, as John Zogby said in this poll we've conducted, investors expect to do better under a Bush presidency than under a Kerry presidency by a hefty margin, good news for the president, but he also said 23 percent say they're not sure, and he thinks that number is troublingly large for any incumbent. Why aren't investors more confident in President Bush, and can the campaign do anything about it?
ADAMS: Well, investors are growing more confident every day. We saw just today actually consumer sentiment up, and the reason why it was up is because people are feeling much better about their employment prospects. But you have to remember the extraordinary confluence of events that this economy has suffered through over the last three years, I think is unmatched in business cycle history, and that is a stock market bubble that burst in 2000, corporate scandals, the war on terror, 9/11, recently a gas spike. And so those things have chilling effect, but despite those things, the economy is roaring and consumer sentiment is coming back.
COLVIN: Mr. Altman, the fact remains that investors do say they expect to do better under a Bush presidency than under a Kerry presidency. Is that just an unpleasant fact of life for the Kerry campaign, or can the campaign do anything about that?
 ALTMAN: Well, first of all, investors are more likely to be Republican, as Mr. Zogby said, than to be Democrat, so one would expect that type of attitude. But secondly, of course Senator Kerry expects to win support from this group and to a greater degree than he now is. After all, we're very early in this campaign. We haven't had the vice-presidential selection, we haven't had the convention. We haven't had the debates, any of those things. So those all lie ahead and those are opportunities.
COLVIN: Well, Mr. Adams, in some of his TV ads, President Bush is clearly trying to get himself out of a hole on the economy, because the fact is a lot of voters still seem to think that the economy isn't doing well.
(Video clip begins)
There are some people who can't find a job yet, and that troubles me. When Americans have more money to save, to spend or invest because of the tax cuts we've passed, the whole economy grows, the job base grows, and somebody who is looking for work will be more likely to find a job.
(Video clip ends)
COLVIN: Now, in fact the economy is doing very well. If you look at the numbers, it's growing strongly, unemployment is low and falling, inflation is still very low, job growth has come back very strongly. By any conventional analysis, President Bush ought to have a huge lead in the polls. Instead, it's neck and neck. Why doesn't he get any credit from voters for the economy?
 ADAMS: Well, he is getting more credit. In fact, we just saw a CNN Gallup poll yesterday that saw a 14-point turnaround in the voter support for the president's handling of the economy. In fact, the levels are the same as Ronald Reagan had at this time in 1984.
But remember, again, the confluence of extraordinary factors that this economy has suffered through over the last three years, including the last three months in which newspapers have had an endless supply of front page news coming from Iraq and other geopolitical issues, which have had something of a negative affect on consumers, but it's getting better and it's getting better every single day.
COLVIN: Well, Mr. Altman, that goes to one of the key parts of Senator Kerry's campaign. In some of his TV ads, he has really been pounding President Bush's economic record and saying he'd do better. We have an excerpt there.
(Video clip begins)
TV AD: While jobs are leaving our country in record numbers, George Bush says sending jobs overseas makes sense for America. His top economic advisors say moving American jobs to low cost countries is a plus for the U.S. John Kerry has proposed a different economic plan that encourages companies to keep jobs here. It's part of a detailed economic agenda to create 10 million jobs.
COLVIN: Now in fact job growth has been so strong over the past nine months that at that rate the economy would create 15 million new jobs over eight years. Why does Senator Kerry think we need a new plan for job creation?
ALTMAN: Well, first of all, like every American, I want to see more new jobs. Senator Kerry wants to see more new jobs. We welcome this latest positive news and cheer it on. Let's have more of it. But the issue here is the overall Bush record -- let me emphasize "overall" -- and the truth is, it isn't terribly good.
And Mr. Adams correctly points out that the economy is improving, but that's a little bit like a National Football League team which plays a 16-game season saying, "Well, we lost the first 12 games, we just won the last two, so we're having a great year." It's just not the way Americans assess it. The issue is the overall Bush record.
So on jobs, we've looked at every recovery since the end of the Second World War. According to the National Bureau of Economic Research, we're now 30 months into this recovery, so we've looked at each 30-month recovery period since the end of the Second World War, and two things jump out. One is that this is the second-slowest growth rate in a recovery over those 60 years. The second is that historically over 30 months in recovery periods the economy has generated 4.5 million net new jobs. To date on Mr. Bush's watch, we're down 1.9 million private sector jobs, so about a 6.5 million job shortfall, 6.5 million jobs short. That's the record to date.
Now, yes, the last few months have been better, but the issue is the overall record, and Senator Kerry does not think, and he's correct in this, that it's consistent with history. And by the way, it's at great odds with the Clinton record, which created 23.5 million over eight years. By the way, under President Clinton we never had a single year in which we didn't have net job growth. And so this is just not a good record.
COLVIN: Well, I think every economist would probably agree that it has been very unusual, in fact, unprecedented, to have no job growth for such a long time after an economic recovery has begun. But to what extent can you lay the blame on President Bush's actions?
ALTMAN: Well, I think we live in a society in America where if the team wins a lot, the coach is a hero, and if the team consistently loses, the coach is out. And as Lee Iacocca said yesterday in endorsing Senator Kerry, we need a new CEO in this country.
So the issue, and this is the way American elections always work, is do Americans feel better about the economic stewardship of Mr. Bush, or do they think it's time for a change? Senator Kerry thinks it's time for a change and that we can do better. After all, we did much better than this during the eight Clinton years, not two years or four years or six years, all eight Clinton years we did better than any year Mr. Bush has had, every time. And the reason is we had a sound set of policies which led to that unprecedented prosperity. Mr. Bush has decided to depart from those and had very dramatically departed from those, as it relates to budget deficits, as it relates to job growth, and so on. And Senator Kerry is proposing a return to those very basic, very American policies that led to such economic prosperity in the '90s.
And if I can add one other thing, Mr. Adams is saying, (during President Bush's) term the confluence of events have made it so difficult for this economy to recover. And some of them of course were unique -- especially 9/11 -- but I'm referring to the period of time, the performance since the recovery started, so that's post-9/11, that's post the tech bubble, that's post the corporate scandals. So for them to say, "Gosh, it's not our fault, we don't have anything to do with it," that's a bit disingenuous. And to say that, "Of course we chose to conduct our foreign policy in Iraq as we have, but don't blame us for any impacts of that on the economy," that's disingenuous, so I just don't accept the idea that these 19 things happened and it's not their fault and so we shouldn't blame them. I just don't buy it, don't think the American people will.
COLVIN: Mr. Adams, he says you're picking and choosing what to take credit for and take blame for. What do you say?
xADAMS: Well, first of all, let's remember the 1990s. It was December of 1996 when Alan Greenspan warned of the irrational exuberance. That irrational exuberance produced the largest financial bubble since the 1920s, and it's that bubble, the bursting of that bubble in 2000, the trillions of dollars of wealth that was lost before George Bush was ever sworn into office started this period of time that really has had a chilling effect.
The president took immediate action and put in place pro-growth policies that are working. You're right, this is not like any other recession we've seen before or recovery. It is extraordinary. I believe that academics and economists and economic historians will be studying this for years. But given what we have gone through, the record that we have seen over the past six months or nine months or four months is truly extraordinary, and the voters understand that.
COLVIN: Let's move to one of the big, big issues in this campaign. The poll that we've conducted, and frankly every other poll I've seen, suggests that the number one financial worry of Americans, and in some polls the number one worry of any kind, is the cost of health care. President Bush has already presided over record federal budget deficits. How is he going to address that worry about health care costs without making the deficit even worse?
ADAMS: First of all, you have to remember that health care costs have been rising for a very long period of time. It is not a recent phenomenon.
COLVIN: It's not. The concern, however, is larger than ever before.
ADAMS: That is true. The President has put in place a number of proposals to deal with rising health care costs. In fact, we're seeing the rise in health care costs abate a bit over the last year. The President believes there is no magic bullet to this problem, that it takes a complex and comprehensive set of proposals which we've put in place. Health care savings accounts, we've proposed association health plans, we need medical malpractice reform in this country, generic drug reform, and of course the most sweeping set of proposals in Medicare since its inception. Forty million seniors will now have a drug benefit, and they didn't have that before.
COLVIN: Mr. Altman, Senator Kerry has proposed a larger federal role in health care, but any such program, whatever it would be, of course has the potential to be the budget buster of all time. How can he reassure people on health care costs without scaring them when it comes to budgets and taxes?
ALTMAN: Senator Kerry has put forward a very comprehensive health care plan. I don't think much debate, there is much debate as to whether or not it's a more audacious and sweeping plan than Mr. Bush has had. I don't even think the Bush people would debate that.
He's proposed to pay for it by rolling back the marginal tax rates on, income tax rates on those earning $200,000 a year or more. That's it. Those earning $200,000 a year or more, and roll them back to the rates which prevailed when Mr. Clinton left office. That affects 2 percent of taxpayers. And he's proposed to use the proceeds from that to pay for his health care plan and for deficit reduction. And Senator Kerry believes that as the fall comes on and the voters pay more attention to the economy and more attention to the election and the choices between having those Americans earning $200,000 a year see their taxes return to the level when Mr. Clinton took office in exchange for real health care reform and deficit reduction, that they will choose his approach.
COLVIN: These are contentious issues, but we're going to have to stop it there. Roger Altman, Tim Adams, thanks for your views.
ALTMAN: Thank you.
ADAMS: Thank you.
Next Week
COLVIN: Next week we're going show you how some of the more ingenious investment scams work, so you won't become a victim. And with an interest hike expected Wednesday, we'll update our Greenspan Proof portfolio.
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