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» Zogby interview » Of economics and elections » Farr interview

Zogby interview

KAREN GIBBS: The gloves are off and the fight for the White House is in full swing. The latest polling numbers from John Zogby, taken at the close of the Republican National Convention, show President Bush gaining momentum. In fact, Bush is enjoying a double-digit lead over Kerry among the self-identified investor class votes. John Zogby joins us with the meat and potatoes of his latest poll. John, you're on record as saying this is Kerry's race to lose. Did Bush succeed in snatching victory out of Kerry's hands?

JOHN ZOGBY: Oh, no. Victory is way too soon for President Bush. He had a good week, a good convention, brought his Republican ducks all in a row. He now for the first time in my poll is getting the support of 90 percent of Republicans. But there are still undecideds out there, Karen, 5 percent of the electorate, and they weren't watching.

GIBBS: Why weren't they watching?

ZOGBY: Well, they tell us that they're interested, they're likely voters. They have other things on their minds. They will start to pay attention some said after Labor Day, others for the most part said after the debates. There will still be a considerable number who won't make up their minds until the last few days.

GIBBS: Was Bush successful in making this election all about terrorism and national security? Before you answer that, let's listen to what he had to say.

(video clip begins)

PRESIDENT BUSH: This moment in the life of our country will be remembered. Generations will know if we kept our faith and kept our word. Generations will know if we seized this moment, and used it to build a future of safety and peace. The freedom of many, and the future security of our nation, now depend on us. And tonight, my fellow Americans, I ask you to stand with me.

(video clip ends)

GIBBS: What about that statement, John?

ZOGBY: He did a good job this week of focusing on his strengths, decisiveness, leadership, handling the war on terrorism. That will be his theme throughout. However, there is an opponent who represents the other half of the country who will be talking about the economy and talking about health care, about the execution of the war in Iraq. The battle is now enjoined by two equal forces.

GIBBS: Well, what about those big issues such as the economy and health care?

ZOGBY: Those are the top issues in the country. They remain to be. Number one all year has been the economy, and in our last poll we found health care actually is the number three issue, actually slightly ahead of the war in Iraq. And so the top four issues, to repeat, are the economy -- score one for Kerry; the war on terrorism -- score big for Bush; healthcare -- score again for Kerry; and on the war in Iraq, an even split, slight favorite Kerry.

GIBBS: Do you think Bush's post-convention bounce will last?

ZOGBY: No. To be perfectly honest with you, it was enough of a bounce to thrust him in the lead where he had been essentially down, but frankly I think that he'll bask in this for about 48 to 72 hours, and then I think there's a fundamental equilibrium in this country. You'll see Kerry out in the hustings, you'll see Kerry trying to regain some of the soft support that he lost over the last couple of weeks. And you'll see two co-equal forces battling it out over the next couple of months.

GIBBS: Can you talk a little bit about the bounce? Where did Bush start, and where is he sitting now?

ZOGBY: Two and a half weeks ago, he was down 50 to 43 against Kerry, and so he bounced up to 46. Where did he bounce? Most importantly: Republicans. He solidified them. Secondly, for the first time in my polling this year, Bush actually leads among independents.

Also a group that we have talked about several times this year, self-identified investors, not as many of them as there used to be, but those self-identified investors have to go with Bush. He has to lead among them by double digits in order to win this race. We saw him succeed this week. He leads Senator Kerry by 10, 12 points now among self-identified investors. He had actually ceded quite a few of that group over to Kerry in late July and August.

GIBBS: Who are these self-identified investors? Is this class growing?

ZOGBY: Actually they were growing, '97, '98, all the way up into early 2002, and then by mid-2002 we started to see a decline. So whereas they were about a half of the total electorate, they had actually gone down to 29 percent. Today you'll see that they are roughly about 1 in 3 of the total electorate.

GIBBS: And the undecided group, is that growing?

ZOGBY: It really is not. Our poll yesterday shows 9 percent undecided, but I need to explain that. Kerry lost points from last poll until now. Whatever he loses in points, that goes into the undecided column. Whenever George W. Bush loses some points from his total, it goes over into the undecided column. Where we sit right now, Karen, there are 5 percent hardcore undecideds. The rest after that are partisan, soft partisans one way or another.

GIBBS: That doesn't seem to leave much wiggle room for either candidate.

ZOGBY: There is barely any wiggle room. Gone are the days, at least for this year, where there is 15, 18 percent undecided at this point in time and another 15 or 20 percent who are soft. That's wiggle room. This now is all about getting out the base and then ultimately during the debates, and in the last week appealing to that last small rung of undecided voters who will tip one way or the other at the last minute.

GIBBS: What do you think will tip those undecided voters?

ZOGBY: It could be anything. It could be a major event or a major mistake. It certainly could be performances in debates. You have two distinctive characters. The more cerebral, one would argue maybe cold, personality of John Kerry, the very affable, congenial President, maybe not so heavy in terms of verbiage, but two completely different guys. Demeanor will have a lot to do with it, whether American undecideds feel they can bond with one or the other. If the debates are focused on issues, then score big for Kerry. If the debate is focused on congeniality, the war on terrorism, that sort of thing, score big for the President. Way too early to tell what's going to happen here.

GIBBS: With less than two months to go to the election, John, what's your prediction?

ZOGBY: I still think it's John Kerry's to lose, because behind the numbers that we saw coming out of the convention, the President still had a negative job performance rating, negative wrong direction as far as the country was concerned, and lastly a negative re-elect. There's still slightly more who say that it's time for someone new than say that George W. Bush deserves to be reelected. So his barometric readings are better today than they were a few weeks ago, but they're not home free yet.

GIBBS: John Zogby, thanks for joining us.

Of economics and elections

GEOFF COLVIN: Well as John Zogby says, the voters consistently say that as far as they're concerned it's not about Iraq, it's about jobs and the economy. But with the U.S. still a million jobs short of where it was when President Bush took office, did he offer a compelling defense of his record in his acceptance speech? On the other hand, with jobs increasing and unemployment now at its lowest level in three years, can John Kerry still play this issue to his advantage?

Mickey Kantor was Secretary of Commerce and the U.S. Trade Representative during the Clinton administration, also the Clinton campaign chairman in 1992. He's advising the Kerry campaign and joins us from campaign headquarters in Washington.

Todd Buchholz was an economic advisor to both Presidents Bush and is the author of Bringing the Jobs Home. Mickey, let's start with the news. The new jobs report is decent. Job growth good. The weak job growth of previous months revised upward. The unemployment rate down. This is all good news for President Bush. That means it's bad news for John Kerry. Isn't it getting harder and harder for him to contend that the U.S. is in economic distress?

MICKEY KANTOR: Not at all. In fact, it's bad news for the American people. In the last three months, there have only been net 312,000 jobs created. We need to create 150,000 jobs a month. That means that would be 450,000. We are light about 130,000 jobs. That means the job picture has gotten worse. More importantly, this is the most tepid recovery in 50 years from a recession. And if you add to that the fact the jobs being created pay on the average about $9,000 less per industry than the jobs that we lost, we've got real problems. The reason the unemployment number went down, which I think Todd will confirm for me, is the fact that people have quit looking for work. That's why the job number dropped to 5.4 percent.

COLVIN: Todd, the country is still down a million jobs since the President took office. That's the worst record since Herbert Hoover. How can he claim he's been anything other than terrible for the U.S. worker?

TODD BUCHHOLZ: Well, first of all, the unemployment rate's lower than it was during the average of the '70s, the '80s, and even the '90s under the Clinton administration. And you know what else? I'd say if John Kerry were not threatening to raise taxes, to repeal the dividend tax cut, the stock market would be higher and confidence would be even higher as well. The other thing John Kerry is doing is threatening to undo trade agreements, including some of those negotiated by Mickey Kantor.

COLVIN: Well, now look, in one poll, just to get the importance of this issue, in one poll 32 percent of those polled said the economy and jobs were their top issue. Only 18 percent said Iraq, just 4 percent said terrorism. So let's listen to what President Bush had to say, some of what he had to say about his economic agenda in his acceptance speech.

(video clip begins)

PRESIDENT BUSH: Many of our most-fundamental systems -- the tax code, health coverage, pension plans, worker training -- were created for the world of yesterday, not tomorrow. We will transform these systems so that all citizens are equipped, prepared -- and thus truly free -- to make your own choices and pursue your own dreams.

(video clip ends)

COLVIN: And he offered some details after that. But, Todd, in light of how important voters think this issue is, did he offer nearly enough of an economic agenda?

BUCHHOLZ: Oh, I think he did. In my book Bringing the Jobs Home I asked the question, or I present this, imagine you're applying for work and you're wearing a sign around your neck that says "I'm really expensive and I don't know very much." That's the plight of the American worker. We've got an education system that needs dramatic reform. Our schools are like Ford Pintos from the 1970s: underpowered, under performing, and under threat from foreigners. We've got a litigation system that robs 2 million jobs from the U.S. economy. We've got an immigration system that needs serious reform. And what President Bush wants to do is push aside these obstacles so American workers have a chance to compete fairly, and those obstacles primarily are put there by special interest groups, primarily by special interest groups that are behind John Kerry and the Democratic Party, including trial lawyers, teachers unions, and other groups such as that.

COLVIN: Mickey Kantor, John Kerry says he has a plan to create 10 million jobs over four years. Is there anything truly that that president or any other president can do to create that many jobs?

KANTOR: Of course there is. And of course the President of the United States last night didn't mention any of them, or barely mentioned jobs. It was astonishing. We're talking about losing a million jobs. We're going to have the first president to lose jobs in a four-year term since Herbert Hoover, and he doesn't mention it. Let's start with deficit. Not a mention about the budget deficit, which is the largest in American history, which is driving private capital out of the markets, which means we don't have enough investment to create jobs. That's number one.

Number two, we have a tax cut that went to the wealthy, not to the middle class, not to the poor in our country. We did nothing to stimulate this economy in a way that we should. And now that tax cut is hurting us because now we have the $422 billion deficit.

Number three, nothing in there about health care costs, which are driving jobs overseas, which Todd will tell you. American businesses leave in the main because health care costs have gone so high in this country. The President has no plan for that. John Kerry does.

Number four, nothing about energy independence. We've got to do something with conservation, something with alternative sources, something with more production here at home without spoiling our environment as this administration would want to do in many cases, and we've got to move forward. This president has no plan. John Kerry has a real plan. We have got to do something about change. If we don't change, we're going to continue to lose jobs, continue to be less competitive. And let me say something about what Todd said. I know he didn't mean this. American workers are the hardest workers in the world. They can compete if given plans, programs and the energy from the White House to go forward, and that's not happening.

BUCHHOLZ: But they can't compete if they're confronting high taxes, if they're confronting lawsuits, frivolous lawsuits that push jobs offshore. I mean the fact is John Kerry, I will grant you, does have a dynamic program, but it's dynamic because it's on all sides of the equation. He's voted for every free trade agreement, and yet now in his campaign he's pandering to unions and saying he wants to revisit all of that. He says he likes lower taxes for corporations, and yet he's proposing higher taxes for individuals. There's nothing new here except his ability to be on all sides of the map, and that map does not point to prosperity.

KANTOR: The only individuals that he is going to rescind the tax cut are those in the top one percent, many of whom make over a million dollars a year. I think they can afford to sacrifice when we have a war going on in Afghanistan, an unfortunate war in Iraq, which is being badly run, in which we are sacrificing young American men and women because of this president's miscalculation, as this president called it, miscalculation. It was his word, not anybody else's word. What we need to do is make sure we make the tax code fair, we lower taxes for the middle class, and we roll back the taxes for those who are the wealthiest, who need to sacrifice, who can afford to help pay for this adventure in Iraq and for what we need to do in Afghanistan and the war on terror.

COLVIN: Todd, let me ask you about something that even some Republicans are angry with the President about. The federal deficit is at a record level. In addition, spending, especially discretionary government spending, has increased at a very rapid rate. He has even done some protectionist things, imposing tariffs on steel and lumber. What kind of a Republican is that?

BUCHHOLZ: Well, I was against the tariffs on lumber and steel, and the President happily rescinded on steel. So I agree, as the President admitted last night, he's got some flaws, he's got some blemishes, and I would freely admit that. At the same time, you have to recognize that a wartime president is spending more money on defense, and at the same time in order to keep coalitions, finds it a little bit more difficult to get a coalition in a narrowly divided Congress to cut spending. The President recognizes he has to do that, and I agree much more needs to be done. I'd also point out, though, that if the deficit were as disastrous an issue as Mr. Kantor and the Democrats point out, then interest rates would not be at unbelievable lows. The homeownership rate in the U.S. is approaching 70 percent because interest rates are at the most attractive level since, oh, since the Eisenhower administration. If the deficit were so big a problem, the bond market would be in a panic, and interest rates on car loans would not be zero percent, but would be nine or 10 percent. So that tells us there's a lot of political PR puffery in complaints and hand wringing about the deficit and not economic reality.

COLVIN: Let me ask both of you a political question. With less than nine weeks to go before the election, does it really matter what either candidate says about the economy? Or is it entirely a matter of how the voters feel about the economy? Mickey?

KANTOR: Well, it's a combination of both. What the voters feel though is the most important. Let's look at a typical middle class family. They've almost gotten no tax cut, about an average of $300, and their incomes have gone down in 3 ½ years an average of $1,500 per family. And add to that they're paying 50 percent more in health care, much more in college costs, much more for gasoline, much more in state and local taxes. They're being squeezed at both ends. And the fact is these middle class folks are the ones also threatened with their jobs. And let me just add one thing. Their jobs are threatened, and they're the ones whose sons and daughters, husbands and wives, brothers and sisters are fighting for us in Iraq and Afghanistan. They're the ones we ought to be concerned about, not those at the upper end, the top one percent that this administration tends to want to help.

COLVIN: Todd, you can cite, one can cite an awful lot of good economic news. The polls continue to suggest that people feel bad about the economy. Is there anything you think the President can do about that?

BUCHHOLZ: Look, consumer confidence is actually quite high. Business confidence, the purchasing managers index, both for manufacturing and for services, are at very highs. Let's also remember a little history. Mr. Bush inherited a steep recession, a market meltdown, from President Clinton and Vice President Gore. On top of that, of course September 11th took place. And at that point, Democratic pundits, economists and strategists were warning of a Japanese style depression. The fact is the American people demonstrated unbelievable confidence, unbelievable composure. They kept buying automobiles. They kept buying homes. So for all the polls that say people don't feel good about the economy, I think we also have to look at the reality, the cars being purchased, the homes they live in, and the lives they are leading, and the composure that they demonstrate despite all the Chicken Littles that the Democratic Party can send out to go clucking.

COLVIN: These are contentious issues, but we've got to stop there, guys. So thanks very much to Mickey Kantor and Todd Buchholz.

BUCHHOLZ: Thanks. Appreciate it.

KANTOR: Thank you.

Farr interview

GIBBS: Wall $treet Week with FORTUNE contributor Michael Farr joins us now with an investor perspective. Hi, Michael.

MICHAEL FARR: Hi, Karen.

GIBBS: We've heard a lot of noise this week. Should investors be reacting or responding to any of it?

FARR: Yes.

GIBBS: How?

FARR: I think they ought to respond by covering their ears and turning away from the radios and televisions and all of the noise. You know the political noise that we're hearing doesn't, will not, I don't think, have any great impact on the markets. Yes, some stocks do perform better under a Democratic administration versus a Republican administration. But bottom line, the fundamentals are what's going to drive, is what's going to drive stock prices. The economy's improving. We are adding jobs. This week's job data were very good. So as these fundamental numbers get better, earnings numbers are improving, things are coming still on an upward bias, and long-term, patient investors can still make money.

GIBBS: You do a lot of research and talk to a lot of people. What sectors are poised to advance regardless of who's President?

FARR: I think several sectors, probably the broad market in general. The ones I guess I don't like -- I shouldn't start this way -- but oil, energy, the ones that have been doing so well, those commodity-sensitive stocks, I think have had a pretty good run and I would look elsewhere. Education stocks, both candidates are saying they support education, even though not a lot of federal dollars go to education. Some of those companies have dropped significantly because of regulatory problems. They've sort of been bad, if you will. But the whole sector's gone down, which has made some of them look pretty attractive.

Education Management Corporation, EDMC, it's around $29 a share, 22, 23 times next year's estimates, growing earnings at around 22 or 23 percent per year. That's a relatively inexpensive company. Financial services I think will do well sort of no matter what. Maybe a Fannie Mae and a Freddie Mac do better under a Kerry administration. He's been sort of soft talking both of those. But by and large, you get a Bank of America at 12 times earnings, growing those earnings at 12 percent with a 3, 4 percent dividend, that's a cheap stock I think and broadly diversified.

GIBBS: Even in a rising interest rate environment, Michael?

FARR: Yes, because in a rising interest rate environment, the interest rate environment is going to be rising because there's expansion, because there's something inflationary, because there are more buyers. Bank of America has investment banking, they can do new stock issues, they can do mergers and acquisitions, and they're well diversified. So, yes, I think even in a rising rate environment they will do well.

GIBBS: What about health care? That's another hot-button issue.

FARR: Hot-button issue. Probably going to do better under a Bush administration than a Kerry administration. Kerry has even talked about perhaps supporting a re-importation of drugs from Canada, and that would be bad for the big pharmaceuticals. They look inexpensive right now. I like Pfizer in that space.

I like Waters Corporation just as another way to take a look at some of those health care stocks. Waters Corporation makes mass spectrometers. These are the big heavy-duty machines that analyze specimens and data and spit out all of the codes and tell you what your blood count is. Biotechnology companies stopped buying these big machines, as did pharmaceuticals, as did the hospitals. They're buying them again. When the market slowed down, the recession, they stopped buying. This is a market-leading company and they're buying those companies again.

GIBBS: The demographic shift also supporting health care?

FARR: Demographic shift supporting health care, no question about it, the graying of America. As the baby boomers age, they're going to be using more pharmaceuticals, all the rest. I think too, with the increased homeownership, now 70 percent in this country, that's another argument to support the financial stocks. Americans are becoming more stable financially.

GIBBS: Michael Farr, thanks again for joining us.