Money & Sports
>> hello, i’m michael mckee. welcome back to “money & politics.” the big news for washington and wall street today, more jobs than expected created last month, 211,000. the unemployment rate fell to 4.7%. while more americans may be happy about getting paychecks, investors were not. the dow jones industrials fell 96 points, the s&p 50014 and the nasdaq lost 22. what is it that investors were so worried about on wall street? let’s ask suzanne o’halloran. she’s been looking into the numbers today. suzanne?
>> thanks very much, mike. strong is a word economists and the white house keep using to describe the economy and the job market . unemployment is back down to 4.7%, matching january’s rate, which was the lowest since the summer of 2001. as you mentioned, 211,000 americans found jobs, more than was expected.
>> the job market looks very strong right now. we have seen a couple of years of strong economic growth and now we’re actually seeing it permeate the job market , really in all aspects. job growth has been high, wages are growing at about 4.5% annual rate. so the lag that we sometimes see in employment following the turnaround in the economy now seems to be there.
>> the wage growth ed just mentioned is causing somewhat of a conundrum. here’s why. a drop in the unemployment rate could push wages higher and possibly trigger faster inflation growth.
>> the jobless rate and what’s going on in wage trends are suggesting the economy is becoming more inflation-prone. and i think so far are now -- investors are now recognizing that the labor markets are sufficiently tight where the fed funds rate could easy easily be guided above 5% later in the year.
>> take-home pay kept rising in march. average hourly averages rose .2%, less than last month, while average wages rose 3.4% from a year ago. the march report has rekindiled speculation that the fed’s rate hike cycle may be prolonged. that’s one reason why all three of the major u.s. stock market averages closed lower on friday. still, not all economists say today’s report is problematic. why? because the economy may be slowing on other levels.
>> we’re anticipating that the economy is on the threshold of a downturn in growth. we have to look at the retailers’ numbers that came out yesterday which were on the weak side, the automobile sales numbers which were on the weak side and the fact that the housing industry topped out last summer, all guiding lights to suggest that the front end of the economy, the leading edge of the economy, has startsed to slow down.
>> steve is among several economists surveyed by bloomberg who say the fed will raise rates again in may, taking the benchmark rate up to 5%. the harder question, however, is whether or not the fed will pause once it gets to that 5% level. and, mike, before that meeting, as you well know, the fed will see another potentially robust hiring report in april that’s very likely to give us more clarity on where rates will be in the second half of the year. back to you.
>> suzanne o’halloran, thank you very much. speaking of 5%, we’re two basis points below that on the 10-year note. the yield now 4.98% after that strong report today. stay with us on “money & politics.” when we return, what’s going on capitol hill? why can’t they get so much done? we’ll talk to senator max baucus, ranking democrat on one of the major committees.
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Listen Interview: Ranking Democrat on the Senate Finance Committee
>> congress heads for spring break without completing work on a range of issues, including a failure of house and senate negotiators to reach agreement on a tax package and the senate’s inability to reach consensus on immigration legislation. earlier, our peter cook spoke with montana senator max baucus, ranking democrat on the senate finance committee and asked why senate negotiators were unable to reach a final deal on taxes.
>> i think too much was rushed too quickly and it looked like it was going to be a bad agreement and generally bad agreements should not pass. this is, looking toward a bad agreement, because it was not addressing a major question facing a lot of taxpayers, called alternative minimum tax. the agreement looked like it was going to raise taxes on a lot of americans by requiring an additional tax. and that’s not good. and second, it tended toward increasing the deficit.
>> the issue here, as i understand it, has been whether or not to repair the alternative minimum tax, spare more middle-income americans from having to pay that tax and also extending the president’s tax cuts, the current 15% tax rate on capital gains and dividends. do you think it’s possible for the congress to reach agreement on a plan that does both?
>> i think it’s possible. i don’t know if a full two years is possible. i think it’s important to remember that the current preferential treatment for dividends and capital gains is in law today and doesn’t expire until the end of 2008. so there’s time with which to deal with that. on the other hand, alternative minimum tax will go up fairly significantly for u.s. taxpayers this year and next unless congress prevents that by passing a hold harmless legislation and that was the breakdown of the conference negotiations. essentially, the senate insisted on a full hold harmless for alternative minimum so no additional americans would have to pay additional a.m.t. taxes whereas the house was going to allow some increase in those taxes.
>> some agreement, do you think, can be reached after this break?
>> i think some agreement can be reached and it has to be reached. and i’m hopeful that, because there’s time, now, a couple of weeks to let things sift a little bit and let’s think this through a little bit, that we’ll get a more solid agreement.
>> let me switch to immigration. your take on the latest compromise plan? do you think this is something that the senate can reach agreement on, again, after the break?
>> again, it’s too much pushed through too quickly and it prevented us from reaching a more comprehensive, common-sense plan. there’s just so much politics involved right now, whether it’s the guest worker program, whether it’s how much additional law enforcement is necessary, what about employers requirements to check employees, border enforcement. there was just too much thrown together and frankly i’m glad it’s not working right now, because it’s too jammed. and i’m very hopeful that cooler heads will prevail in a couple of weeks, we can get this done right.
>> let me switch to china. you’ve been very active on relations with china, even travelling there earlier this year, ahead of a summit next week on trade between the two countries and ahead of president hu jintao’s visit to the u.s., you’ve urged china to take steps to address trade issues with the u.s., sending another letter today to chinese officials. if you could, sir, tell me, what was in that letter, what are you telling the chinese?
>> president hu’s visit to our country, also the negotiations that are going on next week, are very, very important. that’s because there’s rising trade tension between our countries and also the president’s visit to the united states will increase his expectations. i’m saying that china has to do several things. number one, address the currency problem. it’s a problem. they’ve got to address it more meaningfully. they have to let the currency rise more than they have, more market conditions. second, we need more enforcement from china on piracy and counterfeiting, intellectual property. they need to do a lot more. beyond that, they have to take american beef, open up―change their internal government procurement codes so there’s less discrimination against american products. government procurement in china. china will do just enough to get by. we have to tell china they can’t continue to do just enough to get buy, they have to be more solid and address the fundamentals a lot more directly.
>> what’s your level of optimism that the talks next week, the trade summit and the president’s visit here to the united states will produce some sort of progress, some tangible steps from the chinese that they agree that the trade relationship needs to be improved?
>> i’m hopeful. and i think there’s a decent chance of considerable progress because if there’s not, the consequences to the united states and also to china are not good. that’s―would cause a lot more angst, a lot more tension in the relationship, more bills in congress much more draconian being introduced and pushed and that’s not going to help either the united states or china so i’m hopeful we’ll get significant results.
>> in your view, has the bush administration given china a free ride up to this point?
>> i think we can be a little more aggressive with china. i think we can stand up a little taller, be a little more firm. my basic view in life in relations with countries is be fair but firm. we’ve been sort of fair but we could be more firm. i think we should do more.
>> i want to ask you specifically about the intellectual property situation. china has taken steps recently to strengthen its i.p. laws and crack down on piracy on movies. how important are those moves? have they gone far enough?
>> they’ve not done very much, frankly. they’ve done a little and i know it’s difficult in china but china is china. china is a big country and becoming a world player and they have a lot more responsibilities. it’s time for china to stand up and be a stakeholder in a responsible, solid way. and that means not only cracking down on piracy and counterfeiting and intellectual property in their country but taking the measures that need to be taken if they’re going to be truly responsible major world power in our world.
>> when will your level of patience run out, here? if you do not see movement, for example, on the currency issue, greater appreciation in the chinese currency, by the time president hu jintao leaves the united states, will you be satisfied?
>> well, frankly, i think we should engage china irrespective of hu’s visit to the united states. for example, senator grassley and i have legislation which much more directly engages china on currency misalignment, that adversely affects our economic interests, on boosting enforcement within the usdr’s office. i think it’s very important to keep engaging china and stepping up the efforts with which we engage china on many levels at lots of different levels, whether social efforts, whether it’s playwrights or military joint efforts, the more levels we engage china, the more likely we’ll manage the relationship in a solid way.
>> max baucus, ranking democrat on the senate finance committee. president bush telling us today he’ll push chinese president hu jintao on piracy when hu meets with him in 10 days. sources telling bloomberg today that the dispute over copyright infringement may escalate into litigation between china and the u.s. maybe as soon as this month. people briefed on the matter say the u.s. is preparing to file a lawsuit with the world trade organization alleging chinese intellectual property laws fall short of global requirements, those sources saying american officials will give the chinese a chance to offer an acceptable solution starting next week or during hu’s visit. american companies say they lost $250 billion a year because of piracy. president bush dismissed intelligence leaks on his watch, but what if he was the one to give the ok? how does this affect an already weakened white house? john feehery, former spokesman with house speaker dennis hastert, joins me next for this week’s “inside outlook.”
