CNN host Dobbs urges business investment boost

Nation's Restaurant News, Oct 21, 2002 by James Peters

Calling on Congress to implement tax cuts and investment-tax credits to help spur business spending, Lou Dobbs, anchor of CNN's "Lou Dobbs Moneyline," said the U.S. economy likely would fall into a "double-dip" recession if capital investments from businesses do not increase significantly in the near future.

Dobbs, who is a founding member of CNN as well as managing editor of "Moneyline," also predicted during a speech at the 2002 Multi-Unit Foodservice Operators Conference that a potential war against Iraq would be "decisive" and "quick" and likely would not have a significant negative impact on the economy.

He noted that consumer spending, which generally accounts for $2 of every $3 of the nation's Gross Domestic Product, has been strong in such areas as housing and automobiles, but expenditures and investments by businesses have remained weak.

Consumer spending is "two-thirds of the answer, but one-third of the answer is business investment," Dobbs said. "It simply has to be bolstered, and it has to be inspired.... And frankly nothing is happening in Congress that suggests to me that we're going to see anything approaching an investment-tax credit, targeted or otherwise. And I think we're running a terrible risk by failing to act."

Dobbs urged Congress to put into place tax breaks and investment-tax credits targeted toward industries that are most "critical" and industries that were "severely injured" in the recession.

However, Dobbs also remarked that there always is a "great debate over the direction of those tax cuts in Congress."

The recession had "nothing to do with the consumer," Dobbs said. "The consumer has stayed in this economy, buying houses at record levels, automobiles at record levels."

Although the Dow Jones industrial average and Nasdaq composite index have been tanking, most Americans do not directly own stocks, Dobbs said. He cited a recent study by consulting and accounting firm Deloitte & Touche that reported that 90 percent of American households' consumer net worth as a multiple of income has risen because of such factors as the 2001 tax cuts, wage increases and appreciation of housing prices.

Dobbs also took the U.S. government to task for not being aggressive in promoting corporate reforms and criticized its handling of recent corporate scandals.

He said companies should be required by law to expense stock options, and the "assumptions of pension-fund accounting" should be sufficiently transparent and meet the stipulations of "full disclosure."

"The truth of the matter is we haven't done enough to reform corporate America," Dobbs said.

He also criticized chief executives for receiving excessive compensation.

"We're in transition, and I do believe that's going to change as well," Dobbs said. "It's going to come because we're going to hold boards accountable. We're going to hold management accountable. This period of adjustment has to accelerate because we're otherwise going to pay a severe penalty in the capital markets because the investor simply has lost faith--both in the numbers that he and she is reading in financial statements and in the markets themselves."

Dobbs lauded the Bush administration's long-term commitment in the global war against terrorism and its announced efforts to facilitate the democratization of the Middle East.

"That is the kind of commitment that this nation should have taken decades ago in the Middle East," Dobbs said. "And it is the source of a great deal of our problems in the Middle East because we have not been evenhanded and committed to democratic values."

Dobbs also said he believes the efforts against terrorism and those in the Middle East involve the "most sizable long-term risk" to the U.S. economy "over the next several years."