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NEWSROOM for March 2, 2001Aired March 2, 2001 - 4:30 a.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Seen in classrooms the world over, this is CNN NEWSROOM.
RUDI BAKHTIAR, CO-HOST: It's Friday, March 2. From the CNN Center in Atlanta, this is CNN NEWSROOM. Welcome. I'm Rudi Bakhtiar. Here's what's ahead.
In today's news, is the U.S. economy headed for a recession?
Next, we make a move to "Editor's Desk" to find cutting-edge technology in a very unexpected place.
Then, "Worldview" lands in Europe, where an outbreak of foot and mouth disease seems to be spreading.
And we end up in college, as we "Chronicle" the high cost of higher education.
President George W. Bush is pushing his budget and tax cut plan as a way to give a second wind to the sputtering U.S. economy. But Federal Reserve Chairman Alan Greenspan is painting a portrait of dim prospects for a quick economic rebound.
Speaking on Capitol Hill, Greenspan, who in half a century as an economist has tracked eight recessions, did not use that particular "R" word to describe the U.S. economy. Instead, he said the economy is in the early stages of "retrenchment." That's defined as a reduction or curtailment, specifically a cutting of expenses.
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GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: To create economic growth and opportunity, we must put money back into the hands of the people who buy goods and create jobs.
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BAKHTIAR: It's too early to tell whether President Bush's plan to cut taxes would stimulate the economy by giving people more money to spend, but here are some economic indicators he may use to bolster his proposal.
Sales by all U.S. automakers were down in February compared to the same month last year. Manufacturing extended its decline for the seventh month in a row. First-time unemployment insurance claims are on the rise. And the government reports fourth-quarter economic growth slowed to an annual rate of 1.1 percent, down from 8.3 percent last year.
While recent surveys show consumer confidence is falling, other reports show personal spending and construction spending are up.
Some people find it hard to deal with the idea of an economic slowdown because times have been so good for so long. But not everyone has felt the ripple effect of the recent boom. While some people were rounding out their stock portfolios, others were just barely getting by. And it's these people who get especially nervous when there's talk of a recession.
Maria Hinojosa reports.
MARIA HINOJOSA, CNN CORRESPONDENT (voice-over): From a distance, you can see the Manhattan skyline, a symbol of wealth and prosperity. The economic boom here in Bushwick, Brooklyn has a very different look.
A decade ago, crack ruled, graffiti screamed from the walls. It was a dangerous place. The most prominent business was the drug business.
UNIDENTIFIED MALE: I see, like, less drugs in the streets and, like, more kids out in the street playing.
HINOJOSA: Now the effects of a better economy have brought safer streets and shiny new stores. Brand names routine in other towns are treasures here. And local businesses, like the Estrella Meat Market, are seeing the best of times.
JAY RIVERA, ESTRELLA MEAT MARKET: Business picked up for everybody because we just got a new supermarket. It opened on Heart (ph) and Knickerbocker. And they're giving stuff away so its competitive now. So it's helping everybody, actually.
HINOJOSA: But talk of a recession has people who have always lived on the brink fearing a return to the worst.
UNIDENTIFIED FEMALE: More crime, more drug-dealing. People got to do what they got to do to support their families. And if they don't have a job, you know, you have to -- like I said, you have to do what you have to do.
HINOJOSA: Justicia, or justice, is what the community organization, Make the Road by Walking, is all about. A full staff helps garment workers fight for unpaid wages.
BEN SACHS, MAKE THE ROAD BY WALKING: The situation here is one of crisis, and even in a time of economic prosperity.
HINOJOSA: They defend the rights of the poorest of the poor. A recession could jeopardize even that.
SACHS: Even in periods of great wealth, its tough to do. It's tough for a non-profit to put together a budget that's large enough. In a time of recession, it becomes even harder.
HINOJOSA: And it's not just clients who would lose out. If this non-profit loses funding, labor organizer Nieves Padilla, who lives in Bushwick, could also lose her first full-time job in more than eight years. No longer on welfare, this job transformed her life.
NIEVES PADILLA, MAKE THE ROAD BY WALKING: It changed in a good way for me, because now I got -- I make more money, I'm not in the system anymore, on the welfare. I feel better.
HINOJOSA: Better enough to keep on fighting for those untouched by the economic boom, but who still have the spirit to try to make their own road by walking.
Maria Hinojosa, CNN, New York.
BAKHTIAR: In the history of economic turbulence, the "big one" came in 1929 when the Great Depression hit, a worldwide economic slump that lasted about 10 years. The world has gone through various economic slowdowns since then.
Now Garrick Utley looks back on those recessions and how they've influenced our economic outlook today.
GARRICK UTLEY, CNN CORRESPONDENT (voice-over): For all its industrial and technological might, its prosperity and adaptability, the United States has had nine recessions since World War II. They came in all sizes and shapes. In fact, there's a sort of alphabet soup of recessions.
(on camera): There is the "V" shape when the economy goes down and bounces right back up. We should be so fortunate. Then there's the double whammy of the "W," where one recession is followed immediately by a second. And then there is the "U" shape, where the economy goes down and stays down for awhile.
(voice-over): That began at the end of 1973, as rocketing oil prices stopped the economy in its tracks. It took more than a year for growth to resume.
PROF. RICHARD SYLLA, NEW YORK UNIVERSITY: It was pretty bad. The decline in 1974 and then there was really a year of almost no growth, negative growth, and the recovery didn't really come until late '75 and '76.
UTLEY: Next came the double-dip recession, which began in 1979 and helped do in President Jimmy Carter. An anemic recovery peaked just around Election Day, 1980. Ronald Reagan's sunny optimism couldn't brighten what happened next. Inflation was running at 14 percent a year. Interest rates were raised to choke it off. Mortgages reached 17 percent. Unemployment hit 10 percent, the highest level since the Great Depression of the 1930s. After about a year of misery, in 1982, the economy came back strong.
SYLLA: That's when the great bull market in Wall Street that we've had for nearly 20 years now, it began in the summer of 1982. The Dow Jones Average then was at 780, and now it's over 10,000.
UTLEY: Enter the first President Bush and another recession. It was short -- eight months -- and relatively mild. But it brought something new. In recessions, it is traditionally the blue collar workers who suffer the heaviest job losses. But in 1990-91, the number of white collar workers laid off soared as companies extended downsizing from the shop floor into the office.
But the recovery, when it came, led to dramatic growth in new jobs.
So, will there be another recession? Of course. Is it happening right now? Maybe, or maybe not.
(on camera): But if it must be, at least we know what shape we want. Let's hope for a "V," as in very short.
Garrick Utley, CNN, New York.
BAKHTIAR: An update now on Wednesday's strong Earthquake near Seattle, Washington. Things are slowly returning to normal after the 6.8 magnitude quake hit the Pacific Northwest, cracking bridges, damaging highways and triggering landslides.
Officials say residents are lucky the damage is relatively minor considering the magnitude of the quake. They say that's because it happened 30 miles beneath the Earth's surface.
Despite that, damage is estimated at more than $1 billion.
Katharine Barrett has more.
KATHARINE BARRETT, CNN CORRESPONDENT (voice-over): It was a day to clear debris and survey the damage. But spotty cell phone service and some bridge and street closures tied tongues and traffic, delaying a return to normal business. Workers were shut out of Starbucks' global headquarters while cleanup went on. The building's damage was spectacular but superficial.
ORIN SMITH, PRESIDENT AND CEO, STARBUCKS: I'm not sure what the cost will be, but I know we have very good insurance. And I'm told that all of this damage will be covered. BARRETT: Top brass at Boeing were shut out of their offices, too, operating instead from a fire station across the street. Boeing's largest plant, building wide-body jets, was operating normally with only partial operations in some other facilities.
LARRY MCCRACKEN, BOEING SPOKESPERSON: If you have to go in and recalibrate a lot of your measuring equipment, we have cranes that are on the top -- you know, run across the ceiling and you need to make sure that, you know, that everything structurally is OK before you let people back in. You have to make sure that the power, water, fire, sprinkling systems are all intact. And we're going through that with our emergency preparedness people and with our engineers on a building-by-building basis.
BARRETT: And for now, there's no delivery of the company's smaller jets due to damage on county-owned runways.
High tech titans Microsoft and Amazon said damage to their buildings was minimal. In the end, most Seattleites, even economists, were counting not dollar damages, but blessings.
PROF. PAUL SOMMERS, UNIVERSITY OF WASHINGTON: The impact overall is relatively small. This is not the scale of the disaster that hit San Francisco, for example, because of the depth of the earthquake and the amount of damage. It just seems overall to be less. A lot of the most serious damage is to infrastructure; to bridges, in particular.
BARRETT (on camera): Here at Starbucks headquarters, most employees won't be back at their desks until sometime next week. One of those workers, I should note, is my husband, who, along with his colleagues, evacuated this building after the quake, leaving his wallet still on his desk and his car still in the parking garage right over there.
I'm Katharine Barrett for CNN, in Seattle, Washington.
NANCY VIDETICH: I'm Nancy Videtich from Lincoln, Nebraska. And I haven't heard anyone mention the Richter scale anymore. Has that terminology changed when talking about earthquakes?
ANN KELLAN, CNN SCIENCE CORRESPONDENT: Nancy, you're absolutely correct. The Richter scale is no longer used.
The Richter scale basically measured the amount of shaking. It looked at that seismograph and measured the distance between the lines.
Now they look at the amount of energy released in the earthquake and the magnitude of damage. For example, a 4 is moderate damage; 5 considerable damage; 6 severe damage; 7 is a "major" earthquake, and it's widespread, heavy damage; 8 is a "great" quake with tremendous amount of damage. Now, the quake that hit the Seattle/Olympia, Washington, area was a 7. It was about a 7, which means it was 10 times greater than a six. A 6 is 10 times greater than a 5. And you can see it caused a lot of damage.
BAKHTIAR: Each Friday, we feature our "Editor's Desk." It's a chance to take a closer look at the media, current events and the arts.
Today, we find out what happens when a small, unassuming town in Georgia gets hit head-on with a technological revolution. But the real story here is how.
Here's David George.
DAVID GEORGE, CNN CORRESPONDENT (voice-over): Hartwell, Georgia, population about 5,000, doesn't look like the kind of place you'd encounter cutting-edge technology. But people in Hartwell may be the first in the country to receive phone calls, high-speed DSL Internet access and television programs over -- get this -- their ordinary telephone lines.
BILL ROGERS, HARTWELL PHARMACY: They'll look up and I'll say, I've got cable TV in here. And they say, really? And I say, well, actually it's not cable, it's through the telephone line.
GEORGE: High-speed Internet over the phone line is nothing new. It's the addition of the TV signal that makes the Hartwell system unique.
MICHAEL MCINERNEY, HART TELEPHONE COMPANY: Well, it's been attempted before, but the problem has been in compression technology for the video aspects, it's been in crosstalk or interference.
GEORGE: A Connecticut-based company, M-Phase Technologies, builds the set-top boxings and other hardware that are the heart of the Hartwell system. The company says DSL was originally designed years ago in a failed attempt to deliver video over phone lines. M- Phase and scientists at the Georgia Tech Research Institute worked out the bugs.
DAVID KLIMECK, M-PHASE TECHNOLOGIES INC.: We kept that original video concept and expanded on it, so we're doing not only video but Internet access at the same time.
GEORGE: The local phone company, Hart Telephone, has an office in the center of town where customers can experience firsthand the difference between DSL and dial-up Internet.
Attorney Walter Gordon exchanges bulky documents with other lawyers online. One look at DSL and he was hooked. WALTER GORDON ATTORNEY: It is astounding to see the difference, how fast I can download those documents on the M-Phase Traverser system. It's just beyond belief.
GEORGE: Gordon and about a dozen other Hart Telephone customers are testing the three-part service free of charge. The company says by the end of the month it hopes to have 60 paying customers receiving telephone service, DSL and 60 channels of television over phone lines throughout the town.
David George, CNN, Hartwell, Georgia.
BAKHTIAR: In "Worldview," we globe hop to Asia, Europe and the Caribbean. We touch down in Russia for a profile of President Vladimir Putin. We'll also visit China, a country pushing hard to win the Olympics. And we'll head to Cuba, where news is in the news. But first a health story from Europe, where a deadly animal virus is crippling British agriculture. Despite efforts to contain it, foot and mouth disease has spread to Northern Ireland. This has prompted other European countries to take precautions to protect their food supply and livestock. That story takes us to Germany.
STEPHANIE HALASZ, CNN CORRESPONDENT (voice-over): A ferry from England arriving in the northern German harbor of Hamburg. Nothing unusual about this, except Thursday custom officials searched cars and passengers for meat and milk products.
Foot and mouth disease is so contagious that officials do not take the chance that infected food could somehow make its way to a farm where it could then infect livestock.
PETER MIELMANN, OFFICIAL VETERINARIAN (through translator): We are asking people about milk products. And if they come from Britain, we ask people to hand them over to us, and that is what we're doing.
HALASZ: In Germany, at least two farms in the state of North Rhine-Westfalia were cordoned off on Wednesday, its sheep slaughtered on one of those farms. On Thursday, another farm was identified as possibly affected by the disease in the western state of Hesse, its sheep killed.
Germany is still reeling from the mad cow crisis discovered here late last year, which brought meat consumption down dramatically and left the public extremely concerned about food safety.
But all of this did not prevent Chancellor Gerhard Schroeder from enjoying one of his beloved curry sausages in Berlin in an attempt to inspire confidence in consumers.
GERHARD SCHROEDER, GERMAN CHANCELLOR (through translator): I don't know how you see this and how much you like to comment about your eating habits, but my heating habits have not changed. I still eat meat.
HALASZ: The farming community here is hoping Germans will hear their chancellor and regain confidence in the already hard-hit food industry.
Stephanie Halasz (ph), CNN, Frankfurt, Germany.
SHELLEY WALCOTT, CO-HOST: Cuba is an island nation located approximately 90 miles, or 145 kilometers, south of the U.S. state of Florida. Its government strongly supports the arts and often sponsors free ballets, plays, and other cultural events for its citizens. It has also built many schools and improved health conditions.
On the other hand, though, Cuba's communist government has been sharply criticized by international human rights groups, and the people have been denied many economic and political freedoms. Relations between Cuba and the U.S. have been strained since the U.S. imposed an embargo back in 1960, just after Fidel Castro took control.
But there's recently been a thaw in at least one area, as Lucia Newman explains.
LUCIA NEWMAN, CNN HAVANA BUREAU CHIEF (voice-over): It's a sight not seen in more than three decades: American newspaper journalists setting up shop on a permanent basis in Cuba.
After having allowed CNN and then the Associated Press to open bureaus, the Cuban government has now authorized the "Chicago Tribune," the "South Florida Sun-Sentinel" and the "Dallas Morning News" to do the same.
GEORGE DELAMAS, "CHICAGO TRIBUNE" INTERNATIONAL EDITOR: We've been in discussions with the Cuban government for nine years, since the end -- since the Soviet Union collapsed.
NEWMAN: The perseverance paid off, giving the newspapers an advantage over competitors that must request permission from the Cuban government every time they want to come here to cover a story.
The Cuban government's bet is that more reporting from Cuba will have a positive impact on U.S. public opinion, especially with a new, presumably more hawkish Republican administration in Washington.
JOSE LUIS PONCE, DIRECTOR, INTERNATIONAL PRESS CENTER: This has to do with the need that we think that is important, for the American people to have first-hand information about what is really going on in Cuba.
NEWMAN: Still, anyone thinking the opening of the U.S. newspaper bureaus is a sign of new tolerance towards foreign correspondents should think again. FIDEL CASTRO, CUBAN PRESIDENT (through translator): If we have to expel someone who for years has been tolerated and has been deliberately working in complicity with the imperialist enemy, in this case, rather than expel the reporter, it would be more reasonable to cancel the news agency's permission to report from Cuba.
NEWMAN (on camera): With the new Americans now in town, it's hard to tell how the government's carrot and stick policy will play out.
Lucia Newman, CNN, Havana.
BAKHTIAR: Next stop, China, the most populous country in the world. China has often been criticized for its human rights record, and recently it's been in the news again for spiritual suppression.
The Chinese government has stepped up its crackdown against the Falun Gong meditation group. The government calls it a reactionary political organization. The crackdown could affect Beijing's bid for the 2008 summer Olympic games. China hopes to host the world and is trying to avoid a repeat of 1993, when concern about its human rights records helped foil a bid for the 2000 games.
Meantime, the conflict and the controversy go on.
Rebecca MacKinnon has more on the Falun Gong controversy.
REBECCA MACKINNON, CNN BEIJING BUREAU CHIEF (voice-over): The Chinese government says these people, who recently demonstrated in Hong Kong, are a social cancer.
ZHU BANGZAO, FOREIGN MINISTRY SPOKESMAN (through translator): The judicial departments have punished Falun Gong criminals not for their practice of Falun Gong, but for their violation of Chinese law.
MACKINNON: A new campaign is under way in the state-controlled media to justify the crackdown against Falun Gong and to counter allegations by human rights groups that nearly 100 Falun Gong followers have died in police custody.
A recent TV program shows doctors trying to treat a Falun Gong follower in detention for high blood pressure. She refuses to take medicine. It says this woman was detained for demonstrating in Tiananmen Square, leaving her cancer-stricken father abandoned back home. She says he's not her father anyway because she really came from outer space.
This detainee insists he's a god, not a person.
"What's more important, Chinese law or Falun Gong law?" the police ask this woman.
"Falun Gong law," she replies.
In response to what they consider outlandish behavior and beliefs, a citizens group called the Anti-Cult Association has launched a petition drive.
HE ZUOXIU, NUCLEAR SCIENTIST (through translator): Falun Gong has gone too far. They go to Tiananmen Square and make trouble for no reason.
LI ANPING, ANTI-CULT ASSOCIATION (through translator): A few hard-core Falun Gong people are stirred up by their leader, Li Hongzhi, and Western countries to attack the Chinese government. The government should take harsh measures against them.
MACKINNON (on camera): And so the public relations battle between the Chinese government and Falun Gong organizers rages on. While the movement has gained lots of international sympathy, the fight to win over public opinion here in China is by no means finished.
Rebecca MacKinnon, CNN, Beijing.
TOM HAYNES, CO-HOST: We turn now to Russia, a land with abundant natural resources, including huge deposits of natural gas, coal, petroleum and iron ore. While it has rich resources, Russia's economy is struggling.
Today we focus on Russia's leader, Vladimir Putin. Putin became president of the world's largest country just last year. He's already become popular with much of the population, and many are delighted that he is a master of judo. He's even co-authored a technical book on judo, illustrated with all the right moves.
Prior to his political career, he served in the KGB, the secret police force of the former Soviet Union. He was mayor of St. Petersburg in 1994 and worked his way up to prime minister.
Steve Harrigan has this look at Russia's current president.
STEVE HARRIGAN, CNN CORRESPONDENT (voice-over): The first shrine to Russian President Vladimir Putin came about by accident.
UNIDENTIFIED FEMALE (through translator): On August 2, our president, Vladimir Putin, stood right here.
HARRIGAN: A detour by the presidential motorcade in the Pskov region led to a brief stroll, which has now been memorialized for tourists, step by step.
UNIDENTIFIED FEMALE (through translator): On this spot, Vladimir Putin decided to try a local pickle. He liked the pickle very much and gave the girl 50 roubles, which naturally pleased her. HARRIGAN: The president is also the hero of a new primer for first-graders -- a man who flies fighter jets, doesn't smoke and loves his family.
VIKTOR YURAKOV, UNITY PARTY (through translator): He's a symbol, the best example we have to teach our children how to live.
HARRIGAN: After one year in power, the popularity of that symbol is still over 60 percent, untouched by war, poverty, or a string of disasters, including the sinking of a nuclear submarine.
UNIDENTIFIED MALE (through translator): People say they love him. I love him.
HARRIGAN: For some, like Alexei, that love is more than skin deep. He had the president's face tattooed on his right arm. His wife was against it at first.
UNIDENTIFIED FEMALE (through translator): I wake up in bed every morning next to Putin. My girlfriends say it's cool.
HARRIGAN: Steve Harrigan, CNN, Moscow.
BAKHTIAR: We come full circle now with an economic story you may find hits close to home: the rising cost of a college education. It's a trend that could be shutting out low-income students.
Deborah Feyerick looks at creative ways schools are trying to deal with the problem.
DEBORAH FEYERICK, CNN CORRESPONDENT (voice-over): Igor Dolgov is a computer science major studying artificial intelligence at Princeton University. His tuition, room and board at the Ivy League school: $35,000 a year, a tab Princeton's helping him cover.
IGOR DOLGOV, PRINCETON UNIVERSITY STUDENT: My financial aid package is about $24,000 a year; about $2,400 in an outside scholarship, $4,000 in loans and the rest in grants from the school. And $2,500 gets covered by work/study.
FEYERICK: Soon that $4,000 loan will be wiped clean. Princeton, in a major change, turning financial aid loans into grants, using a fraction of its $8 billion endowment.
DON BETTERTON, FINANCIAL AID DIRECTOR, PRINCETON UNIVERSITY: What we're trying to do is attract more middle and low-income students to Princeton. We realize with the price tag we have and our reputation, if we just kind of left things alone, we're not sure we'd get the kind of economic mix that we want.
FEYERICK: But while Princeton has the money to spare, many other colleges and universities don't. A problem, a new study finds, shutting out the poor.
CHARLES TERRELL, COMMITTEE ON FINANCIAL ASSISTANCE: We are denying access to higher education to an increasingly large populations of low-income students who we desperately need to educate. And certainly over the next 15 years, demographic trends are going to exacerbate this problem.
FEYERICK (on camera): Educators say without financial aid policy changes on all levels, there's a real risk that low-income students will be shut out of high-paying jobs, making it harder for their children to go to college in the future.
Deborah Feyerick, CNN, New York.
BAKHTIAR: And that does it for us here on NEWSROOM. Have a great weekend. We'll see you back here Monday. Bye.
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