FTN – 8/18/02

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BOB SCHIEFFER, Chief Washington Correspondent: Today on Face the Nation, will baseball players go on strike? We'll talk to Hall-of-Famer Ozzie Smith.

Plus, what can President Bush do to calm investors?

Last Friday, baseball players set August 30th to go on strike if their differences with the owners aren't settled. Are they really serious, and what would a strike do to baseball? We'll talk with the former Cardinals shortstop and new inductee to the Hall of Fame, Ozzie Smith, Sports Illustrated writer Frank Deford, and baseball editor and columnist for USA Today, Hal Bodley.

Then we'll turn to the economy. President Bush has new ideas to spur the market. We'll talk to his chief economic adviser, Glenn Hubbard, and get the other view from Senator Jon Corzine, Democrat of New Jersey.

Gloria Borger will be here, and I'll have a final word on the hot summer.

But first, the baseball strike on Face the Nation.

And good morning again. Joining us from St. Louis this morning, baseball Hall-of-Famer Ozzie Smith. Frank Deford of Sports Illustrated is in New York City this morning. And in Wilmington, Delaware, Hal Bodley of USA Today.

Ozzie Smith, I start with you. Do you really think this is going to happen?

OZZIE SMITH, Cardinals Baseball Hall-Of-Famer: Well, Bob, you know, we hope that it doesn't. You know, it seems that every four years we always get to this point. It's always amazed me that, with all the time we have in between, that we always come right down to the wire.

I think both parties are well aware of the fact that this could be devastating to the game. So I think part of the strike date is to get some more movement, and hopefully that will happen this week.

SCHIEFFER: Frank Deford, I almost ask you the same question, because it seems to me that people are really getting sick of this. What do you think the impact of this is going to be on the game?

FRANK DEFORD, Sports Illustrated: Well, I think Ozzie used the right word, "devastating."

I think you've got three things that are all coming together. Number one is the cumulative frustration of people who have seen this over the years. They're simply fed up.

Number two; you've got the present situation. It's not a good economy, and a lot of people have lost their pensions or are looking for jobs, and the shadow of September 11th looms.

And number three; there are so many people in so many cities in the small markets who are already discouraged and feel like they don't have a chance. And if nothing is done, you're really going to see them fall off the edge.

It's sort of like what Wall Street calls the triple witching hour, and I think that's what baseball is facing if it has a strike.

SCHIEFFER: Well, Hal Bodley, let me ask you, you have followed these negotiations very closely. Do you think they are actually going to do this, or do you think they may be closer to some sort of a resolution than we have been led to believe so far?

HAL BODLEY, USA Today: Bob, you know, I said all along I felt they would set the strike date even when it looked like they were having optimistic talks about revenue sharing and the luxury tax. I thought that ultimately they would set the strike date, and that it, of course, would push ahead negotiations.

But I don't believe that they're going to walk. I think there is too much at stake, as Bob and Ozzie said, for everyone. The players are somewhat reluctant to even set a strike date.

And they're basically on the same page, although they can't agree. And I don't think they're going to walk out because there's just no Cal Ripken streak, there's no Mark McGwire-Sammy Sosa homerun chase to bring baseball back this time. And as everyone says, it really, really would be devastating.

GLORIA BORGER, U.S. News & World Report: Hal Bodley, very quickly though, will you explain what the controversy is over this so-called payroll tax?

BODLEY: Basically, the big problem is the luxury tax thing.

Commissioner Bud Selig would like to put some kind of a restraint on salaries. Originally the owners came out and they said they wanted to tax the amounts over $98 million by 50 percent, and the union said, "No, no, no, we don't want any kind of a luxury tax. We view this as another form of revenue sharing, a salary cap if you may." And they said no.

But the good thing this past 10 days is the fact that the union has agreed to talk about a luxury tax. Although they're far apart on the numbers, the fact the union has agreed to talk about it and the fact that the owners have agreed to a structure of a luxury tax proposed by the union is very encouraging. I think they can bring all this together.

SCHIEFFER: What you're talking about, Hal, when you say a luxury tax is that there would be a set amount that each team could spend on payroll. And if a team went over that amount, then they would have to pay 50 percent of that amount to some of the clubs that are not doing well, some of the smaller clubs.

BODLEY: That's right, Bob. Basically what has happened, the New York Yankees would be heavily taxed because of this and maybe a little bit of the Texas Rangers, as far as the union proposal is concerned. The owners want more than that. They want five or six teams to be taxed so that it will really restrain salaries.

BORGER: Ozzie Smith, do the players just think that, you know, this is a salary cap in disguise?

SMITH: Well, I think part of the problem here is that in their proposal -- and I haven't seen it, just within what I've been reading -- there has to be some type of mechanism that would say that if there is revenue sharing, that that money would go directly to payroll. Because that's been the problem, you know, small market-big market. And the reason that small markets can't compete is they can't afford the good players.

SCHIEFFER: Ozzie, let me just ask you this. Do you think that the players understand how they're coming off, how this is being received by people? Because I think Frank Deford makes a very good point when he says, you know, these are kind of tough times for a lot of people. They see their 401(k)s shrinking. And now have you players who make an average salary of, what is it, $2.3 million a year saying this is not enough?

SMITH: Certainly. And it's one of the reasons that I think that, you know, everything is relative. I think it's always been very hard for fans to understand why and how guys that are making millions and millions of dollars can talk about strikes. But, you know, I think players, in many ways, because it's such a big business now have learned that, you know, that's going to happen.

And unfortunately it always looks like the players is asking for something. But in this case, the system is broken. You know, blame whoever you want -- owners, players or whatever. The system is broken, and it needs fixing.

And I think part of the impetus to get this going is full disclosure. As I've gone through some of these work stoppages, we hear the same talk or rhetoric all the time about how bad it is. Yet, no team folds the tent. And when a team is purchased, it's purchased for four or five times what it was paid for.

So I think that full disclosure, I think, would bring a little bit more sympathy, I think, and it would give you a better idea of the serious problem that we have. And hopefully that does happen this week and we can get on with this.

And I'd like to see a bargaining agreement that goes longer than four years, you know, something like 10 years. And we won't have to deal with this every four years.

BORGER: Frank Deford, do you think that George Steinbrenner, the owner of the Yankees, could singlehandedly avert this strike?

DEFORD: You mean if he stopped buying players?

BORGER: If he stopped --right.

DEFORD: That's like asking the moon to stand still, Gloria.


DEFORD George Steinbrenner is using the system to his advantage. It's to everybody else's disadvantage, but he is only playing by the rules. What the other owners want, they want a situation like basketball and football. And those sports are so much more stable and so much attractive for buyers.

Ozzie talks about the franchise prices, but there is nobody buying baseball franchises anymore. If have you the kind of money to buy a major league franchise, you are not going to go near baseball anymore. You're going to go into basketball, you're going to go into football.

It was only 10 years ago that football and baseball franchises were about of equal weight, and now football franchises worth much, much more. An expansion franchise in Houston went for far more money than the Boston Red Sox, which is one of the storied teams in all of sports. And the reason is that nobody in their right mind wants to get into a situation like this where they're buying into such instability.

I think baseball is in a situation where if they do have a strike, it is going to drop down a tier, and we're going to be left with two major sports, basketball and football. And baseball is going to be down there with hockey in the second category.

SCHIEFFER: Well, let's talk about something you bring up, and that is the difference in the football situation and baseball.

And, Hal, I'll direct this to you. In football, of course, the big difference is that the National Football League sells the television rights. And that's where the money comes from, the money that the networks pay to the National Football League to broadcast those games. That money is then equally divided amongst all the football teams.

In baseball, it's a different situation. Everybody sells their own television rights. George Steinbrenner sells his for, what, $100 million, and maybe the Minnesota Twins sell theirs for a million dollars. Well, it's not hard to figure out who is going to be able to buy the best players in that kind of a situation.

Do you see that part of it changing at all? Because to me, that seems to be the core problem here.

BODLEY: I don't think it will change as much as baseball's owners would like it to. Each team receives about $20 million a year from the national TV contract.

But what I would like to say about baseball all the time is that there is no Green Bay in baseball. The Green Bay Packers have just as much chance to get to the Super Bowl in the National Football League as any team in the NFL for most years. In baseball that's not true. The lower half of the teams just have really, really no chance to get to the playoffs, and it's because of the fact that they don't share that revenue, like you say.

SCHIEFFER: Ozzie, what about this whole business of steroid use, which has sort of been left aside in the argument over money in all of this. Do you think the ball players are ever going to agree to steroid testing? Now, they have made some commitment, I know, along that line, but don't they really have to do that?

SMITH: Yes, I think that they have shown an interest in doing that. I think it has to be done in a proper manner so that people aren't harassed, but I see the players giving in on that.

SCHIEFFER: Do you think there are many players that use steroids?

SMITH: Well, I don't think there are as many as 85 percent. Certainly in every sport somebody is going to -- someone is going to test it, somebody is going to try it, because it means that you get a bigger contract or you make it to the big leagues. So you're always going to have that. And that's just not in baseball, that's in all sports. And unfortunately, you know, they don't -- they're thinking short-term. They're not thinking long term.

BORGER: Frank Deford, if there does end up with a strike, who is going to get the blame? Who are the fans going to blame for this?

DEFORD: The fans in the past have always, in all sports, have always tended to side with the owners, because, as Ozzie said, they can't quite understand why anybody who is playing a game for a living would ever complain about it.

But I think they've also tended to say a plague on both your houses.

I think this time, because fans know, and they're savvy enough to know that it works in basketball, it works in football, why can't it work in baseball. Why can't you give, if not a salary cap, a salary visor, a salary beanie.

I think the players are going to suffer more this time if there is a strike in the public perception than they ever have before.

SCHIEFFER: All right. Well, let's all hope that somehow or another they work this out.

Gentlemen, thank you very much. A very interesting discussion.

We'll be back in a minute to talk about the president's economic summit, in just a second.


SCHIEFFER: And from baseball we turn to the economy and the recent economic summit held by the administration. With us, Glenn Hubbard, who is the chairman of the president's Council of Economic Advisers. Joining us from New York City, Senator Jon Corzine of New Jersey. We'll start with Senator Corzine.

Well, Senator, the Democrats have been very, very rough on the president's economic summit. They have labeled it things ranging from a joke to something that's no more than a public relations show.

But now I hear that the Democrats are thinking about holding a summit. Is that true?

SEN. JOHN CORZINE, D-NY: Well, first of all, I think that right, the left, the Republicans and Democrats almost uniformly thought that what went on in Waco was a public regulations show. I've heard the term "dog and pony show" from doggone near everybody that talked about it.

Not much on policy, very long on public relations. The only initiative was this cut $5.1 billion out of spending for homeland security, which I think most Americans, if they thought we were spending on fire departments and police departments and the National Guard, would say, hey, what's going on here, we've got a $2 trillion budget, and we're cutting $5 billion out of homeland security. So I think the proposal was -- the discussion in Waco was pretty weak.

I think we actually do need to sit down and talk about a troubled economy. We've had 2.5 million lost jobs. We've seen unemployment go from 3.9 to 5.9 percent. We have to borrow $1.8 billion a day to finance our budget deficit, our trade deficit. We've got serious problems in this economy. People have lost their 401(k)s.

And it's time to have a legitimate bipartisan discussion about how we get this economy back on the right track, take care of America's economic security, as well as our homeland security and our national defense.

SCHIEFFER: But, you know, politics being what it is today, why would the Democrats have something any different than what the Republicans had? They put people together that agree with their point of view. You're saying that you could put together some kind of a forum that would bring in different points of view, points of view that were opposed? Would you invite members of the administration to come?

CORZINE: Oh, absolutely. Bob, I think there needs to be a serious coming together on our fiscal policy. We've seen our budget go from surpluses of $200 billion, 300 billion to this year we're going to run a $165 billion, $170 billion budget deficit. The future is very bleak with regard to our fiscal policy.

The president's still talking about tax cuts for the top 2 percent and saying that's going to stimulate the economy. That is not going to do it. We do need to have fiscal restraint. Some of it may have to come on the spending side, but we also need a two-sided policy. We need to focus on tax cuts as well as some of the spending things.

BORGER: Well, Senator, this week the president did actually float some suggestions to help restore the economy, and one thing he said is that perhaps you ought to allow investors to deduct up to $20,000 for their investment losses that they've suffered. Would you support that kind of a proposal?

CORZINE: Well, I think those things should be considered in an overall package of fiscal consideration.

BORGER: Well, is that something could you support, though?

CORZINE: In the context of looking at the future tax cuts, which are going to the top 2 percent, or capping the inheritance tax, freezing the top rates, and doing something about offshore tax havens for corporations, sure, you can think about those things.

But the fact is, we need to put dollars into working Americans' pockets. We need to make sure that those people that have the largest propensity to spend can go to the stores and drive this economy. Those people should get the support. I don't think that's what those kinds of tax cuts are going to do.

BORGER: Should the Democratic Party support rescinding the future tax cuts?

CORZINE: In my view, we should cap the inheritance tax, we should rescind or freeze those top two tax rates, and we ought to go after corporations that move money offshore to protect it from the American taxes, so that taxpayers who benefit from the American economic system are paying their fair share. That's not happening.

And I think we have higher priorities with regard to national defense, homeland defense, prescription drug benefit, all those things that I think are on Americans' minds. I certainly hear it from my constituents. Those need to be represented before we have a tax cut for the top 2 percent wealthiest Americans.

BORGER: Very quickly, as a former Wall Streeter, do you think Wall Street has confidence in this president's economic team?

CORZINE: I think they look at our fiscal future and they are concerned. I think there is a lack of confidence about the direction, the speaking with one voice, the cohesion with which sometimes is missing here. And I think it has undermined investor confidence.
And I think they don't actually feel that there's been a broad enough dialogue of all the various policy options. When that happens, I think there's investor confidence loss, I think there's Wall Street loss.

But, you know, the real loss of confidence is in the American people in the direction of our economy.

SCHIEFFER: All right. Senator, thank you very much.

We're going to go now to Mr. Hubbard and get your comments there.
Well, if I heard Senator Corzine correctly, he's saying the main thing that ought to be done is to rescind these tax cuts. My guess is you're going to say that's the same thing as a tax increase.

GLEN, HUBBARD, CHM., President's Council of Economic Advisers: Well, yes, it is a tax increase. It's also economic nonsense.

Just some quick math. If we rescinded the president's tax cut, we would probably hurt economic growth by about two-tenths of a percentage point over the foreseeable future. That's $1,000 for every man, woman and child in the country over a decade.

Since Senator Corzine sometime ago decided to focus on effects of lost surpluses on interest rates, one could do the math there. Repealing the president's tax cut would have a diminimous, very small effect on interest rates, which are, after all, almost at record lows.

BORGER: Are you talking, though, about more tax cuts?

HUBBARD: I think there are a lot of very interesting proposals to be discussed, as the president suggested. What's important is a set of policies, a package of proposals that restore economic growth. It's economic growth that gives us a healthy budget, not the other way around.

BORGER: What kinds of things specifically? Increasing contribution limits, for example, for IRAs and 401(k)s, is that something that you would like to propose?

HUBBARD: Well, let's diagnose the problem first, as the president did. We, around the world, have seen a flight away from equities. That is, an increase in people's aversion to risk. It is really important to restore confidence in long-term investing.

And so, there, I think, the 401(k) proposals that the president mentioned, the dividend and capital gains tax changes that the president mentioned, all of those are very strong pro-growth policies, but he has made no decisions.

SCHIEFFER: Well, if Senator Corzine were still here, I am sure he would say if you talk about raising limits on investment losses that can be written off by taxpayers as the president suggested, he would probably remind you that would cost about a billion dollars a year. If talk about putting more into 401(k)s, that would probably cost the government about a billion and a half dollars a year.

The president keeps talking about trying to talk about stopping deficit spending. Isn't that just going to add to the deficit?

HUBBARD: I don't think so.

Let me make two points. One is the key point the president has tried to make is that spending restraint is absolutely essential. Spending is just today's taxes or future taxes. We've got to have it.

Second, it is important to have policies that get the economy growing again. We simply aren't growing as fast as we should. And we need the kind of policies that promote growth. In the long term, that's what makes our budget healthy.

SCHIEFFER: And this business of the president now saying that he is going to withhold spending some of the funds that Congress has approved, you look at it on the face of it and this seems to be pretty dangerous business, because you're talking about cutting off funding to Israel, you're talking about cutting back funding that the Congress had appropriated for homeland security.

We hear on the one hand that all these things are a priority, and now the president is saying he is not going to spend the money. How does he justify that?

HUBBARD: I wouldn't accept that characterization. What the president said is he will not accept arbitrary constraints that he spend money that we don't need. What he said was we will find the money for the priorities that you identified in other ways, but we will not waste the American people's tax-paying money on other projects. That was the message that he sent to the Congress.

SCHIEFFER: So in other words, he said I won't spend this money as the Congress has now appropriated it because it is tied to some other things that he doesn't want to spend money. But he will resubmit those things to the Congress, would that be what happens?

HUBBARD: Exactly. The president will make sure we have the money for the priorities but not for the wasteful spending that the Congress had added at the last minute.

BORGER: How quickly are we going to see the president's proposals to help get the economy moving again?

HUBBARD: Well, I think these are matters of ongoing discussion, as they have been. And the president has been worried about this, concerned about this for some time.

BORGER: And very quickly, what do you say to people who say get ready for a double-dip recession because that's what we are in for?

HUBBARD: I think the chance of a double-dip recession in the United States are really, really remote. Remember, a recession is generally a couple quarters of negative GDP growth. Virtually no economist is forecasting that.

SCHIEFFER: Mr. Hubbard, thank you very much.

HUBBARD: Thank you.

SCHIEFFER: Appreciate it.

We'll be back with a final word in just a minute.


SCHIEFFER: Finally today, this summer has turned out to be a real mess.

Take last week. US Airways went bust, and United Airlines sent out distress signals. Amtrak's expensive new Acela fast trains were shut down. The shock absorbers are cracking. The repair people may also want to check the air conditioner on that train I rode back to Washington from New York on Friday night.

Which reminds me of the stifling heat and drought that settled over the country, just as record floods were washing away half of Europe. Was all this foretold in the Bible? Will it rain frogs next? Probably not, but watch out for mosquitoes carrying West Nile virus.

And did I mention the economy? The administration tried to hype it with that forum, but my friend said the economic news has him sleeping like a baby -- sleep an hour, cry an hour.

And just when we needed baseball to take our minds off all the serious stuff, the ball players threaten to strike. In baseball, enough is never enough. I love the game, and I never thought I'd say this, but one more strike will be about enough for me.

Maybe it was just the heat, but last week nothing seemed as good as it used to be--airlines, trains or baseball. Everything seemed to change for the worst, except Elvis.

On the 25th anniversary of his death, he's as popular as ever. Elvis has not left the building, and be glad about it. In a summer like this one, it's a little something to hold on to.

That's it for us. We'll see you next week, right here on Face the Nation.