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Budget Surplus Shrinking


DOBBS: The budget surplus is shrinking, the government posting a $127 billion surplus for fiscal 2001. That is 46 percent smaller than a year ago. Still, it is the second largest surplus ever. Budget officials today blaming lower personal and corporate income tax receipts on the smaller budget surplus. Joining me now to take a closer look at this economy and its state is MONEYLINE regular, Lakshman Achuthan.

DOBBS: We've watched the budget surplus dwindle. How concerned should we be?

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Well, that's what happens, actually, during recessions. That's what happens.

DOBBS: So we shouldn't be concerned?

ACHUTHAN: Well, I don't think you should be surprised. I think we're -- I think that the nice thing about cycles is as they go down they also will eventually turn up and we hopefully have a long expansion and build up a surplus again.

DOBBS: Some people drawing some confidence from the fact that unemployment remaining relatively stable, at least in the unemployment report for last month. We have a new one coming out. What is it going to it tell us?

ACHUTHAN: It's going move in the wrong direction. I...

DOBBS: What I'm going to ask is, how much is it going to move in the wrong direction?

ACHUTHAN: More than we would ever want, is what I would say. You're going to see a continuation of deterioration in the job market. And that's critical, and a critical negative right now, because consumer confidence is the key to the timing of when all that stimulus will go and get spent. And once consumers feel a little bit more stable about their future, they will spend the stimulus and you will get a strong recovery.

DOBBS: And what's it going to take to bolster that stimulus? We have anthrax attacks. We have the attorney general today talking about more attacks maybe on the way over the course of the next week, issuing more alerts. We have continued cuts, as you pointed out, an economy that is shrinking and it appears for all the world we're in recession. What's it going to take here?

ACHUTHAN: Well, I think it's going to take some time, quite frankly. Job market is where confidence is rooted, and the jobs are going to continue to deteriorate for the next couple of months minimally, as corporate America tries to become profitable. On top of that, when you have the uncertainty introduced by the terrorist situation, that's an additional negative. If we can get some visibility on either of those fronts -- some sign of a stabilization and of some constructive moves going forward -- then the consumer can spend some of the pent-up stimulus.

DOBBS: And some successes in the war against the Taliban, Al Qaeda and other terrorists.

ACHUTHAN: That's part of it. Definitely.

DOBBS: Okay. Good to have you with us.

ACHUTHAN: All right.
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