Marketplace: News Archives

Tuesday, October 24, 2000
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It's Tuesday October 24th. I'm David Brown sitting in for David Brancaccio.

Here's a story that caught our eye out of Washington today. You may or may not know that the fiscal year for the federal government ended back on September 30th. Well, now all the numbers are in for this past year and the Treasury Department says there's a budget surplus of $237 billion. That's nearly twice what it was last year. It's also the third year in a row the feds have reported that revenues exceeded expenditures. The last time we had three straight surpluses was more than 50 years ago.

Now here's rub: this surplus goes right to the heart of the debate between the two presidential candidates: George W. Bush and Al Gore. Governor Bush says that surplus should be returned to taxpayers by way of tax cuts. Vice President Gore wants to use the money to pay down the debt, with narrower, more targeted tax relief. While all this is predicated on further surpluses, Henry J. Aaron, Senior Fellow in Economic Studies at the Brookings Institution calls for some political circumspection.

Aaron: "We have other obligations that are going to be coming due: pensions for federal employees, increased discretionary spending beyond what was assumed by the budget forecasters. If one builds in more realistic assumptions and squirrels away what one should not be spending, I think what we can look ahead to are budget surpluses but not as large as the numbers being bandied about by the candidates".

Henry J. Aaron, senior fellow in economics at the Brookings Institution.

On to some corporate news. Hot on the heels of word that AT&T may be getting out of the long-distance telephone business, another American icon, Xerox, is also talking about restructuring. Today the company synonymous with copiers announced its first quarterly loss in 16 years. Xerox is in serious debt and its stock has been in a major free fall, tumbling from a high of nearly $64 in May of 1999 to a low of under seven dollars this month. From the technology desk, Marketplace's Laura Sydell reports that the announced turnaround plan is getting mixed reactions.

Sydell: "So familiar is the company name that we call them Xerox machines, not copy machines. But now the venerable blue-chip corporation is staring down an $18 billion debt. In the turnaround plan announced today, the company quelled rumors that it would sell it's famed Palo Alto Research Center, home of such historic innovations as the personal computer and the mouse. Instead company officials announced that they are seeking a non-competitive partner in the dance. Observers say that may help Xerox capitalize on it's own innovation. But there are other corporate assets on the auction block. The company plans to sell its China operations, Xerox Engineering Systems and portions of Fuji Xerox. The corporation will also eventually exit the equipment financing business. And the inevitable layoffs are in the offing, although Xerox will not yet reveal details. But talk is cheap and Xerox needs billions in hand to service its debt. Analysts such as T. Rowe Price's David Giroux say the possibility of asset sales may not be enough to bring Xerox stock out of the dumps."

Giroux: "Unfortunately what's going to drive the stock here in the next couple months is fear. And fear is a powerful driver of stocks sometimes. You know we were hoping for a lot more information out today in terms of specifics. Maybe there'd actually be a divestiture announcement that the finance business would be sold to GE capital. And that wasn't announced so I think there's still a little bit of fear out there."

Sydell: "In recent years, Xerox has had major competition from Cannon, IBM and others. But, observers say more is needed. In addition to asset sales, Xerox needs to change its corporate culture to one that is nimbler and better able to face the competition. From the Technology Desk, I'm Laura Sydell for Marketplace."

Doctors are warning that some 20,000 Americans could die from the flu this winter, many will be seniors or people with lung disease or immune diseases. These are the very people the Centers for Disease Control say need flu shots as a priority. But as Helen Palmer reports from the Marketplace Health Desk, this year that's not happening.

Palmer: "It's not so much that there aren't any flu shots, it's just that production problems at the factory means there's been a delay in shipping them out."

Scalettar: "Distribution is a major problem and it's not being distributed to those on the front lines who want to give it to their patients."

Palmer: "That's Washington, D.C. physician Dr. Raymond Scalettar. He's complained to the Centers for Disease Control that though he has sick patients who really need the protection, he just can't get the vaccine."

Scalettar: "Corporations now have it available. They're giving it to healthy employees. Drug stores have it available and are giving it to anyone who walks in. But we, the physicians, are unable to obtain it even though we ordered it."

Palmer: "The CDC, for their part, are urging healthy folks to wait and let those at high risk get their vaccinations first. But, they acknowledge they have no power to enforce that good neighborly behavior. So meantime the vaccine factory is working 24 hours a day in a race against the flu. Of course, millions of Americans now swear by alternatives to drugs or vaccines. When it comes to the flu, vitamin C and Zinc and Echinacea, washing your hands often and keeping cheerful are all popular prophylactics. And, remember: you can keep your window closed. After all, we all remember the hoary old kid's joke. 'I opened my window and influenza!' From the Health Desk at WGBH Boston, I'm Helen Palmer for Marketplace."

And that's the top of our news for Tuesday.