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YOUR MONEY

Polls Show Jobs And Economy Number One Issue on Voters' Minds

Aired November 7, 2009 - 13:28   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(LIVE EVENTS FROM 13:00 - 13:28 SENT WITH 12:00 HOUR)

CHRISTINE ROMANS, CNN ANCHOR: It's been a year since President Obama won the election on a platform of change. And certainly there's been a lot of change particularly when it comes to the economy. Let's take a look. The economy finally shifted at reverse last quarter growing 3.5 percent. The economy's growing now. That's about the best economic news of his presidency. The stock market as well has made a dramatic recovery from its March lost. Commodity prices, they have spiked. Look at Gold. Also a record high. At the same time jobs are still being lost. So are the positive signs we're seeing, that 10.2 percent unemployment rate.

ROMANS: But at the same time, jobs are still being lost. So are the positive signs we're seeing -- that's 10.2 percent unemployment rate. Are the positive signs we're seeing false positives due to massive government spending? Or is this an economy that has goosed by stimulus and is now on the road to recovery?

Here's what President Obama had to say about it.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In every economic recovery there is going to be a lag between the economy growing again, businesses investing again, and businesses hiring again. The need for us to make up a whole lot of job loss is going to require, I think, some bold, innovative action on our part, and on Congress' part, and on the private sector's part.

One of our challenges now -- and I've been speaking about this for many months now -- is how do we get what I call a post-bubble growth model?

(END VIDEO CLIP)

ROMANS: A growth mod that is a stainable. What does the post- bubble world look like? How do we get there? The president may first want to consider how to get the economy out of this bubble, or at least post the little bubble aftershocks, according to our next guest, Rana Foroohar, senior editor at "Newsweek." Also joining us again, Diane Brady, senior writer at "Business Week."

I'm looking at gold. I'm looking at commodities. I'm looking at stocks. I'm saying, wait a minute, We Just got out of a bubble. What's going on here? RANA FOROOHAR, SENIOR EDITOR, "NEWSWEEK": We're seeing an echo bubble. It's something that happens typically after a big bubble. Governments come in, and they pump a lot of stimulus into the economy. And then you see markets go up.

We're seeing that across the board. There's no asset class, virtually, that's down this year.

ROMANS: What happens after that? There's this little bubble. And then does history tell us that, hmm --

FOROOHAR: That's exactly what happens. Typically an echo bubble deflates, usually takes about a year. It doesn't go back to the original lows. That implies a Dow at about 7,000, 8,000, maybe not 6,000. But it does burst. Only then can you start a new business cycle.

ROMANS: Is a new little echo bubble, and then we move on and then we start talking about the post-bubble sustainable growth world?

BRADY: Well, I think the enthusiasm for gold has a lot to do with the view of the U.S. dollar. I think that a lot of the enthusiasm in the market is the fact companies are in fact -- have cut to the point where earnings look good.

One thing we're seeing is a lot of U.S. companies are now getting their growth from overseas. So they're less reliant on the U.S. economy.

But I totally agree with Rana. There is no question that when you look at the U.S. economy in the long term health, it doesn't give a lot of reason for enthusiasm. So, yes, we'll probably go back a bit.

But it's not quite as dire as you might suggest. There's smart people investing, because they see growth that doesn't come from us.

ROMANS: Let me talk about smart people investing in the housing market. We're going to hear the president this week signing this new extension of the unemployment benefits, which is key for hundreds of thousands of people, and also this expansion of the First-Time Home Buyer Tax Credit.

So you're going to get more free money to buy a home. But is that also feeding into this idea of another bubble? I mean, we have to pay for it, first of all. We already know that, according to the Treasury's auditors, children have been getting the First-Time Home Buyer Credit. There's some fraud already in this program. Aren't we just propping up a market that maybe should be allowed to find its own floor.

BRADY: There are probably hundreds of thousands of houses in this country that we don't need. The reality is that, yes, 8,000 dollars helps. But if your real wages are going down -- there are a lot of Americans who bought hopes that could not afford to be in those home. So I'm not sure the extent of bubble. Certainly when you look at the trends with real wages -- we've seen wage cuts, benefits cuts, a lot of people who are being rehired are being hired back as independent contractors. That doesn't bode well.

ROMANS: Kernel answers.

BRADY: Kernel answers.

ROMANS: The word of the day, folks, kernel answers.

BRADY: And that is the trend. So there's less job security. That gives a lot more flexibility to companies. But it doesn't give a lot of flexibility to investing long term in a home.

ROMANS: Let me ask you about that home buyer credit. This got a lot of play this week. Do you think it's a good thing or do you think it's just the government getting in the market when it should just get out?

FOROOHAR: I think the latter. I spoke to Bob Shiller, actually, last week. He says he has seen the biggest turnaround in home prices in the last 100 years. This is coming at a time of record foreclosures. There's a disconnect there.

The real economy and the markets are not moving in sync. I think that is a problem.

ROMANS: They've expanding this. Now they've expanded this to be 6,500 dollars if you already own your home and you're trying to buy a new one. You're gonna move out. You've lived in a home for five years and you're going to move out.

You've talked a lot, Diane, about it. You can see more about this, -- and raising the income cap as well. Look, it's not free. We're going to -- it's going to be -- I don't know -- 10 billion dollars we have to pay for this. This does go on the bill.

Speaking of the bill, you've talk about this reset, this fundamental reset for America, back to the post-bubble world. What does it look like for us, the post-bubble world?

BRADY: Well, you've seen a lot of industries that are fundamentally changing, manufacturing moving offshore. A lot of these jobs are not going to come back. And we've seen a lot of companies that are not just lowering wages, which is unprecedented. They're actually cutting benefits. They're freezing 401(k)s.

So the standard of living for the average American is going to go down. We also don't have access to the credit we once did to create a standard of living that maybe we shouldn't have had in the first place. So I think it's going to about long, hard road for many, many Americans. And our education system's not catching up.

And one more thing I'd mention is when you look as the GDP numbers, that does not really attract the difference between investments in innovation, investments in training, and investments in just hard assets. Really, we need to see the investment in these intangible areas for this country to really be competitive.

ROMANS: Here's the problem for the president and his team: all of these things Diane is mentioning, he's got to be working -- they've got to be working on all of them at the same time?

FOROOHAR: Yes. I think it's going to make for a very tricky election next time. I think it's going to change what it means to be middle class in this country. I think it's not going to mean flying abroad and eating wild salmon anymore.

ROMANS: All right, Rana Foroohar from "Newsweek," thanks so much. Diana Brady from "Business Week," thanks ladies.

All right. Could a Mac Truck be the key to combating climate change? Find out next.

(COMMERCIAL BREAK)

ROMANS: The big three with big some news this week. Ford Motor reported a profit. Yes, a profit in the third quarter. The only U.S. automaker not to file for bankruptcy this year, it earned 997 million dollars, compared to a very big loss a year earlier.

Chrysler, which has seen its sales drop by half in the past few years, it vowed to return to profitability by the year 2011. The company also says it's on track to pay back billions of dollars in bailout loans by the year 2014.

And General Motors announced its plan to cut up to 10,000 jobs in a restructuring of Opal, a European subsidiary of the company. GM, frankly, shocked German officials, public officials, by announcing its decision to keep the European Opal unit, and cancel a planned sale to Canadian firm Magna.

VELSHI: That was interesting, because one of the reasons involved in canceling that sale was General Motors saying the environment, their ability to raise money, is actually better than it was when they made that decision to sell. So a bit of an indication that things might be getting better.

Let's also talk about Volvo. It's a company that you may think you know. But I'm not talking about the car company. Volvo sold the car unit to Ford back in 1999. I'm talking about the second largest truck company in the world. And it's not just those Volvo or maybe Renault trucks you may have seen on the road, particularly in Europe on Asia. Volvo happens to own Mac, which makes trucks right here in America.

I recently met with Volvo's Swedish CEO Leif Johansson. He said if you're concerned about climate change, then we shouldn't ignore the potential of trucks, because they do matter in this debate.

(BEGIN VIDEO CLIP)

LEIF JOHANSSON, CEO, VOLVO: You know, trucks actually run 24/7. And with that, they are actually -- they are good example of how one can make fuel efficiency very good business, also. Because with all of the use of fuel, if we can reduce by 20 or 30 percent, or even one percent, that actually turns into good economics for our customers.

I think we have good situation here, where fuel efficiency and the need to reduce carbon is actually coming hand in hand and doing well.

(END VIDEO CLIP)

VELSHI: It's interesting. We think about industry. We think about cars. But trucks, as he said, run 24/7 in this country. And this is an opportunity. If you make trucks more fuel efficient, you use less fuel. You help the economy. You help the environment. It's a complete sort of a package.

ROMANS: Also important in Copenhagen. You're going to be hearing a lot about Copenhagen, or Copenhagen. It's this conference on climate change coming up next month. It's critical for laying the groundwork for what big countries and developed countries are going to do about climate change.

VELSHI: A lot of eyes on this Copenhagen meeting. We'll be talking to you a little about this, as countries from all over the world will try and agree on standards to reduce carbon emissions.

Leif Johansson is going to go to this meeting, not just because it's like a 20 minute flight from where he lives. But he was telling me about how companies like his stand to benefit if the world can actually come to some sort of an agreement in Copenhagen.

(BEGIN VIDEO CLIP)

JOHANSSON: I think in Copenhagen the real cruxs there is going to be to have a number of countries sign on, sometimes with different commitments. And if I was to be on my wish list there, I would say we should have those. Even if they are voluntary, they should be identifiable, quantifiable and measurable. We should be able to measure effect.

If we can get as far as that, we in industry would know that we have a scenario all over the world that looks basically the same. And the market economy and companies are typically at the absolute best when they know that there is something coming, and we know what the long-term requirements will be, and we can do it efficiently.

(END VIDEO CLIP)

VELSHI: Finally, he brought a garbage a truck when he was here. The city of New York is testing a hybrid garbage truck that apparently belches out air that is cleaner than that which it takes in. It was here in front. We were walking around, looking at the garbage truck. They're testing it out in New York.

These hybrids are particularly good for stop and go travel, which, of course, is what a garbage truck does.

ROMANS: Did you get to drive it?

VELSHI: I did not. I did not get -- it was very clean, though, cleanest garbage truck I've ever seen.

ROMANS: There would be numerous violations, I'm sure.

VELSHI: If I were driving.

ROMANS: You don't have a chauffeur's license and probably our insurance and theirs wouldn't pay for it.

VELSHI: It would be a problem.

ROMANS: Great. Great interview. Thanks, Ali.

Are 401(k)s as safe and secure as they could be? We're going to talk retirement solutions -- retirement solutions about your money, to help you prepare. That's next on YOUR MONEY.

(COMMERCIAL BREAK)

ROMANS: Only about half of Americans participate in a 401(k) account. Among those, the average account only contains enough money to live on for a few years. Not nearly enough to fund a full retirement. so is it time for Congress to reform 401(k) retirement savings plan, make it easier for us to invest? And maybe make sure that this is a better process for us to make sure we're funding our retirements?

Roger Ferguson is the president and CEO of TIAA-CREF. Let me ask you, what do we need to do to make sure there's enough in our 401(k)s, and it's a solid enough system for us to retire on?

ROGER FERGUSON, PRESIDENT AND CEO, TIAA-CREF: The first thing we have to do is we have to recognize that the 401(k) was never meant to be the primary retirement tool in this country. It was meant to be a supplement. So we now have to build a retirement system for the 21st century, which will have four or five basic components.

ROMANS: How? Tell me.

FERGUSON: First thing is we've got to get to a position where everyone is enrolled in and saving for retirement.

ROMANS: They aren't now?

FERGUSON: They absolutely are not.

ROMANS: You have to opt in now.

FERGUSON: Exactly right.

ROMANS: When I talk to young people, when I give speeches, or even talk to young people here in the news room, I say, are you signed up? Are you in? You've got to get in. The younger you get in, the more money you'll have. FERGUSON: And you're giving them exactly the right message. So we've got to flip it to what is called an opt out, which is to say automatic enrollment, unless you opt out. And the second part is, as your income increases, the amount that you save should also be going up. So it's called automatic enrollment and automatic escalation.

ROMANS: Interesting.

FERGUSON: Item one. Item two is they've got to make sure that they are fully and appropriately diversified. One of the mistakes that people make is they say, I don't understand the stock market. I'll never invest in that. Or I'm going to be all in with the stock market.

The reality is broad diversification, and by the way, not just stocks and bonds, but also real estate investments.

ROMANS: Right.

FERGUSON: Professionally managed alternative investments. So diversification, item two.

Item three is look for good, solid objective advice that's not being commissioned.

ROMANS: Right.

FERGUSON: Because commissions obviously change the incentives. You want objective advice, someone who understands you, but is not being incented by a commission.

And the fourth part of a system is guaranteed income for life. The 401(k) focuses in on saving, but not planning to get you through retirement. So you need a system -- we need a system that takes us to and through retirement, including guaranteed income for life, in the form of a cheap, fair annuity. And you want to annuitize enough to pay for your basic expenses, room and board, if you will.

And those are the four major elements.

ROMANS: You also talk about health care expenses. This is incredibly important to save for health care expenses. There is health care reform going on. I don't know how that would change things. But you have an interesting stat to leave the viewers with. The average couple 65 or older without employer provided health care will need to save 200,000 to 800,000 dollars.

ROMANS: Exactly right. A shocking statistic. It is, of course, if you don't have employer provided retirement. But absolutely the fifth element is to start a position in this country where people can save for retirement health care expenses. This is not going to help people my age, the Baby Boomers.

But for folks who are 25 to 35, even to 40, not too late to start saving for retirement health care expenses as well. Because the number is large. ROMANS: All right. Some big choices. We'll have you come back and talk more how can fix it, how we can urge the right fixes from Congress. Roger Ferguson, president of CEO of TIAA-CREF, thank you, sir.

FERGUSON: Thank you.

ROMANS: Simply organic hair care. It wasn't a booming business when it was founded back in the early '90s. But thanks to the founder's son, it's now seeing green. Our Mary Snow reports in this week's Turn Around.

(BEGIN VIDEOTAPE)

MARY SNOW, CNN CORRESPONDENT (voice-over): It's become a place where Hollywood hair stylists turn to for beauty products. But Simply Organic Hair Products; rise to fame was far less glamorous. In fact, its start was near disastrous.

Gene Martignetti and Jon Mostrom founded the company in 2001.

JON MOSTROM, FOUNDER, SIMPLY ORGANIC: Would you put Methyl Propol Parabins (ph) on your salad? Why would you put it on your skin of your head?

SNOW: It strives to use plant-based ingredients whenever possible. But the effects of 9/11, combined with a bankrupt supplier, posed an almost insurmountable challenge.

GENE MARTIGNETTI, FOUNDER, SIMPLY ORGANIC: I had to sell my house, my car. It got to that point where every dollar we could make went back in.

MOSTROM: Quite frankly, 2004, I said, we are not going to recover unless something dramatic happens. Let's step back and look at who we are. That's when the boys stepped up.

SNOW: And step up they did. Their sons, Jeremiah, Gino and Cory, decided to take over the business.

MOSTROM: They have taken a beaten down horse and turned it back up into a race horse.

JEREMIAH MOSTROM, PRESIDENT, SIMPLY ORGANIC: It was definitely nerve-racking at the very beginning, not knowing where our source of money was going to come from.

SNOW: But the boys partnered with a smaller, local manufacturing company, who gave them discounts on raw materials. They focused on the Internet to help drive sales. And they went beyond hair styling products and introduced accessories like lip balm and candles.

J. MOSTROM: We went from salon to salon telling our story and building out business that way.

SNOW: The result of this hard work is a growing fan base. UNIDENTIFIED FEMALE: I'm so excited because it's a product line that I actually believed in, but then also gave me results.

SNOW: It also pumped up the bottom line. When the boys took over, sales were less than 100,000 dollars. This year, the company is on track to make close to four million dollars. The future of Simply Organic looks just as promising.

J. MOSTROM: I really see this as being something that I'll be passing down to my kids some day, and really, truly building an amazing family business.

SNOW: Mary Snow, CNN, New York.

(END VIDEO CLIP)

ROMANS: Why is your money, or the lack of it, such a hard problem for the Obama administration? We'll explain, next.

(COMMERCIAL BREAK)

VELSHI: All right, we welcome back "Business Week" senior writer Diane Brady and journalist and commentator Stephen A. Smith.

ROMANS: OK, two new polls show, once again, it's the economy, stupid. That's potentially troubling for President Obama. republicans scored two key victories in Virginia and New Jersey this week. Bottom line, voters are increasingly worried about the economy.

As you can see, nearly half the respondents in one of our polls state the economy is the most important issue to them. Here is where it gets dicey for the president. A majority of those polled now disapprove of how President Obama is handling unemployment. Is this economy ultimately going to determine President Obama's legacy or at least the chance --

VELSHI: We are a year into it.

ROMANS: Or, I was going to say, at least his chance to get a second chance.

BRADY: This is a dicey period. We have bottomed out. The jobless numbers are increasing. Of course, there's going to be a bit of a protest. I think one of the things people are angry about is he's had such a light touch on Wall Street. On the regulatory front, there's a lot attention on health care, but there hasn't been as much on a lot of the players that really people think got us into this mess in the first place.

SMITH: Couldn't have said it better myself. That's what really this comes down to, especially when you have been pushing the agenda that you have been pushing. You have been focusing so much on universal health care. I'm a guy, grew up on the streets of New York City, the African American community, grew up poor. I understand the importance of universal health care. Please, don't get me wrong. But if you gave me the choice between having health care or a job to go to with money in my pocket, where I can then determine what level of health care -- what quality of health care that I can get, then you know what? I'm going to pick the latter. At the end of the day, it comes down to understanding that it's about jobs. It is about the economy.

When you consider the fact that the unemployment rate in the black community is over 15 percent, and you have a black man who happens to be the president of the United States of America that does not seem to get that, it's highly offensive.

VELSHI: You don't think he gets it?

SMITH: I'm just saying.

ROMANS: Even before this 10.2 percent unemployment rate, the president said, look, I do get it. And we are doing every single thing we can do. You think he gets it.

BRADY: I think the reality is the president of the United States does not have that much control over the jobless numbers. You need a healthy economy. You can only put so much stimulus into the system.

Yes, there are problems with lending. There are problems with taxation. But we need companies to be healthy and hiring, again.

SMITH: Please let me add this. I'm not disagreeing with a single word you just said The point I'm making is that hasn't been his focus verbally. Because it hasn't been his focus verbally, even though he's made it a priority this week, he hasn't given that impression over the last few months.

ROMANS: -- too many irons in the fire?

SMITH: Probably so. And because he's got too many people to deal with. I think the people in Congress in the House are going to suffer more than he's going to. He has some time. He has until 2012. They are the ones that need to be pushing.

ROMANS: That's what happened to Reagan. What happened to Reagan was Reagan was very popular. He did not suffer, but his party suffered.

VELSHI: Speaking of that 2010 election, where the House may suffer, the House wants to move up tough new credit card rules to protect consumers. They want it to go in effect as soon as possible. The move is in response to credit card companies raising interest rates and fees ahead of the new laws. They now its coming in so now they are moving ahead with them.

We have been hearing a lot about this from our own viewers. The Senate and the president have to sign off on this. Is it an election ploy? Probably, but sounds like they got to do it.

SMITH: Ali, this is a classic example of the American people looking at Congress and saying, where have you been. How clueless can you be? Here you are, you pass these laws because you want to make sure that you protect the consumer from these credit card companies. But the laws are going to be enforced in February of 2010, and then August. Then you move it up.

Excuse me, duh, they have to do something wrong. You knew ahead of time they were going to --

ROMANS: It's very hard when so many people have been giving you contributions for so many years and suddenly you have to actually be a watchdog. Right?

BRADY: Their earnings are terrific, by the way. Did you see Cap One last week? The credit card companies are doing very well right now.

SMITH: You knew they were going to try to circumvent. I have a got a cousin -- a nephew, rather, that just came to me and said that they gave him a credit card. Rates went up 29 percent. This is what they do. You know that they are going to do it. Why would you need to see that in order to enforce it and move up the deadline?

VELSHI: That's the bit of cluelessness that we wonder, don't these live out in the same America where we live, where that kind of thing happens?

SMITH: That's how you know they live in a different world. That's the problem.

ROMANS: Steven A. Smith, Diane Brady, thank you both.

Thanks for joining us in YOUR MONEY. You can follow Ali Velshi and me on Facebook and Twitter @ChristineRomans and @AliVelshi.

VELSHI: Make sure you join us every week for YOUR MONEY, Saturdays at 1:00 Eastern, Sundays at 3:00. You can also log in 24/7 to CNNMoney.com. Have a great weekend.