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YOUR MONEY

Obama Vs. Ryan: Revenue/Spending Cut Mix Vs. All Spending Cuts; Gender Pay Parity Coming?; How Could Rising Oil & Gas Prices Hurt Recovery?; gh Gas Prices; Reinventing Your Life; Real Housewives of Wall Street

Aired April 16, 2011 - 13:00   ET

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


ALI VELSHI, CNN ANCHOR: President Obama wants some Americans to pay more for their government. Republicans are asking people to expect less from Washington. Are both sides simply playing politics with the national debt hanging in the balance? Welcome to YOUR MONEY. I'm Ali Velshi.

President Obama laid out his plan for reducing the nation's debt this week. But he clearly explained the contrast between his vision and that of Republicans.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We don't have to choose between a future of spiraling debt and one where we forfeit our investment in our people and our country. To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I'm president, we won't.

(END VIDEO CLIP)

VELSHI: Don't have to sacrifice the America we believe in as long as I'm president, we won't. Democratic strategist and CNN contributor Cornell Belcher.

That sounds like candidate-speak to me, Cornell. Right now we need compromise on all sides, kind of difficult now that we're unofficially into a campaign. Do we give up leadership for politicking at this point?

CORNELL BELCHER, CNN CONTRIBUTOR: Well, I don't think we are in a campaign. I think it's two things. One of the things is, you talked about early on, was sort of the president asking to pay more for government -- some people to pay for government.

No. I think what the president is saying is that you have a -- that we have a responsibility to, you know, the broader society and some people right now aren't paying their fair share. In order for us to get our fiscal house in order, we are going to have to ask those who are able to do so to act and pay their fair share.

So I don't think it's campaign mode at all. I think he's laying out his vision for what he sees as moving forward. VELSHI: All right. Stephen Moore is an editorial writer for The Wall Street Journal.

Stephen, here's something that's kind of interesting and probably fits right into your wheelhouse. Both Paul Ryan's Republican budget plan and President Obama's renewed budget plan that he unveiled this week, have one thing in common: major tax reform.

That's where the similarities on the budget seem to end, however. But President Obama would increase tax revenue by a trillion dollars. He wants to eliminate the Bush-era tax cuts for the wealthy. I suspect you won't agree with that. And he wants to raise taxes on individuals making $200,000, couples making $250,000, the top tax rate would jump to 39.6 percent. It is less clear what happens to tax breaks for those making less money.

Now on the other hand, let's take a quick look at the Paul Ryan budget proposal. It would actually result in less tax revenue, would bring less money in. The top tax rate for individuals and corporations would be lowered, the Bush tax cuts, extended by President Obama, through 2012, they would become permanent.

Stephen, a record number of Americans now relying on government help, why do we continue to hear from conservatives that this is not a revenue issue? It seems like there's a lot of cover for wealthy Americans going on on the part of the conservatives?

STEPHEN MOORE, THE WALL STREET JOURNAL: Well, Ali, I think you just answered your own question. The problem isn't that people aren't paying enough taxes, it's too many people are getting government checks. And we have to do something about that.

I want to correct you on one thing. You said that both the president and Paul Ryan want to do tax reform. No, the president, he's using the terminology "tax reform," but, Ali, the way I think you and I think about tax reform, or most economists do, is the grand bargain is you reduce tax rates, you broaden the base, get rid of the loopholes so everybody pays their fair share.

That's not what President Obama is talking about. He's talking about raising the tax rates and broadening the base, which is another way to say he wants to raise taxes.

Now look, if you look at the official statistics, you know these numbers, Ali, the top 1 percent already pay 40 percent of the income tax. The bottom 2 or 3 percent pay more than the bottom -- the top 2 or 3 percent pay more than the bottom 97 percent. It's a highly progressive system.

One last statistic for your viewers to think about. I ran the numbers this week. If we took every single penny, Ali, from people that make over $100,000, like you and me, if we took every single penny of 100 percent tax rate on people who make over $100,000, that still wouldn't raise enough money to balance the budget. So taxing the rich isn't going to get it done.

VELSHI: Jeanne Sahadi is sitting here with me. She's doing some back-of-the-envelope math on that.

Jeanne, what do you think?

JEANNE SAHADI, SENIOR WRITER, CNN MONEY: OK. So I agree with Stephen Moore that you can't just tax the rich to balance the budget and you can't just rely on taxes to balance the budget. But in fact you can't not tax people more if we're going to support some of the priorities that the government has going forward and that Americans have going forward.

It is going to be a math problem to just do everything on spending side. And I didn't hear President Obama say he wants to raise rates in the guise of tax reform. Both Ryan and Obama said we're going to extend the Bush tax cuts for some or all, and we're then going to do tax reform.

Well, if you do tax reform, it makes the Bush tax cuts a moot point. So let's hope they do that because I'm bored with talking about the Bush tax cuts at this point.

(LAUGHTER)

SAHADI: So, you know, there is that to consider.

VELSHI: Well, here's an important point, I think we can all agree on, Jeanne. We hear so much about debt and deficits and the Ryan plan versus the Obama plan. Let's just take a moment and head over to Christine Romans at the magic wall with a look at exactly what we're talking about -- Christine.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN ANCHOR: What is the difference between a debt and a deficit? Think about your own budget. When you spend more money than you make, you're running a deficit. It's that easy. You borrow to cover the difference. Uncle Sam does the same thing. And all of those deficits year after year add to a huge pile of national debt.

How big? 14,000 billion. So deficits are spending more money than you make and debt is something owed, it's how much money you owe. The U.S. currently has $14.296 trillion of debt. If we continue to spend money at our current rate, our debt will top $25 trillion in 10 years.

Under President Obama's plan, that's 20.8 trillion. And under the Paul Ryan Republican plan, it would be 19 trillion in 10 years. So think of that, even under these reduction plans, trimming it, it's just slowing the rate of increase but the increase is still going up.

(END VIDEOTAPE)

MOORE: Ali, can I mention something?

VELSHI: Yes.

MOORE: The best way to reduce the deficit, John F. Kennedy proved this, Ronald Reagan proved this, Bill Clinton proved it, the best way to get the deficit down and, yes, to raise -- to increase tax revenues, is to grow this economy, put more American people to work, get corporations making more money.

And here's the problem with -- that I have with "soak the rich." I don't see how we're going to get the economy to grow faster if we're raising taxes on the businesses and corporations in America that create the jobs. That's the fundamental contradiction, I think, of the president's plan.

VELSHI: Well, Cornell...

BELCHER: Well, I think -- well, let me jump in here. Because it's interesting, I'm glad you brought up Bill Clinton, because guess what, we're asking that we go back to the tax policies of Bill Clinton. Remember piece and prosperity? We had the largest peacetime sort of economic advancement in our country under these tax policies.

What's wrong with the wealthy paying a higher share? If all of these tax cuts for the wealthy created all of these jobs, we would have jobs coming out our eyeballs.

(LAUGHTER)

BELCHER: But that's not the case right now.

VELSHI: Answer that, Stephen, it's an interesting allegation.

MOORE: Ali, well, first of all, President Obama wants to take tax rates a lot higher than they were in the 1990s. Because, remember, in the "Obama-care" bill, he has a 4 percent surtax on investment income.

But look, the world is in a place right now where the countries around the world are cutting tax rates, China, India, Europe is cutting tax rates. We're in a globally competitive world. I don't like the U.S. chances if we're raising tax rates when the rest of the world is cutting them. That's not going to bring jobs to the United States.

VELSHI: Hold that thought right there. Hold that thought. Cornell, Jeanne, Stephen, stay where you are, dealing with our $14 trillion debt is going to hurt one way or the other. The pain is either going to come now or it's going to come later.

How much would your life change as a result of the Republican plan? We'll discuss it when we come back.

(COMMERCIAL BREAK)

VELSHI: Medicare is the government's health care program for senior citizens. The numbers suggests that the program as it is is unsustainable. Medicare is funded by payroll taxes, premiums, and money from the federal government. The problem, this income isn't keeping up with increasing costs.

Now enrollment is estimated to spike by more than 30 percent over the next decade as our population ages, or as the Baby Boomers age. And during that time, costs are expected to increase by 50 percent per enrollee. Now without reform it is estimated that by 2040, Medicare will only take in enough revenue to pay 30 percent of its costs.

You can see where this is going. House Budget Chairman Paul Ryan, 2012 budget resolution, proposes a dramatic overhaul of Medicare. Jeanne Sahadi here with the changes to the plan -- Jeanne.

SAHADI: Two changes. One, he's going to change a fee-for-service program into what he calls a "premium support system." In other words, by the time -- it would start in the 2020s, once people enter Medicare, they would get a cap subsidy to help pay for a private insurance plan. And it would be a Medicare-approved private insurance plan.

And that premium would be adjusted for a person's health status and age and income. But it would be capped. And basically what he would do is make the federal health spending costs more fixed, more predictable, and he would help reduce the deficit with that.

He would also raise the eligibility age for Medicare over time, do it gradually, again, starting in the 2020s from 65 today until 67 by the early 2030s.

VELSHI: All right. Cornell Belcher, the Republican senators -- three Republican senators this week proposed gradually raising the Social Security eligibility age from 67 to 70 by the year 2032, while lowering payments to upper income retirees. We heard similar proposals from President Obama's Deficit Commission.

When will Democrats stop criticizing on the Social Security side and start leveling with Americans about the cut backs that they are going to have to endure?

BELCHER: Well, I don't know if we've been criticizing. I would say this, the president has called for both sides to sort of come together around this with vice president -- with the vice president and sort of work this out.

What doesn't work is one side shouting across the room at the other side. Social Security -- the president also understands Social Security right now is not driving our near-term debt and it is not sort of in crisis.

However, we do have to sort of fix it for long term. But both sides are going to have to get together on this and compromise. It's not going to be one side or the other.

The only thing that Democrats will sort of draw a line in the sand around Social Security is, we cannot privatize it. Because when you privatize it, you're putting it out there and gambling it and that means Social Security is probably going to go away.

VELSHI: OK. Stephen, I want to ask you something, I want to show you two CNN/Opinion Research polls that go right to the heart of this topic: 68 percent of Americans say that Republican spending cuts do not apply fairly to all groups, just 29 percent of respondents felt that they were fair.

Now those numbers are basically reversed when asked if the GOP cuts would affect your family: 69 percent say yes, 28 percent say no. This would seem to be, Stephen, where the rubber meets the road. We're talking about voters here.

Do Republicans have to listen when seven out of 10 Americans say that the plan is unfair and directly affects their families?

MOORE: Well, look, it's always tough to cut the budget, Ali. That's why we have a 1.5 trillion deficit. Is everybody wants money from the government and nobody ever wants cutbacks.

And that's why, you know, for example, I think we can't have "Obama- care," because once you give out those benefits to 30 million more Americans, it's going to be impossible to take them away.

There's no question there's a lot of political risk, Ali. I agree with you, with the Republican plan, of saying, look, we've got to cut these benefits. But let me, you know, throw the gauntlet to the three of you.

I mean, the Democrats for the last several months, as you know, Ali, have been saying to Republicans, you can't just cut the domestic discretionary programs, all of the money is in entitlements. Now Paul Ryan has come up with a plan to make some deep cuts in those Medicare and Medicaid programs.

I don't agree with everything in Paul's plan, but I give him a lot of credit for doing it. What I'm not hearing, Ali, is from the Democrats, I didn't hear from President Obama what they want to do to get those programs under control.

And by the way, why does Warren Buffett need Medicare? Why can't we take away -- you know, maybe I'm going to engage some class warfare, here, but why do we have to give rich people health care benefits they can afford themselves?

VELSHI: Stephen, in fairness, when you examine the proposal -- I can see Cornell is getting a chuckle out of that. But when we examine the Ryan proposals and the Obama proposals, and their long-term effect, they are not actually that different. And that thing that Christine showed us, ultimately our concern is where our national debt goes as a proportion of our economy, and neither of these really solves the problem.

MOORE: Except that, Ali, I think that's not fair because the president didn't really say what he wants -- all we know that he wants to do is raise taxes on the rich. I didn't really see him be specific like Paul Ryan did. You talked about the rubber meets the road. Where does the rubber meet the road with respect to the president's budget? There were no specifics.

BELCHER: Well, I think actually he has laid out some fairly specific things. But how -- or what we will not do is allow sort of Medicare or Medicaid to become a voucher program, because that's effectively ending Medicare and effectively taking power away...

MOORE: OK. Cornell, but what do we do about it?

BELCHER: Taking power away...

MOORE: OK. So what do you want to do to cut it?

BELCHER: Taking power away -- well, taking power away from seniors and giving it, in fact, to the health care industry and doing all of this so you can give people like us a tax break, is not the way forward.

VELSHI: Jeanne?

SAHADI: OK. So we have those two sides. I really think that Ryan has a point and Obama has a point. Ryan is right that we can't continue to pay endlessly for Medicare without any cap whatsoever. So we may want to do it in a progressive way so that the wealthier get less in terms of benefits.

But President Obama is also correct in that if we want to keep this program in place, and we know our population is aging, and we know medical costs are going up because of advances and so forth. So our standards from what we want for medical care are going up. We're going to have to come up with a way to pay for it.

Now you can disagree about the tax piece of it, but we need a combination of these two men's...

(CROSSTALK)

VELSHI: I think we can solve this whole debt-deficit problem with just the four of us here.

(LAUGHTER)

MOORE: Let's do it. Right now. Let's write a plan, Ali.

VELSHI: I think we should. And if you don't get it done by Sunday night, we're going to have a shutdown. OK, guys, good to see you. Cornell, great to see you, as always, Stephen Moore. Jeanne, thanks so much for your continued hard work.

By the way, go to cnnmoney.com and check out Jeanne's stuff. She is studying this more than anyone else around, and she would like that because she doesn't get out much these days.

In the past, we've always had the unfortunate reality of unequal pay between men and women. Men simply made more money than women. Those days might be over. I'll tell you afterwards.

(COMMERCIAL BREAK)

VELSHI: I am joined now by Rachel Sklar, editor-at-large for mediaite.com, and a fellow Canadian; and my partner in crime, Christine Romans, is back. Listen, here's a recent tweet from Ari Fleischer. You all remember Ari Fleischer. He was the former press secretary to George W. Bush. Goes like this: "I'm glad there was no Twitter when I lived through the congressional debate in '95 over a government closure. This micro play-by-play is rough." He did that last Friday shortly before the budget deal.

Take a look at this. A huge change in the way we get and report news. It's all about the "interweb." Instant information, instant feedback, instant punditry, good, bad, or just deal with it. Christine and Rachel, your answers in 140 characters or less -- Rachel.

(LAUGHTER)

RACHEL SKLAR, EDITOR-AT-LARGE, MEDIAITE: I feel like...

(CROSSTALK)

VELSHI: You're in the business. That pays your check, the Internet.

SKLAR: You know what, and I'm a big fan of transparency, I feel like Ari Fleischer was saying, I'm glad there was no transparency back in '95 when this was happening. It is ridiculous. He should be celebrating the fact that the populous is informed.

VELSHI: Very interesting.

ROMANS: You know, I think the more the merrier, quite frankly. It makes our job even that much more important because we have to decipher through all of the contradicting comments and all of the points -- you know, the talking points and the play-by-play to really kind of boil it down in the traditional way.

So I think the more information the merrier, and I think it also gives us more idea of what's resonating with people. You can see that something is really trending. You know, then you know it's resonating with people, and that's good.

VELSHI: Or that nobody responded to something you did.

ROMANS: Sure, absolutely.

SKLAR: And it allows instant reaction as well.

VELSHI: Christine always cautions me about the degree to which I engage my critics on Twitter, but now I actually podcast about it, I take my criticism every week and I put it out there.

Because the reality is, it's out there anyway, it's what people were thinking. Now they are just saying it.

SKLAR: And it makes you better.

VELSHI: It does make me better, I think. I don't know.

All right. Listen, let's talk about this. There's an app for everything out there, there's now a degree for apps. Now I thought when I first read this that it meant there was an app for getting you a degree. That's not what it is. But there's an app-making degree. According to BLS, computer software engineers are among the fastest- growing careers. BLS, Bureau of Labor Statistics, the government people who measure employment.

Christine, is this good marketing or is this a good degree?

ROMANS: Well, look, this degree is going to change. We made this point. It's a four-year degree, everything is going to change in four years. So you should be taking computer science classes and computer science courses that are changing and that are fluid.

Because some of those old skills that we think of, old meaning three years ago skills, are a commodity now. You have to be much more innovative in all kinds of computer engineering jobs, and you've got to be moving fast.

SKLAR: I mean, the iPhone itself launched in 2007, that's four years ago. This is a great idea, you know, step up the education, but that sounds to me little bit like a degree in dial-up.

ROMANS: Yes. And, look, you should be doing this in high school and junior high. I mean, this is...

VELSHI: I agree. You told me that there's an app camp for kids.

ROMANS: An app camp for kids 7 to 17 years old. I mean, look, this -- and, gosh, there's going to something in four years we don't even know about, you know? So hopefully the universities who are teaching this stuff are moving quickly so that the kids have the skills so that they can compete.

SKLAR: And the kids are doing it by themselves, by the way.

ROMANS: That's right.

VELSHI: Yes.

ROMANS: That's right.

VELSHI: I agree with you. All right.

ROMANS: Taking expensive education out of the mix, I like that.

VELSHI: All right. Look, more evidence of the "man-cession," we called it a "man-cession," a "he-cession," because so many men were employed in construction and factory work, they got unemployed through the recession.

Not only is male unemployment higher than that of women, but a Wall Street Journal op-ed this week found that among those under 30, women earned more money. Christine, gender bias?

ROMANS: No. Well, there has been a couple of studies about this that show that kids who are either the Generation X girls in the next 10, 20, 30 years, they are going to be out-earning their male counterparts, in part because of what they're studying, the kinds of ways they are going and getting it.

So there could be this trajectory in our lifetimes when women have the upper hand, reversing things. I mean...

SKLAR: But.

ROMANS: But?

SKLAR: But this particular article takes the stats and sort of gerrymanders them. I think it's important to note that it is an op-ed written by the executive director of the Independent -- I think the Independent Women's Council -- the Independent Women's Forum, which is a conservative organization, heavy Republican, has been called anti- feminist.

It's clearly not coming from the perspective of, like, let's say, Planned Parenthood.

VELSHI: But do you believe...

SKLAR: So I think that's important.

VELSHI: Do you believe that it's true, that, look, we know half the students...

SKLAR: It's not true.

VELSHI: ... in graduate programs are women. We know that half the students in college are women. Are we in better positions...

SKLAR: Well, talk about the wage gap. So it's important to zero in on equal work. And is there equal pay for equal work? And...

(CROSSTALK)

ROMANS: Seventy-seven cents to the hour right now.

SKLAR: ... say no.

(CROSSTALK)

VELSHI: But wouldn't we think that as things have changed, if we're taking an average of all working women, those at the older end probably have a bigger gap and those at the younger end, do you think they have a smaller gap?

SKLAR: That's taking an average of like a fruit bowl. And it's very important in this situation to compare apples to apples and not bananas to bananas.

ROMANS: I'm looking just at the very front end, at the youngest women right now in the workforce, that's where you're looking in other studies, not just this study that have shown further out that's where you're going to get the best chance of getting parity, getting parity. But it is 77 cents to the dollar now.

VELSHI: This is the first time in the history of the show somebody has maligned a fruit bowl. Rachel, great to see you, as always. Rachel Sklar from Mediaite, a fantastic site.

Christine, hang out, we've got more to talk about.

All right. Four dollar gas is not just ruining your day, it might be threatening your entire economic recovery.

(COMMERCIAL BREAK)

VELSHI: Gas prices up about 30 percent from a year ago. Last year the national average for a gallon of unleaded self-serve gasoline, $2.86. This week it is more than $3.80. Tom Kloza, chief oil analyst at the Oil Price Information Service.

Tom, the highest national average we have seen was back in July of 2008, oil was much higher than it is today, gasoline $4.11 per gallon, national average. We're just under $4 now. We haven't even started the peak summer driving season. What's your sense on where oil prices go and gas prices?

TOM KLOZA, CHIEF OIL ANALYST, OIL PRICE INFORMATION SERVICE: My sense is that we're in yet another year of "petro-noia," where we see prices move up in the spring on the premise that we're not going to have enough fuel, there are too many things internationally happening.

And somewhere in the next few weeks we'll peak. My hunch is it will be less that $4 a gallon probably in most places. And then we'll be paying less than we paid on July 4th than what we pay on Easter Sunday or Cinco de Mayo.

ALI VELSHI, CNN ANCHOR: Peter Morici, professor at the University of Maryland School of Business. Peter, higher gas prices, generally mean particularly in a tight economy that people spend less on other things because you're paying more money for the same amount of gas.

If these gas prices stay high, you say this could bring on the loss of hundreds of thousands of jobs in this country. Why is that not petronoia that Tom was talking about.

PETER MORICI, PROFESSOR, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: There's a difference between petronoia about the price of gas and how high it will be and whether it's all going to be there and whether we need it. What it actually does if it stays high?

If it stays high, most economists are now predicting say 2.8 percent growth, instead of 3.3, 3.4 for the first half of this year. That translates into a loss of about 500,000 jobs that just don't get created.

As the money leaves the country to pay for imported oil and doesn't stay here to buy restaurant meals, get your clothes dry cleaned, people spend less money on non- necessities. If the price goes up above 4 say to 4.25, 4.50 then you're starting to get to the point where growth could fall say below 2.5 percent. At that point, it gets hard to sustain the recovery and things could cycle down.

VELSHI: Christine, you have a couple different views about where oil prices are going. What's your sense of the effect on the economy?

CHRISTINE ROMANS, HOST, CNN'S "YOUR BOTTOM LINE": Well, the effect on the economy is real quite frankly. We have this payroll tax holiday that people have. They're getting more money in their pockets and it will be more than sucked out by paying for higher gas prices.

And it's something you feel every single week when you fill up the tank. There are other rising commodity prices that people feel on milk, on meat, on wheat and on everything that you can imagine when you go to the grocery store so energy prices in general have been moving higher.

I think that it is real, but when you talk about the effect on jobs growth or the economy overall, I mean, the fed keeps saying it's not its fault by keeping interest rates so low that all of these commodities are going up.

And the fed keeps say another so-called, you know, government expert keep saying that this is not going to derail the economy, but it's a fragile economy.

We've been talking a lot about budgets, but jobs are still a problem here. I can't say enough that I feel as though people who have been out of work six months or longer, they go to fill up the gas tank and it's really a critical situation.

VELSHI: Peter, well, Tom, maybe I asked the wrong question whether you think gas is going higher and oil is going higher. It doesn't matter if it goes higher, it's high right now.

Where do you think oil prices are going? Are they going to be substantially lower in the next few years because that's the decision that people have to make if they are investing in alternatives?

KLOZA: Well, we're at a critical juncture here right now. I mean, I think prices will probably peak here for the short term and then drop off the 18 or 20 percent that they normally do. But there's a larger issue here and it's kind of a great issue for our decade.

Money is flowing unfettered into commodities and one of the favourite commodities is oil. Now that money and it's not necessarily sinister, it's coming from, you know, a very passive mass of funds or whatever.

It has an impact and it has an impact of lifting prices for all commodities. The exchanges, everyone that regulates the futures do not want to see any kind of fettering whatsoever. I think that you have this class war between the super rich who tend to invest in commodities and people on the margins and people in the middle who are impacted by the high price. VELSHI: What's your point there, Peter?

MORICI: I think there's more to it than that. I mean, global demand for commodities especially oil is rising very rapidly because of conditions in China and elsewhere in Asia.

And I would point out that Chinese regulate gas prices so they don't feel the full impact when we have these spikes and that tends to push the spike on rest of the global market. I don't think we can get around the fact that there's a secular increase in the demand for oil --

VELSHI: Not in the U.S. There's a secular increase in the demand.

MORICI: We have to pay the global price though. We have to pay the global price, $10 million barrels a day imported. Unless we substantiate cartel our imports by cutting our gasoline consumption that will affect us.

I believe that going forward we're going to see higher oil prices than we have over the last several years, that is over the next several years, 110, $120 a barrel sustainable, yes.

VELSHI: Christine, Tom said something interesting. He said it's not sinister necessarily. You know, every time we talk about oil and if I ever step over the line and talk about oil and ways to invest in it, I get all sorts of tweets.

It's speculators, speculators should be put out of business, speculate - it is. Speculators are the same people who buy your house when you're trying to sell it and people who believe that the price of an asset is going to be higher later than it is today. What role has speculation got to do with $110 barrel oil?

ROMANS: When speculators overshoot and speculators undershoot and when speculators overshoot then suddenly the thinking go down just as quickly when they've gone the wrong way. We've seen that happen before. Speculators, look, they are sort -- I hate to use the word liquidity.

VELSHI: If you have a 401(k) or IRA you're a speculator.

ROMANS: Right, right. But there are other people who are just big, fast, momentum traders, a lot of money behind them who see a trend that's moving and they just start piling the money on the computers that start piling the money into a commodity and that can actually make it worse.

Remember, interest rates are low. When you have people who have got money and trying to get returns, more chunks of their -- those portfolios are going into commodities. When it turns, it will turn hard and it will turn ugly.

But then you do, as Peter says, point out, you have the fundamentals, those big huge, growing emerging markets around the world who are hungry for gasoline to feed their cars and feed the factories and feed the economy and they are competing with the U.S. on a global market.

VELSHI: Tom, final point to you. KLOZA: You know, I think if you go back eight years when the Iraqi war started. Demand for oil is up about 16, 17, 20 percent or so. The size of the oil futures market has increased by about 8 or 9 fold.

So yes, fundamental is a part of this, but it's a big pot. I would argue that this market needs more liquidity like Charlie Sheen needs another drink.

VELSHI: Nicely put. Let's close up on that. Tom Kloza is the chief oil analyst at the Oil Price Information Service. Peter Morici, our good friend from the University of Maryland, School of Business and Christine, stick around, we have more to talk about.

Don't move, by the way, Suze Orman is in the house. When Suzie speaks, people listen. How to reinvent your American dream up next.

(COMMERCIAL BREAK)

VELSHI: My next guest needs no introduction. Her work speaks for itself. Her latest book is called "The Money Class, Learn to Create your New American Dream."

Here she is, Suze Orman. Suzie, it is such an honor and pleasure to be with you. You know, our viewers know we're friends and we've both watched this financial crisis come and sort of leave.

But you have something interesting in this book that I want to touch on. It's something we've talked about for a few years about the absence or death of the old American dream. You're talking about a new American dream. Tell me what you mean by that.

SUZE ORMAN, AUTHOR, "THE MONEY CLASS": Yes, I have to tell you, I think a lot of people who have this dream truthfully that they were going to own a house. That they were going to be able to retire at 59 or 62, and so on and so forth.

They're going to be able to afford to send their children to college. I think that's a dream that for many people now sadly, sadly, Ali, is gone. Many people now who own a home under water, can't afford it.

You know what their new American dream is, they want to rent for the rest of their lives. If they could simply get rid of this albatross --

VELSHI: Right.

ORMAN: On there - you know --

VELSHI: You said this for a long time.

ORMAN: Yes.

VELSHI: You have said, I remember you saying it once, wouldn't you rather have a little shack that's yours and paid for than this albatross and people have come around to that idea. The old American dream did force you into the idea that you weren't successful if you weren't aspiring to own a house.

ORMAN: The old American dream really was more, more, more, better, better, better, bigger, bigger, bigger, it wasn't enough to have a 2,000 square foot home, you need a 5,000 square foot home.

Wasn't enough for one car if you were by yourself, you had to have three cars. You had to have this. You had to have that. Now the new American dream is a dream really where you have integrity, honesty and security. The new American dream is you can sleep at night because you know what yours can never be taken away from you again.

VELSHI: You know from the people you talked to all the time, there's no greater joy than hearing from a person who has paid off debt, but who's free of debt. It's very liberating, but it's an experience a lot of Americans haven't yet had.

ORMAN: I've always said debt is bondage, you will never have financial freedom in you are in bondage. What's so great, really about what happened is people aren't embarrassed anymore to say, I can't afford it.

I have $30,000 of debt. Now the topic of not having money is one that is really acceptable today versus years ago you used to pretend you had money, but your credit cards were maxed out, you leased your cars.

VELSHI: We've often heard people say, you don't want to run up credit cards. But homeownership is a good debt, mortgages are a good debt. We have interest rates still at record lows, home prices are low. Should you be buying a house if you can afford it and you're going to stay there? And you've got the downpayment?

ORMAN: It depends what you mean by a downpayment. It depends what you mean if you can afford it and also depends if you're getting a good deal or not.

VELSHI: OK, on the house, right?

ORMAN: Right, let's first start with have we in my opinion reached the bottom of the housing market?

VELSHI: Right.

ORMAN: No.

VELSHI: OK.

ORMAN: I still think we could have a double dip in housing. Why do I think that? You have houses -- let's take Tampa, for instance, Tampa, Florida, a home in this development, $750,000. Today that exact same home is $150,000.

VELSHI: Which is a deal.

ORMAN: A deal. VELSHI: So what's the problem?

ORMAN: But it's not a deal and let me tell you why. Everybody in America goes to see a home and go, my God, it was 750 now it's 150 -

VELSHI: What a deal, yes.

ORMAN: No, you have to look at every house next door to you. If every house is selling for 150, you want to make sure that you get that house for a steal, which would be 130, 120, maybe 100. Why?

Because if you move in and buy it for 150, the house next door to you, older woman dies and leaves it to her child and now her child can't afford the mortgage payment.

VELSHI: They liquidate it.

ORMAN: They liquidate it for $75,000. Your house now is worth $75,000. That is what's happening across America everywhere.

VELSHI: Let's talk about priorities. One of the things that stood out in this book is that you talk about people obsessing about saving for their kids' college education and price of that education continuing to increase.

But you say in here, quote, "before you save one penny for a child's future, college cost, I insist you have the following financial priorities taken care of starting with credit card debt."

And you continue to insist - I mean, you have stuck to your guns over the years.

ORMAN: have, yes.

VELSHI: Get rid of your credit card debt before you pay for anybody's college education?

ORMAN: And here's the thing, I understand that especially a mother, if it's a single mother particularly, they think, you're only a good mother or good parent if you can pay for your child's college education. That is not true.

Children can do this on their own. You have to stand in the truth. If the truth of the matter is you're in debt, you don't have an eight- month emergency fund and aren't saving for your own retirement and behind on mortgage payments, you have got to show your kids what's true.

Otherwise, they grow up and repeat your pattern and then we are creating an entire society of liars because we're doing things we can't afford. Kids can do this on their own.

VELSHI: You said class two. You've done what we traditionally think of as chapter as classes with a great online component and even given people the password to get in there and do that. Suze, it is such a pleasure always to see you. Come back. This is your home away from home.

ORMAN: You got it.

VELSHI: All right, Suze Orman and when it comes to the bailout, you probably feel like you heard it all, but leave it to Matt Taibbi to uncover something, well, shocking. Wait until you hear which individuals walked away with billions of dollars because of the financial crisis.

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VELSHI: When I'm old and gray -- I guess I won't get gray, but when I'm old, I'm going to remember one thing about the financial crisis and that is that nobody could get a loan.

The government and Federal Reserve were trying to deal with that problem. It ended up that they gave money to people who you would be a little surprised to find out needed the money.

Matt Taibbi has a great article in the new edition of "Rolling Stone." He's talked about what this was supposed to do and how it turned out.

Matt, what was sold to the public isn't what turned out to necessarily be the case. You have a story about two women connected to Wall Street who ended up getting more than $200 million in loans for what? Tell us about the story.

MATT TAIBBI, CONTRIBUTING EDITOR, ROLLING STONE: Just quickly the back story on this is, you know, for ages there's been this effort to try to open the fed's books and try to find out what's been going on there.

During the debate over the Dodd Frank bill, a number of congressman, Allan Grayson, Rand Paul and Bernie Sanders in the Senate side, they got together and they ended up getting an amendment passed that would force open the feds' books.

Unfortunately not for the entire history but for the two-year period to cover the bailouts and even that only covered emergency overnight loans and some of the fed bailout programs like the TALF. In December, they got a list of all of these people who had received money through all these various --

VELSHI: Some of them are exactly who you would expect them to be. Some are major U.S. banks, some are not who you'd expected to be, non- American companies, non-American banks. But that wasn't even the most interesting part?

TAIBBI: Yes, I know, I looked through this list. In order to sell it to my editors, I picked out the craziest names that I could find on the list. The two I found were Christie Mack and Susan Carchez.

Christie Mack is the wife of John Mack who at that time was a CEO of Morgan Stanley. Susan Carchez is the widow of Peter Carchez, another former Morgan Stanley executive. These two women who as far as I can tell have no real business experience got a $220 million loan through the TALF program that allowed them to buy student loans and commercial mortgages.

This is kind of typical of what you'll find in this list is this very esoteric list of people who you would not seemingly designate for government assistance. John Paulson, the Hedge fund guy who - in the Golden Sachs case. Wayne Highsinger, the former Miami Dolphins owner.

VELSHI: Christine, the government's perspective was that it wasn't - this was not meant to give people loans to buy their cars and go the school. It was meant to get loans into the financial system so that ultimately those consumers could get access to credit. Let's go back to this time, remember credit was frozen.

ROMANS: If you give investors the money so they can buy those other loans, those student loans, those debts, these other things and that freeze up the market, guess, a frozen secondary market system going again so that more loans can be made and get credit.

You know, there was a $700 billion TARP bailout. There was TALF, which is another $200 billion of a different program. There's other couple hundred billion -- it gets bigger and others. What I'm saying is on Wall Street, there were a lot of people trying to figure out how they could get appeased of that government largest.

But the government wanted them to do that. That was the whole point of the exercise. In the end, I'm sure we're going to go back with a microscope and find a lot of instances that don't look pretty good.

VELSHI: Matt, you're a reporter, you talked to these women?

TAIBBI: No. Neither of them would -- Christie Mack flatly refused to comment. And Susan Carchez, I approached everybody I could find to try to get a comment out of her and was unable to.

The company they both invested in, Waterfall Talf Opportunity, I called them and they declined comment. I wasn't able to get --

ROMANS: They borrowed taxpayer dollars, but it isn't clear that taxpayers lost money in this.

VELSHI: Let me just tell you, did the fed give you a response?

TAIBBI: No, they did not. They give you a response.

VELSHI: They gave me a response. Let me tell what the fed told me. They said any U.S. firm could borrow from TALF, small businesses, large firms, pension funds, minority-owned firms, new firms, and private individuals, all participated in TALF.

The objective was to encourage lending to U.S. businesses and families at a time when credit was frozen for tens of millions of Americans. TALF supported nearly three million auto loans, more than a million student loans, nearly 900,000 loans to small businesses, 150,000 other business loans and millions of credit card loans.

We suffered no credit losses on TALF loans and expect no credit losses. The considerable excess interest we earn on TALF loans is passed on to the U.S. Treasury to the benefit of taxpayers. Would that have helped?

TAIBBI: Maybe. But you know what my answer to that, basically what Bernie Sanders asked Ben Bernanke when he was asking him about this a couple years ago, where do I sign up?

VELSHI: In truth, you may not be able to have distributed that money as effectively. We don't know how well these two women --

TAIBBI: Why would Morgan Stanley say that?

VELSHI: It's the implication that they're well connected and that's why they got this money?

TAIBBI: Well, clearly. I mean, it's not that they advertised this everywhere. The methodology on how they gave up the loans was not clear. Bernie Sanders was not able to discover what their methodology was for accepting or rejecting --

VELSHI: The fed told me they met all criteria. Christine, you should have a larger point about people who are around money figure out ways to --

ROMANS: Well, I mean, this is a whole industry that's in the no. When the government is opening up a big fire hose full of money and gushing it out the door because it's worried the economy is burning, that's what Wall Street was there to do, to figure out ways to get that money and make money from money.

That is what Wall Street has done. There's no belt-tightening on the other side of the tracks. This is what you're saying this story shows to you. While the rest of us, the rest of the world was trying to figure out if they're going to survive the great recession.

TAIBBI: It's just an eerie coincident that somehow the solution to our economic problems because let's throw a trillion dollars at a problem and let all the millionaires on Wall Street get in the middle.

VELSHI: The banks got us into this problem and the banks ended up profiting remarkably.

TAIBBI: Not only were they not punished, but they got rewarded in the end.

VELSHI: Matt, always good to see you. It's a good read. Thanks very much. Thanks to the Federal Reserve for giving us some feedback on that as well.

All right, high gas prices can be a good thing. If you don't believe me, I'll explain next in my "XYZ."

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VELSHI: Time now for the xyz of it. Oil prices hovering around $110 a barrel, the national average for a gallon of self-serve unleaded approaching an all-time record. We've discussed the reasons for this, but what may come as a surprise is the solution. I think the best solution to high oil prices is high oil prices. They spur us to conserve. They compel us to buy and drive more fuel efficient cars. I think most importantly they lend viability to money-intensive alternative energy projects, the kind that get moth- balled when oil prices are low.

I'm of the view that the high oil and gas prices are going to be with us for a while. It's true that there's no actual shortage of oil. It's true that speculators are driving the price of oil higher. Speculators, by the way, are the ones who will buy the house that you're trying to sell.

Without speculators, the people who buy on the hopes that the value will increase, we'd have no market for anything. What the market for oil is doing is making it more viable to get our energy from less traditional sources. That's a good thing in the long term, despite the economic pain it causes in the short term.

So what do you do about it? Claim your own stake. On this show we continue to outline a number of ways that you can make money from rising energy prices through investing. It's time for you to get on board. That's my "XYZ."

Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday 1:00 p.m. Eastern and Sunday at 3:00 p.m. You can also catch Christine Romans on "YOUR BOTTOM LINE" Saturday mornings at 9:30 a.m. Eastern. Stay connected 24-7 on Facebook and Twitter @alivelshi. Have a great weekend.