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What Will Happy If We Don't Raise the Debt Ceiling?; The Tea Party's Stranglehold on Republicans; American Consumers Are In Dire Straits; Jobs, Debt and Corporate Confidence are Major Challenges
Aired July 24, 2011 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TOM FOREMAN, GUEST HOST: No one knows for sure what would happen if we don't raise the debt ceiling in time, but we've all heard the adjectives, catastrophic, calamitous, Armageddon.
Welcome to YOUR MONEY. I'm Tom Foreman. Ali Velshi is off this week.
The deadline to raise the debt ceiling is August 2nd and still we're left without a viable plan through all this talk, although there are some signs of a potential deal.
Ben White is a Wall Street correspondent for "Politico," Ken Rogoff is a professor at Harvard University and a former chief economist with the IMF and Jeanne Sahadi is a senior writer at CNNMoney.com. Thank you all for coming here to grind this down. Boy has it been ground down in Washington over and over again.
Jeanne, first question here, is it time to simply say, let's go for the possible in Washington? Everybody has grand ideas about what they want to do. Nobody, nobody can get the support to get one of those through. Do we have to look for just the possible?
JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: I think the mission of everyone in Congress is too absolutely to raise the debt ceiling. They cannot get away without doing that. The S&P has been the strongest credit rating agency. They said, we're going to downgrade you if you don't come up with a debt reduction plan. But they did leave a little bit of an out, they said if you raise the ceiling but you give us an indication that you're on the road to getting agreement on the deal, we'll keep you on credit watch negative but we'll take you off and affirm your rating, your AAA rating if you get it done within a couple of months, if we see that possibility.
So that seems to me to be the fallback plan for Congress. Whether they take Senator McConnell's fall back plan, and neither the Republicans or the Democrats seem to like it. It would allow the president to raise the debt ceiling a number of times but politically it would make him look bad. Number one mission, raise the debt ceiling.
FOREMAN: Ken, can I ask you a question? Considering how hard this has been, how contentious it's been, how uncertain it's been, has the damage already been done to some extent in terms of the world's view of our solvency? KEN ROGOFF, PROFESSOR, HARVARD UNIVERSITY: Not yet. I mean they think we'll solve it. And I agree that number one; we just have to raise the debt ceiling. But are we going to do this every year? Are we going to find a system so that we're not? This is a constitutional crisis. I mean I don't know how we're going to run the country if we just wait until midnight on the last possible day. It might as well go on vacation the rest of the year.
FOREMAN: How would we get any other politics done? When you think about it Ben. I mean the simple truth is this has dominated everything else. What conversation have we heard about anything else important while we've been locked in this?
BEN WHITE, WALL STREET CORRESPONDENT, "POLITICO": No, we haven't heard about job creation. We haven't heard about anything else basically as this has sucked all the oxygen out of the air and obviously they need to raise the debt ceiling. But the politics are so complicated; there are so many competing interests. The president who wants to get this done for the reelection year, have the debt ceiling raised, have some significant deficit reduction in place.
The Democrats who want taxes raised, who want shared sacrifice. Republicans particularly in the House, Republicans will not accept any tax increases. So you have this miasma of politics coming together to create this constitutional crisis and we don't know what the end game is. It's a new conventional wisdom every day basically.
FOREMNA: I think one of the real things that continues to be overlooked in all of this was raised by Federal Reserve chairman Ben Bernanke who warned that if we don't have a debt deal in time we could see businesses even less willing to hire. I'm not sure how you can mean less than zero willing to hire. Let's listen to what he had to say.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Of course, if the government is reducing its payments by 40 percent, that's going to have an impact as well. So I can only conclude that this would be very bad for jobs.
(END VIDEO CLIP)
FOREMAN: Ken, let me ask something about that because this week, I was reading a number of warnings that were saying to the public in general, don't make a mistake here, even if we do one of these plans, it very likely is bad for jobs. We're simply talking about a difficult time in our economy. That's why we're having this whole discussion. We are not going to come up with a solution and suddenly say our problems are solved. To the contrary this is a big band-aid on a much more serious problem.
ROGOFF: This isn't about jobs today. This is about where we're going to be in 10 or 15 years, are we going to run off a cliff? Are we going to sort of have a gradual adjustment or wait till the last second and have markets force us? They're not forcing us to do this. Our interest rates are low. That's not the problem. But we see it coming eventually. So this is not going to help, although it will encourage Wall Street. It will encourage credit a bit because it will provide a bit of calm finally in the markets over this.
FOREMAN: Do you think that any of that -- any of the plans you see right now, when you look at them, do you say any of this will create jobs? Because the warning I'm hearing about so many of them is in the short-term, this is possibly going to slow things down even more?
ROGOFF: Yes, I'd say they're not creating jobs now. But they're taking some very hard problems and, by gosh if they actually do some of the tax reform, it's going to make a big difference over the longer term. It really is going to be a help for the economy.
FOREMAN: Jeanne, if they really do some of the tax reform, there are so many "ifs" in Washington. Washington keeps saying, we don't want to do things with a gun to our head. And yet the problem is Washington doesn't seem to do anything without a gun to their head.
FOREMAN: Do you see -- what's the silver lining here, if at all? This sounds more like we just have to protect ourselves, that's it. That's the best we can get.
SAHADI: I've been covering the debt ceiling since January; it was just going on eight months now. Timothy Geithner the Treasury secretary sent out a letter on January 6th to Congress that said, "Dear Congress, it would be an awesome idea if you raised the debt ceiling sooner rather than later because we don't want to get caught."
I don't see a silver lining yet. I think that if they allow themselves time to have a real conversation about a debt reduction plan because right now we're still having a food fight. We had the gang of six plan came out this week. It was a plan, it was an outline, and it wasn't legislation. I started getting e-mails from progressive groups and conservative groups saying, oh, it's terrible. Really? How do you know? We don't really have the details. So we're still having a food fight about it. We need to have a discussion. That will be ---we are discussing this as a --
FOREMAN: I've been referring to this as an adjustable rate negotiation over the debt ceiling because nobody seems to know what the bottom line is. Let me ask you a question. We do know this -- we know that voters are concerned about jobs; voters are concerned about real nuts-and-bolts issues. Do you think that both the Democrats and Republicans as they fight for the edge on this thing are really shooting themselves in the foot politically because there is no political game to be had here? The whole system looks worse and worse and worse.
WHITE: I think there is some political gain. People are tired of all of the enormous debts that are being run up by Washington. They do take seriously the idea that long-term deficit reduction could help our economy in the long term and create jobs if you have long-term low interest rates, you have corporations perhaps as part of tax reform getting lower rates, which could help them create jobs. So I think there is a political benefit to being serious about deficit reduction. Obviously if you cut spending dramatically, quickly, you're going to take some jobs out of the system. You're not adding more stimulus. There could be a short-term hit. But I think in terms of politics, it's a benefit to the politician who can say, I'm serious about getting our deficit under control.
FOREMAN: All right. We're going to get back on to that and on to a poll about what voters want to see in terms of a compromise on this. Jeanne, Ken, Ben, all stay where you are. Playing politics with the debt ceiling, the Tea Party, a popular target for many out there. But another question here has a tactical move by President Obama put our nation's credit further at risk? We'll take all that up in just a minute.
FOREMAN: The Treasury Department has warned that if the debt ceiling is not raised by August 2nd, America will not be able to pay all of its bills. If this happens, the prevailing thought is that bond investors will be paid first. Those are the people who lend America money, of course. For everyone else, no deal could mean possible reductions or delays to Social Security, Medicare and Medicaid, food stamps, even checks to federal workers. Why pay these bond investors first?
Defaulting on our debt would likely mean a lowering of America's sterling credit rating. That could potentially mean it would be harder and more expensive for most Americans to get a mortgage, a car loan, even a student loan as it ripples through the whole interest system.
Ken, by not publicly guaranteeing that bond investors will be paid on time, by not making it firm that this will happen, has the Obama administration created an environment that's caused rating agencies to question our credit worthiness?
ROGOFF: I think rating agencies are questioning our creditworthiness because we have the debt that's soaring, no plan yet to rein it in. I think that's really the number one reason. They are nervous that if we're going to do business this way, once in a while, that is every couple of years we might forget to pay the bondholders and it would be just catastrophic. They have to pay the bond holders first.
FOREMAN: Jeanne there are so many people that I have heard in the business community who have spoken out about this notion of saying, there's simply so much uncertainty that, that's why they won't move forward. It seems similar to what you're saying Ken. People are saying, look the debt, the deficit alone may be a problem, doesn't have to be. The lack of a plan is what scares people. No idea what's coming.
SAHADI: Well I think they certainly have a reason to feel uneasy about the next few weeks. Sometimes when I hear that argument and I think it is just political. If you don't like the president and you don't like his policies, you claim you can't hire people because you are uncertain.
In this case, they have absolute reason to be uncertain. Because what happens after August 2, is that you know Tim Geithner may have to store away a lot of cash to make sure he can pay the bond investors. Because you don't want to downgrade. So a lot of people in the country won't get paid, contractors, federal workers, possibly people in the army, we don't know who and it's not going to be so easy to figure out for Treasury, for the Federal Reserves, for anybody. So that sort of chaotic situation is not going to be good politically for anybody.
FOREMAN: So what kind of deal do people out there want? That depends on what political party you identify with. Take a look at this, 83 percent of Democrats say, give me a deal with a mix of spending cuts and tax increases, but that type of compromise only works for about a third of Republicans. And as for the all-important independents, the people that you can't win the White House without these days, 65 percent want to see a mixed budget plan.
So, Ben, if the Republicans want to get the independents behind them in this next election, can they continue to beat the drum of no taxes, no taxes, no taxes when the independents are saying, we're willing to talk about that?
WHITE: I don't think so. I think the Republicans, particularly in the House, have moved beyond where the public is. The energy in their party, the Tea Party movement, is a no-tax movement. That's a minority in their party. That's not independents clearly who are willing to accept some new revenue, a mixture of spending cuts and new revenues.
I think the Republican Party is almost captive to its extreme wing at this point. A lot of the energy comes from there and they don't want to betray what won them the House this last time around. I think they're in danger of playing to that part of the party and losing the middle and losing the independents. That's where Obama is racing to right now and it almost helps him that the liberal wing of his party is upset about some of the cuts to entitlement programs. Because he wants those independents, he wants to be a centrist; he wants to be Clinton in 1996. That's what help reelect the president in 1996, was the big fight with the extreme wing of the Republican Party or the very conservative wing of the Republican Party. He went to the middle and he won reelection. That is what Obama wants.
FOREMAN: Is there some indication that he actually needs the independents more than he needs the liberals because the liberals can't elect him alone. There aren't enough of them. And in the classical sense, where else are they going to go?
WHITE: Right. They may stay home but they're not going to abandon him and certainly they are not going to vote Republican. If he wants to win in Ohio, if he wants to win in Florida, if he wants to win in the Midwest, places where he absolutely has to win to win the White House again, he needs the independent vote. This is the main moment for him to capture that vote right now is to come up with a deficit reduction plan that has shared sacrifice that takes some tax revenues and that cuts spending. This is his pivotal moment to position himself for a moderate run for reelection.
FOREMAN: Ken, I don't see any way -- let the Republicans and Democrats be mad if they wish -- I don't know if I see any way mathematically to solve this without a combination of these two things. I don't think it can be accomplished. You know the numbers of this sort of thing.
ROGOFF: Well, mathematically it might be possible but it wouldn't be very pleasant for the economy. Taxes, revenues have to go up. I think the gang of six and the position President Obama's embraced and moved toward recently of get rid of some of the deductions, some of the loopholes, that's the way to raise tax revenues without hurting incentives. That's really where the silver lining lies. If they can do that, we will be energized and we will grow and have more tax revenues and it will be OK. But boy, they don't seem to be moving towards that very smoothly.
FOREMAN: Let me follow up on that. The European Union is going to provide more aid to help Greece out of its debt crisis. We keep looking for models overseas to what we might see. Does this put an end to the madness and potential defaults throughout Europe and does it put even more pressure on us to produce a deal here or is it just a step along the way?
ROGOFF: It's just a step along the way. They are sort of stuck Greece in the closet and they still have to deal with Ireland and Portugal and Italy and Spain. They did a lot recently, this meeting on Thursday. They did a lot. But they had to do a lot. The markets were going crazy. And I think they bought themselves some time. So it's just their modus operandi. Let's do just enough to make it to the next meeting.
FOREMAN: Last quick question. Yes or no from each of you. A deal by the end of the week, yes or no?
FOREMAN: This is so bleak. I thought we might have one yes.
SAHADI: I can't wait to be surprised.
FOREMAN: We'll see. We will have a new deal after that.
Thanks for being here, Ben, Ken, and Jeanne.
The Tea Party voice is heard loud and clear in the Republican Party. But will it end up hurting the GOP in 2012? We'll take that up in just a moment.
FOREMAN: As hard as it may be to believe sometimes, history teaches us that Democrats and Republicans actually can work together. But what about the Tea Party? Democrats can't seem to stand them, of course. But the more moderate Republicans are also tiring of the Tea Party's influence in these budget battles in particular. Particularly this uncompromising view on raising taxes held by those by presidential candidate Michele Bachmann.
(BEGIN VIDEO CLIP)
REP. MICHELLE BACHMANN, (R) PRESIDENTIAL CANDIDATE: I know President Obama does because they embrace the idea of increasing taxes. There is absolutely no appetite anywhere across the United States for increasing taxes.
(END VIDEO CLIP)
FOREMAN: Will Cain is a CNN contributor and conservative political analyst.
Will, you join us now. Look the Republicans love the Tea Party. First of all, Michele Bachmann's incorrect there. There is an appetite among some people for raising taxes, just not the people that support her. But Republicans like the energy of the Tea Party. They like the fact that the Tea Party got people engaged and involved and saying, come to Washington, let's make things happen. Do they like it still?
WILL CAIN, CNN CONTRIBUTOR: Some of them. You know Tom; a minute ago you said Republicans and Democrats have a history of working together. And you're right. But that working together, that compromise led to Medicare prescription Part "D," it led to record increases in the Department of Education, interior, agriculture, and virtually every department over the last 12 years.
Thus it led to the Tea Party. Now, the Tea Party has a win on their side. Tom, they've redefined the conversation. Obama is talking about major spending cuts. Now it seems like they have an inability to take a win, 3 to 1 spending cuts that is a win. I don't understand that strategy. Why can't you just take yes for an answer?
FOREMAN: It comes down to a question of compromise. Which I have a lot of people in the Tea Party said, look I'm not interested in compromise. We were sent here, remember in Congress we were sent here to do something. We're going to do what we were sent to do.
CAIN: Yes and that is a noble, noble principle. Guys who are not worried about getting reelected, who are principled individuals, but at the same time, this is a government where you just can't just have my way or the highway. So take a win. It's a 75 percent win.
FOREMAN: All right.
Mark Skoda is founder and chairman of the Memphis Tea Party.
According to a CNN/ORC poll, 55 percent have an unfavorable opinion of the Republican Party right now. Mark do members of the Tea Party concern themselves one way or the other with how the country sees the Republican Party?
MARK SKODA, FOUNDER & CHAIRMAN, MEMPHIS TEA PARTY: No, I think we're focused as well said on the fiscal issues. I mean I have to tell you, one of the things and I've talked to a lot of folks lately. The issue isn't about compromise. The issue is about verifiable results. You know Reagan had it best, trust but verify.
Even the three to one deal that Will spoke about, I looked at the proposal, there's no legislation, as you know. But it basically takes credit for reducing, as we like to hear, the normal cost curve over time. And the problem, I think, and the reason the Tea Party's being perceived as intransigent in this matter is it's not intransigent at all it's expecting real results. And quite frankly we're not seeing that. The only thing we've seen that actually is legislation proposed and passed is cut, cap and balance. So I think honestly there's not a conflict here. It's just holding people accountable.
FOREMAN: All right. We are going to get back to that in a moment.
But first, let's bring in John Avlon; he is a CNN contributor and a senior political columnist for "Newsweek" and "The Daily Beast." John a Pew Research poll found two-thirds of Tea Party members say it won't be a problem if we go past August 2nd without a debt ceiling deal. Almost any economist and certainly the credit rating agencies strongly disagree with that. So how do Republicans strike a deal and still maintain support among the Tea Party base?
JOHN AVLON, CNN CONTRIBUTOR: Well that's becoming a real problem because with a rise of what I call debt ceiling deniers is a dominant strain among conservative populists. I think the Tea Party best sell is one that was focuses, throughout '09 and '10 and rederic on reducing the deficit and the debt, rightly identifying it as generational theft. But it becomes a question of priorities. Right now the divisions of the Republican Party are between deficit hogs and anti-tax absolutists.
Reality check here, tax revenues are the lowest they have been since Harry Truman. And Ronald Reagan presided over 17 rise increases in the debt ceiling. So let's get some - you want to talk about accountability and a sense of perspective. To Will's point, take a win. The gang of six deal which reduces tax rates and does entitlement reform, this is something that should be embraced. This "all or nothing" attitude really exposes the fact that some folks who have been elected, the real enemy is bipartisanship.
Not because of a history of spending increases, because if we divided government in the past, we've had the inner highway bill, we had the Marshall plan; we had all of Reagan's terms, essentially. The real issue for some of this focus is a fundamental discomfort and dislike and distrust with bipartisanship, which is essential to get anything passed in a divided government. So reality check, folks, we need to raise the debt ceiling and we need to reduce the deficit. And the only way that gets done is with a bipartisan plan.
FOREMAN: Mark, I'm sure you want to jump in on that. Why don't you want to take the win at this point? SKODA: Because it's not a win. Look, I've looked at the numbers. And many of the Tea Party have done so. First of all it's a proposal. There's no legislation we can even put our hands around. So first of all it's a $1 trillion tax increase. And secondly the $3 trillion savings includes --
CAIN: It's not.
SKODA: I'm sorry I'm just reading what I read that has been proposed. There's no legislation I can point to. So let me just suggest at this point there's $1 trillion of, quote, unquote, tax increases through closing to proverbial loopholes. And in addition there's roughly the additional $2 trillion of savings on future costs of government.
CAIN: Mark, do you consider closing the loopholes a tax increase?
SKODA: Absolutely. I absolutely do.
CAIN: It's in the tax code. I thought you were against earmarks.
SKODA: Let me be clear. I'm against the current tax code because it's overly complex and it is frankly is deleterious to this economy. There are fundamental issues in terms of closing what loopholes you want, it's a political motivation. We talk about oil companies but we don't talk about windmills. We talk about offshore drilling but we don't talk about aspects of nuclear power. We don't deal with the realities that this economy is facing. So what we as a Tea Party and certainly my own personal views are that we want verifiable reductions in spending. Look if they get to that $3 trillion. That's $300 billion a year, $100 billion of which is taxes.
CAIN: Mark, let me ask you a question. Mark, this is Will. Here's a guy -- I believe in small government, constitutional limited government. You can't win me over, and then we've got a problem here. So here is my thing, you've made two different arguments. Are we opposing this gang of six deal or any kind of grand bargain because the spending cuts are unclear or because there's any potential tax increases?
SKODA: There are two things. Fundamentally one, the tax reduction, as you said the cost reductions are not clear. It's not evident. We went through that already last year at the end of the year with John Boehner. He was excoriated because of that. We haven't saved a dollar. So lets be very clear if we're going to reduce the actual spending, we have to have verifiable results, number one.
That's absolutely required. I think in my context of suggesting to you that a lot of people in the Tea Party aren't maniacs about this, they say, look we're not going to get fooled again. Let's talk about bipartisanship very quickly. In 2009 during the health care there was no partisanship, I was there in Washington, D.C. when they sequestered Congress and made them vote because they didn't want them to come home to hear the constituents. So please don't look at the context of the discussion here around bipartisanship. That's not the question. The question is verifiable results; we want to get cutting in spending. FOREMAN: Mark, we've had a reduction in time here. So we are going to have to wrap it up here. Same question to you guys, very quickly here. John, very quickly, do we see a debt ceiling deal by the end of next week?
AVLON: I hope so. I hope that Obama and Boehner are able put together a grand bargain or the gang of six legislation moves forward.
AVLON: It raises taxes, it raises the debt ceiling, and it will end up dealing and producing deficit in the debt which is what we need to do as a country.
FOREMAN: Mark, yes or no? Do we get a deal by the end of next week?
SKODA: I think we will. We've raised the debt ceiling 100 times since it's been enforced.
CAIN: Yes, I agree we have a debt ceiling deal by next week. We have to.
FOREMAN: All right. Thank you all for being here. We appreciate it.
Listen, coming up, why higher wages could actually be good for job growth. That's next.
FOREMAN: Call it the great consumer bust. Once buoyed by rising home prices and home equity loans, those who have hung on to their jobs are now coping with the reality that has been masked for decades, stagnant wages.
Look at this chart. It says it all. That blue line down there at the bottom is the middle class, incomes for middle class people. As you can see, it has been flat for more than a generation. While the top 1 percent, the red there, look at that. Their incomes have soared.
Richard Florida is senior editor "The Atlantic" and the author of "The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity"
Richard, others have argued that higher income wages are to blame for jobs moving overseas. But you think that higher wages here could actually create better jobs at home. Why?
RICHARD FLORIDA, SR. EDITOR, "THE ATLANTIC": Well, it's the way we built our original middle class after World War II. We decided, as a society, political leaders, business leaders, we had to pay those manufacturing workers better so they could buy cars and buy homes and fuel our growth. Now wages have sunk, our manufacturing jobs have moved offshore. Less than 10 percent of Americans have those good jobs. Construction jobs, which paid high wages, dried up. Our service workers, low-wage workers who prepare our food, take care of our parents, take care of our kids, take care of our homes, 66 million of them, their wages are sinking.
I think we need a new social compact in society. We have to raise those wages up. Americans have to agree. We'll each pay a little more for the services. What's more important? Who's more important to you? The person who builds your car, who we pay well, or the person who takes care of your kids or aging parents? We have to pay just a little more to drive the wages of those 66 million workers, who have families, supporting middle class wage. This is just something we have to do.
FOREMAN: And if those people have more money, they can spend more money.
Terry Savage is the personal finance editor at the "Chicago Sun-Times" and the author "The Savage Truth On Money."
Terry, the wage gap could potentially hit young people even harder in all of this. Take a look at this graphic. This line is the national unemployment rate. But look at the jobless rate for 18 to 24-year- olds. It is much worse off, more than 18 percent of those who are looking for work can't find a job. A lot of people might say, well, they're young, give them time to learn to make their money. But studies show college graduates who can't get a job in their field, because of the economy, make less money over their careers than those who land a job during the first out of school.
So, Terry, will graduating into this economy, with so much debt, make a permanent dent in the future standard of living for all these young adults?
TERRY SAVAGE, PERSONAL FINANCE EDITOR, "CHICAGO SUN-TIMES": Tom, that graphic line is mixing actually two groups. You have 18-year-olds, some of whom who have dropped out of school, and don't have jobs. And you do have those who are graduating as has happened through the business cycles in our economy, graduating without a job and the business cycle will revolve and they will get jobs.
We had this in 1981-'82, when the unemployment rate was much higher, 12 percent. And yet those graduating classes went on to take advantage of the technology boom. So lumping those all in one line is a bit misleading.
The other point I'd like to make, back to Richard, is that, yes, we do have an important service sector in this economy. The question is, what priorities do we set? We have very high-paid service jobs. If you're an NBA player or baseball player or a rock star or reality show star. They're providing a service. We haven't decided as a society that we're willing to pay. Who is going to pay higher wages? If you pay higher wages to the person who washes your car, is at a retail store, then where do you cut back on something else if you're a family? Or if you pay higher taxes, where do you cut back on spending? Or if gasoline prices are higher, we've seen people have to cut back. The real answer is economic growth. That's what drives wages higher. FOREMAN: Richard, what about this fear that higher wages would ultimately just mean that we all pay more and more for the stuff that we want, and at a time when many people can't afford it?
FLORIDA: We go back to what Terry said. We're looking at a split society. Those of us who are fortunate enough to have a college degree, to be a professional worker, have an MBA or graduate degree, we've never seen an unemployment rate that tops 5 percent. But if you don't have a high school degree, you're looking at 15 percent, 20 percent-plus unemployment.
I think we need a more balanced approach. Terry, is right we need innovation. We need economic growth. And the way to make those service jobs better, and to make our economy grow is do what we did in manufacturing. Get the workers engaged and organize them in teams. Get them involved in quality circles. Let's have a national commitment, like we upgraded agriculture in the 19th century. We committed to our federal government and our universities to do research and to organize our manufacturing sector, make it productive, innovative and pay higher wages.
The last frontier of efficiency and growth has to be that low-wage service sector, the personal services. And you know what? You can't offshore the person who cuts your hair or takes care of your kids or takes care of your home. Those jobs are located locked in to the U.S. Innovation, creativity, economic growth and higher wages can go together in a win-win-win economy.
FOREMAN: Terry, I want to go back to that first question I asked you, because I'm not sure I got a full answer on that.
If we look at those post-college Americans, let's go ahead factor out the ones you say have dropped out of high school. Look at the post- college Americans, who are coming out into a terrible job environment. They're not making much money. They're not saving much money. Are we setting these people up, or are we setting ourselves up, for a whole bubble moving through our economy of people who don't have much, can't earn much, and will be a permanent problem? How do they ever recover?
SAVAGE: Well, they will recover. They will recover because the economy will recover. We had a tremendous decline in standards of living in the '30s. Those who gave up on America really missed out on great booms subsequent to that. That same thing in the '80s.
So, thank goodness they're young. It's horrible to graduate from college now without a job because the average college graduate has so much student debt. I wrote a column, it is posted at TerrySavage.com, about the fact that now within six months of graduation, you have to start repaying those student loans. And some helpful websites there for getting information on that, studentloans.gov and the new income- based repayment plan, ibrinfo.org.
These are place that is students-you know, the one thing is we have more student loans out now than we have credit card debt. But student loans, you can't go bankrupt, you can't default. The federal government will follow you and deduct from your Social Security check if you don't repay.
So, yes, it's a horrible problem currently for today's graduates. We can't minimize it. But it would be a mistake if we thought that America was over, that these graduates, the economy wouldn't rebound. And these graduates will get a chance to use their new skills.
FOREMAN: All right.
SAVAGE: Oh, one more point? Here in Illinois, $24 an hour jobs in manufacturing are going begging, while service jobs pay 12 percent. We really haven't educated those high school graduates to do the new manufacturing jobs. That would raise wages a lot.
FOREMAN: Terry, I'm going to have to beg you to hold off. Stay put. We'll continue with you. Richard, thanks for joining us here.
FLORIDA: Thank you.
FOREMAN: Some call him the king of Las Vegas. If you haven't heard of him, you've surely heard of his massive hotels on The Strip. Find out by Steve Wynn is lashing out at president Obama next.
FOREMAN: Yet another top CEO has come out blasting President Obama. The latest lash comes from Las Vegas King Steve Wynn. There he is. He called the president the greatest wet blanket to business progress and job creation in my lifetime. And you know those Vegas folks are not prone to exaggerating. And he's not alone. The lengthening list of CEOs blasting this administration include 3M's George Buckley calling Obama anti-business, Boeing's Jim McNerney, and Intel's Paul Otellini, have also voiced outrage, calling the Obama White House hostile to business and capitalism.
Terry Savage is still with us and joining the conversation, Chrystia Freeland, editor for Thomson-Reuters Digital.
Chrystia, are these comments justified or is this just business folks lashing out at a guy they don't like?
CHRYSTIA FREELAND, EDITOR, THOMSON REUTERS DIGITAL: I think the latter. I'm sorry you didn't have some of the Wall Street CEOs on your list of businesspeople who are lashing how at the president. Because they've been complaining, too.
And these complaints are familiar to all of us. I don't really understand what they are whining about. The fact is taxes are still at the levels of George W. Bush, when you had the big, big tax decrease. The president spent a lot of money on the stimulus. I think that someone like Steve Wynn should be happy about that. That was an effort to goose the consumer economy. What they don't like is that the president sometimes talks about tax increases, but they haven't even happened yet.
FOREMAN: Terry, what do you think? SAVAGE: Business hates uncertainty. Business in America has a very good ability to deal with current conditions, but not with the uncertainty about the future. That's what's been generated out of Washington. Steve Wynn doesn't need us to defend him. He is a man who's created thousands of jobs. He has huge profits. That's what we want. We see companies like CISCO and Borders that don't have profits, what do they do? They lay off people. Steve Wynn makes profits and creates jobs. And those businesses that create jobs are concerned, as we've seen with layoffs continuing, about the future regulation, taxation, and general attitudes toward economic growth. That's what's going on with the private business sector.
FREELAND: That's what they say. But I actually have a hard time believing that concern about future regulation is causing problems for someone like Steve Wynn. I don't see a lot of new regulations on, I don't know, restaurants or casinos or hotels coming out. I think what we're hearing from the CEOs-
SAVAGE: How about the health care part?
FREELAND: I think what we are hearing from the CEOs is real distress about the slow growth of the U.S. economy and that actually is something that, personally, I wish that we had more focus on job creation and less focus on the deficit right now.
FOREMAN: Let's jump forward to a different topic here.
After practically creating the first Consumer Financial Protection Bureau, Elizabeth Warren's big reward was being shown the door. She was passed over to run the agency. Instead, President Obama nominated former Ohio attorney general and "Jeopardy" champion, Richard Cordray to head the bureau.
We want to show you how this new Consumer Financial Protection Bureau works, at least in theory. This is courtesy of our friends at CNN money, namely Blake Ellis (ph), who put this together.
The agency is focusing on all these areas from student loan, companies with credit cards, who got over 33,000 to the FCC. So for credit cards, they have various enforcement things they're looking at here. You can look on the website here on CNNMoney you can look at various readouts about what the mission is, as they look over banks and credit cards. Some of the critic, what they've had to say. The number of complaints they have had, here, look, 29,000. Who could be helped by it? Same for debt collection over here. Student loan companies, mortgage brokers, payday lenders. And you can see we have a very, very cute little watchdog in the middle there.
Let me ask you this -- you can find it all on CNNMoney.com.
Terry, you were raising the alarm here about how much will this really have in terms of the weight of protecting consumers in Washington. You genuinely have concerns that's not clear that it will have the weight it needs.
SAVAGE: Well, no, I think it has more than enough weight. Look we had agencies like the SEC and the Federal Trade Commission existing throughout the mortgage crisis and throughout the stock market issues that we had with the Madoff -- and those agencies weren't able to stay ahead of the scam artists. So it's all right to have a consumer protection agency. The question is, do you give them unfettered power to walk into any business, whether it's a bank or a payday loan company, or a credit card company, and make policy without any oversight or accountability?
Consumers do need protection. But the best protection consumers need also is to be a little bit skeptical. And once we think that someone's watching out for us and can do all these protection things, we tend to let down our guard. So, consumers, the word is even if we have this agency, you still have to be double-checking before you put your money somewhere.
FOREMAN: Chrystia, what do you think?
FREELAND: I think in the wake of the financial crisis, it's actually absurd that people are worried that a consumer protection agency would have too much power in the United States. The fact is that countries with more carefully regulated mortgage markets, like Canada, for example, did not have a subprime crisis and their economies are much stronger. What we have to realize is a stupid decision by an individual consumer can have a real collective impact on our welfare. I think it is absolutely time for more careful regulation of consumer credit. And that's what this agency will do.
FOREMAN: Now, Chrystia-
FREELAND: Now, Elizabeth Warren has scared Wall Street because -
Chrystia, you're scaring me because you're eating up all our time.
Terry, thanks for joining us. Chrystia is going to stay put.
SAVAGE: Thank you, Tom.
FOREMAN: We'll be back in a moment.
It is a smack seen around the world, Wendi Murdoch coming to her husband's defense as a protester assaults him. But will News Corp. get more than just a slap on the wrist? We'll look at that next.
FOREMAN: By now, you're all familiar with the News Corp. hacking scandal and Rupert Murdoch's testimony in the U.K. The 80-year-old media mogul endured a three-hour grilling by British lawmakers. Testified he had no idea his staff at "News Of The World" hacked phones and bribed police.
One thing is certain, thought, this scandal is captivating TV audiences around the world. And now the Murdochs may be up for round two, this time with authorities here in the U.S. Chrystia is back with us. Joined by Richard Quest, host of CNN I's "QUEST MEANS BUSINESS."
Richard, the British have been wrapped up in this story for weeks over there. When do you think the focus really jumps to the U.S.?
RICHARD QUEST, CNN INTERNATIONAL ANCHOR, QUEST MEANS BUSINESS: The moment there is evidence that there was wrongdoing, or some tangential way in which it has brought in.
I'll give you an example. The actor, Jude Law, the question of whether his voice mail was hacked into while he was in the United States; the question of whether from this country to the United States, a call was made that intercepted a voice mail somewhere en route. The moment you end up with that, then suddenly it is open season in the U.S. federal system and the feds can really get to grips with it.
One small point, there have been a couple of U.S. politicians that have groused about the inability of the British to have a decent investigation into this. I think that's sort of playing it a little bit strong. We now have in this country at least four investigations, and a full scale judicial inquiry, that will get to the bottom of this.
FOREMAN: Chrystia, would it be a mistake for people here to keep saying this say problem over in London, but doesn't have anything to do with us, to underestimate it?
FREELAND: Yeah, absolutely. I think Richard is right, and some areas that I would particularly pay attention to are the victims of 9/11. If it were to turn out that the hacking had extended to the victims of 9/11, I think that you would see that as a real catalyst for huge public attention and real public disdain in the U.S.
And the fact is also that, you know, News Corp. is a single company, it was run as a single company, with very close attention paid by Rupert Murdoch, personally, to the media properties in the U.S. and in the U.K. with a single corporate culture. So what we're finding out about News Corp. culture in the U.K., I think, very much applies to News Corp. in the United States.
FOREMAN: Jump in, Richard. I think you have something to say about that, particularly this question about Rupert Murdoch and his role.
QUEST: The point is, look, away from phone hacking and the minutia of who hacked whose phones or bribed who, there are real questions asked about corporate governance here. And not only about why didn't they the chain of command escalate these very serious issues, but the independent directors of News Corp., what were they doing? And the dual share structure, the voting structure of News Corp., that allowed News Corp. and the Murdochs to have such control over what is a huge public company, pro listed company now. Those are other issues. I think we're seeing it from CalPERS, the California and pension fund on the West Coast. We're starting to see it from other institutional investors, that are now saying, OK, Murdoch has done a very well for the company. He's been a great benefit. But is this the way a company should be run?
FOREMAN: Fair, fair, fair questions. Fair questions that I think will be raised by a lot more people as we move on.
Richard, thank so much for being here. Chrystia, as well.
FOREMAN: Why the massive heat wave? Political games and your air conditioner may be all intertwined, that when we wrap it up with my "X, Y, Z".
FOREMAN: Finally, our "X, Y, Z". And this time it comes down to one word, "heat".
About 150 million Americans, that's half the country, are sweltering in a crushing heat wave right now. Folks are being warned to drink more water, stay in cool places, and reporters are busy frying eggs on sidewalks, just in case you don't get the point.
Note to my fellow journalists: It would be nice to include some bacon now and then.
The inferno is focused on the Midwest and East Coast, but it is not cool anywhere. So people are cranking up their air conditioners, which is driving up demand at power companies, which is sounding the alarm about systems being pushed beyond their limits, which leads us to Washington, D.C.
For years political leaders had known that our infrastructure is in bad need of massive repairs including many miles of the very electrical grid we are depending on at this very moment to keep grandma cool, the dog happy, and the ice cubed. And yet time and again, funding to make many of these repairs has been diverted to more politically popular projects.
So if the lights flicker, the air conditioning shutters to a stop, and you feel a hot hand closing around you as this heat wave rolls on, it's not the devil's work. It's our own.
That's going to wrap up YOUR MONEY this week. Ali is back next week, Saturday 1:00 p.m. Eastern and Sunday at 3:00 p.m. If you're an early riser, catch him every weekday starting at 5:00 a.m. Eastern on "WAKE UP CALL" or you can probably reach Ali right now on Titter. His handle, @AliVelshi. He reads every single Tweet. Have a great weekend.