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Obama Versus the Economy; Interview With "Confidence Men" Author Ron Suskind; Continued Political Bickering In Washington Does Not Instill Confidence In Businesses That Could Create Jobs
Aired September 25, 2011 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: Is President Obama a victim of the economy, or is the economy a victim of President Obama?
Welcome to YOUR MONEY. I'm Christine Romans. Ali Velshi is off this week.
Economist Peter Morici is a professor at the University of Maryland school of business. Peter, the president will be forced to run a reelection campaign in a terrible economy. You say that's not because of the legacy of President Bush and his policies or a financial crisis, but that President Obama has been his own worst enemy?
PETER MORICI, ECONOMIST, UNIV. OF MARYLAND SCHOOL OF BUSINESS: Absolutely. He inherited a mess, but he has made it worse and gotten us in deeper. Look at health care costs. The health care bill did not resolve the problem. They're rising steeply. The banks continue trading and don't make loans. Dodd-Frank has not succeeded.
But most importantly, the president promised to do something about energy and about China when he was campaigning. He promised us thousands of green jobs. He shut down drilling in the gulf, more or less, but he hasn't replaced them with another industry. And on China, he simply hasn't acted. That trade deficit is choking this economy. That's why there's not enough demand for what Americans make, and the economy doesn't move forward.
ROMANS: But Peter, he doesn't really exactly have a compliant Congress at the moment, specifically parts of the House of Representatives.
MORICI: That's true, but the reason he doesn't have a compliant Congress is that he squandered his first year. And now as a consequence, the country has elected a Congress that wants a change in direction. The Congress, for its part, doesn't seem much capable of providing it. So to say that Mr. Obama is alone in not getting us out of this mess would not be fair. The Republicans aren't providing a path, either.
ROMANS: All right, Nomi Prins is a senior fellow at Demos, and she's also the author of "It Takes a Pillage: An Epic Tale of Power, Deceit and Untold Trillions." Welcome to the program.
You know, the public continues to give President Obama low marks on his handling of the economy. A CNN/ORC poll shows only 9 percent say the president's policies made the economy better, while 39 feel his policies prevented things from getting worse. Just about the same amount, 37 percent, say President Obama's policies actually made the economy worse.
Nomi, is the president at the mercy of the financial crisis here, or do you agree with Peter that some of his own policies have exacerbated this?
NOMI PRINS, SENIOR FELLOW, DEMOS: I think it's a combination. And Peter is right that certain policies have not necessarily made things better. But on the other hand, it's because those policies haven't really addressed -- not the financial crisis but how the banking system has been a culprit in continuing the problem that the financial crisis that began in 2008 showed, in that it isn't helping to refinance loans. It isn't extending new loans to small businesses which employ nearly 50 percent of the people in this country and create 50 to 40 percent of jobs, depending on the economy.
So when people are upset or confused, which those numbers show, or even negative, it's because that's the result of what's happening. The economy isn't getting better. Job creation isn't positive. And whatever those policies are isn't helping that.
But also, not having a policy that addresses the fact that the banks continue to deteriorate themselves and the economy and not assist in giving forward (ph) to the population, either in the form of small business loans for jobs, refinancing for mortgage market, when the housing market continues to tank and foreclosures continue to rise. The necessity to on (ph) lend the money they received in cheap subsidies from the government and continue to from the Federal Reserve -- that's a fundamental mishandling of policy.
ROMANS: And let's bring in Jeanne Sahadi. She's a senior writing at CNNMoney. You know, the president, Jeanne, announced his debt reduction plan to the nation this week, and Republicans slammed that plan saying, you know, We see a lot of taxes, but where are the major spending cuts? There were some $500 billion in spending cuts, but the bulk of this is paid for by taxing the rich. Jeanne, do they have a point?
JEANNE SAHADI, SENIOR WRITER, CNNMONEY: They do have a point, but more from the fiscal hawk side than from the political side. Senior administration officials basically said this is not a compromise proposal. This is really the direction the president would like to go. And this is not about the summer's negotiations over the debt ceiling.
What he did was, a third of his savings comes from higher taxes, and two thirds comes from spending. The fiscal hawks say it's not really two thirds because one third is from war spending drawdown, which was going to happen anyway. So there's a big debate in Washington about whether those should count as deficit reduction.
He also doesn't really attack the entitlement programs very much. Social Security isn't even in the plan. And the Medicare cuts and Medicaid cuts are mostly on the administrative side, which has to happen, too, but it's not as comprehensive as people were hoping for.
ROMANS: So Jeanne, was this political positioning or was this a positioning to -- for the economy? I mean, that's what I'm wondering.
SAHADI: Right. I think it was -- the more I think about it, having covered it, I really think it was more of a political stance document. He is going to get a lot of support for taxing the rich more. Fiscal hawks, anybody who's really serious about the budget, says that has to happen, but they also say other people need to be taxed more. So he's really trying to appeal to his base as much as anything else with this document.
ROMANS: You know, Peter, you brought in structural deficits, structural imbalances, earlier on in the program. It's something you and I have talked about for years now. When you look around, do you see any of the big problems, the big imbalances that caused this whole crisis in the beginning -- do you see them moving in the right direction?
MORICI: No, I don't. The trade deficit with China is getting worse. Our oil dependence, while it stabilized in terms of the quantity, the prices have risen. And the president is reducing U.S. production.
On the banking side, which we heard a lot about, the big banks are monopolizing the situation. The share of national deposits is over 50 percent. They're acquiring deposits not because they want to make loans to regional customers that need them, the small businesses, the home owners, and so forth, but so they can trade and do business with very large corporations, very often financing outsourcing.
So my feeling is the banking system has become dysfunctional. It's really not in business for America, it's simply in business for itself. And the president of the United States bears responsibility. This is happening on his watch.
ROMANS: You know, Nomi, we've got, you know, 13 months, I guess, until the next election. Is it fair to say that you've got all parties involved in Washington working quickly to try to come up with important policies to mitigate the pain of unemployment, rising deficits and a slowing economy worldwide, or have we turned completely into campaigning mode already?
PRINS: Oh, I think we've been in campaigning mode, you know, since, basically, Obama came into office. It's just -- it's just gotten worse because the general economy has continued to deteriorate because of the fact that our financial and banking infrastructure continues to suck from it and not be addressed.
So all the conversations happening in Washington, you know, about whether it's a spending cut, about looking at Social Security, which is really not the problem, are failing to address the fundamental problem of a banking system not just because it's consolidated deposits but because it's fundamentally deteriorating our entire economy as it stands. And that is not being addressed.
We raised -- the Treasury Department issued $4 trillion worth of debt in the last two-and-a-half years, of which $1.6 trillion currently sits on the Federal Reserve books through the banks, from Treasury to banks to Fed, doing absolutely nothing productive, not creating a single -- think how many jobs we could create with $1.6 trillion. And we are debating a $400 billion stimulus. We're just focusing on a minor part of the problem and ignoring the bigger problem.
ROMANS: You know, Jeanne, let's -- here's -- here's the issue. If we are in campaigning mode and you've got this very important, delicate -- delicate operation that needs to be -- needs to be -- you know, needs to -- needs to happen, which is you need to have long-term deficit reduction, and short-term, you have to show the world you're serious about deficit reduction but not doing it so quickly and indiscriminately that it actually hurts your economy -- that's going to take some nuance, some finesse, and I don't see a lot of finesse in Washington at the moment.
SAHADI: No, there's none whatsoever. Yes, people who, again, are very serious about the budget say we do have to go on two tracks at once. Republicans aren't having it. They don't want any sort of stimulus, really, or they think cutting the deficit will be stimulus enough. They think that alone will help job creation. A lot of economists don't agree with that position.
President Obama, for his part -- you know, he's proposed a jobs plan that isn't really going to garner bipartisan support. So he gets credit for proposing a plan, but it's a plan that he knew walking out of the gate wouldn't get everybody on board.
ROMANS: And that's where the politics comes in. OK, Nomi, Jeanne, Peter, stay right where you are.
Treating the unemployment crisis as an emergency -- one Fed president says it's long overdue. That's next on YOUR MONEY.
ROMANS: Now that President Obama has announced his plan for deficit reduction, all eyes are pinned on the super-committee. Jeanne Sahadi, their plan is due in November. Will the super-committee succeed where so many others have failed?
SAHADI: Well, they're being asked to do so much in such a short amount of time. They to reduce the deficit by at least $1.2 trillion. There's a lot of pressure on them to so-called "go big," which is to say cut $3 trillion or $4 trillion.
They're being asked to reform the tax code. They're being asked to create jobs. They're being asked to show the world that the Congress can function. And they have to write this all in legislation. So that's not the same as writing a proposal in plain English. So it's -- they've got a -- a real load on their backs.
ROMANS: (INAUDIBLE) Thanksgiving to do that? No problem.
SAHADI: They have until November 23rd. So I don't think they're going to accomplish all of that. They might accomplish a small piece of it.
ROMANS: But Jeanne, they have a lot of work that's been done before them, the Simpson-Bowles commission, lots of other deficit -- it's not as if there are new ideas here.
ROMANS: It's picking which ideas have been already been hashed out and rejected and figuring out what we got to do.
SAHADI: So -- but to get to that agreement, you have to get both sides together. And even just on tax reform -- they are under competing directives. President Obama says, I want it to raise revenue more than the current system. House Speaker John Boehner says, No. I don't want it to raise more revenue than the current system. They have to keep in mind their leadership and they have to keep in mind the folks in Congress because Congress actually has to vote this plan through.
ROMANS: All right. A CNN ORC poll shows that 65 percent of Americans want President Obama and Congress to pay more attention to creating jobs, rather than reducing the deficit. Peter, Americans sending a very clear message to Washington here. Is now the right time for the super-committee on deficit reduction, or -- I guess we don't have a choice, right?
MORICI: We don't have a choice. I mean, there are bond rating agencies that evaluate the United States just as they do Greece. And what we're really talking about are deficit reductions that are going to happen in the out years.
What we need to do to create jobs now doesn't necessarily need government spending or to increase the deficit. For example, if we jump-start oil and gas production in the United States, that gives us the very same kinds of jobs we would get from infrastructure spending, you know, spending on construction workers, concrete, steel, and the like.
Similarly, if we did what some folks like -- like Krugman at Harvard -- at Princeton and some of the Republican candidates have suggested, doing something about the trade deficit with China, that would create private investment in the United States, more jobs, wouldn't need government spending.
ROMANS: All right, the president of the Federal Reserve of Chicago, Charles Evans -- he made it clear recently in a speech that he thinks the Federal Reserve should be reacting to unemployment. Evans said, quote, "Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn't any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market."
Nomi, when it comes to job creation, should the Fed do more? Should there be an employment target that the Fed is trying to meet? PRINS: There should be. The Fed has abjectly ignored unemployment, except to discuss it as part of the reason or (INAUDIBLE) reason why the economy's not doing well, which is a circular set of logic.
Really, the fact that the Fed has supported banks and banks have not helped to on-lend (ph) that to small or medium businesses is one of the reasons why we're not creating as many jobs, whether that be in smaller energy or middle (ph) energy technology types of companies or other forms of companies, or infrastructure and construction.
All of that has to do with money that can partially come from the government, for the government component of that infrastructure and those jobs, but from the Fed in the terms of creating a situation where banks are tied to on-lend what they have received. They're getting money at zero percent. They're not lending it out.
So you have this chokehold on any business that wants to grow because it doesn't know now it's going to fund itself. So instead, it cuts job. And so therefore, we don't have new jobs, enough, to be created to make up for the fact that 14 million people are unemployed and 17 million additional people are underemployed. There are just simply no jobs to get.
So I think it has to be a combination. (INAUDIBLE) the Fed can control what banks have been re doing with the money they have very, very easily been receiving.
ROMANS: But everyone's sitting on their money. And Peter, I am in no position to defend the banks. I want to be clear about that because they're sitting on an awful lot of money that could be lent. And companies are sitting on an awful lot of money that they could be using to grow, and they aren't.
Aren't they looking around at the rest of the world, they're seeing slowing growth here, they're seeing the rest of the world that they're concerned about, a China that's slowing down, potentially European financial crisis, and they're saying, We got to do now what we should have done before, which is make sure we have more money on hand?
MORICI: Well, certainly, a lot of companies are shoring up their cash. But some of the biggest companies have lots of cash on hand and they have been investing. But they've been investing in China because they see business conditions there, and business conditions more friendly, growing very rapidly.
In order to get American businesses to invest, fundamentally there has to be more demand. General Electric is not going to invest in another light bulb factory unless people buy more bulbs. And until we do something about energy, China, the dysfunction in the banks, they're not going to invest.
ROMANS: You're talking about long-term solutions that take reform, and they take...
MORICI: I don't believe so.
ROMANS: ... you know, collaboration in Washington.
MORICI: I don't believe so. I think I could free up oil and gas development in 90 days in the United States. We just need a secretary of the Department of Education (SIC) that believes in fossil fuels...
ROMANS: Department of Education? I think you meant Department of Energy.
MORICI: Absolutely. The Department...
ROMANS: Would that be interesting if the Department of Education were doing -- putting out drilling permits!
MORICI: All right. Now, now. Let's not use up the time. But if the Department of Energy took a more assertive position and wanted to free up development, that could be done. Also, with regard to China, we could put on the tax that Romney and Krugman have suggested, you know, tomorrow morning at 9:00 o'clock, if we wanted, and we'd get results out of China within two weeks.
ROMANS: All right, we have to leave it there. Nomi Prins, Jeanne Sahadi and Peter Morici, have a great weekend, everybody.
It's everything a hot novel should have -- controversy, betrayal, infighting. But we're not talking about a novel. We're talking about the hot new book on the Obama White House and the financial crisis. Author Ron Suskind with the juicy details and response to the criticism from the White House of his book next on YOUR MONEY.
ROMANS: A new book claims that President Obama's economic team suffered through infighting while struggling to get a grasp on the 2008 financial crisis. Ron Suskind, a Pulitzer Prize-winning journalist and author of "The Confidence Men: Wall Street, Washington and the Education of a President." Welcome to the program.
Treasury Secretary Tim Geithner disputes your version of reality. Let's listen to what he said about your book.
(BEGIN VIDEO CLIP)
TIMOTHY GEITHNER, TREASURY SECRETARY: But again, I lived the original. And the reality I lived, we all lived together, bears no relation to the sad little stories I heard reported from that book.
(END VIDEO CLIP)
ROMANS: Pretty concerted effort by current and former administration officials to discredit the reporting of this book, a book that you say pulls the curtain back on a young presidency making mistakes in a very historic time.
RON SUSKIND, AUTHOR, "CONFIDENCE MEN": Yes. It was a difficult time. The president is in large measure a victim of the circumstances. As I point out in the book, part of his appeal was that he was not a Washington guy. He was someone who was something of a clean slate here at a time of crisis, largely exacerbated, maybe even caused by the Washington-New York axis that the book examines with such care.
Obama arrives, though, and he has to both own Washington, tame New York, save the economy. And he has around him a variety of senior advisers, all of whom, I would say, had a hand in some of the mistakes that were made that caused the disaster that the president now faces.
ROMANS: Mistakes like what? You mean like deregulation of the banking system?
ROMANS: You mean, like, sort of an open-armed, full-throated endorsement of globalization, not realizing you're going to have millions of American men out of work eventually?
SUSKIND: Precisely. And one of the things Larry Summers was saying to various other, you know, officials who are going through their nomination process is, Don't do policy and don't admit mistakes. Don't admit we made any mistakes, you know, from the days of yore.
Now, frankly, some of them said yes to that, but some didn't. I mean, Gary Gensler's a good example of someone who was much more candid, to say, Look, we did make mistakes. And you know, the key is to admit that so that we can go forward.
ROMANS: Now, in the book you relay a conversation in which Larry Summers is alleged to have said to Peter Orszag, another member of the economic team, quote, We're really home alone. There's no adult in charge. Clinton would have never made these mistakes.
Here's what Summers had to say to "The Washington Post." "The hearsay attributed to me is a combination of fiction, distortion and words taken out of context. I can't speak to what others have to Mr. Suskind, but I have always believed that the president has led this country with determined, steady and practical leadership."
You spoke to so many people from the Obama administration past and present for this book. Are you surprised by their reaction?
SUSKIND: You know, not really. I'm surprised by some of the personal qualities of it. But what I did in this book is really tried to go back to everybody prior to publication and say, Here's what's going to go next to your name in the book. Let's talk about now. Give me your response.
And Larry Summers does give a full paragraph response to the "home alone" quote in the book. I think that's the real response. It's, you know, one he -- he's sober, he talks about, We were overwhelmed, we had five times as many problems and not five times as many people. Essentially, we were a victim of circumstances. And who knows what any president could have done.
I think that's the appropriate and accurate response. As well, I think, importantly, is that Tim Geithner responds in almost two pages of quotes, all from a transcript of a final interview I did prior to publication with the Treasury secretary. And people can judge for themselves...
SUSKIND: ... whether he slow-walked the president or not from that, I believe.
ROMANS: It comes at a tender moment politically for this president, and that's probably part of the sensitivity on the part of the White House. And people who are loyal to him, Anita Dunn, who's in this book, says she would walk over hot coals for this man.
SUSKIND: Absolutely right. People are loyal to him, journalists that are loyal to him, journalists who want access going forward. You know, we are in a difficult period. This is a hard book, in a way, to report.
You know, I was identified by the Bush administration as a lifelong Democrat. I am a lifelong Democrat. To report some of these things, to get these disclosures, to sit down with person after person and hear what they have to say, go over the tapes -- I'm, like, Wow, this is -- this is unsettling, some of it, hard to hear.
But I think the key to the book is this education of and evolution of a president. So many of the disclosures that are being discussed are firmly placed in past tense by the book...
SUSKIND: ... because they're in past tense in the view of the president. He feels he has grown, learned and hardened himself by virtue of these difficult times. And he says that with real force in the last interview.
ROMANS: And the last third of the book is looking forward, what's been learned from these mistakes (INAUDIBLE) all of the press is about the controversy between people who said they did or didn't say whatever about -- but where is this president now, judging from the mistakes that happened at the beginning of the financial crisis and who knows (ph) who (ph) was president if those same mistakes would have been made or a different set or mistakes, quite frankly. So where is he now in terms of handling what is a very serious jobs crisis in this and a political crisis, as well?
SUSKIND: Well, you know, like that old line, Sweet are the uses of adversity. Clearly, this president has found many uses for adversity, and he gives voice to that in this final, long 50-minute interview we do. You know, he says, going forward, he has a model that works. He has, The staff I need now to do what I need to do. It's a much more dynamic version of leadership. Essentially, I can do this. I've got this job in my grasp, a president with a big P. And he knows the crises are acute. And I think what you're seeing in the last week, in fact, is something the president would point to and say there is the president that you're going to see more of, tougher, saying it's about choices. Not everyone's going to be pleased, and tough choices, taking on opponents, not saying, We can all figure this out and come together.
I think that period may be over, and that's what the president telegraphs, I think, at the end of this book.
ROMANS: You say you're a lifelong Democrat. From what you know about this president and the people around him, are you ready to say he needs another four years.
SUSKIND: Not a -- not the kind of thing I talk about.
ROMANS: Well, that's a very diplomatic answer. And it is early, right, 14 more months. Ron Suskind, thank you so much.
President Obama says he has a plan to turn the economy around. But is the president's plan about leading or campaigning?
ROMANS: Plenty of unfinished business in Washington. The super committee's recommendations to cut long-term debt, the president's $3 trillion debt plan, and, of course, the president's $450 billion American Jobs Act. Congress hasn't touched the jobs bill which has been consistently criticized by Republicans.
(BEGIN VIDEO CLIP)
SEN. MITCH MCCONNELL, (R) MINORITY LEADER: If a bring needs fixing, by all means, let's fix it. But don't tell us we need to pass a half a trillion dollar stimulus bill and except job killing tax hikes to do it. Don't tell the people of Kentucky they need to finance every turtle tunnel and solar company on some bureaucrat's wish list in order to get their bridges fix.
(END VIDEO CLIP)
ROMANS: Robert Zimmerman is a Democratic strategist. Will Cain is a CNN contributor.
Robert, I'll start with you because Republican Mitch McConnell is making a point Will has made many times on this show. Is this jobs act about real job creation or is it short-term stimulus that's only going to add to our deficits.
ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: Actually it is going to be about both. The reality is, what you just saw from Mitch McConnell is really an illustration of what's wrong with Washington, because in a sense conflict works in politics. That's how they got there, was through conflict. The economy doesn't work through conflict. The economy only works through cooperation. Ultimately we're not going to see any real progress in terms of job growth or any real stimulus to the economy unless there is more cooperation. Ultimately, it's up to the American people to demand it.
ROMANS: Well, the economy is not working but everyone disagrees on exactly how to get it working again. Let's talk about taxes. Because one of the things the president would like to do, we would like to implement something called the Buffet Rule, named for the billionaire, of course, Warren Buffet, who says Washington has coddled rich people like him for too long. And that he doesn't pay enough in taxes.
The Buffet Rule headlined a plan by the president, that centered on the wealthy paying more, allowing-also including allowing those Bush- era tax cuts to expire for the wealthiest. Republicans say class warfare. You've all heard this all week. But with the poor getting poorer, rich enjoying the only growth you saw over the past 10 years, is it time for the wealthy to pay more?
WILL CAIN, CNN CONTRIBUTOR: That depends on what your motivation is. If your motivation is simply to even out the wealth spectrum so the rich doesn't have as much, and the poor have more, then it might be effective. If your goal is to actually stimulate jobs and growth as Bob just suggested, I think it's a poor measure to affect that.
President Obama is giving lip service to this in the past, Christine. You can use the tax code to stimulate economic growth and create jobs by simplifying it, doing away with deductions and exemptions and loopholes. The truth is, when you have an over complicated tax code, something like 14,000 pages. You know who knows how to negotiate that best? Rich people and their accountants. Simplify it, you will have a huge economic boone. You could even lower tax rates and have tax revenues to the government go up.
ROMANS: Can they guys decide-I mean, simplifying tax code, tax reform sounds so great. I don't see any give-and-take in Washington right now. I mean, could they really do it together?
ZIMMERMAN: I think there is a much bigger issue, here, OK? The first goal has got to be create economic growth and to stimulate the economy. Ultimately we're not going to do that with-we're not going to move this economy forward without creating economic growth. If your focus is deficit and taxes, that's going to paralyze the Congress.
I think you've seen what the American Jobs Act a program even Republican economists like Mark Zandy, who was a top McCain advisor, said this could reduce unemployment by 1 percent. That has got to be the first focus, is to grow this economy. The deficit and the issue of taxes, which are in the outer years, that's got to be addressed at a later time, after the economy is moving forward.
ROMANS: We have to do it all. The only problem is, it has to be done all together. We're not in a position now-- we've given up an awful lot of time, pushed this forward years and years. They have to do it the right way.
And I think we look at Washington and we're not sure they can do it the right way, Will? CAIN: But to answer Bob's question on whether or not stimulus is an effective way to stimulate the economy, and create jobs, there is a serious economic argument and debate to be had there. But one thing people seem to agree on, whether or not it's the Obama reduction panel, Bowles-Simpson, or the Domenic-Rivlin panel for deficit reduction as well. They have all forwarded this idea of tax simplification. Reform the tax code.
Whether or not it's conservative economists or President Obama this is an idea that people are rallying-Christine there's a reason they haven't enacted it. You asked that question a minute ago. The tax code is a way to use social engineering, to influence people's behavior. We decide people we want to buy homes, we give a tax incentive to do it. We have to let go of that concept.
ZIMMERMAN: Will, the bottom line is the Rivlin-Domenici Commission, the Bowles-Simpson Commission all talked about shared sacrifice. Every national poll shows the same thing, that commitment to shared sacrifice.
CAIN: But I'm not making an argument for flat taxes here.
ZIMMERMAN: That's not the point. The point simply is if we are going to move this economy forward, yes, shared sacrifice is part of this. But we also have to recognize both parties should increase their doses of Dramamine, because they are all spinning themselves.
ROMANS: I want you guys to listen to this for just a second. Mitt Romney making a case for middle class tax cut at the Republican presidential debate this week. Listen.
(BEGIN VIDEO CLIP)
MITT ROMNEY, (R) PRESIDENTIAL CANDIDATE: I know there are some that say, look, we should lower taxes for the very highest income people, other folks have different plans. My view is very simple. The people that have been hurt most by the president's economy, the Obama economy has been the middle class. That's why I cut taxes for the middle class.
(END VIDEO CLIP)
ROMANS: Robert, is it responsible for any politician left or right to talk about tax cuts when we have a drastic need for deficit reduction?
ZIMMERMAN: You know something the drastic need has got to be to grow this economy. And in the American Jobs Act, the president has put forward a bill with many proposals the Republicans support. For example, payroll tax cuts, to give working families $1500 extra through tax cuts, or create incentives for employers to create employment. So, what Romney is doing it just political posturing. Quite frankly, it is an example of the type of conflict that has paralyzed this economy.
I would make this point to you. We have seen the economy grow in sectors of our country. We've seen San Diego become a bio-tech, the bio-tech leader in America. We have seen certainly tremendous growth in Pittsburgh through nanotechnology. We've seen Cleveland expand through the Cleveland Clinic or Silicon Valley come back. We are seeing economic growth emerge when there's cooperation between the government and between the private sector. The problem, is in Washington it's just the opposite. They were elected to oppose cooperation.
ROMANS: Last word to Will.
CAIN: I would just say I'm glad that Bob admits that in addition to some kind of government spending, tax cuts can have a stimulative effect. I would just say the Obama admission is going about it the wrong way. Another loophole, another exemption for payroll taxes, or whatever, are temporary measures that don't have the effect of simplifying the tax code.
ZIMMERMAN: Bottom line is, Will, you are outlining once again-
ROMANS: Wait! Will got the last word! We didn't interrupt you about the-
ZIMMERMAN: Took my best shot.
ROMANS: Will Cain, there you go, guys. Have a great weekend. Come back and do it again, right?
Is it possible to anger 750 million people at once? Apparently it is. We'll explain what it's all about and why you very well might be one of them next.
ROMANS: Welcome back to YOUR MONEY. Richard Florida is the senior editor at "The Atlantic". Richard Quest, host of "QUEST MEANS BUSINESS" on CNNI.
European markets, gentlemen, rocked this week. The U.S. market followed suit, posting steep losses of its own. Christine Lagarde, head of International Monetary Fund, warns the world is in this together.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: It's a problem that concerns just each and every country, each and every member of our institutions. We are in this together and we can pull out of this together, because from the Fund's perspective our analysis says there is a path for recovery.
(END VIDEO CLIP)
ROMANS: Well, that's nice to know. A path for recovery, Richard Quest, but could that path, I don't know, go steeply downhill before it gets to the end? RICHARD QUEST, CNN ANCHOR, "QUEST MEANS BUSINESS": There is a new reality. There's a new seriousness. I would say it's come in the last two or three weeks. People are now talking about-finance ministers, analysts, economists-everybody is now talking about a window closing to sort this thing out. If you look at the last four or five days in the market, that's exactly what we are seeing. This window is getting tighter and tighter.
But we're hearing the same rhetoric. Christine Lagarde is a fine finance minister and leader of the IMF, but you've got to do more than simply say we're in this together. Angela Merkel has to do more, Sarkozy has to do more, the president has to do more. Whichever way we look, it's the same rhetoric. But frankly, where is the action?
ROMANS: Richard Florida, one of the things here, is that people keep saying starting to feel like 2008 again. If you said that six months ago, it was too premature. That it is feeling like 2008, but this time it's Europe and financial crisis there, instead of a crisis in the United States. Is that too dramatic that comparison?
RICHARD FLORIDA, SENIOR EDITOR, "THE ATLANTIC": No. It was easily predictable. You know, what we are going through is not a typical business cycle. This is a great economic and financial crisis. I call it a great reset. You know, if you look back in history at the two analogous events, the Great Depression of 1930s, and panic and long depression of 1870s, those were generational events, two to three decades long from crisis to reset to recovery. It's quite predictable.
While monetary fixes and meetings of financial ministers could mute the most onerous and heinous and tragic outcomes of this crisis, we need a different kind of focus on long-run recovery, real innovation, productivity improvement, building new ways of consumer demand. The current approaches can only mute the worst outcomes, they are not going to set us on a path to real recovery and prosperity.
ROMANS: Gentlemen, all is not hopeless around the world. Richard Florida you came out with a list of the top 25 most economically powerful cities in the world. I want to take a look at just the top five. New York comes in number two, just behind Tokyo. Not listed is Boston at number six. That's three U.S. cities among the top six. Is this evidence, perhaps, of rumors of America's decline have been greatly exaggerated, Richard Florida?
FLORIDA: Oh, I do not think America is in any way in decline. I would predict that America will come out of the crisis in the single best position of any economy, including Asia, and China and the world. We're already ahead of the world in resetting our economy. Look at Europe and getting back on track.
The fact of the matter is that list we ran at the "Atlantic", cities this week, shows the crisis is terribly uneven. And this comes out in the new census data. While places like New York and Washington and Boston and San Francisco, and in other countries, London and Paris are doing OK, and even Tokyo, other parts of our own country and the world are sinking. So one of the things we have to come to grips with is not only a growing economic inequality but growing geographic inequality right here at home, where some places of our places are recovering so nicely, in others, in Detroit, in the Sunbelt they are falling further and further behind. I think the United States comes out of this in the best shape of any economy in the world.
ROMANS: Richard Quest, that is such an interesting analysis. The crisis had an uneven effect. I think you see that along the income stream. You see that depending on how much money you make, where you live, what you do for a living, what country you live in.
QUEST: We're in very dangerous territory in this interview. I have to tell you. For the first time you have a guest on with me that I completely agree with me everything he's said so far.
FLORIDA: Thank you, Richard. Thank you.
QUEST: This is very worrying. Let's hope it's not a trend.
Firstly, this concept that we are in a generational great reset is absolutely what's happening. The tinkering that's going on by mealy mouth politicians is really what's worrying.
But let's-on this other point, if I look up Britain, London is doing OK, frankly. You talk to British Airways, they will say their flights from London, their yields have held up, their passengers have held up. Because the London economy is one on its own.
ROMANS: I want to switch gears quickly and talk about Facebook, 750 million members.
QUEST: Oh, oh.
ROMANS: About 750 million of them are quite irked by plans to make major changes to the site. I did log in this week and it gave me headache. The social media giant announcement this week prompted users to take to Twitter and other online venues, to vent. Petitions popping up. Richard Quest you are in London, Richard Florida in Toronto. I presume you are friends on Facebook. I'm in New York. Would we all still be friends without it?
QUEST: Look, put it this-the thing about Facebook is, it's a very short period of time it's enmeshed itself into people's psyche. So, just as much if "The New York Times" changes one bit of formatting or CNN, we change or program schedule on little bit, gazillions of people start getting really upset. People have nothing better to do, really get irked and write long letters to the newspapers. Facebook is now suffering the same syndrome. Everybody believes it's theirs, the moment you tinker with it, you better wait out for the volume of mail.
ROMANS: Richard Florida, 750 million anything is a lot, isn't it?
FLORIDA: Yes, I don't think Facebook is going away. But I'll tell you, it would seemingly give a boost to things like Google, plus, and certainly help Twitter along. But I think, you know, social media is part of our life. The one thing that it has done, which is really interesting related to the previous conversation, it's actually helped create this concentration of economic assets, and kind of exemplified the divide. I think social media and globalization and this uneven crisis all go together in one picture.
And as Richard said, we've got mutual admiration society, two Richards do make a trend.
One of the things that we have got to come to grips with in our social media, globalized world where we are all connected, is that we are all getting-depending on where we live, going further and further apart. I would say, just going back, just wrapping this back to the last conversation; solving this problem not only of socioeconomic inequality in the United States but the growing inequality in cities is one of the key factors to getting us on the path of recovery
ROMANS: All right, guys, we'll have to leave it there, with the Richard Mutual Admiration Society. We should just start a whole segment just named after it. Thanks, guys. Richard Quest, Richard Florida.
QUEST: All right.
FLORIDA: Thank you.
ROMANS: The unemployment rate for African-Americans, is at a 27-year high, double that of whites. It is not a new problem, but why is it getting worse?
ROMANS: The jobs crisis in this country is not improving and there are few signs it will in the near future. The outlook particularly grim for African-Americans. The overall U.S. unemployment rate is 9.1 percent. But for black males it's more than twice as high, a staggering 19.1 percent Jobs were the focus at the Congressional Black Caucus annual meeting in Washington this week.
CNN Contributor Roland Martin has been participating.
Roland, welcome to the program.
ROLAND MARTIN, CNN CONTRIBUTOR: Glad to be here.
ROMANS: The jobless rate hit a 27-year high last month for African- Americans. And this was shocking. You got to go back to the Reagan administration to see a situation that's been so difficult for this particular group. What's the problem? What solutions are being discussed, or are we not discussing race specific solutions, and that's a problem?
MARTIN: First of all, we're not discussing race specific solutions. Do understand there's a common phrase used that when America gets a cold, black America gets pneumonia. So whenever there's an economic downturn, folks who are at the lower end are always impacted.
First of all, when you talk about black men, you have to tie the job situation to education. And so when you talk about Detroit and Chicago, and other cities, where you have 25, 35, 40 percent of black men graduating from high school, what that means is that you have people who are not even -- not even a having high school diplomas. Now in a position where they are really looking at lower wage jobs, possibly customer service jobs, or opting for jobs in pharmaceuticals also known as being drug dealers, involved in crime, or whatever. Folks absolutely out of the marketplace and so education is a direct correlation.
But, when we also study the stats, that the unemployment rate of college educated African-Americans is twice that of white Americans, that says something as well. But clearly when you talk about across the board, education is the fundamental issue that speaks to this high unemployment rate.
ROMANS: I'll tell you one thing that a lot of the research that I've covered over the years is that the first job is critical for the rest of the path.
ROMANS: If you don't have that first job, you know, it sets you back. You've got 20 years, 18 or 20 years to really groom an American, to get the right foot hold in the economy and education is a big part of that 20 years.
MARTIN: When you also expand this conversation beyond the issue in terms of having the job, it also applies to the creation of wealth. We've seen the loss and I talked about this two years ago, 53 percent of black wealth has been wiped out as a result of the home foreclosure crisis. When you talk about low jobs, low wage jobs, then you talk about the whole education issue, Christine, then your in a situation that I'm familiar with, that is that I might be educated, high earner. But I might have a brother or sister who is in need of economic help, and so what end up happening, a lot of African-Americans deal with this, you're providing so much resource to siblings, you're unable to truly save accordingly. So therefore your wealth creation is not as great as it should be, so now it's a circle issue.
So, if it's you, you, you and now you have a greater problem. That's why it's vital for African-Americans to have the education, get that particular job so you're not having to sustain the rest of your family as a result of your one income.
ROMANS: All right. Roland Martin, fascinating discussion. We should make sure that discussion never end here on one week. That we keep going and keep talking about it.
MARTIN: I agree.
ROMANS: Roland Martin, CNN contributor, thank you so much, sir.
MARTIN: Thanks a lot. ROMANS: So what could the U.S. government learn from corporate America? A lot, according to the head of one of the most successful brands in U.S. history, that's next on YOUR MONEY.
ROMANS: When discussing solutions for unemployment on this show we often ask what will it take to encourage businesses to expand and hire. Ali Velshi posed that question to Coca-Cola CEO Muhtar Kent. The two sat down this week at the Clinton Global Initiative.
ALI VELSHI, CNN BUSINESS CORRESPONDENT: You are at a conference here where they really aim to come up with solutions, participants are meant to take action to improve things. And one of the things that is a focus of this particular conference is jobs. It seems to be an intractable problem. Is it?
MUHTAR KENT, CHAIRMAN & CEO, THE COCA-COLA COMPANY: We are faced now with a situation where companies and corporations, small or medium size or large, are actually doing pretty well in the United States as a result of actions that they've taken. But they are not employing people and so we're faced still with a very high unemployment rate. And I think unless we can take some really bold action, both at the federal government level, policymakers, as well as at the local level, we're not going to come out of this current dilemma of decoupling of growth and employment. I think it is incumbent upon us to do that, because at the end of the day, we'll be faced with a big social issue if this continues and the divergence continues.
VELSHI: Ultimately, jobs are mostly created when there's demand for those jobs to be created. So look at your own company. Is there something, some policy that can change, some initiative that can be taken that would cause you to create jobs, and hire people that you otherwise are not hiring right now?
KENT: There's this notion that growth overseas takes jobs overseas. Not necessarily so. Not always the case. But I think what we really need more in the United States is clarity, is more trust, is a policy- creating incentives, creative incentives for business in the United States, for businesses that will invest and will invest also in specially sustainable infrastructure.
VELSHI: Is that businesses like yours or is it going to be mid-size businesses, or is it going to be smaller businesses?
KENT: I think all, for all. We would invest more if there was creative investment incentives given to our business, especially for sustainable innovation, and for sustainable infrastructure and for green infrastructure both production and distribution.
ROMANS: Fascinating stuff. Thanks for joining the conversation this week on YOUR MONEY. YOUR MONEY is here every Saturday, 1:00 p.m. Eastern. Sunday at 3:00 p.m. You can also catch me on "YOUR BOTTOM LINE" Saturday mornings 9:30 a.m. Eastern. And stay connected to us 24/7 on Twitter, the show handle @CNNYourmoney. I'm Christine Romans. Have a great weekend.