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YOUR MONEY

Buried By The Tax Code; President Not Counting On Congress; Interview With Americans For Tax Reform President Grover Norquist; Living Up To The Pledge; Interview With HUD Secretary Shaun Donovan; Heated Debate Over The Wealth Gap, Tax Reform, U.S. Immigration Policy and Brain Drain

Aired October 29, 2011 - 13:00   ET

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


ALI VELSHI, HOST: Simple solutions to complicated problems. If you want to know why simplifying the tax code is such a popular idea, take a look at this. This is the federal tax code, all 72,000 pages worth.

I'm Ali Velshi. Welcome to YOUR MONEY.

Governor Rick Perry is proposing giving you taxpayers a choice. Essentially you can pay your current income tax rate under this code or you can skip the accountants in the software and pay a 20 percent flat tax rate.

The bottom line, most Americans would choose a 20 percent and at the very least this would amount to a tax cut for the wealthy.

Candy Crowley is CNN's chief political correspondent. She is the anchor of "STATE OF THE UNION" on CNN. Candy, no one is yet sure what Romney's proposal is, whether it's economically sound.

But after Herman Cain's success in getting attention for his 9-9-9 tax plan, I could see why Perry seized on the idea of a simple tax. This tax code helps us understand that.

Here's what I'm not clear on, whether these candidates succeed or fail on their economic plans or how sexy or simple the plan sounds or whether it has nothing to do with that and whether it's about who has got best chance of beating President Obama.

CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: It's sort of somewhere in between there, Ali. I mean, there are certain things a candidate could say in this Republican primary that would make him or her a non-starter, and that is I'm going to raise your taxes.

I will make big cuts in defense spending and there are, you now, big things we need to do with federal spending. OK, those would be non- starters, but when you look at these plans, they're much more political productions than they are substantive productions because I think, as we all know, there are three branches of government including Congress.

No one looks at a candidate's plan and thinks this is going to happen on January 21st or 22nd or whenever the date is that this person first takes office, should they become president. VELSHI: Right.

CROWLEY: And we have poll after poll after poll that shows that most Republicans want Barack Obama to be defeated. So in the end, this will be by and large in the Republican Party a calculation on who can beat Barack Obama.

VELSHI: For months we have been talking -- longer than months, in some cases for years about something called comprehensive tax reform, right? Taking all these pages of the tax code and getting rid of them and doing something more simple.

It took Herman Cain's 9-9-9 to get everybody really studying it and seeing whether it made sense and whether it would work or whether you'd to have twice as much. Did it surprise you that that got a great deal of attention?

And now I think Perry is trying to come up with something. It sounds simple as opposed to the complicated proposals put out by say, Romney or Huntsman.

CROWLEY: Right. No, it doesn't because it is something -- I mean, Herman Cain picked that and said it over and over again. Simplicity and repetition work on a campaign trail. They don't work when you're making policy.

Because what happens is you go up there, and you know, the homeowners or you know, the home mortgage lenders, you know, come in. They want something different. The CPAs want something different.

So it is a -- it's something that draws attention politically. It didn't surprise me because it had some simplicity to it. Everyone hates the tax code because everybody has to go and do that every April 15th.

You want to tear your hair out. So it's a great catch-all, and it's the way that Republicans are saying that they can cut the debt. It's a two-fer really. You know, going against something you hate and trying to deal with the debt. At least that's what the alleged outcomes would be

VELSHI: Even I want to tear my hair out, so you can imagine how extra frustrating it is for me. Stephen Moore is joining us. He's an editorial writer with the "Wall Street Journal."

Stephen, Governor Perry says his plan is essentially going to shrink all of this down to the size of a postcard.

(BEGIN VIDEO CLIP)

GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: The best representation in my plan is this postcard. This is the size of what we're talking about right here. Taxpayers will be able to fill this out and file their taxes on that.

(END VIDEO CLIP) VELSHI: All right, Stephen. You're a conservative. You're in favor of lower taxes. I'm sure we all agree that a 70,000-page tax code is a little much, but is a postcard, a flat tax not a swing too far in the other direction?

I asked you this because you've written that a flat tax is like a Porsche when right now we're driving out a rusted-out Pinto. You've also written that it's steroids for the economy.

Aren't there benefits to certain deductions? Aren't there things that my economic behavior should be rewarded for versus penalized?

STEPHEN MOORE, EDITORIAL WRITER, "THE WALL STREET JOURNAL": Well, you could make that case, Ali. The problem is the tax code has become just a big swamp.

VELSHI: Right.

MOORE: You know, we just keep adding more and more deductions. What about the mortgage deduction? What about the charitable deduction? What about the deduction for state and local governments? It just goes on and on.

Nowadays, you can get tax deductions for wind mills and bull sperm and all this stuff. It just has made the tax code that incomprehensible mess that you were talking about, 72,000 pages. I do believe, especially, Ali, among conservative Republican voters voting in the primaries and caucuses starting in a couple of months.

This idea of just blowing up the tax system and starting and replacing it with something very simple and clean and pro-growth has a lot of appeal. I mean, you're going to find very few Republican voters who say, I like the tax code just the way it is.

VELSHI: But however, the postcard idea ultimately in a year or two years, somebody is going to say, we need to reward this kind of behavior, because we need people to spend this way or invest this way. It doesn't stay a postcard necessarily.

Let me bring in Diane Swonk into this conversation. Diane, again, I think this is one thing upon which almost every American other than those who make money out of doing taxes can agree, 72,000 pages of tax code is rough and we need comprehensive tax reform.

But what should that look like? Who should undertake tax reform? Isn't that kind of thing that's better done by experts, economists and accountants than by presidential candidates who are appealing to what Candy points out is a fatigue with complexity?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, certainly, I agree with that, and I think we are seeing -- we have seen some proposals for fundamental tax reform in the Simpson-Bowles plan. We've seen it in the gang of six.

We have seen fundamental proposals for changes in the tax code. I don't agree with the flat tax. Even Adam Smith agreed with the graduated tax structure. That said, let's get rid of some of the behavior distorting deductions particularly in the corporate tax codes that allows us to bring money back to the United States from abroad.

So there are a lot of things we can do with the tax code. But at the end of the day, when was the last time we had fundamental tax reform in 1986 under President Reagan. At that time, it was the largest tax increase in history by eliminating deductions and simplifying the tax code.

VELSHI: Right.

SWONK: Be careful what you wish for because I think that's where we're moving. The idea is to raise revenues and not reduce revenues and also reduce all these special interests that are involved in the tax code right now.

VELSHI: Candy, let's talk about the other side of the equation. President Obama, this week, he introduced a new mortgage modification plan.

An enhancement on the previous nine that they've had designed to help maybe another million, maybe a million and a half troubled homeowners. Then he moved up the time line for helping college students cope with the cost of education. Listen to what he said.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: College isn't just one of the best investments you can make in your future. It's one of the best investments America can make in our future. So we want you in school. We want you in school, but we shouldn't saddle you with debt when you're starting off.

(END VIDEO CLIP)

VELSHI: Candy, first of all, is this go it alone on the economy, don't wait for Congress strategy likely to work for the president?

CROWLEY: Politically, absolutely. I mean, I think this idea we can't wait is, you know, same song, different verse of, you know, give them hell, Harry. This is about being against Congress, which Democrats interpret as being against the Republicans blocking the president's agenda.

So this is all a part of it. It's about -- he made changes to student loans, for some homeowners unable to take advantage of some of the lower rates. He's done some executive orders that would ostensibly help veterans, so these are all key -- not just key voting groups. They are key kitchen table groups.

VELSHI: Right.

CROWLEY: These are the sorts of things that people talk about when they talk about the economy. Like how are we going to pay for our kid's education? How our kids going to pay for our kid's education? How are we going to keep this home? What about these veterans we owe so much? So these are like - these are actual issues that people talk about. They don't talk about the GDP. You know, I don't care how good the GDP gets, people aren't talking about them.

They're talking about those issues and that helps the president reconnect in a way that he has been and many people see him as having disconnected with the voters that he rallied so well four years ago. This is a way for him to reconnect.

VELSHI: Candy, Diane and I are a little hurt, by the way, by that people don't talk about GDP thing.

CROWLEY: OK, you guys talk about the GDP.

VELSHI: Stephen, here's a good point though that candy makes. The president has decided he's going to work around Congress. He's going to do things on the margins. He's going to force their hand.

Congress, particularly the Republicans and conservatives in Congress have been remarkably effective strategists since their election in 2010. This is a change in strategy.

The president is working around it. You worried that that could steal some thunder from this Republican movement of cutting spending and controlling what the president does?

MOORE: Yes, it's probably a good strategy. That's what I would do if I were the president. You know, it's interesting in the last couple of weeks, President Obama and even Harry Reid and others have been talking about, quote, "the Republican Congress."

Wait a minute. People forget the Democrats still control the Senate, but -- look, everybody hates Congress, right? I hate Congress, you hate Congress. So it's a very populist thing to do. But I just have to say one thing on this.

I have two kids in college. You know, I'm paying almost $80,000 a year. They go to some pretty expensive schools. What is going on with college expenses right now is just putting -- it's out of reach of American families.

And the problem is just keeping, giving money to the schools and tuition and scholarships, all that is doing, Ali, in my opinion is feeding the increase in the tuitions, which have been growing as you know over the last 20 years two to three times the rate of inflation.

When I went to the University of Illinois, it was $1,000 a semester and that wasn't so long ago.

VELSHI: Yes, there are people in America who are living with college age students and their retired parents who are consuming health care, which is increasing at that rate is really crushing them in the middle. We'll be discussing a lot of that.

Diane, last word to you. Sorry about the whole people don't talk about GDP thing. I guess you and I are isolated on that, but this is a valid point that Candy makes.

That people are talking about education. They're talking about their mortgages. They're talking about health care. They're talking about their jobs. They're talking about veterans, but we still have this larger economic issue to solve. It does not look like we're solving it in Congress.

SWONK: Well, the bottom line is that is absolutely true. I think the reality is they do talk about GDP. They just don't know it. They're talking about all the things that influence economic decisions in their lives, and that's what GDP is.

And that's we're talking about right now. The economy is not growing enough to make us all feel good. It's not growing enough to make us be able to pay all of our bills on a mass scale that we would like. That's where the fundamental problem is.

VELSHI: The good -- the little bit of good news is that the GDP for the third quarter, which just came out on Thursday at 2.5 percent for once wasn't worse than we thought it was going to be. We had a piece of economic news.

Whether you like it or not or even know what it means, it wasn't worse. That today in this economy is a win. Candy Crowley, great to see you. We look forward to seeing you on the show on Sunday morning. Steven and Diane, always a pleasure.

All right, we got this tax code here. Let's talk about taxes, 9-9-9 or a flat tax? The man behind the Republican pledge not to raise taxes is only a fan of one of them, which one would he choose? That's next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: He is one of the most powerful, influential voices in the country. He's not an elected official. He's Grover Norquist, president of Americans for Tax Reform, a conservative group, which has secured pledges not to raise taxes from 238 members of the House and 41 senators.

Grover, welcome back to the show. You've warned that those who signed the pledge and break it will pay a political price. So whether they're listening to you because you're respected or feared, your opinion on the tax plans being offered by presidential candidates matters. Do you support Rick Perry's optional flat tax?

GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM: I think it's a really good step in the right direction. It takes the top rate to 20 percent. It does what we need to do internationally.

A lot of people have been talking about taking the corporate rate to 25 percent because that's the European average. The problem is we have state corporate income taxes of between 4 percent and 5 percent on average.

You really need to take the American corporate rate to 20 percent in order to be competitive internationally at a total of 25 percent and of course, on the individual level same thing. Most businesses pay taxes through the individual tax code.

VELSHI: So, Grover, your thinking on this is that if you make taxes low enough -- the money. I don't mean to speak for you. Tell me if I'm wrong. The money people that don't spend in taxes or businesses don't spend in taxes will be otherwise employed in a way that it will create demand and grow the economy?

NORQUIST: Well, certainly let people decide how to spend their money. People will spend it more wisely and more effectively than the government would.

You also have -- you have to do a lot of other things like remove the regulatory overhang that's threatening every business decision in America, cutting taxes is step one. You also have to remove some of the threats of all of Obama's new regulatory impositions.

VELSHI: So most people who pay a personal income tax in America pay more than 20 percent. Bottom line is if you give an option of the old system versus a flat tax, which Rick Perry is suggesting doing, I would guess most people would choose the flat tax. Is that a problem because all of a sudden the government is going to get a whole lot less money?

NORQUIST: Well, two things. I think over time this would be so good for economic growth that you will have more resources coming in. But immediately I like the idea of having an alternative because there are some people who were told by the government these are the preferences the IRS has.

Buy a big house, live in a state with high taxes and you get all these deductions. If you organize your life around the IRS' preferences, it's a little unsettling or unfair to say, we change all the rules on you.

Instead what Rick Perry's plan does, here's an alternative system. You want to move into the alternative system? Do. You want to stay where you are? That's fine, too.

VELSHI: OK, here's an interesting thing. Perry's plan also proposes to attach government spending really as a set percentage of GDP. The more we take in, the more we produce, the more we spend and the reverse would also be true.

Is there ever a case where you would favor sort of flexibility on that sort of arrangement over a hard and fast rule when it comes to allowing the government say to deal with a fiscal crises where some argued they had to get in and spend money where businesses and consumers weren't spending it.

NORQUIST: Well, I reject the idea that the government takes a dollar out of the economy and then spends the dollar that that makes the economy bigger or better, which is the theory under which the government would spend money and help the economy. But I do like the idea and I think it's the third really important thing that Governor Perry does here. He sets as a goal 18 percent of GDP as government spending. It's at about 24, 25 percent right now.

This is what Bush never did. President Bush over eight years never was looking at spending a percentage of the economy as the metric by which you govern whether you are spending too much or too little.

If he said 17 percent or 19 percent, I could have lived with that. But the idea that he's setting that as a goal and everybody who works for Rick Perry will know, we're trying to get spending as a percentage of the economy down is a huge step forward. Not been focused on in the last 10 years.

VELSHI: Herman Cain's 9-9-9 plan is based obviously on national sales tax. You've said that that wouldn't violate the pledge to raise taxes because Herman Cain has signed that, but you don't really like the idea?

NORQUIST: Yes. I do like the idea where he says present code is problematic to re-distributionists rates are too high. We must go to a single rate tax, the taxes consumed income only. He does the fair tax that the retail sales tax, but the transition to get there is what's scary to me.

He has three taxes, the income tax only at 9 percent, OK, a new 9 percent retail sales tax on top of all the states sales taxes that exist and the 9 percent Japanese-style VAT to replace the corporate income tax.

Those three taxes I think would be likely to grow and to become less flat. I don't know why you create three tapeworms hoping that later you have one small one out of the deal.

VELSHI: And I heard that expressed. Let me ask you one thing. Since the last time we talked, there have been a lot of criticisms of the intransigents of conservative lawmakers, many of whom have signed your pledge when it came to making a deal on the debt and on the budget.

Have you changed your position on how tough you want to be on anybody that does anything that might as some point looks, smells or walks like a tax increase?

NORQUIST: Well, the good news is, is there were people in the last year who thought you didn't give the Democrats tax increases, we'd never get spending restraint.

It turns out they were wrong and the Republican leadership and my position as well was correct, by telling Obama the Democrats' taxes are off the table, we got 2.5 trillion in committed spending restraint.

We're now going back to the table to finish the last 1.2 trillion there. Some Democrats want to renegotiate and have tax increases. The Republican leadership has made it very clear that's not going to happen. The only way to get spending restraint is to say taxes are off the table. We learned this in '82 and we did it the wrong way and in '90 when we did it the wrong way and we just learned in 2011, this year, we did it correctly, taxes off the table and real spending cuts.

VELSHI: Grover, good to have you back. Thanks very much for joining us.

NORQUIST: Sure.

VELSHI: Grover Norquist is the president of the Americans for Tax Reform. The housing market has been immune to recovery. President Obama says he can help homeowners even if Congress won't help him. We'll find out just what is in the plan and what it could mean for your mortgage after this break.

(COMMERCIAL BREAK)

VELSHI: The Obama administration announced its latest effort to help struggling homeowners this is week. It centers on allowing more people whose homes are now worth less than the mortgages to refinance at lower rates as long as they've been current on their payments over the last 12 months.

Shaun Donovan is the secretary of Housing and Urban Development. Mr. Secretary, welcome back to the show. Good to see you.

SHAUN DONOVAN, HUD SECRETARY: Great to be back, Ali.

VELSHI: This is the administration's tenth attempt to help struggling homeowners. We're nowhere near the goals that the president laid out two and a half years ago to help several million troubled homeowners.

About 3.5 million people in this country are you know, in that foreclosure range, three or four months behind on the payments, and the range of families that I've seen that this new program is expected to help tops out at about 1.5 million.

And I'm not sure if that's a fair estimate whether you agree with that. Why can't we do something more and bigger to get all of those people out of trouble?

DONOVAN: Well, Ali, first of all, let's recognized the progress that we have made. Since the president came into office, over five million families have had their mortgages modifies. If you like just over the last year, the number of people getting foreclosed on is down 40 percent.

So we are making real progress, but the president's also said, we haven't done enough and we have to keep doing more. So let's be clear. This effort is a targeted effort that was announced this week that there are four million families around the country who have Fannie Mae or Freddie Mac mortgages.

They're underwater and they're paying rates of 6, 7 percent even though they're doing everything right. They're paying their bills, and they could benefit from about $2,500 a year in reduced payments on average.

VELSHI: Right.

DONOVAN: That's like a major tax cut year after year.

VELSHI: They're underwater and this allows --

DONOVAN: Exactly.

VELSHI: So here's the thing. You guys have setup even in the last, you know, big program. You setup an infrastructure that allowed banks to do -- so when you talk about the five million who have modified, not all those have been under a government program.

But it's been government influence that has helped the banks or cajoles the banks into setting, you know, a system where they will modify people's loans. What else could work? When you're sitting around with decision-makers or with the president and you're talking about things that can work, what are the options?

Can we take the money that homeowners owe, capitalize it into their own mortgages and extend the term of the mortgage? Can the government do something with the houses that are sitting around there in clumps and hold onto them for five or 10 years and release them on a controlled basis? Help me out with some options? What else is might be on the table?

DONOVAN: Well, two specific things. This refinancing effort is important not for just for those four million underwater Fannie Mae and Freddie Mac borrowers. The point here, Ali, is that we sat down. We've attacked five major barriers to people refinancing.

Many of those could help other families that don't have a Fannie and Freddie mortgage. Just give you an example. We've now figured out a way to automatically re-subordinate second mortgages. You may ask what is that mean to a homeowner.

Well, many folks who have an underwater first mortgage also have a second mortgage, and they're blocked from refinancing. That automatic re-subordination can help them refinance.

Another example is we've eliminated the need for an appraisal for many of these mortgages. That lowers fees, and it will allow other folks. So if we can take these innovations and spread them more broadly to other parts of the market, we could have a bigger impact.

The second thing I would say, the president was in Las Vegas on Monday to announce this. He said, look, this is an important step, but we also need Congress to do their job. We need them to pass the American Jobs Act. Why?

Because part of the jobs act is a project rebuild that would create 200,000 jobs, putting construction workers back to work, renovating and rehabilitating vacant and foreclosed homes. What would that do? That helps to lift everybody's property values. Because if you live next door to a home that's been foreclosed on, even if you're paying your bill, you're doing everything right, your own home drops in value. So we need to take this step as well and we need Congress to act.

VELSHI: All right, we're going to hope this works. When do you think -- we're getting a lot of e-mails and tweets about this. For people affected by this new change, the new announcement that the president's made, when will they be able to start the process of getting their loans modified?

DONOVAN: Well, they should certainly get ready and start working with their lenders, but we think December 1st we'll start to see loans refinance under this.

For those people who are most deeply underwater, it may take a little longer, around the 1st of the year. But we're moving as quickly as we can to get this in place to help homeowners. But let's be clear, we're also going to keep doing other things to make sure that we help this market.

We've stabilized it, but we're going to keep doing things to help make sure we have a true recovery going on our hands.

VELSHI: When you say we're going to do other things, should we expect another announcement. Is there a new initiative under way?

DONOVAN: Well, I would say two things. Clearly getting the American Jobs Act passed, a project rebuild would help a lot. The other thing is we are pushing the banks to make right for all of the robo-signing and other practices that have led many people into foreclosure.

And so we're negotiating with the 50 state attorneys general to try to get real principal write-down on loans as well. So that's an important step that we're working on and I hope we'll get there soon.

VELSHI: All right, Secretary Donovan, always good to talk to you. Thanks for being with us.

DONOVAN: You too.

VELSHI: Housing and Urban Development Secretary Sean Donovan.

Over the past 30 years, incomes have tripled for the top earners in America. How did the rest of us do? I'll tell you on the other side.

(COMMERCIAL BREAK)

VELSHI: Welcome back to YOUR MONEY. I'm joined now by two of my favorite CNN contributors, Will Cain and Pete Dominick. Pete is the host of "Sirius XM Standup". Will is a noted conservative commentator.

Guys, listen to this. We've heard about the "we are the 99 percent. They're the top 1 percent in this country. The top 1 percent in this country has nearly tripled its income since 1979, up 279 percent. That's according to the Congressional Budget Office.

Now for people in the middle of the economic scale, after tax income grew by just 40 percent in that same period, and those at the bottom experienced an 18 percent increase over the same time.

Will, how does this disparity play into the political discussion? We've certainly seen it play into the Occupy Wall Street movements across this country. There's a real realization and frustration. About something that has been going on for a long time. It's affecting people more now.

WILL CAIN, CNN CONTRIBUTOR: I hope it doesn't. I'd make two points.

First of all, inequality has actually come down over the last two years. It peaked at about 24 percent, two years ago. It is down to 18 percent now. As that happens in economic recessionary environments.

Second point-so? That stat out of context means nothing to me.

VELSHI: All right. Give me context.

CAIN: Inequality has grown over the last 30 years. If you tell me it is attributable to corruption, we have a conversation that takes place.

VELSHI: Right.

CAIN: And we have a political conversation that should take place. But without that being attributable to corruption.

VELSHI: But there are people gathering in cities across this country who are not saying what it's attributable to, but they are saying it's happening. What's the cause? Something has to be causing it to happen?

PETER DOMINICK, CNN CONTRIBUTOR: This is the cause right here. This tax code is the cause. For 30 years there's been an army of lobbyists hired by that top 1 percent to lobby for a tax policy that benefits them. The tax system is rigged for the top. It's rigged. It's not illegal. It's rigged. The middle class average Americans don't have someone lobbying on their behalf. They have unions. They have been decimated.

VELSHI: You agree, you don't like this?

CAIN: Pete and I don't disagree on this. The point I want to make is inequality in and of itself, out of context, is not necessarily a problem. It's a bug in any system that is based upon merits, upon capitalism. In response to that I would have say we've gone 1500 years where the average income was $500 in this world. Over the last 100 years it peaked to $6,000.

VELSHI: The biggest problem is not the inequality, which as you say, has been around forever. But we have eroded the middle class. The bottom line is the middle class, which carries most of the burden of paying taxes in this country, historically, now is not as in as strong a position to continue to do so.

DOMINICK: And the people at the top realize, that can't be sustained. It can't be sustained the way its happening. The question-let's be specific here. Is the word I'm looking for, thank you; $60,000, that is what you pay a year. You pay less of a percentage of your income if you may millions. Everybody knows about that.

How is that OK, Will? How is it OK to pay a million bucks and pay less of a percentage than someone who makes $60,000 in works in a steel company or coal mine.

CAIN: A, I think that statistic is completely overrated.

DOMINICK: It's overrated?

CAIN: Yes, it is not accurate. It is riding off of Warren Buffets' statement, which is inherently untrue. He doesn't pay less in taxes than his secretary. That being said, this as you say--

VELSHI: He does pay less as a percentage of his income.

CAIN: On his capital gains.

DOMINICK: Come on. People at that level make the majority of their money on capital gains.

(CROSS TALK)

CAIN: The percentage of rich people that actually make the majority of their income off capital gains and pay the 15 percent rate is low. That being said, we're arguing about that statistic. We agree. This is a problem.

The reason that rich people have any way of avoiding the highest tax brackets they are assigned under the income tax code is because in every one of these books, there is a hole and loophole and expenditure created by politicians to socially engineer a better world they envision. And thus make it easy for-

(CROSS TALK)

VELSHI: We agree on that point. This has to change. There's nothing better than illustrating this tax code to make people understand. I think if you ask people how many pages were normally in a tax code. I've heard 3,000. I've heard 8,000. What is it? 72,000 words in here.

OK, guys, a month after Bank of America got pummeled by consumers and politicians for introducing plans for new debit card fees, most other big banks in the United States, including JP Morgan Chase, U.S. Bankcorp, Citigroup, have decided not to follow suit.

Now, on one hand, I'll tell you, companies like this including Citibank have never charged those kind of fees, but I am wondering whether these just banks don't want to get Netflixed? DOMINICK: Well, listen, I mean, they're saying this B of A decision hasn't reflected on why they're not doing it. B.S., come on. What they do is they make money.

VELSHI: In other words if B of A had done and they hadn't gotten Netflixed, for doing it? You might have seen other banks follow suit?

DOMINICK: B of A says Dodd-Frank, Wall Street reform is going to make them loose $2.2 billion. The $5 fee? They are going to make $3 billion. These other banks that say they are not going to do it. Believe me, they'll find a way to make that money back. They might just be gambling saying, bank with us. They're charging 5 bucks.

VELSHI: Well, Will Cain, I bank at a bank that doesn't charge me that kind of fee. When I was on TV about this, when it first happened, people said is this right? Is this legal? Should something happen? I was like, it's completely legal. Bank of America can charge you anything they want to charge you. You also have a right-but you won't do it, to leave your bank and go to a bank that doesn't do that; 40 percent of bank accounts in this country charge no fees whatsoever, if you don't go into overdraft.

CAIN: I'm tempted to get suckered into the idea this is a free market -- an example of free market working. That all these other banks see a business practice that isn't going to work. And they are like, we'll do some thing different and attract customers.

But let's not forget that the Bank of America fee is in response to the Dodd-Frank regulation.

VELSHI: Right.

CAIN: Specifically the Durbin Amendment that puts extra fees on banks. Had the government not inserted itself there, do you think Bank of America would have charged those fees?

VELSHI: As a business guy, it costs under 10 cents apiece to conduct those transactions.

CAIN: So, all we're going to do now is we are going to micromanage Bank of America's business practices?

DOMINICK: Who do you side with? Retailers or banks? Americans can make that decision.

VELSHI: I side with my wallet. I walk. I go to a bank that doesn't do that. Lots of Americans are free to do exactly the same thing.

DOMINICK: I'm with you. I'd walk.

VELSHI: What a pleasure to see you both, as always. Will Cain and Pete Dominick.

Europe has a debt crisis deal, but will it be enough to avoid another global recession? We'll talk about that on the other side.

(COMMERCIAL BREAK)

VELSHI: Stocks in the U.S. and globally soared as European leaders approved a deal to deal with the debt and banking crisis this week. Now, the deal addresses three major problems. First, it contains, we hope the Greek debt crisis. Banks and investors, private investors who hold Greek debt will only get half of their money back under the terms of plan. That is hoping to ease substantially the Greek debt load.

Number two, it shores up European banks in general. Bank in Europe are going to be required to sharply increase their capital reserves to create a buffer against potential losses. Now the goal here is to foster more confidence in the European banking sector, avoiding a run on the banks from investors and those who keep their money in those banks.

Finally the deal aims to boost Europe's bailout fund for future crises. It creates new ways for others to investigate in the European Union. Watch China carefully. They could actually end up as a major investor here.

But will all of this be enough? Despite the rally in stock markets after the news.

Nina Dos Santos joins us now. Nina has been covering this very closely. She was covering those meetings in Brussels. She's back in London.

Nina, is this going to be a sufficient deal to stop us worrying about whether Europe is going to take the world into another recession?

NINA DOS SANTOS, CNN BUSINESS CORRESPONDENT: The consensus is, Ali, that the devil is in the detail. And so far we haven't had all that many details. But it has been a huge shot in the arm for Europe, if you like; that they have managed to come to some kind of consensus. Because we saw the two strong men of Europe, Germany and also France, very much at odds clashing on various issues of this fiendishly complicated plan.

The real challenge for them is to see eye to eye in the future to try and implement all of this. They are going to have to think about exactly they are going to be doing that before the G20 gets under way in about a week or so time. Otherwise they are going to have to do some tough talking with some of their larger economic partners.

VELSHI: That was my next question, because as we get into this new week I'm going to be at the G20 in France. And that's is what that next big question is going to be. You've come to a framework. You have come to a deal. How fast can they get down to the details and start implementing?

DOS SANTOS: Yeah. That really is the sort of the trillion dollar question, isn't it? Because what they said is they are going to be boosting that European bailout fund. The euro zone sort of rescue fund, if you like, which is dubbed the EFSF, European Financial Stability Facility, to the tune of 1 trillion euros. That is about $1.4 trillion, Ali.

If that sounds a lot to you, think about where they are starting from. They are starting from about $600 billion, and here's the catch. They are not going to be putting any more money into it themselves. They are going to have to try and convince other people, from outside the European Union, to put their cash into it. To do so they are going to have to offer some pretty solid guarantees.

VELSHI: And as I said, there is some interest that even the Chinese may be interested in that if those guarantees are in place.

Nina, great coverage of it all week. Thanks for joining us today. Nina Dos Santos in London.

All right. So much of the immigration debate here in the United States centers on protecting our borders, but what happens when in doing that, the best and the brightest of highly skilled workers are no longer able to beat down the door to get into the United States? Then we have a different kind of immigration debate, and we're going to talk about it after the break. Stay with us.

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VELSHI: Science, technology, engineers and math, they're known as STEM. These are the staples to competing in the 21st century, globally. The education debate focuses on our need to train our American students for these fields. But a particular focus of the immigration debate is now centered on making sure that the best and the brightest foreign born are able to fill shortages, labor shortages here in the United States.

Some people want to make it easier for non-Americans to study and work in the United States, if they can do things that not enough Americans are trained to do. Literally some think we should staple a green card to people with degrees in science and technology and engineering and math.

Ron Hira (ph) is a an associate professor of public policy at Rochester Institute of Technology. Vivek Wadwa (ph) is the director of research at Duke University Center for Entrepreneurship and Research Commercialization.

Ron, let's start with you. But welcome both of you gentlemen.

You're both very studied in this area.

Ron, you say America's companies are lobbying for more foreign-born, highly skilled workers, not really because there's a shortage, but because foreign-born skilled workers are cheaper than American counterparts. And yet we constantly hear from companies and universities and engineers themselves that the U.S. needs to be more attractive to engineers from other countries. Why don't you believe that?

UNIDENTIFIED MALE: Clearly many American companies are using these programs to bring in lower wage foreign workers, particularly on the temporary visa programs. But they are also using it to basically jettison older workers and bring in younger, foreign workers through these programs. So, is that fair to American workers? I think it isn't fair. And I think that that is what needs to be put into place here.

In fact, we have programs in place right now where American companies are forcing their American workers to train foreign replacements. We have that in place now. That needs to be fixed.

VELSHI: Vivek (ph), you-

UNIDENTIFIED MALE: We keep hearing the same rhetoric over and over again. He takes one or two examples of some stupid company that did something. You meet real world companies. You deal with the Googles and the Microsofts and all those great Silicon Valley companies. You feel their pain. We have a couple of academics trying to sell some books, who keep on haranguing foreigners. Look at the irony over here. All three of us are foreign-born over here. If we had this sort of policy, if we had Ron here from the past, he would never be here.

We need to have the world's best and brightest coming here and competing. If it makes Americans work harder, think smarter, then be it that way. This is what made this country what it is. It is competition from abroad. Waves and waves of immigrants coming here, making people work harder, think smarter. This is why America is the greatest country in the world. Because we have immigration, we have the world's best and brightest coming here.

VELSHI: Ron, is your concern that companies are deliberately not hiring Americans? They are deliberately trying to import younger engineering students, and the fact that they are looking for cheaper wages. Do you feel that's really widespread, or is it like Vic said, a few key companies can be fixed?

UNIDENTIFIED MALE: I think it's quite widespread right now. You have companies like IBM, Bank of America, Pfizer, Wachovia that all have these policies in place. The question isn't whether we should have immigration

UNIDENTIFIED MALE: That is complete nonsense.

UNIDENTIFIED MALE: Wait I'm making statements that were-that have been in the press.

(CROSS TALK)

UNIDENTIFIED MALE: Prove it.

VELSHI: You're saying, Ron, that there are companies and you named Bank of America, IBM, Pfizer that have policies that somehow do this. They have policies?

UNIDENTIFIED MALE: That's correct.

UNIDENTIFIED MALE: Policies to hire younger workers and displace older workers. I would like you to show me one policy like that. This would be a national scandal if it was true.

UNIDENTIFIED MALE: They have this in practice. If you want to look at the newspaper reports you can-

UNIDENTIFIED MALE: You said it's a policy.

No, no, no, don't look at the newspapers. Show me a policy. You're a professor on national TV talking about -- making huge allegations over here. Prove your allegations. Prove there's a policy at Bank of America, or any of these companies have.

VELSHI: Do they have policies that do this, or are you saying it's widespread practice?

UNIDENTIFIED MALE: They have it in practice. I'll put it that way.

UNIDENTIFIED MALE: No they do not.

VELSHI: What is it are they doing? Are there people -

(CROSS TALK)

UNIDENTIFIED MALE: That's a dishonest statement.

VELSHI: You're saying there are people who are deliberately not hiring American engineers, or American students, or they are displacing American workers.

UNIDENTIFIED MALE: Both.

VELSHI: In favor of foreign born.

UNIDENTIFIED MALE: Both, and they are able to do that legally.

VELSHI: In favor of younger engineers.

UNIDENTIFIED MALE: That's correct.

VELSHI: Is that legal?

UNIDENTIFIED MALE: That's legal right now, under the H1B program. That is correct. And the L1 program.

VELSHI: So what's the solution to that?

UNIDENTIFIED MALE: There have been many cases -- there are cases of engineers who have testified before Congress that they've trained their foreign replacement.

UNIDENTIFIED MALE: There are some lies over here. There are some outliers over here, there are some bad companies and some bad mistakes have been made.

UNIDENTIFIED MALE: Companies like Siemens, A.C. Neilson.

UNIDENTIFIED MALE: There may be some stupid manager that did something stupid. When we say that all these big companies have policies do not hire Americans to displace them, this is complete nonsense. This is the rhetoric that's hurting American competitiveness. We have this xenophobia, this stupidity. And it's scaring the world's best and brightest away.

(CROSS TALK)

VELSHI: Ron, that is something you definitely heard? That engineers trained in other places in the world, or trained in the United States do not feel like this is a logical place for them to stay. Is that a danger?

UNIDENTIFIED MALE: There's really no evidence of that. In fact, foreign students -- foreign student enrollments are going up quite significantly from those source countries.

The question is how do you create enough demand in the U.S. to hire and absorb folks? And the reason people are returning -

(CROSS TALK)

The reason people are returning is because the labor markets abroad are very, very good in their home countries. So, I mean it's not a question of us kicking them out. It's a question of, there are better opportunities abroad. What we really need to do is create more opportunities in the U.S. in terms of labor demand for these types of workers. And then you'll keep them.

VELSHI: Guys, thanks for joining us. A heated conversation, a vibrant conversation. Hopefully we'll have it again and try to get to the bottom of this.

Ron Hera is an assistant professor of public policy at the Rochester Institute of Technology. Veck (ph) Wadwa is the director of research at Duke University Center for Entrepreneurship and Research Commercialization.

One thing we need to simplify is the tax code. But is a flat tax really the answer? My "X, Y, Z" is next.

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VELSHI: It is time once again for the "X, Y, Z Of It"

Once again flat tax fever. GOP presidential candidates beating off a long standing understandable frustration with this, the U.S. tax code. They are trotting out proposals to fix it, make it easier, make it smaller, less complex. And the perennial idea of a flat tax is once again being presented as a solution.

But is it? The image of a simple postcard replacing endless forms, complicated software and accountants, is very appealing. But is it really the solution? Let's consider where the flat tax is in use. There are about two dozen countries with a flat tax. The vast majority of which are small, relatively uncomplicated economies. Think Iceland. Many were former Communist countries that didn't use their tax code to steer consumer behavior, because they were economies that didn't depend on consumer spending.

Not one of these countries adopted a flat tax after tossing out a 100- year-old progressive tax system, the sort that we have here in the United States. As a matter of fact, no major industrialized nation has ever made the swap for a flat tax system. Why not? Because as much as we all would like to think that there's a simple solution to a complex problem like this one, sometimes it's not that simple.

I am not making the case that all of this is necessary. And that much of it is not the product of lobbyists securing preferential treatment for their clients. But some of what is in here are legitimate and beneficial deductions that serve a purpose. The deduction for charitable giving help fund soup kitchens and other social programs that the government might have to pay for if individuals and businesses were not incentivized to direct some of their own money in that direction.

And a nod to Rick Perry, he understands that. He said he would leave the charitable donations alone.

Tax reform should be a real priority but it needs to be done sensibly with consideration of the long-term implications of each and every deduction that is removed. Albert Einstein once said everything should be made as simple as possible, but not one bit simpler. That's good advice for people looking to overall the U.S. tax system.

That's it for me. Thank you for joining the conversation this week on YOUR MONEY.

We're here every Saturday 1:00 p.m. Eastern and Sunday at 3:00 p.m. Make sure to check out my new book with Christine Romans. It's called "How To Speak Money: The Step By Step Guide To Understanding the Language of Money" With everything you need to know. Head to Amazon.com right now to be one of the first to get the book. And you can stay connected to us 24/7 on Twitter my handle is @AliVelshi. The show's handle is @CNNyourmoney. Have a great weekend.