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Fairness and the Economy; Inequality In America; Is America "Exceptional"?; The Big Fix: Corporate America's Role In Helping Society
Aired January 29, 2012 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, HOST: Fairness and the economy. Can one presidential election really fix what's broken in America's economic system? I'm Ali Velshi. Welcome to YOUR MONEY.
President Obama delivered his State of the Union address earlier this week. Critics would call it his first major campaign speech in his bid to win re-election. Now, in that election he'll need an opponent, and just days before Tuesday's critical GOP primary in Florida, Mitt Romney was in Jacksonville to let voters know he was less than impressed with the president's economic message.
(BEGIN VIDEO CLIP)
FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: He said he was the candidate of change, but you still have 25 million people out of work. You still have almost 10 percent unemployment here in Florida.
You still have home values down and continuing to go down. You still have record number of foreclosures in Florida. You still have median incomes suffering, middle income families suffering.
(END VIDEO CLIP)
VELSHI: Florida is an epicenter of the housing crisis that put us into the great recession of 2008 and 2009. CNN senior political analyst David Gergen joins us from Jacksonville.
David, Mitt Romney is not only focused on President Obama, he's got Newt Gingrich to deal with as well. Florida was one of the states that was hardest hit by the housing crisis. Its unemployment rate remains above the national average.
So is Tuesday's primary going to end up as a referendum on whether voters who are focused on the economy can get behind Mitt Romney as the man to best fix it?
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Probably so, Ali, but I must tell you that this has become such a personalized race, and it's sort of -- they've gone -- Romney and Gingrich have gone mano a mano now in these several debates.
And we've had all this focus on sort of a boxing match between the two of them that I think that is sort of more dominating the way people are thinking about this and whether Mitt Romney has a better plan than Newt Gingrich does to fix the economy, it's gotten so personal.
But having said that, I do believe that the debates have now put Romney in a commanding position heading into Tuesday. He's very likely now to win the Florida primary. And trade (ph) after the debate with CNN Thursday night put the chances of him winning Florida at 90 percent.
So he'd be -- you know, he's the heavy favorite here now. And if he wins Florida, he's more likely to win the nomination, and then his economic plans and his policies are really going to be put to the test.
GERGEN: Because I think most voters haven't sorted out quite what he's going to do yet.
VELSHI: And in these many debates, we really do tend to lack specifics. Once in a while somebody comes up with a plan that's highly specific, and we in the media world set about to try and test that plan.
But generally speaking, the idea of creating jobs, the idea of lowering taxes, the idea of tax reform, the generalized idea of health care and immigration is not specific enough.
Stephen Moore is an editorial writer with "The Wall Street Journal". Stephen, President Obama emphasized this notion of fairness or unfairness in our economic system when he talked about taxes during his State of the Union address. Listen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: When Americans talk about folks like me paying my fair share of taxes, it's not because they envy the rich. It's because they understand that when I get a tax break I don't need and the country can't afford, it either adds to the deficit or somebody else has to make up the difference.
(END VIDEO CLIP)
VELSHI: Now, I'm going to presume, Stephen, that you don't even agree with the premise, that if somebody gets a tax break that they don't need, that it adds to the deficit because there are people who argue that that creates economic growth or it stimulates spending or investment.
But you don't need to read too much into what the president was saying to see that the connection that he's drawing, particularly to Mitt Romney, who this week revealed that he made close to $43 million over the last two years but paid a tax rate of about 15 percent -- because most of that money was investment income and that's what the law says. Capital gains is 15 percent.
I'm sure you don't like the president's plan to make sure that millionaires pay at least 30 percent in taxes. But what's your sense of -- you know, can you acknowledge the fact that there are people that think the current system does seem unfair?
STEPHEN MOORE, EDITORIAL WRITER, "THE WALL STREET JOURNAL: Hey, it seems unfair to me, Ali. I've been writing about this for 25 years. I think the tax system is an abomination. I think it needs to be blown up and start over again.
Here's one problem I have with the president's message, leaving aside how much millionaires should pay and so on. Look, we have an economic crisis on our hand. We still have those -- Mitt Romney has been saying about 20 to 25 million people unemployed.
There in Florida you've got, you know, so many homes, millions of homes and millions of homeowners underwater on their mortgages.
So my point is really shouldn't we be emphasizing economic growth as the first principle rather than fairness? I think that's a vulnerability for the president. I'd like to see the Republican candidates, Mitt Romney and Newt Gingrich, really hitting harder on that exact theme, that, look, fairness is fine. But what we need is a rising tide of economic growth that, as John F. Kennedy said, lifts all boats.
And just to dovetail on something David was saying, you know, the problem Republicans are having right now is that they are slugging at each other and they're kind of forgetting the adversary here is, of course, the guy they're going to have to face in November.
VELSHI: Whomever the successful candidate is going to be may go into this presidential election limping a little bit.
Diane Swonk is the chief economist at Mesirow Financial. Diane, the U.S. economy, we just learned, grew at 2.8 percent in the fourth quarter, the fourth -- the last three months of 2011, compared to a year ago. It's nothing to sneeze at, 2.8 percent, nothing to celebrate either.
We're looking back all the way into 2010 and what economic growth has done, it's come down, it's leveled out and then it's started to go up again. I guess the theme of this recent recovery is slow and steady and it's a major part of the reason why the Federal Reserve chairman, Ben Bernanke, says he's not ready to pop the champagne corks when it comes to people getting back to work.
Listen to what he said.
(BEGIN VIDEO CLIP)
BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: In light at the anticipated modest pace of economic recovery, the committee expects that over coming quarters the unemployment rate will decline only gradually.
(END VIDEO CLIP)
VELSHI: All right. So let's just take Stephen's point for a second, Diane, let's put aside the fairness discussion, whether or not you think it's correct. Let's talk about growth. What comes first in the recovery of this economy, economic growth or jobs which put money in people's pockets, which then causes economic growth?
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, clearly you can't have growth without jobs, that's the bottom line.
And I think it's really important to understand that much of the gains that we saw in the third quarter, although it was an acceleration in growth, came from a catch-up in inventories, that now that that catch- up from the auto sector, after the Japanese earthquake last spring, now that that is sort of playing out, that won't be there to support growth.
In fact, domestic demand, final domestic demand slowed quite dramatically. Over 2 percent of that 2.8 percent gain was inventory gains alone that won't be there to support growth in the first quarter.
And it's why the Fed is so still very concerned about growth in the U.S. economy and trying to provide some level of certainty in terms of providing stimulus for the economy through its communications when there's so much uncertainty and just, you know, a lot of lies and things going on in the political spectrum that I don't even want to address.
GERGEN: Yes. You know, Diane, can I just mention something about this? You know, we had an editorial in our paper called "The Zero Decade."
We've had close to zero interest rates by the Fed now for five, six, almost eight to 10 years. And this idea that we can keep stimulating this economy with a free flow of money and record low interest rates, I'm just not so sure, Diane, it's a strategy that has worked very well. This has been a lousy decade for growth --
VELSHI: Well, that's a good point --
GERGEN: -- with the Fed holding those rates down.
SWONK: Well, let me interrupt you, because I --
VELSHI: It's a good point because I don't know -- Diane, I want you to answer this, but I'm not sure the Fed is saying they can stimulate any further. We're at zero.
VELSHI: I think all they're saying is we're not going up. What's your answer to that, Diane?
SWONK: Actually no, I don't think that's true at all.
And I think -- I actually read your editorial, Stephen, and I didn't like it. So I didn't agree with it because I don't think it was very informed on what the Fed is actually trying to do. Agree or disagree, the Fed is using communication strategy, learning from the Great Depression and learning from the mistakes of Japan, that you can do more at the zero boundary, that Keynes actually was wrong when he came to that conclusion when you hit zero interest rates there's nothing you can do.
In fact, the Fed has done a lot. They did a lot when they announced the mortgage buy-back program and mortgage-backed securities and retriggered a program that keys (ph) up in terms of any kind of mortgage lending in 2009. The announcement effect of that alone was tremendous.
So the Fed expanding their balance sheet, doing out-of-the-box thinking, has had a major effect in terms of stemming the losses and triggering some level of growth. The problem is the headwinds.
And I believe the greatest headwinds we face today are political in nature and political uncertainties from Europe, the Middle East to the U.S. Those are our biggest stumbling blocks and we probably agree at some level on that level.
GERGEN: Yes, I just wanted to make a couple of points. I do think this conversation illustrates and underscores what Diane was just saying.
I think the -- what's the conversation in politics does not seem to me to fit very well the nature of the problem, the structural problems that we have, that we -- at the center of a lot of our political argument now is whether the tax rates ought to be raised on the upper income. And you can agree or disagree about that. But if you raise them, that's not going to solve some of the structural problems.
VELSHI: That's right.
GERGEN: We have a real problem creation with jobs now. We, with this growth that we've experienced in 2011, the economy today is bigger than it was before the recession hit. And yet we have 6 million fewer jobs than we did before, at that time. We have had a real problem creating jobs, and I don't know what the answer is to that.
Even if you keep interest rates down at zero, that is not going to necessarily create the jobs. So where are those jobs going to come from? I think the candidates have to engage --
GERGEN: -- at a more -- at a more macro level and help us understand what their alternative paths are out of this, so that you do get a more vibrant economy that actually creates jobs.
VELSHI: I know you and I weren't in the same place for the debate, but you're taking the words out of my mouth. I wanted to -- I just feel like throwing pillows at the screen every time to say, come on, guys, give me details. Tell me what exactly you're going to do, because that's the conversation we need to have.
I want you to stay there. I got a second -- Stephen, you're a big fan of paying the bills. I've got to pay the bills, so hold on, we'll come right back. Stay where you are.
The top man in President Obama's economic team, by the way, says you won't have him to kick around for much longer, regardless of who wins the White House in November. There's going to be a change near the top. I'll tell you about it when we come back.
VELSHI: Treasury Secretary Tim Geithner told Bloomberg Television this week that he does not expect to be part of President Obama's administration, should the president win a second term. That's hardly news. Geithner's impending departure is the worst-kept secret in Washington.
But the timing of his latest remarks is a bit curious. CNN polls continue to show that four out of five Americans feel that the economy is in poor shape and they give the president low marks on his handling of the economy.
David, I want to ask you this, because you've sort of connected the threads on the economy and growth and fairness to politics. Is the timing of Secretary Geithner's comments designed to make it clear that a likely target of many Republicans is on his way out, so don't spend too much energy on him and the policies he's associated with?
GERGEN: I'm not sure there was -- I don't read a lot into the timing of this recent statement because he's made it clear before he was -- he's only staying on because the president really pressed him and he's now simply saying I don't think the president is going to do that again.
The president, obviously, has come to rely upon Tim Geithner. He's turned to him, you know, to have frequent conversations with the Europeans, especially Chancellor Merkel and others, about the Eurozone and because there's such fear in the White House that that might be -- you know, that could upset their apple cart.
And presidents do become reliant on Cabinet secretaries. Hillary Clinton is another example of someone who is also leaving. But, Ali, it's also an opportunity. When someone leaves like that, you have an opportunity to find the next person who can send signals about your intentions.
If he finds someone who is not only well respected internationally but is a deficit hawk, someone who is really committed to bringing these -- this debt under control, that would help him working on Capitol Hill, help him politically, it would help him with the financial community, it would -- he's got an opportunity now to reach out to the financial community, the business community in ways that Tim Geithner, for whatever reason, hasn't been seen as the bridge that they were looking for.
Yes, so there are a lot of things you can get that are pluses for you as a president when you have a major job opening like that.
VELSHI: Stephen, what's your take on this?
MOORE: I don't dislike Tim Geithner personally. I think he's a good man, and, in fact, I think the fact that he understands financial markets has been pretty critical for this administration. But I'd also have to say I give him pretty close to failing grades.
I mean, as you -- the statistics that you just rattled off about how half of Americans still think we're in a recession, obviously, we've had a very mediocre-at-best recovery.
And so I think that, you know, one guy I'd like to see brought in, just as some food for thought here, Ali, would be somebody like Paul Volcker, somebody who was very involved in the big recovery we had in the 1980s. I mean we need a big, robust expansion.
And the big problem for the president right now is, even though the economic signals are suggesting a pickup, a lot of Americans aren't feeling it at home.
VELSHI: Which leads a lot of people to the question we started with, which about fairness.
Diane, I want to get back to this idea that we have an economic system that is unfair to millions of Americans. We continue to say that it now appears that, you know, capitalism itself might be on trial. So forget the politics for a second.
As an economist, do the numbers tell you, when you look at all the economic indicators out there, do or can the numbers tell you that America has an unfair economic system?
SWONK: Absolutely. I mean we forgot -- we have neglected education in this country. We hit a peak in educational attainment in the 1970s, as other countries continued to educate people in the 1970s moving to the 1980s.
At the very moment, the information age and ideas were being rewarded more than manual labor. The bottom 50 percent of income earners in the United States has stagnated or lost ground in terms of income since that period of time, with the top 90th percentile or the top 10 percent who have graduate degrees and more education were beneficiaries, because there was a shortage of them.
That gap between the 50 and 90th percent was filled with debt. That was sort of more expedient for us in our capitalist economy with deep and liquid capital markets at the time than actually educating our people and sending them to educate themselves.
You know, we had the G.I. bill, we had all kinds of things. We took people from the farms and brought them into the factories. We educated them, we made them literate. We did things that were pushing education for much of the 20th century and, at the end of the 20th century, gave up on that. That's a structural problem that is absolutely relevant in the numbers, and it gets to the broader issues that we were talking about earlier that, you know, the candidates are not dealing with the real structural problems in the U.S. economy, you know, dealing with these sound bites of unfairness in income and equality. They do exist, but they are rooted in very decade-long problems.
VELSHI: Are we going to get to that point, Stephen, where we were all listening to these debates or whatever candidates are doing and saying, hey, we've got some real options, one versus the other on the table, that would be real solutions for our economy?
MOORE: Well, look, I think this big issue, I mean, just to frame this whole debate, it's going to be a debate between fairness being pushed by President Obama, and hopefully a growth platform by the Republicans, probably Mitt Romney.
And I think that's really the decision Americans are going to make. Do they put fairness ahead of growth? I reject this idea that if the economy grows, it only helps rich people.
Diane, if you look at the data from 1980 through --
SWONK: I didn't say that it only helps rich people.
MOORE: No. No, I'm just saying --
SWONK: I just said the income inequalities are there.
MOORE: Yes, but it's also true that the middle class did really pretty well over that period, you had about a 30 percent increase in real incomes. The problem has been the recession has just crushed people and we've had no recovery in incomes, wages or jobs.
VELSHI: All right, good conversation, folks. We'll hope that the conversation does get more specific as the campaign goes on, so we can actually start to evaluate where those choices should lie. David Gergen joining us from Jacksonville, Stephen Moore is an editorial writer with "The Wall Street Journal" and Diane Swonk is the chief economist at Mesirow Financial.
Housing crisis got us into this whole economic mess in the first place. Housing continues to be missing in action during this economic recovery. Florida has been particularly hard-hit and it just happens to be holding a primary on Tuesday. It's why our own Christine Romans is there. She'll be with us next to break it down on YOUR MONEY.
VELSHI: Florida is big in the news with that upcoming primary, so let's take a look at Florida's housing market. It's been particularly hard hit. If you look back to 2006, you'll see that Florida's home values, which is the line in red, were actually higher than the national average. This is typical, by the way, of the states that were hardest hit, in some cases Arizona, Nevada.
In the green, you see the national average over the past year. You can see that, while the national average has declined somewhat, Florida has been in steep decline, and the prices there have now fallen below the national average.
At the same time, foreclosures in the state of Florida have skyrocketed. This is typical when you see a continued decline in home values, because people stuck in those homes who have lost their jobs cannot sell those homes to make up for their mortgage payment, so they get foreclosed on.
Christine, as you can see, is in Jacksonville, one of the hot beds in the housing crisis. It's actually one of the worst places in the country for foreclosures.
Christine, what are you seeing, what are you hearing there?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, the bigger they are, the harder they fall. That's what that chart shows that you have there, and it's what people are grappling with here. I mean, here in Jacksonville, I mean, there are other parts of the state that are worse than Jacksonville.
But in Jacksonville, you've got about -- almost half of people are underwater on their loan. Just about every neighborhood has an abandoned house or a foreclosed house or a house that's now falling into disrepair.
And you know, look, we went to -- we went this week with a guy named Scott Nicholas, who's a realtor, right? We went door to door with him as he was checking to see if people lived in some of these houses, because the banks were looking at them, Ali, and they were trying to figure out which houses they could sell, which houses people were still living in, that they had to be negotiating with those people to figure out where they stand on their mortgage.
I mean, some of these neighborhoods, it's just -- in fact, Scott says he goes to some houses, and the people who live there don't own the house, they're renting from someone. They have no idea that house is in foreclosure. He says it gets pretty interesting, some of the conversations he has.
We also talked to an attorney named Chip Parker, who represents people -- lots of people -- who are fighting foreclosure from their banks.
Listen to how -- listen to the terms that he puts this state's housing crisis in.
(BEGIN VIDEO CLIP)
(BEGIN VIDEO CLIP)
CHIP PARKER, JACKSONVILLE FLORIDA BANKRUPTCY ATTORNEY: Jacksonville is a beautiful, vibrant city, and it is being attacked by a cancer from within, house by house. And what we see in these neighborhoods, established neighborhoods and new neighborhoods, you start to see vacant houses, decaying lawns. You really lose a sense of community when your neighbors. all of a sudden, have gone.
(END VIDEO CLIP)
ROMANS: So home prices here down from the peak $80,000.
ROMANS: Median home prices down $80,000. Orlando is a little bit worse, Miami is a little bit worse, down about 40 percent here. You can see it's about 50 percent. Imagine the value of your home cut in half, really limits your options, doesn't it, if you're a homeowner, whether or not you're underwater --
VELSHI: Which is why --
ROMANS: -- by yourself.
VELSHI: -- which is why, when we heard the debate in Jacksonville on Thursday night, those social issues didn't come into play all that much. If you could get past Newt Gingrich and Mitt Romney sniping at each other, it was all economic issues. Even Rick Santorum, who likes to spend a lot of time on social issues, wasn't doing that in Florida.
ROMANS: Yes, and you know anybody who's going to go cast a ballot either on Tuesday or in the general election, clearly, they're going to have some sort of housing baggage and jobs baggage, 9.9 percent is the unemployment rate here.
And you know, I talked to a real estate professor, who said you're not going to fix the housing crisis till you fix the jobs crisis, first and foremost.
But he also said, Ali -- and I know you're going to be interested in this -- he said when he runs studies, going back as long as we have any kind of data about housing, five years from now, his best assumption is that home prices will be higher, because all of the ingredients are there, right? Record low mortgage rates, home prices that are so low, affordability finally.
He said you've got to clean out, which is kind of a brutal term, but clean out these foreclosures, the people who have been blown out, and start fresh. But right now, you've got a delay in that cleanout because the foreclosure -- there's still the shadow inventory of homes --
VELSHI: -- get these foreclosures. That's exactly right.
Christine, great reporting. Thanks so much. You look like you're having fun out there on the road. Suits you very well. Christine Romans in Jacksonville.
ROMANS: Thank you. VELSHI: Well, the American dream is at risk and many say income inequality is at the heart of the problem. Now is fixing income inequality the key to fixing our economy? That's next on YOUR MONEY.
VELSHI: Keeping the American dream alive, President Obama said this is the defining issue of our time in his "State of the Union" address this week. Listen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: We can either settle for a country where a shrinking number of people do really well while a growing number of Americans barely get by or we can restore an economy where everyone gets a fair shot.
(END VIDEO CLIP)
VELSHI: Who can disagree with that? Will Cain is a CNN contributor. I'm putting you on the spot, Will. You say that the things that have made the United States what it is today, capitalism, democracy, the industrial revolution, none of them were ever based on the idea that the economy does or should reward people equally. You've actually come armed with a chart that proves --
WILL CAIN, CNN CONTRIBUTOR: That's right.
VELSHI: -- that income inequality debate is off base. Tell me what you're talking about here.
CAIN: I think the conversation on income inequality focuses on the wrong question. It constantly asks how are you doing compared to someone else, when the real question is how are you doing?
And the system that happens to benefit the most people on the face of the earth also results in inequality. What I have here is a chart that shows data from the last 2,000 years of human existence.
VELSHI: That is a chart.
CAIN: This is the life's work of a British economist named Angus Madison and what it shows is for the first 1800 years, right, of human existence since 1 A.D., we made not much north of $500 a year on average.
That's per capita GDP adjusted for inflation, but something happened 200 years ago, something. Call it the industrial revolution, capitalism, democracy, whatever it may be. It wasn't a focus of economic equality. It just so happens that 500 years ago, we were all equally poor. Today, we are unequally rich.
VELSHI: Very interesting. All right, Harold Meyerson is editor-at- large of the "American Prospect." He's an op-ed columnist for the "Washington Post." He looks decidedly unimpressed by this argument that Will just put forward. Harold, what do you think? HAROLD MEYERSON, EDITOR AT LARGE, "THE AMERICAN PROSPECT": Well, I think what happened is that James Watt invented the steam engine in Britain and the industrial revolution began.
Even as Karl Marx, no fan of capitalism he, even as Karl Marx noted, industrialization and capitalism produced a quantum leap at that point in human productivity. That was the main change was human productivity.
And that's why that chart looks the way it does. I mean the chart is not wrong. The average wealth of the average person began to take off first in Britain as a result of this invention, and then as other countries grew industrialized, there too, as in China today.
But I think this is a separate question from the question of how equal or unequal incomes are within a given country.
CAIN: I don't think it's a separate question, Harold. I think you give a lot of credence to the industrial revolution as it should be, but I think you dismiss the effects of capitalism going on simultaneously.
And I think that the problem here is when we talk about inequality, we start to erode the concept that allowed that chart to go through explosive growth 200 years ago. When you constantly evaluate relative wealth, you threaten absolute wealth.
The fact is, we have all gotten vastly more wealthy over the last 200 years with a total ignorance towards equality, economic equality.
VELSHI: Let me ask you this then, Harold. You recently wrote that as the American middle class is thinned out, the idea of America as a land of opportunity has become a farce.
Now, what happened to the concept that I think is so important here, this concept of social mobility or socioeconomic mobility, the idea, which you could not do in 1 A.D. and you could not do in 1600 or 1700 A.D. the idea that you can be born in one socioeconomic place in life and die in another one. Do we still have that in America?
MEYERSON: Not nearly enough. What many studies show is that traditionally we have been this great land of opportunity and we measure that by intergenerational mobility. Can sons do better than their fathers and can daughters do better than their mothers?
That's been in decline in the United States for the last 20 or so years, and there are other nations in Europe, in Northern Europe in particular, that have surpassed us that also have greater equality of resources and wealth.
So I think the chain is broken down here. The ladder has a couple of rungs missing. I think there's a whole stratum of jobs, jobs in manufacturing in particular, which have disappeared.
Actually that's one reason why presidential candidates of both parties, not just Barack Obama, but also Rick Santorum and even Mitt Romney are talking about things to help the return of American manufacturing because that's one of the things that's broken in this country.
VELSHI: And you both draw the same conclusion. With the industrial revolution that got us to this place of greater productivity and/or wealth, the fact is that thing that made America and built the American middle class does not exist to the same degree as it did some time ago.
Hold on there, Will, because I want to transition from this. The thing that made America so great may be disappears. It's something that will's friends like to call American exceptionalism.
It sounds like an idea that our elected officials in Washington could actually agree on so why it's turned into exactly the opposite. What is this American exceptionalism anyway on YOUR MONEY right after this.
VELSHI: All right, American exceptionalism. Republican presidential hopeful Newt Gingrich says it's an idea that he embraces and President Obama doesn't.
(BEGIN VIDEO CLIP)
NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: If you are for American exceptionalism, you're us. If you're for European socialism and (inaudible) radicalism, you're with Barack Obama.
If you are in fact in favor of a strong America in a dangerous world, you're with us. If you're for a weak America that tries to appease its enemies, you're with Obama. I think that's what this whole campaign will be about.
(END VIDEO CLIP)
VELSHI: Kind of interesting. So he thinks American exceptionalism stands in stark contrast to European socialism. American exceptionalism is a hot topic in the current race for the White House, but it's an idea that dates back all the way to the 1800.
It's the idea that America has a unique identity and ideology. Will, it's often interpreted to mean that the U.S. is superior in several ways to other countries. You're a conservative. I hear this more from conservatives than anyone else so tell me to you what American exceptionalism means?
CAIN: All right, first I'm going to explain it from a romantic perspective. Last block, I went back 2,000 years. This time I'm going to go back one year. Michael Lewis wrote a book called "Money Ball" just in the last couple of years.
And in it there's a scene where the manager of the Oakland A's, Billy Bean, says I have always despised and feared failure more than I've enjoyed success. You've heard Bill Parcells, Troy Aikman talk about this. Failure is key to success. That happens in the United States, but today we pursue policies like too big to fail and entitlements to deny the repercussions of failure. But the second part in America is we've never been debilitated by fear.
There's another scene in "Money Ball" where Billy Bean is sitting on a bench watching Mitch Williams do (inaudible) pitches and he's wondering how am I going to ever hit this guy.
Lenny Dystra sitting down an aisle, looks down and goes screw it, I'll stick him. He walks up there and he does. That is America. We are never afraid to fail. But we will allow people to fail. If you allow people to fail and celebrate those that risk failure, you'll be exceptional and we have it.
VELSHI: I have to tell you, Harold, if that was what I heard as a description of American exceptionalism on an ongoing basis, I would give it a big hug every time I heard it. Is Will making any sense at all?
MEYERSON: He is unless you're not a fan of the Oakland A's.
CAIN: I'm not, Harold.
MEYERSON: I don't know how American exceptionalism got narrowed down to that. It's a much broader term. And, you know, when Newt Gingrich uses it, it's simply a way of his making the allegation that Barack Obama is not really someone who loves the United States.
VELSHI: Right. That's how it often comes across.
MEYERSON: Right, so that's a campaign attack, which plays to Newt Gingrich's base. More seriously, I think it refers originally to the fact that, yes, America is less social democratic, less socialistic than Europe and that's empirically true.
I mean, we clearly are. Does that make us the best nation in the world? Well, I mean, there are things I love about America that are exceptional. The one defining, most distinguishing feature of America is that we're entirely a nation of immigrants.
And that creates a very different kind of nation and a nation bound together by love of country and not for love of we've been here for 800 years so that's a real difference.
VELSHI: Let me ask you this, Will, in the debates on Thursday in Jacksonville, Newt Gingrich plays to this a lot. He talks about the fact that I am not going to accept that America is in decline. If you want that, you're with Barack Obama.
So they're linking the idea of America being in economic decline with the idea that you don't believe in American exceptionalism, I follow the economy very closely.
America is in relative economic decline compared to China and compared to India and compared to Brazil and places like that. That is an economic fact. Does that make me anti-American to say that?
CAIN: No. This allows me to explain to you the practical applications of American exceptionalism. I'm fascinated to see if Harold disagrees with me on that.
That rugged individualism that I described through the Oakland As, a moment ago, that manifests in things like six-month unemployment benefits versus three years in France or endless unemployment benefits in Germany.
It manifests with a weak social safety net with low entitlements. It is ruthless, it is heartless but it creates a workforce that is mobile, that moves. It means we work through our economic problems through this process.
That is the manifestation of the romantic vision of American exceptionalism that you must do or you will fail. If you do, if you push west, if you are a creative destroyer of capitalism, you will be celebrated. That's the practical application. Barack Obama to many conservatives threatens that.
VELSHI: All right, a recent Pew Research study finds that political conservatives are especially likely to believe that their culture is superior to others.
I'm pushing you on this, Will and I keep pushing back, to the idea of while your description of American exceptionalism is remarkable, I don't know that's how others are using it.
In the United States, 63 percent of conservatives take this view compared with 34 percent of liberals. So if this is the case, Republicans like Newt Gingrich have a point that there's a clear political divide on the issue, Harold, or are liberals just self- loathing.
MEYERSON: No, liberals are not self-loathing. I think the idea that you want to make America better and that occasionally means, yes, you see what other countries are doing and look at the best practices that they do and, you know, we can adapt those to our own modes.
Yes, France has unemployment insurance that's longer than ours, but Germany has a way of keeping workers on the job even during hard times, and this is something that liberals and even some conservatives here support.
So it's not -- you know, it's a more complicated picture and I think you can love the country, but still want it to get better in all kinds of ways, obviously.
VELSHI: I tip my hat to Will for the finest explanation and most romantic explanation of American exceptionalism that I've ever heard, including movie references and sports references.
Harold, great to see you, thank you for joining us. Harold Meyerson is an op-ed columnist with the "Washington Post" and an editor at large at the "American Prospect" and our good friend, Will Cain is a CNN contributor. Thanks, fellas.
We heard the president this week tell American companies to invest in American jobs, but what role should business actually play in helping fix the U.S. economy? It's a big question you've got and the big fix is up next.
VELSHI: Two weeks ago, we began focusing on capitalism on trial here in this country. On that show, Arianna Huffington said one of the biggest problems with American capitalism was that the interests of business are misaligned with our social values.
She also suggested that if we want the best ideas to fix the U.S. economy, we should speak to Roger Martin, he's a dean at the University of Toronto Rotman's School of Management.
He's also the author of "Fixing the Game, Bubbles, Crashes and What Capitalism can Learn from the NFL." Why should companies focus on their communities as well as their shareholders?
ROGER MARTIN, DEAN, ROTMAN SCHOOL OF MANAGEMENT, UNIVERSITY OF TORONTO: Those are the things that make a company succeed long term. If they succeed long term in serving their customers well, being good to their employees and their communities, the shareholders will do just fine.
But if they focus on the shareholders without thinking about the customers or their communities or employees, then shareholders won't do very well.
VELSHI: How far do you go with this? The issue right now in the United States is this competition between Washington and businesses about whose responsibility it is to be hiring people, to bring jobs back to America, to open factories. Is that a company's responsibility?
MARTIN: Well, I think the company's responsibility is to produce great products and services that get them customers. The great management guru, Peter Drecker said the first job of a company is to acquire and keep a customer.
I think if they were doing that and focusing on that, then the jobs would follow. They'd need to have employees to be able to do more of that.
VELSHI: All right, CNN Money's Poppy Harlow was in Davos for the week for the World Economic Forum and she had a chance to speak to Cisco's CEO, John Chambers, about this idea of aligning business goals with social responsibility. Here's what he said.
(BEGIN VIDEO CLIP)
JOHN CHAMBERS, CEO, CISCO SYSTEMS: You've got to be success for your shareholders, but you've also got to create jobs and give back. That's something I am deeply committed to and I think it's something that all American corporations have to do a better job on.
(END VIDEO CLIP)
VELSHI: Alexis Glick knows about this. She's the CEO of the Gen Youth Foundation. Alexis, you have worked on Wall Street. You've covered Wall Street. Business leaders have been telling you privately that they have enough problems just trying to run their own businesses without taking on social responsibility or responsibility for propping up the rest of the U.S. economy.
So let's just talk about this. What moral responsibility do American companies have both in terms of philanthropy and charity and giving back to their communities and in terms of hiring more Americans?
ALEXIS GLICK, CEO, GEN YOUTH FOUNDATION: The rule is growing precipitously and look at where we've gone in the past three to four years, this recession. If you look at the change in 2010 versus where we are today, almost every CEO in the country realizes that they have to be giving back to their communities.
In fact, their shareholders are demanding it. So it's becoming a bigger and bigger issue for business. The question for business is whether or not they can ultimately have an impact. And that's been the argument, is government making it more difficult to create jobs and to give back to the local communities?
Or is government creating more regulation, which is stifling business and innovation in I'll tell you, I work in the not for profit sector right now in Childhood Obesity. I see this story every single day and I'm spending more time with corporate America than ever.
They are giving back at a greater rate, but I'll also tell you on the other side of the ledger it's extremely hard for them to work with the government. It's extremely hard for them to get past the politics of the business environment to effect real change.
And, in fact, you and I both know when the stories are focused on them they tend to focus on the bad. You don't hear the stories of the good that corporate America is doing in giving back to their communities. Those stories largely get ignored.
VELSHI: What do you think of that? Back to your point, Roger, there are companies, particularly at a smaller level, at an earlier level that don't confront some of these things that Alexis is talking about and all of that regulation starts to set in.
Despite the politics with the discussion in America most of these regulations have been in place for a long time or either were put in place because of a lawsuit or something like that.
It is not that this administration came in and dumped a bunch of new regulation, but it does seem to be a mantra that government is standing in the way of companies doing the right thing.
So to your point that if a company's only job is to create good products and keep customers where is the conflict here? MARTIN: Well, I really don't think there is a big conflict. I actually think that in many respects people and companies say there is a conflict. They say, well, I can either support creating shareholder values or serve my customers and employees and that's just a false dichotomy.
It's a false trade off and the companies that I think say as Alexis said that you can do both by serving your customers, your communities well. You will create shareholder value and jobs. I think it's just that mindset.
It's not a trade off. You can do both and the modern company that succeeds will recognize that it has to do both and they will figure out ways that they can do both.
GLICK: And one of the things that we're seeing more and more Ali, you're hearing about this every day, is the role of the social impact bond, right? That is being capitalized from the business community and yet the interest on these bonds, right?
If you're thinking about it, it's coming out of the private sector, but the interest can be returned from the government sector, right? Because it's going to reduce their expenditures on many of the social issues we're addressing whether it be welfare, whether it be imprisonment, a variety of different things. The question now is can the government properly look at the private sector and figure out how to make a public/private partnership work?
That public/private partnership can create jobs, can create innovation. We've seen it coming out of the recession. Green jobs, infrastructure jobs, right? When done effectively it can have an enormous impact, but they have to treat each other as equal partners in order to get the real return on investment, particularly in something like job creation.
VELSHI: All right, Alexis, great talking to you, as always. Roger Martin is Dean of the University of Toronto Rotman School of Management. Alexis Glick is the CEO of the Gen Youth Foundation.
From Tuesday's Florida primary right up to November's presidential election, Americans are going to have a lot to think about heading into the voting booth.
I'll tell you what to leave oust the ballot box if you want to help fix the economy. My XYZ is next.
VELSHI: Time now for the XYZ of it. A non-American watching primary season would be forgiven for forgetting that the U.S. constitution does in fact enshrine the concept of separation of church and state.
But America at its founding as it is today was a diverse society comprising people of many faiths and denominations and some who had none. The founding fathers wanted Americans to have the right to subscribe to their various creeds in freedom without fear of discrimination or persecution that state sanctioned religion might press on.
Many Americans are religious and the most religious among them seemed to be running for president judging how often Republican candidates invoke their faith in their speeches or quote from the bible.
A recent study put out by the University of Missouri shows religion still has a major impact on how Americans vote and as such it helped define the platforms that candidates run on.
The study's author he says, quote, "Religiosity is on par with class issues as far as why people vote" and he says, religious voting tends to correspond with traditional conservative political values.
I don't want to over play that study or over simplify it by suggesting that the more religious you are necessarily dictates where you stand on social issues like abortion or gay marriage. I don't have enough data to know that is really true. Despite some candidates' best efforts those types of social issues haven't taken center stage so far this election.
That's because the number one issue on voters' minds for the past four years whether or not you are religious has been the economy. Religion and the economy are not disconnected. My degree is in religion and what I learned at university is that most faiths strive first to organize society with an aim to prosperity.
They largely just differ in details and approach. With that common goal in mind it would be best if we kept our religion to ourselves during the campaign or at least out of the presidential race.
We should avoid getting distracted by President Obama's Muslim ancestry, Mitt Romney's Mormon faith, or questions about whether Newt Gingrich's short comings in his family life may or may not contradict his own faith.
These issues are not entirely unimportant, but they are unimportant to the most important matter facing America and that is the economy. That's my xyz.
Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday 1:00 p.m. Eastern, Sunday at 3:00 p.m. Make sure to check out my new book with Christine Romans, "How to Speak Money."
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