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Slow Recovery; Threats To The Recovery; Debating Your Health Care; Buying Into The Recovery; Innovation Nation
Aired March 25, 2012 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: From a land of opportunity to a land of confusion, the numbers say an economic recovery is under way in America. So why do so many feel left behind?
I'm Christine Romans. Welcome to YOUR MONEY. Ali Velshi is off today.
Three strong signs that a recovery is indeed taking hold, stocks have been soaring with the Dow hitting levels not seen in nearly four year. Hiring is picking up as employers added more than 200,000 jobs per month for three straight months.
Even the housing market is leaving a little bit of room for optimism with sales of existing homes up 8.8 percent in February compared with one year earlier.
Will Cain is a CNN contributor, Marc Lamont Hill is an associate professor at Columbia University. We'll see what we can get those two to agree on if anything.
But I want to start with Rana Faroohar. She's the assistant managing editor for "Time" and she co-wrote the cover story this week entitled "The Wimpy Recovery." Rana, in the piece you asked folks to honk if you felt the recovery. The signs are there, but people aren't honking.
RANA FAROOHAR, ASSISTANT MANAGING EDITOR, "TIME": You don't hear anything in the streets. No honking. You know, we are in recovery. In fact, we've been in recovery for over two years, which really says something.
A lot of us aren't feeling it. The numbers are there as you mentioned it, but this is bifurcated recovery. You know, the fact stocks are up kind of speaks to that because people who own stocks tend to be wealthy.
They are getting wealthier. There are a lot at the top. There's a lot of fast growing at the bottom, but still there's still aren't enough in the middle. We've got a two-speed recovery.
ROMANS: Yes, and a lot of people have been saying that. The other thing is that people with money feeling this recovery, people without money aren't. I think that's something we can all agree on.
Let's talk about Mitt Romney, the frontrunner for the GOP presidential nomination. I mean, he acknowledges that a recovery is under way. But he says he would be doing a lot better if he was in charge.
(BEGIN VIDEO CLIP)
MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I'm someone experienced in the economy. I'm not an economic lightweight. President Obama is. We're not going to be successful in replacing an economic lightweight with another economic lightweight. We're going to have to replace him with someone that can run this recovery.
(END VIDEO CLIP)
ROMANS: So Will, he's making the case that he is the guy to help the recovery. And if there's a recovery under way, he has got to be the guy to say amidst the economic recovery, I'm the guy to really know how to make it better.
WILL CAIN, CNN CONTRIBUTOR: Yes, it's interesting. You see the shift in the message because you have to recognize the reality. We're starting to see economic indicators as you just listed point northward, point up.
So his message has shifted to, look, we could have done better. Somebody like me could have performed better in this recovery. He points largely now to the 1981 Reagan recession, which was shorter, more robust.
He says if you have somebody like me in charge, I can make this better. Now whether or not that's a fair comparison is beside the point. I'm not going to sit through that and tell you 25 years and two different types of recessions is a fair comparison. What I am going to tell you that's his argument and that's one he's trying to sell politically.
ROMANS: And he's trying to change his tone, his supporters say it's a great line where he said, look, we live in a country where we built the Hoover down and Interstate highway system this president can't build a pipeline.
You know, so he's trying to say that if things get better, Marc, that he is the guy who can really leverage it. But the president has to be careful about crowing about an economy that Rana just pointed out, a lot of people aren't feeling.
MARC LAMONT HILL, ASSOCIATE PROFESSOR, COLUMBIA UNIVERSITY: You know, absolutely. But he's always in the defensive position because Republican mantra since the beginning has been that the economy is broken. President Obama is responsible, has no idea to fix it and all things are pointing downward unless he gets out of office.
And because it's pointing upward and everything is much better than it was before, he has to celebrate that. In fact, the Obama administration has done a terrible job of celebrating its successes and showing how it prevented the disaster from being worse, and how it's made things better.
So he has to do that at the same time he can't flaunt that as people don't have work, as people still don't have living wages, he has to strike that balance and I think he's doing a decent job on it.
ROMANS: Do you think jobs are really important part of this scenario? And jobs, we said 200,000 jobs created for three months in a row. We know that this week, you know, you saw jobless claims the lowest they've been in four years meaning there are fewer people heading to the unemployment line.
I say these things on television and I get hate mail from people who say my brother can't get a job. He's out of work 14 months. You know, don't overstate the strength in the labor market because a lot of people are coming back and they're getting jobs for much less pay than they used to.
FAROOHAR: Absolutely. You know, going back to the point about what happened in the '80s versus the '90s versus now. Here is an important fact.
Every recovery since 1990 has been weaker and taken longer since the last one. This is the weakest and longest recovery in history. So, you know, there are just a lot of people out there either not coming back into work, or when they do they are having jobs much less than what they settled for before.
ROMANS: Inversely proportional to how much technology is changing the speed of the economy.
CAIN: I agree 100 percent because it's a physical fact that Rana just laid out that every recession has been longer and more painful starting in the '70s we've had this technological and industrial shift in the United States.
That being said, you want a fair criticism of how Obama handled this recovery. You can make the argument very strongly that he got distracted early on in his presidency.
ROMANS: By health care reform.
CAIN: By health care reform, by considering cap and trade and he talked about things and put his attention on things that had nothing to do with the recovery thus prolonging it.
HILL: I don't agree with that. I don't think they are competing agendas. It may have the political perception, but I think he can walk and chew gum at the same time.
CAIN: Whether or not the massive business sector across the economy not knowing future taxes will be, not knowing what their future regulatory scheme would be felt good investing in this economy.
FAROOHAR: You know, if I can just jump in on taxes. I don't think it's about taxes. Now Warren Buffett, one of the greatest investors in the country if not the world, will say that there was more investment in the '50s when taxes were much higher than they are now.
But I do think it's about investment and education. That's what will actually enable us to complete globally. That's what we have to do to get back to the growth that we have in the '50s.
CAIN: I want to be clear about something because I didn't make an argument about taxes, higher or lower. What I made the argument about is in 2009, when you're faced with a massive recession, the uncertainty that was injected into a massive economy.
The largest economy in the world that you're going to restructure 20 percent of it in health care, and impossibly more with cap and trade injects a massive amount of uncertainty into what you hope will be a recovering economy.
HILL: Well, first of all, the mass anxiety that the wealthy, the uber rich seem to have. They have that whenever there's a proposed bill, whenever there's a proposed tax hike --
CAIN: Not just wealthy, it's business.
HILL: There's always this wolf cry.
ROMANS: Well, the mass anxiety at that time was not because of health care reform even though many of those people didn't like it, the mass anxiety is their business went off a cliff.
I think that one of the real problems is that this administration and a lot of people underestimated how hard it was going to be to get out of this mess.
And at the same time was pushing, you know, the president's signature legislative agenda, which will vastly remake the health care system so, you know.
CAIN: Forty percent of the American economy. That's what health care is and you want to put energy on top that, cap and trade. I'm telling you these things --
ROMANS: I haven't heard the words cap and trade in a long time.
CAIN: But you did in 2009 and that's the point.
HILL: No, but cap and trade wasn't at the top of the legislative agenda. I mean, it was very quickly pushed off the table. Democrats pushed off the table even more so than anyone else.
CAIN: They had three things they wanted to focus on. They figured out very quickly they could only do two, stimulus, health care, and cap and trade. Cap and trade lost, but we all knew the three things they're focusing on.
HILL: It's something that quickly ended the conversation.
FAROOHAR: I'll jump in and just say on health care because I think it is something worth bringing up. It was a huge issue, a huge thing to bite off. You can make the argument you just made.
But I think that it wouldn't have mattered because ultimately President Obama did try and get through infrastructure change. He tried to make investment there.
He tried to make investment in education, which any company will tell you -- I'm not talking to companies all the time. They say we've got three or four jobs open particularly in high-tech areas that they can't fill because they don't have the skilled workers. That's when they would be putting the money.
ROMANS: Rana, Marc, Will, stay right where you are. America's debt, Europe's debt or just that nauseous feeling you get every time you go to fill up your car with gas. The biggest threats to recovery next on YOUR MONEY.
ROMANS: Gas prices are up nearly 20 percent this year. The national average creeping de los that $4 a gallon mark. Everybody wants to know why gas prices are rising so rapidly and President Obama says he has the answer.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA; Every time there's tensions that rise in the Middle East, which is what's happening right now, so will the price of gas. The main reason the gas prices are high right now is because people are worried about what's happening with Iran.
It doesn't have to do with domestic oil production. It has to do with the oil markets looking and saying, you know what, if something happens, there could be trouble, so we're going to price oil higher just in case.
(END VIDEO CLIP)
ROMANS: No, as gas prices keep rising, the Republicans keep blaming the president. Would gas prices be lower if a Republican was in office?
CAIN: No. In fact, you can make an argument that it would be worse. You can make the argument that Republicans would be taking a more hawkish stance against Iran, more fear and more speculation on global oil prices making them higher. That is fair and true.
HILL: Well, I agree. I don't think there's a more hawkish policy than President Obama is taking. But I do think you're right there's nothing to do with what we do domestically, which is why I get so frustrated when people on the right, sometimes left, start advocating for drilling, mass drilling, mass exploration, mass domestic oil production, ramp it up because it won't change anything. Gas prices will still be the same.
CAIN: You went way too far.
FAROOHAR: I'm surprised you guys agree in the first place. I think you're right. The fact is that gas is high because oil is high. Oil is high not just because of tensions in the Middle East, but China -- ROMANS: The rest of the world, we don't move the needle anymore, folks. It's not about us.
FAROOHAR: The rest of the world is growing like gang busters.
HILL: There's nothing we can do about it.
FAROOHAR: There's not a lot we can do about it. You know, the other thing that's worth mentioning is we're actually more energy independent than we have been in a long while. We're exporting more petroleum products this year than we have since 1949.
CAIN: There's a reason for that and when people make the argument that we're part of a global oil market and what we drill locally won't have a big effect on price. They carry the argument entirely too far.
ROMANS: But it does sometimes, it does sometimes. I mean, you look at blockages, for example. We can put up the Keystone map, you talk about blockages in the Midwest because you actually are having increased production in the Midwest.
CAIN: It's not just the increased production. This is a revolution. The state of North Dakota has just moved to the second largest oil producing state in the nation ahead of California, or they are about to.
ROMANS: Let me explain this while Will is waxes poetic. Down at the bottom the orange, that is the Keystone pipeline extension that the president fast tracked or as you heard this week, has fast tracked.
The blue part is the part that crosses the border -- I almost said with China, with Canada. That part goes through the Nebraska Sandhills and there are some environmental concerns there.
But the president kind of didn't fast track it. They are already starting to build it down there. I mean, he doesn't really have the approval to fast track it. The administration wants this pipeline, but they've got to be very careful about how it's done.
CAIN: This is the fair criticism of the Obama administration. Over the long-term, they have put in place hurdles, made it hard for domestic oil production to move forward, drilling on federal lands off the continental shelf is down, not approving the Keystone pipeline. These are important to our long-term energy future. What it has to do with current gas prices, nothing.
FAROOHAR: You know what's really more important to our long-term energy future though is green technology. You look over the last 100 years there's been a lot of oil spikes. But every time there's been some new technology, some new shift be it from oil to gas or coal to oil. Now we need to make the shift from oil to green technologies. The more we can push that --
ROMANS: How about we have the Department of Energy give a blank check to a bunch of solar companies. FAROOHAR: Wait. I'm not saying that. A lot smarter like China, Denmark, and Germany have a lot smarter public-private partnerships with universities, with companies. People want this in the business world too.
HILL: He's shaking his head.
FAROOHAR: Teaming up.
CAIN: You know why, you want to talk about having a smarter energy policy, I think it has a complete lack of humility to suggest you know what energy future of tomorrow is when we have energy future of the past.
For the past 200 years pulled more people out of poverty, warmed more homes, put more people on the roads than any energy source in the history of mankind. But you, guys, suggest you know what tomorrow's is. I'm going to stick with the one that's working.
ROMANS: Well, the thing I will say though the big Buffett buy of Northern, Santa Fe, look at how much -- I was in Nebraska a couple years ago. The amount of coal that's coming out, I mean, they are making a bet we're going to be burning stuff, stuff like oil and coal for 200 years.
FAROOHAR: Nobody is saying fossil fuels are going away. But what I'm saying is we have access to about 12 percent of the entire world's fossil fuels, the rest of it is in the hands of state-owned companies and --
ROMANS: Let me ask this question though. People think in this country they have a right to very low gas prices. Do you have a right in this country to low gas prices? Gas prices go up, people go crazy, Will.
CAIN: No, you don't have a right to low gas prices.
ROMANS: It's like -- gas prices go up, it becomes more important than any poll out there. It becomes blame the president, blame the Republicans, blame Congress.
HILL: I don't think it's having about a right. But I think what it is the American people have been duped into thinking that this is something manageable or something that can changed to a legislative policy. It's not that they have right they feel it can be fixed.
CAIN: How long in the future until the future will you guys be arguing the gas is a right. We're arguing health care is a right, why not gas.
ROMANS: Since we're talking about this gradual recovery, I want to talk about risks because we're talking about gas prices. But are gas prices the biggest risk to recovery or is it European debt, is it American debt?
HILL: European debt. FAROOHAR: European debt. You don't see a euro sign over the pump every day when you go in to fill your car, which is why we think so much about gas, but Europe can blow up. Solutions have been piecemeal. If that happens we could find ourselves in another slowdown.
ROMANS: All right, we'll leave it there. Thanks, guys. So wait, does the recovery last? Do you think the recovery last?
HILL: Of course. Of course, the recovery will last. Things will be great. Jobs will be created.
CAIN: I'm the only one with humility, tell you the right answers. I don't know.
ROMANS: We'll keep that under Will's name. Rana, thanks so much. Thanks so much, Marc Lamont Hill.
The health care debate goes before Supreme Court this coming week. This is an issue that affects every single one of you watching right now. How can it all shake out? Jeff Toobin and Will Cain work through it for you next on YOUR MONEY.
ROMANS: President Obama likely considers it his signature achievement the health care reform that was signed into law two years ago. This week it's headed to the Supreme Court. Six hours have been set aside to hear arguments. Most Supreme Court cases get just one.
Will Cain is back with us. Jeffrey Toobin is CNN's senior legal analyst and of course, the authority on all things Supreme Court. The central issue here, Jeff, in this case is the mandate stating Americans must buy health insurance or face financial penalties. If that's unconstitutional, what happens is the entire law dead?
JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Well, that's up to the Supreme Court. Of the judges that have declared the law unconstitutional and there have been a handful of them, most of them, except for one, have said only the mandate is unconstitutional.
One judge, a trial court judge in Pensacola said as a result of the mandate being unconstitutional, the whole law is unconstitutional.
ROMANS: The mandate is the glue for the whole reform.
TOOBIN: But there are many other provisions that are not legally controversial.
ROMANS: Like a pre-existing, not allowing the insurance companies to deny you coverage if you have a pre-existing condition.
TOOBIN: Right or requiring children to be allowed to stay on their parents' health care until age 26. That is not constitutionally controversial. There is one judge that threw out everything. I think if they throw out anything it will be -- ROMANS: How deep will the divisions be within the court on this?
TOOBIN: Well, let's start with this. There are four judges appointed by Democrats, Justice Ginsberg, Brier, Sotomayor and Kagan who I think are virtually certain to uphold the law.
There is one justice, Clarence Thomas who is virtually certain to strike it down. So the question is, can the liberals get one more justice out of Chief Justice Roberts, Scalia, Kennedy, and Alito.
I think the odds are that they will get. I think the law will be upheld, but those four justices are really going to hold the outcome in their hands. Kennedy, most of all, as usual the swing justice.
ROMANS: And so what is the basis of this? I've been hearing so much about the commerce clause. What is it they are fighting the legality of this?
TOOBIN: OK, what's important to remember about the federal government you don't usually think about this is the federal government has limited powers. It's limited by the constitution.
Article One says Congress may regulate commerce among several states. That's a key provision. Most of what Congress does with regard to the economy is use of that power.
ROMANS: Is that like fuel economy standards in cars.
TOOBIN: Everything, it's the minimum wage. It's Medicare. It's Medicaid, all financial regulations.
ROMANS: Why isn't requiring someone to have health care face a penalty, why is that different?
TOOBIN: The Obama administration says it's not different. It's just the same. The argument against it, and Will, will certainly give this, but the argument against it is that it's OK for Congress to regulate economic activity like paying someone the minimum wage.
But Congress cannot regulate economic inactivity. It can't force you to enter into a commercial transaction with a private party, an insurance company, or pay a penalty. That's the argument against.
CAIN: That's correct. Jeff said that really well. The Congress has an enumerated list of powers. One of them is the commerce clause, which has really a simple one-sentence line. It says Congress has the ability to regulate trade among the states.
Originally, the intention there or how it played out was to avoid trade wars between the states. That all changed in 1942, which the case. This will be the president's entire decisions based upon where a farmer in Ohio was growing wheat on his land.
There was a law where the Congress was trying to boost the price of wheat. They thought it would be good if we had a higher price. So what they said is you cannot grow over certain quota of wheat. They told them do not grow anymore and he did.
Now here's what Jeff laid out. The difference is between inactivity and activity. They do not tell that farmer in order to boost the price of wheat. You must go buy wheat. They put a limit on how much wheat he could buy. So it comes down to inactivity versus activity. For those of us from the conservative side of this looking at this law.
ROMANS: I want to look at this new ABC News/"Washington Post" poll, 26 percent of Americans want the Supreme Court to uphold the health care law, 25 percent want to get rid of the individual mandate and 42 percent want the entire law thrown out.
You're not only a resident conservative. You're also an attorney. What's your take on this? I mean, what does the public want and will the public be satisfied if it's thrown out because things will change for them. I mean, things under way health care reform implemented.
CAIN: As most things in the political arena, the public wants its cake and eat it, too. They want the freedom not to have the government come down on them and tell them they much buy health care.
But they also like portion of the law that says insurance companies can't deny you for pre-existing conditions, but these are intricately linked. You can't have one without the other.
If you tell insurance companies they can't deny people with pre- existing conditions that insurance business falls apart. They can't just accept sick people. So you must force healthy people to buy insurance.
ROMANS: Every time he says insurance --
CAIN: It's true. The public is going to have to realize that if you want that condition you have to have the mandate. If you don't have the mandate you don't get that condition as well.
ROMANS: It's already being implemented. You know, talk to people at HHS. You talk to doctors. Yesterday, I talked to a guy who's running a big urban hospital system. They are already working toward a lot of these things and they're working assuming it will be upheld because there's nothing they can really do.
TOOBIN: It's the law of the land now. I mean, it has not been suspended. I think it's important. When we talk about this activity, inactivity distinction, one of the judges made a very interesting point in one of the early opinions upholding the law.
He said there is no such thing as being outside the market for insurance. If you choose to get health insurance -- if you choose, I don't want to buy health insurance. If you're hit by a car on the street they will take you to the hospital.
ROMANS: It's federal law.
TOOBIN: You have to be treated. Somebody has to pay for that. So we're all paying for it if you don't pay for it.
ROMANS: So you can't be inactive. TOOBIN: That's the argument of the Obama administration that it is not -- there is not inactive about not buying health insurance. That is a choice you make.
And in order to promote the general welfare to take care of everybody in the insurance market, which is everybody, we have to force you, just like if you drive a car. You have to buy car insurance. This is the law of the land.
CAIN: Now for those opposed the difference between those conditions that Jeff just laid out like buying car insurance is this law, this mandate, is a precondition to living while car insurance is a precondition to driving on public roads.
So for the first time, and this is what we see as the key distinction, you have a condition to living this country and that is buying health insurance. If you're inactive by simply not buying health insurance, where does it stop? Where is that limited?
So let's talk about politics of it because if this is overturned, it provides new energy to people for several years to the people saying the president was wrong on this. His signature achievement is a failure and this is government overreach. Does it reenergize that movement?
CAIN: The political movement?
CAIN: You know, that's an interesting question. I don't know how it plays out.
ROMANS: Does it help GOP in November.
TOOBIN: Absolutely. If Obama loses this appeal, it is a catastrophe for him. Most of all it's a catastrophe on the substance. This is what he cares about.
What he's going to be in the first room when you walk into the Obama presidential library. The substance frankly matters more than the politics, but the politics is terrible for him. He spent all this time embracing a law that turns out to be unconstitutional. I think that is a catastrophe.
ROMANS: For a constitutional law professor.
TOOBIN: Forget constitutional law professor, for anybody. That you made your signature achievement something that is so outside the mainstream. That it's unconstitutional, I think it is a train wreck for him.
CAIN: It is very powerful for his opponent. You hung your hat on something that isn't within the purview of American governmental power.
TOOBIN: Absolutely. The stakes are enormous. Mostly they are enormous because 30 million people won't get health insurance if this law is struck down. But subsidiarily it's a disaster politically for the president if he loses. I don't think he will lose.
ROMANS: You don't think he's going to lose it.
ROMANS: Do you think there is a chance he loses it?
CAIN: I think if he doesn't lose this, we have a new question, what is the limit of American governmental power?
ROMANS: Sounds like a book. All right, Jeff Toobin, Will Cain, thanks so much to both of you.
Are ready to buy into this recovery? We look at two competing ways to grow your money, which one is right for you. That's next.
ROMANS: Welcome back to YOUR MONEY. I think at this point everyone agrees the economy is in a slow recovery. That can mean opportunity for you. Home prices are at the lowest levels in 10 years. Interest rates are still incredibly low. The 30-year fixed rate is 4.19 percent.
In 98 of the top 100 metro housing markets, it's now cheaper to buy the house than rent it. What about the stock market? Right now stocks, believe it or not, they are cheap. Dividend yields are up. Interest rates are low.
So if you're ready to buy into this recovery, which is the way to go. You buy stocks. You buy a house, real estate? How about buying both?
Matt McCall is the president of Penn Financial Group, Scott McGillivray is a real estate investor, contractor and host and executive producer of HG TV's hit series "Income Property." Nice to see both of you.
Now we're assuming we have some money in our pocket burning a hole I guess for this segment. But we're seeing these signs of life in both markets. Matt, make the case for me for stocks.
MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: Well, as you just mentioned, Christine, stocks are really cheap right here. What called the PE ratio, price earnings. That's basically how we value stocks if they're cheap or they're expensive.
Right now, we're trading at about 13. Historical average is 15.5. So what that means is we get back to where we should be historically. The market is 20 percent undervalued right now.
At the same time, dividend yield, you know, we have a dividend yield last year in the S&P 500 2.1 percent. Now, we've had a lot of banks raise dividends. We had Apple come out with a dividend.
You're looking now this year of a dividend yield on the S&P 500 of over 3 percent. That's versus 2.2 percent for locking your money up for 10 years in a government bond. So to me stocks are the best out there right now.
ROMANS: Yes, if you got money sitting in a bank account, you're looking at the same 3 percent. Are you kidding me? Scott, your expertise is real estate. So is it a good time to buy?
SCOTT MCGUILLIVRAY, HOST, HGTV'S "INCOME PROPERTY": I absolutely believe it's a great time to buy. I think there are a lot of opportunities out there. We're still seeing a lot of negative news, which is actually good for buyers.
Because it's keeping house prices low. Interest rates are extremely low. So price points getting into the market are good, which means you don't need a huge down payment. The affordability is there, at least affordability coming back because interest rates are so low.
So instead of trying to time the market, which a lot of people are trying to do, they are waiting for a recovery and then trying to jump in. Why not get in while it's low and then just do the long-term play with real estate.
ROMANS: You know, Matt, I want to talk about stocks, for everyone or should people be proceeding here with caution on the stock front?
MCCALL: Well, they're not for everybody because everybody thinks, well, I want to be in the stock market. But if you're 65 years old and have two more years to work, no, you shouldn't be in the stock market.
Over the last century, the stock market has been the greatest wealth generator that we've ever seen. The problem is if you need the money a year from now or two years from now or even five years from now, you may have to step away from the stock market because we're going to have ups and downs.
Even though we have ups and downs, we end up going higher. But if you need to start taking money in five years, you can't be in the stock market right now. So it depends on what your age is and what your risk level is as well.
You have to realize in the stock market, you're going have years where you lose money. If you can't deal with that then you can't be in the stock market.
ROMANS: Scott, if you need your money in five years you can't put it in the housing market either quite frankly because it could take a while before home prices really, really recovers.
Scott, you know, it's interesting, too, a lot of people are paying cash. You know, 33 percent of existing home sales in this country are cash. So people taking advantage of those low interest rates, they are still waiting. MCGILLIVRAY: Yes, it's true. They are still waiting. I mean, anything both stock market and real estate you do need to be thinking long-term right now.
But the beauty about real estate if you're getting into real estate for investment purposes, the long-term buy and hold positive cash flow model is great because it's like getting dividends every month, right?
As long as you're buying the right investments and the fact they are going to go up in price in the future is a bonus. We can't time that. A lot of people think is it going up next year, a year later.
You need to be able to start making money right away, which is why you need something that has rents above caring cost of the house, above cash flow is a safe situation and then waiting for the economy to recover while you're getting paid to wait.
ROMANS: Scott, I know you bought your first house when you were at 21. At 21, that's a big financial risk. According to a new survey by PNC, people in 20s carry an average debt of $45,000. Clearly, home ownership isn't for everyone right now, especially people with a lot of other high-interest debt. Is that going to hold back that generation?
MCGILLIVRAY: Well, I think, you know, there have been a lot of lessons learned over the last few years. It has to be -- it's cool to be frugal. Savings is awesome. You have to be excited about that you need to be able to save up a down payment in order to buy a house.
I think people need to discipline themselves. They need to take advantage of the low house prices that are probably going to stay low for the next couple of years. Use this time to build up some savings so you can get in while the price points are low. I bought early, but I was modest.
I tell people all the time, look, I had my first house when I was 21. The only way I could do it was by renting out the whole upstairs to a group of people whose rents covered all the costs. I lived in the basement apartment. Yes, I lived in 800 square feet one-bedroom apartment below my tenants for almost eight years.
That was the reason why I was able to afford it. Had I lived upstairs the situation may have been different, my debt would have continued to build instead of the reverse order. I was able to stay in that apartment and buy my first 50 houses over that timeframe.
ROMANS: My first 50, then my next 50 came. He's obviously turned some money out of that one situation and that's great. Right now, should you be saving money, put it in the bank or owning stocks. Is that the better investment for the long-term, for the long run rather than buying a house right now?
MCCALL: First I want to talk to Scott. I'm the only guy in America that bought three homes and lost money every time. I need to talk to him about this.
ROMANS: He doesn't have stocks.
MCCALL: You want to save money. You always want an emergency fund. But with interest rates so low money markets paying less than 0.5 percent, you're actually losing money with inflation, I think right now you have to ask yourself do you want to be in the stock market.
If you say yes, right now is the best time based on evaluations, based on the fact good dividend yields, no reason not to be in the market. It is a long-term gain.
Scott, you're buying into a home as well, tough to time it. You don't want to time the market. You want to get in when the stock market is cheap. History proves long run you're going to make money in the stock market.
ROMANS: Last word to Scott, I guess, we went through 10 or 15 years where people thought there was a get rich scheme in the housing market. I think that is over. Do you agree?
MCGILLIVRAY: It was over even when people thought it was happening it was over. It was destined to fail. There's no such thing as money for nothing. It's a long-term play. You have to work hard to make money in it.
There's just a couple of opportunities right now that make it really attractive for investors with low price points and low interest rates if you're willing to play that long-term real estate game you can win big right now.
ROMANS: All right, Scott McGillivray and also Matt McCall, nice to see both of you today. Thanks for making your cases, gentlemen.
All right, one thing is very clear during this recovery, the United States needs innovators and innovations to set it apart from the rest of the world. But should that come from the government, should it come from big business?
We're going to ask the man once named, yes, the real sexiest astrophysicist by "People" magazine. Don't miss it next on YOUR MONEY.
ROMANS: We're all about solutions on YOUR MONEY. So what's the solution to fixing the economy? One thing we keep hearing again and again is the need for innovation, but how do we create an environment that supports and nurtures the next big thing.
Neil Degrasse Tyson is an astrophysicist and author of "Space Chronicles Facing The Ultimate Frontier." Real pleasure to meet you. It's really nice having you on.
NEIL DEGRASSE TYSON, ASTROPHYSICIST, AMERICAN MUSEUM OF NATURAL HISTORY: Thanks for having me.
ROMANS: Your latest book is about space exploration. You say one of the great things about space is that it gets people interested in all the sciences and the related fields. In the 21st Century, innovations in science and technology are the foundations of tomorrow's economy.
TYSON: Yes. I think traditionally people have always imagined and thought of space exploration as driving some kind of economic spinoffs. Sure. But I want to try to raise the dialogue beyond that and have people recognize that when a nation invests in a big way in a major frontier, among the list of great frontiers that can attract the next generation of explorers you have space.
And when you do that, what you do is you cultivate an innovation attitude, you cultivate an innovation culture. When you do this the act of advancing a frontier, everyone is society participates in that adventure culturally, emotionally, psychologically. Even if you're not a scientist, engineer, a poet, journalist, a comedian, whatever.
ROMANS: A teacher.
TYSON: A teacher, whatever it is your subject, you will embrace that advance of the frontier and have an influence in the rest -- these other aspects of society.
ROMANS: Back in the day it was the government that supported finding new frontiers.
TYSON: It's always been.
ROMANS: And space industry. But things are changing. Now we want the private sector to have more of a role. That is going to foster innovation in a different way or is it dangerous?
TYSON: There's a lot of misunderstanding there. Of course, NASA has always partnered with private industry from the beginning. NASA doesn't have all that innovation and technology in its own centers.
So just a great example is right here in New York, so on Long Island, they designed and built lunar excursion module. They went on the moon. You go down in the neighborhood, they are still proud of that.
Somebody had an uncle, brother, somebody knew somebody was a participant on that frontier. It's one of the strongest points of pride to this day in that community. So you can see the effect that participating an advancing frontier has on a culture.
So that's corporate participation in NASA's adventure. The misunderstanding is NASA is out of the space business and privatized.
ROMANS: They are not out of the space business. It's a different model for it. Much more high-profile retiring the space shuttle fleet is a big moment.
TYSON: It was a big moment and some people shed a tear. I could you have those people of not actually understanding why they shed a tear. An era comes to an end. That's not why you're shedding a tear.
You're shedding a tear because there's not another vehicle ready to continue that venture beyond the shuttle. No one shed a tear when Gemini stopped because Saturn 5 was there. As long as the adventure continues you have something to look forward to tomorrow to dream, imagine and invent.
ROMANS: So our tomorrow for science and technology in this country looks what?
TYSON: So the emerging model, NASA has been in and out of lower orbit, risks assessed, costs understood, so you see it's a private enterprise. We should have done that 30 years ago if you ask me, but private enterprise --
So private enterprise presumably will do it more cheaply, more efficiently in the economies of scale that private enterprise brings to bear on a problem.
So what will not happen and will never happen and a good reason why it can't happen is the private enterprise has never led a big, expensive, dangerous adventure with uncertain risks.
ROMANS: Because private enterprise reports to shareholder and investment return.
ROMANS: Big ideas and exploring frontiers is meant to make somebody some money.
TYSON: Exactly. So if you've never done it before and can't assess the risk you can't go to an investor and say here is the money you give me and the money you get back in a certain time. Governments have always done this.
When Columbus went over the ocean, government did that. OK? I recently learned some private money had contributed to that, but the bulk of that was government. And once the maps are drawn and you see where the demons aren't and where the trade winds are.
And if there's wealth, then you bring back those maps and private enterprise says I'll take that route and that route and I can make money. Who is coming with me? It's been this way forever.
ROMANS: So it's a partnership.
TYSON: It's always been a partnership, but the government has to take those leaps.
ROMANS: Let me ask you in this country, the leaders of technology really right now, Apple computer. I've heard a lot of people tell me about how we're going to Applize this country, design it here, build it someplace else.
I've always thought, a lot of evidence to back it up, innovation comes from the factory floor. Innovation comes from a place where you're making something. Innovation comes from the people who find a better way to do it while you're doing it. Are we risking, losing something by inventing stuff and not making it in this country?
TYSON: OK. So if we want to claim, assert that our market economy is global then it is expected that they will take their factories to someplace where they can make the product cheaper where at the end of the day they are serving their shareholders.
We shouldn't cry foul your inter-global company, international global company found a cheaper place to make the product than here. We shouldn't be surprised by that. But here's what happens, we are surprised. We want tariffs or tax incentives and create -- rebalance the playing field to enable us.
I assert if you're always innovating, always innovating, you can end up creating products no one else has figured out how to make yet. That way you keep your jobs. It's only when you make a product and then it kind of stabilizes. They say, I know how to make that. I can make that. I can build a factory to make that. Then the jobs go overseas.
In the 1960s and '70s jobs weren't overseas. If they were they were jobs nobody wanted here. Everything was innovation throughout the entire era. I did a quick calculation on the GDP per capita decade by decade, it's gone up since the '60s every decade. However the amount it's gone up as a fraction of the total has dropped.
TYSON: So in fact it's flat lined this decade. So I long for that time. Not for the civil unrest that poisoned the '60s, I long for the era where everyone dreamed about the city of tomorrow and home of tomorrow.
ROMANS: Wow, we'll have to leave it there. That's a nice thought to leave it on. Neil Degrasse Tyson, very nice to meet you.
TYSON: Thank you.
ROMANS: All right, invented personal transportation system. Known for his music. Two bright minds, two very different worlds, but put the two of them together at our own Ali Velshi, you get pure innovative collaboration. That's next on YOUR MONEY.
ROMANS: Welcome back. Dean Kamen is a top innovator having invented the Segueway. So what happens when music superstar, Will.I.am., a tech and innovation geek of sort crosses paths with someone like Dean Cayman?
You get something called "First" designed to inspire kids to build their science technology and engineering skills through a mentor-based program.
(BEGIN VIDEOTAPE) ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: You're the accessible inventor. You're the guy who thinks up crazy things and some we actually use.
DEAN KAMEN, INVENTOR: Every once in a while we get one right.
VELSHI: What's your thinking about all this? We're in this environment where we think our future is going to be powered by science and engineering.
KAMEN: We don't think it. It's the only plausible alternative. Technology, whether you like it or not, is the only solution if we expect the next generation to have access to a better life. Technology is the only way that 9 billion people will be able to share more wealth instead of the 6 billion people fighting over less wealth.
WILL.I.AM, BLACK EYED PEAS: The benefits and blessings of traveling the world, seeing what's coming tomorrow. Hanging out with folks at Google and with Dean and seeing what's happening. And then I get concerned. Like, wow, that means my ghettos, still be a ghetto 20 years from now.
VELSHI: Right. So you're seeing the rest of the world, you're seeing the way it's changing and want to bring the ghetto along with you?
WILL.I.AM: If I can at least go to my yet ghetto and tell the youth, take an interest in science, technology, engineering and mathematics so that you are prepared 20 years from now. Not just prepared like, you can get a job, but understanding it to where you can create jobs.
KAMEN: I have never felt any pressure running my business compared to sitting in a classroom and feeling, I'm going to get picked on to do something, that I don't understand and -- look like an idiot.
VELSHI: That's the magic. That's probably what keeps a lot of kids out of science, technology and math courses. Anybody of come back to you and say, why do you care?
WILL.I.AM: No. Because I did it -- it was a cool way.
VELSHI: Right. You're making that cool?
WILL.I.AM: You make it cool. My friends, probably like, you always on that geek stuff. Why you so geeky so that's geeky cool. It started getting a bunch of traction and people were talking about it and the hash tag with, I am first.
KAMEN: "First" is about giving kids a taste of what the real world can be like for people that are properly prepared, willing to work hard and solving complex problem.
And they get so passionate and so excited, it's like they go to the football game, because they don't know who's going to win, right? But they can try hard. If they don't win this week it's OK. It's not judgmental. They don't get an F. Maybe they'll win next week. WILL.I.AM: What's missing here? Buy-in technology, right? Because we're -- infatuated with it and it helps us connect and communicate. Why isn't it cool in culture? So I was like, we got to put it on TV.
KAMEN: We just proved that, you know what? Math and science and engineering are every bit as accessible, every bit as fun, every bit as rewarding and way more likely to lead to careers than anything else they can do.
WILL.I.AM: So wouldn't it be cool if next Black Friday, an 18-year- old had the best selling product on the shelves of Best Buy?
WILL.I.AM: Right? Or, you know, electronics. That's when it all changes.
VELSHI: That's when it becomes obvious to the kids in the neighborhood that, I can be that next kid.
ROMANS: We'll tell what you everyone will be talking about this coming week next on YOUR MONEY.
ROMANS: Health care is on tap next week in the Supreme Court. Stay with CNN for the very latest on what it means to your medical bills. We want to thank you for joining the conversation this weekend on YOUR MONEY. Have a great weekend everybody.