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YOUR MONEY

America's Jobs Crisis; Land Of Confusion; The Politics Of Money; Washington Compromised; Facebook Fizzles

Aired June 2, 2012 - 13:00   ET

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


ALI VELSHI, CNN ANCHOR: No matter how you feel about this economy, the one place that matters most, jobs. The latest hiring numbers are in and there is simply no way to put lipstick on this pig.

Welcome to YOUR MONEY. I'm Ali Velshi. Christine Romans the host of "YOUR BOTTOM LINE," my good friend, has been studying these numbers. She breaks it down for us now.

Christine, everybody who watches knows that every jobs day, you and I have some area of disagreement. I can't even find one.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: No, no. You and I are together on this one. The glass is half empty and we both see it that way and that's kind of rare, 69,000 jobs created.

This is the world's largest economy. The labor market report that the world follows because, you know, the American middle class is still a very big driver of global growth. There you go.

If people don't have a job, they can't be spending money. Here is the trend, look. Here is the last three months and this is what's important. You don't look at just one month of data. You like to see what the trend is both for markets and economics.

The trend is here after three months of 200,000 jobs created or more, people were saying, look, it's healing, things are going to get better. Finally, the rear view mirror is a very slow jobs recovery, and then you have the stall here.

Now one of the reasons might be Europe. Quite frankly when your biggest customer has countries in it that are in recession, that doesn't mean if you're a big company in this country you want to be adding a lot workers, right?

That could be a big part of it. I want to look at the private sector and public sector jobs. You and I have talked about this a lot, Ali, 82,000 private sector jobs created. You want to see more than that.

And 13,000 private sector jobs lost. There's that tug-of-war for the economy. The private sector trying to create some jobs, but the public sector still losing jobs, that's where it gets real political.

Because you'll hear people say, you'll hear people on the GOP say, look, this shows the president's policies aren't working. VELSHI: The problem is what's the answer to that? If the president's policies aren't working, how do those that say we should be cutting spending right now fit into this whole equation?

ROMANS: Cutting spending will mean more public sector job loss, no question, which means you'll have another drag here. So you have for the GOP you have the kind of a double edged sword for them in these economic numbers if you're talking about the politics of the jobs report.

But most people aren't talking about the politics quite frankly. They are talking about their personal economy and whether there are more opportunities and that's the real key there.

VELSHI: Who is going to swing into politics real fast, possibly within the next couple of minutes. Before we get to Will, Diane Swonk is the chief economist at Mesirow Financial.

Before we get into politics of this thing, what's wrong? Why after seeing and feeling an economy that looked like it was chugging along quite nicely have we seen this and we saw the revisions of the last couple of months. What has weakened?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, a couple things I think are important. First, there was, of course, reduce the economy with unseasonably warm winter weather and we had some payback to that.

But these numbers go far beyond any payback to unseasonably warm winter weather they are weak. They are weak in a lot of areas that I think we need to take note of. It is important too. You know, that the wedge between public and private sector employment.

That had narrowed. Many people had sort of start taken on with the first cut of GDP in the first quarter with state and local government sector in that first cut rising that this would not be the headwind.

Well, yesterday that data was revised down, this week that data revised down. Now we're actually showing that the state and local governments are continuing to cut the bulk of the public sector job losses were, again, teachers.

And then on the federal level, you're starting to get those postal worker reductions in payrolls there. That's where we saw the rest of it. So mostly teachers at the state level, at the local level and again, that wedge, the public sector now beginning to play the headwind once again.

Also Europe, let's face it. We're not an island. Not only is Europe weak, but China is weak. We saw news out of China this week that show that China is weakening. China buys a lot of our heavy manufacturing equipment.

The global economy, again, we're not an island and this really matters. I think also uncertainty. We saw the buoyancy, the irrational exuberance let's say of the '90s when people invested even when it was wasteful investment.

Now we're seeing a pullback where uncertainty about both policies that kicked down the road -- this is third year in a row we kicked down the road policies fiscally in the U.S. and in Europe and accumulated and gotten worse.

There's just no reason to feel certain about making a bet in the future even if you got cash on your balance seat when you've got those in front of you.

VELSHI: All right, so you gave fantastic answers to all of these without invoking politics. Will Cain, it was moments after that unemployment report came out that you had heard from everybody politically about what was wrong with this world politically.

I argue to you, Will Cain, this issue transcends the ability of Barack Obama or Mitt Romney to deal with it. These headwinds are global, as Diane said, some of them are cyclical, but nonetheless this will work into our election.

WILL CAIN, CNN CONTRIBUTOR: I love the way Diane broke it down. I think she essentially pointed to different factors affecting these numbers, China, Europe, and uncertainty. I would agree with you on two of those three factors.

China and Europe are largely outside of the president and the policymakers' control in this country, but uncertainty is not. If I have a criticism of Barack Obama, it lies in that realm uncertainty.

When businessmen across the country don't know what the tax rate they will pay in the next year is or what the regulatory environment might be or how their health care will be handled, that creates uncertainty.

VELSHI: Let me stop you there for a second. I want to bring Christine in and just to complicate this a little bit more.

ROMANS: It's not complicated enough.

VELSHI: You have a number there and we're talking about underemployment. A lot of people tweet me all the time when I give these unemployment number. They say the unemployment rate has risen to 8.2 percent. People think I am flat out lying to them.

ROMANS: Yes, you're not lying. I mean, there's a labor market that's a labor market measured, people who in the market working or actively looking for a job and the unemployment rate is 8.2 percent of that group.

Then there's a group called the underemployed. That's a bigger number. In this job report this week we saw it's 14.8 percent. Those are people, Ali, who are unemployed. They are marginally attached to the workforce.

They are working part time for economic reasons. They would like to be working fulltime, for example, but they just can't get that job. So this is the underemployment rate of 14.8 percent. That's a more troublesome number.

There are people who throw in, talk about real unemployment rates that are even bigger than that. Because they are throwing in people who aren't in the labor market, people who have been discouraged and dropped out for years, people who would like to be working but can't.

I mean, you look at the population, the American population that's working. You know, it's less than 60 percent of adults working. So there are a lot of different numbers to look at. You'll see the politicians parsing these numbers a lot.

VELSHI: You're in the same studio as me, but you can't see Will's case. I'm not quite sure whether he didn't eat good food or something is troubling him.

CAIN: Nothing is trouble me.

VELSHI: You're looking at Christine and saying that doesn't make sense.

CAIN: No, it all makes sense. I think you can play the death star music as we talk about all these unemployment numbers. When you analyze this politically, the guy in charge of the schizophrenic economy no matter whether he's to blame for it or not is going to pay the price for all of these bad news.

VELSHI: All right, hold that thought. Coming up next, we are going to continue this discussion with all these folks. It's like Will, I gave him a piece of chewing tobacco and didn't let him spit it out.

Unemployment benefits are being pulled back amidst a hiring slowdown. That's a problem. What happens when that safety net is gone? I know a lot of you tweet me about this. So let's talk about it.

And later, it would have been 40 years in the making, one of the largest public works projects in American history. I went inside New York's new subway line. I'm going to tell you why no matter where you live, you're paying for a piece of this.

(COMMERCIAL BREAK)

VELSHI: You know, Christine said something really interesting a few moments ago. She said this whole larger macro discussion about unemployment is not so important. The one that's important is how it affects you, what you see around you.

So that's what I want to show you. I want to show you a map of the United States that is color coded into red, green and gray. Those states in red have an unemployment percentage, an unemployment rate that is substantially higher than the national average.

Those states in green have an unemployment rate that is below the national average. Those in gray, keep in mind while they don't look like there's as many of them, they are heavily populated.

Look at everything east of the Mississippi, there's a lot of gray there, which means, you're right about the national average of 8.2 percent. This is interesting.

There's a big chunk of this country in the middle that is actually doing well. But this election, Christine Romans, this election is going to come down to votes that take place in some swing states, places like Ohio, places like Florida, places where unemployment is going to matter.

ROMANS: And that's why you're seeing the Obama administration fine- tune its attack on Mitt Romney's record as a job creator, his record at Bain Capital, his record in Massachusetts.

This started as an attack on Bain Capital and private equity and then moved quickly into what kind of economy he really left in Massachusetts.

They are going to keep hammering on that because they want to appeal to those lunch bucket Democrats in towns and cities in battle ground states who say the factory that closed down the road, people like Mitt Romney who did that.

People like Barack Obama who saved the auto industry. That is the story line at least they are going to try to keep because those battleground states are important this time around.

CAIN: I think this is an absolutely fascinating analysis. First of all, I think Barack Obama and the Democratic machine have a tough pill here. They have a tough job.

That's convincing Americans this economy is headed in the right direction. I think, in fact, that's why they went for the Bain Capital attack because that was an easier one to make. But as that didn't resonate, they're moving to a stewardship as the governor of Massachusetts, they essentially have to attack that stewardship from the left.

Meaning two things, you're attacking health care and his job production record. That's not a strong place for them to attack from unless, as you point out, you can micro target that.

You can say, the national job creation isn't that great. In Ohio, not that bad, I don't know if you can micro target. But that's interesting.

VELSHI: I want to take this somewhere else. Diane, you pointed out in our last conversation that a lot of these jobs are teachers. They are state employees.

As state employment rates improve in those green states that had improved, they lose the ability to offer extended unemployment benefits.

By the end of summer, extended federal unemployment benefits, 99 weeks, 79 weeks in some cases will be gone. So states are scaling back on seasonal benefits.

Checks that might go out to a school bus driver during the summer, for example, 5.4 million Americans officially out of work for more than six months or longer.

This is a doubly complicated issue now. We're going to be pulling back on some employment benefits. That's going to affect demand and employment further.

SWONK: Absolutely. The one issue that isn't clear-cut at all is many people thought once you pull back on that unemployment insurance, all of a sudden these people sitting on the sidelines would jump back into labor force and start working again and take any job at any price at any wage.

What we did see is last month many of those workers dropped out. They ran out of benefits. Nine states actually dropped benefits, lost benefits in the month of April. Many of those people actually, the long-term unemployed fell.

They stopped looking for a job for a month. Now they started looking for a job again, but there are no jobs to be had. That's where the difficulty is, even if they are looking for work they are not getting jobs and not getting paid now.

We already know that from different surveys many of these long-term unemployed have -- most of them have borrowed money from friends, have borrowed money from their families or are living with families, doubling up, putting additional financial stress on their families as well.

So that has collateral damage. The only silver lining in this whole situation is that the weakness in the economy, global economy brought down oil prices. That's a defacto tax cut because prices at the pump are falling.

Right now oil prices are plummeting. That will help to give consumers some more disposable income that they didn't have earlier this year.

VELSHI: As you have pointed out before, the relatively mild winter also meant that we didn't get into higher oil prices even though our oil prices were high they didn't hit people as much as they could have. So here's my question to you.

SWONK: Right. We didn't pay heating bills.

VELSHI: For all the people who are out there saying I'm going to vote for somebody and jobs is going to become a big issue, is there a logical solution to what is looking like the intractable problem of our time of high unemployment and not fast enough job creation?

SWONK: Well, you know, I think Will made a good point. We do agree on this, uncertainty. If we are able, our worse problems today, the economy is going to grow at a subpar pace, do that out of the financial crisis. That's partly a given.

The extent to which that happens is manmade. I'm a little poignant on that because there's not enough women leaders, I believe, that's my own personal view. At the end of the day the problems we have are political in Europe and they're political in the U.S. and until we move forward on those political road maps that uncertainty, additional uncertainty exacerbating the problem of making these decisions when you're on the margin it really matters.

It becomes more than noise, the dissidents overwhelms. We don't want that dissident and more we've kicked our problems down the road, kick the can down the road, the more they've accumulated.

Europe has gotten worse and our fiscal problems in the U.S. We now have the fiscal cliffs of spending cuts that are substantial and retroactive along with tax hikes at the end of this year, beginning of next year that are we need to deal with within the context of long term deficit reduction. Those are very difficult to deal with.

VELSHI: So Will, when you leave, and I say thank you, I want you to go to the greenroom, you're going to see Amy Gutman, the president of the University of Pennsylvania, and her book is called "The Spirit of Compromise." I want you to explain why this uncertainty gets blamed on Democrats by Republicans, because nobody is compromising.

CAIN: I'll say this and I'll take this up with Amy back stage. Before you throw a parade for bipartisanship, I want you to understand that you can have uncertainly as the result of authoritarianship. Just because you have --

VELSHI: You're kidding me -- President Obama --

CAIN: No, I didn't call him that. I said just because you have one person or one party that could theoretically get every policy they wanted. It doesn't mean you'll get certainty.

VELSHI: I got it. That's a good point. Amy Gutman, by the way, the president of the University of Pennsylvania will be coming up a little later to talk about partisanship.

I tweeted you about this, who you think more to blame for partisanship in America, is it the politicians or is it voters who put them there.

Thanks to all of you. Will, always great to talk to you. Diane Swonk, chief economist of Mesirow Financial and Christine Romans, the host of "YOUR BOTTOM LINE," which you watch on Saturdays at 9:30 a.m.

Coming up next, how is this economy really doing? We got so many conflicting indicators. I've spent the week pulling my hair out. Let's figure out it when we come back.

(COMMERCIAL BREAK)

VELSHI: All right, you can be forgiven if you're confused by the recent news on the economy. Some indicators are looking up, others are looking down. As we've been discussing, the most important thing is jobs.

This is all the way from the beginning of the recession. Well, almost the beginning of the recession. This is the end of 2008 all the way through here. We've had 20 straight months of job creation.

But any optimism there has been offset by a severe slowdown in the number of jobs added each month. That's not all. Let's look at how consumers feel. This is a consumer-driven economy.

Now according to Thomson Reuters University of Michigan, they have a report every month called consumer sentiment. That's just one year. It showed that in May, consumer sentiment rose to its highest level since late 2007.

Before the recession when the Dow was at its all-time high due to what it says are more favorable job and wage prospects. That sounds positive. Then a different body, the Conference Board, released its own report that says consumer confidence in May fell to its lowest level in five months because Americans are less optimistic about jobs and business conditions.

Now, that sounds awfully pessimistic to me. That's confusing. I should tell you this report tends to be a much bigger survey than the other one. But why are they going in different directions?

One more thing, let's take a look at housing. The National Association of Realtors said that existing home prices, existing homes are most of the market, used homes if you'd like.

They rose in April by 10.1 percent compared to the previous year. That's a positive trend. It said it showed back-to-back price increases from a year earlier for the first time in two years.

However, that was quickly followed by something called S&P Case- Shiller home price index announcing that home prices in April fell 2.6 percent from a year ago. A negative trend it said showed prices at their lowest since 2002.

Getting confused? So am I. Why this discrepancy? Well, here is one explanation. It's the way the two indexes track sales and prices. The National Association of Realtors track existing homes that sell each month.

The S&P Case-Shiller compares the price that a home sells for compared to what the same home sold for in its previous sale. I don't know which one is right or wrong. Whatever the explanation, it's very, very confusing. Which is it? Are things looking up or are they working down?

Joining me now is Michael Pento. He is the president of Pento Portfolio Strategies. He is a registered investment advisory. His firm is a registered investment advisory. And John Lekas, he is the president and CEO of Leader Capital, which is a fund manager in Portland, Oregon.

Mike, let's start with you. You don't see mixed signals in the economy.

MIKE PENTO, PRESIDENT, PENTO PORTFOLIO STRATEGIES: Well, you know, GDP has been very anemic. Home sales have been very anemic especially on the price level. I tend to put a lot more credence in the Case- Shiller S&P home price index. Look at nonfarm payroll growth.

VELSHI: That the number of jobs created in May.

PENTO: And the most disturbing part of that, Ali, is that we lost, still losing 15,000 goods producing jobs even after the recession began in December 2007. We are still not producing jobs in this country that can sell goods overseas.

VELSHI: You're an investing expert. So in a minute I'm going to get to what you're supposed to do about it. But as far as you're concerned, things are not looking good. John, what's your take?

JOHN LEKAS, CEO, LEADER CAPITAL: You know, I have to tell you, we think things are getting better. Now look, you have to look for the silver lining. Nobody does anything until they have to.

Somebody has to -- I agree with you, the numbers are confusing. The statistical data isn't giving you much direction. Let's talk about what's really important. Let's talk about the bigger picture.

What's going on in Europe is that the confidence in governments, to say the least is waning. To give you an example, governments issued 50 percent less debt in Europe. Corporations, however, have issued 300 percent more debt.

What you're seeing globally is a huge gravitation away from institutions and people investing in governments to seeing them invest in corporations, because it's a safer bet. They are more well managed. They have their house in order. They run on gap accounting.

So what we're seeing is borrowing cost for corporations coming in at all-time levels. You're seeing huge, massive amounts of refinancing. That is going to set the table for large, large profits and cash in corporations. That is what's going to start moving in another direction.

VELSHI: You guys are both very smart. You know your numbers and you completely see this differently. So my confusion going into this is validated. My question is, Mike, let me ask you, my question is, what -- your view, a lot more pessimistic than John's about where it's going. What does my viewer do about this if anything?

PENTO: Well, if you were a client of Pento Strategies, we exited most of our equity positions in May of this year. We own some gold. Mining shares have already priced in I think the metal going to $850 or $900 an ounce.

If you can believe that central bankers across the globe are going to sit on their hands and watch a deflationary depression unfold then my investments are not going to work too well. My gold stocks are going to go down.

How far away is the ECB from another round of money printing? How far away is the Federal Reserve from another round of money printing? That, I think, is going to drive commodity prices higher. VELSHI: If you're John and you've got a much more optimistic view of what's going to go on, John, then your strategy is much more obvious, right? You're long and exposed to equities and you think this world gets a bit better?

LEKAS: Well, I'm a bond fund manager. So look we run a short-term bond fund. We've produced a 4 percent to 5 percent return for the last, you know, five or six years here. We beat the markets handily without the volatility.

So look, in the short run I'm going to agree with the pessimistic view. In the short run, it's going to remain volatile. There's no question about that. I'll agree with that.

So we say stay in short-term bonds. Look, treasures at an all-time low, interest rates probably go up. We've got a duration of one. We're providing 4 percent to 5 percent current yield. I think that's a terrific place to be. It has been for the last five years.

VELSHI: Gentlemen, thanks very much. We'd love to have you back to talk about this more. The one thing we both agree on is this isn't ending any time soon.

All right, coming up next, the very people that helped fund President Obama's first run for the White House are now devoted to funding his Republican rival.

We'll look at the speed with which Wall Street abandoned President Obama and why.

Later, I went 100 feet below Manhattan to find out what goes into the most expensive subway lines of all time.

(COMMERCIAL BREAK)

VELSHI: Polls show that President Obama and Mitt Romney are in a dead heat, but Mitt Romney is winning on Wall Street. According to new data from the Center for Responsive Politics, the Obama's camp has raised $3 million.

That's a pittance compared to $8.5 million that the security and investment industry has contributed to Mitt Romney. Now compare that to four years ago, candidate Obama back then raised $16 million compared to his rival John McCain, $9.2 million.

So what explains this shift? One reason could be that criticism of Wall Street has been a staple of the Obama presidency?

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: Large banks engaged in reckless financial speculation without regard for the consequences. Not everybody has been following the rules. Wall Street is an example of that.

(END VIDEO CLIP) VELSHI: That is what the president said, but what has he actually done? Let's start back in 2008 right before President Obama took office, President Bush signed TARP, the Troubled Asset Relief Program into law in order to stabilize Wall Street and prop up the auto sector.

Taxpayers still owed about $119 billion according to special inspector general who oversees that. In order to get the economy moving again, Congress passed American Recovery and Reinvestment act, the stimulus bill.

President Obama signed it into law in February 2009. One year later, the president signed health care reform into law. No Republicans in either House voted for that bill.

Four months after that, the president signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. One key provision of that law was the Volcker Rule, which was designed to stop banks from making risky trades on their own account.

Dodd/Frank also established the Consumer Financial Protection Bureau. Fast forward to this year, we find the president unveiling a plan to cut the corporate tax rate from 35 percent to 28 percent and to close dozens of loopholes.

Don Peebles is the CEO of the Peoples Corporation and a member of President Obama's National Finance Committee. John Fund is a national affairs columnist for "National Review" magazine.

John, as a conservative, what is the number one reason why Wall Street has not had the ability to shed its tone deafness and say we really were responsible for a lot of this stuff.

Maybe the president was politicking a little bit, but you know, why won't they get behind the fact this is a guy who has actually been relatively friendly to them.

JOHN FUND, NATIONAL AFFAIRS COLUMNIST, "NATIONAL REVIEW": I am because Wall Street shares with Main Street and average Americans the same goals, which are a stable, prosperous, growing economy.

The economic recovery began three years ago this month and how has it been doing? President Obama says you pass my stimulus bill unemployment will not go over 8 percent. That was his administration that said that. It just went up to 8.2.

Economic growth last quarter, 1.9 percent, stock market flat last 15 months, how is that working out for us? I don't care whether it's Main Street or Wall Street, we expect results.

After three and a half years there's only so much you can blame the previous administration. At some point, you've got to own the economy. Guess what? This recovery is the most anemic in modern American history, 8.2 percent unemployment three years in, does anyone think that's working?

VELSHI: Don?

DON PEEBLES, CEO, THE PEEBLES CORPORATION: I'm almost laughing over here. They left us with the biggest mess since the depression.

FUND: Blame game.

PEEBLES: No, it's called accountability not blaming.

FUND: Why don't you accept responsibility? I didn't vote for George Bush.

PEEBLES: When the conservatives stopped wreaking havoc on our country, we were losing 400,000 a month. Now we're gaining on an average 168,000 a month.

Rome wasn't built in a night. We need to exercise some patience. Also, look, the president's policies are working. We're making progress. We've had 26 consecutive months of job growth since he's taken office.

He took office at a time when the country was the weakest since the great depression. He's cut taxes 18 times for small businesses.

FUND: What's the uncertainty in the economy? Much of it has to do with things the president can't have any affect over, right? Just as presidents get more credit when the economy gets better. It's true.

The bottom line is at some point you have to accept some responsibility. At this point, I hear blame for a previous administration, which deserves some blame but the president refused to accept responsibility.

PEEBLES: Look, this administration could do more. Congress could do a hell of a lot more.

FUND: Tell me their failings.

PEEBLES: I think the administration should put more emphasis on job creation. I think it was a distraction.

FUND: Obama care, how is that working out?

VELSHI: It's not in place. Is there a single job that hasn't been created because of what you call Obama care.

PEEBLES: In January 2009 --

VELSHI: John, answer my question. You're a smart guy. Is that one job not created or one American laid off? Please, if you see it out there, tweet me and tell me.

One job lost or created because of what you call Obama care? Just answer that. Do you know anybody in this country of 310 million people who didn't hire anybody because of a pending decision on Obama care? FUND: I know an employer in Louisville, Kentucky, I spoke to the other day who is about to drop health care insurance for all his employees because he doesn't believe Obama care is going to work.

And Obama care creates incentives to drop employer coverage and throw them into the general pool. And they have laid off three people because their health care costs went up 37 percent.

PEEBLES: My health care costs go up 27 percent each year. I don't blame it on Obama care. It has been doing it through Bush's tenure as well. The reality is health care in America is out of whack. He's the first president who's attempted to tackle this issue.

VELSHI: It's been going up for years.

FUND: The increase we got this year is smaller than we've had in years gone by.

PEEBLES: Look, how many people work for you?

FUND: I'm self-employed.

PEEBLES: How many people? Do you have anybody working for you?

FUND: I'm self-employed, a small business.

PEEBLES: I'm small business, too. I started of my company with $600. By the way, I prospered under Ronald Reagan, under George Bush, under Bill Clinton and under Barack Obama our business is now growing this year.

FUND: God bless you.

PEEBLES: The reality is who the president of the United States is has some impact on business and some impact on the economy. But we as business people, we as American citizens have to accept responsibility, too.

The fact of the matter is banks are getting rewarded every day for not making loans. They are not making loans to small businesses who are going to create jobs. Wall Street has conducted itself for decades as though they are a casino in Las Vegas where under the circumstances to -- where you get to play with the House's money.

FUND: You have to bail them out. You just said you have to bail them out.

VELSHI: We have agreement. Gentlemen, we must do this again.

FUND: He now agrees we shouldn't have bailed out Wall Street and the banks but said something different a minute ago.

PEEBLES: No, I didn't. No, I didn't.

VELSHI: We'll have you guys back for this conversation. Thank you to Don Peebles. He's the CEO of the Peebles Corporation and John Fund, national affairs columnist from the "National Review."

Coming up next, Washington is, as you've heard, gridlocked thanks to a hyper partisan environment. My next guest says it's your fault and actually mine. I'll explain next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: The word "compromise" has 10 letters except in Washington where it's a four-letter word. Take a look at this chart from the University of Georgia.

Congress is now more polarized than at any point since the 19th Century, the higher the line the greater the ideological distance between the parties.

By the way, the blue line shows the difference between Democrats and Republicans in the Senate. The red line shows the difference in the House of Representatives. When you see it over here, you can really tell the difference in the last few years how partisan the House has become.

Voters are showing frustration with this gridlock. According to polling from Gallup, Congress's approval rating stands at 17 percent. That is lower than Richard Nixon's approval rating during his impeachment.

Even Congress is frustrated with Congress. In February, moderate Republican Olympia Snowe cited Washington's hyper partisan atmosphere as the reason for her retirement.

(BEGIN VIDEO CLIP)

SENATOR OLYPIA SNOWE (R), MAINE: People are just stunned by debilitating partisanship, overall dysfunction even the most perilous times facing our country we couldn't get together.

(END VIDEO CLIP)

VELSHI: Amy Gutmann is the president of the University of Pennsylvania. She is the co-author of a new book "The Spirit Of Compromise, Why Governing Demands It And Campaigning Undermines It." Welcome to the show. Thank you for being here.

AMY GUTMANN, PRESIDENT, UNIVERSITY OF PENNSYLVANIA: Pleasure.

VELSHI: You heard even on this show there's a lot of partisanship. It permeates what's going and you have pointed out that you think that there are a few reasons of this. One is the cost of campaigns, the need to constantly raise more money. This 24/7 echo chamber that we're part of, what else?

GUTMANN: Relationships have disappeared in Congress. That's part of the campaigning mentality, which is that politicians are campaigning all the time. It's as if every day were Election Day. That means they are not sitting down with each other and doing the work of governing. VELSHI: Right. When you look at Olympia Snowe and you look over the last few years the people who left, one always tends to refer to them as someone who reached across the aisle, who have great relations with other people.

As people whom moderates in both parties looked to see which way they are voting, what has that changed? Why is that absent, those relationships?

GUTMANN: Olympia Snowe could have won by a landslide, but she decided to leave because she was fed up with the fact she couldn't get anything done in Washington.

What's happened is very simple, actually, and very sad, which our politicians are out of Washington more times than they are in there and they don't have the kinds of relationships -- they don't know each other enough to extend the respect of sitting down.

What I like to say is when it comes to compromise, familiarity breeds attempt and we're not having the attempt to compromise anymore.

VELSHI: The issue here, of course, what we've heard at every stage in this economy, the uncertainty, unknown about how politicians deal with it, by the way, this is in Europe as well, is what's crippling businesses and people. They just don't know they will elect this bunch of people who will come to reasonable solutions.

GUTMANN: Yes. Here is the hope. After this election, nothing is going to happen before the election. Everybody agrees on that. That's a sad commentary. We're now in election mania.

After the election, the Bush tax cuts are going to expire, the sequester is going to go into effect. That will be a disaster by everybody's lights.

So the voters are electing people who they are going to want to sit down and compromise and not just kick the can down the road. Here is a striking fact. The majority of Tea Partiers wanted their representatives to compromise in the face of the debt ceiling crisis.

VELSHI: And yet you have people like Grover Norquist who come on this show a fair amount whose basic premises you sign a thing that says no tax increases under any circumstance and there are many congress members beholden to that.

GUTMANN: You have Alan Simpson who says that's crazy. Simpson-Bowles is the kind of big, bold compromise this country needs. The vast majority citizens would rally behind if there were leadership in Congress.

There were three Republicans and three Democrats who voted in favor of it and three and three who voted against it and the president didn't rally behind his own commission's recommendations.

That was, I think, the low point of the uncompromising mindset in this country. I think we'll see a shift after the election. VELSHI: Amy Gutmann pleasure to have you here. Thank you.

GUTMANN: My pleasure.

VELSHI: Amy Gutmann is the president of the University of Pennsylvania and the author of "The Spirit of Compromise."

Coming up next, Facebook stock has flopped in the last two weeks since it opened. Is this your chance to get in on a bargain? I'll tell you on the other side.

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VELSHI: It was the big fear before the Facebook IPO. Retail investors like most of you out there wouldn't be able to get the stock unless you paid a lot more than the $38 initial price. Fear not.

Stock dipped below $27 this week. Matt McCall, by the way, is the founder of Penn Financial Group. Matt, with Facebook stock, around $10 cheaper than the opening, do you recommend the stock to viewers today?

MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: No. I continue to be bearish and negative on the stock at this price. There's a lot of uncertainty going around the stock right now and that keeps people away.

We've seen big money shy away and now a lot of negativity floating around the stock. I truly believe Facebook see the low to mid-20s. At that point, it actually become as decent value and comparable to let's say Apple and Google at that point. So no, continue to sit on your hands. Be patient. You'll get a lower price.

VELSHI: All right, when you say uncertainty. I want to give our viewers a sense of what you're talking about. It's not just a legal mess. There are lawsuits around the whole thing. There are a couple important events ahead that are likely to dictate where this stock goes in the near future.

The first one and this is the most important thing when you buy a stock, it's the earnings. How much that company's going to earn. We don't have an exact date yet, but sometime in July or August Facebook will disclose its revenues, its expenses, its taxes, its profit, every public company does this for everybody to see.

Wall Street has some big expectations forecasting 20 percent growth over the next year. The second thing you have to remember is the end of the 90-day employee wait period called a lockup period.

That expires in August. After which a bunch of employees who may want to get rich off their shares may want to sell shares of Facebook. So all the shares go on the market, what could happen then?

MCCALL: Well, when the shares go on the market, a lot of millionaires that worked for Facebook. Well, they're millionaires on paper, until they actually sell those shares and they're not really millionaires in my mind.

So a lot of the people who have been sitting back on these shares for years when Facebook was nothing. Now they've become a millionaire and want to take the money and do something else with it. So I think we're going to see a lot of employees out there selling shares as soon as they're able to do that.

Plus the fact they've seen paper value fall from $38 down to the mid- 20s, their value, they maybe millionaires now worth only $700,000. They see their wealth is kind of going by the wayside.

VELSHI: They might panic and get out?

MCCALL: And sell, exactly.

VELSHI: We'll have earnings and we'll have this, which will be about two months from now, basically. At some point at the end of August, we're having this conversation and Facebook is around low 20s or mid- 20s or high 30s. At that point, would you be able to make a call to say, now it's likely a good or bad buy?

MCCALL: Yes. I think I'd be in much better position to make a call at that point. Those employees that want to sell today, they have to wait. They'll be out. Also, once we see earnings. Keep in mind, earnings from 2011 and 2012 dropped. We're seeing acceleration in earnings growth. That's not a good sign for companies growing in the opposite direction. That should be growing between 50 percent and 60 percent.

VELSHI: That's beauty of a public company. We'll be able to hear it, people ask questions and we'll get answers. We'll continue to have this conversation because I know a lot of you are interested about whether or not you should buy Facebook. Matt, good to see you as always. Thank you.

Coming up next, more than a billion dollar as stock and that's just for starters. I'm going to take you inside one of the most expensive subways of our time. One you're footing a bit of the bill for even if you live nowhere near it. That's on YOUR MONEY coming up.

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VELSHI: It is one of the biggest public works project in American history at a cost of $4.5 billion and that's just for the first mile and a half.

I'm talking about New York Second Avenue Subway line. To complete line, which would run nearly the length of Manhattan would cost between $22 billion and $24 billion. What is behind the enormous tab?

I went 10 stories beneath Manhattan surface to get to the bottom line.

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VELSHI (voice-over): Backhoe excavators that can cost $700,000 apiece. Man lifts that sell for up to half a million bucks. See that hydraulic drill jumbo? They can go for 800 grand a pop.

These are the machines of modern day civil engineering. New York City has them working full speed ahead on its new Second Avenue subway line.

(on camera): Subways are expensive. Just to give awe sense of perspective. Way back when the first subway in Manhattan was 21 miles and it cost $35 million.

This one, about a mile and a half for about $4.5 billion that's more than $1 billion a stop.

(voice-over): And that's just phase one. We went digging 10 stories below Manhattan to find out what goes into the bottom line on a new subway line.

DR. MICHAEL HORODNICEANU, PRESIDENT, MTA CAPITAL CONSTRUCTION: It's a bargain. It's a bargain $800,000 a pop.

VELSHI: The most massive piece of equipment used the tunnel boring machine. The last time New York built a subway and used cut and cover method. Digging from street level, boring is much more efficient and disrupts life above ground a lot less.

TOM PEYTON, PARSONS BRINCKERHOFF: The one that did this is 22 foot in diameter a little over two stories tall. It can go on average, about 50-foot a day.

VELSHI: One of these things costs $12 million and requires 20 people to operate it. At 50 feet a day, boring two mile and a half tunnels takes a long time.

HORODNICEANU: This is a linear project. You must do the tunnels before you do this.

VELSHI: And highly specialized laborers are the ones doing that. Sandhogs or urban miners work alongside operating engineers to drive and maintain the machinery.

PEYTON: On average we pay a guy about $1,000 a day, and that's day salary plus benefits.

VELSHI: It's putting people to work in a tough economy. The metropolitan transit authority expects phase one of the subway, that's 3.5 stops and a new tunnel at a fourth stop to create 130,000 jobs with an economic impact of almost $18 billion over the nine years of construction.

(on camera): New Yorkers keep asking, why does it take so long?

HORODNICEANU: It is normal.

VELSHI: This is what it takes?

HORODNICEANU: It is what it takes.

VELSHI (voice-over): All the while, Americans are footing the bill no matter where they live.

HORODNICEANU: Second Avenue right now $1.3 billion comes from the federal government and the rest of $3.15 comes from New York.

VELSHI: The portion from New York comes largely from New York state bonds and MTA bonds.

HORODNICEANU: And in 2016 when we swipe our card and ride their first train it's going to feel real good.

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VELSHI: Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday 1 p.m. Eastern and Sunday at 3 p.m. You could stay connected to us 24/7 on Twitter. My handle is @alivelshi. The show handle @cnnyourmoney.