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YOUR BOTTOM LINE
Taxes Increasing For The Middle Class; Is Maternity Leave Decreasing?; Is The Housing Market Making a Turnaround?
Aired July 28, 2012 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: The fiscal cliff threatens the economy, your wallet, and even your job. Unless Washington wakes up, you are just 156 days from going over it.
Good morning everyone, I am Christine Romans.
Unless Congress acts, your taxes will go up on January 1st. The white House says 114 million families will see taxes rise by an average of $1600 in 2013, at the same time, massive cuts to every government agency. Last year, the people you paid to represent you in Washington, they failed to agree on a deficit reduction plan and that triggered automatic spending cuts known as sequestration. They happen on January 2nd. It is $1 trillion in cuts over nine years split evenly between defense and non-defense programs.
The Bipartisan Policy Center estimates sequestration of defense will mean cuts of 15 percent next year. Every non-defense agency faces a 12 percent cut and that means job losses from doctors, teachers, border patrol agents and even government contractors. Anywhere from 1 million to 3 million jobs will be lost. California, Virginia, Texas, Washington D.C. obviously, Maryland, would each lose more than 100,000 jobs.
The bottom line here, this is a manifestation of your elected officials not doing their jobs. They don't see it that way.
(BEGIN VIDEO CLIP)
SEN. PATTY MURRAY: Then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle class families under the bus.
SEN. KELLY AVOTTE: When we don't take on the issues like entitlement reform, tax reform, the things that need to be done, it doesn't get any better. It only gets worse.
(END VIDEO CLIP)
ROMANS: Mark hill is an associate professor at Clemson University and Steven Moore an editorial writer at "The Wall Street Journal."
Gentlemen, thanks for joining us. Big issue, Mark, doesn't it scream for compromise? ASSOC. PROF. MARK HILL, CLEMSON UNIVERSITY: It absolutely screams for compromise. I would love to see tax hikes and revenue increases, that to me is the best way to go, but there I snot way you are going to get anything through unless you also compromise on the other end and have some kind of spending reduction. Not in the major stuff, not in the most crucial stuff, but we have to make cuts and take losses
ROMANS: Do you think the Republicans, Steven Moore, are going to be able to agree to something, anything that will allow them to keep their pledges not to raise taxes? That's going to be the political problem for Republicans.
STEVEN MOORE, "THE WALL STREET JOURNAL": Christine, by the way, it is very appropriate you're dressed in red for this discussion. This is all about red ink, right?
But I think the Republicans when I talk to them and interviewed the Ways and Means Committee chairman who writes the tax laws in the House and he said, look, we're willing to raise revenues, we just want to do it in a way that fixes the tax system in a broad based way.
And one just slight correction on what you saw earlier, Christine, you are right, all of these government agencies will take pretty deep cuts under the sequester but remember, one of the problems with sequester is what we all know, the big problem with the budget is these entitlement programs and the Welfare program, Social Security, Medicare--
ROMANS: They're left out.
MOORE: They don't get a dime of cuts.
ROMANS: And they are left out.
HILL: And appropriately so, Stephen. Again, we have to think about the social safety net. We have to think about the long-term consequences of cutting programs that is protecting the most vulnerable citizens. We pay now, we pay later.
ROMANS: Also, Mark, we have to think about the long-term consequences of not living within our means that is one other big problem we have. If you don't go over the fiscal cliff you still have to have a Congress that's not very good as compromising figuring out to have deficit reduction and debt control.
HILL: Absolutely, and you would think something like that would create such anxiety in people they would actually come to a compromise.
ROMANS: They can't.
HILL: I know.
HILL: Because everyone is digging their heels in and know if they wait long enough they will probably win. I think that's what the Republican strategy has been.
MOORE: The other issue here is this delay. At some point they probably will reach a compromise, but the question is when is that going to happen, when I talk to people on the Hill they say it is going to happen after the election which is sometime late November or December. What that means, Christine, think about it. This is a personal finance show. It means people aren't going to know what their tax bill will be next year, it means investors and businesses won't know what the tax code is going to look like. That's just not a very good way to run a country.
ROMANS: Well, there are laws for how much time you have to give people- to give them notice you are going to lay them off and those laws mean that right around election time those companies will have to be telling people whether they will be laying them off and how many of them.
Stephen, I want to talk about defense in particular. It is taking a disproportionate amount of cuts. I think it is 20 percent of the budget and taking half of these cuts. But the U.S. Military also spends as much on its military as the next 14 countries combined. We have a chart which shows it. So tell me in this era of new fiscal responsibility why we can afford this military?
MOORE: It is a good question. First of all, I do think that the military, the defense budget can take cuts just like I think every agency is going to have to and by the way, we'll have to those Welfare and Medicare and Medicaid programs or we are never going to make any progress. But even the President's own national security advisors and even the defense secretary says this is dangerous, it could be catastrophic for national security that worries me, so yeah, we can make cuts but to make such a disproportionate amount of cuts that have to come on the defense budget, I don't think it is very wise.
HILL: I think most of it has to do with political calculus though. It is never politically wise or popular to say you are cutting defense spending, even when there is certainly waste everywhere, including-
MOORE: oh, there is, yes. There is a lot of waste, but what Leon Penata (sp) is saying is, Look, we can get rid of a lot of the waste, but we are going to have to cut some vital missions, cut aid for the troops and things like that. It is still a dangerous world that is all I am saying.
ROMANS: And the point is, this is supposed to be done with thought not because they couldn't get their job done last year and this is the-
MOORE: It is so frustrating.
ROMANS: Guys, don't go anywhere because coming up, both presidential candidates say they are the best choice for the middle class, but how many Americans are really in the middle class? The number might surprise you. Next on your bottom line.
(COMMERCIAL BREAK) ROMANS: Are you in the middle class? Chances are you think you are. Ninety five percent of Americans consider themselves middle class that is according to a "Washington Post"/ABC poll. By definition, not everyone can be in the middle, but most people clearly identify with middle class values. Let's take a look at the numbers. What does it take to be middle class in America?
The White House Chief Economist defines middle class as Households earning 25,000 to $75,000 a year. The President calls families earning up to $250,000 middle class. The median Household income, right in the middle, $49,455. But feeling middle class really depends on where you live. A family with a median income right near in Manhattan, Kansas, would need $115,000 to maintain that same standard in Manhattan, New York. In Ann Arbor, Michigan, they need to have $52,000, almost $53,000 and in Seattle they need to earn more than $61,000 a year to feel the middle, middle class.
But if everyone feels like they're in the middle, it is no surprise President Obama has built his campaign around defending the middle class. But defending it from whom? Republican Senator Jon Kyl says President Obama should stop talking about class because it turns middle income Americans against the wealthy. The wealthy who he calls the Michael Jordan's of the middle class.
(BEGIN VIDEO CLIP)
SEN. JON KYL: I don't think there is anything called middle class values. That is different from the values of other people in this country. Tell me what's different about the values of someone who the President identifies as middle class?
(END VIDEO CLIP)
ROMANS: Now, Mark, Senator Kyl says Michael Jordan's success was good for the whole team. Are the wealthy just the most successful of the middle class or is there something different about their values.
HILL: Their values aren't different. Let's use the P word, poor people. Poor people also have good value. We're scared to say poor in this election cycle in the last twenty years, we hate the word poor. Everyone has good values. The rich aren't doing it any better than anyone else. They have had a set of advantages and also work hard and have had a set of experiences we all want to replicate. The problem is whenever you trim taxes just for the wealthy whenever you create taxables just for the wealthy, they will continue to look like Michael Jordan where the middle class won't.
ROMANS: I heard conservatives recently say this President and his policies want to give people, all people, and a middle class life without necessarily having them earn it, expanding the safety net. Do you buy that?
HILL: I don't think it is about people not earning it. People earn it every day. They work hard for less money, taxes are going up, insurance rates are going up and all the challenges are building up and everyone works hard and everyone needs it. What we're trying to do right now is create a space for people to work hard and have it rewarded. That's all.
ROMANS: Stephen Moore, depending who you talk to, wealthy people are either the Michael Jordan's of the economy or have a bad image problem, maybe both.
MOORE: I would say the only people you can legally discriminate against in this country anymore is rich people. But you know, I love that statistic that 95 percent of Americans think they're in the middle class. I think Donald Trump thinks he is a middle class guy these days.
I disagree a little bit with what you guys were saying earlier. I think most people who are rich get there the old-fashioned way. They do work really hard. They take risks. They do all the kinds of things we want people to do. They work long hours. They put their sweat equity in their businesses and it goes back to a little bit about what Barack Obama said that you didn't build that business. These are people who have done all the right things.
HILL: What about inheriting stuff?
MOORE: You know what, there was a great book out ten years ago or something like that about the millionaire next door and what it found was that the vast majority of people with million dollar assets did not inherit their wealth. They made it the old-fashioned way and worked for it. Meanwhile, and I think another big issue that is brewing with the middle class is the fact that we really have expanded the welfare states so dramatically over the last few years.
ROMANS: So you guys buy this idea that the middle class is not as big as it thinks it is and we have social programs that allow people to feel middle class even though they aren't.
MOORE: I think the welfare state is out of control when you have 45 million people on food stamps, when you have the President trying to gut the work for welfare requirement, when you have 99 weeks of unemployment. (INAUDIBLE) That's the way to stimulate the economy, by giving out more welfare benefits.
HILL: When you say Welfare, I am assuming Welfare for the poor and the working poor. The reality is that we have a Welfare state that benefitted corporate America forever.
Moore: I agree with that.
HILL: We haven't had a Welfare state (INAUDIBLE) but somehow Welfare talk always ends up being about poor people.
MOORE: I am for getting rid of all of those unearned benefits. I think you are right, we should get rid of the corporate welfare, too.
HILL: I don't mean to interrupt but you said something really important. You said unearned benefits. My point is if people work every day in a democracy and a capitalist democracy and the month is lasting longer than the money and they can't afford education, housing and health care, it isn't unearned. We need to support them because it supports all of us.
MOORE: I think this is what is causing a backlash against the middle class. People who are working, a lot of people watching the show work 40, 50, 60 hours a week to feed their family and make ends meet and getting angry there are so many Americans that aren't working and that aren't doing their part and that they're getting these benefits.
ROMANS: I thought we found some middle ground and then you both just separated, back to your corners. Thanks guys. You know, middle class values guys, I feel most of the country has middle class values, but boy, it is harder and harder to stay in there.
Coming up, the worst is over for the housing market, or is it? If you were waiting for the bottom to buy, maybe you missed your chance.
ROMANS: The housing market has hit bottom. That is the bold call from real estate website Zillow, making that call this week. Zillow found home values are up for the first time in five years after losing a quarter of their value. The first little signs of bottoming right there. I want to take a look at where they are calling the bottom. Anything green on this map is where they said the bottom has already been hit.
Look here, California, look at Arizona, big, big gains for Phoenix, near Colorado, look at some of these metropolitan areas, and down here in Florida and up the east coast.
But take a look at the red, those are the areas that Zillow says there is not a bottom now and there won't be a bottom in the next twelve months. They say all real estate like politics is local, you can see it is different depending where you live.
Robert Shiller is professor of economics at Yale and co-founder of the S&P home price index which saw its first uptick in seven months in April. Bob, have we finally hit the bottom? I know bottom can be a big long dangerous place to be?
PROF. ROBERT SHILLER, YALE UNIVERSITY: Well, Christine, people have been asking me that for some years now and there has always been a feeling that maybe we are at a bottom. But this looks a little bit better. Still, the Zillow report that you referred to made it sound more dramatic news than we already have, they talk about a u-shaped recovery in many cities. U-shape suggests to me like we're going all the way back up. I don't think so.
ROMANS: You even worry about more declines and think there could be more home price declines in some places.
SHILLER: You have to remember that we had some big price increases in some cities between 2009 and 2010. San Francisco went up 20 percent, and then it fell again. So, these things -- also, we're entering the summer season, which is normally strong. So, it's a little bit ambiguous. I think Zillow might be right, we might be heading for substantial, but not as big as the last time, price increases. On the other hand, it might go down. And nobody knows. That's the thing to recognize, there's no expert who knows the answer.
ROMANS: And you're absolutely right. A lot of this is driven by what people are doing in their lives, and I feel like there are two housing markets. There's one housing market that's opportunity for people with jobs and savings, there's another housing market where people who don't have jobs and/or savings and it is still the same devastation.
SHILLER: One thing we are seeing, since this crisis began is that [people are moving more toward renting, and that might be a new trend, and if that's a new trend, that speaks poorly for the home prices in the suburbs, I think, or the detached single-family home. And a lot of the new construction lately has been on multi-families. There's a sense now that we're becoming more of a renting nation. So, it's positive for the rental district downtown, negative for the suburbs.
ROMANS: Negative for the suburbs. We need a real jobs recovery to come with a real housing recovery, too. You need those two things, I think, really together. The jobs picture still isn't that great. Bob Shiller, really nice to see you. Thanks for coming by. Have a great weekend.
SHILLER: My pleasure, Christine.
ROMANS: Yahoo!'s new CEO has shattered the glass ceiling, but some women worry she's also shattering their work-life balance. Why Marissa Mayer's climb to the top may not be such a great day for working women in America.
ROMANS: Marissa Meyer is really smart, really rich, and has one of the toughest jobs in corporate America -- turning around Yahoo! But her ride to the corporate suite has been overshadowed by one thing. She is six months pregnant, and plans to take just a few weeks of maternity leave while working throughout.
ROMANS: At this yoga class for pregnant women, the conversations turn from prenatal to post natal now that new Yahoo! CEO Marissa Meyer says she will only take a few weeks maternity leave.
There has been a big backlash, women are saying wait, is this what we got into, to have it all, if you want to be at the very top your family has to sacrifice?
DEB FLESHENBERG, YOGA INSTRUCTOR: I think we are fortunate because what is the point in having a child if you are only going to see them for two weeks and then send them off to a nanny?
ROMANS: Yoga studio owner Deb Flashenberg says, she regrets going back to work so soon after her son was born last year.
FLASHENBERG: I wish I had had that time.
ROMANS: You regret it?
FLASHENBERG: I do, I wish I was a little bit more separate.
ROMANS: A concern, will Meyers' decision derail gains made by working mothers?
Is she the new role model or is she ruining it for the rest of us who want a little bit more time and flexibility?
JESSICA WHITNEY, STUDENT: I hope she isn't the role model for all of us.
ROMANS: But she has her supporters. Joan Walsh from Salon.com wrote, Not everyone has to approach the birth of a child as a life changing disruption. Another (INAUDIBLE) Facebook's number two, Sheryl Sandberg said she believes in flexibility.
SHERYL SANDBERG, FACEBOOK COO: I want to have (INAUDIBLE) at five thirty so I am home for dinner with my kids at six.
RAMOS: The U.S. requires many companies to provide twelve weeks of unpaid leave for working mothers. Compare that to some other countries. Germany affords fourteen weeks. Canada fifty weeks. Sweden, sixteen months, and that is paid maternity leave.
UNIDENTIFIED FEMALE: It is like we are with countries like Saudi Arabia. It is really bad.
ROMANS: With sixteen percent of U.S. companies offering paid maternity leave, many women, unlike Meyer return to work sooner than they may want.
WHITNEY: she is an exceptional woman with an unbelievable opportunity and resources at her disposal, that is not the reality of most working women who are working class/middle class, especially in this economy.
ROMANS: Can you have it all?
WHITNEY: you can have it all but you can't have it perfect.
ROMANS: We wanted to know how Meyer feels about being the most talked about pregnant woman in America, a Yahoo! spokesperson said she will have no comment because she is focusing inward on the company,.
Here with me author and journalist Gail Lemmon. Gail, why are women so obsessed with how long Marissa Meyer is going to be out for maternity leave?
GAYLE LEMMON, AUTHOR: People are frightened this will be the new normal for maternity leave and I think she is not trying to create that. My sense is, just from talking to people at Yahoo! even, is that what she is trying to do is be a leader who is taking over a public company at a really difficult time. I think we want more women like that. We spend so much time talking about how few women there are at the top. Her is someone who is trying to make it work in a very personal way and we have a really public discussion because everyone is uncomfortable with the range of choices.
ROMANS: And I think some are saying at a time when they are trying to have more choices and trying to have a corporate structure that recognizes women can be at the top so we should be a little more intone with what women need, and then you have someone who arrives at the top, some women think just like a man, she will have a child and it do nest change her work behavior.
LEMMON: Well look, she is taking a couple of weeks, she is trying to figure out-but no one knows how it is going to work, including her. The baby is not here. But the point is that she is trying to make leadership work alongside a really tumultuous time in a company she is taking over and a really personal marking point.
ROMANS: Is this an upper/middle class conversation, is this an elite conversation because most women are taking two week maternity leave because they have to, they have to go back to a work place that doesn't have any protections at all, they are working an hourly job. Maybe this can be used to focus attention on that.
LEMMON: That is what I think is so important, she is not making a public policy statement. The public policy discussion we should be having is what you said in the piece, sixteen percent of companies offer paid maternity leave and forty seven percent of the workforce is female. Those numbers don't square.
So there is this pregnancy penalty and a lot of people should be talking about the single moms who are working as waitresses, who, if they don't work, there is no rent being paid and we don't talk about that. I think if we use this conversation as a jumping off point for that, it would be terrific.
ROMANS: I am so surprised how the conversations keeps going. I thought after a week it would wind up and people are still talking. Gayle, really nice to see you thank you for your perspective.
So does Marissa Meyer's decision to take a two week maternity leave make her a role model for other women, or do you think she is ruining work/life balance? I want to hear what you think. Find us on Facebook and Twitter, our handle is CNN/Bottomline. My handle is Christine Romans.
Back now to "CNN SATURDAY" for the very latest news headlines, have a great weekend.