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YOUR BOTTOM LINE
Americans Need Jobs, Not Sound Bites; Is Overregulation Preventing Businesses From Hiring?; Congressional Gridlock Stalling America's Recovery
Aired August 18, 2012 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: President Obama attacks success and, therefore, under President Obama we have less success.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We don't need someone who's a pioneer in offshoring or outsourcing.
CHRISTINE ROMANS, HOST (voice-over): Americans don't need sound bites, they need jobs. But what if I told you neither President Obama nor Governor Romney can create a single extra job quickly?
The economy is adding jobs but not enough. Nearly 13 million Americans are still looking for work, and many frustrated Americans have simply given up, with those either employed or actively looking hitting a 30- year low.
You are demanding answers but your politicians are too busy yelling at each other to hear you.
(END VIDEO CLIP)
ROMANS: Good morning, everyone, I'm Christine Romans.
Politicians create sound bites. These people create jobs. Meet four people with the power to hire. They employ anywhere from nine to 300 workers each: Barry Sloane is the chairman and CEO of Newtek, a small business service company. Rupila Sethi is the founder of Aerial Design and Build, a New York City contractor. Jeffrey Scheininger is president of Flexline. That's a manufacturer. And Don Peebles is chairman and CEO of Peebles Corporation, a real estate developer.
OK. Raise your hand if you've created a job any time, let's say, in the last year? There you go. OK. So people who are actually creating jobs. How? Why? Why did you have to create a job?
BARRY SLOANE, CHAIRMAN AND CEO, NEWTEK: As we provide funds to small businesses, they create jobs. We've also increased our workforce by about 12 percent over the last year.
ROMANS: 12 percent over the last year? So that would sort of defy what we're seeing more broadly in the economy, really.
You've been hiring people, I know, because you're actually -- you're getting contracts. Your margins are tight.
RUPILA SETHI, FOUNDER, AERIAL DESIGN AND BUILD: Margins are tight.
ROMANS: But you hire people, you say, before you actually get the business because you're anticipating demand.
SETHI: Absolutely. We've tripled our workforce over the last one year.
ROMANS: Tripled your workforce?
SETHI: Tripled our workforce. (Inaudible) we've hired one person every two months. And I think we need to hire an extra employee.
ROMANS: You are very careful to watch costs, aren't you?
SETHI: Yes, we are.
ROMNEY: Customers are penny pinching.
SETHI: Absolutely. You know, in the past we would see two contractors bidding on one project. But now you have sometimes four to five contractors bidding on one project. And they typically go for the lowest bidder.
ROMANS: And Jeff, you're already seeing -- you're a manufacturer, you're already seeing Europe and -- or Europe and China slowing on your business for sure. And you can feel it.
JEFFREY SCHEININGER, PRESIDENT, FLEXLINE: Correct, correct. It started about six to eight weeks ago. And we can certainly sense that there's been a change in our economic underpinnings.
ROMANS: So what do you do differently? How do you watch the global economy and worry about your own business?
SCHEININGER: Well, you know, it's real easy to tell when your orders go down. We're -- as a manufacturer, we're primarily driven exclusively by demand. We do hiring based -- you know, if it's manufacturing based, it's purely demand driven. If demand goes down, there's no hiring.
ROMANS: And I know that you, Don, real estate, a lot of people have been saying has been bottoming, commercial real estate and the housing market in general. Do you see a bottom?
DON PEEBLES, CHAIRMAN AND CEO, PEEBLES CORPORATION: Yes, I do. I think the housing market and throughout the country is pretty much bottomed out. I think -- and we're seeing tremendous recovery, say, in New York City, in all sectors, especially the super, super high end. You know, we have apartments now in New York City routinely now selling for over $10,000 a square foot, which is an absurd amount of money.
Also, what we've seen in our businesses is hospitality is growing. We're seeing occupancy going up higher in our hotels, customers spending more money while they're there on food and beverage and other activities in the hotel. And we also are looking at much more deal flow in our major markets that we operate in, but also cities like Detroit. And so we're hiring people now to look at more of these deals, because we now belief that these deals are going to lead to new development and new construction, which I think will help pull the economy up a bit more, to have new construction activity start taking place.
And we're seeing that in markets that we wouldn't have thought of before, again, such as a Detroit, a Washington, D.C., and now Miami. We're looking at new construction in Miami, which, three years ago, was just, you know, basically a cemetery.
ROMNEY: All right. And do politicians create jobs?
Or, Jeff, do people who run businesses create jobs?
SCHEININGER: The difference between my hiring a welder based on my demand and the economic impact of my hiring a welder or a setup man (ph), versus the local town hiring a teacher, is phenomenal, because not just the multiplier effect, but the creation of wealth, the creation of additional revenue, versus the consumption of it.
ROMANS: So you're saying the economic benefit of you hiring a welder is bigger than the economic benefit of a new teacher job being created?
ROMANS: I think that teachers would argue with you about that.
SCHEININGER: Teachers should argue with me about it. If you're unhappy and uncomfortable with teacher, then say bureaucrat. If you're unhappy with that, say, you know, you pick, but the bottom line is, how many people must support that one government hire, as opposed to growing the economic pie?
PEEBLES: Well, I think what you're saying is that it's growing organically, that basically it's economic circumstances that dictate you creating a job as opposed to -- there could be stagnant economic activity and the government can create a job.
I don't think politicians create jobs at all. I'm a big believer that the government can create an environment for us to do business. And the best way they can create an environment is just give us some basic regulations, be consistent about the regulations, so what the rules of the game are, and get out of our way and let us do business.
ROMANS: And can someone here point to me, any of you, can you point to me a tax or a regulation that has prevented you from hiring a worker?
PEEBLES: Yes. Actually, right now, we're looking at a deal right now, and the biggest stumbling block is that we have -- it's a major site to develop. The biggest stumbling block is they want us to close before the end of the year. We need to close the first of next year. If we buy this project, there will be a couple hundred new jobs created as a result of this project. ROMANS: And the government wants you to close by the end of the year?
PEEBLES: Of course. Well, however, the reason -- no, not the government, it's the seller of the property. And the reason the seller wants us to close is they're convinced capital gains are going to go up next year.
ROMANS: I see.
PEEBLES: And so, they feel that they're going to -- their taxes are going to go up 10 points. So instead of 15 percent, they see capital gains being 25 percent or worse.
So, they -- that uncertainty has made it a deal-breaker. And they've taken the position that they will keep the property themselves and develop it themselves, as opposed to selling it to us. And they would develop it into a use that will create very few jobs, because it will be a residential rental building as opposed to a hotel.
ROMANS: So do you all agree that there are taxes and regulations that prevent people from hiring?
SCHEININGER: Every single day. I'm informed of another one. Whether it's the local sewer authority promulgating regulations for wastewater that exceeds the local drinking water standard or it's the uncertainty created around taxes.
You can't invest in a project or in a piece of equipment that has a three- and five-year economic life if you don't know what the taxes are.
ROMANS: More with my panel of job creators coming up next. What's one thing Washington can do to improve conditions for your company? You say do nothing?
SCHEININGER: Fix the tax code in terms of letting us know what it's supposed to be over the next few years and then take a breath.
ROMANS: I'm back with four people who don't talk about creating jobs. They are people actually doing the hiring.
Let's talk about -- we're talking about regulation. ObamaCare, as the Republicans call it, even the White House sometimes calls it ObamaCare, by the way, but is the Affordable Care Act.
Is health care reform preventing anyone from hiring right now?
SLOANE: Yes, there's no question. And there's nothing wrong with ObamaCare, just like there's nothing wrong with the Bush tax cuts. It's the president's key feature in his legislation.
So with respect to the patient protection Affordable Health Care Act, it's really concerning to a lot of small businesses. There are businesses that are right at the break point of 50 employees. They don't want to go over it for fear that they're going to have additional compliance.
ROMANS: So, they're holding back on growing because they don't want to go -- they don't want to trigger -- after 50 employees, you have to provide health insurance.
SLOANE: That's correct.
PEEBLES: But, look, I think we're a great country, a nation of individuals, and also a nation that is innovative. And so, we should spend some of our -- a significant amount of resources on preserving human life and improving the quality of human life.
And as a business person, from day one since I started my company, I provide health care to our employees because it's impossible for me to look any of my employees in the eye and if they have a sick child or a sick parent or a sick spouse, and let them suffer.
So either we're going to pay for it as a company or we're going to provide a system that allows them to have health care. So as businesses, our role here is not just to make money. Our role here is to build businesses and help build this nation and make it an even greater nation. And that means taking care of (inaudible).
SETHI: And we have nine employees and we provide health care.
ROMANS: You do?
SETHI: We don't have to but we do because, you know, it's the employees that help our business grow, you know, they're out in the field.
ROMNEY: Is it employee retention? I hear so much about the skills gap, people still looking for just the right level -- the right worker for the right job.
Does health care help you retain that worker?
SETHI: I think so. I think they see they're getting benefits by working with us, so --
ROMANS: Jeff, I have a feeling that you are just not really a fan of this legislation.
SCHEININGER: Well, you know, I am a fan of health insurance. I pay for my employees 100 percent. I pay for their families 100 percent, no contribution.
ROMANS: Do you have any job openings at the moment?
SCHEININGER: I do. ROMANS: Because I'm --
SCHEININGER: How are your skills?
ROMANS: Well, I'm afraid I probably wouldn't be able to help you out much in the metal tube fabrication.
SCHEININGER: But I do believe that and I also believe that health care should be a right.
That having been said, I can tell you that for the vast majority of very small businesses that don't provide health insurance, they -- the mandates will be difficult for them.
I can also assure you that the cost control mechanisms built into the Affordable Health Care Act are such that your employees will be spending a great deal more time getting health care-related services.
The way the bureaucracy will lower costs is by erecting arbitrary barriers to care. So your employees will be out of the office a lot longer. And that is going to be a huge productivity drain.
PEEBLES: Solving a problem doesn't happen overnight. We obviously can all admit that health care is a problem in this country. It takes too much money. And too few people are covered. So we need to solve that problem. So somebody has to do something.
So what I think the president did is a good start. Is it perfect? No. Does it need work? Yes. It's a work in progress.
And what we should be doing, and our politicians should be doing, saying, OK, this is a given. We're doing this. And we're doing this, so let's make it better. Let's make it work better. How do we reform it and refine it?
ROMANS: (Inaudible) the White House before on financial matters. And have you talked to -- has anybody -- has there been a lot of outreach to business, do you think, about how to make this work for business in America?
PEEBLES: No. I think that they're probably -- there was one of the pitfalls, one of the shortcomings of this legislation, is I think that they could have involved more businesses.
But I understand the president's goal, which was to get something done and get it implemented. And if he had continued to have a broad dialogue with a lot of constituencies, it would never get done and we'd still be talking about it, as we have had since Hillary Clinton started working on it a couple decades ago.
So I think that the White House did the right thing by getting something going, but I think it needs refinement. And I would like to see them more open and receptive to refinement.
UNIDENTIFIED MALE: I'm sorry.
UNIDENTIFIED MALE: I'm sorry, (Inaudible).
SCHEININGER: I'm afraid the bill, as it stands, is a monster that will, in fact, consume enormous amounts of capital without delivering any health benefits. Do you know that the bill includes billions of dollars for the Health and Human Services secretary to invest in emerging health care technologies?
SCHEININGER: That can't end well.
ROMANS: There's a lot of things that are in this bill, but this bill is the law of the land. The question that I'm asking is, has anyone here not hired anyone because they're afraid of health care reform? And I don't think any of you have not hired someone because of this.
SLOANE: But we're an anomaly. And in my 100,000-business customer portfolio, we're going to lose a lot of businesses. There's restaurants, there's doctors that are leaving the profession because now the government is going to decide what care you get, what price it is and what the rules are.
And small businesses are not going to be able to afford it. So, it's a choice. I choose to pay my employees' health care because I want the best employees. But if there's a smaller employee and they can't afford it, that's their choice. It's a free market.
ROMANS: This is a very great, great conversation. I appreciate it from all of you. Thank you so much.
SETHI: Thank you.
ROMANS: The stalemate in Washington is hurting the recovery. America's infrastructure, schools and health systems badly need an overhaul but your elected officials don't seem interested in dealing with our long- term problems. Coming up, I'll talk to a financial crisis expert who has an unusual solution.
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ROMANS (voice-over): Plus, five years after the credit crunch began, the middle class is still struggling.
UNIDENTIFIED MALE: There's two things you're not supposed to talk about, is religion and politics.
ROMANS: So how often do you break the rules?
UNIDENTIFIED MALE: About every day.
ROMANS (voice-over): We'll break the rules and see how America looks from a diner in Iowa.
ROMANS: Five years after the credit crunch began, the middle class is still struggling. The recession wiped out two decades' worth of accumulated wealth. Americans who invested in their homes watched as a piece of the American dream lost value for them.
Home values, well, they have started to inch back up again, but many experts expect a slow recovery.
The economy is adding jobs, but not enough. Nearly 13 million Americans are still out of work. And when Americans lose their jobs, they don't have enough saved to get by.
According to the latest numbers from bankrate.com, more than one-fifth of Americans don't have enough savings to cover three months of expenses. And 28 percent say they have no emergency savings at all.
Americans lucky enough to have jobs, well, they aren't seeing their paychecks grow. The middle class will decide this presidential election. And the latest look at our economy shows that 41 percent of you think the economy is stable; 19 percent of you say it's starting to recover. But 39 percent of you say the economy is getting worse.
Polls aside, I traveled to the heartland to find out what America looks like from a diner in my home state of Iowa.
(BEGIN VIDEO CLIP)
ROMANS: Do you think the middle class is growing today? Do you think the middle class is in an OK position?
MARVIN KANE, CONCRETE WORKER: I think they're doing better. But, you know, three years ago, we were a lot busier earlier in the year compared to what we are right now.
ROMANS: What does it mean to be middle class in the Midwest, do you think?
KANE: Probably $50,000 to $150,000 a year.
ROMANS: Having a job and --
KANE: Having a job, getting yourself stabilized and getting yourself (inaudible).
(END VIDEO CLIP)
ROMANS: When you talk about Iowa, you need to talk about corn, of course. Americans consume nearly 43 pounds of corn every year on average. That's seven pounds of sweet corn and nearly 36 pounds of high fructose corn syrup. The U.S. produces 38 percent of the world's corn. And no state produces more than Iowa. But the drought that's destroying crops across the U.S. is hitting that state hard. Farmers are watching their crops shrivel in the fields, but they say there's always next year.
(BEGIN VIDEO CLIP)
ROMANS: How many years did you farm?
HARRY VENHORST, FARMER: All my life.
ROMANS: All your life. So, you've seen some beautiful crops and you've seen some really terrible crops?
VENHORST: This is one of the years it was a bad crop.
UNIDENTIFIED MALE: Yes.
ROMANS: When you drive by those fields, what do you think?
VENHORST: It looks bad. And every day it's getting worse.
ROMANS: A lot of these guys are just going to go on for the next year, you know? You just kind of take the hit this year and --
UNIDENTIFIED MALE: Oh, yes.
ROMANS: Got to keep going.
UNIDENTIFIED MALE: Hope the bank (inaudible).
ROMANS: We've seen some good economies and some bad economies over the years.
VENHORST: Right. Yes. Right. Went through good times, bad times. But farming is a great life.
(END VIDEO CLIP)
ROMANS: That retired farmer you just saw, 92 years old, lived through the droughts of 1936, 1956, 1988 -- he says this one may be worse, but this time around 90 percent of the farmers have crop insurance. So they certainly won't get rich this year, but they won't go broke, either.
We've got a lot more reporting on the drought for you on our blog. If you want to see how the drought will affect food prices and how it's reigniting a debate over our ethanol policies, please head to CNN.com/yourbottomline.
Coming up, the stalemate in Washington, it's hurting the middle class. The schools, health system, infrastructure that you depend on badly need an overhaul but your elected officials don't seem interested in dealing with our long-term problems. We had an election, right? I'm going to talk to a financial crisis expert who has an unusual solution. (COMMERCIAL BREAK)
ROMANS: Gridlock in Washington is standing in the way of a strong recovery, and our elected officials are not dealing with long-term issues like infrastructure, health care, education.
Financial crisis expert Ken Rogoff says the situation is getting worse, but he may have a solution -- teach politicians to play chess.
(BEGIN VIDEO CLIP)
KEN ROGOFF, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY: I'm Ken Rogoff. I'm a professor of economics at Harvard University. I work on financial crises. I have a wonderful wife and two children.
I used to be a professional chess player in my youth. I'm still an International Grandmaster at chess. It helps me a little bit in economics.
ROMANS: Well, someone described to me once trying to solve a financial crisis is like you're trying to play chess blindfolded against someone else who is better than you, and then the chessboard is moving like this, you know, and you're switching positions all the time.
ROGOFF: There are certain things, life negotiation, where like other sports analogies, chess teaches you to think what the other person's thinking.
ROGOFF: No, no, it's not bad.
ROGOFF: It's not bad.
ROMANS: Let's talk about right now, trying to solve a financial crisis. Sometimes you're making a move out of desperation just to stay in the game, and sometimes you're making a move for strategy.
ROGOFF: Sometimes that's like what you call a force move. If you don't do this, it's checkmate, it's over.
In the heat of a financial crisis, when there were things that just had to be done, the banking system's falling apart. It's clear you have to back the banks to some extent.
ROMANS: That's a force move.
ROGOFF: Monetary policy has to loosen up. And in some ways, if you look at America today, you know, we don't just need to react to the immediate force move. You can't do that again and again and again. We need a longer term, strategic vision.
ROMANS: How do you feel right now about the gathering storm, what we're seeing right now in the economy? What is your experience of financial crises telling you about how serious this moment is?
ROGOFF: The good news is that today's leaders, today's market participants, everybody just saw Lehman, most of them lived through it, they don't need to be told again what can happen.
ROGOFF: The bad news is we are at a precarious moment where growth is likely to be much slower, and at the same time, we hope that it won't be a collapse.
But it's a very risky move with what's going on in Europe. Greece will likely eventually fall out of the euro.
ROMANS: You think so, they'll be out?
ROGOFF: Eventually, absolutely. And they don't really have a plan.
(END VIDEO CLIP)
ROMANS: Something you didn't know about Ken Rogoff, he's an international chess Grandmaster. Wow.
Think you have a better solution than Ken Rogoff to fix our long-term economic problems? I want to hear from you. Find me on Facebook and Twitter. Our handle is @CNNbottomline ; my handle is @christineromans.
Back now to "CNN SATURDAY" for the latest news headlines. Have a great weekend.