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YOUR MONEY

The Economy Election; Why Companies aren't Hiring; Shelter from Economic Storm; Presidential Investments

Aired September 22, 2012 - 13:00   ET

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


CHRISTINE ROMANS, CNN ANCHOR: It's the economy, stupid. So what do President Obama and Mitt Romney say they'll do to fix it? Well, that's the problem. They're not saying enough and with less than 50 days to go until the election, Americans need specifics.

I'm Christine Romans. This is YOUR MONEY. Ali Velshi is away this week. But he has been warning you about the coming economic storm and you're feeling it. Two-thirds of registered voters believe economic conditions today are poor. That's according to the latest CNN/ORC poll. And it could get worse.

While the clouds brewing in Europe and Asia are beyond our control, the storm gathering in Washington is of our own making. I'm talking about the fiscal cliff, the automatic spending cuts and tax hikes set to take effect in January. January 1st. They could push America into another recession.

And let's not forget jobs. Twelve and a half million people without them because nothing is more important to our economic recovery than job creation. You can blame whoever you want for causing the state of the economy. But today's downturn is persisting on President Obama's watch.

So you'd think that Mitt Romney could make the case for change to voters desperate for someone to fix this economy.

Candy Crowley is CNN's chief political correspondent, she's the anchor of CNN's "STATE OF THE UNION."

Candy, let me show you a clip from last week's "Saturday Night Live" with, I guess, a comedic take on the state of this economy election.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The economy is in the tank. The job market is horrible. Our campaign has a secret weapon.

UNIDENTIFIED MALE: I understand the hardships facing ordinary Americans. For example, this summer, one of my horses failed to medal at the Olympics. So I know hardship.

(END VIDEO CLIP)

ROMANS: Candy, that clip aired before Romney's 47 percent flop. What is it about Mitt Romney that's allowing the president to escape being dragged down by this economy?

CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: Well, I think there are a couple of things at play and that skit is absolutely right, part of it is Mitt Romney himself. Whether it is true or not, and Certainly the Romney campaign will argue it is not, people look at him personally and think, he doesn't understand someone like me, he doesn't understand someone in my situation.

And that's always a critical question that folks ask themselves and that pollsters, in fact, ask people, who best understands the needs of people like you? Mitt Romney doesn't do well on that. They think he's, you know, either too rich or too out of touch or doesn't understand what it's like to grow up tough.

I will tell you the other thing that's playing into this election is that that poll that you showed is really interesting because there's people saying, we think things are really bad now. And you think, well then what in the world, you know, constitutes all this support for President Obama?

And when you ask the question, how do you think economic conditions will be in the future, it's almost a reverse, 67 percent think a year from now the economy will be good. So if you look at that, it certainly helps explain as well why President Obama continues to do well because people clearly think that a year from now, the economy will be good.

ROMANS: Yes.

CROWLEY: And in that case why do you then change a horse midstream and all that -- all those cliches we use when talking about elections?

ROMANS: So the president is connecting better with voters and at the same time they feel like things might get better down the road.

You know, with me here in New York, Harvard economist Ken Rogoff. He's the former chief economist at the IMF and the world's leading authority at financial crises. And Stephen Moore is editorial writer with "The Wall Street Journal."

Stephen, asked likely who's better to handle the economy and the latest CNN/ORC poll finds it's President Obama with a one-point lead, one-point lead over Governor Romney. You have made your chase on the show each week that you're part of the 49 percent who want to give Romney --

STEPHEN MOORE, EDITORIAL WRITER, WALL STREET JOURNAL: Forty-seven percent.

ROMANS: Forty-seven. To give Romney a shot to fix this economy.

MOORE: Right.

ROMANS: If they're so close on the economy, why isn't your guy doing better? MOORE: Well, look, first of all, I think Candy nailed it. I mean it is true that two-thirds of Americans think the economy is in pretty rotten shape right now. But if on election day, people feel like things are getting better, then there's no question Barack Obama will win this race.

ROMANS: Do you think things are getting a little better in the economy right now?

(CROSSTALK)

MOORE: And no, actually they getting a little better.

ROMANS: You think they're feeling that?

MOORE: But, you know, we go through -- it's a rollercoaster ride on this economy. It's also reflected not just in the polls that Candy talked about, but the Consumer Confidence number seemed to be rising a little bit, but my god, the stock market has been on a tear for the last of couple of weeks.

(CROSSTALK)

ROMANS: Do you think your guy is not connecting? He's not connecting?

MOORE: They love this cheap money as we talk about last week. But I think Mitt Romney basically is saying, look, I'm the -- I'm the candidate of the middle class, I'm the one who wants to raise --

(CROSSTALK)

ROMANS: Do you think he's been careful to not talk about wealth and not talk about religion and not talk about personal things, and so that has -- made it less likely for him to connect to people?

MOORE: It's a problem for Mitt Romney. We've known that. Even in the Republican primaries, remember, he was only getting 35 or 40 percent of the vote in a -- in a pretty weak field.

You know, the Democrats are very good at feeling your pain. Remember, that was the Bill Clinton line? And Barack Obama is very good at that. What Mitt Romney has to do in that critical debate, which is coming up in a couple of weeks, is say, look, I'm not as stylish as this -- you know, as Barack Obama but I've got a plan. I know how to create jobs and this guy's failed. And he hasn't done that.

ROMANS: Ken, let's talk about -- there's feeling your pain and there's fixing your pain. And I'm not -- there still are a lack of specifics in both -- from both of these candidates, quite frankly, about what the next four years is going to look like.

What do we need to hear from them that's going to tell us they're going to fix things like the fiscal cliff and all this, you know, deficit spending in the short termism that still runs rampant in this country? KEN ROGOFF, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: Well, Christine, it's really hard to ask the presidential candidates to give specifics when the voters don't want to hear it.

(LAUGHTER)

When you look at what --

MOORE: Great point.

ROGOFF: What we need to do.

ROMANS: Why don't they want to hear it? Because it's going to hurt?

ROGOFF: Yes. I mean, it's sort of, well, you know, what has to happen to our taxes if the government is borrowing so much? They have to go up.

(CROSSTALK)

ROMANS: Go up.

ROGOFF: But not mine, right? Somebody else's taxes have to go up or some program I want has to change. And nobody wants it. That's why you have this fiscal cliff coming up because they can't agree on what to do. So of course they don't want to be specific. They want to have everyone think they're going to help them when at the end of the day, you know, somebody has to pay.

That said, there are improvements they could make. The education system, infrastructure. I mean there are things that could be done. But again there are all these vested interests that block things. And as candidates, they're really afraid to talk about it.

ROMANS: And, you know, Candy, it's so interesting because the vagaries are something that's been -- you know, for reporters covering the economic plan at least of Mitt Romney the vagaries have been maddening because there's a lot I'd like to know about his taxes -- his taxes and his tax policies, quite frankly, but vagaries, I mean, you don't get pinned on something and opposition research doesn't hammer you on something if you're too specific.

CROWLEY: Exactly. You just put a big old target on your back. Obviously the more that somebody knows about what you want to do, the more people there are that are going to oppose that and there might not be copious amounts of people but there are always going to be people that make a lot of noise.

But I think more than that, it gets to a pretty important question here because I don't care how many specifics these candidates would give you that satisfy you, Christine, they can't do it by themselves.

They don't -- they don't make the budget. They can't pass tax reform --

ROMANS: Right. CROWLEY: -- without a Congress that they can work with, and vice versa. So you know, to me, you say, OK, here's the direction I want to go, and here's how I'm going to make this happen.

MOORE: Which is --

CROWLEY: Because the fact is, what we're -- what we're stuck with here -- and not stuck with, three branches of government, it's worked so far. But the fact of the matter is, they can't say what they're going to do because they don't know who they're going to be working with and neither one of them has yet told President Obama hey, how is it going to to be different, and Governor Romney, hey, how do you intend to work with a Congress that -- you know, particularly in the Senate that's going to be pretty closed.

MOORE: Candy, you're right about that. But look, I mean, you know this. You've been covering politics as I have for a long time. I mean this does take presidential leadership. And the fact that we haven't had a deficit deal over the last three or four years with $1.2 trillions deficits year after year, you know, that's partly due to the failure of leadership in this White House.

And let me just say one thing to -- if I can to defend Mitt Romney. Look, it is true that he hasn't been entirely specific about his tax plan. And that gets to the point that Ken was making. If you start saying, well, I want to get rid of the mortgage deduction and the charitable deduction, all these, that's all everybody is going to talk about.

But Barack Obama has almost no plan at all. All he's talked about, Christine, as we know that he wants to raise taxes on the rich and we know he wants another $100 billion stimulus plan. But what else is there? Is that it? Is that all we get in a second term from Barack Obama? So I wish you all in the media would be a little tougher on Barack Obama saying, where are you crossing your T's and dotting your I's on your plan?

ROMANS: I mean, Candy, I think we in the media have been pretty tough on Barack Obama every time we say the unemployment rate is 8.1 percent. No incumbent has ever been reelected with an unemployment rate at 8 percent.

CROWLEY: True that, except for that -- you know, that's a fact in figure. And I'll tell you, let me just point out that I think both of these candidates need to say how they intend to work with Congress, not just Mitt Romney.

ROGOFF: Right.

CROWLEY: I mean clearly President Obama has, you know, a record of either doing or not doing things that he needs to address, vis-a-vis, Congress. But I think that this is a common complaint that you hear from conservatives. That the media just doesn't go after the things that President Obama has done wrong. And certainly when you look at that 8 percent, I don't think it actually -- you know, history is made to be broken, precedents are made to be broken. I don't know that 8 percent -- I think people have figured that into their equation.

ROMANS: Yes.

CROWLEY: I think people know when they go to vote the unemployment is going to be high. So I don't -- I don't know that it changes between now and November.

ROMANS: All right. Candy Crowley, we'll watch your show this weekend. Thanks for being here.

The gentlemen, stay.

CROWLEY: You bet.

ROMANS: Coming up, the unemployment rate has been stuck above 8 percent for three years. At this point in the recovery it really should have been more like 7 percent. Instead the people you're paying to solve our problems are preventing it.

The truth about how your politicians are hurting America's attempt at a jobs recovery next.

(COMMERCIAL BREAK)

ROMANS: If there's one thing of which we can be certain is that markets hate uncertainty. But uncertainty is even worse for economies. And it means job loss.

A new report from the San Francisco Fed quantifies how heightened uncertainty about future economic conditions in recent years added between one and two percentage points to the jobless rates.

Take a look at this chart. In early 2008, the unemployment rate was 5 percent, which is considered -- you know, that's considered good, even though storm clouds were gathering there.

Now the uncertainty about the great recession led to a drop in hires, then layoffs and a pullback in investments. And this is what happened. By 2009, unemployment jumped to 10 percent. Right now, it's back down to 8.1 percent. But researchers at the San Francisco Fed suggest that unemployment could be as many as two points lower if not for the current uncertainty over the economic storms that could hit America's shore, especially that fiscal cliff. That fiscal cliff is the result of your political leaders playing a very dangerous game.

Now speaking of games, something you probably do not know about Harvard economist Ken Rogoff. He is an international grand master in chess, a title he earned as professional chess player in his youth. And last month, Ken even played the world's top-rated grand master, Magnus Carlson, to a draw here in New York.

This is big news in the chess world, folks.

Ken, you described to me last spring a chess maneuver called the force move. Tell me what -- tell my viewers what that is and why Washington has been reduced to a series of force moves.

(LAUGHTER)

ROGOFF: Still recovering from those pictures. Magnus Carlson, by the way, is an incredibly talented player, maybe the best in 50 years since Bobby Fisher. But force move really in a chess game is when you find yourself in a position, you've backed yourself into a corner where there's nothing else to do. And that's the way we've been running the government. They wait until the last minute and there's nothing else to do and so they punt. And there's no long-term strategic measure.

ROMANS: And so the fiscal cliff then, what is that? I mean what do we need to do to fix the fiscal cliff? That feels like a force move kind of situation to me.

ROGOFF: Yes, because they're waiting until there's nothing else to do but extend it for four months in some way, the status quo. I mean that's what's going to come out instead of really thinking about how do we fix the tax system here is really the problem, much less think of things like moving ahead with infrastructure or education so we can compete in the 21st century. So they're just frozen.

I mean this incredible gridlock and this disagreement, lack of leadership in many ways, it's a very, very bad situation for the United States.

ROMANS: Allowing our own Congress to check our queen or something, you know? Continue the metaphor. Checkers or chess, Stephen Moore?

MOORE: Well, I'll tell you this, Christine, I'm not going to play Ken Rogoff in chess.

ROMANS: I know.

MOORE: He's a grand master. You know, I was -- Ken is exactly right. But you know, this is actually Washington. I mean this is the nature of our political system. They always put off these tough decisions until the last minute.

I'll give you a little point of optimism. That this week, the House and Senate, Democrats and Republicans --

ROMANS: Went home?

(LAUGHTER)

MOORE: Exactly. That's next week. But they had a hearing on what to do about this tax system that Ken and I read so much about that's such an abomination, an albatross around the neck of the economy. And you know what? The Democrats and Republicans at least agreed we've got to fix this thing. You know, they didn't come to an agreement on how to fix it but at least they decided next year we've got to do this.

And I actually think 2013. You can hold me to this promise. I think next year, they do something really big on fixing the tax system. They've got to deal with the AMT, the estate tax, the tax cliff that's coming, all these things come to a fore in 2013. It gets to the point that Ken said. When will they fix it? When they're right up against the abyss.

ROGOFF: I mean I think if there's a fairly decisive election result --

MOORE: Right.

ROGOFF: -- the Democrats win across the board or the Republicans win across the board, yes.

MOORE: Right.

ROGOFF: I'm not so sure. I'm just not so sure what they're going to do if we get stuck in the middle longer.

ROMANS: What if you have an Obama second term and you have a newly emboldened Tea Party contingent in Congress that says, we will not raise taxes. And we will not --

(CROSSTALK)

ROMANS: Cut defense spending.

MOORE: Yes, I mean, look, there is a -- we've talked about this for the last couple of years on the show. There is a wide gulf between these two parties in terms of what they stand for. I do think the reason we have elections --

ROMANS: Is there a wide gulf in your party, too?

MOORE: No, I think the Republicans are pretty unified about -- against raising tax rates. They want to fix the entitlements. You know I think --

ROGOFF: But there are some are more pragmatic about it.

(CROSSTALK)

MOORE: There is. And it is true. Look, if Barack Obama wins the election, he will have a voter mandate to do some of these things that he's been talking about. The tax rates probably will go up if Barack Obama is elected because he can say, look, we had an election about this, I won and I can do it.

ROMANS: What if Mitt Romney wins?

MOORE: Well, then I think -- then I didn't think even the chances for tax reform are even higher because I think this is a top priority for the Republican Party. And I keep going back to this, Christine. We did this in 1986. That was a long time ago. But it was bipartisan and you know what? That passed.

You want to talk about bipartisanship, that bill that lowered the top tax rate to 28 percent, it passed 97-3 in the United States Senate. When have we had that kind of consensus?

(LAUGHTER)

ROGOFF: We're raising taxes instead of lowering them which I think is harder to get consensus around.

MOORE: That's true.

ROMANS: All right. Gentlemen, we have to leave it there. Thank you so much. Nice to see both of you.

MOORE: Don't be so tough on Mitt Romney. But you all in the media are too tough on --

(CROSSTALK)

ROMANS: I'm tough on everybody. That's my job. I would like to see tax reform in 2013. And I'm just trying to figure out how in the world the easiest ways to get there.

ROGOFF: I've got to throw it in, it was a miracle that I made a draw with Magnus Carlson.

ROMANS: I love -- I didn't mean to embarrass you. But I really -- you know, I love playing chess with you or sort of trying to play chess with you. And it was delightful to see those pictures.

So there you go. Thanks, guys.

ROGOFF: Thank you.

ROMANS: Leaders in Washington are nowhere near an agreement on the fiscal cliff. Up next, what every politician does seem to agree on, the need for energy independence. So how would either President Obama or a President Romney get us there? Ali Velshi has got that story next.

(COMMERCIAL BREAK)

ROMANS: Governor Romney and President Obama agree, they do, both stress the need to scale back this country's dependence on foreign oil. But as Ali Velshi explains, they have very different ideas about how to do that.

(BEGIN VIDEOTAPE)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: America's dependence on foreign oil has gone down. In fact, in 2010, it was under 50 percent for the first time in 13 years.

MITT ROMNEY (R), PRESIDENTIAL NOMINEE: In eight years, we're going to get a North America energy independent, where we don't have to buy any oil whatsoever from the Middle East or from Venezuela.

ALI VELSHI, CNN ANCHOR (voice-over): They're both right. Forty-five percent of the oil Americans consume is imported, that's way down from the peak of 60 percent in 2005. And it's largely due to lower demand since the recession and America's new energy boom.

In fact, the United States is the third largest producer of oil in the world today. And oil production has jumped 14 percent in the last three years alone, largely due to advances in technology. Hydraulic fracturing, or fracking, can now extract oil and gas trapped deep in shale rock and deepwater drilling in the Gulf of Mexico is bringing even more oil to the market.

But even with those advances, America, the world's biggest consumer of crude oil, still needs more than it produces. Twenty-nine percent of America's imported oil comes from right next door, much of it from the rich oil sands of Canada. Another 19 percent comes from Mexico and Venezuela. Only 14 percent of America's imports actually come from Saudi Arabia.

Both President Obama and Mitt Romney want to wean America off its dependency on foreign oil. And they agree that expanding domestic oil production is crucial. But there are key differences in their approaches.

OBAMA: Meeting the goal of cutting our oil dependence depends largely on two things. First, finding and producing more oil at home. Second, reducing our overall dependence on oil with cleaner alternative fuels and greater efficiency.

VELSHI: President Obama wants to curb consumption. In August, his administration proposed fuel economy standards for cars that would average 54.5 miles per gallon by 2025. And he favors alternative forms of energy to replace oil. At the same time, he has opened up new areas of drilling in the Gulf of Mexico and says he'll do the same in the Arctic.

Romney says he'll move to open up the Pacific and Atlantic coasts to drilling, something President Obama opposes.

ROMNEY: We're going to open up federal lands to really take advantage of those resources.

(CHEERS AND APPLAUSE)

ROMNEY: And this is not just talk.

VELSHI: Romney's drill everywhere approach is unlikely to reap much new bounty, though. According to the Congressional Budget Office, more than two-thirds of the country's oil and gas is currently available for drilling.

America is working toward energy independence in the long run. But for the time being, it will still depend on oil imports regardless of who's in the White House next year.

Ali Velshi, CNN, New York.

(END VIDEOTAPE)

ROMANS: And that's a pretty broad look at where we are right now. You know it's going to take a lot more than sound bites to become energy independent.

Up next, we're going to show you what it takes and what it cost you and why it just might be the key to lowering your gas prices and lowering your electrical bill.

(COMMERCIAL BREAK)

ROMANS: There is a great need for repairing what's broken in this country. And it's going to take a lot of money and a lot of time. Ali told you last week that the American Society of Civil Engineers gives U.S. infrastructure an overall grade of D. Roads and bridges need to be repaired. Our transit systems need improvement. We need new school buildings, updates on our air traffic control systems and more Internet access.

But before we talk about doing any of that, we need to address our energy situation. Ali just told you that the candidates have plans for making America more energy independent. But what may be even more important is fixing the system that gets that energy to your house, to your business or to your car.

Last year, the average U.S. household spent $368 a month on gas. That's up almost 90 bucks a month from 2010. The average electric bill was more than $110 a month. That's also up from the year before.

So what's behind the rise? Here's what moves gas. Sixty-five percent of the cost comes from crude oil. That's a volatile commodity and it's the main reason for all those price fluctuations at your local gas station. Refining is 15 percent. Taxes account for 12 percent. And then distribution, marketing and retail cost make up 8 percent.

Like gas, electricity cost depending on where you live. But what goes into making it? Forty-eight percent is produced by combusting coal, 22 percent from natural gas, 20 percent is made by nuclear power plants, 6 percent is hydro power, 3 percent is renewable sources like solar and win, and only 1 percent comes from oil.

Stephen Leeb is here. He runs Leeb Capital Management. He's the author of "Red Alert: How China's Growing Prosperity Threatens the American Way of Life."

Frank Sesno is also with us. He's director of the School of Media and Public Affairs at George Washington University.

So prices are going up, most electricity is produced by coal, almost half of our oil is coming in from different countries. Our energy infrastructure is in poor condition. On this we agree. America is the strongest country in the world, yet energy is still a really big problem.

Stephen, you say the big fix starts with something called the smart grid. Explain.

STEPHEN LEEB, CHAIRMAN, LEEB CAPITAL MANAGEMENT: Yes. Well, the smart grid will allow us to do many things, Christine. But among them, it will allow us to monitor electricity and how much we should be using. We waste a lot of electricity. So we'll put meters in people's home. It will allow the monitoring of electricity.

ROMANS: And we have technology. Technological advances --

LEEB: We do have the technology. Yes. The other thing, and this is probably even more critical. When you hear these candidates speak and all these sound bites and listening to all these conventions, you never hear the word "water" mentioned. When you're talking about energy. Well, energy is the second largest consumer of water.

Now America is in the midst of a major drought. We need all the sources of energy we can get, even those that are not water dependent. Like solar. Solar (INAUDIBLE) for instance is probably one of the few energy sources that is not dependent on water. Now why do I bring this up? Because the smart grid allows you to integrate all these different sources of energy.

ROMANS: Right.

LEEB: And this is what China sees. China gets. China will spend between now and the end of this decade probably close to $2 trillion on a smart grid. They get it. And their plans are by 2020 to have 50 percent of the cars sold in China, like 10 million, they expect to sell 20 million, 10 million will be hybrid. And they will get their juice from the grid, their smart grid that they're putting up as we -- you and I are talking.

ROMANS: And that's why it's called the smart grid. Everyone calls it the smart grid for a reason.

Frank, I want to bring you in here.

FRANK SESNO, GEORGE WASHINGTON UNIVERSITY: Sure.

ROMANS: If we produce more oil here and that's what so much of the conversation on the campaign trail is about, right? If we produce more oil here, will prices stabilize? It doesn't seem like it could be as simple as that.

SESNO: It's not as simple as that because it's a big wide world. You know, for several years now I've led this project called Planet Forward. At Planet Forward we collect all the ideas and innovations that going out there in the energy and sustainability space. And there a million of them. And the biggest development without any question is what's happening -- you pointed it out -- on the natural gas front, the fracking.

We are in a new American century here. This is entirely changing the equation. I completely agree with what was just said about the smart grid. But the other thing that's missing, really missing from what the candidates are saying and from what the country is doing is a serious national energy policy.

We talk about taking in 2025, gas mileage up to 52 miles to the gallon or whatever it was. I was just in Europe. I was driving a diesel vehicle, a clean diesel car getting 45 miles to the gallon. That's pretty close. The reason? When I went to the pump, it was $7, $8 a gallon.

So people drive that kind of vehicle because it's there and there's a government decision to raise those taxes to make them do it. If you go to Brazil, every gas station in Brazil has a pump that pumps just alcohol or ethanol. Every car, new car made in Brazil is a flex fuel vehicle so it can drive on either one.

These are big decisions made at national government levels that can drive this kind of energy equation and it's really what we lack here because we're paralyzed.

ROMANS: Frank, let me ask you something because one of the things here -- we know that the payoff -- there's a payoff for private energy companies, right?

SESNO: Yes.

ROMANS: They charge us and they make big profits.

SESNO: Yes.

ROMANS: But what about the payoff for taxpayers? How will investing in energy products -- projects improve our daily lives and how do you sell to it taxpayer who say, wait, I don't want my money going to something that's going to benefit a big energy company?

SESNO: That's one of the -- right. Big oil gets away with all these tax breaks. It's right in the middle of the debate here in the political season. How it sells to taxpayers is it brings your prices down. Best example you can point to it right now, for example, is again natural gas. It's a third of what it was just a few years ago.

If you've been heating your gas with natural gas and the bill was $180 a month in the wintertime, it's $60 now and you have the stability and you have the ability as you buy these plug-in vehicles, for example. If you've got a smart grid because you've invested in that, to be selling back to the grid or if you've got solar panels on your roof.

There are unbelievable benefits to consumers. Never mind the environmental benefits and others. The energy discussion is a great discussion to have. And it comes right into every person's home or into every factory. We just need to have it with a little bit of logic for a change.

ROMANS: Stephen Leeb?

LEEB: Well, I agree with much of -- what frank says. And I certainly agree with his heart. I mean I think his heart is definitely in the right place.

SESNO: I'm glad to hear that.

(LAUGHTER)

LEEB: No doubt about that, Frank. I really do. But I mean --

ROMANS: We all mean well. Let's just establish we all mean well.

LEEB: We all mean well. OK. First of all, though, when it comes to fracking, I mean we have to get real about this. I mean we have to have a real serious researched discussion about it. It needs a lot of water. The marginal cost of fracking is extremely high. There is not one company dedicated to fracking now that is actually cash flow positive, has free cash flow.

The biggest fracker right now for oil is a company called Continental Resources. They're in North Dakota. Guess what? They're making a lot of money. But when you take out the money that they have to put in for capital expenditures -- I know I'm getting too technical, Christine -- they have to borrow money every year. They don't have enough money to sustain it. A lot of this stuff on fracking is a dream. It requires tremendous amounts of water.

ROMANS: Right.

LEEB: Doesn't mean there's not a spot for it. There is. But we have to have a more serious discussion --

(CROSSTALK)

ROMANS: We'll have --

SESNO: And --

ROMANS: And we'll have to have a more serious discussion on fracking -- sorry, Frank Sesno -- the next time.

SESNO: OK. OK.

ROMANS: Because when you talk about energy restructure seriously, I mean there are so many different aspects to it that are incredibly important for consumers, for companies, for regulators, and everybody.

Frank Sesno, Stephen Leeb, thank you both of you.

And coming up, education is our shelter from the coming economic storm. But is our system putting students -- pitting students, rather, against unions? The strike in Chicago may be over. But the battle for education reform rages on.

(COMMERCIAL BREAK)

ROMANS: On this program we've warned you about the coming economic storm. Clouds rolling in from Europe and Asia, there's thunder and lightning from our own government seeming inability to avoid the self- inflicted wound that this is fiscal cliff.

We've just talked about infrastructure. It could be one pathway out of the darkness but just let me tell you what I think is the biggest shelter from the storm. Education. It is vital to America's economic security and to our children's hopes for a prosperous future.

Last week students in the third largest U.S. school district finally went back to school eight days after Chicago's teachers went on strike, a deal was struck.

(BEGIN VIDEO CLIP)

MAYOR RAHM EMANUEL (D), CHICAGO: In past negotiations, taxpayers paid more but our kids got less. This time, our taxpayers are paying less and our kids are getting more.

(END VIDEO CLIP)

ROMANS: But are students really winning? Nick Kristof is a two-time Pulitzer Prize-winning columnist for "The New York Times."

Nice to see you, Nick.

NICHOLAS KRISTOF, COLUMNIST, THE NEW YORK TIMES: Good to see you.

ROMANS: All right. Instead of a laddered opportunity, you say America's education system is just transmitting inequity from one generation to the other. And that's why we need school reform. Did we get it in Chicago?

KRISTOF: Well, we're inching toward it. I mean one of the things that I think the Chicago debate really underscored is the degree to which the Democratic Party has been separating itself from teacher unions and, you know, gradually embracing the mantel of education reform and school reform. And so we're -- you know, we're making mile steps toward it but there's a long way to go.

ROMANS: I want you to listen to the president of the teachers union after this deal was struck in Chicago.

(BEGIN VIDEO CLIP)

KAREN LEWIS, PRESIDENT, CHICAGO TEACHERS UNION: The sort of idea of corporate efficiency that's been pushed towards schools, that's a problem for us. So it's not good for kids. I think people don't seem to understand that.

(END VIDEO CLIP)

ROMANS: So, Nick, in the private sector we're graded on results. But teachers say that just doesn't work in education. And one of the reasons that they often cite is because of poverty. Sometimes they're in a situation where they're working in schools with high levels of poverty, and so it's difficult to grade the performance of the teachers.

What do you think about that?

KRISTOF: Right. Well, I mean, I think that the teachers have a good point. That the real problem for -- the biggest reason for failed schools is not bad teachers but is poverty. And I think that it's also true that critics of the unions are too quick to say the problem is just unions. If you look at states that don't have strong teachers unions, mostly in the south, they tend to have weaker schools than those that do. But still, having said all that, even in the context of poverty, then there has been pretty good evidence emerging that the teacher makes a huge difference. And the best study of that came out from some Harvard and Columbia researchers. And it showed that a bottom 1 percent teacher -- and these are real results from a major district in the U.S.

ROMANS: Right.

KRISTOF: That a bottom 1 percent teacher was equivalent to having a teacher in -- a student in a class for only 60 percent of the school year.

ROMANS: Right.

KRISTOF: You know? Which of us would want a teacher, in effect, absent for 40 percent of the school year for our kids?

ROMANS: And let me show you the money for that. I want to jump in. Replacing a teacher at the bottom 5 percent with an average teacher, Nick, means an additional $1.4 million in collective lifetime earnings for the whole class. But how do you find out who is the good teacher and who is the underperforming teacher?

KRISTOF: Well, that is in a sense what the debate has moved to. I think that earlier the debate was really about, you know, do teachers make a difference? And now I think increasingly the unions are acknowledging teachers make a difference but they're saying it's very difficult to identify who is and who isn't?

But I think that we're -- you know, I mean the truth is that a lot of teachers' colleagues are aware of that. They know that. But there's been much less of a willingness to weed out poor performers in teaching than in other sectors. And the -- one of the big debates is about value added. Measuring where students stand at the beginning of the year and at the end of the year and looking at how much margin of improvement they have.

And you know, sure there are difficulties with that.

ROMANS: Right.

KRISTOF: But if you have three years of data, then in many classes and things like elementary school, for example, three years of data, you know, the same teachers consistently seem to raise their students' performance the most. And some teachers consistently have their students do really poorly in terms of the gains every year.

ROMANS: I mean you can -- you know, sometimes it just gets so heated. And you can love teachers and you can love the profession of teaching, which is by the way the largest profession in the country, you know, 3.2 million teachers, but you can also really want to know how to make sure the best teacher is in your kid's classroom. Those two things can cohabitate.

KRISTOF: Yes, that's right. And I mean ultimately I think teaching needs to look much more like other, you know, white-collar professions. Be better paid but with less job security. Right now, it's poorly paid but if you have tenure, you have pretty good job security. I think we'd be much better off with paying a lot more and much more to attract really good people into teaching and -- than, you know, measure their performance, hold them more accountable for how they're doing. I think teachers and students alike would be better off in that situation.

ROMANS: All right. Nick Kristof, really nice to see you today. Have a great weekend.

KRISTOF: Thank you.

ROMANS: All right. Coming up.

(BEGIN VIDEO CLIP)

JACKIE GIOVANNIELLO, GRADUATE IN DEBT: My family is in that middle ground where they don't make enough money to really pay for my entire education because it's a ridiculous amount of money.

(END VIDEO CLIP)

ROMANS: I'll tell you how President Obama and Governor Romney plan to deal with the rising cost of college. And I'll explain why Congress may pose the most immediate threat to U.S. education.

(COMMERCIAL BREAK)

ROMANS: You can't afford to go to college. But you can't afford not to. Tuition is rising. So is student debt. That puts college out of reach for some families. It leaves others saddled with debts they can never pay off. Those families are banking on President Obama and Mitt Romney to help make college affordable.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): When Jackie Giovanniello graduated from Brown University this year, she put off going straight to medical school. Instead, she took a research job at Sloan-Kettering Hospital.

GIOVANNIELLO: It is nice to have a paying job where I can pay back part of my student loans before going to med school and possibly adding on a lot more.

ROMANS: And she had plenty of them, $100,000 worth. Why? Her family is middle class. Her mother works in a school. Her dad owns a bar. She says they're considered too wealthy to qualify for many grants but she says not wealthy enough to have saved the money for the more than $50,000 a year to attend Brown.

GIOVANNIELLO: When you're in the middle class, you are a normal suburban family but you just don't make an outrageous amount of money so you can't pay for these outrageous prices for tuition, you know?

ROMANS: She's not alone. Student loan debt hit $1 trillion last year, even tuition for public four-year colleges rose 68 percent over the last decade.

Enter the presidential campaign with college affordability a key issue for younger voters.

OBAMA: And I want to make college more affordable for every young person who has the initiative and drive to go. And make sure they're not burdened by thousands of dollars worth of debt.

ROMANS: President Obama has expanded Pell Grants and cut out the banks as middlemen for loans, allowing students to borrow directly from the government. Now Obama proposes to slow tuition growth by increasing state grants. Yet he'd need Congress to help fund that.

ROMNEY: I'm not going to go out and promise all sorts of free stuff that I know you're going to end up paying for. What I want to do is give you a great job so you'll be able to pay it back yourself.

ROMANS: Mitt Romney's plan to help students, remove burdensome regulations and get the government out of the student loan business. Romney says the flood of federal dollars just drives up tuition.

Molly Corbett Broad of the American Council on Education says the recession's heavy toll on state budgets is also a factor.

MOLLY CORBETT BROAD, AMERICAN COUNCIL ON EDUCATION: When the state reduces its support, the only other place to turn for most colleges in the public sector is to increase tuition.

ROMANS: Either way, students like Jackie feel left out in the cold.

GIOVANNIELLO: A lot of people who don't have students in college or don't have kids my age do think like, you're either wealthy enough to go to college or you get financial aid from the government, and it's that simple, but it's not that simple.

(END VIDEOTAPE)

ROMANS: The biggest challenge to U.S. education doesn't come from China, by the way. It comes from Congress. Jackie won't be the only one left out in the cold if the U.S. falls over the fiscal cliff. That fiscal cliff is a combination of tax increases and budget cuts that will hit at the beginning of next year unless of course Congress does its job and fixes it.

Some of the cuts to education programs would hurt at-risk students. Pell Grants are safe at least for next year, but most other federal financial aid programs face an 8.8 percent cut. K-12 education grants to state and local districts would be as well, that means less money to support smaller classrooms, after-school programs and children with disabilities. Programs that support research would also be scaled back.

Now while Congress is busy doing nothing, the rest of the world of course is moving forward. U.S. college graduation rates are among the highest in the world, but the Organization for Economic Cooperation and Development, the OECD, it warns that the rest of the world is catching up quickly and may surpass the U.S.

For high school graduation, the U.S. ranks much worse, 22nd out of 27 countries. And another worrying sign, just 29 percent of students in the U.S. whose parents didn't graduate from high school will go on to attend college. That's worse than every other country in the OECD except New Zealand and Canada.

CNN is covering all the issues that are important to you this week including education. All next week, we're going to look at the candidates' positions on health care, the size of government, drug policy and immigration.

But first, an Obama boom or a Romney rally? How your vote may put money in your portfolio. The stocks to pick if you think your guy is going to win in November.

(COMMERCIAL BREAK)

ROMANS: Conventional wisdom says Republicans are better than Democrats for the stock market. Always question conventional wisdom. Take a look at this. This is the Wilshire 5000. It's the broadest gauge of the stock market. We're taking a look with President Reagan first. The hero of American conservatives. The stock market rose by 54 percent during his first term and it went up by even more in his second term.

The same thing happened under President George H.W. Bush, but take a look at President Clinton, a hero to the modern Democrats. During his -- first four years in office, the Wilshire 5000 nearly doubled. Growth was a bit slower during his second term, just a mere 74 percent.

Then we come to the most recent President Bush, America's first and only Harvard MBA president. He had to deal with the bursting of the tech incredi-bubbles, by the way, that were started in the years before him, and those pushed the stock market down during both of his terms. By contrast, the market is now up 96 percent under President Obama.

Now I've said over and over again that presidents get too much credit and too much blame for the economy. And I agree with Allen Sloan over at Fortune who put these numbers together who said you should vote for the candidate you'll want. Don't vote because you think your stocks are going to go up. But that doesn't mean the president has no effect.

I want to bring in Paul Lamonica. He's an assistant managing editor over at CNNMoney.

And Paul, the team at CNNMoney put together a gallery of the sectors that will do well under a President Obama and the sectors that would do well under a President Romney. And I want to start with companies that export to China.

Mitt Romney and President Obama have both ramped up their rhetoric on China, and some members of the business community say that that could lead maybe even to a trade war. But you say this sector, companies that export to China, Paul, could still do well under a President Obama. Why?

PAUL LAMONICA, ASSISTANT MANAGING EDITOR, CNNMONEY: I think most people believe that if President Obama is re-elected, there will be a little bit more of a cooperative tone with China. I mean he has obviously talked tough and taken actions against China because of, you know, concerns about trade, you know, but I think most people believe that he won't have as hard line a stance as a President Romney might.

ROMANS: Right.

LAMONICA: So that could benefit companies doing business in China already like Tiffany, Coach, GM, and Ford.

ROMANS: Those companies -- American companies that export to China and a lot of companies import from China, so that would be some of those luxury goods and automakers.

I want to look at hospital stocks now. An Obama win in November would mean that Obamacare is here to stay. That's something that would affect hospital stocks, you think.

LAMONICA: Right. With the Supreme Court already upholding the Affordable Care Act, I think that many people believe that if Obama, President Obama is re-elected, you should have hospitals benefitting from just the millions of Americans that will have coverage, will be able to go as insured patients to hospitals any time they need to. And that will be a big boost for many of the public and trade hospitals.

ROMANS: Let's stay on Obamacare because Mitt Romney has vowed to overturn Obamacare. That would be a win for medical device companies, you say.

LAMONICA: Right, there's a tax that medical device companies pay and there are some firms like Medtronic and St. Jude that are concerned about this. And definitely are worried that this will impact their profitability going forward. So people definitely feel that if Mitt Romney wins, there's a greater chance that some if not all of the Affordable Care Act could be overturned and that could be a plus for the medical device company.

ROMANS: We know that a Romney administration would likely mean a less aggressive regulatory environment. And that could help financial stocks.

LAMONICA: Right. I mean financial stocks have had a pretty good year already, so it's not as if they're completely terrified of the prospect of President Obama winning, but many banks have talked about the onerous regulations due to Dodd-Frank, a lot of them haven't kicked in yet, and there are many concerns that those rules will hurt profits for large financial firms like JPMorgan Chase, Goldman Sachs, over the years to come.

I think it is safe to say that a President Romney, given his Wall Street background, with --

ROMANS: Right.

LAMONICA: Private equity firm, he would probably be a lot friendlier to the large banks as opposed to antagonistic which we have had at times with President Obama being very strong with his words for the large Wall Street firms.

ROMANS: Fat cat CEOs comes to mind.

LAMONICA: I believe that might have been one of the terms, yes.

ROMANS: Fat cat CEOs.

Paul Lamonica, nice to see you.

If you want to see more of the sectors and stocks to bet on under a President Obama or a President Romney, you can find a full list at CNNMoney.com.

Thanks for joining the conversation this week on YOUR MONEY. Ali is back next week. And we're here every Saturday, 1:00 p.m. Eastern. Sunday at 3:00. Have a great weekend.