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YOUR MONEY

Spin on the Jobs Report; Solving the Unemployment Crisis; Battling Reverse Brain Drain; Fiscal Cliff Threat; Can Political Leaders Actually Create Jobs?

Aired October 7, 2012 - 15:00   ET

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


ALI VELSHI, CNN ANCHOR: A new report out Friday points to a steadier labor market but some conservative conspiracy theorists are trying to spin it for political gain.

I'm Ali Velshi and this is YOUR MONEY.

Before we get to that spin, let's get to the facts. Our Christine Romans has the numbers for us -- Christine.

CHRISTINE ROMANS, HOST, CNN'S YOUR BOTTOM LINE: Hello there, Ali. Well, we have an unemployment rate in the United States that dropped to 7.8 percent. That's down from 8.1 percent the prior month. And that's one survey. That's the household survey. The other survey of businesses shows net jobs created 114,000 net jobs created. It's below average for the year but just a few thousand more than economists had been expecting.

Let me show you the long-term unemployed, Ali. Forty percent of people out of work in this country have been out of work for six months or longer and then there's the underemployment number, we report this every month, 14.7 percent of the labor market are either unemployed or they're working part time. They'd like to be working full time. They're not really being used to their potential.

So those are the headline numbers, Ali, from that jobs report.

VELSHI: OK, Christine. Stay with us. The jobs report numbers were quickly, quickly politicized. I mean more quickly than normal. I want to bring in Labor Secretary Hilda Solis.

Secretary Solis, good to see you again. It's been a while.

HILDA SOLIS, LABOR SECRETARY: I know.

VELSHI: And I didn't think we'd be -- well, I didn't think we'd be talking for this reason but some conservative voices challenge the legitimacy of the Labor Department's numbers when they came up on Friday. They said, how is it possible that we created 114,000 jobs, not enough generally to keep pace with population growth, and yet the unemployment number went down? The percentage. And they said -- they suggested, they hinted that there might have been political interference in the Labor Department's calculations. I find this quite stunning. SOLIS: It is. And it's ludicrous. It's I think it's totally inaccurate. I have the highest regard and faith in our Bureau of Labor Statistic individuals. These are civil servants. They are not political. They have served many years in their capacities as professional statisticians, economists, analysts. They serve under Republican as well as Democratic administration. They are not political at all.

I receive the information the first Friday of the month at 8:00 a.m. in the morning and I -- you know, I am reporting on exactly what is given to me. There's no manipulation that occurs, and I am just astound that people are making these accusations. It's unfortunate because what the fact of the matter is that we've seen job growth. We've seen a lot of people that have now are finding employment and you have basically two surveys, one that reports the receipts of jobs being created, payroll, and then you have the household survey.

The household survey also includes people that are self-employed and also that are attached to new jobs that are coming about. You know these are the smaller jobs but small businesses that are creating jobs. So both of them are married and we come up with the information that's presented to me.

And all I can say is that in the past -- you know, in the past 2 1/2 years we've seen now --

VELSHI: Yes.

SOLIS: -- 5.2 million private-sector jobs created.

VELSHI: And Secretary --

SOLIS: Can we do better? Absolutely we have to do better.

VELSHI: But that wasn't the argument. I agree with you. That's en entirely separate discussion as to whether you think if we can do better. The issue of attacking the bureaucracy is new even in America.

Let me ask you this. There has been no substantial change in the way these numbers have been calculated in recent history. Am I right?

SOLIS: No. They have been -- exactly. And this methodology has been in place for decades.

VELSHI: Secretary Solis, I'm glad you could join us to clear this up. Thank you for joining us. A pleasure to see you again.

SOLIS: You too. Thank you.

VELSHI: Christine, Secretary Solis told us something you and I know, that this is -- this is calculated as two separate surveys. So what she was explaining was that the job creation numbers, that bar graph that you always use, is a report of companies and their payrolls.

ROMANS: Right. VELSHI: The unemployment number, the percentage, which has gone down today, this week, is a percentage of -- that's a number based on a household survey, phoning people at home.

ROMANS: I'm going to make two points here, Ali. If you really believe as one limited government group said in a press release that there are Baghdad bombs in the Bureau of Labor Statistics making up numbers for the regime, if you believe that like some conspiracy theorists apparently do, then why weren't these numbers better for the past three years and why were these numbers so lackluster the day after the president gave his speech at the DNC taking the wind out of the DNC because the headline the next day was only about a jobs number that wasn't very good.

It just doesn't make any sense.

VELSHI: No. No.

ROMANS: It defies logic. We know these people. We've reported on these people. We crunch the same numbers --

VELSHI: Yes.

ROMANS: -- these people are crunching. It shows you how disgusting and exasperating, very contentious election can be. And it really hurts the movement of small government, I think. Because I think a lot of people realize our government is very big.

VELSHI: Yes.

ROMANS: It is -- it has become much bigger. And well thinking moderates in both parties can say we need a smaller footprint of the government.

VELSHI: Yes.

ROMANS: But when the small government movement comes out and just says crazy things like this.

VELSHI: Yes. Yes.

ROMANS: It hurts their cause.

VELSHI: I absolutely agree with you, Christine. All right. Thanks for clearing that up. Stay there, we'll be back to you a little later.

Stephen Moore is an editorial writer for the "Wall Street Journal".

Stephen, I want to talk about the real stuff here, the real meat of this jobs report. Before we do that I just want to -- I mean I think Christine's point is very valid and that is that there is a really reasonable and strong argument for smaller, more effective government in the United States but these kind of conspiracy theories do nothing to help anybody's cause. STEPHEN MOORE, EDITORIAL WRITER, WALL STREET JOURNAL: I don't think there was a conspiracy behind these numbers at all. I think it's mystifying. I mean we're a little confused about, Ali, why there was such a big leap in the number of jobs in one of the surveys and a modest gain in the other.

And a lot of economists like myself are scratching our heads trying to peer at these numbers a little closer and figure that out, but I do not believe there was a conspiracy.

VELSHI: But if you don't believe there's a conspiracy, take your best shot. This is not -- as I've been sort of saying, it's not a number that Barack Obama can really crow about. I have been saying for a very long time, for most people kind of ignore the unemployment rate because it does move around around in an unpredictable way.

The jobs added and jobs loss number is really the one you can get your teeth into. Not enough for Barack Obama to crow about. Not that much for Mitt Romney to sink his teeth into either.

MOORE: Well, I think Barack Obama will probably will crow about this number and already has. You know, we did see a big gain in this household survey. Here's one of the problems with the -- with the number that came out. The big gain in jobs, Ali, about 600,000 of those jobs were an increase in part time work. Now, look, working part time is better than not having a job at all no, question about it. But try, you know, feeding your family, try paying your medical bills, try paying for all your other expenses like your mortgage with a 20 to 25 hour job.

So, look. I think the American people still believe as I do, it's a still a pretty miserable labor market out there. It's getting a little better, Ali, but not a whole lot.

VELSHI: Diane Swonk is a chief economist at Mesirow Financial. She joins us from Chicago.

Diane, let's talk about it, 7.8 percent unemployment -- unemployment rate. It's an improvement but we're not out of the woods yet. Let's deal with the real numbers rather than that rate that gets confusing. 12.1 million people unemployed in September, 40 percent of them have been unemployed for six months or more.

As Stephen just alluded to, many of the jobs created are not of the quality that you'd like to see. What's your evaluation of where we are in our efforts to get our jobs back?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, I think the point that Stephen made about, the 600,000 is really important because it's two-thirds of those jobs where people were looking for full time to extend, on Stephen's point, and only got part time. Now some of that is seasonal hires. We did see retailers are hiring up sooner and earlier for the Halloween which is now the second largest spending holiday of the year.

So good. They got the jobs. They get a little bit. But it's not really what they want. It's not the quality they want. When we look at the payroll survey you really see that great divide that's emerging between domestic demand and the consumer which has been a little more confident. Maybe not about the labor market, a little bit, but more so because they've seen home values couple. That's their largest wealth factor. That's no longer falling.

I think that's big factor in the confidence figure.

VELSHI: Sure.

SWONK: Also we're seeing refinancing pick up 80 percent of mortgages being -- applications today are refinance applications and a lot of that money is coming back into the economy and will help during the fourth quarter. That's the good news. The bad news is all the job losses on the goods producing side of the sector.

VELSHI: Right.

SWONK: Manufacturing job losses two months in a row.

VELSHI: Right.

SWONK: And having manufacturing sector. That's global demand and the global weakness.

VELSHI: Yes.

SWONK: So you really see the unevenness of the recovery persist which isn't enough.

VELSHI: That's the stuff that presidential candidates or presidents can have difficulty moving the needle on. But you did talk about housing which I've been calling the golden lining around the -- around cloud.

I want to bring in Don Peebles. He owns a real estate development firm. He's a Democrat. He's a top fundraiser for the Obama campaign.

And, Don, most of your work is in sort of bigger stuff. You're not buying individual homes. But there's definitely stuff going on in the construction sector, in home building, in home buying, as Diane said, in refinancing. These low rates as expensive as they've been to keep in place seem to be -- it seems to be combining with low home prices, low property prices, and causing some activity.

DON PEEBLES, CEO, THE PEEBLES CORPORATION: Yes -- no, the housing market has picked up especially in more of our global cities. If you look at the market in Miami, for example, which was one of the biggest drops when the housing recession hit the hardest. Miami is back. Miami is back in a very big way.

New York is back in a very big way. Washington, D.C. is back. Markets like Phoenix, they're back as well. But in Nevada, for example, still having a lot of difficulty. And that's a combination of foreign interests. Foreigners buying in our market especially, say, South Florida, where South Americans are looking at our U.S. markets as being very, very cheap.

So you look at a big chunk of those buyers in Florida, for example, are foreign buyers. So many Americans are taking advantage of these lower interest rates.

Also rental rates have gone up so much that the cost of ownership now in many instances after taxes is less money than it cost to rent. The big challenge, though, is that we're not getting enough people being able to move up out of their existing houses. We're not getting enough people to relocate because they are stuck in their homes even though they are current on their mortgages, even though they qualify for their mortgages, the homes are worth so much less than their current mortgage amounts, they can't get out and they can't refinance.

VELSHI: Yes.

PEEBLES: And so there's got to be a new policy that comes in to address that challenge.

VELSHI: Yes.

(CROSSTALK)

MOORE: Ali, can I mention something about housing for a second?

VELSHI: Go ahead.

MOORE: I want to pat my -- myself on the back. As you know for the last year or two I've actually been somewhat bullish on real estate and housing.

VELSHI: You have been.

MOORE: And I think that we are seeing -- this gentleman is right if you look at the major markets, you are seeing a rebound in real estate especially in states like Florida and states like Arizona.

And what's interesting is the two reasons I think you're seeing an uptick is, number one, you've got these mortgage rates that we're going to be telling our grandchildren there was a time you can get a mortgage for less than 4 percent.

VELSHI: Right.

MOORE: But the other thing just to think about, if you're worried a little bit about inflation taking up in the future, and I am.

VELSHI: Yes.

MOORE: Given all the money, you know, what -- a good way to protect yourself against inflation, this is --

(CROSSTALK)

VELSHI: A hard asset like a house.

MOORE: Own real estate because it holds its value.

VELSHI: All right. I want all three of you to stay right where you are. We're going to talk more about jobs and we're going to keep looking at how housing is not the silver lining but probably the gold lining in the economic storm clouds that are threatening the recovery.

(COMMERCIAL BREAK)

VELSHI: All right. We're talking Friday's jobs data with our panel. I want to get back to Diane Swonk.

Diane, what were you saying just before the break about housing, not always being as safe as we think it is.

SWONK: Actually there's two critical issues. House is number one and it's still on such low levels. And we're seeing a housing recovery, occurring things like apartment rentals more than it's occurring in single family after adjusting for, you know, household formation we're at depression levels in the housing market on housing starts activity.

That's where the real bang for dollar is in terms of employment, is in single family housing construction. We are seeing investors come in because of all the right things -- Steve and I agree, it's actually a good time to buy real estate. That said, there's investors coming into real estate, buying single family properties either renovating out of foreclosure or building it and then renting it.

When you flip to rent a single family home versus flipping to buy you have far less multipliers. You don't put as many high end things in it. Let's face it, renters are hard on properties rather than owners. So the multipliers are much less. But we're also not seeing the real comeback in single family housing starts that we'd like to see.

VELSHI: Right.

SWONK: To see the jobs that you really want to see. That's where the bang for the dollar is. It's one of the reason the Fed picked mortgaged backed securities to purchase and try to help that market.

VELSHI: Right.

SWONK: And I think that's important to remember right now.

VELSHI: OK. Let's take this over to Don for a second.

Don, you're the guy who can explain in very clear terms for my audience how it is that a combination of low interest rates and low property rates and a boom in housing, how much of a relationship that has to job creation. I think there still may be some people in this country who don't get what a big deal that is. Tell me how you end up creating jobs.

PEEBLES: Well, number one, of course, is construction jobs. When there's a demand for new housing and when inventories decline as they have been doing over these past 36 months, gradually going down, and now it's significantly going down, for example, inventory in Miami is about what it was during the boom time. So what that does is it creates a demand for new inventory, new product, new construction.

And not just from housing, by the way. On multifamily housing, condos, hotels, all generate construction jobs and they're tremendous construction job generators so that creates jobs there. And then the massive amounts of supplies and building materials that are necessary and the consultancy, architects, engineers, the professionals, even the lawyers. They all get hired to help create this product of real estate housing and so forth.

Also I disagree, by the way, that real estate is not the best hedge against inflation. It is. And if you look at 2006 I can assure you by 2016 that those property values will have come back and that asset, that real estate asset even in Las Vegas will have outperformed inflation during that same 10-year window of time.

And real estate is a long-term assets.

SWONK: OK. I agree with that.

PEEBLES: And Americans need to look at it as not a commodity, it's not a stock, it's not a commodity, it is an asset that you have a utilitarian use out of and over time it hedges an American family against inflation. Over 10, 20, 30 years. My father owned the house I came home to as a child. Owned it for 34 years.

VELSHI: Yes.

PEEBLES: And he paid about $16,000 for it, and sold it for 500,000 and it was his nest egg for retirement.

VELSHI: All right, Don. Your explanation about the job creation --

(CROSSTALK)

SWONK: The problem is more people don't hold their --

VELSHI: Do ahead, Diane.

SWONK: But the problem is most people don't hold their -- most people don't hold their homes that long. I've been in a house for 21 years. And I agree with that in terms of principal of having a home for a long time but that's just not the way the American housing market has worked over the last 20 years and I think that's important to point out as well.

PEEBLES: Well, actually it has worked over -- up until the big boom in real estate, the average hold of single-family homes was over 10 years. And if Americans look at housing as not a speculative asset but as an asset that they can utilize and invest in their long term future they will outperform any other asset.

VELSHI: I actually think -- I think we're all agreeing on this point actually. So I want to ask -- I want to ask Stephen Moore something here. I think all three of us -- there are four ever us actually. Forget my math. All four of us agree on this point. Why is it that's not why Mitt Romney says he can create 12 million jobs over four years. He talks almost exclusively about lowering taxes to spur job growth. And I have a suspicion you actually agree with him on that.

MOORE: Yes. I know you've been skeptical of that number. I think it's very achievable. I mean as you noted with that chart that you were showing even though we have had five million new jobs over the last four years, we're -- do you realize we're still about I think about four million jobs short of where we were in 2007?

So we still have a lot of ground to be made up. In fact we should be growing the labor force and employment by about double the rate that we are. If we pick up the pace we should be at and keep that for four years I do really believe 12 million jobs is achievable.

My goodness, Ali, we did that in the 1980s under a Republican president, Ronald Reagan.

VELSHI: We did. We did.

MOORE: And under a Democratic president, Bill Clinton.

VELSHI: And I would point -- and GDP was 4.8 percent, it went 4.5 percent in one case, 4.3 percent.

SWONK: And we didn't have a financial crisis --

(CROSSTALK)

VELSHI: And I can't find economists who are going to tell me that we're going to have that kind of growth rate. I agree with you, Stephen. We had those kind of --

MOORE: But you're (INAUDIBLE) your show. Come on, we should aspire to 12 million jobs even if we can't --

VELSHI: We should. And I should aspire to look like Brad Pitt. That's not going to happen either. But thank you all for coming on the show today.

Coming up, something both candidates actually agree on.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL NOMINEE: If someone gets an advanced degree I want them to stay here. So I'd staple a green card to their diploma.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: But as soon as they get their degrees we send them home to invent new products and create new jobs somewhere else. That doesn't makes sense.

(END VIDEO CLIP)

VELSHI: Immigrant entrepreneurs could be a powerful force for job creation but U.S. policy is standing in the way.

(COMMERCIAL BREAK) VELSHI: Friday's jobs numbers underscore something we already knew. We need more jobs in this country. So how do you create them? Well, one answer may surprise you. Immigration. I know what you might be thinking. How does bringing more people into this country already without enough work create jobs? Doesn't it take jobs away from hard- working Americans who desperately need employment?

Well, the truth is that highly skilled immigrants with degrees in science, technology, engineering and math, a.k.a, the STEM jobs, well, they create jobs for other Americans. According to one study from 2000 to 2007 for every 100 foreign-born workers who earned an advanced STEM degree here in the United States and went on to work in those fields, that created an additional 262 jobs for native-born Americans.

But instead of embracing this the U.S. immigration policy sends those highly skilled immigrants, many of them educated in the best American colleges and universities, back home to their countries of origin so they can create jobs there, competing against the U.S., by the way, in the global economy. It's called the reverse brain drain.

Joining me now is Vivek Wadhwa, he's a director of research at Duke University and a fellow at Stanford Law School. He's also the author of "The Immigrant Exodus: Why America is Losing the Global Race to Capture Entrepreneurial Talent."

Vivek, good to see you, my friend. Your previous research found that from 1995 to 2005 immigrants founded more than a quarter of all tech and engineering startups in the United States and more than 52 percent of those in Silicon Valley. Now you have just updated the numbers and immigrant entrepreneurship has declined.

Talk to me about this.

VIVEK WADHWA, DUKE UNIVERSITY: Yes.

VELSHI: How -- why it is happening and how do we fix it.

WADHWA: It's very simple. There are million skilled immigrants waiting for permanent resident via sass. Many of them want to start companies and employ Americans and do good for this country. We won't let them, we won't give them via sass. So they're getting frustrated, they're getting fed up and they're trotting home. So the jobs that would be here -- the jobs that will be boosting American competiveness are now boosting our competition.

VELSHI: Yes.

WADHWA: Brain dead policy.

VELSHI: It's weird. So it's brain dead policy that both presidential candidates disagree with.

WADHWA: Yes.

VELSHI: They both think, you know, you heard Mitt Romney saying, want to staple a green card to the degree. You heard Barack Obama say it. So tell me why -- where is the hold up? Where is the problem?

WADHWA: You know, I call them juveniles. Our political leaders right now are battling each other rather than trying to fix the real problem they agree on skilled immigration. Everyone agrees that we need to have a start-up visa to allow entrepreneurs to start companies here. That we want more scientists, more engineers, more doctors. It's good for America. But they won't give each other political victory. Both sides, you know, support STEM but they won't agree on legislation for petty, you know, wrangling that they are doing.

It's really silly what's going on in Capitol Hill.

VELSHI: The same stuff we've been talking about for the whole rest of the show.

WADHWA: Yes.

VELSHI: They can't agree on actually stuff that's going to send us into a recession. They can't agree on fixing that. So this is probably way down the political totem pole.

WADHWA: Exactly.

VELSHI: It is by the way easier to get rich in Asia than anywhere else in the world. Does this exodus of immigrants reflect that new reality, that there are opportunities in other countries for highly education workers? The U.S. is not the only game in town for them.

WADHWA: Absolutely. You know, Ali, my team at Duke had surveyed several hundred entrepreneurs that went back. We were shocked to learn from them that they're doing better back home. You know, how could they be doing better back in India and China with all the corruption and the pollution and so on, but they said that they're doing better financially than they were doing here. They're doing better in terms of quality of life.

Almost every measure they're doing better back home than they are over here. Big surprise. So this is a wakeup call for America that we can't assume that this is the only land of opportunity. That the -- for great people there are opportunities in many, many other countries in the world. And unless we do everything we can to get them here they will go and become our competition.

VELSHI: That's right. OK. So let's hold on to permanent residency and the start-up visas and the green cards for a second. H1b visas allow U.S. companies to temporarily hire qualified immigrants. The number is currently capped at 65,000 of these visas per year, plus another 20,000 for immigrants with advanced degrees.

Now listen to this, almost every year employer demand exceeds the number of h1b visas issues with STEM occupations dominating the response. That's where -- the request. You can see that 63.4 percent of them were STEM.

Look at where we are getting these visa requests. Computer occupations, 152,000, engineers, 26,000, business occupation -- business operations 20,000. Health and treating 18,000. And finance 13,000.

Vivek, you say we need more of these visas but you also admit that there is a dark side to this program. What is the dark side?

WADHWA: Well, the dark side is that right now if you're coming on an h1b visa you're tied to the employer. Which means that you can only work for the company that brought in. And if you filed for a green card, the permanent residence visa, it could take a decade, 15 years. You get the green card.

In the meantime while you're waiting, you're stuck working for the same employer. And these employer know that they have you captive. Therefore they are more -- they're less likely to give you promotions, less likely to give you increases than other people. So you're stuck doing the same menial job. So you have these really smart people coming here, doing the same menial jobs that they did when they entered the country for decades or the best part of their lives. This -- this is really bad for America and for our competiveness.

VELSHI: Let me ask you this. Critics of this h1b program say that what you and I are saying is false. They say the issue is that these are unskilled, relatively unskilled people coming in to take these jobs, taking jobs away from Americans and we constantly hear it, you're going to get tweets today, Vivek, and so am I.

WADHWA: I know.

VELSHI: From people who say, I'm highly skilled, I'm in one of those areas, and I can get a job. We haven't been able -- we don't have a shortage.

WADHWA: Well, you know, this is the research that Brookings Institute did. They looked at the job of a h1b workers. And they found was it's regional. There's shortages in Silicon Valley, there aren't shortages in other parts of America. But the most interesting thing is that whenever there are more immigrants, whenever there's more demand, there's more economic growth.

So it sort of builds on itself that these people come in, they work for American companies, who are then going to start their own companies, and they'll hire more Americans. This is what's made America what it is. This is why Silicon Valley thrives. Silicon Valley is more than half immigrant. It's the most innovative place on this planet.

VELSHI: Vivek Wadhwa, always a pleasure to see you. Thank you my friend for joining us.

WADHWA: Absolutely.

VELSHI: We'll talk about this --

WADHWA: Anytime, Ali.

VELSHI: We will talk about this more once we don't have to talk about economic fiscal crisis and things like this. We'll talk about great solutions.

Vivek Wadhwa.

WADHWA: Read my book.

(CROSSTALK)

VELSHI: All right, President -- yes, I will definitely read the book. Thank you.

President Obama and Mitt Romney talked about jobs at the debate. They discussed taxes, debt, even Big Bird. But neither candidate mentioned the most immediate threat to our economy. I'll tell you what that is next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: I've been warning you about the coming economic storm. That as positive job numbers and higher consumer confidence are convincing many of you that my storm or at least talking about it makes me full of hot air. But there is a storm coming if Congress doesn't act soon. I am talking about the fiscal cliff. That's more than $600 billion worth of budget cuts and tax hikes for next year mandated to start taking effect as early as January 1st.

Now what can happen, you ask. Let's bring in Christine Romans. She's the host of "YOUR BOTTOM LINE" to answer that very question -- Christine.

ROMANS: Ali, I cannot confirm nor deny that you are full of hot air but I can tell you that tax hikes will affect us all if nothing is done to avert this fiscal cliff.

Here's what we're looking at here at the beginning of the year. The Tax Policy Center forecasts American households will pay on average $3500 more in taxes if Congress let the Bush era tax cuts expire for everyone. Along with ending the payroll tax holiday.

What effect could that and across the board spending cuts have on the wider economy? Well, a new report from the Center for Regional Analysis at George Mason University predicts that some 277,000 federal employees will lose their jobs in the next 12 months. That's 14 percent of the federal workforce.

And 14 of the 17 economists surveyed by CNN Money, Ali, they predict fiscal cliff will cause a new recession. Now interestingly all 17 believe the economy won't plunge off the cliff because they think Congress will finally get its act together and do something in the lame duck session following the elections or when the new Congress convenes in late January.

Lame in either case. But by then it could be too late for the economy. That's because companies don't like uncertainty as you know, Ali.

VELSHI: Yes. ROMANS: And some say they're holding back on hiring. We can't have an economic recovery without job creation.

VELSHI: All right. So with the looming economic disaster like the fiscal cliff you would have expected the topic, Christine, to top the agenda at the week's presidential debate. I was waiting for the question. I wanted to know the leadership they were going to take.

You have devised a word cloud from that first debate and it turns out that the words most uttered, the words most uttered were the big ones. So you can see people, Medicare, governor, obviously, Romney. What jumps out? Well, I don't know but what doesn't jump out is the word fiscal cliff. Neither President Obama nor Mitt Romney mentioned it at all during -- Wednesday's debate.

I was kind of amazed, Christine. I was -- I was amazed to have a debate focused on the economy and not one word about how these guys would avert the fiscal cliff.

ROMANS: And you're right to.

VELSHI: And frankly not one question from the moderator about the most serious thing that could be facing our economy right now.

Christine, stay right where you are. I want to bring in CNN's chief national correspondent, John King, who has been a debate moderator in the past as well as the former Democratic U.S. senator from Georgia, Sam Nunn, through the non-partisan campaign. To fix the debt he is actively working with both Alan Simpson and Erskine Bowles to find sensible long-term solutions to the current gridlock. Think of this as Simpson-Bowles 2.0.

Senator Nunn has been highly critical of both fellow Republicans and Democrats over their handling of the fiscal cliff that threatens our economy.

Senator Nunn, you have said, quote, "Both sides seem to have a political strategy but their governing strategy is in doubt." Those are your words. Have you ever seen a government so broken that lawmakers would rather take the economy to the brink? And I agree with those economists who say it probably won't happen but why are we risking this? Why are risking people's decisions about whether to employ someone because they're not sure what will happen?

SAM NUNN (D), FORMER U.S. SENATOR: Well, it's a very dangerous game of chicken going on, and I think that game needs to be changed and changed quickly. The lame duck session can do that. What I would like to see is instead of just kicking the can down the road and kicking the cliff down the road with this same draconian solution if we don't reach an agreement change the can before you kick it.

That means something like Simpson-Bowles or Domenici Rivlin or a combination would become the default position. So you give the next Congress time to take their own course if they choose to but failing that you would have a soft landing rather than a disaster which is what we face now unless changes are made. So I do believe -- (CROSSTALK)

VELSHI: That's an interesting point.

NUNN: Yes, I do think they will kick the can but I think it ought to be a different can with a soft landing.

VELSHI: What an interesting point. So we tried the -- if you don't do it it's going to be catastrophe and guess what, we couldn't trust them to avert catastrophe in good times. So you're saying we need to do something else but say this is what it's going to look like. It's not going to hurt the economy. There are times when this -- wouldn't be as damaging as it now.

Let me bring in someone you know, Senator, John King.

John, you watched, I know, and you watch and comment around the presidential debate. Neither Mitt Romney nor President Obama even mentioned the fiscal cliff. They talked a lot about the economy, they talked a lot about jobs. If I were a voter I'd demanding an answer right now on exactly how anyone who wants any elected office in Washington plans to prevent this insanity.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: It came up sort of indirectly once when Jim Lehrer reminded Governor Romney back in the Republican primaries, all the Republican candidates were asked, raise your hand if you'll take a deal that for $1 in tax increases you get $10 in spending cuts.

VELSHI: Right.

KING: And none of the Republicans would take that deal. Look, the president doesn't want to talk about this before the election because he would have to look Democrats in the eye and say, if I cut a real deal it's going to cut some of the programs you love. Governor Romney doesn't want to look the voters in the eye right now because he knows probably if you've still got a Democratic Senate or roughly evenly divided Congress, the revenue question will be back on the table in some form.

You know, Senator Nunn has been gone from the town for a while and he's probably grateful for that. He used to serve in what they called the world's most deliberative body. Not so much any more.

VELSHI: All right. All of you stay here. We got more to discuss on this.

Hey, coming up, Winston Churchill once said you can always count on Americans to do the right thing after they've tried everything else. So I'll ask former Senator Sam Nunn why he's optimistic that this dysfunctional Congress can come together and come up with something like what he just suggested, the condition being a soft landing not a hard dangerous landing that could send us into a recession. That's coming up next on YOUR MONEY.

(COMMERCIAL BREAK) VELSHI: We're back on YOUR MONEY, back with former Georgia senator, Sam Nunn.

Senator Nunn, you made a very interesting suggestion a few moments ago that, OK, if Congress is bound to kick the can on a decision about cutting spending and deficit control, change the can. Come up with a condition for not making a deal that is actually palatable and not horrible for the economy like the currents situation that we have.

What is the -- tell me how that would even happen. Are there enough people like you and those who you're trying to work with who actually are still in office in Washington to hammer out a more perfect compromise?

NUNN: I think those kind of people are in the House and the Senate. And I think they are talking with each other. But the problem is, Ali, they are not getting support from their own leaders in the Congress, Republicans or Democrats. They're not getting support from the White House. They are not getting support from their party base who insist on 100 percent solution in their favor.

And the American people, the common sense Americans that I think are in the great majority have to rise up because that's the missing part of the -- of the airplane is the middle. The wings are flapping and making their voices heard but the middle is not. And that's got to happen because we've got to get behind people like Saxby Chambliss from my state and Mark Warner from Virginia, and many others that are working together.

VELSHI: John, you follow this in and out. You probably have a sense of congressional districts where there are people who might do this. How is that going to play? The wings are flapping and making noise. And there's nothing coming from the middle. Can we get something from the middle?

KING: I love Senator Nunn's analogy. Look, there's a lot of dysfunction right now and there is going to be dysfunction until we have the election. Then we will have the lame duck session. But that lame duck session and this question of the fiscal cliff and what to do to keep the car from going over it will be heavily influenced by what happens in that election. If Governor Romney wins the election then Republicans will be less likely to come to the table seriously ready to talk about revenues.

If the president wins the election, you know, he will say look, that's a mandate from the American people, we're getting rid of the Bush tax cuts on higher income Americans and I want even more revenue from wealthy Americans. But the composition of the House and the Senate, even though this lame duck session will be the current Congress, what they see happening in November will greatly influence.

So the best thing, the best thing between now and the election is for you to talk about this on your program. Hopefully the candidates would talk about it around the country.

VELSHI: Right. KING: And the American people in their votes on November 6th would make some kind of a decision on this. But you mentioned it didn't come up much in the debate. The candidates won't talk about it much, most candidates for Congress won't talk about it much, because it requires tough choices.

VELSHI: Yes.

ROMANS: And Ali, you know --

VELSHI: That's why we keep talking about it here. Christine.

ROMANS: Even the people who are going to have to fix this, you know, we talk about the senators, a few senators who are starting to talk about -- starting to talk about a framework and we don't have an awful lot of time. And even when you talk to them and you say look, can you tell me what are you doing? We know there's a meeting next week. When are you going to hammer this out? Who is involved?

They get very skittish. They don't want to raise expectations. And they really -- they're really, really far apart still, Ali. They're very, very far apart. So for all those people in Washington who say, don't worry, 11th hour, you know, they're going to get it done.

VELSHI: Yes.

ROMANS: That's not good enough. They haven't even started on this.

VELSHI: Christine, I'm getting tweets as we speak from -- saying, you're Chicken Little, the world is falling, they're gong to make a deal, it's all going to be fine. Why are you worrying about this recession? You even said the economists said they'll get a deal. So why are we worrying about this? What's the danger of worrying about this?

ROMANS: The danger is a big recession. And if they get a deal the danger is -- the worse thing they could do is go off the cliff. The second worst thing they could say is say we're going to punt for three months. Oh no, now we have a framework and we're going to give ourselves a year to figure out how to get $4 trillion in spending cuts and make everybody happy.

VELSHI: Yes.

ROMANS: Guess what, you would have businesses saying, we can't do anything until they get this mess fixed and --

VELSHI: Sam Nunn -- let me ask Sam Nunn.

Do you believe -- I mean I know you know that there are people who are working on this. Do you think that everybody involve in this gets that there is a danger -- it may not be huge but there is a danger that you can put -- push this fledgling economy, this fledgling recovery into a recession?

NUNN: Well, let me give you the encouraging spin on the debate which goes to that point. Both candidates, President Obama and Governor Romney, said good things about Simpson-Bowles. Of course neither one -- neither one of them embraced it. But the other thing that happened and it hadn't been emphasized as much as I would have thought, I think we've had some creeping candor going on here in terms of the structural debate, not the cliff, but the structural deficit situation.

VELSHI: That's right.

NUNN: Governor Romney made it clear that he's going to have rate cuts but not tax cuts. He's talking about revenue mutual reduction in rate. That's a $5 trillion change just in one debate. And on the other side President Obama, this was a dog that didn't bark in effect because usually Democrats talk about Medicare and Social Security in a way that --

VELSHI: Right.

NUNN: -- indicates they would never do anything about it. President Obama to his credit did not do that. So I took some encouraging spin from those things during the debate.

VELSHI: All right. If you're encouraged then --

(CROSSTALK)

VELSHI: We're encouraged.

NUNN: Yes, something that Congress can build on. I mean that may give the people in the Congress working together a little more ammunition.

VELSHI: Yes. Very good. All right. Thank you, Senator. Good to see you as always.

Senator Sam Nunn, former senator from the state of Georgia.

John King, as always. Good to see you. And Christine Romans.

Coming up next big promises, small returns. Can political leaders actually create jobs or our voters around the world being lied to with false expectations? Q & A next with Richard Quest.

(COMMERCIAL BREAK)

VELSHI: The fiscal cliff we are racing toward is just the latest frightening example of the incompetence of our elected officials. It's also proof of what a small world we live in since people running for office around the world make unsubstantiated claims about job creation all the time.

See, for all the things that matter in an economy, jobs matter the most. And in a desperate world outlandish promises can give a candidate traction or even victory.

Joining me now from London is my esteemed colleague, Richard Quest, the host of "QUEST MEANS BUSINESS" on CNN International and a man who would never make a promise that he couldn't keep.

Richard, today's Q & A question, can political leaders actually create jobs or are voters around the world like those in America being lied to and given false expectations?

I'm going to go first. Ring the bell, and give me 60 seconds.

Presidents don't do as much to fuel jobs growth as President Obama or Mitt Romney would like you to believe, Richard. Dysfunctional legislators have more impact, but it's really about the business cycle. U.S. job growth may have more to do with slowdowns in Europe and Asia than with anything Washington does. The only thing presidents can do is instill confidence in consumers who will feel safer spending their money thereby creating demands, thereby creating jobs.

Mitt Romney, Richard, after making a ridiculous pledge to create 12 million jobs in four years -- a pledge by the way that the Obama camp quickly matched -- now argues that the way he'll cut taxes without increasing the deficit is that so many jobs will be created under his administration that people will be working and spending the money that they're not paying in taxes.

It could happen. I could also become as tall and handsome as you are, Richard, but I don't go around promising to do so. And I'm not asking anyone to vote for me.

How much can politicians actually do to create jobs? I guess they can create stability and an expectation of what will happen and low taxes and regulation.

I don't know, Richard. What do you think?

RICHARD QUEST, HOST, CNN'S QUEST MEANS BUSINESS: I'm glad you asked. Politicians do not, cannot, and will not create jobs. We agree on that. We also agree on the fact that they create an environment that allows the private sector, men and women who start businesses, to actually go out and create the jobs that we all seek.

But here's the important point. There is a no difference this time -- a big difference this time around because what has happened is the awful deep structural recession. We are slowly but surely crawling our way out of a mess that took years to get into, and we certainly are not going to solve in a matter of a couple of months.

That is why politicians who make promises are so disingenuous. That is why politicians who promise jobs are so dangerous. And that is why politicians who promise jobs should be ignored.

In the European Union, we have unemployment over 11 percent and it is rising. That is the true disgrace of politicians and jobs.

VELSHI: The difficulty, though, is when they both make the same -- both sides make the same promises and you get stuck in the pickle that you're in.

QUEST: But, but -- hang on, hang on. I heard you, Ali Velshi.

VELSHI: Yes.

QUEST: Maybe they can find the moment when you promised this. You promised that if one of those political promises were broken, I think you said you'd wear a dress.

VELSHI: I -- if they make it, if they get -- create 12 million jobs in four years, I'll wear a dress, but I'll be so happy that the economy is doing so well that it won't even matter. We'll erase this tape. Hopefully this doesn't get recorded.

(LAUGHTER)

Richard, always a pleasure to see you. Richard Quest, host of "QUEST MEANS BUSINESS."

QUEST: I'll pay -- I'll pay you money. I'll pay -- I'll pay good --

VELSHI: Somebody cut his mike, cut his mike off right now.

QUEST: I'll pay good money to see --

VELSHI: Speaking about money, we have to raise some so we're going to take a commercial break. When we come back, investors have cashed out a $5.1 million worth of U.S. stock mutual funds. That's just last week.

Since the financial crisis hit, you've been scared, and I don't blame you. But other than me, who's looking out for you? The Consumer Financial Protection Bureau. They've been busy. I'll tell you what they're doing to protect your money. Coming up next.

(COMMERCIAL BREAK)

VELSHI: Congress is on vacation, the White House is in election mode, and economic storm clouds are gathering on the horizon. Virtually no one is watching out for you. No one except for the Consumer Financial Protection Bureau.

In the fallout of the financial crisis of 2008, it was the -- it was very obvious that American people needed a watchdog and they got one in the form of the CFPB. It was created as part of Dodd-Frank. The bureau was slow getting onto its feet particularly because of resistance from Republicans in the U.S. Senate. But now it's up and running and so far this year, the agency has put $425 million back into the pockets of defrauded consumers.

Just this week, the CFPB ordered American Express to refund $85 million to more than 250,000 of its customers. The CFPB charged the company with violating consumer protections laws at, quote, "every stage of the consumer experience, from marketing to enrollment to payment to debt collection."

Now in the last few months, the bureau has also targeted deceptive and illegal practices at Discover Bank, Capital One, and all of the major credit agencies. CFPB director Richard Cordray is sending a strong message to Wall Street that things have changed since 2008. Hopefully Wall Street will listen.

Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday, 1:00 p.m. Eastern and Sunday at 3:00 p.m. Find me on Facebook @facebook.com/alivelshi, and tweet me, my handle is @alivelshi. I read every message.

Have a great weekend.