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What Voters Want; Obama's Economic Plan; Romney's Five-Point Plan; The Fiscal Cliff; Why the Fed Matters; China vs Europe
Aired October 27, 2012 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: The election is less than two weeks away. The weather here in Florida may look all right, but that economic storm I've been telling you about is still headed our way and this week, it got much stronger.
Welcome to YOUR MONEY. I'm Ali Velshi.
Recent polls show a dead heat in the presidential election. The economy is still issue number one and the very voters who could decide this election are still undecided.
UNIDENTIFIED MALE: I try and keep an open mind.
UNIDENTIFIED FEMALE: I have not heard anything of substance.
UNIDENTIFIED MALE: I'm looking for more. I mean we're talking about another four years.
VELSHI (voice-over): The questions are all about the economy.
UNIDENTIFIED MALE: I'm not up at the White House. I don't see rich people all the time but I see a lot of poor people.
VELSHI (on camera): Part of the microcosm of the issues that we're facing in America. You can find every one of the major issues that were involved in the great recession. Housing.
UNIDENTIFIED MALE: When the whole mortgage debacle happened the banks weren't lending any more money.
VELSHI: Social Security, Medicare.
UNIDENTIFIED MALE: It's a life saver for me.
UNIDENTIFIED MALE: I want Medicare preserved.
UNIDENTIFIED MALE: You can cut other things besides Medicare.
VELSHI: This is a state where a quarter of the population is over the age of 60. That's the biggest proportion anywhere in the United States. So these people are concerned about every part of the economy. They want answers as to who is going to be best for them in the next four years. UNIDENTIFIED MALE: Who truly is the best for America, not for me.
UNIDENTIFIED MALE: Go Obama. Yes.
UNIDENTIFIED FEMALE: Vote for someone that will help this country. Not destroy it.
UNIDENTIFIED MALE: That's breaking my chops just thinking about them.
UNIDENTIFIED MALE: I think the American people are going to pick it up and I actually think it's going to be a landslide. It's going to be Reagan-esque.
VELSHI: That little slice of people in Florida who haven't made their decisions, what are the things they need to hear from their candidates in order to make a decision and cast their ballot for the president of the United States less than two weeks?
VELSHI: Well, both candidates' economic plans rely on big growth and this week, some of the biggest and strongest U.S. companies said the growth that we've already got is tepid and slowing. Companies like Caterpillar, General Electric, 3M, Ford, all warning about conditions in Europe and China. These are companies that are symbols of American stability, they are worried. So worried that some are laying off workers to cut costs.
You remember that move. The problem here is that there's just less money coming into the United States. The candidates aren't talking about the slowdown overseas or the storm that it's fueling, but they claim that they can keep America competitive, create millions of jobs, and cut the deficit.
Voters understand their big ideas and they like them, but undecided voters aren't sure which guy can turn promises into economic reality.
I've got two of the best political minds in the country to break this down for us. Candy Crowley is our chief political correspondent, she's the host of "STATE OF THE UNION WITH CANDY CROWLEY," and Mark Preston is CNN's political director.
Candy, let's start with you. From the very first primary which you covered to the last hour of voting, the economy has been and will be issue number one. Is there anything either candidate can really say or do in the next few days to sway voters who are still not convinced?
CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: I don't know that even if they could, they have anything left to say or do to convince these voters. You know as well as I do, we're going to get one more jobs report and we're also going to get the report for how the economy, the GDP, how the economy did in the third quarter, so, you know, it's possible that they will have some talking points around that but at this point in a campaign, they don't want to say anything new, Ali. They don't want to move it.
CROWLEY: Right now the campaign is at the subterranean level. It is about getting out their voters and they don't want to -- you know, they don't want to say anything new.
CROWLEY: That people have time to kind of, you know, throw -- throw arrows at the target.
VELSHI: I think you're exactly right. That's the frustration we're hearing.
Sure, Mark, it's a small number of undecided voters in a small number of states right now who are undecided. Tell us about who these undecideds are because in a tight race, a race that's this tight, they could make the difference. As Candy says, it could be a get-out-the- vote operation or it could be some nuance in the campaign. Is this typical and how tight is it?
MARK PRESTON, CNN SENIOR POLITICAL DIRECTOR: Well, Ali, you know, let's even make it even a little bit more complicated. There's a subset of the undecided voters, that's the uncommitted voters. So there's probably about 1, 2, 3 percent of the nation right now that is actually undecided. Folks who haven't made up their mind.
There's probably about 4, 5, 6 percent of the uncommitted voters, these are folks who might be leaning towards Obama, might be leaning towards Romney, but haven't cemented it in. So what we're going to see over the next two weeks or next 12 days, is they are going to make an effort to try to lock up their base, get their vote out, but also try to get these uncommitted voters to come their way.
So we've heard a lot in their messages. It has all come down to the economy. The last presidential debate this past week was about foreign policy but it was dominated by the discussion of the economy and that's what we're going to hear from the candidates.
PRESTON: On the campaign trail.
VELSHI: All right. Candy, ultimately those -- that small sliver that Mark is talking about want answers, as you suggest, they are not likely to get in the next week and a half or so. Inevitably, there are going to be unanswered questions. It won't matter for the loser what is the advantage to being nonspecific right now. Can they still -- can these candidates who are deadlocked, can they win this election without getting more specific?
CROWLEY: Well, somebody will without -- and neither one of them have been very specific as you well know.
I do think, Ali, that in terms of putting out a -- look, here's the bill I'm going to introduce, or here's the exact numbers in the budget, in general what happens with campaigns, at least for the presidency, it is less about filling in those lines as it is about talking about a direction.
I think for a couple of reasons. First of all, the more lines you fill in, the bigger target it is. But second of all, voters are smart enough to know that no matter what these guys are promising right now, they have to work with the Congress. So people know that they're going to say things that are not going to happen.
CROWLEY: Because they have to deal with Congress. So they kind of want to set a general direction for two reasons. One, people get that, you know, they're not going to get everything they want, and two, they just don't want to be that large of a target because people start kind of picking it apart and saying oh, you know, this is what he means and this is what it's going to mean to you.
CROWLEY: So they don't want to do that at this point. And yes, it's -- they -- whatever thus.
VELSHI: You make -- you make a very good point because people who are undecided about Romney are telling me they would like to see the bat, they'd like to see how he gets to some of these things because he's put some ideas forward about tax cuts and job creation. Those who are undecided or leaning toward Obama are saying they want to know how he gets this done if he's got the same makeup of Congress the second time around because he spent so much time saying Congress has been the impediment.
Mark, these candidates are spending millions of dollars on this home stretch. We're seeing it here in central Florida. It's quite remarkable. We're going to North Carolina next, and then Virginia and finally Ohio.
Right now, you've done the math a million ways, what matters the most? Which of these battleground matter the most?
PRESTON: Well, you're in Florida right now and right now it is leaning also slightly towards Mitt Romney. That is a good sign for Mitt Romney. You're heading up to North Carolina, right now we have flipped that to Mitt Romney's call in just this past week. It was a tossup state, we decided to turn it into a Mitt Romney win, or at least that's what we think right now.
But it really boils down to two very important states, Virginia, very important state for Mitt Romney. He has to win it. But more importantly, he has to win Ohio.
VELSHI: Candy, good to see you. Mark, thanks very much. We will be talking to you both in the course of the next few days.
CROWLEY: Thanks, Ali.
VELSHI: The country will be hearing a lot from both of you.
All right. Coming up, we're going to give both sides a chance to defend their economic plans.
(BEGIN VIDEO CLIP)
CROWD: Four more years, four more years. Four more years.
(END VIDEO CLIP)
VELSHI: All right. We're going to give President Obama his chance first. He says he needs four more years to finish the job. That's four more years possibly with a dysfunctional Congress at home and economic turmoil abroad. So why will the next four years be different from the last four? That's next.
VELSHI: That is the CNN Election Express. It's our great big bus. I'm in Orlando, Florida, on the first leg of the CNN battleground bus tour. I've talked to a lot of undecided voters over the past few days. They are worried mostly about the economy.
Now while they understand the candidates have plans they are uncertain as to which of them can actually get their plans done. I'm going to try and help them out.
President Obama frames this election as a choice between moving forward or falling backward. But when you look at his plan compared to Mitt Romney's there are similarities. He wants to create one million new manufacturing jobs over the next four years, double the amount that the United States exports over the next five years.
He wants to reform the tax code and get $4 trillion in deficit reduction over the next 10 years. He also wants to create an infrastructure fund to attract private investment. It's a fund that would give loans based on need and economic benefit. That was part of his Jobs Act.
The president also says he would increase domestic production of natural gas and reduce America's dependence on foreign oil.
All of it is ambitious but some voters are asking what's going to change in a second term.
Robert Reich is a professor of public policy at the University of California, Berkeley. He's also a former labor secretary, he is not an official surrogate for the Obama campaign.
Bob, good to see you again.
ROBERT REICH, PROFESSOR, UNIVERSITY OF CALIFORNIA, BERKELEY: Hi, Ali.
VELSHI: The president is going to face opposition from Congress. Just like he has for the last two years. He does not have the power to fix the situation in Europe. He doesn't have the power to fix slow growth and all sorts of problems with China.
So what's the best reason to think that a second term is going to go better from -- than the first for President Obama?
REICH: Now there are two possible ways it could go better. Number one, if Congress were actually different. I mean remember this is not just a presidential election, Ali. This is also an election with regard to at least a third of the Senate and all of Congress.
REICH: And the president might have a more cooperative Congress. But number two, if the president is re-elected, that is normally considered to be a mandate to get done many of the things that a president up for re-election wants to get done. In this case, for example, raising taxes on the rich. Most of the polls show that a large majority of Americans think that's a good idea. Politicians read the polls.
If the president's re-elected that will be an agenda item that many politicians, even Republicans, say well, I made the pledge to Grover Norquist, but the public wants it and the president was re-elected, that's part of the mandate. So there may be other things like that.
Number three, Ali, there will be circumstantial changes. I mean, for example, something has got to be done on the budget deficit. There is going to be some sort of a grand bargain. The president is going to use every power that he has and many Republicans know that, again, a grand bargain has to be struck on the budget deficit. We can't be stuck where we were.
And so all of these things, plus external events like, say, a more of a recession in Europe, are going to drive change.
VELSHI: Well, the president's advisers have repeated a claim, they don't say it much, but they've repeated a claim that Mitt Romney made that he can create 12 million jobs in four years. They've offered no evidence as to how they do that but to achieve that -- that goal, job growth would need to be 50 percent higher than it is right now.
So under normal circumstances now, under current circumstances, we'd get about eight million jobs over four years. So this means creating an average of 250,000 jobs each month instead of the number that the economy is adding now.
What's the secret plan there, Bob? You were the labor secretary. Is there a secret plan to create jobs that doesn't just depend on growth that may not materialize. Right now it's iffy that growth will get to the 4 percent that we need to get to to create 12 million jobs in the next four years.
REICH: Yes, Ali, you need to have a very, very strong recovery. We don't have a strong recovery yet to get to those kinds of job numbers. I think the White House assumes and I wouldn't be surprised if the Romney camp didn't also assume that the economy will gain momentum over the next four years and those job numbers are not out of the question.
Remember under Bill Clinton, and I was very proud to be his labor secretary, 22 million net new jobs were created over eight years. So 12 million --
VELSHI: Do you remember -- remember the job growth, though? You guys were averaging over 4 percent job growth during that period.
REICH: Yes. And the -- and the economy is larger and more people.
VELSHI: I'm sorry. Four percent --
REICH: I'm not saying we're going to do it. I think the 12 million is very, very optimistic. But it is possible with a recovery, with a strong recovery, policies, specific policies, I don't think there's a magic bullet, I don't think that either Governor Romney or the president has any particular secret up his sleeve that is going to generate a lot of new jobs suddenly.
VELSHI: Right. And it's a tough one because it becomes a wash. They both made the same promise. The issue is what kind of jobs they're going to be. That's been a criticism of President Obama. He has made up for all the jobs that have been lost on his watch, but as often happens, the recovery has created jobs that are not as lucrative as the ones before.
So the president's plan now that he's unveiled focuses on manufacturing jobs. He says he wants to add a million new manufacturing jobs over the next few years. Now the U.S. has added nearly half a million manufacturing jobs in the last 32 months, but over the last few months, we've started losing them again. It's lost 38,000 manufacturing jobs.
So give me the thinking behind this, Bob. This is where I'm talking to people and they say I need the distinction between goals and ambitions and dreams versus how this happens. Why does the president believe he can actually create a million manufacturing jobs and what's the follow-on effect of doing so?
REICH: Well, the -- here's the economic argument, Ali. A lot of manufacturing companies that sent jobs abroad over the last 10 or 15 years, they are bringing them back because transportation costs actually are becoming a larger and larger part of the cost structure. It's much easier to be close to your customers and if your customers in the United States, if we do have a good recovery, those customers want to have manufacturing jobs here because that means cheaper manufacturing goods altogether. Secondly, you see durable orders are up 10 percent. We just got that data. That suggests that there are going to be more manufacturing jobs here in the United States.
A big part of that is natural gas. Those pipelines and all of the natural gas facilities in the United States. As those natural gas sort of deposits are explored and developed, we're going to see a lot of jobs.
VELSHI: Bob, good to see you as always. I'm sorry I couldn't be there. You're sitting there in my studio and I'm somewhere else.
REICH: I'm actually taking over for you here, Ali. I hope you don't mind.
VELSHI: Yes, please. I imagine I'll tune in. It should be good. Bob Reich, former labor secretary of the United States.
All right. Coming up, we're going to dig into Governor Romney's plan and give his side a chance to clear some things up. That's next on YOUR MONEY.
VELSHI: I'm riding the CNN Election Express this week on our battleground bus tour. Undecided voters I've been talking to here in Florida want details. We just went through the president's economic plan. Now it's Governor Romney's turn. He has a five-point plan for the economy and he says he'll create a whopping 12 million jobs in four years.
I have said before, I will say it again, that's a ridiculous pledge and I'll wear a dress for a week if it happens. Why? Because our anemic economic growth cannot support a huge surge in job creation. Not without something very substantial changing and nobody predicts that to happen.
Here's the five points that President Romney -- that presidential candidate Romney is focusing on. First, energy independence. He says this will create millions of jobs in areas like oil, gas and manufacturing. Second, trade. Romney will open new markets and create a level playing field by pressure countries like China.
Three, he'll improve education, retrain workers and help the unemployed. These will likely be state run initiatives, however. Four, he'll slash spending to cut the deficit and shrink the government deficit. And five, he'll help small businesses that includes repealing Obamacare and cutting taxes.
So let's give Romney the benefits of any doubts here and say that he gets all of these plans going in his first year in office. By that point if the country is on track to create 12 million jobs in four years, the labor market should be adding an average of 250,000 jobs a month.
The economy just added 114,000 positions last month, by the way, to give you some context.
Vin Weber is going to tell us how Mitt Romney gets this done. He's a policy adviser to the Romney campaign and a former congressman.
Vin, thank you for being with us. I'm bringing you the questions that people are asking me out here.
VIN WEBER, ROMNEY POLICY ADVISER: Sure.
VELSHI: Undecided voters, they don't -- they don't disagree with the goal. They don't disagree with the idea that we want a stronger economy. But I've hit Governor Romney hard on his jobs claim.
Give me specifics as to how we get big-time jobs, 12 million jobs in four years, when we have -- we'll be lucky to get 3 percent economic growth next year.
WEBER: Well, Ali, first of all let me put the 12 million number in context. I don't want you to have to make good on your pledge, but 12 million jobs really --
VELSHI: Me either.
WEBER: Twelve million jobs is really just getting us back to what should be the normal growth rate of the economy. It's actually the number of jobs that the Obama administration predicted last February. Now we're way short of that and we will remain short of it as long as this president is pursuing these policies. But Governor Romney isn't putting out there anything other than what happens if we restore basic health to the American economy. So it's achievable.
Couple of major things. First of all, the tax reform proposal that the governor has put on the table is absolutely essential and every independent economist that's looked at it said it will create a whole lot of new jobs. You bring down the rates, you broaden the base, bringing down the rates and broadening the base encourages productive investment as opposed to tax driven investment. It's what Reagan did. I was there when the Congress did it. It can help create a tremendous amount of jobs.
Second, we're all aware in this country that we have this tremendous potential in the energy sector. Some of it has been materialized. But over the objections and resistance of the federal government. The government will do a number of things like building the pipeline, allowing much more drilling and exploration on federal lands.
We can accelerate this huge shift in the energy economy of the world that we're seeing is making predictions that the United States and North America could become the Saudi Arabia of oil in the near future. So this is achievable. But we've got to have a change in policy and a change in presidents.
VELSHI: OK. So one of the key legs of that stool is taxes as you said.
VELSHI: Governor Romney saying he'll cut everybody's marginal tax rate across the board by 20 percent. That's an estimated $5 trillion in cuts but he says his plan is revenue neutral and will protect the middle class from tax increases.
So here's the question about the revenue neutrality, again you're referring to your time under President Reagan and I was talking to Bob Reich, who was referring to his time under President Clinton. The job growth under both of those presidents, the big area times of job growth where we created more than 12 million jobs over four years, happened with economic growth greater than 4 percent, something nobody predicts.
So what do you predict economic growth to be at in order to achieve 20 percent tax -- decreases across the board and not add to the deficit?
WEBER: Well, first of all, we did achieve growth rates higher than that in recovering from the 1982 recession. We should have achieved some high burst of growth following the great recession. That never happened under this president, we believe, because of the fiscal drag of his spending, borrowing, taxing and regulatory policies.
But if we have the right policies in place, we should at least get a spurt of growth as we have in every past recession that gets us up to fairly high levels for a while before we level off to a level of growth of 3 percent plus, which is very realistic for this economy.
There's no reason -- we're not going to grow at 10 percent a year like the Chinese have been, but there's no reason why --
WEBER: -- after we've achieved some spurt of growth to make up for the lost ground of the last four years, we can't settle in at 3 percent plus and that will get us to this goal. But you've got to have the right policies. Less regulation, lower taxes and less spending, instead of the exact opposite direction which is where we've been going under this president and where we will continue to go.
VELSHI: All right. Neither you nor me want to see me in a dress.
WEBER: I don't.
VELSHI: And I will concede to you that President Obama has made the same 12 million jobs promise over four years but the three times in history that's happened in the United States growth has been in excess of 4 percent. So I'm still not sure we get there with 3 but let's leave that aside for a minute.
One of the other things I've heard a lot on the road is the fear of one of these candidates messing things up. We've got headwinds from Europe and China, we saw this week that it's already affecting our economy here from some of our earnings reports, from some of America's bigger countries -- bigger companies. There's not that much that any president can do about that. About Europe and China.
So how do you prove to viewers that Mitt Romney won't mess that up, given everything else that's going on?
WEBER: Well, first of all, I think you're basically right. What goes on in China and what goes on in Europe, it's not entirely out of our influence. We can have a global leadership role if we have a little bit stronger economic leadership. But I'll grant the fact that what happens over there affects us.
It doesn't have to necessarily have an entirely negative affect. If we can reassure investors around the world that this country, this economy, is the safest haven in the world, they will send capital here in response to weakness in Europe and China. We've seen some of that happen in the bond markets.
As people say, they say disparagingly, we're sort of the cleanest dirty shirt in the laundry bag. Well, if you actually get regulatory tax and spending policies right, as Governor Romney has pledged to do, we can become an even more attractive place. We don't want Europe to go downhill. We want them to get growing. We want China to keep growing. But if they encounter bumps in the road the best strategy for us is to make this economy the safe haven for investors from around the world. And Governor Romney's strategy will help accomplish that.
VELSHI: All right. Vin, maybe you should come on the bus with me, because I'm getting a lot of questions about these kind of things. Thanks for coming on and giving us some answers, Vin Weber.
WEBER: Great to talk to you, Ali.
VELSHI: Thanks, Vin.
The most immediate threat of this economic storm that neither candidate is talking about, I'm going to tell you about on the other side. Voters tell me they want details but they aren't getting any on the fiscal cliff. Going over it could mean steep job losses in these battleground states that I'm driving through. And the possibility, the very real possibility, of another recession.
VELSHI: Welcome back to YOUR MONEY. Coming to you from the battleground state of Florida. I'm on the road for an 1800-mile trek on that bus from Florida to Ohio. Talking with undecided voters with a little more than a week left until the election and what they're telling me they like what each candidate has to say about the future, but they want to know which one of them can really get it done?
With more than three million Florida residents over the age of 65, senior citizens are a big part of the conversation here. Here's what a few of them told us over cards.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: People who play cards are always alert.
UNIDENTIFIED FEMALE: Not always.
UNIDENTIFIED FEMALE: Social Security and the --
UNIDENTIFIED FEMALE: Yes. And Medicare.
UNIDENTIFIED FEMALE: And Medicare. And we're concerned because --
UNIDENTIFIED FEMALE: I don't think really --
(CROSSTALK) UNIDENTIFIED FEMALE: -- our children and our --
UNIDENTIFIED FEMALE: Not going to affect us.
UNIDENTIFIED FEMALE: No. Worry about our children.
UNIDENTIFIED FEMALE: Can't all talk at one time. We want to know it's there for the future generations, not only ours.
UNIDENTIFIED FEMALE: I think that Obama try to get (INAUDIBLE). And I think the Republicans try to get you into.
UNIDENTIFIED FEMALE: I think we should give someone else a chance because the last four years have not been good. He didn't do what he promised.
UNIDENTIFIED FEMALE: And he's going to do better.
UNIDENTIFIED FEMALE: I know. We gave him four years. I'm a Democrat, but I don't think he did his job.
UNIDENTIFIED FEMALE: The house and the Senate for two years and jobs was not part of it.
UNIDENTIFIED FEMALE: And we've never been in debt like we are now.
(END VIDEO CLIP)
VELSHI: All right. So you heard it, Social Security, Medicare, jobs, the debt. Their concerns run the gamut but there's something immediate coming just after the first of the year that will affect the personal financial situation of virtually every American and voters are hearing virtually nothing about it from either President Obama or Mitt Romney.
This is the fiscal cliff. The $7 trillion worth of tax increases and spending cuts that begin on January 1st. I have been warning you about this part of the economic storm for months now, unless Congress and the president act, your taxes will go up, millions of jobs could be lost and the Congressional Budget Office says the U.S. economy will likely be plunged into recession.
Yet, it is something neither presidential candidate has adequately addressed.
Let's bring in my friend Christine Romans, the host of "YOUR BOTTOM LINE".
Christine, it is shocking that we have not heard more about avoiding the fiscal cliff.
CHRISTINE ROMANS, HOST, CNN'S YOUR BOTTOM LINE: It really is, Ali, and time is running out to fix it. It's a cliche but it's true. You know, it actually came up in the last debate, the so-called sequester. That's the part of the fiscal cliff that mandates sharp automatic spending cuts. The president brushed it aside. (BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It will not happen.
(END VIDEO CLIP)
ROMANS: It will not happen, he said. Awfully confident, don't you think? That raised questions immediately. Are there secret talks going on with Congress to try to avoid the fiscal cliff? How else can the president be so sure it will not happen, he said, but the president's campaign quashed that speculation.
(BEGIN VIDEO CLIP)
DAVID AXELROD, OBAMA CAMPAIGN SENIOR ADVISER: He can be sure because when the people vote on November 6th and the president is re-elected a strong message will be sent that the American people want a balanced approach to solving this problem. There are plenty of people on both sides who want to get that done and will get that done.
(END VIDEO CLIP)
ROMANS: So no meaningful talks with Congress, no effort to make any real progress, just a wait until after the election and it will be all fine.
Not encouraging for the millions of Americans whose jobs are on the line if we fall of the fiscal cliff.
Here are the numbers, Ali. If Congress doesn't act, $109 billion in automatic spending cuts take effect next year. $55 billion in defense alone. A study funded by the Aerospace Industry Association finds more than two million jobs will be lost by the end of next year, more than a million in defense and nearly as many nondefense-related jobs. Only 16 percent of these are federal workers. The majority of the pink slips will be in the private sector.
Now voters in key battleground states are going to feel most of this, Ali. In Florida where you are, that same study found about 80,000 total jobs lost. In Virginia where you're headed next week, more than 207,000 jobs lost. And, you know, of course it's home to numerous defense contractors and military bases, including the Pentagon.
And then take a look at California and Texas. Not swing states but both, both of those states would be hit hard if the sequester happens.
But, Ali, spending cuts are just part of the fiscal cliff. There are also monster tax increases that will take effect and as the Bush tax cuts expire, the AMT patch expires, I could go on and on, the payroll tax holiday, the nonpartisan Tax Policy Center says American households face on average $3500 in higher taxes next year.
Middle income earners would see an average increase of two grand. And look at this, the wealthiest people in the country are going to pay more than $1,000 extra a month in taxes next year and yet no indication that either candidate has a plan to avert the fiscal cliff. And, Ali, who has more leverage? The president or Congress? It's a big problem.
VELSHI: It's a very big problem. We have the same frustration. We've been asking these questions for months. I am fascinated that it doesn't come up more and I think Candy Crowley is right, it's not going to come up in the next few days before the election.
Christine, thanks very much for that. We'll keep trying.
That brings me to my next guest. Joining us now is Norm Ornstein. He's a residence scholar at the American Enterprise Institute and co- author of the book "Even Worse Than It Looks."
Norm, good to see you. The candidates are not talking about the fiscal cliff. But no matter who wins there will have to be some resolution with Congress. So what's your sense of how this plays out?
NORM ORNSTEIN, RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE: Of course, remember that Barack Obama did in the debates say there will not be a sequester, which caused a little scrambling on his campaign's part. But, you know, the fact is, there hasn't been much discussion of this, but as soon as the election is over, we shift into full governing mode with the reality that if they do not reach a deal, president and Congress, before the end of the year, all the Bush tax cuts expire, all the extenders expire. The payroll tax cut expires and we get these across-the-board cuts and then looming a debt ceiling vote.
The odds of something happening, though, in November, December are slim.
VELSHI: And we've started -- well, we've seen CEOs recently start putting the pressure on Congress and the president to reach a deal. And a bit of a shift -- a bit of a shift here, Norm, because for a long time people were saying it wasn't going to happen. Now this involvement from the business community, is that a game changer? Because members of Congress rely on their donations.
ORNSTEIN: It could be a game changer because, of course, the fact is that when we have the debt limit debacle last year, the business community was largely absent without leave. Now you've got a much more aggressive movement.
The problem, Ali, is it's an aggressive movement in the Senate where you've got 40 senators, a bipartisan group, across the spectrum, working on a solution. It's not going to be the full Monty of Simpson-Bowles but it'll be that template with some promises and some explicit things to cut the spending, but not with the crazy across- the-board cuts and to extend some of the tax cuts, but not all of them, and I think you've got the possibility of 70 votes in the Senate.
The House of Representatives, though, was going to be more polarized after the election, and it's not clear where that goes. And frankly, if Obama loses the Republicans in Congress are going to say, hey, why should we even do anything now, or negotiate with a lame duck president, let's wait until January if we've got all the reigns of power and do our mother-of-all-reconciliation bills.
So it's only if Obama wins, that we will see this movement forward in November, December.
ORNSTEIN: But the critical question is, can John Boehner bring a bill to the House floor that will probably need more Democratic votes than Republican votes?
VELSHI: Well, I'm sorry that it's not being discussed more on the campaign trail, but I think that elected officials or those who are running get how serious this is and I hope you're right that it works itself out.
Norm, good to see you as always. Norm Ornstein.
VELSHI: All right. Ben Bernanke has been the steady hand on the wheel of a ship that's been tossed around wild economic seas over the last four years. But his days may be numbered as the head of the Fed. That's going to have a major consequence for you and your money and I'll tell you why, right after the break.
VELSHI: Take a good look, folks. The steady captain of the Federal Reserve faces an uncertain future that is tied to this presidential election. If Romney is elected he has already said he would replace Ben Bernanke as Fed chair when his term expires in January of 2014. If Obama is elected it's uncertain whether Bernanke would want to stay for a third term.
What can't be denied is how big an influence Ben Bernanke and the Fed has had on the economy and the markets especially over the last four years. Some critics say Bernanke should have seen the financial crisis before it hit us. That's a conversation for another time. But no matter what you do for a living Bernanke's policies have affected you and your money.
Consider this. Bernanke's Fed has pumped more than $2 trillion worth of stimulus through the economy through various programs since the recession. Unemployment has been trending lower since those stimulus programs started in 2008 and Bernanke's Fed has been focused on bringing it down.
Inflation, another one of the Fed's chief concerns, has been relatively tamed if you take out food and energy prices over the last four years, although hard to take out food and energy prices. There are concerns about inflation going down the road, though, given the low lending rates that the Fed has fostered. But that may be Ben Bernanke's successor's problem. Let's look at stocks. The S&P 500, the broadest measure of the stock market, that's not the per view of the Fed but it is up 10 percent since President Bush appointed Bernanke as Fed chairman back in 2006.
Now theoretically, the Federal Reserve is independent of the president and the executive branch of government, but -- presidents do appoint the chairman of the Fed, so it matters to you and your money who sits in that seat.
Alan Blinder is a professor of economics at Princeton University. He's a former Federal Reserve vice chairman.
Thank you for joining us, sir. It's good to see you. Let's talk about Ben Bernanke's Fed.
ALAN BLINDER, FORMER FEDERAL RESERVE VICE CHAIRMAN: My pleasure.
VELSHI: Has it had more of an influence on our economy -- has this Fed has more of an influence on our markets and the economy than the Fed's mission would dictate that it has?
BLINDER: Well, that's a hard question to answer, you know, because the Fed's mission is to promote maximum employment and stable prices. As you just said, the price level -- the inflation rate has been very stable over the Bernanke era as it was in the later part of the Greenspan era.
The Fed has been working overtime so to speak, both figuratively and literally, on its employment mandate and it still is. It's been -- what's clear has been very activist by historical standards, absolutely.
VELSHI: When you say activist, you know, some people call it mission creep, others say that it's doing that because it has the effectiveness, it's able to do it where Congress doesn't do it. What's your sense on -- should Congress be doing more of the work that the Fed is trying to achieve?
BLINDER: Congress should be doing more of the work the Fed is trying to achieve. Look, the reason the Fed has been pulling so many different levers over the last several years, is that it's -- it's normal weapon, the short-term interest rates, the federal funds rate, hit virtually zero all the way back in December of 2008. At that point, the Bernanke Fed could have said, well, we give up, we're closing up shop, that's all we can do. I think that would have been a huge mistake. Or it could try to look for other things it could do, such as these various quantitative easings and other things that the Fed has put into effect.
That's the course it took. I think that's the right course. It doesn't mean it got every little detail right always, but it was basically the right course. And frankly, the job might have been a little easier or might have been a lot easier if Congress was more cooperative.
I don't mean cooperative with the Fed, I mean more cooperative with the president in getting things done, such as, for example, the Jobs Act that the president proposed a year ago and other things like that, rather than letting this thing go and basically leaving it to Ben Bernanke.
VELSHI: Alan, a pleasure talking to you. Thanks very much for joining us and giving us a bit of a conversation and a primer on what the Fed is supposed to do and what it's been doing in the last few years. Alan Blinder.
Well, President Obama and Governor Romney treated China like a pinata in the last presidential debate. But they didn't even address a part of the planet that represents a far bigger problem. We'll tell you what it is right after this break.
VELSHI: President Obama and Mitt Romney battled for 90 minutes over foreign policy this week in their final debate and spent a good deal of time bashing China. They called it a currency manipulator, a job stealer, an -- intellectual property thief. Romney promised to be tough on the red giant, Obama defended his toughness on China over the past four years, but what about Europe? It was barely mentioned in the debate, and its economic problems get scant attention on the campaign trail.
In China growth slowed this year but the International Monetary Fund expects it to grow next year. It is a very important trading partner for the U.S. and the rest of the world.
Joining me now for some Q&A is Richard Quest, host of "QUEST MEANS BUSINESS" on CNN International.
So, Richard, the question is, what's the bigger threat to the global economy right now? Slowing growth in China or Europe?
Richard, let me go first, 60 seconds right now.
Well, for all the saber-rattling the presidential candidates have been doing about China, you might think that we're back in the 20th century worrying about communism and the Cold War.
Please, people. China has been taking manufacturing jobs out of the U.S. and other countries because of cheap labor and efficient manufacturing, and yes, the U.N. has been kept at very low levels versus other major currencies, but make no mistake, the rest of the world wants China to grow and keep growing. They need China to grow.
When the Chinese government announced that its growth slowed to 7.4 percent in the last quarter, the slowest pace in three years, that got people's attention, but 7 percent growth is on fire when you compare China to Europe. We just need to adjust our expectations a little when it comes to China.
When you look at Europe, you better strap on a helmet. Europe is in recession. A massive debt crisis that could take other countries, including the U.S., into a deep spiral. Listen to what companies like Caterpillar and Ford are saying. They're cutting sales forecasts because of European uncertainty and laying off workers in the European plants.
That Mr. President or Governor Romney, should be getting your attention, Richard. Europe matters more than China right now.
Defend your continent, Richard.
RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": And once again Ali Velshi told us nothing that we didn't already know.
Well done, Ali Velshi.
The fact why the candidates aren't talking about China or about Europe is simple. They can't do anything about it. Europe is a trading block as big if not bigger than the United States. The United States can shout and bleep (ph) on all about it, but there's nothing they can really do about the European sovereign debt crisis other than worry about it.
China, however, is a long-term running saw. You have got a change of government this year. You have got an economy that is slowing but is not going to crash. You have a rising middle class. You've got a more important economy in the longer term because it's growing faster.
That is why immediately you need to worry about Europe. Longer term, it is China that is the big worrying saw.
As for Ali Velshi, maybe he needs to remember which side is which.
VELSHI: Richard, you made sense for the first time in a long time. Good to see you, my friend. Richard Quest is in Atlanta. And I will be seeing you at the end of this bus tour.
QUEST: You will.
VELSHI: All right. The slowdowns in China and Europe are being felt here in the United States. The U.S. has lost 38,000 manufacturing jobs in the last two months.
Next week, YOUR MONEY is headed to a battleground state where manufacturing is a key component of the economy. I'll tell you where that is after the break.
VELSHI: This week, we've been traveling through Florida, listening to undecided voters. Next week, the bus tour continues. We'll be heading to the toss-up states of Virginia and Ohio. We're going to North Carolina, too, depending on how you see that state.
No Republican, by the way, has ever won the White House without winning Ohio. President Obama took the state in 2008 with a 4.5-point margin, but the state went for President Bush in 2000 and 2004.
The election is up for grabs. The state is up for grabs. Voters who have already voted in Ohio favor President Obama over Mitt Romney by a 2 to 1 margin. This is early voting. That's according to a new "TIME" magazine poll. But voters who haven't voted yet, they're apparently evenly split.
Our traveling partner John Avlon is with me. He's evidently qualified for this because he hails from Ohio. Or your parents do.
JOHN AVLON, CNN CONTRIBUTOR: My mother and my 97-year-old grandmother still lives there.
VELSHI: There you go. So what are you looking for? What conversation are we going to be having with those people in Ohio?
AVLON: It is amazing, first of all, that again it's coming done to Ohio and every vote counts. The swing states and districts in Ohio are the southern area around Cincinnati and the area around Youngstown, my mother's hometown, and up into Toledo.
The whole economic profile of Ohio is tied up in the political profile.
AVLON: This is a state that has been the manufacturing backbone of the country.
AVLON: And it has gotten gutted in the past three decades. Manufacturing leaving.
VELSHI: First steel, general manufacturing, and then autos.
AVLON: That's right. That's right. And that's one of the reasons why the auto bailout is a big deal in Ohio and why it's a benefit to President Obama.
VELSHI: I'm looking forward to riding to Ohio with you. We are either going to be great friends or we're not going to want to see each other again.
AVLON: We're going to have a great time.
VELSHI: I'm loving being with John.
John, thanks very much for that.
All right. YOUR MONEY is going to be live from Toledo next Saturday at 1:00 p.m. Eastern.