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Fiscal Cliff Meeting Today; Interview with Economist Ken Rogoff; Eva Longoria Gives Back

Aired December 28, 2012 - 08:30   ET


ALI VELSHI, CNN ANCHOR: Coming up on STARTING POINT, a high level meeting to find a fiscal cliff deal. Our next guest says the whole thing is going nuclear. We'll talk to Harvard professor Ken Rogoff, one of the smartest guys around, on the economy.

Plus, amazing, terrifying video when a 33-ton shark tank explodes. You do not want to be near the shark, who would be pretty annoyed. We'll show you the rest of this when we come back.


ALINA CHO, CNN ANCHOR: Good morning, everybody. It's a fight between world powers with agonized parents and children caught right in the middle. Russian President Vladimir Putin has just signed a bill today that bans U.S. families from adopting Russian orphans. It's thought to be payback for a U.S. law that attacks human rights abuses in Russia. Moscow says too many orphans have been abused by their new American parents. The State Department says it is willing to talk more about keeping children safe.

First the fiscal cliff, now get this, container cliff? Posing a threat to the U.S. economy, nearly 15,000 dockworkers from Texas to Maryland are threatening to strike starting Sunday. That could shut down 14 key shipping ports and cripple commerce across the country. The dockworkers are demanding higher container royalties to boost their pay.

Secretary of State Hillary Clinton's spokesman says she will be back to work next week. Clinton spent most of December fighting off a stomach flu and a concussion after she fainted. Doctors have grounded her from overseas travel for a couple more weeks. Her return means that she could soon testify before Congress about that attack on the U.S. consulate in Benghazi.

Have you ever been at an aquarium and wondered what would happen if the glass broke? Take a look. Amazing and terrifying video out of Shanghai, China. A 33-ton shark tank exploded sending sharks flying everywhere and shoppers running for their lives. At least four people were in front of the tank when it cracked, as you saw there. And 16 people suffered cuts and bruises, but nobody was seriously hurt. Three lemon sharks died. Officials are investigating whether cold temperatures along with shoddy design may have caused this.

WILL CAIN, CNN CONTRIBUTOR: I'm not sure this gives you the story you want. I got bit by a shark in front of the Gap.


RON BROWNSTEIN, CNN SENIOR POLITICAL ANALYST: Shanghai is known for its rigorous building standards.

CAIN: I love Shanghai but this is always the criticism. Is everything built right because it looks good.

BROWNSTEIN: It's a fabulous city but a little shoddy in some of the standards.

VELSHI: That's a weird story.

CHO: I've never heard of that happening.

VELSHI: Never before. We cover a lot of crazy stories.

One of the crazy stories we cover on CNN is the fiscal cliff. We'll wait to see if a critical meeting at the White House will prevent us from falling over the fiscal cliff. Congressional leaders meet this afternoon with President Obama and Vice President Biden if hopes of coming close to a deal. Senior Democratic officials say if they can't find forward a path in this meeting it's pretty over.

Ken Rogoff is an economics professor from Harvard University. Ken is a prolific author, probably one of the greatest minds on economic crises, former chief economist at the international monetary fund. Tell us the truth about this, Ken, not that you don't usually. But this is what people want to know. What happens, if they don't come up with a deal and the deadline comes and goes, what happens?

KEN ROGOFF, ECONOMIST, HARVARD UNIVERSITY: Well most likely they'll reach a deal in a few weeks, there will be this cry, everybody will be screaming because their taxes are going up and spending went down and they'll come to a deal. This is an artificial crisis. We have a 20, 30-year path that doesn't work. They can't agree the Democrats want to go off in this direction, the Republicans off in this direction, they can't agree. So they just said we'll make a deal. If we can't agree by the end of 2012 we'll jump off this cliff, and here we are.

VELSHI: An interesting point you've made when you look at the fractious, parliamentary parties in Europe, a fractious extremely group come to power, we don't think of that happening in America. But we're the worst of a parliamentary system right now.

ROGOFF: That's absolutely right. That's the thing that's ugly here. For all the things we complain about our government, it's pretty darn good compared to most countries. There are these country, they just swing this way and that way and 20 different parties. And we're in this situation where there's no iron center here to anchor things, and it's not just this fiscal cliff. It's everything.

BROWNSTEIN: We are in a quasi-parliamentary system with political institutions aren't built for it. Our structure does not allow for this level of partisanship. As you look at this as you point out, we are on an unsustainable path in the long run in our fiscal kind of situation. Republicans and Democrats have to live with each other probably for the next four years, at least for the next two years, but likely the next four years. Is there a path that you think makes sense that is a truce line that would be reasonable for both sides to accept?

ROGOFF: Well, we'd really like to see some forward movement in the bigger problems, the tax system. There are actually things we need to spend more money on, some things we need to spend less money on. It's dysfunctional. And those ideas are out there. They've been discussed. But they've reached this point where both sides are saying I'm going to hold my breath until I get my way.

CHO: I think when you talk about the partisan bickering is one thing but I think you really need to remember there are real Americans who are going to be affected by this. If we go over the cliff on January 2nd, the payroll tax goes up by two percentage points. And 2 million Americans with unemployment benefits will no longer have them. And I think it's important to remember, for those people that's really, really important. I think we need to remember that.

VELSHI: We keep on saying this could reduce economic growth enough that it sends the U.S. into a recession. You're of the school that for many, for many reasons, we may still be in a recession.

ROGOFF: Oh, yes. We still haven't recovered from 2008. We have an unemployment rate near eight percent. We're way below where we would have been.

VELSHI: This is a bad time as much as it's a creative crisis it has real consequences.

ROGOFF: It's part of why we're having the crisis, if we were booming they could come to a deal a lot easier. In these banana republics as you mentioned we don't want to be like it's exactly when things aren't going well they can't agree.

ROLAND MARTIN, CNN POLITICAL ANALYST: Can you call this an artificial crisis, Ken, do you believe that those of us, the business that we're in, we are playing a role in this drama, because when you say artificial crisis come January 1 it's really not that big of a deal.

ROGOFF: The silver linings in this country we at least try to do something in advance and don't wait until we are Greece. That is a silver lining. We're still borrowing money for nothing practically. It's not like we couldn't just keep spending for a while. The trouble is you can see the handwriting on the wall. You don't want to do it forever. Do you cut taxes, do you cut spending, what do you do?

CAIN: Set the fiscal cliff aside for one moment. You've done extensive research on recovery from recessions. Where are we in the current recovery? What in your estimation does 2013 look like from an economic standpoint?

ROGOFF: Fairly normal from other post World War II financial crisis. Even housing recovers on cue five or six years later. The good news is that there's stable underlying g growth. The bad news is you don't get the zoom you got out of it during the depression.

CAIN: We're in year five of a seven year process.

ROGOFF: More than seven years.

BROWNSTEIN: Last time you were here you said we were half way through regardless of who wins in 2012. The next four years would not look much better than the past four years.

ROGOFF: Yes. We're going to have, I don't know if not very much better than the past four, but we're not going to have fantastic growth. Unemployment will take many more years to feel normal. So we have many years left in the recovery. But hopefully in two or three years we feel like we're moving there and not at the starting point.

VELSHI: Let's talk about the global picture here. You have slow growth in China, slow growth in India, slow growth in Brazil, no growth in Europe for all intents and purposes. So America is chugging along somewhere between 2.75 and three percent probably around now is one of the best deals going, one of the best things happening.

ROGOFF: Everybody looks at us as the bright spot. So about the fiscal cliff, they're saying you're the only ones doing OK. Why are you doing this to us? Why are you doing this to yourself?

VELSHI: Particularly because a lot of the world blames this for the first time it happened.

MARTIN: You talk about spending in Washington, D.C., but one of the reasons we're also as a nation in this dilemma is that the nation was stuck in this. Last 20-some-odd years frankly we were living in the false economy, credit, credit, credit. It catches up with you.

ROGOFF: Absolutely. What happened in 2008 didn't happen out of the blue. We had built up this huge bubble. We had been living beyond our means in an unsustainable way.

MARTIN: Not D.C., individuals, Americans.

ROGOFF: Individuals. Now it's D.C.

VELSHI: All right, go ahead.

BROWNSTEIN: Compensating for 20 years, or decade of slow income growth since 2000, people trying to maintain the lifestyle. In that longer term issue is there anything on the trajectory accelerating the growth with the living standards, do you see that reversing any time soon or is this kind of the new normal for average American workers?

ROGOFF: I think it will take decades to go back to what we saw before. I don't think anything will reverse this quickly. We're in this globalized world winner-takes-all.

BROWNSTEIN: So in that world is it kind of structurally there will be tight finances for government at all levels if earnings aren't going up we are looking at, and yet the number of seniors are doubling in society? This is kind of very structural pressures.

ROGOFF: That's right, and that's what underlies the fiscal cliff. They're looking out beyond 2020, all these people retiring, and we're providing defense costs more and more because of less efficiencies in government stuff. And so the calculus isn't good. It isn't good for us or anyone but there are things to do. But there are a lot of things we can do better, more private infrastructure spending, improving our education system, making entitlement systems means tested.

BROWNSTEIN: Shifting federal spending from consumption to investment as for the future.

ROGOFF: Right.

VELSHI: All right, Ken thanks very much, and we'll be leaning on you for guidance over the course of the next few days.

Who doesn't want a little Eva Longoria in their life? Alino Cho one on one with the actress next to talk about how she's helping fellow Latinas get a college education.


VELSHI: Well, yesterday we brought you the shirtless Matthew McConaughey. Today, finally something the team of men at the desk can enjoy, Eva Longoria. Alina Cho is here with today's "Big Stars, Big Giving".

CHO: I know what you're always thinking: here is a woman with a great personality.

VELSHI: And a charitable heart.

CHO: And a charitable heart, you're absolutely right.

Good morning ,everybody. You know, Eva Longoria of course is a famous Hollywood star, a working actress. But when you sit down, you pin her down and ask her what she's dedicated her life to, she will tell you it's giving back.


EVA LONGORIA, ACTRESS: I've been pulled a million different directions with, you know, supporting AIDS in Africa or you know sex trafficking in Thailand or dolphins in Japan and you can't do everything. And so I'm thinking what -- what do I really want to do where can I create the most impact?

CHO (voice-over): To answer that question, you could say Eva Longoria looked in the mirror.

LONGORIA: I always knew I wanted to be with women and within the Latino community.

CHO: Best known for playing the vixen on "Desperate Housewives." UNIDENTIFIED MALE: Celiz (ph) how are you?

LONGORIA: The best you ever had.

CHO: Longoria had humble beginnings. The youngest of four daughters, born in Texas to Mexican-American parents.

LONGORIA: I wasn't the first to go to college. It was expected.

CHO: But let's be honest. I mean, when you went to college it wasn't a walk in the park. You had to work.

LONGORIA: I was flipping burgers, I was an assistant to a dentist, you know, I worked in a car shop changing oil, I was an aerobics instructor. I mean, yes I had -- I was definitely work study.

CHO: Seventeen percent of Latinas drop out of high school. Fewer than half of adult Latinas hold college degrees. So in 2010, the actress started a foundation focusing on helping Latinas get a college education.

On the day we meet up with her at this high school in Los Angeles, she's the keynote speaker at a graduation for parents.

LONGORIA: Everyone here has taken a stand for their child.

CHO: The program is called PIQE. Longoria's foundation is helping to fund it.

LONGORIA: Well, it's a nine-week program that parents can take in order to help them navigate the institution of schools. It is not easy. I've sat with a lot of these parents before the program and they didn't know what a transcript looked like, they didn't know what a GPA was, they didn't know what SAT meant.

CHO: Children of parents who graduate are guaranteed admission to one of several schools in the Cal State University System, provided they meet the basic requirements like Juana Martinez.

JUANA MARTINEZ, STUDENT: I only went to elementary school.

CHO: She graduated from PIQE so her daughter, Alejandra, could have a better future.

LONGORIA: Very good. Make your mother proud. I don't want the Latina community to just be a large community; we need to be an educated community, because this is going to be our future work force.

CHO: Something Longoria has talked about a lot on the campaign trail. And now as a co-chair of President Obama's inaugural committee.

Are you nervous?

LONGORIA: I'm very nervous.

CHO: What will you wear? LONGORIA: Who knows, I don't know.

CHO: Politics and philanthropy, making a difference in both.

LONGORIA: I'm funding these programs because I believe in them. I think it's important that you, that you, yourself, as a role model, as a philanthropist, as an activist, that you yourself give out of your back pocket. I would give my shirt off before I would ask to you give yours.


CHO: That's right. She's the real deal. And remember, hey, listen, stop it, guys. Remember, the Latino community is the largest and fastest growing demographic right here in the United States. We saw how important the Latino community was in the election.


CHO: Eva Longoria is so serious about this; she's actually getting her master's degree in Chicano Studies at Cal State North Ridge. I mean, she says when she goes out and talks to people about her cause, she wants to have an authentic voice. I give her a lot of credit for that. She's spending the Christmas break working on a thesis.


BROWNSTEIN: In the attic of obscure knowledge, about 20 years ago -- 20 years ago, I wrote a book about the history of the relationship between Hollywood and politics. And for most of this period, stars did what she did, which was be out on the campaign trail, which she really knew. And it's really the Bono effect since the '90s, is they're much more likely to create their own institutions and take direct action -- Matthew McConaughey yesterday, Eva Longoria today. That would not have been Bogart and McCall in the '50s. It's a different world.

CAIN: Part of it.

BROWNSTEIN: More direct action and more willingness to step into the spotlight.

CHO: They use that because they an enormous megaphone.


CHO: You know they use that fame for something really good.

MARTIN: But also was neat. Look, I'm born and raised in Texas and I can tell you what's critically important for Latinos in America is to have the sophisticated political infrastructure. She's also involved in them advancing that in terms of fund-raising when it comes to candidates, because when they had the huge rallies several years ago, part of the problem was you had boots on the ground but didn't have the political infrastructure to make that reality.


CHO: No and it's important --

CAIN: We've seen the deep Hollywood and charitable knowledge these two guys brought from that segment. What did you take out of that, Ali?

VELSHI: I took out the fact that yesterday Matthew McConaughey, we started with him being shirtless, and in the last thing, Eva Longoria said, "I would give the shirt off my back."


CHO: Can we even go any further.

VELSHI: I think it's time to get paid. The "End Point" is next on --


VELSHI: And it's time now for the "End Point". Will is just jumping to get in there.

CAIN: Yes, I was ready. I was going to bring.

VELSHI: And wait, what role in case you can't tell?

CAIN: No, no, look, OK. Thank you.

I was going to bring a very thoughtful emotionless conversation about the gun control debate. And we're going to have a really enlightening moment, and I looked over and I see this.



CAIN: And how are you going to have a gun control debate sitting next to this

MARTIN: You would say that because the longhorn (INAUDIBLE), they shoot a little cap gun, we have a howitzer when we score touchdowns so I got your gun in. But no I'm not going to see you Ali, of course, next Friday, Texas A&M and Oklahoma in a cotton bowl, I got to support my (INAUDIBLE) and Johnny football.

So Will, you're longhorns are terrible. We --

CAIN: Aggie versus Sooners, I mean, they're just --


MARTIN: We know what somebody did to your Longhorns, so we'll take care of business for Texas.

BROWNSTEIN: Yes. I can't go there on college football. One thing, man. (CROSSTALK)

VELSHI: Baseball, Hollywood --

BROWNSTEIN: Not college football but real quick, Olympia Snowe had it exactly right. The whole fiscal cliff was designed to create a machine to force them to compromise and even that can't do it. What does that say about where we're going to get in 2013?

These guys have to live with each other for at least two years and probably four. At some point they have to decide either they're going to get along or just kick the can down the road to our kids to solve all the big problems we face.

VELSHI: It was a poison pill. The whole idea of a poison pill is you don't want to take it.

BROWNSTEIN: You don't want to take it.

VELSHI: Real quick, the fiscal cliff.

Alina Cho asked me whether I'd like to do a diet challenge with her in January. The answer is probably no to that.

Thanks for joining us today. "CNN NEWSROOM" with Victor Blackwell starts right after this.