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YOUR BOTTOM LINE
Obama's Economy: The Sequel; Run on Guns
Aired January 19, 2013 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: Thanks, Randi and Victor. See you at the top of the hour.
Good morning, everyone. I'm Christine Romans.
Forget the Golden Globes, disregard the Oscars. There's one script is being written right now in Washington that everyone can't wait to see. And you -- you are the only critic that matters.
ROMANS (voice-over): Obama's economy, the sequel, crafting a legacy.
You remember the original. The president inherits the worst economy since the Great Depression. Billions in bailouts save the auto industry and stabilize Wall Street.
But where are the jobs?
Landmark health care reform passes Congress along party lines.
But the star of this show has his enemies -- millions of Americans turn to the Tea Party. Their mission? Stop this president from making fundamental changes, changes they see permanently damaging the U.S. economy.
Gridlock follows. And the 112th Congress passes the fewest bills in 40 years.
But in the end, its congressional approval that plunges, now standing at just 14 percent.
The president insisted on higher taxes for the wealthy. Part of his campaign designed to cast Mitt Romney as out of touch. His victory sealed, this president will have a sequel.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: For the United States of America, the best is yet to come.
ROMANS: The original was a drama. But what the sequel needs is action. To craft a legacy, this president must bring lawmakers together.
Cliff after cliff, short-term thinking and political bickering at every turn, dysfunction is ruling Washington.
But look beyond that and this economy is poised for a recovery, a recovery the audience, you, the American people, have desperately been waiting for.
Businesses hiring, home foreclosures down, the value of your house rising, a resilient stock market at five-year highs, historically low interest rates. Plus, consumers are still spending.
But, beware, most sequels are never as good as the original.
ROMANS: So what will Obama's economy, the sequel, look like?
John Avlon is a CNN contributor and senior political columnist at "The Daily Beast".
Peter Morici is the professor of international business at the University of Maryland.
And Annie Lowrey is an economic policy reporter for "The New York Times."
Nice to see all of you.
John, I'll start. All great movies have memorable endings. When we look back at the second term, is this a blockbuster or dead?
JOHN AVLON, CNN CONTRIBUTOR: Look, it's got a making of a blockbuster. I mean, he comes in with the economy in absolute free fall, stock market hits its low on 50 day, half way through the first 100 days, real fight through reelection, trying to make a case that it could have been worse, not the most inspiring re-election slogan.
But compared to where, for example, countries in Europe are, countries that chose a more traditional path of austerity, the U.S. is doing pretty well. We do seem poised for an overall recovery. If you begin on a freefall and end on an up note, that's got the makings of a blockbuster.
ROMANS: Peter, you say that Obama's legacy will be awesome, except on the economy. You say the president's policies are responsible for holding America back?
PETER MORICI, PROFESSOR, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: President Reagan had a similarly deep recession, unemployment peaked at 10.8 percent. At this point, he had the economy growing at 6 percent. We should simply be doing better.
But there are important legacies here. The health care legacy, my feeling is although it's going to prove to be very expensive, that's what will finally force reform in an American system that doesn't measure up to how well the Europeans do. And I think it's in areas like that that we're going to see fundamental changes in American society.
You know, if George Bush hadn't had the financial crisis, America would not have been changed at all by his administration. If Barack Obama had the economy growing at 5 percent, it still would be fundamentally changed by virtue of his presidency.
ROMANS: I want to bring Annie in here, because we have three more cliffs on the horizon, Annie, the debt ceiling, sequester and the budget -- the continuing budget resolution. How much will his legacy, how much will the sequel depend on strengthening these three things out? The very beginning of this second movie, how is this going to set the plate?
ANNIE LOWREY, ECON. POLICY REPORTER, THE NEW YORK TIMES: Well, I think that it's important to note that the hardest part is over. They managed to get through the fiscal cliff without allowing these huge tax increases in spending cuts. They delayed the spending cuts. There's a lot of work ahead of them.
But there's been deficit reduction they've managed to get done in the past year. And so, the problem, I think, is political. It's not economic.
Right now, Congress is obviously very divided. They're not working together. They're going to have to, if they want to, for instance, raise the debt ceiling and avoid a financial crisis.
And the question is, can Barack Obama do a better job of helping them do that because there's been a lot of complaints in Congress that he hasn't been leading. He has even offended some members of Congress by implying that they're not doing their job.
So I think there's this political question that's overlaid this very thorny economic question.
ROMANS: John, is the leadership of this president going to make a difference? Will he have to lead differently this time than he did in the first time?
AVLON: I think he does and I think he's already learned how to. I mean, he's shown a learning curving, the way he has framed the debt ceiling debate saying that, look, he's going to not let America be held hostage in these negotiations. That's one of the real key questions of a second term. Can you go from lucky or good to good to great, is this.
Will the president really lead on debt? Will he pull a Nixon on China when it comes to debt and really start trying to lead on issues like entitlement reform? Like Clinton did on health reform. Can a Democratic president, like Barack Obama, who has always talked a good game on entitlement reform, he really lead on this issue and leave us in a fundamentally more sound fiscal situation when he leaves office?
ROMANS: So, Peter Morici, outside of Washington and the Beltway and the leadership of the president, what it's going to feel like for the American middle class term two versus term one?
MORICI: I don't know that it will be much different. When you look at the forecasts, whether Democratic or Republican analysts, they're talking 2 percent growth, which means, you know, continuation of 150,000 jobs a month. That's if nothing goes wrong.
The slightest little hiccup could throw this economy off balance and put us in a recession. And while Mr. Obama might not necessarily be to blame, it would happen.
We simply have to grow better. The style of leadership has changed and improved but where are the proposals to really get stuff done and get the economy jump-started ? I'm waiting to see that.
ROMANS: All right. Peter Morici, Annie, and John, don't move, anybody, all of you stay where you are. After the break, we're going to lay out the challenges -- jobs a big part of that challenge, getting people back to work.
So, I ask you at home, a quiz for you at home, how many jobs have been created since this president took office? A. 76,000, B. 276,000, C. 476,000, or D. 1.76 million?
ROMANS: Fiscal cliffs ahead, still struggling economy, debate on gun violence and an election full of promises.
President Obama's legacy here is on the line. His second term start this is week. And depending what your political views are, he's either in a tough spot or off to a solid start.
One important fact, President Obama is a job creator.
Look at what was happening in the first few months he was in office, millions of jobs lost, in just a few months, nearly 800,000 in just his first full month in office.
But then that trend reversed and now, going into his second term, he is a net job creator. Te economy has added 476,000 jobs under this president's watch. That's according to the Labor Department data. But the unemployment rate remains stubbornly high, 7.8 percent.
John Avlon, Peter Morici and Annie Lowrey are back with me.
Annie, when we look at the president's biggest obstacles, first, it was recovering from the Great Recession. Then it was the Tea Party and reelection. He got over those.
Can he give over the jobs hump next?
LOWREY: I think it's a very good question. Obviously, the unemployment rate has come down very, very slowly. And even if you're looking at people who do have jobs, if you're middle income, you haven't really seen strong wage gains for more than a decade. In fact, if you account for inflation, people are earning less at that middle income than they were back in 1999. It's just feeling really bad for the middle class.
I think that President Obama has tried to do more to make sure that people who are middle income, they have health care. He's made the tax code more progressive. But I don't think anybody quite knows what we can do to get those millions of middle class jobs with wage gains that we need. It's a really, really pressing question for this economy.
ROMANS: And when people are living paycheck to paycheck who weren't 10 years ago, that still becomes a problem, even if you have health care and some of these other things.
John, we are in the throes of partisanship in Washington. I want you to listen. Even the president is pointing fingers.
(BEGIN VIDEO CLIP)
OBAMA: We are poised for a good year if we make smart decisions and sound investments, and as long as Washington politics don't get in the way of America's progress.
(END VIDEO CLIP)
ROMANS: What breaks that juggernaut? I mean, can it get worse than this or -- please tell me this has got to be the bottom.
AVLON: Ha! Every time we've said that it can't possibly get any worse in Washington, it magically gets somehow worse in Washington.
I mean, look, we are in a surreal situation where right now probably the biggest impediment to America's recovery is the United States Congress.
If we end up following a debt ceiling debacle like we have last time, leading to another downgrade, which is possible, that could have enormous repercussions throughout our economy. That is the kind of dangerous game being played in Washington.
ROMANS: You know what I hear sometimes in Washington, I hear, well, you know, look, if you look at the last debt ceiling showdown, stocks are up since then. We created jobs since then. You people are all just, you know, Chicken Little.
AVLON: To Annie Lowrey's point, which I thought was so important. It's not just how the stock market is doing. It's what happens on Main Street even more than Wall Street is what happens to the American economy. And Main Street is still suffering. I mean, middle class Americans has been squeezed for decades now.
President Obama, rightly, wisely, politically and I think practically said that he wants to be their defender, because they certainly need an advocate out here. So, it's not just the measure of the stock market. I mean, the surreal situation we're facing is that this president gets called a socialist. He is probably the best thing that ever happened in terms of just rated growth.
ROMANS: That's actually a good point. Stock market is up quite a bit since he began the first movie, if we continue that metaphor.
Peter, what's the biggest challenge for this president in crafting the legacy over the next four years?
MORICI: I think he has to make an adjustment with regard to regulation. You know, we all agree something has to be done about the banks and something was, but it hasn't worked. They're out there trading again, the "London Whale" and all the rest. You know, we need a restructuring kind with regard to Wall Street.
Other segments of the economy -- just completely shutting down drilling in the Gulf certainly makes it safer, but it's kind of like burning down the house to get rid of the mice.
We need to get regulation right. Just laying on very heavy dosage because of the aftermath of the financial crisis and the BP Horizon and so forth isn't working. You know, we have to create 360,000 jobs a month, each and every month, for the next three years, not just to keep up with population growth but to get unemployment down to 6 percent.
ROMANS: You know, Annie --
MORICI: Those are the kinds of numbers we need.
ROMANS: Annie, let's bring in the whole regulation theme here. I spoke to a small business owner earlier this morning who said to me, look, in small business, we're concerned with hiring more than 55 people because we don't know how we're going to implement the president's health care. We don't have demand coming in. We're concerned -- we're concerned about so many things.
What helps in the next four years for small business to feel -- to feel better about things and start growing and hiring?
LOWREY: Well, I think one important thing to remember is that for a lot of small businesses, regulation and taxes are a problem. And I would never argue that they weren't. If you ask small business owners what their biggest problem is, they still say it's that they don't have enough customers, the economy isn't growing quickly enough, business is still sluggish. And I think that that remains the really pressing issue.
And one nice thing about 2013, it looks like we could get some bang up growth for the first time in basically half a decade at this point if housing keeps on turning around the way that it is. If we get to exporting our natural gas and keep on having energy investment. And I think that could make that regulatory burden feel better for these small businesses if we had some really strong growth. It makes everything easier and everything basically.
AVLON: And that could be a small irony in the second term if we see an economic improvement because, actually, of fracking and natural gas exploration and shale exploration. It would be an historic irony and possibly a real boom to this president's economic legacy.
ROMANS: I sure hope you're right, Annie, that we do have some, you know, like the genie is going to come out of the bottle in the economy this year. I know we talked a lot on Ali's show, too. Hopefully, you're right.
John Avlon, Peter Morici, Annie Lowrey, nice to see all of you guys. Come back again soon.
Coming up, when the history of the president's second term is written, will it include new laws to curb gun violence. The president's push and then the push back, next.
(BEGIN VIDEO CLIP)
OBAMA: You know, that was the worst day of my presidency.
(END VIDEO CLIP)
ROMANS: That's how the president described the tragedy at Sandy Hook Elementary School. But will his legacy include tougher gun laws?
This week, the president called on Congress to reinstate the assault weapons ban, restrict ammunition magazines to no more than 10 rounds and require background checks on all gun purchases. He also signed 23 executive actions.
For the first time in years, it looks like gun legislation could happen and that immediacy is turning the fight over the president's plans very personal.
The president invited four children who wrote him letters, begging for an end to gun violence, invited them to join him at the White House.
Eight-year-old Grant wrote that, quote, "I think there should be some changes in the law with guns."
Eleven-year-old Julia wrote, quote, "even though I am not scared for my own safety, I am scared for others. I have four brothers and sisters."
(BEGIN VIDEO CLIP)
OBAMA: These are our kids. This is what they're thinking about. And so what we should be thinking about is our responsibility to care for them.
(END VIDEO CLIP)
ROMANS: But the National Rifle Association, the NRA, it got personal, too, releasing a new ad invoking the president's children.
(BEGIN VIDEO CLIP)
AD NARRATOR: Are the president's kids more important than yours? Then why is he skeptical about putting armed security in our schools when his kids are protected by armed guards at their schools?
(END VIDEO CLIP)
ROMANS: This was fine-tuned, of course, for friendly audience, one cable channel, a hunting network.
But it shows that not even the president's family is off limits when it comes to the debate over gun violence. Meantime, gun sales and gun membership in the NRA are surging. The group says 250,000 new members have joined since the Newtown shooting when calls for tougher gun laws began surfacing.
Rommel Dionisio is senior vice president of equity research at Wedbush Securities. He doesn't take sides here. He analyzes companies in the firearms space.
So, you don't have a dog at this fight. You're just looking at these companies, these companies and the profitability of companies.
Look, a CNN/"TIME"/ORC poll finds 55 percent of those surveyed favor stronger gun laws.
What's your read? Will the words Obama and gun legislation be written in the same words of the history book?
ROMMEL DIONISIO, SENIOR V.P., WEDBUSH SECURITIES: That is certainly the intention of the Obama administration. You know, it was certainly their intention the first four years of their administration, as well. But going into the next four years, what has really changed in the last several weeks is the public sentiment has swung so far in their favor in the wake of the Newtown shootings.
So they realize that they've got a tough fight ahead of themselves, facing a Republican-led House of Representatives. Certainly, we've got motivated people on the other side of the argument who are trying to defend what they perceive to be their Second Amendment rights to bear arms. But with public sentiment having swung the pendulum in the favor of the Obama administration's platform and tightened gun control legislation and the specific clauses banning assault rifles and high capacity magazines, I think they're more than motivated to wage that fight right now.
ROMANS: But gun stocks are up since Newtown. You know, they're up since Newtown. Does that tell you that investors at least think there's not going to be meaningful decrease in the value of gun manufacturers and in the sale of guns in America?
DIONISIO: Well, I think what has happened is since the Newtown shooting, gun sales have absolutely exploded. In the month of December, background checks with the federal government were up 58 percent, indicating that there were very, very strong year-over-year sales in firearms.
Right now, if you walk into most retails of firearms, the shelves are almost empty --
ROMANS: I know.
DIONISIO: -- for both guns and ammunition. So that's part of the reason, you know, these firearm stocks are probably going to see record sales in earnings over the next few quarters as a result of that.
ROMANS: This week a group of activists delivered 300,000 signatures to the Walmart near Newtown, Connecticut, demanding that that retailer stop selling these modern sporting rifles. Listen.
(BEGIN VIDEO CLIP)
PAM SIMON, GUN VIOLENCE SURVIVOR: We don't feel in a store where it's a family-friendly store, where you're buying a stroller and three aisles away, you can buy a military-style assault weapon. This -- this doesn't belong.
(END VIDEO CLIP)
ROMANS: You know, anti-gun activists may not like that Walmart sells these things, but the demand is there, very brisk demand. You point out that for Walmart, its sales of these things are a small percentage of its overall sales.
DIONISIO: That's right. For a big retailer like Walmart, you know, firearms, first of all, they don't sell handguns, but partly because of the public sentiment against the particular form of fireman. For a company the size of Walmart's broad, frankly geographic platform, there aren't that significant a source of sales and profits.
ROMANS: But they do sell these modern sporting rifles like the one used at Newtown.
You know, it's interesting because I hoped to interview the president of Walmart this week about this. They were making some other initiatives, some talks about -- you know, about hiring veterans and some -- they knew I would ask about guns and they weren't really interested in sitting down and talking about guns.
Rommel Dionisio, nice to see you, of Wedbush Securities. Have a good weekend.
DIONISIO: Thank you.
ROMANS: Coming up all you parents, you've been saving diligently for your children's education, right? A golden ticket to a brighter future, a college education. I'll tell you how your kids can guarantee a return on that investment.
ROMANS: Congratulations, you've done everything right. You've set aside money for retirement while also saving for your children's college education. Every spare dollar has gone into that 529 plan, and you will not be saddling your kids with $26,000 in student debt. That's the national average. Nope, not you. You sacrificed.
Now, brace yourself. Here's what a new study from the University of California, Merced, concludes -- the more you contribute to your children's education, the lower their grades are likely to be. That's right. You're buying them a golden ticket, and they're tarnishing it.
So, what are you supposed to do? Are you supposed to make them pay their own way? What we can do is help college kids keep their debts as low as possible and acknowledge that that golden ticket of a college education, it won't just be automatically stamped in the workplace. You don't float through.
Job success depends on your major, your internships, networking, frankly, a little luck. Remember the 1967 career advice in "The Graduate"?
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I just want to say one word to you -- just one word.
UNIDENTIFIED MALE: Yes, sir?
UNIDENTIFIED MALE: Are you listening?
UNIDENTIFIED MALE: Yes, sir, I am.
UNIDENTIFIED MALE: Plastics.
(END VIDEO CLIP)
ROMANS: Just one word: STEM. Today's plastic, STEM -- science, technology, engineering, and math. Graduates in those fields are more likely it find a job and make money.
The starting salary for engineering graduates is nearly $62,000. For humanities and social science majors, it's about $37,000. You don't have to be a STEM grad to do the math on that one.
Now, back to the student loans for a moment. If you believe that study, maybe a little student debt isn't such a bad thing. But you've got to keep that down. Scour for grants and scholarships. Earn college credits early to graduate sooner.
And remember this rule of thumb --
(BEGIN VIDEO CLIP)
MARK KANTROWITZ, PUBLISHER, FASTWEB.COM & FINAID.ORG: Your total education debt at graduation should be less than your annual starting salary.
(END VIDEO CLIP)
ROMANS: Think about that for a minute. But remember, student loan debt isn't insurmountable. You can pay it back.
Just ask America's most famous student borrower-in-chief.
(BEGIN VIDEO CLIP)
OBAMA: Look, we were lucky enough to land good jobs. But even with those great jobs that we had, we only finished paying off our student loans about eight years ago. Now, think about that, I'm the president of the United States.
(END VIDEO CLIP)
ROMANS: See, the president can even laugh about his loans now.
But this is no joke. A college education is an investment. Maybe the most important one you'll ever make.
This week, I had the honor of speaking to students at Knox College, a private liberal arts college, in Galesburg, Illinois.
Here's what I told them: there are four available workers for every job in this country. I said, look around you, look around you in that room. You got to beat out three of those classmates just to get hired.
You still have a golden ticket. You're just going to have to work harder to get it punched.
Parents, I want to hear from you. Are your kids coming out of college, are they prepared to enter the job market and fend for themselves?
Find us on Facebook and Twitter. Our handle is @CNNBottomLine. My handle is @ChristineRomans.
And catch me right back here at 1:00 Eastern with Ali Velshi on "YOUR MONEY." I'm going to show you why some Democrats are saying debt problem, what debt problem?
"CNN SATURDAY MORNING" with Randi Kaye continues now.