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YOUR MONEY

Washington's Budget Battle; What's the Deal with Davos?; Big Business, Big Lobby; Road to Renaissance; The Big Fix

Aired January 26, 2013 - 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: From the World Economic Forum in Davos, Switzerland, I'm Ali Velshi and this is YOUR MONEY.

World leaders including the U.K.'s David Cameron, Germany's Angela Merkel, even the president of Iceland have spoken here this week. But you're in North America so let me focus on the political brinksmanship that threatens your economic future.

Congress voted to suspend the debt ceiling for three months this week, effectively raising the country's borrowing limit while they figure out deeper cuts to reduce the deficit. That keeps me employed for at least a few more months.

But even before that deadline hits again, March 1st will be on us, the so-called sequester deadline. That's a stupid Washington name for a stupid and dangerous Washington creation. The automatic across the board spending cuts and then there's another date to worry about, April 15th. Not just tax filing day but the date by which Congress has promised to adopt a budget resolution.

They'd even this time staked their pay on it, agreeing to reach a deal or face suspension of their paychecks until they reach a deal. That might just be enough of a carrot to make them actually present a budget that takes on ballooning deficit. But the battle over that budget may -- make that recent battle over tax hikes for the rich seem like a friendly game of badminton.

Big spending cuts are needed and they will hit Americans where it hurts -- in their entitlements. I'm talking about health care, Medicare, Social Security. President Obama, emboldened by his re- election, has already drawn his so-called line in the sand. Now Republicans have to be the proverbial -- they have to come to the proverbial table.

Now perhaps the most powerful Republican in Washington, the Republican majority leader, Eric Cantor, from Virginia says he and his fellow Republicans congressmen will have a plan and they are ready to deal.

(BEGIN VIDEOTAPE)

REP. ERIC CANTOR (R), MAJORITY LEADER: I think it's important that we be here as members of the U.S. Congress. There are six of us who are here. Really interested in the discussion about the global economy. Obviously, the U.S. economy is still a global leader. We want it to remain that way. The political debate at home has been very much about jobs and the economy. And we're here listening to some of the leaders from the EU and the other sort of entities that are here trying to understand how they're dealing with their problems.

And I think coming out of all this will be a renewed sense that in America we can compete and we will compete and we will continue to be the destination for capital and innovation.

VELSHI: And we've got a natural gas boom, we've got an oil boom, we've got -- thanks to low interest rates -- what appears to be some sort of a housing boom. So much more can happen. And in fact it seems like the only body, the only institution that might stand in the way of 2013 being a great year is Congress.

CANTOR: Well, listen. There is certainly not the outcome that anybody wants. And I'm hoping that after we've been through the election of last November, we've been through a fiscal cliff debate, we are working our way through a debt ceiling debate, I think in a responsible manner, with an eye towards trying to fix some problems.

VELSHI: When you look at the options out there, President Obama's budget proposal and Paul Ryan's offer, they both don't do what guys like you say need to be done, balancing the budget for a long time. Now you guys have a proposal or you're coming with a proposal that says you'll balance a budget in 10 years.

I asked Paul Ryan this and I can't get an answer. How?

CANTOR: Well --

VELSHI: Because it's going to hurt.

CANTOR: Well, I mean, there are new baselines now in the budget. I mean, obviously we just -- as we know, some of the difficulty and the differences in Washington are centered around the method of accounting, whether it's static or whether it's dynamic. Because it's static, when you raise taxes, that $650 billion of additional taxes that went in because of the cliff deal, that adjusts the baseline.

That is going to make the numbers look somewhat differently. Right? And we'll have to make some choices, there's no question about it.

VELSHI: Right.

CANTOR: But we have committed to putting a budget out there that will actually bring it to balance within 10 years. Now --

VELSHI: But you can't tell me what -- because there's got to be some big change --

(CROSSTALK)

CANTOR: We haven't seen the numbers. We haven't seen the numbers yet but I'm telling you this added baseline adjustment, because of the revenues, because you're statistically scoring it.

VELSHI: Right. CANTOR: Is going to have an effect.

VELSHI: Yes.

CANTOR: But listen, there are things that we've got to do. You cannot keep spending this kind of money, and it's driven by the health care costs coupled with the demographics. We've got to do something to control it.

VELSHI: Right.

CANTOR: And we -- and I think most people would say --

VELSHI: But there are more proposals out there. Paul Ryan had them. The Republicans couldn't get behind that either. The fact is nobody seems to want to own up to a budget that is going to hurt. There's no solution that's not going to hurt.

CANTOR: Well, but the -- the Ryan budget, I mean, the last one, didn't balance it. It was almost 30 years.

VELSHI: Correct.

CANTOR: But the way that we -- we were trying to move is said, look, like in most in the private sector we want to transition from a defined benefit scenario to a defined contribution scenario. But you need to effect some real reforms in health care, delivery and compensation and payment, if you're going to have that happen. We cannot get agreement from the White House or the Democrats in Congress to join us in that effort.

VELSHI: So whether it's spending cuts or whether it's taxes, ultimately you started by saying it's about growth. We all agree. In fact, here at the World Economic Forum, everybody in the world agrees it's about growth. You can achieve that a few ways. Some say spending cuts, others say increased, you know, employment. But ultimately what's the thing that you can do to really move the ball forward and create growth?

CANTOR: What I think that the election said more than anything else is the people of our country want to see a government that works.

VELSHI: Yes.

CANTOR: And we --

VELSHI: Regardless of whether that's about taxes or cuts which is --

CANTOR: And we've got to -- we've got to -- and I hope the administration and Barack Obama, the president, will come and join us and say, look, it's time for us to set differences aside and do what any couple does, any group of people do, which is say, look, you're not going to agree 100 percent on everything and you're not going to agree 100 percent on anything, so find where we can agree.

VELSHI: And when they did that on January 1st of this year you voted against it.

CANTOR: No, they --

VELSHI: When they found middle ground between Democrats and --

CANTOR: There was no middle ground. There was no middle ground because where were the cults? Here's what we did.

VELSHI: OK. Middle ground on the fact that you guys had asked for no tax increases, then you put a threshold of $1 million dollars. Then we've got that --

CANTOR: We had always said -- according to the Boehner rule, we had always said if we're going to raise revenues through borrowing, through taxing, is we've got to do something about the problem. You can't keep digging the hole deeper and keep asking people to pay more taxes.

VELSHI: But you did vote against a consensus agreement.

CANTOR: No. There really wasn't. There really wasn't. This was a last-minute jam of a deal that I think we could have done a lot better for the American people.

VELSHI: Are we going to have a last-minute jam of a deal on sequestration, on the debt ceiling now, which is going to happen in May on a continuing resolution, on a budget?

CANTOR: I hope that we can work things out and come to an agreement, that you're going to have to do something about the problem. It is about spending. We've got to get control of the spending.

VELSHI: But you understand you're never going to get Democrats to really agree to that so you're going to have to find another way around coming to that solution.

CANTOR: Well, if --

VELSHI: If it gets stuck on --

CANTOR: If we don't get -- if we don't get control of the spending.

VELSHI: Right.

CANTOR: Then you're going to end up like Europe.

VELSHI: And don't you pick -- don't we go back to Bowles-Simpson then, the idea that nobody likes it but this could solve the problem.

CANTOR: Bowles-Simpson didn't solve the spending problem. Back to that, the main driver of the spending problem are the health care entitlements. Bowles-Simpson left that out.

VELSHI: So can you lead and say, let's do a Bowles-Simpson and --

CANTOR: Absolutely. We're working with the Fix the Debt Coalition and others to say yes, let's come together both sides of the aisle. We've got proponents on our side. We're looking for those on the other side who will say fine, let's do something.

VELSHI: But you're prepared to go in with documents rather saying the president won't do this and the Democrats won't this.

CANTOR: We have --

VELSHI: We won't do this. You're prepared to go in and say, this is what it looks like, let's talk?

CANTOR: I think we've done that ever since Barack Obama was elected with the stimulus plan.

VELSHI: I think some may disagree. But --

(CROSSTALK)

CANTOR: We've got (INAUDIBLE). We've got --

VELSHI: You'll go in and say let's negotiate on our suggestion and let's come to the table. Here's the room and do it.

CANTOR: Consistently have done that. Unfortunately it's not been properly or accurately portrayed because it is about sitting down together.

VELSHI: Right.

CANTOR: And figuring out how we fix the problems for the people who put us there.

(END VIDEOTAPE)

VELSHI: All right. Eric Cantor had his say. Coming up, reaction to that interview with Eric Cantor.

Did what we just hear provide some real hope for the end of the dysfunction in Washington or is it the cold Swiss air that's making me hear things?

You're watching YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Welcome back to YOUR MONEY. I'm coming to you from the World Economic Forum in Davos, Switzerland. You just heard my interview with Representative Eric Cantor, quite possibly one of the most influential Republicans in Congress right now.

I want to head back to the U.S. for reaction to that. Christine Romans is host of "YOUR BOTTOM LINE," John Avlon is a CNN contributor and a senior columnist at "Newsweek" and "The Daily Beast," and Margaret Hoover is a CNN political contributor and a Republican consultant. Margaret, I want to start with you. Congressional approval ratings were the lowest history in 2012, they stand at 14 percent right now according to the most recent numbers from Gallup.

Did anything you heard from Eric Cantor make you feel that 2013 is going to be a more productive legislative year, a more productive year in Congress?

MARGARET HOOVER, CNN POLITICAL CONTRIBUTOR: Well, let's be fair, Ali. They've just stopped using the debt ceiling as a -- as a bargaining tool. They've decided to put it off for three months and really try to negotiate. We can all admit that that is a proactive, constructive, positive step in the right direction. I think you would definitely agree with that.

Secondly, he did promise to say we will work towards health care entitlement reform in a bipartisan way. You heard it. I heard it. So let's see if they can move on it. Some folks are shaking their heads, don't believe it, but he just said it to you. So let's hold him to it.

VELSHI: I agree with that. Let's see if we can take them at their word I heard. Congressman -- or I asked Congressman Cantor why Republicans and Democrats didn't go with something like Simpson-Bowles and he -- you know, it looked like a plan that had ideas from both sides and leave -- left everyone a little bit unhappy. Here's what he said.

(BEGIN VIDEO CLIP)

CANTOR: When the president set up the commission, he specifically told the members of that commission not to deal with health care.

VELSHI: Right.

CANTOR: Because Obamacare had just passed. Well, if you're not dealing with health care, you're not dealing with the main drivers of the debt.

(END VIDEO CLIP)

VELSHI: All right. So he's right about entitlements driving the debt. I'm glad he said that and didn't carry on with that old saw that it's government waste, which doesn't even move the needle. It is entitlements and that's going to be a bigger problem. The -- the Simpson-Bowles plan included nearly $500 billion in health care savings over 10 years as well as recommendations for a long-term budget to reduce overall spending on those problems.

John, with that in mind, I have to wonder about why Eric Cantor said that it didn't touch health care.

JOHN AVLON, CNN CONTRIBUTOR: Because that's become the talking point that's -- you know, we've seen this again and again, Ali. Narrative -- outpacing facts in our political and particularly economic debate. The Bowles-Simpson plan was a balanced plan. Everybody gave a little. That's its virtue as well as part of the reason it's difficult to swallow. But there were spending cuts, entitlement reforms and also revenue increases. That balanced plan is the problem for Republicans. Not a single Republican representative who served on that commission supported it despite all their rhetoric about dealing with deficits and debt.

HOOVER: That's not true. That's not true.

AVLON: It is true. And --

HOOVER: Tom Coburn supported it.

AVLON: No. Tom Coburn -- representatives, not the senators. So this is -- this is a real fundamental problem. You have the rhetoric of bipartisanship but not the follow-through when the proposals are put on the table. We see it over and over again.

VELSHI: I was trying to get beyond just debating about spending and taxes so I asked Eric Cantor about establishing a national infrastructure bank that would use a little public money but really leverage private money to rebuild the U.S.' crumbling roads, bridges, and electrical grids.

(BEGIN VIDEO CLIP)

CANTOR: I'm all for leveraging private capital. And I think we need to do a lot better job at that. I know in my home state of Virginia we do a very good job --

VELSHI: That's right.

CANTOR: -- leveraging private capital for public infrastructure projects. The problem with creating an infrastructure bank at the federal level is the opacity that comes with that.

(END VIDEO CLIP)

VELSHI: That's interesting, Christine, because I said to him, can't we deal with the opacity? He was in favor of the concept of an infrastructure bank but he said at the state level. He said the minute you take it to the federal level it takes it out of the oversight of Congress.

CHRISTINE ROMANS, HOST, CNN'S YOUR BOTTOM LINE: Yes.

VELSHI: And he's not interested in that. I couldn't make sense of whether that meant he liked the idea or he didn't.

ROMANS: He -- but isn't that a classic sort of conservative position? Even if it's something that's a good idea, everyone gets their head around, leave it in the hands of the states, the federal government doesn't want to have -- this doesn't belong in the hands of the federal government.

Look, when we talk about infrastructure bank and infrastructure buildup, let's be clear here. You've got interest rates at 1.8 percent or something for a 10-year bond. I mean that -- this is the time. The markets are telling us there's never been a better time to invest in infrastructure, to borrow money to invest in infrastructure.

You use the private sector do that with some guidance from the government and it could be a great idea. But you've got that resistance about the federal government being involved.

AVLON: And that's why, Ali, that answer was so classic and so frustrating. Those are weasel words.

(LAUGHTER)

When you say that you support an infrastructure bank, level -- you know, leveraging private capital, well, that's what a public/private infrastructure bank does. This used to be a bipartisan idea. Why is it so difficult to --

HOOVER: And actually --

AVLON: -- back in fact then?

HOOVER: Actually it used to be a Republican idea. If you go back and you look at how the Hoover dam was financed, it was financed by a public/private infrastructure led by a Republican secretary of commerce who then went on to be president, was named after the dam and seven states collaborated, private sector collaborated, private sector was all paid back with interest. This is not a partisan idea actually.

AVLON: But it's become one and that's the problem.

HOOVER: Well --

AVLON: It's not.

VELSHI: I -- I agree with you, Margaret. I think this is the thing that we're all agreed on. I'm puzzled as to why Republicans don't like this idea more than they do.

AVLON: Right.

VELSHI: If the -- I mean, I buy into the idea that opacity is a problem. That when government gets to do things without proper oversight, things don't always go well. Look, the stimulus of 2009 had some of that going on. But we are talking about building something from scratch. We have to try all options. Do you think Republicans can get behind that?

HOOVER: Well, I mean, certainly Eric Cantor isn't going to be behind it, but there -- you know, I am working with and sort of hope to see grow a group of reformed Republicans who are not these sort of reactionary traditionalist conservatives who are -- you know, who will -- who will defend state's rights and federalism until the day they die, which frankly there is a place for. But, you know, we also live in a --

VELSHI: Yes.

HOOVER: Fifty states. We need infrastructure. There -- there are constructive market-based solutions to a lot of the problems we have that will solve our national problems, especially our infrastructure.

VELSHI: Right.

HOOVER: That I think some Republicans ought to get behind. I don't think they -- I don't think everybody Eric -- echoes what Eric Cantor says.

VELSHI: This is -- that's a good point. Christine, I mean, what Margaret said is key. These can be market-based solutions. We know from private organizations that infrastructure in the United States needs repair. We know from examples in other countries that if you have proper infrastructure it over time attracts business and we can shed this whole nonsense about taking on debt for our grandchildren if we actually create a place where it's fascinating and profitable to do business.

ROMANS: And it's economic security for your grandchildren. I guess this becomes a message that has to be -- that has to change here where instead of talking about spending and federal government getting bigger and more involved in the economy and your life we have to be talking about investing and using the government the way it should be to invest and put us in the right position so that we can compete with the rest of the world, that by the way is going crazy doing infrastructure spending and using cash in many cases to do it. Something we don't have.

(CROSSTALK)

HOOVER: But just changing the words won't fix it because if Obama -- has also said investing in lieu of -- as a synonym for spending. So I mean it has -- investing has to be investing.

AVLON: Yes, but -- but it is. And that's what -- if we can't get behind a no-brainer like this, a public/private infrastructure bank, we've got a real problem. This is leveraging, private capital. This should be a no-brainer and it is ridiculous that it's contentious where the rubber meets the road.

VELSHI: Yes. It is. It is a no-brainer no matter what side, where you are on the political divide.

Christine, thank you so much. Margaret and John, stop playing footsie.

(LAUGHTER)

We're going to take a quick break. But one man, two skis, multiple falls. Richard Quest is fresh off the bunny slope. He joins me next to discuss all things Davos.

You are watching YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: All right. Richard Quest joins me now. He is the host of "QUEST MEANS BUSINESS" on CNN International. He is a perennial all- star here in Davos.

Now, Richard, I want to give our viewers a look at what this place, Davos, and the World Economic Forum is really like. Where in world are we? Take a look. Davos is Europe's highest city. It's located in the eastern part of Switzerland in the Alps. Now most of us flew into Zurich and then took three trains to get here.

It is, however, a really beautiful place, known for great skiing and upscale hotels. It's also really expensive in January. I've been eating pizza all too much this week, 25 bucks for a little pizza, $13 for a pint of beer in this town. It's costly.

RICHARD QUEST, HOST, CNN'S QUEST MEANS BUSINESS: Laundry, three shirts, four pairs of smalls and a few socks, about $100.

VELSHI: Yes. It's very expensive.

QUEST: It is unbelievable.

VELSHI: So you've got the top 1 percent of the 1 percent who are here. But mixed in you have great business people, entrepreneurs, academics and intellectuals. And they've all come around to some ideas.

QUEST: And they have, and they've all got a point to make. Howard Lutnick, for example, the head of Cantor Fitzgerald.

VELSHI: Yes.

QUEST: Everybody is worried about Europe.

VELSHI: Yes.

QUEST: Lutnick is worried about the U.S.

(BEGIN VIDEO CLIP)

HOWARD LUTNICK, PRESIDENT AND CEO, CANTOR FITZGERALD: The Republican Party who was elected to control the Congress the same time as Obama was elected are going to cross their arms and they are not going to raise the debt ceiling ultimately unless they get severe spending cuts and the Obama administration is not going to give it to them. And you're going to watch the U.S. do crazy, crazy things this year.

(END VIDEO CLIP)

VELSHI: Great. He -- he was pretty clear. He called it crazy. I talked to Eric Cantor earlier, the Republican majority leader. He sort of said wait, we're ready to make -- we're ready to deal and compromise, but people are very worried about what the U.S. could do.

QUEST: Oh, and this latest decision to just kick the can, I hate to use the cliche.

VELSHI: Right.

QUEST: Further down the road.

VELSHI: Right.

QUEST: Axel Neighbor is a former central banker in Europe. He is also the head of UBS and he was absolutely in no doubt that what we are seeing in the U.S. in the political and economic process is dangerous.

(END VIDEO CLIP)

AXEL WEBER, BOARD CHAIRMAN, UBS: If you have the debt ceiling, the Europeans will talk about how you can make that binding. In the U.S., the concern is much more whether you can lift it in time in order not to put too much break on the economy. Now, the U.S. economy has bottomed out, it's coming back, and I think sooner or later the U.S. has to face the fiscal issue not just in the sense of delaying adjustment but really making a credible adjustment.

(END VIDEO CLIP)

VELSHI: This is very reminiscent of the conversations we were having a year ago about Europe. Right? From the outside it looked very obvious. Guy, you've got to get your house in order, we know what the decisions are likely to be, you've actually got to just do them. And now I hear in Europe everybody is saying, guys, we know what you need to do, you've just got to do it.

QUEST: Well, they were particularly amazed in this latest decision to suspend the debt ceiling once again. Don't just go tying it --

VELSHI: Right.

QUEST: -- to this pay -- congressional rating.

VELSHI: Right.

QUEST: Instead of just simply doing it.

VELSHI: Right. Right.

QUEST: Constantly.

VELSHI: Coming up with gimmicks and --

QUEST: Well, shackling.

VELSHI: Right.

QUEST: Shackling something onto the side of it.

VELSHI: Right. Right. Right. Well, they said this time if they don't do it, they're going to stop getting paid. Congressmen are going to stop getting paid.

Now listen, there's another CEO, very interesting guy, you know him and I do, Andrew Liveris. He's the CEO of Dow Chemical, but he's also the author of a book about manufacturing. And he says one of the problems in the United States and in developed countries is we see manufacturing as the old and the past whereas a lot of developing countries see it as the future and the road to prosperity. Here's what he told us.

(BEGIN VIDEO CLIP)

ANDREW LIVERIS, CEO, DOW CHEMICAL: Manufacturers go to small towns. Manufacturers have barbershops that supply them and local cafeterias. To educate communities around the world that this is vital for job growth because we have a jobs crisis today, Ali.

VELSHI: Yes.

LIVERIS: And manufacturing is the solutions base for the jobs crisis.

(END VIDEO CLIP)

VELSHI: So Andrew Liveris talking about job, job creation. The theme here, resilient dynamism has emerged, it seems, over the course of the week in Davos into jobs.

QUEST: I'm starting -- I came here thinking they were absolutely stark-raving mad with resilient dynamism. Now I'm starting to think it was a stroke of genius because it's allowed everybody to grab on to something.

VELSHI: Right.

QUEST: And that developed into the theme, jobs.

VELSHI: Good. All right. Well, listen, we've got a few long working days here at Davos.

QUEST: Yes.

VELSHI: We've interviewed a lot of people, we've attended a lot of sessions. Some of the best work is done just in the hallway when you're having conversations with people. But this is a -- it's a beautiful place and it's a pretty fun place to be. There are a lot of dinners and parties and of course the skiing.

Richard, before we even got started, hit the slopes. But being the true journalist that he is, you asked people how they were feeling about the economy. What did they tell you?

QUEST: They are all slightly worried because things are getting better but the risks --

VELSHI: Right.

QUEST: It's all about risks, Ali. VELSHI: Right.

QUEST: Again and again and again people say risk, risk, risk.

VELSHI: All right. We're not done here. You can't hit the slopes just yet because we're going to talk a little bit more.

Richard Quest with me here in Davos.

Listen, you heard a lot from the CEOs, you've heard from others about what's going on in the world and at Davos, but there's one man in the United States who holds no elected office and yet could stand in the way of President Obama fulfilling the agenda that he's promised to fulfill.

Stay with us. You're watching a special edition of YOUR MONEY from Davos, Switzerland.

(COMMERCIAL BREAK)

VELSHI: Welcome back to a special edition of YOUR MONEY from Davos, Switzerland, here at the World Economic Forum. I'm about to introduce you to one of the most powerful men in Washington who doesn't hold elected office.

Tom Donohue is the president and CEO of the U.S. Chamber of Commerce. He joins me now.

Tom, good to see you. Thank you for being with us here at Davos.

TOM DONOHUE, PRESIDENT AND CEO, U.S. CHAMBER OF COMMERCE: Great to be here.

VELSHI: Tom, so much has happened with you in the last few years. You have been a force to reckon with for this administration, and in fact you sort of went down some paths to not see them re-elected, they got re-elected.

What's your relationship with the president and the administration going to be?

DONOHUE: First, we have nothing to do with presidential elections. We of course involve ourselves in senatorial and congressional elections and others.

VELSHI: Right.

DONOHUE: Our relationship with the White House is very broad. We have helped them on many issues. We have opposed them on issues. We work closely with Treasury and OMB and others, and from time to time with people directly in the White House.

VELSHI: But would you say it's good?

DONOHUE: I'd say I have to deal with the White House on the behalf of the American business community. VELSHI: Right. Yes.

DONOHUE: They have to deal with us.

VELSHI: You've taken sort of harder political positions in the last few years. Let's talk about one of them. You didn't really like the climate change stuff that the administration was up to. They may go into that again in the second term. It's probably not the highest priority but they may go down that road.

DONOHUE: I think it is a high priority. It was the first thing the president said when he did his inaugural address, and he isn't going to go to the Congress to do it.

VELSHI: Right.

DONOHUE: He's going to do it on a regulatory basis. And if you look what he's brought out of the EPA before, he can do a lot more going forward and we're all going to have to work on that.

VELSHI: All right. Let's talk about spending cuts. One of the things you'd like to see is deficits getting under control, spending cuts. Here we are in Europe where the austerity of the sort that they imposed is not certainly in the short-term working. We've just seen new unemployment numbers out of Spain and Portugal. Spain at 26 percent. Youth unemployment at 16 percent. We've gotten to the point where we're lapping ourselves in Europe because so many are unemployed that the -- the idea of organic growth any time in the next five years is impossible to see.

How do we manage that in the United States? How do we manage a cut in spending that doesn't send us into a downward growth spiral?

DONOHUE: It's where you cut the spending. And you're absolutely right the way you evaluated the trouble in Europe, and that's a problem for us because they're our largest export partner. But the spending that we want to adjust is the spending that is automatic, and that is entitlements. Social Security a little bit but primarily Medicare.

VELSHI: Right.

DONOHUE: And it goes up, up, up, and the problem is people living much longer than anybody ever thought. You don't have to cut it. You have to turn the curve down, you have to make some adjustments. If you do it, A, you'll get some benefit in budgets, you'll get a lot of benefit in debt.

VELSHI: We got -- we got waylaid a little bit in the past four years talking about government waste and fraud and stuff like that. In the long term, that's not the stuff that moves the needle.

(CROSSTALK)

That's what you're talking about is what we have to change.

DONOHUE: It's entitlements.

VELSHI: Yes.

DONOHUE: We have to fix Social Security because for years we've been spending the surplus. Now we're having to borrow money to pay Social Security.

VELSHI: Right.

DONOHUE: Medicare, we borrowed $3 out of every $4 and have from the beginning that we have spent. We have to fix it.

VELSHI: What's your recommendation for the process of how we fix this? We have the math. It's actuarial. We know how to do it but we can't get -- we can't get it done.

DONOHUE: Well, I've got a process different than some people do.

VELSHI: Yes.

DONOHUE: We've been talking about fixing this in two buckets, one bucket is reducing costs and another bucket is increasing taxes. If you think you can get this all done for the amount we have to do with -- let's say a 10-year program, you're going to have to dig very deep. We need a third bucket and it's sitting right there and we should use it. It's energy.

Fracking, for example, has created 1,750,000 jobs in less than two years. Billions and billions of dollars going to the states and the federal coffers. We have more energy than anybody in the world. And if we -- in an environmentally friendly way -- acquire it, go on the federal lands, do it in the right way, we'll get that extra piece of cash and bring manufacturing and jobs back to the United States or create them in the United States because of our energy.

VELSHI: The last four years of the Obama presidency was marred by not great relationships between the business community and the administration. You are one of the key faces of the business community. Have you reached out to the president or has he reached out to you since his election to say let's make this four years look very different?

DONOHUE: Just remember my job is to represent the business people.

VELSHI: Right.

DONOHUE: He's the president of the United States. We deal with each other when we should, and when we need to, and sometimes we agree, sometimes we don't.

VELSHI: But do you have a good relationship with him?

DONOHUE: I --

VELSHI: Would you like a better relationship with him?

DONOHUE: Oh, I would like to have a more regular relationship with him, but we're doing just fine.

VELSHI: All right. Very good to hear that, Tom. Great to see you. Come back and talk to us. I know we want to talk about my home country of Canada. I know you went in there. Some examples there.

DONOHUE: The great Canadian miracle is something we should follow.

VELSHI: Not the health care part, though, right?

DONOHUE: No.

(LAUGHTER)

Thank you very much.

VELSHI: Good to see you. Tom Donohue is the president and the CEO of the U.S. Chamber of Commerce.

DONOHUE: Thank you very much.

VELSHI: This year's theme at Davos is resilient dynamism. Not sure exactly what that means but I've got a hunch it's something the U.S. has got and the Europeans not so much. I'll explain why America's economic renaissance -- I said renaissance, so did Tom Donohue -- is enough to make the Europeans envious of you.

(COMMERCIAL BREAK)

VELSHI: We are in Davos for the World Economic Forum. Resilient dynamism. Resilient dynamism. That's the theme of this year's World Economic Forum meeting here in Davos.

Frankly, I am still trying to figure out what that means. We are certainly seeing resilience in the U.S. economy assuming, of course, our elected leaders can get out of the way and the political dysfunction that has become the norm in Washington doesn't drag down the still-fragile recovery. But as I told you before, if Washington doesn't interfere, if they actually help, the U.S. is on the road to economic renaissance.

Now if we're talking resilient, jobs in the U.S. are coming back. They've come back to some degree, job growth is not nearly as strong as we'd like it to be, as most economists think we need it to be, but the U.S. economy has added jobs for 27 straight months, 1.8 million jobs alone in 2012.

And how's this for resilient? 2012 was the best year for home sales since 2007 before the recession began, 4.7 million homes were sold. Prices are rising. Fewer Americans have underwater mortgages and mortgage rates are hovering near record lows.

And talk about dynamic, America is beginning to reap the rewards of a domestic energy boom. We are extracting record amounts of oil and gas from shale rock through fracking and other new technologies that's pushing down prices for natural gas, which is used in part to generate electricity. Now that helps utilities and heavy the industry compete, creating more jobs for Americans. In the meantime, Europe is not looking as resilient or nearly as dynamic. There are fears of a triple-dip recession in the United Kingdom after British GDP shrank in the final three quarter, the final three months of last year.

Earlier this week the International Monetary Fund downgraded its forecast for the entire Eurozone to a second consecutive year of recession.

Ken Rogoff is a professor at Harvard, he is the former chief economist for the International Monetary Fund. Chrystia Freeland is an editor at Thomson Reuters Digital.

Let's start with -- both of you, welcome.

Let's start with you, Ken. First of all, the UK, this business of a triple dip. The movements have been very small between the third quarter and the fourth quarter. A lot of economists say that don't worry about that just yet.

KEN ROGOFF, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: Yes. I mean it's reflecting what's going on in Europe. They had a deeper financial crisis. They didn't have the energy boom that you're talking about. And otherwise they'd look a lot like the United States.

VELSHI: Now Chrystia --

CHRYSTIA FREELAND, EDITOR, THOMSON REUTERS DIGITAL: Don't you think, though, also it is that they cut deeper? I mean the U.S. had a --

(CROSSTALK)

VELSHI: Well, that's the big theme that we're talking about this year.

ROGOFF: Well, I mean, the U.K. had a gigantic pre-stimulus and they have been gradually pulling out but the budget deficits are sort of the same. So, I mean, they followed a very similar path bottom line. I don't really think that's where it's coming from. I think it's the bigger, more important financial system, London, it just dominates London. They're right next to Europe, which you just said, in the second year of recession or -- that sounds like a good forecast to me. And at the same time the energy boom I think is worth a percent a year for U.S. --

VELSHI: Right.

ROGOFF: And by the way, they have -- we have more population growth.

VELSHI: Right.

ROGOFF: So it's different.

VELSHI: A lot of things in the U.S. are looking different. Chrystia, let's talk about the energy boom for a moment. There are some real -- there are some real jobs to be created. There's a real sense that it's bringing electricity prices down. I've spoken to a number of manufacturing CEOs this week who think that, you know, they're not paying as much attention to Washington. They're thinking there's some real hope in the U.S.

FREELAND: Yes. No, no, one of the things that I've been really struck by here at Davos is the real optimism around the U.S. economy. And that's something you're hearing a lot from the American business people.

VELSHI: Right.

FREELAND: But also from business people from other parts of the world. And very closely tied to that is people have now gotten that there is a U.S. energy story and there is a lot of enthusiasm around that. A question I have in my mind is, you know, to what extent that energy boom can be squared with the pressure that I think Barack Obama is under from some wings of his party to really push an environmental agenda in his second term.

ROGOFF: I'd just qualify that by a lot of the multinational corporations people operate in the United States and all over the world say, we're optimistic about the United States but we're not seeing it. Our sales aren't that good. Not much is happening.

VELSHI: Right.

ROGOFF: Maybe it's because January nothing happens. It will all happen in March. But there's a cautious optimism because the numbers on the ground, their business isn't showing it yet.

FREELAND: I agree with that. I think it's like a looking-forward optimism.

ROGOFF: Yes. Yes.

FREELAND: But I am, like, they are all saying that same looking forward optimism, which they weren't last year.

ROGOFF: Yes. They -- they were liking the U.S. better than Europe last year and they're maybe liking it much better this year.

VELSHI: Let me ask you this. There's a different part that goes on here and that is these sessions, these ideas, these smart people who come out and say things. Some of them are just political but some of them, you know, have some great ideas.

Did anything strike you, Ken, that something we can build on, that's just going to be economically exciting?

ROGOFF: Well, I have to tell you the thing which has struck me the most actually has not been there but talk about cybersecurity and you talk to these, you know, big energy corporations, people (INAUDIBLE), you don't see it in the news, you know, what goes on, security, also political instability, what's going on in some of the countries of very large Muslim populations. The tensions between the radicals and the moderates.

In general I would say a theme I've come out with this here is that people are more worried about geopolitical stability. I don't know that it's worse or they're just less worried about everything else.

VELSHI: The way you would.

FREELAND: I would agree with that. And the other big theme that I've heard a lot of people talking about is -- actually touches on Ken's world, which is, is the educational sector going to be the next sector which is seriously disrupted by the technology revolution. It sort of feels as if maybe some of those online education technologies that have been on the brink for a little while might really start to come good this year.

ROGOFF: Every 23-year-old in Boston has an education start-up by the way going. That's the new thing.

FREELAND: And one of them might turn out to be the next Mark Zuckerberg.

ROGOFF: I hope so. I hope.

FREELAND: Right?

ROGOFF: We hope so.

VELSHI: Good to see you both here and we'll see you both back when I'm back in New York, Ken Rogoff and Chrystia Freeland.

As I mentioned this year's theme at Davos is resilient dynamism. Still trying to figure out what that means but I have a hunch that Nouriel Roubini doesn't agree.

(BEGIN VIDEO CLIP)

NOURIEL ROUBINI, PROFESSOR OF ECONOMICS, NYU: We're going to continue on unsustainable economic and fiscal policies for years to come. Until then something is going to crack eventually.

(END VIDEO CLIP)

VELSHI: I'll introduce you to the economist they call Dr. Doom right after this.

(COMMERCIAL BREAK)

VELSHI: Well, if you've watched me before you know I've been telling you the United States is headed for an economic renaissance. The manufacturing sector is getting a boost from a boom in domestic energy production. The S&P 500, you may have an investment that looks like that, is at a five-year high. The housing market seems to have hit bottom and is on its way back up but not everybody is as optimistic as I am. I want to bring in Poppy Harlow. I think is actually an optimistic person but Poppy sat down with Nouriel Roubini, the world-renowned economist they call Dr. Doom for famously predicting the recent financial crisis. He certainly doesn't see things the way I do.

POPPY HARLOW, CNN CORRESPONDENT: He doesn't, but consider the source. Right? Dr. Doom, he's been very bearish on the U.S. economy for -- you know, the last five, six years. But he has two main points, and that is persistently anemic growth in the United States.

VELSHI: Right.

HARLOW: And this huge fiscal drag. Here's how he explained it to me.

(BEGIN VIDEO CLIP)

ROUBINI: This year (INAUDIBLE) between tax increases and spending cuts at least 1.4 percent fiscal drag. Now if the economy was growing robustly, we say, about 3, 3.5, you get a fiscal drag of 1.4 per year, big deal, you grow 2.4 for the year. But the economy has been growing barely 2 percent so you subtract 1.4 from the fiscal and you get something closer to a stall-speed 0.6. In Europe they forced them to do fiscal austerity.

HARLOW: Right.

ROUBINI: In the U.S., rates are lower and they're going to stay low for many reasons so there's no market pressure for the political system to break the gridlock. So we're going to continue on unsustainable economic and fiscal policies for years to come until then something is going to crack eventually.

(END VIDEO CLIP)

HARLOW: So saying something is going to crack eventually. And it's interesting because he says, look, Europe has this market pressure to do something. In the U.S. we don't yet so he's saying basically this lack of policy, lack of pressure on the U.S. is going to just catch up with us.

VELSHI: All right. So the idea is how do you spur growth in the economy. And there are different opinions as to how you do that. You also sat down with the billionaire investor George Soros. What did he have to say?

HARLOW: Well, let's be clear here. This is a man that describes himself as a bleeding heart liberal.

VELSHI: Right.

HARLOW: So we know what camp he's in. He said look, the U.S. is in the best position of any major economy now but he also said that the only way to spur growth, spur jobs is to spend a lot more money.

(BEGIN VIDEO CLIP)

GEORGE SOROS, CHAIRMAN, SOROS FUND MANAGEMENT: Having additional stimulus.

HARLOW: You want more stimulus?

SOROS: Fiscal stimulus -- actually, fiscal stimulus combined with quantitative easing where the Central Bank effectively buys the debt that the government issues is about as close to a free lunch that you can have when you have unemployed resources. Putting them to work is much better than cutting back going the wrong way.

(END VIDEO CLIP)

HARLOW: So he thinks we need to spend. He's a big critic of austerity here in Europe. But I said OK, what do you want to spend more government money on? He said infrastructure. And I know you've talked a lot about an infrastructure bank.

VELSHI: Right.

HARLOW: And also education. Things he thinks will pay for themselves in the long run.

VELSHI: Yes. That was actually a big topic here this week. Some other news came out in the middle of the week, though, that for the last three months of 2012, Spain's unemployment hit a record for the quarter.

HARLOW: Right.

VELSHI: Twenty-six percent.

HARLOW: Right.

VELSHI: Sixty percent youth unemployment.

HARLOW: That's unbelievable. And you have the same problem even in a stronger economy like Germany. Angela Merkel, the German chancellor, speaking here, said youth unemployment is such a huge problem. And interestingly, I sat down with Arianna Huffington who's also very vocal politically. And what she said her top concern is actually surprised me. Listen.

(BEGIN VIDEO CLIP)

ARIANNA HUFFINGTON, FOUNDER, HUFFINGTON POST: For me the biggest crisis that's not being creased out of Washington is youth unemployment. It's the fact that 50 percent of college graduates either can't get a job or are doing a job for which they would not have needed a college degree. And that's not sustainable. That really goes right against the American dream, which is based on the assumption that you work hard, you play by the rules, and then you do well and even better than your parents.

HARLOW: I think really as I've watched over the last five years since the crisis, companies have learned how to operate so much more leanly.

HUFFINGTON: Right. HARLOW: And they're just not going to bring on the amount of people they had before. So isn't there a real fundamental issue there for job creation?

HUFFINGTON: Businesses have multiple bottom lines we're beginning to learn. It's the bottom line that is the responsibility to their shareholders. But it's also the bottom line that is the responsibility to the public and to the general stakeholders beyond their shareholders. And after all, a country where half its youth graduates from college and cannot get a job is not the best environment in which to run a business.

(END VIDEO CLIP)

HARLOW: So that's interesting because this is a woman who is now one of the top positions at a public company.

VELSHI: Yes.

HARLOW: At AOL. So then someone on the complete opposite side I talked to, someone you and I both know well, John Chambers.

VELSHI: Right.

HARLOW: The CEO of Cisco, staunch Republican, you know, endorsed Romney. And he said look, they've got nearly $40 billion overseas. He has no intention of bringing it back to the U.S. unless policy changes. And be like this, he said the best place to do business --

VELSHI: Let me guess.

(LAUGHTER)

HARLOW: What?

VELSHI: Canada.

HARLOW: Canada.

VELSHI: Yes.

HARLOW: Then Russia. Now, you know, he's making a point with Russia.

VELSHI: Oh well. OK.

HARLOW: He's making a point with Russia.

VELSHI: Right. Right.

HARLOW: But Canada.

VELSHI: Interesting.

HARLOW: And you know he just thinks that if the policy doesn't change here, he's not going to bring the money to work here. He told me, you put money to work, you hire, you acquire companies where you're wanted, clearly sending a message to the administration. I don't know if it's going to change anything.

VELSHI: Yes. Well, it's interesting to hear from different people. But one thing you get here is in one place over the course of a few days.

HARLOW: Yes.

VELSHI: Such broadly divergent views between academics and business experts and leaders.

Poppy, good to see you, as always.

HARLOW: Good to see you, too.

VELSHI: All right. You can see more of those interviews, by the way, and all of our interviews from Davos on CNNMoney.com.

We'll be right back.

(COMMERCIAL BREAK)

VELSHI: As the 43rd World Economic Forum in Davos, Switzerland winds down, it's time for a little reflection and as always with Richard, a little Q&A. "Quest and Ali."

Richard Quest is the host of "QUEST MEANS BUSINESS" on CNN International. Our topic today, Davos. Is it worth it? We're on your home court in the European -- on the European continent. I know you're in Britain. It's not the same thing.

QUEST: So you go first.

VELSHI: So I will go first.

(LAUGHTER)

Start the clock, working the bell. It's Davos, Switzerland and I have a story to tell.

Richard, 2500 participants from more than 100 countries including 900 top business executives, more media than you'd even see at the Oscars have descended upon this beautiful town nestled in the Swiss Alps. Now I bumped into Charlize Theron, Derek Jeter. I got shoved off the sidewalk by David Cameron's bodyguards. I ripped my pants. Someone made fun of my dressing and someone stole my hat, as you know.

It's been a blast. I'm not sure this is what Claus Schwab, the German professor who founded this forum 43 years ago, had in mind but he throws quite a shindig up here in the Alps. It's my first one, as you know. And I see why it gets bigger every year. This is not a place really where deals get done or treaties get signed but it's a place where big ideas get thrown into a somewhat controlled mosh pit of executives, world leaders, movie stars and big thinkers.

And somewhere in the midst there, there is probably -- well, there are probably some good ideas that come out of. So yes, I thought it was worth it.

QUEST: My turn.

VELSHI: Say when.

QUEST: They say here in Davos the World Economic Forum committed to improving the state of the world. What a pompous piece of arrogant nonsense that is. But the truth is, even though everybody says they're never coming back here again, that it is a talking shop, a lot of hot air in the cold Swiss mountains, the truth is, once you get here, there is an inalienable atmosphere, a hot house arrives, and issues that you never really expected to go onto the agenda suddenly arrived.

People put in the same room, CEOs, ministers, NGOs, yes, even old hacks like us, we come together and people start discussing issues. Davos was never meant to be a place where decisions were taken, communiques written.

VELSHI: Right.

QUEST: Statements made. It was always meant to be that place where you had a conversation an idea was sparked. Do you need to bring 5,000 people? No, but at least there exists.

VELSHI: Well, it was a week where we've learned a lot. We've spoken to a lot of people and hopefully given our viewers some access to them.

Richard, it's been a pleasure --

QUEST: Thank you.

VELSHI: Thank you for teaching me the ropes. You can have your bell back.

I want to hear what you think about Davos, my interview with Congressman Cantor or anything else we discussed today. You can find me on Facebook at Facebook.com/alivelshi and you can tweet me, my handle is @alivelshi.

Have great weekend. Thanks for watching this special edition of YOUR MONEY from Davos, Switzerland. You can catch us every Saturday 1:00 p.m. Eastern, Sunday at 3:00, plus weekdays at 3:30.

Have a great weekend. I'll see you back in New York next week.