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YOUR MONEY

Economic Storm Looming?; Big Problems, Small Thinking; Minimum Wage, Maximum Fight; Natural Gas Gains; Fracking Fears; The Consumption Economy

Aired February 17, 2013 - 15:00   ET

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


ALI VELSHI, CNN ANCHOR: Despite a recession in Europe, major mergers here in the United States show evidence that business is in fact picking up. America could be on the road to prosperity if not for our politicians standing in the way.

I'm Ali Velshi. This is YOUR MONEY.

(BEGIN VIDEOTAPE)

VELSHI (voice-over): There's an economic storm hovering just off our shores. The headwinds are gathering strength as our elected official once again seem prepared to take the American economy to the brink of destruction. This time over a March 1st deadline for the across-the-board government cuts known as the sequester.

LEON PANETTA, DEFENSE SECRETARY: This is not a game. This is reality.

REP. JOHN BOEHNER (R), HOUSE SPEAKER: I don't like the sequester. It's taking a meat axe to our government.

PANETTA: These steps would seriously damage the fragile American economy.

VELSHI: Still fragile enough that four years after the recession the U.S. economy actually shrank in the last three months of 2012. The storm clouds were ready to blow away and Washington basically called them back.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think we're all aware that we have some urgent business to do.

VELSHI: If not for indecisive, uncompromising, and polarizing politicians, America's economy could take off again.

OBAMA: We are producing more energy and America can become an energy exporter.

VELSHI: We're in the midst of an energy boom and it's lowering the price of electricity and bringing manufacturing back to America. A housing boom fueled by the lowest interest rates in history. And 35 months of private sector job creation. America's future could be great.

REP. ERIC CANTOR (R), MAJORITY LEADER: I'd like to focus on what lies beyond the fiscal debate.

VELSHI: I'd like to, too. But that's not possible the with a sequester deadline about to descend on the American economy. When will Washington's small thinking about big problems end?

(END VIDEOTAPE)

VELSHI: Now if this week is any indication the dysfunction won't end anytime soon. Earlier this week we learned that the euro area experienced its third straight quarter of negative growth. GDP there fell by 0.6 percent, that is the worst since 2009.

Europe has been experimenting with austerity. The deep cuts to government spending that have failed to turn the euro area economies around. Unemployment in the euro area is 11.7 percent. Some countries like Spain and Greece above 25 percent.

Now Washington is less than two weeks away from austerity in the form of the sequester. $85 billion in automatic across-the-board spending cuts that are set to take effect on March 1st.

I'm joined now by my good friend, Christine Romans, host of "YOUR BOTTOM LINE," John Avlon is a CNN contributor and senior columnist at "Newsweek" and "The Daily Beast." Margaret Hoover is a CNN political contributor and Republican consultant.

Christine, let's start with you. Economists warn that the sequester could lead to a recession. That's not scaring business away, though. American Airlines and US Airways have set -- said that they're going to merge. Warren Buffett is buying Heinz. Michael Dell is taking his company -- his computer company private.

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

VELSHI: So there's business going on. And as you've said before, uncertainty is the new normal.

ROMANS: Absolutely. So you see these movements within the corporate sphere that are telling us that they are trying to be on the offense. At the same time, you see a retrenchment deepening in Europe. And that Europe story is so instructive for the discussion going on about the sequester in Washington.

By the way, there's going to be a 10-day break coming up for your elected officials, for our elected officials, so they don't really have much time to get this straightened out. So when you look at companies in America and mergers and acquisition activities just beginning to, you know, get back and -- get back going.

VELSHI: Yes.

ROMANS: And you look at retrench worsening in Europe, it all spells trouble for politicians if they don't do this right.

VELSHI: Right. But for some reason -- and, Margaret, I'm going to bring you in here -- the threat of recession doesn't seem to be scaring our elected officials.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R), MINORITY LEADER: The days of 11th hour negotiations are over. Washington Democrats have gotten used to Republicans bailing them out of their own lack of responsibility. But those days have passed.

(END VIDEO CLIP)

VELSHI: So, Margaret, the cuts, the sequester, I've often referred to as a stupid name for a stupid thing, they were designed to be a poisoned bill. They were supposed to be so draconian that they would push both parties to agree on a debt reduction plan because the consequence would be so horrible that it couldn't possibly happen. They haven't -- they haven't come to a deal. What -- how do you see this fight ending?

MARGARET HOOVER, REPUBLICAN CONSULTANT: Well, look, there's a little bit of time and there's news that the Senate Democrats are moving to put forward a proposition for a smarter prioritization of cuts that don't undermine the functioning of the federal government. That's what we're going for here. We're going for a deal that's smarter than the across-the-board cuts that actually could hurt the economy.

The Republicans have passed two different versions in the House so you've got to wait until the Senate does something and then hopefully they can come together in conference and send it to the president for a signature.

I mean that's -- that's what we want to happen.

VELSHI: Right.

HOOVER: It looks like Harry Reid is going to move something February 25th. That's the best-case scenario. But if the Senate doesn't move we might just have a sequester.

VELSHI: Yes. And that is going to spend trouble -- spell trouble. This comes back to America's $16.5 trillion in debt. A new poll from the Pew Research Center shows that Americans want their elected officials to stop kicking this can down the road, 72 percent of Americans say deficit reduction should be a top priority for the president and for Congress, and that's up 19 percentage points in the last four years.

That ranks third, by the way, behind strengthening the economy and improving the jobs situation. And I'm not sure how you prioritize these things, John, because they're all important, they're all crucial.

JOHN AVLON, CNN CONTRIBUTOR: That's right.

VELSHI: But you say that the president the uniquely positioned to deal with the deficit, which is coming out as the top issue for people. Why?

AVLON: Absolutely. For two reasons, Ali. First of all, President Obama is in the sweet spot of his presidency, the moment of maximum leverage that occurs for a president right after re-election. Basically there are around 18 months in the -- at the start of a second term where a president can push through almost anything he wants.

Second of all, President Obama is perfectly positioned to pull a Nixon in China on the issue of deficit and debt. This is a metaphor that can get overused but it's important. Just as only a committed anti-communist like Richard Nixon could go to China, someone like a -- a progressive, pragmatic progressive like President Obama could appeal to his base and still get tough entitlement cuts through as part of a grand bargain.

This is a moment of rare opportunity but it takes presidential leadership and that, frankly, has been lacking.

VELSHI: All right. One -- one approach that Republicans have put forward is the idea of a balanced budget amendment.

(BEGIN VIDEO CLIP)

SEN. MARCO RUBIO (R), FLORIDA: The real cause of our debt is that our government has been spending $1 trillion more than it takes in every year. That's why we need a balanced budget amendment.

(END VIDEO CLIP)

VELSHI: All right. Republicans, Margaret, are not blameless in this. The Bush era tax cuts, the wars in Iran -- in Iraq and Afghanistan are major drivers of the deficit that Marco Rubio was just talking about in a response to the State of the Union. The spending cuts that a balanced budget amendment would require, as attractive as it sounds, could cripple the economy. Austerity hasn't worked in Europe so why does Marco Rubio, Margaret, think that it would work in America?

HOOVER: Look, what you have to keep in mind is when Marco Rubio said that. Marco Rubio said that in his response to the president's State of the Union right before Rand Paul was about to give the Tea Party response to the State of the Union.

What Marco is also trying to do here is politically position himself as a -- almost a unifier of the Tea Party and mainstream conservative fiscal -- fiscal conservatives in the Republican Party. And so, look, the balanced budget amendment is a -- is red meat to the Tea Party crowd. They believe in it because they want fiscal responsibility. So I think that was a political and tactical play on his part as much as a -- more than a reasonable or achievable fiscal possibility.

VELSHI: John?

AVLON: Bumper sticker politics. It's not serious. It doesn't reflect the realities of governing, but it's a very popular and powerful contrast with the Democrats.

VELSHI: Yes.

AVLON: Because many states have balanced budget amendments and they operate just fine. Federal governments obviously a lot more complex but all the more reason for President Obama to set a clear contrast. If the Republicans want to focus solely on spending with the example of austerity in Europe, there's an opportunity for President Obama to really be the advocate of a genuine grand bargain, one that has increased revenue from closing tax loopholes, like very and powerful entitlement reform, take on his own base, and more measured spending cuts that wouldn't put the economy in recession.

But the fact that Congress is going on vacation, Ali, with this looming says it all.

VELSHI: Yes. Unbelievable.

AVLON: I mean this says it all.

ROMANS: And there's no pressure from the markets. Let's be honest.

VELSHI: Yes.

ROMANS: We got five -- almost near five-year highs, you got very, very low interest rates, so there's no fire burning under these men and women to fix it because the markets aren't screaming at them but that day could come.

VELSHI: Yes.

ROMANS: And they're really not laying much groundwork.

VELSHI: We're all hoping that this does actually gets solved. But we're going to have to do more and help.

All right, thanks. Margaret, John, great to see you, too. Christine, stay where you are.

Coming up, Washington has got big problems and most of the talk is about small solutions. But there are lawmakers in Washington focused on what the country actually needs to do. I'm going to talk to one of them next.

And later, a critical moment for Carnival. How could it change its public image after the cruise from hell?

We'll be right back. You're watching YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: The sequester is a stupid name for a stupid thing. It's the second mini cliff that came out of last year's big fiscal cliff. The sequester is the series of automatic across-the-board cuts to government agencies. It will total $1.2 trillion over 10 years. The cuts would be split half between defense and domestic discretionary spending.

It was put in place as a stopgap measure to control the growth of the U.S. national debt, which exploded upward when the 2007 recession hit. It now stands at more than $16 trillion.

The sequester has been coming for more than a year with Congress pushing it back to March 1st as part of the fiscal cliff deal that happened at the end of 2012. But it is already having an impact on economic growth. The Commerce Department says a large cut in federal spending, primarily on defense, contributed to the 0.1 percent decrease in GDP. That's how we measure economic growth here in the United States during the last three months of 2012.

Now, Democrats, including the president, are pushing for more revenue, those are taxes, mostly from ending some tax breaks. Republicans, of course, say bring on that fight.

(BEGIN VIDEO CLIP)

BOEHNER: The president wants more tax hikes that destroy jobs then his Democrat allies in the Senate plan to take it up. This isn't the agenda that many Americans are looking for and I think many in the president's own party won't support those ideas.

(END VIDEO CLIP)

VELSHI: Senator Johnny Isakson joins me, he's a Republicans from Georgia. He's a former businessman and in my opinion a very reasonable guy.

Senator, good to see you again. You were on this show in mid- January. We discussed the debt ceiling. You then voted against the deal to suspend the debt ceiling with 34 of your fellow senators but it passed anyway.

What do you need to see in a bill to avoid the sequester on -- sometime between now and the end of February?

SEN. JOHNNY ISAKSON (R), GEORGIA: Well, Ali, first of all, as someone who did run a business for 22 years, I'm embarrassed about the way we're operating the country right now and I want to say that up front. Sequestration is a bad idea. We ought to be doing our business, we ought to be appropriating and budgeting, we ought to make the decisions on a cost benefits analysis.

These continual deadlines and cliffs that we go over is no way to run a country much less no way to run a company.

VELSHI: Well, you know, when you run a company, you have these things called poison pills. That's what the sequestration was. Right? It's something that's so awful that it would prevent -- it would prevent a certain course of action from taking place.

Why is it that elected officials don't treat that the same way that you would if you were in business? If you had a poison pill in your business to say if you don't do something X will happen or if you do something X would happen, you'd avoid that bad thing.

ISAKSON: Well, a poison pill portends at some point in time you have to take it. Congress has become an expert at pushing that pill down the road and putting it off for another few months like the proposal from the Democrats now to put it off until the end of the year.

It's time we got down to business of running the country like a business, appropriating, budgeting, reforming our entitlements, reforming our spending, reforming our -- corporate tax code.

VELSHI: You mentioned the Democrats' proposal. Let's talk about that for a second. The Democrats put out a plan this last week to replace the sequester. The main points are that it would delay defense cuts, as you say, until next year. It would save $27.5 billion through what it calls modest defense cuts over seven years. The plan would save the same amount by cutting farm subsidies and ending some direct payments to farmers. It would enact the Buffett rule, the millionaire's tax, raising $55 billion that way, and it would end some corporate tax breaks and close the loopholes for the oil industry.

Senator, is there anything in that Democratic proposal that you can support?

ISAKSON: Well, the problem with -- is the premise of the proposal. We've got a 10-month postponement of sequestration but a pay for that becomes permanent and only over 10 years does it pay for the $85 billion over that 10 months. We really ought to be doing what we're supposed to do, appropriate money, have the committees meet, decide where we're going to cut, make the cuts based on spending.

If in fact we have a revenue issue we ought to reform the code, not just pick on an industry like oil or like aviation and try and gig them a little bit. We ought to have a comprehensive reform.

VELSHI: How do you propose we achieve that given that we're working up against deadlines? Because what you're talk about is a good discussion.

ISAKSON: Well, I appreciate your asking the question that way, Ali, because for me I'm one of the five Republicans that voted for Simpson/Bowles when it was created. I'll never understand why the president blinked and didn't send Simpson/Bowles to the Congress when he got it over two years ago. But that's the way we've got to approach -- we have a big, big problem, $16.5 trillion in debt.

VELSHI: Right.

ISAKSON: We have zero equity in our country, we're basically 100 percent mortgaged. It's time we sat down and realized we can't just do --

(CROSSTALK)

VELSHI: I agree with you, Senator. I agree with you wholeheartedly. The problem is as you said you hate the way we run things. We're now up against a deadline in two weeks. So what do we do? Do we hit sequestration and have these across-the-board cuts which you as a businessman would agree are sloppy, they're not targeted, they're not going to work the right way, or do we what do what you're suggesting or we should have done but it's going to take months?

ISAKSON: Let me -- let me make one guess, and this is just one senator's opinion.

VELSHI: Yes.

ISAKSON: The sequestration will go in effect on March 1st. March 27th the Continuing Resolution under which we're running the government goes out. We have to extend it. It is an open opportunity in time where we could make those cuts in the -- in the Continuing Resolution for the remaining eight, 10 months of the year.

VELSHI: Yes.

ISAKSON: And then take those eight to 10 months at the end of this year to make the cuts for the other nine years. It's doable if we have the intestinal fortitude to do it.

VELSHI: March 28th is the day that if what you're saying doesn't work the government could shut down. You don't foresee that.

ISAKSON: I don't foresee that happening. I think Republicans learned a real good lesson back during the -- when Speaker Gingrich in office. Shutting the government down is a bad idea.

VELSHI: Yes.

ISAKSON: Defending the country is important. Making sure Social Security checks are delivered is important. But it's a better idea to run the country like it's supposed to be run, do your responsibility, appropriate money, make cuts where you have to, and if you have to change the tax code, change the tax code but do it in the context of the macro sense not the micro.

VELSHI: I just wish we'd been doing that for the last several years.

ISAKSON: Reform, Ali.

(CROSSTALK)

VELSHI: In a more wholesome ways.

Senator, good to talk to you again. Senator Johnny Isakson of Georgia.

Coming up, if you think the debate over taxing and spending can get ugly, just wait until my next topic, the minimum wage. It's a subject that has divided economists for a century. Get ready for a minimum cage fight with my colleague Christine Romans.

Plus Paralympics champion Oscar Pistorius charged with murder. Nike learns once again pinning a reputation on a star name is a risky business.

(COMMERCIAL BREAK)

VELSHI: Christine Romans is back. Three hot business stories this week. Minimum wage, Nike, and Carnival.

I want to start with minimum wage where I'm going to eviscerate Christine, who I think has it all wrong on this one.

(LAUGHTER)

ROMANS: Bring it on. Bring it on.

VELSHI: All right. Right now the federal minimum wage is $7.25 an hour, that's about $15,000 a year for a full-time worker. The president's proposal would raise the minimum wage in three stages, reaching $9 by the end of 2015. Not exactly a drastic move. This is a debate that has divided economists for decades.

For every study that says it doesn't hurt jobs you can find one that says it does. Now it's about to divide my colleague, Christine Romans, and me -- the host of "YOUR BOTTOM LINE."

Christine, I'm going to give you the advantage of going second.

ROMANS: All right.

VELSHI: Here's my take. America is the richest country in the world. But the current minimum wage is a joke. If it kills jobs, then we have a bigger, deeper problem to consider. I don't care if you live in Montana or Manhattan, if you make $15,000 a year anywhere in America you are poor and your wage is a disgrace. At nine bucks an hour it's $18,720 if you work full-time. It's better but you'd still be poor.

Check out Australia, which has a minimum wage of almost $17 U.S. an hour. This is a moral less of an economic issue. Though raising the minimum wage does mean that businesses, not taxpayers, share a bigger part of the burden of poverty in this country.

It's not that we can't afford to pay a higher minimum wage, Christine, it's that we can't afford not to.

ROMANS: I agree with you on the moral part of this because if you think this is anything other than a moral certainty, you know, that's the only we're really sure about. Because I think people should have higher paychecks, Ali, but I'm not convinced that raising the minimum wage won't kill jobs for other people. We've been talking to small business owners all week. They say they will have to lay people off to pay other people more money.

We're talking about minimum wage jobs here, we should be talking about the jobs we really need, $25 or $30 an hour job. If this is the centerpiece of the president's plan to boost the middle class, he's aiming too low. This is a poverty initiative, not a middle class initiative. Why? Because raising the minimum wage doesn't create jobs in the middle and that's what we're looking for.

It's almost a distraction and it doesn't fix the underlying problem. When you can't figure out how to add good quality middle class jobs, what do you do? You duck and weave and promise to raise wages on millions of well skilled workers because hey, everybody wants these people to make more money.

You're right, it's true. The studies are all over the place. There is no clear-cut answer on whether this will kill jobs. But we do know this -- businesses with 50 or more full-time employees also have to pay health care coverage next year for the first time ever. Those business owners are struggling to survive in a world where demand is not up, their rents and and costs are rising, they're scared to death.

They see a president who doesn't get it. So don't mistake this for a jobs plan, this is an anti-poverty plan. And I think the president's call for universal preschool does a lot more on that front than raising the minimum wage. We've got to figure out how to make sure people don't get stuck in minimum wage jobs but it's a -- it's a very short steppingstone and there are a lot of other good jobs out there.

VELSHI: I can't even disagree when I try to. All right.

(LAUGHTER)

Let's let the viewers decide which one of us won that argument. Follow us on Twitter and Facebook and tell us what you think about it.

I've got to talk about another sports scandal, another headache for Nike. Nike is the sponsor behind the world's most prominent athletes. Remember Tiger, Lance. This time the company's $2 million deal with Oscar Pistorius, the South African runner and amputee now charged with shooting and killing his girlfriend.

This ad probably doesn't help. "I am the bullet in the chamber." Although Nike did pull it done, Nike still has deals with Michael Vick and Tiger Woods, but Oscar Pistorius may not be so lucky.

(BEGIN VIDEO CLIP)

JIM HAGGERTY, CRISIS MANAGEMENT EXPERT: It certainly is more serious because it involves a homicide. They should at the very least suspend their relationship, I think, until an absolute determination of whether he's guilty is determined.

(END VIDEO CLIP)

VELSHI: OK, Christine, obviously Nike can't figure out. It sponsors a lot of athletes.

ROMANS: Sure.

VELSHI: Some of them are going to do something wrong. I get when they sponsor an athlete, people might buy more of their sneakers. But when something like this happens, do you think there's anybody who's not buying a Nike product because of it?

ROMANS: I don't. I think in the case of a company that's tied to an athlete, they try to step back very quietly when something like this happens. They give their condolences to the family. They say they're going to -- let somebody be presumed innocent until proven guilty, and in some cases there is a rehabilitation of an athlete and they get -- they recover some of their sponsorships later.

This case is very, very different. A young woman is dead in this case.

VELSHI: Right.

ROMANS: Also remember, his sponsorships in total were something like $2 million so he was very well-known in South Africa, not necessarily globally.

VELSHI: Right.

ROMANS: Nike has a lot of people they sponsor.

VELSHI: Right.

ROMANS: I think this quietly goes away and I don't think the sponsorships come back for him. I really don't. Even if --

VELSHI: Probably doesn't hurt Nike all that much.

ROMANS: It does not hurt Nike. No.

VELSHI: OK. Let's talk about Carnival, though.

ROMANS: Oh that.

VELSHI: I've been -- I was away for most of the week. But every time I turned on CNN there was something about 4,000 people stuck on a -- on a ship.

ROMANS: And sloshing sewage in the halls of your cruise ship.

VELSHI: Yes.

ROMANS: You know, this is bad for Carnival. A critical moment for its management. You know, how will it manage this public image? You know, the Carnival Cruise CEO, Gerry Cahill, was very quick, Ali, to apologize.

(BEGIN VIDEO CLIP)

GERRY CAHILL, CEO, CARNIVAL CRUISE LINE: We pride ourselves in providing our guests with a great vacation experience and clearly we failed in this particular case.

(END VIDEO CLIP)

ROMANS: Carnival also offering refunds, cash, a flight home, and Cahill said he went on the ship to personally apologize to all the passengers. But look at where Micky Arison was this week. A Miami Heat game. He is the CEO of Carnival Corporation, the parent company which owns Carnival, Holland, American, Princess. He's also a part- owner of the Heat. But he's courtside --

(LAUGHTER)

While those people are just desperate to be dockside. It appeared a nightmare but analysts we talked to, they aren't that worried. They think people will keep wanting to book these cruises.

VELSHI: Yes. They're good deals. Cruises are good deals. They made it through the Norwalk virus stuff, the Costa Concordia. I mean, people do tend to move on because they are a very good deal in tough economic times.

ROMANS: Bookings did not go down after Costa Concordia.

VELSHI: Yes.

ROMANS: The question now is what kind of maybe settlements they'll have to come to -- and look, when you buy a ticket, you buy a ticket on one of these things, it's very clear.

VELSHI: Yes.

ROMANS: You know, people were just inconvenienced, no one was hurt.

VELSHI: Right. I understand that Micky Arison is a -- is a part owner of the Miami Heat but on Tuesday we didn't know that this was going to have a relatively happy ending. It just made me cringe to see, you know, a rich guy at a basketball game while these passengers are stuck on a boat.

But anyway, good happy ending to the whole thing.

ROMANS: All right.

VELSHI: All right. Coming up, gas prices are up. But I'm going to tell you where you might benefit from the price of energy.

(COMMERCIAL BREAK)

VELSHI: I'm going to talk to you a little about gasoline prices then I'm going to tell you where you might be benefitting from the price of energy.

Take a look at the average price per gasoline, it's jumped 35 cents a gallon in one month to $3.64 a gallon. And everybody is asking me why are gas prices so high. Well, the biggest determinant of gas prices is by far oil and it's been hanging around in the 95 to 100 dollar range for the last few months. This is for light sweet crude that is used in the United States. Brent Crude, which is the world standard, is actually much higher than this price.

And when oil goes up, gas prices go up. I can't do anything about gas prices. What I can tell you about is how you might be saving money elsewhere in the energy world and how you might actually make some money out of it. This is all of our energy consumption in the United States by different sources. Petroleum makes up 36 percent, coal is 20 percent. Renewables are only 9 percent, nuclear energy is 8 percent.

Take a look at the 26 percent that is natural gas. In the last five years we've been squeezing, pulling, and extracting natural gas from everywhere we can find it. This is a natural gas boom in this country. The amount extracted has gone up 19 percent over the course of five years. Back in 2008, before the recession, natural gas was running at $13.31 per million British thermal units. That's how they measure it. Today it's around 3.34 million.

While most people think the price will go back up maybe to, say, $6 per million, few believe that it's going to get up to that $13 that we saw in 2008 anytime soon. That's because natural gas is a source of energy and what you're seeing is some conversion from other sources of electricity like coal into natural gas.

A lot of companies that are heavy users of electricity like steel production or heavy industry manufacturing, are benefitting from this low price of natural gas. So you could see a boom in industry and industrial jobs in the United States because of this low price of natural gas. Now you're not going to see much relief from higher gasoline prices anytime soon. You may be able to take advantage of the natural gas boom because you'll pay less on your electricity bill.

You can also take advantage by investing in this domestic energy boom. And here to talk more about this is Stephen Leeb. He's an energy expert. He also heads Leeb Capital Management. Stephen is an author of many book. He's something of an energy expert.

Stephen, let's talk about fracking. That's what this natural gas boom is all about. Fracking is a way to get natural gas from deep under ground. And so we have a boom under way. But you don't believe it's something people should be investing in, particularly natural gas.

STEPHEN LEEB, CHAIRMAN AND CEO, LEEB CAPITAL MANAGEMENT: I don't think people should be investing in the producers of natural gas, Ali, because the commodity is so volatile. I mean, basically if the weather report changes natural gas can go up 10 or 15 percent. I've actually seen that. And when natural gas prices rise, typically I'm looking at colder weather if it's in the winter. If it's in the summer I'm looking at much hotter weather.

VELSHI: Right.

LEEB: So it's very difficult. And with natural gas prices between $3 and $3.50 there are not a lot of producers that are going to make any real serious money here.

VELSHI: Stephen, you are one of those guys who think the price of natural gas is going to go up to $5 or $6, maybe more. Why is that not a good way to invest in this?

LEEB: I think that, A, I could be wrong. And, B, I think in the economy that we have today where it's so hard to earn money, I mean, if you put your money in the bank you're going to be lucky to get 1 or 2 percent.

VELSHI: Right.

LEEB: There are companies here around that actually transport natural gas from one place to another in existing pipelines. And they get paid for that. And they're structured --

VELSHI: And they're getting paid regardless of what the price of natural gas is.

LEEB: Right. Regardless. They'll do a little better with higher natural gas. So you're not giving up the possibility that natural gas will go up. You still would do better. But what you are getting near term is a very, very good yield. Companies like Atlas Pipeline. Yields about 7 percent. And basically that yield is as secure as the transportation of natural gas.

ONEOK yields about 5 percent, and that, again, is a very, very secure yield. And if you really want to, you know, be a little bit more adventurous, maybe play LNG, there's a company in California called Sempra. They own -- actually they own renewable utilities. They have a lot of natural gas and they basically cover the gamut and they yield about 3 percent and they do have, I think, a lot of growth in front of them.

So that would be one way. And I think the best way for the typical person to play it, because you're getting decent immediate income and you're not giving up chances for capital appreciation.

VELSHI: Stephen Leeb, always a pleasure to talk to you. Thank you for being with us.

LEEB: Thanks, Ali.

VELSHI: The natural gas market is on fire, literally. But video clips like this haven't put a stop to fracking or hydraulic fracturing. The number of gas wells in this country continues to grow.

Coming up, I'm going to ask documentary filmmaker Josh Clops what it's going to take to make fracking safe.

(COMMERCIAL BREAK)

VELSHI: Those of you who are regular viewers or readers of my columns know that my argument that America is on the edge of an economic renaissance has a lot to do with the natural gas boom that's under way. That boom is because of major advances in the extraction of natural gas from the ground. That technology is called hydraulic fracturing or fracking. Now these new technologies enable drillers to extract oil and gas encased in shale formations throughout the country -- the northeast, the mountain, the plain states, the west coast. Domestic natural gas production has a lot of boosters including Texas energy magnet, T. Boone Pickens.

(BEGIN VIDEO CLIP)

T. BOONE PICKENS, FOUNDER, BP CAPITAL: We have the most natural gas of anybody and we've got to use it. It's cleaner, it's cheaper, it's abundant, and it's ours.

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VELSHI: And the result is that natural gas has become even more abundant and a cheaper, about a quarter of what it cost five years ago. Gas companies are paying Americans whose property sit on natural gas formations. That's making a lot of Americans wealthy and according to some very sick.

New York has put a moratorium on fracking in the state, and this week that moratorium was extended to spend more time reviewing health effects that shale drilling and fracking could have on local communities.

Now the 2010 movie "Gasland" took a highly critical view of the expansion of fracking and the state of regulatory oversight over it. Have a listen.

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UNIDENTIFIED FEMALE: And as we drove in the yard, there was this huge rig and semis, and the smell is so intense, the benzene and -- was so intense that we ran for our deck. So we're in the house I'd say mostly at the most 15 minutes when I got up and passed out. And you get pains, pains all over your body. You don't know why you're getting the pains. And then they come and go.

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VELSHI: Josh Fox is the filmmaker.

Josh, good to see you. Thank you for being with us. You didn't start up with a -- with a problem with natural gas. In fact, you own a property where they were offering to pay you money.

JOSH FOX, WRITER AND DIRECTOR, "GASLAND": Well, absolutely. It was a -- it was a lease that was worth initially about $100,000 and then of course the promise of more once royalties are running in. But now I am in a situation where I am surrounded -- in the upper Delaware, which is part of the watershed for New York City and Philadelphia, about 16 million people, I'm surrounded by people who have leased.

And we rejected that offer because we found out or I found out by traveling around the country just on a sort of fact-finding mission that this is devastating to live near. And when you talk about money, you know, if the people across from me, for example, get the right to drill, which so far they haven't, and so pictures like these actually have stopped drilling in places like New York, like the upper Delaware River --

VELSHI: But according to your film and other research, there's a whole lot of that going on across the country.

FOX: Well, there is.

VELSHI: Yes.

FOX: But what I'm saying to you, if they were to drill.

VELSHI: Yes.

FOX: And this is my experience to talking to people, my house is worthless. Now my house is not worth that much money.

VELSHI: Right.

FOX: You know, it's maybe $150,000, $200,000.

VELSHI: Right.

FOX: Something like that. But if they drill next to me, those people they make $150,000 and they've taken that money out of my pocket. And there's millions of people in that situation. As we see -- and we're going to come out with "Gasland Two" which tracks a lot of these stories which are emblematic of people around the nation who have literally been forced to move out of properties that they've been on for three or four generations.

VELSHI: Right.

FOX: This is not a small problem. This is a huge problem.

VELSHI: Let's talk about your main criticism of the oil and gas industry is that fracking has been exempt from the clean water -- the Safe Drinking Water Act of 2005. Can you explain this?

FOX: Yes. Well, basically in 2005 the Bush-Cheney government and the Congress passed the Energy Policy Act, which contained something called the Halliburton Loophole, which was an exemption to the Safe Drinking Water Act. Our primary public health ground water protection law for Americans. It states if you're injecting toxic materials under the ground, then you have to report those to the EPA. They're exempt from that. And the fracking process does inject enormous amounts of toxic under ground.

(CROSSTALK)

VELSHI: So there are -- there were a couple of Congress -- members of Congress who put forward a bill to take that exemption out.

FOX: Right.

VELSHI: Listen to some -- this is from your film.

FOX: Thanks.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm not personally familiar with your bill, ma'am.

UNIDENTIFIED FEMALE: It makes chemicals used in hydraulic fracturing subject to the reporting requirements of the Safe Drinking Water Act.

UNIDENTIFIED MALE: As stated earlier, we believe that the current regulatory --

UNIDENTIFIED FEMALE: Yes or no?

UNIDENTIFIED MALE: We believe the current regulatory --

UNIDENTIFIED FEMALE: So, yes, you would object to my bill because you don't think we would need to report it under the Safe Drinking Water Act even though you say the chemicals are safe. Correct?

UNIDENTIFIED MALE: Correct.

(END VIDEO CLIP)

VELSHI: So what happened with that?

FOX: Well, the frac act died. It wasn't a priority. And when the Republicans took over Congress, it wasn't getting on the agenda.

(CROSSTALK)

FOX: But --

VELSHI: But that would -- if it were subject to the Safe Drinking Act, you'd have a lot -- fewer problems with it.

FOX: No.

VELSHI: Because your film indicates that they put in 500 and some odd different chemicals.

FOX: This is the tip of the iceberg.

VELSHI: Right.

FOX: The chemicals is a small piece of the problem. When you're talking a gas well is basically a pipe of steel surrounded by cement. That cement cracks and leaks at enormous rates. The natural gas industry's only statistic, and you can take a look at this in follow to "Gasland", "The Sky is Pink," say 5 percent of the cement cracks and fails within -- immediately. And 50 percent fails over a 30-year period which means you're creating a conduit punching through the aquifers all throughout this nation.

And if you want to look at the areas that they're proposing to drill, it did bring a little bit of a visual aid. That's the map of natural gas exploration in the United States. This is the proposal. One to two million new wells in America at the high end. That's one well per 150 people.

VELSHI: Josh Fox is the writer and director of "Gasland." Thanks for joining us.

FOX: I really appreciate it.

VELSHI: It's a complicated issue. Of all the things our government spends money on, what do you think is most expensive? The answer wasn't the case 50 years ago and it now costs twice as much as everything else the government spends money on combined. I'll tell you about it when we come back.

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VELSHI: The budget, the sequester, the debt ceiling. It all boils down to government spending. The problem in Washington is that neither side is listening to each other but lucky for you I am listening to everyone.

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OBAMA: Now is our best chance for bipartisan, comprehensive tax reform.

BOEHNER: Americans do not -- do not support sacrificing real spending cuts for more tax hikes.

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VELSHI: Now, conservatives, I get where your frustration is coming from. With the state of the economy right now, it feels like your tax money is being tossed into a black hole and you get nothing in return. That's what it really comes down to -- a return on your investment, your tax. Well, it's true. Over the last 50 years or so, our government has gone from being one that invests in the future to one that feeds consumption. Entitlement program rose from one-third to two-thirds of government spending over that time and our debt is out of control.

So the problem now is that raising rates on the rich alone simply won't cut it in terms of revenue if we're going to bring down the debt. Everyone has to pay more.

Now my solution is we use some of that additional revenue to fix our crumbling infrastructure. That will kick start investment, employment and America's future. The U.S. was just ranked 25th in overall quality of infrastructure by the World Economic Forum. We tied for 33rd with Bosnia, Herzegovina with the state of our electrical grid. Investing in infrastructure does end up paying in the long and short term.

Every dollar spent on infrastructure boosts GDP by $2 according to a report from the San Francisco Fed and when companies see the U.S. investing in electrical grids and roads and broadband, it becomes worth it for them to return to the U.S. and invest.

President Obama explained it well in his State of the Union on Tuesday.

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OBAMA: Ask any CEO where they'd locate and hire. A country with deteriorating roads and bridges or one with high-speed rail and Internet? High-tech school. Self-healing power grids. The CEO of Siemens America, a company that brought hundreds of new jobs in North Carolina said that if we upgrade our infrastructure, they'll bring even more jobs.

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VELSHI: Christine Romans back again. Will Cain is a CNN contributor and our resident nice guy conservative.

Will, let me ask -- just hold on a second. I think you're going to say --

(CROSSTALK)

Hold on.

CAIN: Can I greet -- congratulations.

VELSHI: Why?

CAIN: Who told you taxes are going to go up on everyone? There's not enough rich people in the country to pay for everything we've asked for.

(CROSSTALK)

VELSHI: I always agree with you on that.

CAIN: A little --

VELSHI: But I would like -- I would like -- no, no. I've always been the record on this but I would like a return on investment like everybody would. So if your taxes are going up, I'd like to think we're getting something in return. Don't try -- I know what you're going to do because I heard you muttering about this on the break. You're going to say that I think this is a job creation program, that infrastructure is not a great job creation program.

I'm not really worried about as a job creation program. I think it will be great incidentally if we build all these things and they create jobs. I'm really concerned about the fact that in 15 or 20 years, if we do not keep our infrastructure up, we will not be competitive businesses will go to countries that have good infrastructure and not in the United States.

CAIN: That's good stuff. So let's start with the points where we disagree, OK? In your setup, you said over the last 50 years, our economy has moved from one that invests in the future to one that fuels consumption.

VELSHI: Correct.

CAIN: The word you left out was appropriately. Is that an appropriate role for government? I think President Obama instead he reflected sentiment you just talked about. Is that the role of government? Is it to continue to put little chinks in front of the Pac-man so we can continue to eat it? Is that the role we want?

I say it shows very little faith in the American innovator, the American entrepreneur, the country that invented the iPhone, that has one of the world's highest per capita GDP, that gave birth to Willie Nelson.

(LAUGHTER)

I say have some faith in that country. We don't need you to fuel consumption.

VELSHI: I agree with you. The criticism, Christine, is that we are spending our tax dollars -- let's just be clear on this on consumption, which means we're giving it in the form of checks to people and hoping that they will stimulate the economy by taking that money and spending it. When in fact we're not taking tax dollars and using them to fund an infrastructure bank where we're fixing roads and bridges and building new infrastructure.

ROMANS: Something really interesting that I found this week. This is a survey from T.E. Ameritrade. So interesting. Affordable health care, Will Cain, 38 percent job creation, 36 percent public education, improving health care overall, improving what you get for your dollar in health care, 24 percent.

Americans also differ between men and women about what they want their tax dollars. Men prefer jobs, jobs programs. Women prefer quality health care. So we don't agree on how we want to spend our money but all those things are paying for things that Americans are used to.

VELSHI: But none of them actually are talking about infrastructure.

CAIN: Right.

(CROSSTALK)

VELSHI: Nobody ever says I want my tax dollars to go to -- build a better electrical grid and build bridges and things like that because we assume that is somehow paid for.

CAIN: We do. Also that's a good transition where you and I agree. Infrastructure is a fine investment if serves the in goal of creating better infrastructure.

VELSHI: Right. Right.

CAIN: Build a bridge because a build needs -- a bridge needs building.

VELSHI: Correct.

CAIN: Don't have it be make-ready work, busy work for the American worker because it's poor at that, right? Stimulative infrastructure has to be targeted, timely and it rarely is those things. President Obama himself said that shovel ready wasn't quite a shovel ready as we thought.

(CROSSTALK)

So if you need a bridge, build it.

VELSHI: Right.

CAIN: All right? And if we had D grade infrastructure --

VELSHI: And we need a bridge. We have degraded for sure.

CAIN: Correct.

ROMANS: But we have bridges but they're too narrow. Right? And then you can't sell somebody on widening a bridge but widening that bridge now is going to mean more traffic and more volume on that bridge later. You can see how it's an investment for the future, not necessarily for a job created right now.

VELSHI: Can I get agreement out of you on that?

CAIN: Yes, but --

VELSHI: Great. That's the end of this block.

CAIN: It's just not a jobs program.

(LAUGHTER)

Not a jobs program.

VELSHI: That's great. The end of this block, America can be great. We can have Willie Nelsons born all the time.

Coming up, a monster merger of two airlines, U.S. Airways and American coming together. You're probably worried it means higher fares. I'll tell you why it probably won't.

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VELSHI: Was love in the air in corporate America this past week because of Valentine's Day, or were companies just deciding to fall in love with each other and merge? Anheuser-Busch and Grupo Model moved closer to their $20 billion beer merger. Warren Buffett's Berkshire Hathaway announced it's buying food giant Heinz for $28 billion. And if U.S. regulators allow it, US Air is going to take over bankrupt American Airlines creating the world's biggest airline in the process.

Now that deal is probably good for investors but passengers worry that airfares will shoot up as competition disappears.

But take a look at this. Just after airline deregulation came into effect, there were 20 major airlines in the United States. By 1990, there were only 12 major airlines in operation. Today just seven and with US Air and American merging we'll be down six. US Air and American don't have a lot of overlapping routes or hubs. In the end there will only be about eight routes out of the combined airlines' 900 or so that will only be served by one airline. And that means they may see fares go up.

But take a look at this. Since 1979, prices for an average domestic economy airfare have actually dropped from $579 then to $365 now, though they have started to tick up a little bit lately. So so much for that myth that merging airlines causes prices to go up.

Thanks for watching this week. Tweet me, my handle is @Alivelshi. Find me on Facebook at facebook.com/alivelshi. See you Monday around 3:30 p.m. for "YOUR MONEY DAILY".

Have great weekend.