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YOUR BOTTOM LINE

Freedom to be Fat; One America, Two Families

Aired March 16, 2013 - 09:30   ET

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


CHRISTINE ROMANS, HOST: Hey, see you at the top of the hour.

Good morning, everyone. I'm Christine Romans.

Waistlines in America are growing and so is the controversy over what to do about it. More than two-thirds of adults are overweight or obese. This week, a court struck down New York Mayor Michael Bloomberg's attempt to put serious restrictions on the sale of large sugary drinks.

So what does this have to do with money? A lot.

Take a look. This chart shows obesity among adults in the last 25 years, going into the red here means almost a third of the adults in those states are obese. The highest rates of obesity are found among lower income groups. In fact, people with less than a high school degree have the highest obesity rates and some of the lowest in the nation.

Evidence is emerging that obesity in America is largely an economic issue. Experts say it has to do with the energy and density of food. That's right -- energy density.

Good tasting and convenient processed foods with added sugar and fat, here in New York a quarter pound of salmon costs about $5, gives you 161 calories. Quarter pounder from McDonald's costs you about 3 bucks and give you around 510 calories.

People who don't have the money to go with healthier options sacrifice the nutrients they need for cheaper choices and with those choices come calories.

According to New York Mayor Bloomberg, saving money in the short run hurts everyone in the long run.

(BEGIN VIDEO CLIP)

MAYOR MICHAEL BLOOMBERG (I), NEW YORK: Obesity is going to bankrupt this country because the health care costs of people overeating is just growing leaps and bounds much faster than we can come up with money to pay for it.

It's a big problem.

(END VIDEO CLIP) ROMANS: So, where in America should we have the freedom to be fat or do the poor in particular need to be protected from obesity by their government?

Mississippi State Senator Tony Smith is author of the Anti-Bloomberg law. He's also a restaurant owner.

Amy Kalafa is a child nutrition activist and the author of a really great book called "Lunch Wars."

Tony, I want to start with you.

You introduced this so-called anti-Bloomberg bill that focuses on limiting restaurant regulations. That includes preventing limits on sugary drink sizes as well as banning any requirements to post calorie counts, even laws about toys in kids' meals.

What do you see as the government's role, if any, in encountering the obesity crisis that's threatening public health?

TONY SMITH, MISSISSIPPI STATE SENATOR: Well, thank you for having me this morning.

Well, I think it's a far more outreaching than what we're discussing here. It's more about government intrusion into business and putting regulations in place that could be detrimental to their business. This -- the bill that we have passed here in the state of Mississippi does not do away with what the fed is already requiring, if you own 20 or more restaurants, you still have to supply nutritional values, you to have it on your menus and have it presented for the consumer.

Our bill is all about protection to the free rights operating business. And there again, we don't want a hodgepodge of municipalities --

ROMANS: Right.

SMITH: -- across our state, coming up with their own regulation. And then if you decide to do businesses or open a business at a different state or a different city, then you're going to be looking at all these different regulations that could be there.

ROMANS: All right. In one of the largest national studies, obesity rates increased by 10 percent for all U.S. children, 10 to 17 years old between just the years 2003 and 2007, for low income children, though, the increase is more double that, ballooning 23 percent during the same period.

Amy, I want to ask you, do low-income Americans in particular need to be protected from obesity?

AMY KALAFA, AUTHOR, "LUNCH WARS": Yes, as you said our government needs to step in because of the way our food system works, the less healthy food is the cheaper food. In other parts --

ROMANS: So it's not necessarily a free market. I mean, people think it's a free market for all kind, but you've got -- the system is rigged so it's delivered the most calories and fat at the lowest cost and so people aren't making a free choice really.

KALAFA: Exactly and it has to do with how our farms are subsidized and it's agriculture policy going back decades. And it worked at one point because we were trying to feed a hungry nation.

Now, we're overfeeding a nation. We're growing more food per acre but we're also having less nutrition per acre so people are hungry, they have to eat more in order to get the same amount of nutrition.

ROMANS: Are these restrictions like the Bloomberg restriction or sugar tax, what is the solution?

KALAFA: You know, you would think as a health advocate that I would support the Bloomberg proposition. But I just think that whenever you ban something like that, in a free market, there's always a workaround if you're a vendor or store owner, you're going to sell those sugary drinks two for the price of one or free refills, whatever.

So, I don't think that works. I think things that encourage people to make better choices by making fruit and vegetables less expensive. You know, the cost of fresh fruit and vegetables has gone up 40 percent in the past 20 years while the cost of the fatty and sugary foods has gone down 20 percent.

ROMANS: Let's talk about the health cost. And, Tony, I'll bring you in here.

By 2030 the Robert Wood Johnson Foundation estimates medical costs associated with treating preventable obesity-related diseases will increase by $48 billion to $66 billion per year in the U.S. I mean, that is huge. The loss in economic productivity, anywhere from $390 billion to $580 billion annually.

I'm all for the free market, Tony. I want to be very clear about that. But as a restaurant owner, when people have high calorie choices, don't you end up paying in higher health care costs down the line?

SMITH: Well, I'm not sure. And I want to agree with your other guests, I still think we got to go back -- we have got to educate people. We have basically taken physical education out of our school systems. We're letting our kids sit on the couch playing their PlayStation, they're not getting the activity that's needed.

Another issue that I have is those low income folks, they can take their EBT card and they can go and buy at the convenience store, they can buy a honey bun or a soft drink with that, where long ago, not very long ago, but it was only for staple items -- you know, your flour, your meats, those type things. But now we're trying to get so convenient to allow them to buy anything that it's a lot easier to buy those convenience foods and not go home and cook a meal.

ROMANS: Well, you can talk about what the roles are of government, but also the role of parents. I mean, just this week, McDonald's announced that it's going to start with an egg white McMuffin at 250 calories, starting at around the country because of demand from people who want a lower calorie option.

And that's -- there's no government pressure on that. That's a company doing it because it thinks there's a market there. That's -- I guess that's one way that the marketplace is speaking, Amy Kalafa and Tony Smith, nice to see you. Have a great weekend.

All right. Coming up, Will Smith played him in the movies.

(BEGIN VIDEO CLIP)

WILL SMITH, ACTOR: That's my money. How is somebody just going to take my money?

(END VIDEO CLIP)

ROMANS: Chris Gardner overcame poverty and homelessness to become the head of his own brokerage firm. Next, find out why a man who has lived in both America's economies says only the wealthy are cashing in on this record-setting stock run.

(COMMERCIAL BREAK)

ROMANS: So, the Dow keeps hitting record highs, home prices are rising, but many of you tell me you don't feel any more secure today than you did five years ago. You say it's feeling like one America with two economies: the rich and then the rest struggling just to get by.

Poppy Harlow introduces us to one woman who feels that way.

(BEGIN VIDEOTAPE)

POPPY HARLOW, CNN BUSINESS CORRESPONDENT (voice-over): For many Americans who don't own stocks, the recent giddiness on Wall Street feels a little remote.

(on camera): The Dow closed at record highs. Are you feeling that?

NICOLE DOWLING: I wish I was.

HARLOW (voice-over): You could call single mom Nicole Dowling lucky to have a job in this economy but the reality is she's barely getting by and the stock market boom means nothing to her.

(on camera): Is it frustrating to see the headlines?

DOWLING: Yes, it does but what am I going to do?

HARLOW (voice-over): A mental health technician at the Veterans Administration, Nicole and her teenage daughter diamond are renting after losing their home to the bank.

(on camera): How hard is it to get by?

DOWLING: Extremely hard. HARLOW (voice-over): She's one of the 46 percent of Americans who have zero stock investments and as the markets boom, the gap between them and the wealthy grows.

DEAN MAKI, CHIEF U.S. ECONOMIST BARCLAYS: When the stock market rises significantly, it increases the gap in wealth between those upper income households and other households in the economy.

HARLOW (on camera): Just how much is stock ownership skewed toward the healthy? NYU economist Edward Wolf calculated the wealthiest 10 percent of Americans own more than 80 percent of stocks. The bottom 60 percent, just 2.5 percent.

(voice-over): But with the salary in the $40,000s, she says there's nothing extra to put towards retirement savings or diamond's college education.

DOWLING: I can't afford it.

HARLOW (on camera): Why?

DOWLING: It takes away from my necessities, my daily necessities.

HARLOW: Has the economy gotten better for you in the last year or so?

DOWLING: No, it's actually gotten worse and it's going to get worse.

HARLOW (voice-over): Nicole's salary hasn't budged in three years, but her cost of living has gone up and she fears furloughs from the forced budget cuts. That housing rebound that's helping many folks? Well, if you've lost your house already like Nicole, that boom doesn't matter to you either.

DOWLING: There's no more middle class. I used to consider myself middle class but now no.

HARLOW (on camera): So, what do you feel?

DOWLING: Working poor.

HARLOW (voice-over): Poppy Harlow, CNN, New York.

(END VIDEOTAPE)

ROMANS: So are we one America with two economies?

Ali Velshi is CNN's chief business correspondent and host of "YOUR MONEY."

Chris Gardner is the CEO of Happyness, an asset management firm. He's with us from Chicago.

We met Chris when his remarkable journey from homelessness to stockbroker was drama advertised in Will Smith's movie "The Pursuit of Happyness."

(BEGIN VIDEO CLIP)

SMITH: You got a dream, you got to protect it. People can't do something themselves, they want to tell you, you can't do it. You want something, go get it, period.

(END VIDEO CLIP)

ROMANS: So, Chris, is there no middle class in America anymore?

CHRIS GARDNER, CEO, HAPPYNESS: No, there is not, and I've known that for some time. There's only rich folks and working folks, and let me define both of them for you.

Rich folks, if you are an owner of a highly profitable business or a significant equity player in such business, you qualify as rich folks. If, however, no matter what your salary is, you could be downsized, laid off, outsourced or fired at will, you're working folks. There is nothing in the middle.

However, in the middle there is opportunity.

ROMANS: What kind of opportunity? What -- you know, here is the thing and let me bring in Ali for a second because this is what I find so amazing. You talk about how people are working day to day and just can't feel the stock market rise.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Sure.

ROMANS: But a rising stock market, Ali, has to be better for everyone than a falling stock market.

VELSHI: Regardless of what Chris says which is true, that there's inequality amongst people, the idea that people who are investing are getting more should have a relationship to the economy, it should make them invest more, it should make them hire more.

But for regular folk who have a little money, one of the things you and I have written about in our book is the ability to put some money away, start to participate in what's going on.

So whether or not there are two economies and there may well be and there is a shrinking middle class, at least do what we can to partake in that economy.

ROMANS: Chris, what do you think people can do? Especially like the one we just profiled. She makes $40,000 a year. She's got a kid she's like to send to college. Is there room for her to be an investor?

GARDNER: Well, you know what? First of all, let me say this, this Dow or this market high that everyone is so tremendously excited about, I don't think that average Americans are participating at all for two reasons.

Number one, trust and confidence in financial institutions. There's going to be and continues to be a great deal of talk about more regulation and more regulation and legislation in the securities business and there should be. But how do you regulate trust?

(CROSSTALK)

VELSHI: While we're talking about trust for five years, Chris, people have gotten rich. So, I agree with you, there has to be that conversation.

ROMANS: Somebody is making money.

VELSHI: We can't wait for it to get perfect if there is an opportunity to make money.

GARDNER: I am not saying that others have not. I am talking about the 46 percent, Christine, that you mentioned.

ROMANS: Yes.

GARDNER: Those people have been so devastated. They're just now recovering. It's taken them a much longer time to recover.

ROMANS: I get it.

GARDNER: And there is a lack of trust and confidence, and until that trust and confidence restores, those people are not coming back into the market as they once did.

ROMANS: Yes. All right. Guys, don't move, because we're just getting started on this discussion. I want both of you to stay right where you are.

It may feel like one America with two economies but housing is definitely a bright spot, is now the time to buy a house if you can?

(COMMERCIAL BREAK)

ROMANS: So think of building your wealth as a three-legged stool. You've got your job, your home and your investments.

Right now, the first leg looks a little wobbly, right? Yes, jobs are coming back. First time unemployment claims are falling, 236,000 jobs were added last month, but wages are stagnant, and 12 million people out of work. There's little leverage to ask for a raise right now for a lot of people.

The next leg of that stool has finally stopped wobbling. Home prices rose more than 7 percent last year. But they're still only back to 2003 levels. And you've got to have a pretty sparkling credit history if you're looking to buy.

The last leg, that's feeling the most solid right now. A Fed-induced rally has driven the Dow to record highs. Both the Dow and S&P 500 have more than doubled since the March 2009 lows.

My colleague Ali Velshi, and Chris Gardner, CEO of Happyness, are still with us. Ali, let's talk about the housing leg. You and I agree if you can, now's the time to buy. . Some people are still under water and slammed.

Will housing ever again be a real wealth builder?

VELSHI: You know, I've really run the numbers on this. It's not a wealth builder the way you think other things can be. So, you can get maybe 10 percent or 11 percent in a good year, but there are costs to owning a house.

And in the end, people say I bought my house for $150,000, I sold it for $200,000. I made $50,000.

You didn't make $50,000. You paid a lot of money to finance the $150,000.

But it is a good thing to do if you can afford it, if you have the credit for it, and you're prepared to stay somewhere and let it appreciate. It should not be your central investment.

ROMANS: What about investing in the stock market, Chris? I mean, is it -- are you advising -- are you buying stocks at the high? Are you advising people to buy stocks here?

And how does somebody who doesn't have trust get in the stock market at highs?

GARDNER: You know what, right now again, so many Americans that 46 percent, those people are still trying to recover. And I personally am not in any hurry to be chasing this market right now. I don't have confidence in the numbers. I don't know what it's really based on.

OK, we had a good number recently in the jobs market, that's one month out of how many in the last five years?

VELSHI: Thirty, 30, 30 months of job growth. Chris, I love you, but this is nonsense. I mean, the fact is that there have been ways to make money in the housing market for five years. Ways to make money in the stock -- I don't trust anybody any more than anybody else does. We're at the front line of seeing how untrustworthy banks have been and regulators have been.

But there are a whole bunch of people who increase their net worth by 20 percent, 30 percent, 40 percent over the last five years while the rest of us are busy not trusting anybody. I don't recommend that people sit this out. I get that there are people --

GARDNER: Those people, sir -- those people, sir.

VELSHI: Chris, what are you talking about, everybody could have been invested.

(CROSSTALK)

GARDNER: But those are two great big "ifs." Excuse me, sir. Those are two huge "ifs." If they had the credit and if they had the cash.

VELSHI: Chris, your answers to all the questions are the same, that nobody trusts anybody.

(CROSSTALK)

VELSHI: The fact is, somebody could have been in the stock market with 25 bucks a month and making money. But if you keep on telling everybody not to trust anyone, that's fantastic. While everybody sits out and doesn't trust, other people will make money in the stock market. Why do we do both at the same time?

ROMANS: How do we get the 46 percent to partake in what is wealth -- we're seeing wealth creation in housing and we're seeing wealth creation in the stock market?

GARDNER: First of all, those people, again, it comes down to things that cannot be instantly done, trust and confidence. And those people, again, have been decimated. It's going to take more time, Christine, for them to come back.

Young people, those young people that you talked about in your earlier segment. Those young people, if you went to college in 2007, which we'll say was the last good year, you thought you'd come out in 2011, get a job, go on and do what you wanted to do with your life.

Well, the truth of the matter is, they've now come out of school, tens of thousands of dollars in debt. No jobs and they've got to move back at home with mom and pop if mom and pop haven't lost the house.

We're talking about --

ROMANS: So we go back to the original -- the original issue, which is there are people right now who are playing offense, right? Who are making money and there are other people who are sitting on their hands because they either can't or won't make a move. What does it take to dislodge that confidence and get the spirits going again so we don't have two Americas and there's a bigger middle.

We've got to leave it there, guys.

Chris Gardner and Ali Velshi, nice to see both of you. How did this guy finish his bachelor's degree free of charge? We're going to tell you right after this.

(COMMERCIAL BREAK)

ROMANS: Today's college graduates are overeducated, underemployed and deeply in the hole, 2/3 of students graduate with debt and it's reaching new highs. Seniors graduate with almost $27,000 in debt in 2011. That's a 5 percent increase from the year earlier. That comes from climbing tuition costs.

Students at four-year private universities pay about -- look at that number in your screen -- that's almost $160,000 for a four-year education. But there is season alternative: an associate's degree from a community college only costs about $6,000 and it is a start.

Community college grads often have the skills they need to get straight to work and now they're paving a new road to the middle class.

(BEGIN VIDEOTAPE)

ETHAN DUMEYER, COMMUNITY COLLEGE GRADUATE: I didn't realize why I liked I.T. or where it was going.

ROMANS (voice-over): Ethan Dumeyer chose a two-year degree in liberal arts at the Borough of Manhattan Community College.

DUMEYER: I thought it would be a great place to just find my direction.

ROMANS: He ended up finding a lot more than that. His degree landed him a job in the college's computer center and later a promotion.

DUMEYER: I was making $ 62,000. I felt pretty good about how things went even without having a bachelors.

ROMANS: Ethan is one of many community college graduates proving that a four-year university isn't the only gateway to the middle class. According to a Georgetown University study, 28 percent of Americans with associates degrees make more than those with bachelor's degrees.

ANTHONY CARNEVALE, GEORGETOWN UNIVERSITY: Associates degrees are for fast starters.

ROMANS: And that's exactly what it was for Ethan -- a start. He went on to get his bachelor's degree on his employers' tab.

DUMEYER: Because of my role working for Tuni (ph), they were able to waive the tuition.

ROMANS: His salary now, $76,000, not a bad return on a $10,000 investment.

His sister chose a different path, an expensive master's degree from New York University.

DUMEYER: She went into biology and I believe she's opting more into wanting to teach. That's an expensive way to switch gears.

UNIDENTIFIED MALE: I didn't have to provide --

ROMANS: Enrollment at community colleges spiked during the recession, now it's beginning to fall as the economy improves, but tuition at four-year colleges is rising. The job market is still struggling and student loan debt is skyrocketing.

CARNEVALE: And attending a community college and getting an associate's degree is a more practical decision.

ROMANS: So, if you're trying to trim your college cost, start at a community college.

CARNEVALE: Where you went to school matters less and less. What matters more and more is what you take.

ROMANS: Second, learn a practical in-demand skill like computer science. And finally, see if your employer will chip in.

DUMEYER: That was essential to help me finishing my bachelors.

(END VIDEOTAPE)

ROMANS: So is America on the verge of an economic renaissance? Catch Ali Velshi and me right back here at 1:00 p.m. Eastern on "YOUR MONEY."

"CNN SATURDAY MORNING" continues right now.