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The Obama Economy; The Budget Battle; The Jobless Recovery; Can Smart Guns Save Lives?; Beer for Bitcoins?
Aired April 13, 2013 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: What a year so far in Washington and we're only four months in. Congress and the president avoided a fiscal cliff but not those forced government spending cuts. The sky isn't falling, not yet anyway. So if the worst is over in Washington, is now the time when President Obama steps in and shapes his legacy?
I'm Christine Romans, and this is YOUR MONEY.
To start the country needs a blueprint for this economy. Like any business, this country needs a budget. President Obama introduced his latest plan this week and he insists it's one that Republicans can work with.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: For years the debate in this town has raged between reducing our deficits at all costs and making investments necessary to grow our economy. This budget answers that argument because we can do both.
(END VIDEO CLIP)
ROMANS: Gloria Borger is CNN's chief political analyst and she's the author of a recent opinion piece on CNN.com. "Crunch Time for Obama and Washington.
Good morning, Gloria.
GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Good morning.
ROMANS: You write that President Obama now has a chance to act on his to-do list, which you say could set his legacy for the second term. Movement on gun control, real immigration reform and for the first time in four years a new federal budget. We're going to break down the president's budget proposal later in the show but let's just say that an agreement on a federal budget and immigration reform could both change America's economic landscape.
ROMANS: Why do you think now is crunch time for this president and his agenda?
BORGER: Because he's in his second term and the window starts to close after about 18 months in. And this is a president who didn't think he was going to have to deal with gun control but after Newtown it became a priority item. Immigration, of course, is a priority now for both Republicans and Democrats. And on the budget, and I don't want to be Pollyanna about this, but on the budget there may be an opportunity to do something short of a grand bargain because what you saw from the president was some movement, you know, putting entitlements, Medicare, Social Security on the table.
Not enough for Republicans because the president also wants more revenue. But he has started reaching out a little bit and -- so you can see that this is kind of a different president who understands in this term he's got this window where he's actually got to get some things done.
ROMANS: Will Cain is a CNN contributor. Will has been critical of the president's outreach or lack of outreach to Republicans on the hill. But the president had dinner this week with a group of Senate Republicans. By all accounts it went pretty well. Georgia Republican Johnny Isakson, a frequent guest of this show was in charged of the GOP guest list.
(BEGIN VIDEO CLIP)
SEN. JOHNNY ISAKSON (R), GEORGIA: The bulk of the conversation was driven by the members the president allowed to come. And most of the conversation was about debt, deficit, our growing national debt, our fiscal policy and reforming entitlements. It was a very meaningful three-hour discussion, a free-flowing exchange of ideas from both sides.
(END VIDEO CLIP)
ROMANS: Will, a meaningful discussion with the other side and a budget plan that cap entitlement spending. Key demand of the Republicans. And it raises revenues. A key demand for Democrats. Are you seeing signs of sincere compromise from this president?
WILL CAIN, CNN CONTRIBUTOR: Well, what does compromise mean?
ROMANS: Putting Social Security on the table.
CAIN: Oh, does that satisfy it? Because I thought compromise meant some -- you know, giving some things back that you didn't want to give up, coming back, coming in the middle to proposals. What -- let me just show you the only number that matters in President Obama's budget proposal and that is the number that he's going to spend next year. Projections 10 years out need to be taken with more than a grain of salt.
Look, there are four budget proposals that have been put outside of Congress. You have one from Senator Rand Paul, one from Congressman Paul Ryan, one from Democratic Senator Patty Murray and then President Obama. Look where his numbers for 2014 come in. The most expensive of the four plans.
Now it seems to me a compromise might come in somewhere in here, somewhere a little bit cheaper than Patty Murray. Democrat Senator Patty Murray's plan. How do you put out the most expensive proposal and call that a compromise?
ROMANS: Because it's a starting point for discussion.
CAIN: Because you put entitlements on the table which you suggested. This small cost of living adjustment simply recognizes the reality. Recognizing that entitlements need to be reformed, not tweaked. Reformed is a recognition of reality. It's not a compromise on our future.
ROMANS: Let me bring in Annie Lowrey, she's an economic policy reporter for "The New York Times."
You know we've been talking a lot on this program, Annie, about one America, two economies. Stocks on a tear, housing is coming back, partly because of investors buying up property, yet a jobs recovery in particular has been very slow. Stubbornly slow. This is just one of the reasons only 44 percent of Americans approve of President Obama's handling of the economy. That's according to the latest CNN/ORC poll.
Annie, what does the president need to do to convince Americans that he can get the economy working for those that are not feeling richer despite one record stock market one after another?
ANNIE LOWREY, ECONOMIC POLICY REPORTER, THE NEW YORK TIMES: Well, it's an interesting thing. You know, we had some retail sales numbers this morning that came in very weak. It seems that that has a lot to do with the payroll tax cut expiring back in January. And despite the fact that there's all these good things going on in the economy, housing is turning around, for instance, the jobless rate is coming down, it's all going really, really slowly. And I think Americans feel this.
And I think that the numbers are still really bad. And that's reflected in the relatively low approval of the president from now -- now and again. And there isn't a ton that the White House can do to shift that. These are really big economic trends. This budget is probably not going to pass. The other budgets, you know, it's not clear how they're going to deal with the sequester, if they're going to deal with it at all. And we're just kind of in this continued slog, even if the economy is picking up a little bit.
ROMANS: But, Annie, what does this budget -- this president's budget tell you? You heard -- you heard Will's criticism of it saying it's not really a compromise. So $3.77 trillion budget, if enacted as is, it would be a first step toward stabilizing debt and deficits, wouldn't it?
LOWREY: Yes, absolutely. And it's worth noting that there's already been a tremendous amount of debt and deficit reduction performed by this Congress, including the sequester. That's $1 trillion over 10 years. And so I think that both sides want to move the budget into closer balance. And the question is, how quickly to do that, given that the economy remains really, really weak, even if it's still getting better. The numbers are not great.
ROMANS: Gloria -- BORGER: I just want to -- I just want to point out to Will, you know, to his earlier point about how the president didn't really put enough on Social Security on the table. The Republicans are divided on this, too. I watched a senior Republican say to Wolf Blitzer the other day that, oh, my god, this president is really taking seniors on. And he shouldn't do this. And he's trying to --
CAIN: Well, everybody understands how to demagogue.
BORGER: Senior benefits. And then I saw the House speaker take on that Republican and say, I don't agree with him. So not only do you have splits in the Democratic Party on what you ought to do on entitlements but you have splits in the Republican Party because there are clearly some Republicans who are really ready to use this against the president as a political issue, even given, as you point out, sort of the pausety of what he did put on the table.
CAIN: That's -- I mean, that's all fair, Gloria. I mean, it's no news that both sides in the political spectrum know how to demagogue an issue.
CAIN: Whether or not this particular budget is a real and sincere move towards deficit deduction, as Christine and Annie were discussing, seems to be undercut by the fact that those $1.2 trillion in sequester cuts that Annie points out, President Obama would like to repeal those cuts. His $1.8 trillion in deficit reduction would then be offset by him cutting back the sequester cuts. It just doesn't seem like anything sincere of a bargain for more taxes.
ROMANS: And as Annie points out, there's virtually no chance -- well, there is no chance -- there's a minus infinity as John Berman -- that this budget gets --
ROMANS: Gets enacted, right, Annie?
LOWREY: Yes, there's no chance that this budget is going to get enacted and I think that the real questions are, are they going to cut some kind of smaller deal on entitlement reform.
LOWREY: And are they going to do anything about the sequester and will they start a tax reform process that will probably take years once they actually start it. And, you know, I think that there's probably going to be some movement to replace some of the cuts in this sequester. Some of them are really bad. Like there's a cut that prevents some Medicare patients with cancer from getting treatment. And I think that there might be some movement there. But I don't think that you're going to see a bigger repeal because it's really hard to find that much money. ROMANS: Gloria --
BORGER: And you know --
ROMANS: Go ahead.
BORGER: All of this has to be sort of seen in the context of everything else that's going on that we spoke about earlier. So you have immigration reform. If some kind of deal can be cut with some -- you know, a group of Republicans, a group of Democrats, that may set the tone for something else on deficit reduction. If the same thing happens in the smaller version on guns, for example, so these are shifting coalitions.
Right now everybody's looking towards 2014 and what will -- what will work for them. But I -- you know I think you have to look this -- look at this in kind of a larger picture about what else is going to be going on on Capitol Hill.
CAIN: To put a -- to put a button on this, if I could, Gloria, the larger picture is, do small things. It's the message over and over. Obamacare proved how problematic big things can be. And immigration reform, comprehensive immigration reform, is proving that again. And on gun control, something I disagree with, is small, you might be able to get something done.
ROMANS: All right. Will Cain, Gloria Borger, Annie Lowrey, nice to see all of you. Have a wonderful weekend.
Coming up, praise for the president from Paul Ryan?
(BEGIN VIDEO CLIP)
REP. PAUL RYAN (R), CHAIRMAN, HOUSE BUDGET COMMITTEE: Does deserve credit for challenging his party on entitlements.
(END VIDEO CLIP)
ROMANS: Could the president be making some new friends just as he loses some old ones on the left?
ROMANS: President Obama revealed his 2014 budget this week. The $3.77 trillion proposal would cut deficits by $1.8 trillion over the next decade. While it's two months late and no one expects it to pass in Congress, it's a very important marker for the president's continuing debt talks with lawmakers. His budget includes some new spending and priorities that the president thinks are important. Spending on infrastructure, for example, $50 billion worth.
The universal pre-K education for all children in America and tax hikes that target the rich. A 30 percent tax rate on those making more than a million bucks a year as well as new rules for taxing investment fund manager income. That so-called carried interests. Also in the budget was a minimum wage increase and a cap on itemized deductions and exclusion for high-income households. But he also surprised some by handing Republicans a good deal of entitlement reform. A change in the CPI, or how the government measures inflation, would reduce projected federal spending by slowing the growth of federal benefits that are adjusted for cost of living. That includes Social Security.
The adjustment would save the government about $130 billion over the next decade but many, even his own party say, it unfairly targets seniors.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D), MINORITY LEADER: I myself believe that whatever we talk about in terms of prolonging life of Social Security should be considered in its own place. Whatever we're doing, it's about extending the life and the strength of Social Security. It's not about balancing the budget. And so that's some of the concerns that some of our members have, why is this in this bill?
(END VIDEO CLIP)
ROMANS: As part of his proposal to replace the forced government spending cuts that went into effect earlier this year, another $400 billion for Medicare and other federal healthcare programs would be cut as well.
I'm joined now by Jeanne Sahadi, senior writer at CNNmoney.com, Nancy Cook, economic and fiscal policy correspondent with the "National Journal", and our friend Stephen Moore, editorial writer at the "Wall Street Journal."
Stephen, I'll start with you. President Obama handed down significant entitlement changes. You actually agree with the president on this. He's moving in your direction. Is it enough?
STEPHEN MOORE, EDITORIAL WRITER, WALL STREET JOURNAL: You know, the only thing I take issue with you is when you say significant. I don't think these are really very substantial cuts.
ROMANS: So it's not enough? It's not enough.
MOORE: It's not enough.
ROMANS: That's what you would say.
MOORE: But you know what, I will say this, you know, I do think the president's budget is pretty dead on arrival but I also think that there's -- raised a lot of eyebrows on both sides of the aisle, Christine, in Washington. The president opened up this Pandora's box of talking about Social Security reforms. I'm all for it. I think the program is really broken. I think these long-term liabilities are a big, big problem. And congratulations to the president for really taking the entitlement problem serious.
ROMANS: And that's why progressives are just spitting nails this week because they don't want, Jeanne, a Democratic president to be the one putting entitlement changes into a budget proposal.
JEANNE SAHADI, SENIOR WRITER, CNNMONEY: Yes, they don't want any of that going on ever it seems. But you know also there were some Republicans who said, he's attacking seniors. I mean, they are going to demagogue. And I know Will was talking about that before.
MOORE: Yes. Right.
SAHADI: He -- and everyone is focusing on the spending side of chained CPI. Chained CPI will also raise revenue because it will --
MOORE: That's right.
SAHADI: -- change how pieces of the tax code are adjusted like your standard deduction. It goes up every year because of inflation. It will go up less under chained CPI. I haven't heard too many Republicans pipe up about that yet but I'm sure they will.
ROMANS: Just the politics of the -- of the chained CPI. I can't believe I'm saying the politics of chained CPI are fascinating but politics of chained CPI are fascinating, Nancy.
They really, really are. It's wonky meets politics. No one expects this budget to fully pass but because of the new budget no pay act, lawmakers have until Monday to pass one, Nancy, or they lose part or all of their paychecks. What do you think happens next?
NANCY COOK, ECONOMIC AND FISCAL POLICY CORRESPONDENT, NATIONAL JOURNAL: Well, I think what happens next is really that there's sort of two tracks of things that are going to happen. One is that we could wait and see if the House and Senate can reconcile their budgets and come up with a budget agreement. I think the likelihood of that seems very low at this point.
And then the other sort of track to watch is the president has been reaching out to all these different Republicans and you know having to -- he's had two dinners now with 12, you know, different Republican senators each time. And one of the things the White House is doing is hoping that they can pick off some Republican senators and come up with some sort of budget deal this spring ahead of the debt ceiling.
ROMANS: The debt ceiling, that even -- that makes me nervous. I'm twitching when I hear the words debt ceiling.
Stephen Moore, I mean, do we think that there's any more chance that they're moving to at least some kinds of consensus of how we're going to run the nation's books before we get to the debt ceiling?
MOORE: I'm not sure we are, actually. I think this budget was an ideological document. Now we're standing --
ROMANS: But aren't they all? Wait, wait, wait. Isn't that what a budget is.
MOORE: They are.
ROMANS: The president's mission statement, right?
MOORE: Of course -- of course it is. There's no doubt about it. This is the president's statement. And I worked for Ronald Reagan when we put our budgets. It's a statement of kind of principle. The point I'm making is that there's not a lot in here Republicans are going to go on to and say, oh, wonderful idea. I mean let's not -- we haven't even talked about there's a trillion dollars of new taxes which the Republicans are going to reject out of hand.
I think the most interesting thing that happened this week, Christine, is, you know, when the president proposed this really what I think is a fairly modest change to Social Security, oh, my gosh, these organizations on the left, I mean, had cardiac arrest. And that makes me somewhat nervous about whether we're ever going to get serious about these big entitlements.
ROMANS: Well, but they gave other options.
MOORE: We talk about -- all the money is in the entitlements. And we can't even do this little baby step. Little baby step.
ROMANS: But, Stephen, they gave other options. They had cardiac arrest. And then they gave other options. For example, it was either Krugman or Robert Reich who said raise the cap of how much income --
MOORE: Of course.
ROMANS: -- you tax the Social Security, raise --
ROMANS: Raise the age, raise other things.
ROMANS: But don't -- don't shrink the size of the check. They didn't just have cardiac arrest and not give other options, Stephen.
MOORE: Yes, but Paul Krugman and Robert Reich, all they ever want to do is raise taxes. I mean, raise taxes, raise taxes. You know, by the way, I'm in favor of raising the retirement age for these programs. I mean, when we started out these programs, people's life expectancy was, you know, much, much lower than it is today. So we've got to get serious about these proposals.
And my only point is, my goodness, if this little tiny cut is seen as Armageddon, how are we going to make the really, really big decisions we all need -- know need to be made on Medicare and Medicaid and Social Security. ROMANS: Jeanne, I know you want to jump in.
SAHADI: I -- you know, I think it's interesting, Obama when he campaigned for president actually in 2008 was calling for higher payroll taxes on the wealthy. He didn't do that in his budget. He did something Republicans want. So from the Republican side, for them -- for anybody to complain on the Republican side that, hey, he hasn't taken a step forward, it's not a huge step forward, I know.
ROMANS: Nancy --
SAHADI: But it's a step forward. So --
ROMANS: Nancy, let me give you the last word on the budget.
COOK: Yes, I mean, I think that, you know, Republicans on Capitol Hill this week, I was up there a lot, they do, I think -- they were heartened by the idea that the president was willing to make cuts to Social Security and just to Stephen's point, I mean, there are a bunch of concessions in the budget. You know, there's the Social Security cuts. The president undid a lot of the sequester cuts to defense. And he's interested in doing corporate tax reform, which is also something the Republicans want.
So yes, maybe it doesn't go far enough in terms of reforming Medicare but he has stepped forward on a number of things.
ROMANS: Oh my gosh, the budget, gun control, immigration, go down the line and meanwhile we still have a jobless recovery, so a lot of work to do.
Nancy Cook, Stephen Moore and Jeanne Sahadi --
MOORE: That's right.
ROMANS: Nice to see all of you, guys. Thanks. Have a great weekend.
MOORE: You too.
ROMANS: Since the end of the recession the economy has created almost five million jobs. Majority of those positions are for low-wage workers. After the break, we're going to look at the growing divide between America's two economies.
ROMANS: One America, two economies. The stock market shatters all- time records, corporate profits go through the roof, middle class Americans are getting squeezed. Real median income has continued to decline during this recovery. Still 9 percent lower than its 1999 peak. In that same period total economic output has expanded by about 24 percent. That means you are creating more and you're getting paid less.
Jobs have been coming back since the recession officially ended, but the majority of those jobs are low wage, part-time jobs. At same time, more and more people are dropping out of the job market, labor force participation, that's the number of people working or looking for work, has hit lows not seen in decades.
I recently sat down with Wilbur Ross, he's an investor who really understands how the economy works. He's made billions investing in failed industries and turning them around. I asked him if he thought there were two Americas.
(BEGIN VIDEO CLIP)
WILBUR ROSS, CEO, WALL STREET ROSS & CO.: Well, I think there are really three Americas. You have the people who are more or less permanently on welfare, just not employed. Something like 37 percent of working-age Americans neither have a job nor want one. They're apparently comfortable with the system the way that it is. That's one segment.
Then you have the segment in between that wants and needs a job. And there I think the biggest problem is that our educational system has been failing them. And unless we fix the educational system, we're not going to solve the problem of those people in between.
(END VIDEO CLIP)
ROMANS: I want to bring in Ken Rogoff, he's a professor of economics at Harvard and the former chief economist at the IMF.
Ken, two economies, three economies, four economies, five economies -- it's clear that the economy is not working for a big chunk of people. What's going wrong?
KEN ROGOFF, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: Well, there are many dimensions, globalization and some of our jobs are being replaced by people in Asia and other places. Eventually robots. We also have the financial crisis, which has left a lot of our youth unemployed. A lot of people have trouble getting into the labor force and they're going to be hurt for a long time.
And on the other end of it, certainly what Wilbur said about the rich getting very rich. That's really split people up. And he mentioned the education system. Absolutely we have to work on that.
ROMANS: Is he right about that 37 percent, that we have such a great safety net in America, that 37 percent of people are not sort of engaged in the economy and that's all right?
ROGOFF: Well, I don't want to go there, but obviously what it means to be poor in the United States is different than what it means to be poor in India. And it's one of the things that societies get wealthy, they have to adjust to. But I think the vast majority of people are still quite aspirational and would like a ladder up if they're offered one. ROMANS: Yes. And that's the really troubling thing when you have this middle that wants to get on that ladder and the ladder keeps moving way from them.
ROGOFF: It's been a really rough period. Like I said, especially for people, the unemployed, there are a lot of people who have been unemployed for a long time, a big chunk.
ROGOFF: And they lose the ability to ramp back onto the labor force. That's a huge, long-run cost out of this whole financial crisis that worries me for the future.
ROMANS: It's interesting, you know, he was -- Wilbur Ross was a supporter of Mitt Romney, we should be very, very clear, but no matter who you talk to on the left, on the right, in the middle, no matter your political affiliation is, everyone agrees that education is such an important tool. An equalizer, you know, for -- as we go forward here.
ROGOFF: Yes I mean, education is not going to propel us ahead of Asia and ahead of Europe because they're doing the same thing.
ROGOFF: They're saying the same thing. But education has become unequal for a number of reasons. Public school education has deteriorated in a lot of places. College education, there's less equal access. So certainly this idea that everybody could be the same, you start out the same, that's a key to it, the education system.
ROMANS: All right. Ken Rogoff, nice to see you.
ROGOFF: Thank you so much, Christine.
ROMANS: Talk to you very, very soon.
All right. President Obama promised to create a million manufacturing jobs in four years but last month we actually lost manufacturing jobs. What happens to U.S. workers if America can't manufacture a renaissance? That's next.
ROMANS: Welcome back. Manufacturing once supported the middle class but not anymore. The sector has been hit hard over the last decade. Now increasing productivity, falling energy prices and rising wages overseas was supposed to power a recovery. But so far the manufacturing comeback has been a flop.
OBAMA: We can help big factories and small businesses double their exports. And create a million new manufacturing jobs over the next four years. You can make that happen.
ROMANS (voice-over): A bold promise during the campaign. Now facing the reality of an industry that's been in decline for decades. The U.S. shed 40 percent of its manufacturing jobs between 1980 and 2010. They're coming back but not fast enough to keep pace with the president's promise.
To create one million new manufacturing jobs in the president's second term, the economy should have created 42,000 jobs by now. It's less than half of that. And while the rest of the world is buying more products made in the USA, it's not even close to what America is buying from abroad. So is the manufacturing renaissance any more than a manufactured promise?
ROMANS: Scott Paul is the president of the Alliance for American Manufacturing, Richard Florida is a senior editor at "The Atlantic," he's also a professor at University of Toronto and NYU.
Gentlemen, thank you for coming by today.
Scott, the trend in manufacturing jobs has not been good. The economy just lost another 3,000 manufacturing jobs last month. Even so, Scott, you say you think the president can make that goal of creating a hundred -- one million, rather, new manufacturing jobs in four years. Why are you so optimistic?
SCOTT PAUL, PRESIDENT, ALLIANCE FOR AMERICAN MANUFACTURING: Christine, I think it's possible. I actually think it's an economic imperative to do it, to rebuild the middle class. First, there's the business cycle. I think that we should be seeing an upswing with housing starts. There's a lot of folks who need to buy automobiles, who have been putting that off for a -- long time. What we don't know about is Europe and Asia and how strong growth potential there is going to be.
The other thing are these underlying factors. We do see energy costs quite low for manufacturers in the United States because of the natural gas and oil boom here. We could expect that trend to continue. We can also expect to see rising wages overseas. That makes U.S. manufacturing look a lot more competitive.
What we don't know about, Christine, is public policy. And I firmly believe that we need the right public policies, both internally, and then with our trade policies, to achieve that one million jobs goal. I think that we can get it done. I think there's public support for it. And I do think that it's an economic imperative that we try to re-grow manufacturing. I don't think it's guaranteed.
ROMANS: So before we talk about those policies, let me bring in Richard.
You know, Richard, because -- the question is, manufacturing might not be driving new job creation, even if you do have more manufacturing returning to U.S. shores. As the U.S. has lost manufacturing jobs, manufacturing output is up. Are we going to see a manufacturing renaissance maybe but it won't be a manufacturing jobs renaissance?
RICHARD FLORIDA, PROFESSOR, UNIVERSITY OF TORONTO AND NYU: I think the U.S. will always be a great manufacturing nation. I mean, we're -- we are the greatest agricultural nation in the world. And we employ less than 1 percent of our people. We got more productive, we got more efficient, we learned a little bit business and managerial methods.
Manufacturing employs -- I don't know, 10, 12 percent of the population. But the figure I like is they're less than 6 percent of the workforce today involved in direct production. Those are the people who are directly touching and making products. And that's been shrinking for the past several decades. So there's no way the president is going to make his number unless he takes a very broad view. But manufacturing will remain important. It's just not going to power our economy. What's going to power our economy's job growth are two categories of jobs.
Those high-skill knowledge in professional jobs in which 40 million Americans work. We're going to add seven million more of those. And then the terrible fact the low wage service jobs where more than 60 million Americans work and we'll add another 10 million of those. I think the president should focus on making bad jobs better or not trying to retain or gain strength in an area that's been declining in terms of jobs.
ROMANS: Richard, I mean, let's be clear. When you're hollowing out a middle, a middle that used to be powered by those manufacturing jobs and you replace it with jobs that don't even pay enough to send the kid to college, let alone buy a house, that's a real problem for the economy. You could have strong manufacturing but a not strong middle class. It's not something people want to hear.
FLORIDA: So the first thing we have to do is we have to make those bad jobs better. We can't go anywhere with 60 million crappy low-wage service jobs. Look, my dad worked in a factory. He started that job in the factor in the -- in 1934. Took nine people to make a family wage. He came back from his service in World War II, and with the unionization, and the new social compact, with productivity up, he had a great job in the same factory.
We can do the same thing for service workers today. But the other thing that's really important is not every manufacturing job is a good job in America. For every aircraft assembler or tool and die maker that are taking home 50,000 grand or more a year, we have sewing machine operators and others who are making 10 bucks an hour.
FLORIDA: So just like our economy and our labor market are split, so is our manufacturing labor market. And the jobs we're bringing back, you know, there was a great "New York Times" story that said, GE is bringing back jobs home. Great. The jobs that were there before paid 30 bucks an hour. The new jobs GE was bringing back home paid 12 to 20 bucks an hour.
FLORIDA: So yes, we have to do better in manufacturing. We have to drive the wages up there, too.
ROMANS: That's a really good point. And let me -- Scott, let me ask you. Do we risk on losing out on innovation if we don't have more factory jobs or if we don't bring back factory jobs? Because, you know, my dad who had also worked in industry, he always said, you know, innovation happens on the factory floor, it happens on the factory floor, from a guy on a line who figures out a better way to do something.
PAUL: It does. And you have you a slew of management consultants and academics at Harvard, MIT, and other places who are now saying that separating innovation from production was a lousy idea. And that you should try to sell -- make things in the market you're trying to sell in. And where you're innovating as well and that you lose a lot of that potential, when the production goes overseas.
And so I do still think that there will be some off-shoring. I think there are some folks who think that's pretty much run its course. But on-shoring is a trend, not only because -- I mean, country -- companies aren't doing this just to be patriotic. They think that they will make money and they realize that they have to align innovation and production to be globally competitive.
I want to go back to something that Richard said about the quality of manufacturing jobs.
PAUL: Here's something, 9 out of 10 manufacturing jobs come with healthcare benefits. You don't find that in the service sector. And by and large, even though there has been some reduction in the wage premium, there still is no comparison for folks who don't have a four- year college degree. It's about the only career path that's going to get you to the American dream, to a middle class job.
And also if you locate a factory in a community, you're going to get those service sector jobs. The opposite is never the case. That's why manufacturing is important because it spurs economic activity in other parts of the economy, like no other sector can.
ROMANS: All right. Gentlemen, we have to leave it there. I mean, there's so much -- so much we could talk about. We could talk about tech, whether tech companies are going to start to change this trend, too. But we've got to leave it there.
Thanks so much, Scott and Richard.
PAUL: Thank you.
ROMANS: Up next, can there be a true recovery in housing without a genuine recovery in the job market?
(COMMERCIAL BREAK) ROMANS: Six years after home prices collapsed in this country, the housing market is back, and back with a vengeance in some parts. Especially once hard-hit states like California, Arizona, Florida and Texas.
(BEGIN VIDEO CLIP)
JUAN GOMEZ, HOMEBUYER: The market does not allow you to even think right now. I mean, you walk out and it's -- it's gone.
(END VIDEO CLIP)
ROMANS: Snap is right. Because home inventories in those markets have become so tight. That means there aren't a lot of homes on the market. That's because of pent-up demand from homebuyers who put up purchasing for years until the market bottomed out and prices are starting to rise again. And interest rates have never been lower. The national average for a 30-year fixed rate mortgage is now less than 3.5 percent.
But large investors are also buying up homes and converting them into rental properties and investment vehicles and that's tightening up inventories in once troubled markets pushing up home prices in places like Vegas, Phoenix, and Atlanta.
Now Jennifer Westhoven is my friend. She covers the economy, business and money for CNN's sister network HLN.
Glad to see you here this weekend, Jen. You're there in Atlanta. And where you are, prices are -- they're heating up again. Real estate is local, right, but home sellers are finally feeling like maybe they're in the driver's seat for the first time in years. For years.
JENNIFER WESTHOVEN, HLN MONEY ANCHOR: Yes.
ROMANS: If rates go up another point or so, or we see another wave of foreclosures, we could see prices fall again, Jennifer. Is the housing recovery real, is it solid?
WESTHOVEN: Well, I'll tell you, Christine, the realtors here definitely say that we're in something that they call this mini bubble. So I think they mean by that absolutely the prices could come back again. That for now, things are just so hot because there are so few houses out there, but they're saying even -- once people figure out that they're going to really get a pretty good amount of money for their homes, they're going to start listing. You're going to get more supply out there and prices will level.
So they're not seeing a crash again. They're saying that things are just going to level out a little bit more as the market continues to heal. They just think it's been so bad that we can't fall back that for much further.
ROMANS: You know, it's so interesting because, you know, I've been watching all the real estate in my neighborhood, too, as you have, and I'm here in the tri-state area in New York which has been not -- has not seen the price rises of the rest of the region. A lot of heat. A lot of talk about what's going on. Somebody on my block put on a house, you know, 100 people came to see it, no offers. Right? So there's a lot of window shopping, too. I think people are ready to put their foot -- their toe in the water but they're still a little scared or they might not have access to the money.
WESTHOVEN: Yes. Well -- and the Realtors say that's part of the change, too. People got so used to staying where they are, that they're going to be picky. That if they're going to buy a house and put -- make the big change after they're used to kind of sticking it out for a while, that they want everything to be perfect. So even though in some ways the seller's in the driver's seat and they're doing better, they're going to have to really clean up.
ROMANS: All right. I recently talked to a billionaire investor Wilbur Ross. He made his money buying and fixing troubled companies, Jen, and now he's among the group of investors, large investors buying homes across the country to convert into rental properties, but he does have advice for regular folks, too. You know people who can't buy $25,000 houses. He says take advantage of today's low rates and refinance. This is what he told me.
(BEGIN VIDEO CLIP)
ROSS: We're encouraging all of our -- both real estate and corporate portfolio entities, borrow as much long-term fixed rate money as you can because these rates are not going to stick around forever. I think that's the best way for regular people to participate in real estate. Take advantage of these very cheap mortgage rates. Lock it in.
(END VIDEO CLIP)
ROMANS: Lock it in. Thirty-year fixed money at 3.43 percent. You know, 10 years ago, Jen, I never thought those words would come out of my mouth.
WESTHOVEN: Let alone that they would stick around for so long. And I do think, you know, he's saying, you know, he's a huge investor but for small investors, the news that the White House is extending that Hart program for another two years, if you are under water, you can still find a way because of this government program to refinance, cut your bills and, you know, even you can take advantage of these low rates. A lot of people haven't been able to capture them.
ROMANS: I know. You're right. And a lot of people -- a lot of people who are still under water are thinking about maybe renovating their kitchen or bathrooms at this point, because they're not going to move because they can't afford to get a place now again.
ROMANS: Jen Westhoven, so nice to see you, from HLN. Talk to you again very soon. Coming up --
(BEGIN VIDEO CLIP)
ROMANS: When you saw the news of the shooting at Newtown, did you think, wow, what we're working on is really meaningful?
MICHAEL RECCE, ASSOCIATE PROFESSOR, NJIT: It's sort of disheartening. To have the technology, have it sitting on the shelf and know that it actually would have decreased gun violence.
(END VIDEO CLIP)
ROMANS: I'm going to pull the trigger myself on a new gun that could make firearms safer. And I'm going to tell you why you can't buy one.
ROMANS: All eyes on Washington this week as your political leaders are working on a gun control bill to expand background checks. Behind the scenes inventors and entrepreneurs are coming up with their own solutions to try to curb gun violence. They're called smart guns. Makers say they're child proof and could prevent future tragedies so why can't you buy one?
ROMANS (voice-over): What if your gun could only be fired by your hand?
UNIDENTIFIED MALE: We could do with your palm print so only you can fire it. That's not a random killing machine. More of a personal statement.
ROMANS: This technology isn't only for James Bond.
(On camera): This will not fire for me, will it? Nothing.
(Voice-over): The New Jersey Institute of Technology has spent the last 13 years developing a gun that analyzes a person's grip and only fires for its owner.
(On camera): The goal here is using science, technology, to make sure that someone who's not supposed to fire this gun is not firing this gun. A child, a criminal, someone who's taken the gun and tried to use it against you.
RECCE: Or stolen the gun or actually had someone else buy it.
ROMANS (voice-over): Armatix, a German company, takes a different approach. Its guns are activated by a watch and a unique PIN number.
BELINDA PADILLA, PRESIDENT & CEO, ARMATIX USA: It says it's good, you're now ready to shoot. Ready to fire.
ROMANS: Ready only if you're wearing the watch. PADILLA: If at any point an unauthorized user takes the gun and I try to shoot, it will not fire.
ROBERT MCNAMARA, FOUNDER, TRIGGERSMART: Now I'll introduce the RFID tag --
ROMANS: TriggerSmart uses similar wireless technology like what's in electronic toll readers to unlock its guns.
MCNAMARA: And now the gun is ready to fire. The chip can be worn in the form of a ring on your finger or a bracelet. Now they're starting to imbed chips in humans there in the fatty part of the hand.
ROMANS: These technologies are not expensive but you can't buy any of them in the U.S. Lack of demand has kept these guns off the shelves. But with guns in the national spotlight, that could soon change.
(On camera): Has Newtown changed things, you think?
DONALD SEBASTIAN, SR. VP. FOR RESEARCH AND DEVELOPMENT, NJIT: What Newtown has changed, I think, is the public appetite for doing something.
ROMANS (voice-over): Sebastian and the others have been to the White House to talk about their work. It's part of the president's efforts to curb gun violence.
You will not find the gun industry pushing for this technology. The National Shooting Sports Foundation says the technology is not reliable enough yet and potentially makes guns more dangerous.
LAWRENCE KEANE, SR. VP. & GENERAL COUNSEL, NATIONAL SHOOTING SPORTS FOUNDATION: It can actually encourage people to leave loaded firearms accessible relying upon the technology which can fail at the most inopportune time.
ROMANS: These entrepreneurs say smart guns would prevent more headlines like these.
PADILLA: Personalized handguns and personalized technology will save the lives of many people and children.
ROMANS: Even if this technology does make it to the market the National Shooting Sports Foundation said gun owners -- gun owners are not interested. Some of the inventors I spoke with say people are scared of personalized weapon won't work in a crisis, but they argue we trust our lives to technology every day, when we get in a car, we step in an elevator, so why are we so afraid of technology in guns?
According to the Bureau of Justice Statistics more than 200,000 guns are stolen every year. If the guns were personalized those criminals wouldn't be able to use them.
Now smart guns, make no mistake, they are not a silver bullet to end gun violence. But they may be a starting point.
Up next, it's a virtual currency. It was created by an anonymous hacker, and it's all too good to be true run up following the crisis in Cyprus. This sounds like a great idea. Bitcoin explains next.
ROMANS: So which would you trust? The euro, this is 20 euros, the official currency of the eurozone backed by European governments, used by hundreds of millions of people or this, a virtual currency called Bitcoin created by an anonymous hacker four years ago used for a range of illicit activities in its early days but now gaining kind of a mainstream following after the botched bailout of Cyprus. For many the answer was this Bitcoin.
Maggie Lake is here to explain.
Maggie, what is a Bitcoin?
MAGGIE LAKE, CNNI BUSINESS CORRESPONDENT: It's digital currency, Christine, but it's not that easy to understand which may be one of the problems. You can only buy it through a circuit of online exchanges, a few of them. You can't use a credit card to purchase it. So it's a little complicated for the average person. But everyone is talking about it. Everyone is asking about it. So because of that, I went to a bar, of course, to find out exactly how this works.
UNIDENTIFIED MALE: Can I get (INAUDIBLE)? And I'm going to pay with Bitcoin.
LAKE (voice-over): You don't have to whip out your wallet to pay for a drink at this bar. At Midtown Manhattan's EVR Bitcoins are now accepted.
UNIDENTIFIED MALE: .2855 Bitcoins. Send payment.
LAKE: EVR began taking Bitcoins with the help of this group of early adopters. The owners were quickly won over.
(On camera): Can you explain to me how this works?
ALEX LIKHTENSTEIN, CO-OWNER, EVR: You put in the amount in U.S. dollars. When you go to your wallet on your phone, your Bitcoin wallet.
LIKHTENSTEIN: And you simply scan the QR code, all you do is press send. We get the Bitcoins which are then converted into dollars within minutes for us and you get your drink and --
LAKE: And you get paid. (Voice-over): EVR is one of the few brick and mortar places to accept the payment system.
UNIDENTIFIED MALE: Bitcoins are transferred directly from person to person via the Net.
LAKE: The virtual coins are bought and sold through a limited number of online digital exchanges like MtGox. You can't buy them with a credit card. But you do need to link a bank account or cell phone.
UNIDENTIFIED MALE: So I just heard about this.
LAKE: Charlie Shrem is an investor in EVR and the co-founder of Exchange Bit Instant. He admits the currency has a reputation to overcome.
CHARLIE SHREM, PARTNER, EVR: In the beginning Bitcoin was I would say over 80 percent volume was for all illicit activities, drugs, things like that, fake I.D.s.
LAKE: The boost in popularity came on the heels of the crisis in Cyprus where people have little access to traditional banking. Some say Bitcoins would have offered a workable currency alternative.
(On camera): You may not want to take your real cash out of a real bank just yet, though. Although there are now places in New York City where you can spend Bitcoins, there are real concerns about consumer protection.
There is a reason that people started putting their money in banks, that you get some sort of -- you have some transparency, you have recourse, you don't get any of that with this new currency.
SEBASTIEN GALY, SOCIETE GENERALE: No, you don't get a regulator, and there is a reason why we have regulators and we are not in the Wild West.
UNIDENTIFIED MALE: Can I pay for this with Bitcoin?
LAKE (voice-over): Despite the stomach-churning swings, EVR's managers say they're convinced Bitcoins have real benefits for businesses and are here to stay.
LIKHTENSTEIN: If everyone would use Bitcoins, I would love that. I wouldn't have to deal with waiting for a credit card, it would be a much smaller processing rate.
LAKE: People find a way to pay for a good drink one way or the other but EVR hopes this payment experiment will raise the currency's profile at least in this New York bar.
ROMANS: And let's talk about those stomach-churning swings, Christine. At the beginning of this year Bitcoin was trading at about $20. This week it hit $266 before tumbling. MtGox went offline, one of the main exchanges I'd say, they handle about 80 percent, it came back online, it fell more. It's been very rocky since. So clearly, you know, this is something that's got a lot more volatility than a lot of other currencies that we see so --
ROMANS: But we keep seeing these headlines about these Bitcoin millionaires, right? People who are early investors in Bitcoin. And now -- but my question is how liquid is it? Who's really in this market? How do you get in and get out quickly and with your profit. It still seems very, very, I don't know, small and new.
LAKE: Dubious maybe? Even -- yes, there are definitely reasons to be concerned. But there are people who are in it. We just heard headlines about the Winklevoss twins.
ROMANS: That's right.
LAKE: Of Facebook fame, remember them? They say they have amassed a very large holding of it. Listen, the early adopters, very tech savvy people, but what we have to worry about as these headlines have grown and we've seen it rally, I am told by sources that the people trading in this are very sophisticated, some day traders, some day traders who lost their job who are used to trading in emerging markets and very illiquid currencies, who understand the system, perhaps understand how to game the system.
So you have to be very careful. If you see a headline and you're an ordinary investor and you say, I can make a million dollars getting in on this, there is no transparency.
LAKE: There is to resource. There's no central bank. There is no government. So you really have to be careful about the swings.
ROMANS: They will trade anything. They will trade anything. Even on Wall Street.
Maggie Lake, thank you so much, Maggie.
Thanks for joining the conversation this week on YOUR MONEY. Make sure to catch us at our new time, just one hour later, 2:00 p.m. Eastern starting next Saturday. Find me on Facebook, tweet me, my handle is @ChristineRomans. Have a great weekend.