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CROSSFIRE

Economy Finally Taking Off?

Aired December 6, 2013 - 18:28   ET

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


ANNOUNCER: Tonight on CROSSFIRE, more than 200,000 new jobs, the lowest unemployment rate in five years.

Is it because of President Obama's policies or in spite of them?

(BEGIN VIDEO CLIP)

SEN. RAND PAUL (R), KENTUCKY: It doesn't work, let's try something different.

(END VIDEO CLIP)

ANNOUNCER: On the left, Jennifer Granholm. On the right, S.E. Cupp. In the crossfire, David Madland, who supports the president, and Nancy Pfotenhauer, a Republican political strategist.

Is the recovery taking off or are the president's policies holding it back, tonight on CROSSFIRE.

S.E. CUPP, CO-HOST: Welcome to CROSSFIRE.

I'm S.E. Cupp on the right.

JENNIFER GRANHOLM, CO-HOST: And I'm Jennifer Granholm on the left.

And in the crossfire tonight, two guests with very different ideas for helping the middle class.

Today's news about jobs is too good to miss. The unemployment rate fell to its lowest point in five years. Auto sales at their highest levels since 2007. And a lot of people, especially in the Midwest, Michigan and manufacturing states, they should be thanking President Obama for saving the auto industry and U.S. manufacturing.

And the economy is doing well despite the best efforts of Republican obstructionists, who worked hard to shut down the government.

Folks, with the national deficit dropping at its fastest rate in 60 years, it is time to stop the obsession with deficits and start an obsession about middle class job creation.

CUPP: Well, Governor Granholm, I -- I'm going to give the president credit for these good job numbers. But this nation...

GRANHOLM: Stop the presses.

CUPP: I am.

But this nation is still woefully underemployed and he has to take credit for that, too. And, you know, what I do know is these numbers could not have come at a better time for an administration that has had a rough couple of months, and for people.

In the crossfire tonight, a pair of economic experts.

David Madland is director of the American Worker Project for the Center for American Progress.

Political strategist Nancy Pfotenhauer is a former chief economist for the Republican National Committee.

David, let me start with you.

Even though this morning's jobs numbers sound really good, a lot of people are just giving up and they're stopping looking for jobs. They're going on disability.

The dependency on government has absolutely ballooned under this quote, unquote, "recovery."

And I think folks in your camp want more dependence on government, yes?

DAVID MADLAND, CENTER FOR AMERICAN PROGRESS: No, we want jobs, which is exactly what the president is starting...

CUPP: But how do you get there?

MADLAND: -- starting to provide. In fact, you follow the president's agenda, which has created 45 straight months of job growth. That's going in the right direction.

It's not enough and it's not fast enough and the quality of jobs that we're creating is not good enough.

CUPP: Yes.

MADLAND: So there definitely needs to be much more there.

The first thing we can do is stop the sequester, which is this across the board slashing of government, which is -- cuts the good stuff and the bad stuff.

UNIDENTIFIED FEMALE: Yes.

MADLAND: We could be much more targeted, because the biggest problem right now in the economy is still the lack of demand. Consumers don't have enough money in their pocket and government spending is part of that demand. And it's being cut.

So we can start by reversing that.

GRANHOLM: And, in fact, Nancy, you know, the Republicans this week have made a big deal about not wanting to increase the minimum wage, which is an issue about creating demand, putting money into workers' pockets.

And yet, I have not heard a single specific thing that Republicans want to do or would be willing to do or putting in the pipeline to do to create middle class jobs.

And please don't just say tax cuts and cutting the deficit.

NANCY PFOTENHAUER, REPUBLICAN STRATEGIST: Can I just start by saying I don't know what anybody has been smoking here, but if you think that this is a good economy, then we need to start all over again.

What you need to pay attention to -- first of all, 200,000 -- 203,000 jobs, I'm glad that we've got that. But we need to create at least 150,000 a month just to keep our mouths...

(CROSSTALK)

PFOTENHAUER: Let me finish.

GRANHOLM: OK. I'm waiting.

PFOTENHAUER: And what you need to pay attention to -- and David is well aware of this -- is the labor force participation rate.

And what we've seen is that people, particularly young Americans, are opting out. They're giving up. They are underemployed. That means they're getting part-time jobs.

It is at about 63 percent, which is about a 30 year low, which means that 47 percent of this economy has basically given up under Obama.

These policies have not created economic growth and everybody knows it.

(CROSSTALK)

CUPP: -- my question.

(CROSSTALK)

PFOTENHAUER: I did answer it.

(CROSSTALK)

UNIDENTIFIED FEMALE: The House GOP, the House Republicans have 40 jobs creation bills that are stalled in the Senate.

(CROSSTALK)

CUPP: They're all the same two things.

GRANHOLM: No, they're not. They're energy...

(CROSSTALK) GRANHOLM: -- they're energy jobs. They're rural jobs.

UNIDENTIFIED FEMALE: No, it...

GRANHOLM: -- they're farm jobs.

(CROSSTALK)

UNIDENTIFIED FEMALE: I mean, OK, so -- so...

PFOTENHAUER: The biggest thing you can do to create jobs, whether you're a Republican or you're a Democrat -- and this has been true throughout centuries, is for the government to be smaller and for the private sector to be bigger.

That means less regulation, not the monstrous expansion that we've seen under ObamaCare. And we've just got the tip of the iceberg there.

MADLAND: Wait, wait wait.

(CROSSTALK)

UNIDENTIFIED FEMALE: But more taxes...

MADLAND: But wait a second.

(CROSSTALK)

UNIDENTIFIED FEMALE: -- less spending and sane...

(CROSSTALK)

GRANHOLM: There was the stimulus at the beginning of the Obama administration.

(CROSSTALK)

GRANHOLM: However...

(CROSSTALK)

GRANHOLM: However, wait a second. The deficit is done to levels pre that stimulus now.

(CROSSTALK)

GRANHOLM: And it's heading in the right direction.

PFOTENHAUER: Despite Obama. Despite Obama.

(CROSSTALK)

PFOTENHAUER: And the sequester, by the way, is less than 1 percent of total federal spending.

If we think that this nation cannot tighten its belt by less than 1 percent of total federal spending, then we should give up.

(CROSSTALK)

UNIDENTIFIED FEMALE: David, go ahead, get in here.

MADLAND: Well, look, you -- what you've recited as the way to go forward is what we've done for the past 30 years, which is cut taxes on the wealthy, cut regulations on business. And it's proven to be a failure.

That's where the direction -- that's why you've been so opposed to the president's plan, because it is a reversal of where we failed.

(CROSSTALK)

MADLAND: We got into the Great Recession...

PFOTENHAUER: How can you claim that we have reduced regulation, whether it's under President Bush or President Obama?

There has been an explosion in regulatory burden.

MADLAND: (INAUDIBLE) I mean the cuts of regulation on banks that got us into the Great Recession is exactly what I'm talking about. That's what we are starting to reverse. We are starting to create the conditions for a prolonged expansion. It is far too weak. I agree with you on that point. So we've got the point the agreement here...

PFOTENHAUER: I'd start with expansion.

CUPP: Well, listen, the governor brought up raising the minimum wage. And I want to ask you about that, because here's what -- here's what I don't understand, and I think most Republicans don't understand.

If the Walmart in, say, rural North Dakota that services four towns and employs half the population is forced to double its wages, its salaries, and then that Walmart decides to cut its labor staff and raise prices on the rest of the community, who is that helping?

MADLAND: Well, that's not what happens when you raise the minimum wage.

CUPP: Of course it is.

MADLAND: What -- no, it isn't. What happens when you raise the minimum wage, is you put more money into people's pockets, into workers' pockets. They go out and spend that money. That has a stimulating effect on the economy.

CUPP: Wait, wait, wait.

With no -- with no repercussions on the business itself or the price of -- or the price of the product?

(CROSSTALK)

PFOTENHAUER: What fantasyland is that?

(CROSSTALK)

MADLAND: You mentioned Walmart. If they -- if they would increase wages to 10 bucks an hour, it would add about 50 cent to a shopping trip expense, a very manageable expense. And that would enable the work...

CUPP: Says you. I mean you have that on...

(CROSSTALK)

MADLAND: No, actually, says the University of California...

CUPP: You add that onto multiple items in every week...

(CROSSTALK)

MADLAND: -- study.

(CROSSTALK)

MADLAND: We're talking about employment. This is the key thing. The minimum wage has no effect on employment. You try to say it kills jobs, but it doesn't.

You take states like Vermont, among the highest minimum wages in the country, among the lowest minimum wage, also, among the highest minimum wage in the country and the lowest unemployment rates in the country.

We have study after study that shows raising the minimum wage doesn't kill jobs. What it does is boost workers' wages, which is what we need to do right now.

(CROSSTALK)

UNIDENTIFIED FEMALE: Wait, wait wait, wait, wait. Wait. Wait.

PFOTENHAUER: I fundamentally disagree with you. Econ 101, if you raise the cost of -- if you raise the cost of something, you get less of it.

(CROSSTALK)

PFOTENHAUER: In fact...

(CROSSTALK)

GRANHOLM: -- what every study has shown...

(CROSSTALK)

GRANHOLM: -- that has recently reviewed this.

(CROSSTALK) GRANHOLM: The University of Chicago School of Business -- the University of Chicago, hardly a liberal lefty organization, has studied the whole state of studies that have looked at a minimum, wage. And they have found -- the overwhelming majority of them say that raising the minimum wage does not affect unemployment.

But let me just tell you this -- in this Walmart example, you've got the Waltons, who own Walmart.

UNIDENTIFIED FEMALE: Yes.

GRANHOLM: And six of them are richer than the lower 42 percent of the...

(CROSSTALK)

GRANHOLM: -- of the entire nation.

CUPP: I know, that's not fair...

GRANHOLM: So all I'm suggesting to you...

CUPP: -- that they've become successful.

GRANHOLM: All I'm suggesting to you is that if they shared that a little bit with their workers, like Henry Ford did...

(CROSSTALK)

GRANHOLM: -- way back in the day, and paid $5 so that his employees could buy the cars that they were producing...

(CROSSTALK)

PFOTENHAUER: -- that the Walton family, that has created hundreds of thousands of jobs, has done something...

CUPP: Good for them...

(CROSSTALK)

CUPP: Good for them.

(CROSSTALK)

GRANHOLM: Well, what they haven't done is paid them a fair and living wage.

PFOTENHAUER: Can I get back to the minimum wage...

GRANHOLM: That's the point.

PFOTENHAUER: -- point, because when you talk about employment, I would assume that we care a lot about the people who are at the lowest end of the employment ladder, particularly those who have the hardest time being employed. That tends to be, historically, teenage male minorities.

When you raise the minimum wage, the people who are the first -- the last hired are the first fired. They are the ones who do not get the job. That is why, it is the example, with supply and demand, that is given in the first...

(CROSSTALK)

PFOTENHAUER: -- graduate econ class...

CUPP: Why would you pay people more to stay in a low income job, a low skilled job longer?

MADLAND: Well, here -- because most of the people working at the minimum wage are adults. So the first -- that's not the teenager example. That's sort of a very small percentage of the people working at the minimum wage.

But really, your...

(CROSSTALK)

MADLAND: -- you're saying...

(CROSSTALK)

MADLAND: -- your example assumes human beings are widgets, that the supply and demand is exactly like that.

What human beings, when you pay them more, you get more effort and you get -- reduce their turnover. They're going to stay in the job longer, become more skilled at the job. So the company benefits. They are more productive. They get better -- and you also save the taxpayers money, because right now, we are subsidizing low wage workers with things like Medicaid and food stamps, because companies aren't paying them enough.

CUPP: OK, we'll come back to this.

Next, though, David, I want to ask you why thousands of young people are signing up for something new online. Sorry, President Obama, it's not that thing you keep talking about.

(COMMERCIAL BREAK)

CUPP: Welcome back.

In the crossfire tonight, David Madland and Nancy Pfotenhauer.

The president's supporters are jumping up and down today because of today's news that November saw the best hiring and lowest unemployment numbers in five years.

But news flash -- plenty of people are still hurting, including some of Obama's core supporters. Millennials can't find jobs that pay a decent income. So in New Jersey, they're doing something to compensate. Online gambling just became legal there, with Web sites designed to appeal to young people.

In "The National Review," John Fund reports 50,000 people signed up during the first week.

Compare that to only 741 Jersey residents who signed up for ObamaCare during the entire month of October. It seems a lot more people are willing to bet their future on online casinos than on ObamaCare.

GRANHOLM: Whatever. Talk to me in a month.

CUPP: David...

(CROSSTALK)

CUPP: I just thought that was adorable.

New Jersey is so cute.

OK, David, explain to me -- talk about millennials a little bit, because as we just discussed, unemployment among youth is higher than the national average. And we've seen recent polls suggesting millennials are leaving Obama. They're disillusioned.

What kind of policies has he implemented -- fiscal policies -- that are helping that particular demographic?

MADLAND: Well, you started off with health care, actually. That's one of the biggest things...

CUPP: Don't say that they can stay on their parents' insurance until 27 percent.

MADLAND: They also can get...

CUPP: That's not enough.

MADLAND: They also can get care...

UNIDENTIFIED FEMALE: And the problem is...

MADLAND: They also can get care on their own as an individual with -- so they're unemployed right now. You mentioned that. They can at least find a way to get health care. That's a huge step...

CUPP: They can, but they're not. They don't want to spend that money on ObamaCare.

MADLAND: Look, so that's one of the things.

But the -- really, the biggest thing the president started -- has done for young people is to change the direction of the economy. When he started and took office, look, 700,000 jobs a month were falling off of the economy. We were losing jobs at an amazing rate. The economy, as we are starting to talk about, has picked up significantly. It's by no means where we need to be -- go, but it is helping young people. The unemployment rate for young people too high, but it has dropped just like the unemployment rate for everyone else.

GRANHOLM: Let me -- let me just jump in, because I think millennials, as well as a lot of people, do want this minimum wage raised.

And I just have one -- one last final follow-up on this minimum wage issue.

Nancy, you know, you were affiliated with the Republican Party.

I'm wondering, do you think that Republicans would be happy to run against statewide ballot initiatives in 2014 with the raising of the minimum wage on it?

My advice would be to put it on every state ballot proposal you possibly can in 2014.

PFOTENHAUER: I can understand why you would make that recommendation. Politically, it's a smart move. Economically, I think it sounds good. And it unfortunately hurts the people that it's designed to hurt.

GRANHOLM: Do you want to run against it, though? Do you think --

PFOTENHAUER: I think, politically, it's a smart move, because it takes longer to explain why it's bad policy than --

UNIDENTIFIED FEMALE: And it's counter-intuitive.

PFOTENHAUER: Yes, it's counter-intuitive. That's my answer. As an economist, it's bad policy. From a political strategy standpoint, I can understand why Democrats would want to do so.

GRANHOLM: And let Democrats get it on the ballot.

S.E. CUPP, CO-HOST: Thank you. Take your message.

GRANHOLM: Right, exactly right, exactly right.

Well, the numbers were encouraging today. The long-term unemployment, of course, is another issue holding up potentially a budget agreement, the extension of unemployment benefits. Would you be in favor or opposed to the extension of long-term unemployment benefits?

PFOTENHAUER: I don't think there's a need to extend them further. I mean, if you look it up -- first, it varies from state to state. So, you can have unemployment benefits be as relatively low as, say, 19 weeks in a state like North Carolina, but they can be over 72 weeks in places like Nevada and Illinois.

At some point, what we have found is while it's compassionate, you want to help people who are out of a job, particularly if it's transitional, but the longer the period of unemployment benefit -- CUPP: Yes.

PFOTENHAUSER: -- the less inclined they are to search and the longer they stay out of the job market, the less they are likely to get back into the job market. So, it's kind of --

CUPP: David, how long would you go? A hundred weeks? Two hundred weeks? Why not indefinitely?

(CROSSTALK)

DAVID MADLAND, SUPPORTS PRESIDENT OBAMA: When the unemployment rate is so high that there are three or four job seekers for every job, I think it's the right thing to do.

CUPP: For how long?

PFOTENHAUER: For how long?

MADLAND: Extended to where --

CUPP: For how long?

MADLAND: For how long?

CUPP: Is it however long it takes?

MADLAND: As long as it takes. The point to unemployment insurance is that when people can't get jobs, when they're actively looking to get unemployment, you have to be actively looking for a job. When they can't get it, we --

CUPP: We have spent half a trillion on unemployment benefits.

MADLAND: And here's what the CBO --

CUPP: Just since President Obama.

PFOTENHAUER: Not only that --

MADLAND: The CBO just said if we cut this extension, we will kill jobs, because those people who are looking for work won't have any money to spend.

(CROSSTALK)

CUPP: -- coming from.

GRANHOLM: Look into the eyes of some guy who's 50 years old, whose job left, because he was a factory worker and he's been a good worker for 30 years, that guy is not going to be picked up immediately, especially without training.

(CROSSTALK)

CUPP: We're talking economic realities. GRANHOLM: Economic reality is this -- he is not going to be able to pick up another job like this without training. And here's what's happening, is that workforce training has been cut in half since they year 2000, and Republicans refuse to invest in people to get them trained and up again. And that's to me is the greatest travesty of all.

PFOTENHAUER: With all due respect, there are significant resources that are going for training and it's not done well at the federal level.

UNIDENTIFIED FEMALE: I agree with that.

PFOTENHAUSER: It is done better at the state level. And you can even talk unemployment benefits all we want, when you ask the average American how long that should go on, it is usually roughly half the period of time that is being discussed at the federal level.

What you have to do is solve the root problem, which is turn the economy around. I'm sorry, we have --

(CROSSTALK)

PFOTENHAUER: I am opposed to --

GRANHOLM: I'm with you on pushing money back to the states. I think the states can create --

(CROSSTALK)

PFOTENHAUER: It's like being stuck in a treadmill rather than sprinting. It's not --

GRANHOLM: So, let me just ask you, as a follow up to that, do you think the Republicans in Congress would be willing to grant to states the flexibility, put it back to where it was in the year 2000, the amount of money that was in workforce training, give it to the states to be able to use the community colleges and partnership with businesses to train people for specific jobs in the economy. Do you think Republicans would increase an investment to do that?

PFOTENHAUER: I have no idea. But I think they should -- if they decide to do it, they should do it with no net increase in spending, since we've been spending like -- what did Senator McCain used to say? To say spending like drunken sailors is an insult to every drunken sailor he knew, and I think he knew a few. I'm just saying.

CUPP: But, David, I mean, we started this show talking about improving numbers, improving jobs numbers. So, if the economy is improving and unemployment is improving, how long before we decide, OK, the economy is improving, we need to cut these benefits down?

MADLAND: When the unemployment rate drops to reasonable level, past 6 percent, which the new Fed study says, at the current rate we're going, which is too slow, we're still going to be at two plus more years of unemployment rate at about 6.5 percent. So, what we really need to do is to create jobs and better jobs.

This is where the minimum wage really starts to come in. And all the strikes we've been noticing in the past couple of days, these are workers, especially fast food places that are demanding much higher wages than they're currently getting which is a start to how you boost demand in the economy and really get things going.

GRANHOLM: OK, so, wait, wait, we're talking about raising the minimum wage. But, Nancy, Rand Paul, Senator Paul was in Detroit today. And he laid out an economic strategy. Some of which I like and some of which I think was problematic.

One of the things he said he wanted to do was to lift the requirements of paying prevailing wage and paying a wage to construction workers that for union construction workers. He said I want to lift that burden from construction companies. We've been talking about raising the wage.

Do you think we should be cutting little class wages? Do you think that's an increase in prosperity?

PFOTENHAUER: I think it could be if it creates jobs. If you train --

(CROSSTALK)

GRANHOLM: -- people's paycheck.

PFOTENHAUER: You know what, Governor? I'd like to really be able to answer this question seriously. And as someone who had a record that was not all that rosy as governor of that state, I think should you allow me to answer.

Now, when you economic growth, then it doesn't matter if you set an artificially high wage. What he's talking about doing is lowering the level of taxation and lowering the artificially high costs in a state that is hemorrhaging jobs. So when you had other states even with similar manufacturing bases that were doing well, this state is doing poorly. And it's because the taxes --

GRANHOLM: This state was doing poorly because I don't --

(CROSSTALK)

GRANHOLM: You went bankrupt. Hello!

PFOTENHAUER: Do you know what?

GRANHOLM: Hello!

PFOTENHAUER: Toyota built flourishing plants in places like Tennessee.

GRANHOLM: And so, the America --

(CROSSTALK)

PFOTENHAUER: So higher regulation, higher taxes and you had prevailing wages.

(CROSSTALK)

GRANHOLM: Wait a second.

CUPP: Let the governor defend her record.

GRANHOLM: Let me just be clear about this. Michigan's economy for 100 years has been tied to the American manufacturing industry. There has been a global shift in manufacturing jobs to low wage countries. The auto industry was part of that. We lost huge amounts of jobs. It is true in the first decade of this century because of the shift in manufacturing jobs and the president who did not do a thing to raise his hand to help manufacturing.

This is my point. We have a government that has not done anything to help industries like manufacturing stay in this country. Unlike our economic competitors in other countries who have done, who have aggressively intervene.

Now, you can't attack my record without listening to me respond. What I'm telling you is that the loss of manufacturing and automotive jobs in Michigan was not the governor's fault. It was global forces that were beyond the fault of a governor but certainly could have been help by a Bush administration that would reach its hand out to help manufacturing.

And that's my point, because that's exactly what the Obama administration has done, is reached out to help automotive manufacturing and look at the results now. We've got an automotive industry in America that is flourishing and auto sales that are at record levels since 2007.

CUPP: OK. Stay here. Next: the final question for both of our guests.

We also want you at home to weigh in on today's "Fireback" question. Does President Obama deserve credit for the drop in unemployment? Tweet yes or no using #crossfire.

We'll have the results after the break.

(COMMERCIAL BREAK)

CUPP: We're back with David Madland and Nancy Pfotenhauer.

Now, it's time for the final question.

Governor?

GRANHOLM: So, Nancy, you've got to admit, especially after our exchange that we just had. In the numbers today embedded were 1.5 million jobs that were saved because of the auto rescue. Now, you've got to admit in retrospect it was a good thing.

PFOTENHAUER: I think that what helped the auto industry was actually bankruptcy. And so, it wasn't spending their way out of the problem. It was the bankruptcy process itself that allowed people to get rid of assets that were no longer performing and to keep the assets that were.

CUPP: So, David, my final question is about income equality, which has grown four times as much under Obama than Bush. As a progressive, aren't you a little disappointed?

MADLAND: I'm very pleased that the president has started to make this a big issue. Just two days ago, I was at a speech that he gave which, you know, talked about the problem with inequality, which is not just that it means that some people are not doing well, but it means the whole economy suffers because we don't have a strong middle class. That means we don't have adequate demand.

It also means we don't have government that works. We have too much power among the elites and not enough among ordinary middle class to demand the kind of policies that we need.

CUPP: So, you are not disappointed?

MADLAND: No, I'm pleased.

(LAUGHTER)

CUPP: OK. So, thanks to David Madland and Nancy Pfotenhauer. And thanks very much to Governor Granholm for joining us tonight.

Go Facebook or Twitter to weigh in on our "Fireback" question: Does President Obama deserve credit for the drop in unemployment? Right now, 66 percent of you say yes, 34 percent say no.

GRANHOLM: And the debate continues online at CNN.com/Crossfire, as well as on Facebook and Twitter.

From the left, I'm Jennifer Granholm.

CUPP: From the right, I'm S.E. Cupp.

Join us Monday for another edition of CROSSFIRE.

"ERIN BURNETT OUTFRONT" starts right now.