Return to Transcripts main page
White House Presses for Increase in Minimum Wage; Gap to Raise Minimum Pay to Workers; Interview with Billionaire Wilbur Ross; Colorado Tax Revenue from Legal Pot Sales Used for Education; Netflix Increases Membership
Aired February 22, 2014 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: Can you survive on $7.25? Good afternoon, I'm Christine Romans. This is YOUR MONEY. That wage is a reality for 1.6 million Americans. Another 17 million earn only slightly more. These are the people who prepare your food, clean your offices, and stock the shelves at your local supermarket. If President Obama gets his way, those workers will get a raise.
Now, the minimum wage today buys 20 percent less than 50 years ago. The White House wants to trays from $7.25 to $10.10 an hour. Some Republicans and business leaders say raising the minimum wage will hurt the very people it's supposed to help. Liberals stay will lift nearly a million people out of poverty.
Both sides this week seized on a new report from the Congressional Budget Office. Here's what Republicans see. They say employers will be forced to raise prices at the checkout. That would hurt consumers. Or they do cut hours. That could hurt their employees. And in some cases they could be forced to cut jobs. Just how many? Around 500,000 jobs at a time when the labor market is still struggling to grow.
But liberals dispute the number and argue this is about social justice, and they say even if raising the wage does cost half a million jobs, that's only 0.3 percent of the workforce. Compare that to the 16.5 million American whose would see fatter paychecks each week.
Now, raising the minimum wage is popular with voters, and this is an election year. Even a slim majority of Republicans support raising it. But some states and companies aren't waiting for Washington. Just this week Gap stead would raise wages for 65,000 workers. I sat down with Treasury Secretary Jacob Lew for an exclusive interview. He says the president is doing what he can but it's up to Congress to raise the pay for low-wage workers.
(BEGIN VIDEO CLIP)
JACOB LEW, TREASURY SECRETARY: I don't believe it's right for people to work for 40 hours and take-home pay is below the poverty line. The president made it clear as a country we have to make sure if you work full-time you're at least at the poverty line. ROMANS: You think can you get that done this year? I know the president has done an executive order on a small sliver of the federal workers.
LEW: We'll keep pushing at it. It's obviously not in our power to force Congress to act, but we can make the case for it and we can have the American people make the case for it. And we're going to continue pressing because it's the right thing to do. States are taking action on their own, and we're seeing in many states doing it, their economies are doing well. And I think that it's just something we need to do.
ROMANS: The CBO report this week really gave the people who are against it what they feel is ammunition. It would be a job loss. It would be a poverty alleviation program on the backs of small businesses who'd have to pay for it.
LEW: If you look at that CBO report, it also showed it would take almost a million people out of poverty. If you're working full-time, getting out of poverty and working your way out of poverty is an important thing for our economy and for our country. There are a lot of different views on the economics of the minimum wage. I know that the studies done by a number of people including Nobel laureates show an opposite effect. I tend to think that they're right. But we have time for that debate.
ROMANS: The people making $7 an hour say there's no time for debate. They're mad, they're really mad. But they aren't the only ones. At the other end of the spectrum, the one percent, the one percent of the one percent, some of them are mad, too. We decided to ask our own billionaire, Wilbur Ross is here. He is the extremely successful chairman and CEO of WL Ross and Company, one of the largest corporate finance organizations in the world. Not that we're keeping track, Wilbur, but Forbes put your net worth at about $2.6 billion. We think you are qualified to talk about what the one percent think about this, the very top of the income spectrum.
Let's start first with income and equality. Two-thirds of the country says the government should have a role in reducing inequality, Wilbur. You just heard Secretary Lew say raising the minimum wage will lift people out of poverty. Do you believe it's the government's role to narrow that income inequality gap?
WILBUR ROSS, CHAIRMAN AND CEO, WL ROSS AND COMPANY: I think the real issue is upward mobility. When I first went to work, I was working summers and I was getting paid minimum wage and it wasn't very lucrative even then, but it was the way things were. And a lot of college kids in those days worked at minimum wage, saved a little tiny bit toward their schooling or their books or something while they're at school.
But I think upward mobility is the real issue, and I don't think the minimum wage is what solves that. It may solve a different problem. The way to solve the upward mobility problem is education. And I'm extremely disappointed that government, with all the rhetoric about the new jobs being created and the technological society, is permitting high schools to stop teaching high school math and high school science. If you don't have kids who are properly equipped for the jobs of the future, you're going have a continuing problem of lack of upward mobility.
ROMANS: Let me ask you quickly about this. Why do you think people -- you've had a minimum wage job, I've had a minimum wage job. I'm looking around me, everyone here has had a minimum wage job in the past. Why are people so mad right now? Is it because there aren't the jobs in the middle anymore, Wilbur?
And I'll tell you another reason why many people say they're mad. It's because they see 95 percent of the income gains of the recovery have gone to the top one percent, they haven't been shared, and they're very concerned about that.
ROSS: Yes, but the reason they haven't been shared is the lack of upward mobility. When I got out of school, out of Harvard business school, I had what in those days was quite a lot of student debt. So what did I do? I shared an apartment with some other guys in New York, saved up, each month gradually paid down the debt, and eventually worked my way out of it. People nowadays seem to feel that they can borrow the money, and as I understand it, some of these student loan programs not only lend them the tuition but lend them entertainment money. When I was at school, in addition to having student aid, I had to work.
ROMANS: So do you think that --
ROSS: I had little jobs.
ROMANS: Do you think that people are more entitled now? They think they're entitled to a middle class way of life and they don't work as hard?
ROSS: Well, I think there's getting to be a feeling, and I was alarmed at the remarks attributable to Nancy Pelosi, where she said the best thing about Obamacare is that now people don't have to have jobs. I don't think it's a legitimate choice for an able-bodied adult to say, I don't feel like working. I feel just like being subsidized by the government, and that's a legitimate choice. I don't think it is a legitimate choice.
ROMANS: Do you think -- is it a choice you think that more people are taking? I mean, do you think that's the difference between now and when you were working a middle class -- a minimum wage job?
ROSS: Yes, I do, because if you look at labor force participation, it's been going steadily downhill. And 37 percent of the working age population, according to the government statistics, neither has a job nor is seeking one. That's a record high. It may even be over 37 percent by now.
ROMANS: I think a lot of people think there's not something out there. It's not because suddenly a third of the population this I want to live on the government dime and not have a job. There's not the opportunity there used to be, Wilbur, when you were coming up.
ROSS: I don't agree with that. I, in fact believe, as weird as it may sound, that expiration of long-term unemployment is actually going to -- benefits is actually going to result in lower unemployment. The reason I believe that, I have some friends who are in very rapidly growing businesses entry level jobs, warehousing jobs, plant guards, things like that. They tell me that the applications they get from the unemployed folks only come in as the unemployment benefit is about to run out. And I think that's a very, very significant thing. Now that it has run out for people, I'll bet you a lot of those will find a way to get a job.
ROMANS: All right, we'll have you come back and talk more about education and how we can fix that part of the equation because definitely we need to have more technical skills and do a better job of matching people and skills and the jobs that are available. Always nice to talk to you. Thank you, Wilbur Ross.
ROSS: Thank you.
ROMANS: Coming up, the rest of the nation is watching Colorado's experiment in legalized marijuana. Is it paying off?
(BEGIN VIDEO CLIP)
TIM CULLEN, CO-OWNER, EVERGREEN APOTHECARY: We paid about $190,000 in sales tax that we collected during the month of January.
(END VIDEO CLIP)
ROMANS: And where is that tax money going? It's going to teach kids to stay away from smoking legal marijuana. We head to Colorado, next.
ROMANS: Follow this logic with me. Colorado legalizes pot, taxes it three times, when it's grown, bought, and sold, and then puts that money, that tax money, right into state coffers. And then the state turns around and spends it on telling kids not to smoke pot and treating patients who are abusing alcohol and drugs, including pot.
Ana Cabrera joins us from Denver with more on this. Hi, Ana. We are just learning more about how much money Colorado expects to bring in from the legal recreational sale of marijuana.
ANA CABRERA, CNN CORRESPONDENT: We're talking lots of money, Christine. Remember, it's been about six weeks since it became legal to sell pot for recreational use here in the state Colorado. To say business is going strong is an understatement. The state just released new tax revenue projections for selling marijuana, and it beat expectations by tens of millions of dollars. Now leaders here at the state capital get to decide how to spend it.
CABRERA: High hopes for a Colorado green rush are being realize. UNIDENTIFIED MALE: It exceeded all my expectations.
CABRERA: Business at Evergreen Apothecary, previously just a medical marijuana dispensary, has more than quadrupled. More than a month after recreational pot sales became legal people are still lining up at the door get their hands on this stuff. This place is packed at 10:00 when doors opened. In fact, this pot shop averages about 500 customers a day. And the state of Colorado is reaping the benefits as well. Sales and excise taxes on recreational cannabis are over 25 percent.
UNIDENTIFIED MALE: The total is $147.77.
CABRERA: Marijuana dispensaries were required to turn in January tax reports on Thursday.
CULLEN: We paid about $190,000 in sales tax that we collected during the month of January.
CABRERA: While official numbers won't be made public until March, the governor's budget office just released its own tax projections. It estimates the state will collect about $184 million in tax revenues in the first 18 months of recreational pot sales. Here's Colorado's plan for spending that money -- $40 million automatically goes to public school construction. That was mandated by voters. Then the governor wants to spend about $85 million on youth prevention and substance abuse treatment, $12.4 million on public health, about $3 million on law enforcement and public safety, and nearly $2 million on industry oversight.
MASON TVERT, MARIJUANA POLICY PROJECT: I don't think the people who are buying marijuana want the tax money to be used to discourage adults from buying marijuana.
CABRERA: While not everyone agrees how that money should be spent, and although still early, there's no denying the apparent economic boost that's come from recreational pot sales.
CABRERA: Of course, right now, Washington and Colorado are the only two states where recreational pot is legal, and Washington is still working through its regulations for selling pot. But we know at least eight other states that are considering this from California to Maine. And you have to think when they look at the kind of money Colorado is projecting to make from taxing marijuana, that could have some influence, Christine.
ROMANS: Ana Cabrera for us this morning, thank you, Ana.
Here's the challenge facing the nascent legal pot industry, banking. The Obama administration says it's OK for banks to now start offering services like checking and savings and loans for the legal distributors of marijuana. Until now, the estimated $2.5 billion has been all in cash, and the administration is worried that's a public safety program, all that cash. But the big national banks are saying, no thanks. The concern there is the difference between state and federal law. The federal government regulates banking transactions. Big banks don't want caught in the middle. Analysts tell us small and midsized banks, community banks are most likely to fill the gap. Finally they get the go ahead from Washington that it's OK to do business with legal pot companies and the banks say not quite yet.
Is your Netflix streaming a little slow? You're not imagining it. The bandwidth battle that could come between you and the "House of Cards" next.
ROMANS: All right, did you watch "House of Cards" season two on Netflix? Millions of you did, and some noticed a slowdown in their streaming. Netflix says streaming speeds have slowed in recent months. The streaming service is a notorious bandwidth hog, accounting for a third of Internet traffic in the U.S., and Internet providers want Netflix to pay more for all of that traffic. If Netflix fights the fees it could mean blackouts like we've seen on some cable channels. With Time Warner Cable and Comcast potentially merging, the battle for bandwidth could just be getting started.
In the meantime, Netflix is taking over our TVs. The stock is up almost 20 percent so far this year. Subscriber growth at a three-year high and so is customer satisfaction. Behind the streaming service, there's founder and CEO Reed Hastings, a man who changed the way we watch television.
ROMANS: Maybe you know frank Underwood?
UNIDENTIFIED MALE: Democracy is so overrated.
ROMANS: Piper chapman and Michael Bluth.
UNIDENTIFIED MALE: That's not a great sign.
ROMANS: But what about the man who started it all, Netflix CEO and co-founder Reed Hastings? Hastings hasn't always been a successful tech entrepreneur. He did a stint in the Peace Corps.
REED HASTINGS, NETFLIX CEO: I was teaching high school math and I loved it.
ROMANS: At age 30 he started his first company, Pure Software, and made a debugging tool. He sold that for $750 million and Hastings left a rich man. Then an overdue movie from Blockbuster gave him a brilliant idea.
HASTINGS: It was a $40 late fee. Clearly there's got to be a better way.
ROMANS: In 1997 he founded Netflix, a DVD by mail company. The little red envelopes would eventually contribute to Blockbuster's downfall. And in a move that changed how we watch television, Netflix began offering on-demand streaming.
HASTINGS: You can watch more, watch on your schedule.
ROMANS: But Hastings's journey isn't without missteps. In 2011, Netflix announced price hikes and plans to spin off its DVD business.
HASTINGS: We named our DVD service Quickster.
ROMANS: That caused a flood of cancellations and sent the stock price tumbling. But Hastings backtracked and apologized to customers. Now Netflix stock is at an all-time high. The company has 44 million subscribers and counting. A lot of that growth is thanks to the popularity of its original series.
UNIDENTIFIED MALE: Welcome back.
ROMANS: With a huge chunk of subscribers binge watching "House of Cards" season two.
UNIDENTIFIED MALE: So help me god.
ROMANS: And the company's fearless leader is getting rewarded with a 50 percent pay bump this year, a $3 million salary plus $3 million in stock.
HASTINGS: It's wanting to push the edge, to create something people are proud of and that they enjoy.
ROMANS: A board member of Facebook and a huge education advocate, serving for a time as president of the California State Board of Education. He's donated millions to help charter schools and push education technology. He's heavily involved with organizations trying to reform schools. With Netflix changing TV as we know it, the business of being Reed Hastings is on everyone's watch list.
ROMANS: Coming up, winning an Oscar can change an actor's life, but even the losers are winners this year. The value of Oscar gift bags is at an all-time high, and you will not believe what's in them, next.
ROMANS: The polar vortex is cooling the red hot housing market. Home sales fell five percent in January. Construction of new homes fell 16 percent last month. No surprise, right? It's hard to build a house when it's so cold out. Of course, all real estate is local. How much salary do you need to buy a median priced home? A new study finds just $19,000 a year is what you need to make to afford a home in Cleveland. St. Louis and Atlanta also are pretty affordable. But in San Francisco, Los Angeles, and New York, you've got to make a lot more to buy a place.
You'd probably guess one of those cities already has the highest rent in the country, but you'd be wrong. The highest rent in the country, welcome to Williston, North Dakota. A 700 square foot one bedroom apartment in Williston costs $2,400 a month. That's the most expensive in the country according to an apartment guide study. A similar pad goes for $1,500 a month in New York. Williston's population has nearly doubled. Since the 2010 oil boom rents have exploded.
It was one of the most expensive bailouts of the financial crisis. Taxpayers shelled out $187 billion to rescue mortgage giants Fannie Mae and Freddie Mac, an ugly and painful time for taxpayers who had to shoulder the costs of horrible decisions in the mortgage market. But now taxpayers have recouped all of the billions they gave and even turned a profit. Fannie says it will pay treasury an additional $7 billion in profit from the end of last year. We'll hear form Freddie Mac next next.
For more stories that matter to your money, give me 60 seconds on the clock. It's "Money Time."
ROMANS: Bad habits are back. Household debt jumped last quarter for the first time since 2008, mostly because of new mortgages, but it also it includes credit cards, auto, and student loans.
Check your freezer. Nestle recalling to varieties hot pockets. Certain boxes of Philly steak and cheese flavor may contain bad meat already recalled by the U.S. Agriculture Department.
Don't feel bad for Oscar's losers. They'll head home with plenty of swag. This year's gift bag for nominees is worth more than $80,000. Loaded with luxury items, including a $16,000 hair transplant system, plus trips to Japan, the Rocky Mountains, and Mexico.
Forget the swimsuit. Barbie has got new gig, entrepreneur. Mattel unveiled the doll at this week's international toy fair in New York. Barbie is wearing an elegant pink dress, carrying essential cool tools of start-up life, a smartphone, tablet, and briefcase. Those gadgets will perform a lot faster in a handful of U.S. cities. Google is bringing what it calls its fiber Internet to nine new metro areas. Google says it's 100 times faster than broadband.
ROMANS: Speaking of speed, the Olympics are coming to a close, but the endorsement event is just getting started. Winter Olympians typically don't score the big deals summer Olympics do. There's less interest globally and many athletes wear helmets making them less recognizable. But top performers, good looks, and compelling life stories, can turn medals into money. Figure skater Gracie Gold, hockey star T.J. Oshie, and snowboarder Sage Kotsenburg are top contenders for sponsorship gold.
Congratulation to a good friend of the show. Education secretary Arne Duncan balling at the celebrity all-star game. He was named MVP. Look at this. Look at this, 20 points, 11 rebounds, and six assists. Dunking, who is 6'5", was the co-captain of Harvard's basketball team back in college. He played professionally in Australia for four years. He wears number 80 because the U.S. is now boasting an 80 percent high school graduation rate. That's the highest rate in American history.
That's it for YOUR MONEY. For more of my interview with the treasury secretary, Jacob Lew, check out CNNmoney.com. Have a great weekend.