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tv   Your Money  CNN  July 16, 2011 10:00am-11:00am PDT

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and so far, looks pretty good in the los angeles area where residents are staying off the roads to avoid what's being called carmageddon, a ten-mile section of the busy 405 interstate has been shut down for the weekend for a construction project. officials urge residents to stay home to avoid getting stuck in standstill traffic on surrounding roads. right now, it looks like nobody is stuck. you're seeing the empty 405 that's closed down. but surrounding arteries, apparently traffic is moving freely. if there is any traffic at all. join us at the 2:00 eastern hour and we'll teleyou what you can do at home to save you money. and then at 3:00 eastern, we're going to look at rare photographinphotograp photographs of the beatles that were taken by my guest when he was just a teenager. i'm fredricka whitfield. "your money" starts right now. no one can say for certain what would happen if the debt ceiling is not raised. but the consequences are likely
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to be severe. welcome to "your money." i'm ali velshi. august 2nd is the day the treasury department says it will no longer be able to pay all of our nation's bills. and the united states will default on its debt. republicans are going to vote on their own plan this week, complete with spending cuts. but president obama says he won't support deep cuts without increases in taxes. >> if you're trying to get to $2.4 trillion without any revenue, then you are effectively gutting a whole bunch of domestic spending that is going to be too burdensome and is not going to be something that i would support. >> david gergen is cnn's senior political analyst. david, there was a time when republican house speaker john boehner and president obama both talked of doing something big to change america's unsustainable economic path. what do you think? do you think that opportunity's lost? >> well, a week is a long time
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in politics. it can be a lifetime. i think what's now clear is that the big deal, the grand deal, the grand bargain of $4 trillion over ten years is dead, it's gone. i think the chances of getting a deal at $2.5 trillion or the middle-level deal, very unlikely because the president does not want to go that high without tax increases and republicans are not going to do it. here's the hard question i think that's coming up. the house republicans are now pushing a very, very tough deal through the house. over in the senate side, the republicans and democratic leaders are working together on a version of the mcconnell plan. and the president will accept that, as he said in his news conference friday. but whether the house republicans would accept that or not is a big, big question. it seems to me that's the lead horse, that's the lead solution right now, is a version of the mcconnell plan throwing in the spending, which i think would be a good idea of at least $1.5
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trillion worth of spending cuts. whether the house republicans -- they've been sending some signals they won't accept that. in this case, we're really at loggerheads. >> diane swonk joins us. ben bernanke called it calamitous not to raise the debt ceiling. moody's said it would downgrade the u.s. aaa credit rating. let's talk about consequences from an economist perspective. if the u.s. fails to raise its debt ceiling on august 2nd, what does it mean for our already struggling economic recovery? >> well, it's incredibly bad news. it could be enough to push us into another recession, depending on how far. immediately they'd have to do 40% to 45% cuts in spending right off the top of the board. how long that would last? i would first stop paying congress for not doing their job. but i think the real issue is this is broad-based. you can't escape these. i know the american pick doesn't
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like the fearmongering going on around this issue. the thought that we would all have to pay higher interest rates, that we would allow the freedom of choice in this country to choose our future and leave to it the rest of the world to determine our future with higher interest rates and changes in spending cuts that are forced upon us and thrust upon us is just unimaginable to me. but, unfortunately, it's getting to be more worrisome as each day ticks on. >> when you and ben bernanke are saying these things in the same week, we have something to worry about. how might a u.s. default affect you and your family? tom foreman is here to break it down for us. >> breakdown is the right phrase. we're talking about a shock wave that would go through houses all across this country. it would start with the value of your house itself if the cost of borrowing money for the government gets higher, that
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would mean probably the cost of borrowing money for all of us would get higher. interest rates would rise. that could mean many, many thousands more on mortgages for many people out there. things like your car, the rates could rise there. gas prices could rise as a result of that. and your roads might be in poor quality if the government can't afford to take care of them. what about the people who earn the money for the house? let's say you have a small business father. if he works for a small business, he could wind up unemployed because the business can't afford to operate anymore. he could lose moneying in his savings account and he could have a difficult time getting a loan if he's trying to run his own business because money would tighten up all over. let's say that mom works for the government, immediate impact. she could wind up furloughed. she could also see credit card rates rise. one of the keys to this is the way the interest would ripple throughout this country. here's a son, he wants to go to college. student loans could become hard tore obtain for the same reason, interest rates, restrictions on
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financial aid could be put into place. what about the daughter over here? her salary could be limited or delayed. she could possibly get ious. and private contractors, really important here, the people who supply everything for the government and the military and all these people, they could be left hanging out on a limb simply because the money was not there. and of course what we heard this week, what about grandma? social security could be delayed, retirement benefits could be reduced. it's not just a concern for capitol hill. it could be a concern for real homes across the country. >> tom, there's a lot of would have, should have. there's a lot of sheer ri there. but the bottom is, we don't know. we were all together after lehman brothers collapsed and a lot of smart people thought markets would take that in stride and they didn't. this is a lot bigger than lehman brothers collapsing. david, you have been in the white house. you understand how people think. why are some people so
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concerned, particularly those who are concerned with scoring political points, why is it going to have a broader and more devastating effect to not raise this credit limit? >> i think ultimately the republicans -- at least i hope -- will agree to go and lift the debt ceiling. certainly speaker boehner has agreed to that. mitch mcconnell has over on the senate side. but there is a strong sentiment among republicans that the cuts that are on the table now are -- we had great, big budget cuts. when you broke it down, it didn't turn out to be much. there's a strong feeling that what they're being asked to do is to agree to cuts that are actually quite modest. and then increase taxes. and in effect to pay for the
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welfare state, a bloated welfare state. they would like to shrink the size of the welfare state. this is ultimately a conversation, a debate, a food fight over how big the american government should be. that's why they're not doing it. but the question becomes -- i cannot believe at the end of the day house republicans will be so recalcitrant that they'll take us into default. that would be so much beyond what i think we've ever experienced, ali, knowing we're on the edge of niagara falls, on the edge of a precipice, i can't believe they will take us over. >> let's talk to one of the most powerful voices in the debt ceiling debate. he's not an elected official. he's not a government employee. grover norquist joins us. your lobbying group has gotten more than 230 house republicans and nearly 40 gop senators to sign a pledge never to support an increase in taxes.
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and you warn those who break your pledge will pay a political price. are you the reason that we don't have a debt ceiling increase right now? >> well, as you know, the pledge, the taxpayer protection pledge, is a pledge that candidates for office and house and senate members and presidents signed to the voters of their state and to the nation. the pledge isn't to americans for tax reform. it isn't to me. the american taxpayers have asked and elected a majority in the house of representatives and 41 members of the senate who ran, committing not to raise taxes. >> right. >> our friends, president obama, has said he won't try and solve the problem he created with his spending -- >> wait, wait, wait. what do you mean he created with his spend? you didn't just suggest our budget problem is because of president obama, did you, grover? >> well, see, on august 2nd, which is the new date that geithner gave us, he gave us a may date. now there's a new absolute date that he wasn't --
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>> grover, let's have a true conversation here. you know better than that. you know we hit the debt limit on may 16th and you know the treasury secretary said, i can move things around until august 2nd. >> why are we hitting august 2nd? >> moving things around. let's get back to the point -- >> because obama spent -- >> are we in this debt situation because of the obama administration, grover? >> yes. >> we're going to pass by that question. that's an unreasonable position. >> the stimulus -- >> our debt problem is far beyond $800 billion, grover. we're electing people as we do to represent us in government and get to washington and say, this conversation is a whole lot more nuanced and complex than it was when i was running for office in iowa or in arkansas or in new york. and i might have to compromise. why is preserving the inability to increase taxes more important than the overall health of the economy and the danger that it's
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putting us into right now? >> because not raising taxes is important to the health of the economy because the president wants to spend the money, he wants to raise taxes and spend more moneyment and the answer to that is, no. the most important thing to turn the economy around -- we've been losing more jobs since obama's been spending more money. obama's spending is $1 trillion more this year than when bush left office. $1 trillion in one year. he's going to add another $10 trillion to the debt during his presidency. that's what we need to pull back. he wants to raise taxes. the american people and the people they elected say, don't raise taxes, cut spending. that's the argument. obama wants to spend msh and raise taxes. the republicans don't want them to raise taxes. why would you say, because obama wants to spend more money, you have to pay for it? >> grover, hold on. i want to ask you whether or not there are any taxes in this
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country that you need to see increased to make things a little more fair. grover norquist is standing by. i don't even know anymore. [ tapping ] well, know this -- for a good deal on car insurance, progressive snapshot uses this to track my good driving habits. the better i drive, the more i save. it's crystal-clear savings and only progressive has it.
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we're back with grover norquist, he's the president of americans for tax reform. grover, you've gotten so many republicans in congress to sign a pledge to never raise taxes. a lot of people are wondering if it's appropriate that you hold so much power in the republican party. you've never been elected to public office. but you certainly are influential. what's the consequence, if somebody who has signed one of those pledges of remarkable inflexibility that you forced them to sign goes against you? >> well, people take the pledge because they speak to their voters. the pledge is not to me. can we make this clear? the pledge is to the voters of oklahoma if your name is tom coburn. it's to the people of your state
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who elected you. >> you write the pledge. you get everybody to sign it. it's your pledge. let's not mince words, grover. tell the truth. you want to make sure people don't increase taxes. this isn't -- the voter in iowa didn't write that pledge. >> we offer that pledge to all candidates for office. some choose to say to their constituents, vote for me, i won't raise taxes. obama said, vote for me, i will raise taxes. different people take different approaches. that vote, that pledge is put to the voters of their state and then they get elected. it's important that people can trust their elected officials not to lie their way into office. >> is it more important that people can trust their elected officials to make the right decisions in their interest than to be loyal to grover norquist so that they get reelected again? >> okay, are you not listening? the pledge is not to me. the pledge is to their constituents. raising taxes does not make the economy stronger. it makes it weaker.
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spending money you don't have does not make us stronger. it makes us weaker. we ought to spend less and not raise taxes. that's what people take the pledge to do. obama wants to spend more. >> i'll give you this, grover. you were into this long before it was majority opinion. but you've seen the polls that say most republicans -- not most americans -- most republicans agree with the fact that there need to be spending cuts and some corresponding tax increases. do you think there is not a tax in america on the wealthy or on corporations that needs to be increased? there's just no tax anywhere that you think needs to be increased? >> well, the taxpayer protection pledge, which any of your viewers can read on, makes it very clear. tax reform, if there's a credit or a deduction that's inappropriate, just reduce rates so it's not a hidden tax increase. we're americans for tax reform. we were founded to pass tax reform in '86. we want lower rates and a
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broader base. we want tax reform but not hidden tax increases. >> the pledge reads this -- i, the undersigned, pledge to the taxpayers of the state f undersigned and all the people of this state that i will oppose and vote against all efforts to increase taxes. that's accurate, grover? >> pretty simple. no net tax increase. >> and you continue -- no net tax increase. you continue to counsel those who sign this pledge not to negotiate at all with anything that will increase the debt limit if it involves increasing taxes? >> and take a look at what's happened across the country and the states this year, governors who signed the pledge have won that fight. they're not raising taxes. they are reducing spending. the healthy states are not raising taxes. they've elected people who have taken the pledge. the unhealthy states like illinois and connecticut are raising taxes and damaging their economies. the pledge has saved the americans hundreds of billions of dollars. >> are you okay that the pledge
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may cost americans when this debt ceiling is not increased? it will cost americans a lot of money when it's not increased? >> i hope that president obama will not stick to his ideological left wing guns and demand more spending and tax increases, that he will come to the table and actually put something in writing, which he hasn't done yet. there is no obama plan in writing. >> grover, it is remarkable to hear you suggesting that president obama does not stick to his ideological guns. grover norquist, thanks for coming on the show, the president of americans for tax reform. grover norquist is remarkably committed to what he's talking about. but there is a problem here. there's an underlying problem that politicians in america cannot do something that risks their seat because their voters won't let them. pledges like this contribute to a great deal of inflexibility in washington. >> well, ali, listen, let me put my cards on the table. grover know this is.
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i have supported the simps simpson-bowles plan all along. i believe taxes need to go up as part of an overall effort to get the deficits under control. but in fairness, grover does have a point. and simpson-bowles itself said it wasn't one-to-one, it was two-to-one in spenting cuts versus tax increases. the simpson-bowles commission recognizes that more central than taxes is the question of how much we're now spending. we've taken the level of spending in this country from about 20% of gdp at the federal level up to 24 hearse to 25% over the last two years, another year in sight for 25%. and what republicans are saying is you have to sweat that down. i believe that taxes ought to go up as part of this taxes. but i think it's unfair to villainize the republicans when, in fact, there is a very real
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possibility that the senate will present a plan which will have $1 trillion to $1.5 trillion dollars in cuts and no tax increases. and that's what the president will accept and that may be where we come out at the end of the day. >> the issue is more political, david. >> default versus tax increases misstates the problem somewhat. >> i'm not sure why the two are in the same discussion. i would have really preferred they deal with the debt ceiling and they deal with spending and taxing entirely separately. but we're not in that position. the reality is in part because of people like grover nor quishgs we're not in that position. a lot of people who would otherwise vote fn an increase in the debt ceiling can't do so because they're not in a position to compromise. >> yes and no. it comes back to what people fundamentally believe is the problem. and republicans fundamentally believe that this underlying problem is we've allowed spending to go higher and higher
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and they don't want to raise taxes to pay for that. they would rather see it shrink down. the democrats -- i'm not trying to villainize democrats either. i think they come from a very sincere place of wanting to provide a stronger social safety net. they want to provide far more services to the country. and they believe the rich ought to pay a lot more to get there. >> diane swonk, is there any way to reduce our debt, to get into a situation where our deficits are not as big in a meaningful way to the tune of $2.4 trillion that we're talking about without increasing some taxes? >> there's a way to do it. it's whether or not that's really going to be politically acceptable to the american public. the kind of pain that that would induce. and i agree completely with david on this one. the kind of pain that would induce is not something we're really ready to swallow. there is a balance in this country between spending and tax cuts. and it is more. we do need to cut spending more than raise taxes. >> david gergen, thanks very
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much, cnn's senior political analyst. diane swonk is a chief economist. we're going to tell you exactly what would happen if the president and congress do not raise the debt ceiling in time. ordinary rubs don't always work on my arthritis.
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try capzasin-hp. it penetrates deep to block pain signals for hours of relief. capzasin-hp. take the pain out of arthritis. on august 3rd, there is a chance that america will wake up without enough cash to pay its bills. that means our senior citizens or our military may not be getting the checks they depend on. jay powell is a visiting scholar for the bipartisan policy center. he served as the undersecretary for finance at the treasury under president bush, sr. what are the consequences if the debt ceiling isn't raised in time? the prevailing wisdom is that those that hold u.s. debt, bond investors, would get paid first. but what about everybody else? jay, you and others at the
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bipartisan policy center say it would be impossible to keep paying for all of the most popular and important programs in this country that americans rely on. that means possible reductions or delays to social security, to medicare or medicaid, food stamps, checks to federal workers. president obama, in fact, said this week that he could not guarantee social security checks would be mailed out if we don't raise the debt ceiling. jay, republicans are calling that a scare tactic. forget the politics. tell me what the numbers say. >> yeah, it's not a scare tactic. it's a fact that if the debt ceiling is not raised by august 2, then on august 3, the federal government will have approximately half of the cash it needs to pay its non-interest bills. that is really not in dispute. i'm hearing a lot of people saying that's not true anymore. >> august 3rd, the revenue that will be taken in is $12 billion. the expenses are $32 billion, of which a big portion are social
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security payments. others have said, well, the government doesn't work on this basis where it's got no money left over from the previous day. would there be money left over to pay for social security on august 3rd? >> yes, there would, but not enough to pay all of that $32 billion in bills. we don't know where there would be anywhere near enough to pay all of them. that's the very first day after the debt ceiling should have been lifted. what it really suggests is that that social security payment would be at risk of slipping a day or so. that's what it suggests. but it's not a prediction. so i think the president's statement was accurate on its face. >> the next pretty important day, according to some of your research, is on august 15th. tell me what happens then. >> well, on august 15th, that's not a good day to be working in the treasury department. you have basically a $29 billion interest payment. you've only got $22 billion of incoming funds. the thing is treasury will always make sure it has enough
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cash to pay the interest. that will be the highest priority. >> right. >> it won't even be a thought process. that will be the highest priority, i believe, having worked there. so you will make sure to have enough cash to pay that. the problem is, there's another -- it's $39 billion -- $41 billion in total costs that day. so you don't have anywhere near enough money to make all the other payments. that's the day the quarterly refunding auction closes. >> you have to have the ability to pay that. >> that's right. $27 billion worth of new money has to come in and buy a ten-year security and that's the challenge. >> the rising possibility that congress does fail to raise the debt ceiling has resulted in credit rating agencies threatening to review america's sterling aaa credit rating. ben bernanke testified before congress last week. and he said, it doesn't actually matter whether you do some of the juggling that you're talking about. the credit markets will see this as a default one way or the other. if you pay your bondholders but
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you don't pay something else, they'll still downgrade you. what is the risk that if america gets it together before the august 2nd deadline, that we keep our sterling credit rating? >> well, first of all, our work strongly suggests that interest rates would go up if we enter the prioritization period. but in terms of the ratings, it seems likely that standard & poor's will downgrade us whether there's a bond default or not. that will mean higher rates, not dramatically higher rates necessarily. but higher rates. moody's and fitch have said by contrast that they won't downgrade us unless there's an actual bond default which we think is unlikely. >> you've been in the treasury. on august 3rd or 4th or 5th, whatever the case is, if we don't have a debt ceiling increase, who in treasury makes that decision as to what gets paid? >> of course, there is no playbook here. this is not the executive branch's role at all. so this is a new thing.
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theoretically, people in the administration could make decisions and set priorities or maybe not. maybe they'll let the fed pay the bills in the order they come do. >> jay powell, good to talk to you. visiting scholar with the bipartisan policy center, former undersecretary of the treasury. more than 14 million americans are still out of work. we need a solution to that problem. we need it pretty fast. is a new stimulus the answer? with all this debt talk, doesn't seem likely. but we're going to discuss it right after this. miles per gallon on the highway. how does it do that? well, to get there, a lot of complicated engineering goes into every one. like variable valve timing and turbocharging, active front grille shutters that close at high speeds, and friction reducing -- oh, man, that is complicated. how about this -- cruze eco offers 42 miles per gallon. cool? ♪
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welcome back. there are still too few jobs to go around. 18,000 jobs added in june, well below the nearly 300,000 jobs some economists say we need to see each month for a sustained period to see a meaningful reduction in the unemployment rate. some 14 million americans remain out of work, a lack of jobs is just one reason why federal reserve chairman ben bernanke is warning congress to be careful where they slash spending.
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>> i only ask or suggest that as congress looks at the timing and composition of its changes to the budget that it does take into account that in the very near term that the recovery is still rather fragile and that sharp and excessive cuts in the very short term would be potentially damaging to that recovery. >> former "new york times" columnist bob herbert is a distinguished fellow, will cain is a cnn contributor. bob, you feel the deficit reduction focus in washington with the full support of president obama is actually hurting job creation efforts. >> no question about it. but i actually think that -- this is going to make you really cynical. i think this is sort of a phony debate. this is a manufactured crisis. we should be dealing with the debt ceiling separately, just raise it. and dealing with budget matters separately, they're very complex and they involve more even than just the idea of whether you're
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going to raise taxes or whether you're going to cut spending. and i don't think that we're making any progress here. i doubt -- i agree with david gergen. i doubt that even the republicans are going to send the economy over a cliff. so i expect the debt ceiling to get raised one way or another. but the real issues relating to the budget and the long-term debt are not going to be dealt with. >> will cain, something that sort of started trickling out there which would be very hard politically to deal with in this country, in this climate is the idea of the necessity of more stimulus. we've just heard from people about how the stimulus is the reason to some people why we're in this trouble. is there any possibility of more stimulus coming from the government? >> none, zero. let me tell you why. it's because, i think, for a lot of us, the feeling is the stimulus was effective as if we had taken $800 billion, walked into the bathroom, dumped it into the toilet and flushed it. that was about how much help it did. i'm not going to join the chorus
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that says it hurt. but it didn't help. president obama himself says it didn't create the jobs we expected. even paul krugman says it wasn't created the right way. northeast that's the narrative now, that it should have been created the right way. >> bob, let's just get your response to what will said. >> the first thing is that suggesting the stimulus didn't help is just wrong. it did save a significant number of jobs. it probably created some jobs, not nearly enough, not even enough, he's right, as the president had hoped for. but it also -- and this is crucial -- gave significant help to the states who were just hemorrhaging revenue. so we were in a very dire crisis. and the stimulus helped prevent it from becoming even worse. i think the stimulus wasn't big enough. i think it wasn't shaped properly. there were too many tax cuts -- et cetera.
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but beyond that, now we should take the budget issues and the jobs issue and move it separate from the debt ceiling thing. the only way to really get a handle on long-term deficits is, one, you need to increase some revenues. i think the bush tax cuts for everybody ougt to be allowed to lapse. but we need job creation so that you have more people working and paying tax -- >> we're all agreed on that, right? >> yeah, but that requires investment. so you begin to create these jobs and you address the budget deficits -- >> why are you flinching? >> not in the immediate term. >> immediate investment means -- >> extra spending. whatever you want to spend it on. >> how do you create jobs? >> bob and i have a simultaneous agreement and disagreement. we need to separate the economy and the federal government budget and deficit. those aren't necessarily playing together. a lot of conservatives would have you believe the federal government's deficit is impeding the immediate economy. no. it will eventually if you don't
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get entitlements under control. >> yes. >> so now that we get to how do we fix the economy, we'll have a difference on investment. i don't believe putting it in the hands of politicians and the government -- i don't believe they know what the next big thing s. i don't believe they know how to invest it properly. i believe the spontaneous of free market dos. >> we need to create jobs. >> what's the investment you think creates those jobs? and, frankly, whether it's big companies or it's small businesses, what's the thing that's going to -- >> franklin roosevelt said we ought to address this -- the jobs issue the way we would approach the emergency of a war. and that's what i think because i think we have a jobs crisis that is that dire at the moment. i think we ought to be investing in infrastructure and not just roads and buildings. i think we should be building new schools. i think we should be weatherizing every building in the united states. and we should have a crash program on new forms of energy, clean energy and that sort of thing so that we are in the
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forefront of this new industry for the 21st century. those are the investments i would make. >> he can't put that together, that perfect package. >> you asked what i would do. >> now we have to ask nancy pelosi and eric cantor to get together and come up with something center. >> eric cantor would take us over an economic cliff. >> so would nancy pelosi. >> i really disagree with that. >> let's say you don't like bob's suggestion. we have had the freedom to have businesses have the freedom to create more jobs. we haven't had it. businesses are sitting on a lot of money. what's stopping them? we keep hearing, it's a lack of clarity about what governments are going to do. it's obamacare. the fact is, that's not really starting -- >> there's one answer. >> debt. >> demand. >> how is it stopping people from hiring people? >> the commerce department said
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yesterday consumer spending is inching along. it's gagging. why? two-thirds of our economy depends on consumer spending and household debt, yours, mine, bob's, everyone's, is at record, historical levels. bob thinks the problem is jobs. i think the problem is debt. you'll never have a good employment market until you get rid of debt in the economy. >> you can get rid of debt real well if you have jobs for everybody. >> the big corporations have found that they can make tremendous profits without as many workers. so they've got tennessee cost of workers down and they are not going to jack that up much higher. i think it's amazing that jeff immelt from ge is the president's pointman on jobs. jeff learned at the neutron jack school of job creation. give me a break. >> we agree on that. >> i would just as soon give the economy to both of you to handle. will and bob, thank you.
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while rupert murdock's "news of the world" is out of business, hacking into the phones of celebrities, politicians, even murder victims is being alleged. now comes word that the fbi is looking into whether families and victims of 9/11 might have had their phones hacked as well. the fbi is responding to angry lawmakers like senator jay rockefeller who issued this statement -- quote, the reported hacking any news corporation newspapers against a range of individuals including children is offensive and a serious breach of journalistic ethics. this raises serious questions about whether the company has broken u.s. law. and i encourage the appropriate agencies to investigate to ensure that americans have not had their privacy violated. howard kurtz is host of "reliable source" which airs every sunday morning. howard, the u.s. audience may not be too familiar with "news of the world." could this change their perception of other news corp.
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properties like fox news, "the wall street journal," the ""new york post"" if 9/11 victims and their families are involved in this scandal? >> that would make things more dramatic. the fbi is conducting a preliminary inquiry under some pressure from politicians, as you noted. it may well be that "news of the world" was going after 9/11 victims because the tabloid thought it would be a great story. but we shouldn't make the leap and say that fox news or the "new york post" engaged in it -- >> why shouldn't we? is it not necessarily the kind of thing that would happen in the united states? >> the whole culture is a lot looser and more permissive and more questionable, in my view, than what we have here in the states. "news of the world" beyond the phone hacking thought it was a great idea to have a reporter
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dress up as a fake sheikh. that wouldn't fly here in the united states of america or at least there would be a lot of criticism. and there was little of it in london. >> does rupert murdock need to do something to convince u.s. adviser and readers that these things were isolated to british tabloids and they weren't practices at "the wall street journal" and fox news. >> murdock has a lot of damage-control work ahead of him. on friday when he accepted the resignation of rebecca brooks, that was a step in the right direction. there's going to be full-page apologies in the london newspapers. clearly the onus now is on murdock. this is a huge black eye around the world for his empire. and naturally people are going to be suspicious about whether or not any of his u.s. media properties indulged in any of the same kind of questionable conduct. murdock has a lot of to do to repair the tattered image of his
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company. >> howard, good to talk to you. deal or no deal, is there a safe haven for your money in all of this debt mess that we're talking about? coming up next. but with advair, i'm breathing better so now i can take the lead on a science adventure. advair is clinically proven to help significantly improve lung function. unlike most copd medications, advair contains both an anti-inflammatory and a long-acting bronchodilator, working together to help improve your lung function all day. advair won't replace fast-acting inhalers for sudden symptoms and should not be used more than twice a day. people with copd taking advair may have a higher chance of pneumonia. advair may increase your risk of osteoporosis and some eye problems. tell your doctor if you have a heart condition or high blood pressure before taking advair. if you're still having difficulty breathing, take the lead. ask your doctor if including advair
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if you're struggling how to understand how it would affect your 529 and other investments, you're not alone. this are plenty of dooms day scenarios out there and one of the reasons for concern is that asset prices are based on what's called the risk free rate of return. that's the rate of return of u.s. treasuries which are generally assumed to be risk free. a default would signal for the first time ever that treasuries are not free of risk and it would trigger a repricing of many financial assets. so how do you protect yourself from that? jim awad is back with us. jim, will is not to presume -- i don't want to put words in your mouth and tell people they should be worried about what's
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going to happen. but people are worried. >> it is a possible very negative event. now, what i always tell people is don't panic and change your basic portfolio structure based on short term or unpredictable events. but the u.s. might default. greece might dedefault. there's a lot going on. what people should do is reduce their risk profile, not change their strategic long term allocation. for instance, by lightening up on junk bonds and small cap stocks and commodities. things that might be affected. >> we're probably talking a week again and things might be more serious in which case my first advice to people has been find out how to log in to your 401(k. but when you say lighten up, do what with it, just hold the money in cash, buy cold? >> we're talking about maybe 10% to 15% of your portfolio and i would put money in gold because gold goes up whenever there is
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confusion and chaos and you have key baseme debasement of currencies. also if the u.s. treasury were to default, people want to go into corporate bonds. so the an etf that invests with a five year authority, 3% yield, great credit, jpmorgan, goldman, sachs. you want to go to u.s. treasury debt because people will run to the certainty of strong corporate debt. >> in fairness, that hasn't given much of a return. you're just talking about safety. if you close into barclays, that's safe. >> that's safe. if treasuries go down and interest rates go up, people will want to own corporate bonds instead of treasury bonds. and what you want is you want high quality corporates and you didn't want to go too long term because who knows what inflation will be in ten years.
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so this is a five year high quality -- >> because that's what the government's bonds are right now. you're recommending the eft for gold, gld. by the way, up 30% over the course of a year, but an etf is easy to buy and sell. >> and gold is still not adjusts for inflation. it's lower than it was in 1980. people won't want to own only dollars and euros if you're a chinese and just came into a lot of money. you'll want some of your money in values because currencies are being debased. >> thanks very much, jim. advice on how you can start to protect yourself no matter out delegate debt ceiling negotiations shake out. one thing is certain, americans are going to have to learn to accept the new reality that they face in the future. i'll explain next. [ woman ] we take it a day at a time.
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time for the xyz. it has become fashionable and justified to be frustrated with congress about the snails pace at which debt ceiling negotiations are moving. this republican congress and the democratic controlled congress that preceded it have shown a si singular inability to perform the most basic tasks, namely making and passing a sustainable budget one time and raising the debt ceiling. neither of these matters are options. on friday, i spoke with presidential candidate tim pawlenty and asked him about the fact that both a gallup poll and quinnipiac poll show that most americans and republicans would support a compromise that involves not just budget cuts, but also tax gincreases. or the closing of certain loopholes and elimination of certain credits for businesses and high earners. pawlen pawlenty's response was you
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can't cover by polls. i agree. greek enacted legislation that clearly went against the will to people. but so my open letter is to you. dear plerk, the solution will be painful. some intending cuts are necessary and everything needs to be discussed. programs like medicare do need to be retooled. there can be no sacred cows. and he, yes, millionaires and big business, you need to pay your share. tax increases or whatever you are more comfortable calling them do have to be part of the solution. there is simply no way to make the math work without them. not everyone is going to be happy with the outcome. it's possible that no one will be happy with the outcome because we'll all give something up. but the sacrifice you refuse to make today will only require more painful ones not just for your children, not just for your grandchildren, but for you. this is going to start hurting in the foreseeable future. i'm asking you to give your elected officials the freedom to do what is best for the country even if it is not ideal for you.


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