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YOUR MONEY

Congress Puts Forth Three Different Health Care Reform Bills, But Will Any Of Them Heal The American Medical Crisis?

Aired July 18, 2009 - 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, YOUR MONEY: All right. After decades of talk Washington, is Washington finally ready for serious health care reform? And who is going to pay for this massive overhaul.

I'm Christine Romans. Welcome to YOUR MONEY.

ALI VELSHI, CNN ANCHOR, YOUR MONEY: And I'm Ali Velshi. The recession has seen unemployment soar to over 16 percent for black males. Surprised? Well, you shouldn't be. We're going to take a hard look at the real reasons for racial disparity when it comes to wealth and work in this country.

ROMANS: Plus, we'll reveal the best places to live for singles.

VELSHI: Not use information for us but might be for you.

And sex, money, betrayal. We've got a behind the scenes look at the founding of the Facebook empire.

ROMANS: But first, the single biggest overhaul of social policy in some, what, 60 years? It's health care reform. What the president and Congress decide will affect virtually every American. And it's complicated and it's contentious.

VELSHI: But we're not scared.

ROMANS: No, we're not.

VELSHI: We're going to give it to you straight. How will your doctor visit change? How much will you pay for it? Will this new system, whatever it is, work? Our good friend Jeanne Sahadi, senior writer at CNNmoney.com.

I'm surprised she still has hair after pulling it out for the last year, but she's the one we go to with complicated issues like this. This is the most complicated.

JEANNE SAHADI, SR. WRITER, CNNMONEY.COM: Yes.

VELSHI: You have it in simple terms for our viewers.

SAHADI: Well, from what we know, and we don't know nearly enough about how this is going to go in Washington.

We have got two bills that have come through, waiting on a third that will be critical in the pay-for issue. The "what it means to you" factor that we know, so far. If you have insurance and the Democrats have their way and they create an insurance exchange, they create a public plan and they help subsidize Americans who can't afford insurance; for people who have insurance through their job, it's unlikely much will change for you. The Congressional Budget Office director, yesterday, said he doesn't think premiums will go down a lot for those folks at least initially. And there are going to be some barriers to getting into that public plan. So, it's not like you can just hop out of your company plan.

ROMANS: So, if you get health care from work, it's unlikely you're going to see much of a change. You could be required to pay a tax and there's a possible surtax for people who make a lot of money?

SAHADI: Those are the ideas floating around. The big idea -- until it was shot down in the last week -- was let's tax the benefits your employer gives you at work. They help pay for your insurance, that's tax free income to you. Let's tax a portion of that. We give about $260 billion in revenue. Give or take $10 billion a year. If you tax a portion of it, that is money that could help pay for health care. Policy experts say it's a good idea because we would be more conscious of our health care cost and use it more judiciously.

VELSHI: All right. So, there will be some changes, but maybe not many if you're insured. Under the Democrats' plan what happens if you are not insured?

SAHADI: If you are not insured you stand to gain a lot here. Potentially you could use the insurance exchange. There will be a lot of competition among plans, if it works well. And there's going to be the public plan in the exchange, which is going to hold costs down and hotel private insurers' feet to the fire, on their costs.

In fact, the makeup artist I was talking to before, she said she was told she had to pay $700 a month for her own insurance, to pay on her own. Hopefully, that price would come down for her. She would have more options, and they couldn't deny anybody coverage if they had a preexisting condition. That's part of the reform plans, too.

ROMANS: Jeanne Sahadi, we are going to talk about this more. It is going to change. It is kind of in flux. There are a lot of different proposals out there, but they're trying something that really is a big, big job. You're going to keep track of it.

Thanks, Jeanne.

VELSHI: We'll stay on top of that for you.

The Republicans released a very interesting flow chart this week. This one got our attention, which they say illustrates the bureaucratic mess that could come from the Democrats' health care proposal.

ROMANS: Let's just leave that up there for a minute.

VELSHI: Yes, that's incredible.

ROMANS: That is what the Republicans say is the flow chart of what the prescriptions from the Democrats for health care. For all of you students of health care, I don't even know where we are on that darn thing.

Oh, there we are. We're over there where the consumers is on the far left -- on the far right are the doctors, bottom right. Somewhere in the middle is the health insurance exchange.

Someone who is going to help us, from his point of view at least, to make sense of this is Congressman Kevin Brady of Texas, lead House Republican on the Joint Economic Committee.

He's going to tell us about this charter, this labyrinth, this mess here.

You know, I have to say something. A lot of government agencies and government programs, I think they have flow charts that look like this.

VELSHI: Right, I don't know if this is specific to our health care system?

ROMANS: I'm not sure how unusual it is.

VELSHI: Or is this something else?

Representative, good to have you.

REP. KEVIN BRADY (D) TEXAS: Hey, thanks for having me.

VELSHI: Is this specific to health care?

BRADY: Yes.

VELSHI: Or is this what government looks like?

BRADY: No, it's specific to the Democrat bill. We tasked our economist health care advisers at the Joint Economic Committee to go through the three-committee bill, released in the House, just provision by provision. And show us how it works. What they showed us was there are 31 new federal commissions, agencies and mandates in this new government plan, this new health care reform. Most of them get in between you and your doctor.

And our point was really for people to be able to see just how much bureaucracy we're adding to the current bureaucracy. That's a critical point. This isn't subtraction. This is addition. We've already got far too much overhead, red tape in the health care system today. This adds costs.

ROMANS: Now, the president says he'd like to have health care reform before the recess. There are a lot of people who say something's got to be done. These health care costs are runaway. The system as it is, it cannot be allowed to go on like this.

Listen to what the president said about people who, like you, who are opposed to this effort.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Don't be fooled by folks trying to scare you saying we can't change the health care system. We have no choice but to change the health care system, because right now it's broken for too many Americans.

(END VIDEO CLIP)

ROMANS: Congressman, do you agree that it's broken but you'd like to fix it a different way?

BRADY: Yes, it is broken. There is a crisis. I always do sort of puzzle at the president. He's got this invisible "frienemy" who is always standing against what he believes. Truth is, we agree on health care. We just have different way to solve it.

I'll tell you what, I just don't see what kind of person would put this much bureaucracy between them and their doctor.

VELSHI: Well, you know, here's the thing -

BRADY: The Congressional Budget Office yesterday said, this won't lower -- will not lower health care costs. In fact --

VELSHI: There's two problems. I think that it's fair, at this point -

(CROSS TALK)

VELSHI: It's fair to probably point out to our viewers, as we go along in the next few months, there are two distinct issues here. One is how you insure uninsured Americans and how that system works out, whether it's fair or bureaucratic. And the other one is the cost of health care. Take a look at these numbers from the Department of Health and Human Services.

Health care costs in the United States have been rising at four times the rate of wages. They've doubled in the past 10 years. And they're expected to double again in the next 10 years. That, for the purposes of our viewers understanding this, is a different issue. Am I right? Health insurance and coverage versus the cost of health care. They may or may not be solved with the same solution.

BRADY: Yeah, I don't think the cost of the care is going to be addressed in this, myself. But the uninsured - one of the problems we have today is we have two massive government plans -- Medicaid and Medicare -- which unfortunately are run in such a way that they shift costs over to most Americans who have private plans. In fact, you and I pay about $1500 more a year because of the government-run plans. The theory that if we add a third government-run health care plan will lower our costs just doesn't hold water. And, again, Congressional Budget Office director yesterday agreed. This will not lower health care costs. ROMANS: All right. Congressman Kevin Brady from Texas. Thank you, sir. Thank you for letting us use your chart. We love -- we love nice graphics like that. That's something.

BRADY: Thank you.

VELSHI: All right. Well, there is a way to pay for this. It means taxing the rich.

ROMANS: Yes, tax them.

VELSHI: Might be a good idea, it might not be. Taxing the rich to fix the broken health care system might sound good unless you're the rich, which means this could be about class warfare. We're going to tell you about that when we come back.

(COMMERCIAL BREAK)

ROMANS: "Sick joke" blared the dire headline in the "New York Post" this week. You know, that's where we get all of our important economic news, from the tabloid "New York Post". "Successful New Yorkers would pay 57 percent, mega-tax under Obamacare".

VELSHI: Those in the top tax brackets have a right to be spooked. Perhaps not as much as the "New York Post" would have you guess. But the income surtax to pay for House Democrats health care bill would start at 1 percent for couples making $350,000. It would jump to 1.5 percent, above $500,000 of income, before leaping to 5.4 percent for people making more than $1 million dollars.

ROMANS: Dan Mitchell, a senior fellow with the CATO Institute. Chuck Collins is co-founder of Wealth for the Common Good. He's also a rich guy who wants to be taxed, saying tax the wealthy, so everyone else is healthy.

Funny, because the rich are the new tobacco. In the '80s when times were tough, you tax tobacco, nobody would complain about it.

VELSHI: Yeah, there was nobody to stand up on the other side, except a few lobbyists.

ROMANS: And now it is tax the rich. Chuck, you say bring it on, I want to pay.

CHUCK COLLINS, CO-FOUNDER, WEALTH FOR THE COMMON GOOD: Yep. I think this is an important issue for a lot of our Wealth For The Common Good members. They feel it's a small price to pay for a much broader health insurance that will cover those 50 million people that have no health insurance.

VELSHI: A matter of interest, are there a lot of your Common Good members who would be subject to the tax?

COLLINS: Absolutely. We have an online petition. We're asking people who will pay the tax, who want to reverse the Bush tax cuts of the last 10 years, and to make those investments in health care and energy independence. These are folks who are part of, I think, a silent majority --

VELSHI: Let me just ask you again. Because there is no -hang on a second.

There's no majority of people who would be subject to this tax. It's a very small portion of people.

COLLINS: That's right.

VELSHI: Are there members of yours, who would be subject to these types of proposals about taxing people who earn over $250,000 each, or $350,000 as a couple.

COLLINS: Yes.

VELSHI: Who would say I would be willing to do that?

COLLINS: Yes, so we have hundreds of people who have signed on to this public petition and more are signing on and we're gathering that right now.

What I was saying is the silent majority of people who will pay this tax actually don't resent it. I mean, this will sound strange. But this is a group -- those of us in the top 1 percent, have got a $700 billion tax cut, thanks to George Bush. Many us didn't ask for it. Many of us were embarrassed to be getting tax cuts while other members of our country were going to war and making enormous sacrifices. This is a time of national sacrifice. We urgently need to address the health care situation.

ROMANS: Right. Dan Mitchell from CATO Institute, you disagree. There are some on the right and libertarians who are saying, like, look, this smacks of redistribution of wealth. This smacks of socialism. Taking from one part of the society to pay -- although you could argue the entire tax code does.

VELSHI: Yes, well, the taxes exist.

ROMANS: But what do you think about this, about taxing the rich for health care?

DAN MITCHELL, CATO INSTITUTE: Well, it's almost beyond parody to listen to someone who inherited a lot of money to say let's tax the rich. This is pulling up the ladder so that other people can't become rich.

As far as I'm concerned, what we need to focus on is what are the policies that are going to make America more prosperous. And going down this path to a 1970-style tax and spend big government is a recipe to make our economy more like France. If taxing the so-called rich was such successful policy why is America so much richer than France? We definitely do not want to punish success in this country. I want more rich people. I don't want fewer rich people. And I certainly don't want people who inherited wealth trying to stop middle class people from climbing the economic ladder. ROMANS: Chuck, you inherited -- how did you inherit your money? He's talking about your inherited wealth. Just tell us quickly how you inherited your money.

COLLINS: I'm the great grandson of Oscar Mayer. But I should say a lot of our Wealth For The Common Good members are entrepreneurs. There are people like Reed Hastings, the CEO of Netflix, Warren Buffett, others, who are entrepreneurs. They don't resent capitalism. They love this country. They love the amazing system for wealth creation. We also want to encourage wealth in creation.

What we believe is a healthy capitalism has a healthy safety net. And if we make -- we have long overdue investments not just in health care, but education, energy independence. If we want to be a competitive country, if we want to have the next generation of millionaires and billionaires come up the ladder, and come from all the walks of society, we need to make these long overdue investments.

Where is the money going to come from? Where else is the money going to come from?

VELSHI: I understand that this is a slippery slope, Dan. Right now we're talking 1 percent and 5.4 percent for those earning over a million dollars. I suppose once you go down this road you can start taxing people for all sorts of things. But why would that -you made a comment that it's going to prevent more people from being rich. I think there's nothing wrong with rich people. Why would this prevent more people from becoming rich?

MITCHELL: Because marginal tax rates are a price of earning income and becoming more productive and more successful. And if you're already rich, if you're Warren Buffett, by all means raise tax rates. You already have all your money and all your lawyers and lobbyists and accountants. You can figure out how to beat the system.

VELSHI: If I earn $280,000, which is the bottom line for this one. If I earn $280,000 or more, by American standards I'm rich.

MITCHELL: By American standards you are probably in the top 5 percent.

VELSHI: Right.

MITCHELL: But the key thing is we want more people to become rich. Look at France. France has the kind of policies that these guilt-ridden liberals are in favor of.

(CROSS TALK)

VELSHI: OK, I'm going to tell you - that you said France a few times. You know, Sanjay Gupta will often tell us if you have a heart attack, you want to be in the United States because it's got the best treatment. If you don't want to have a heart attack, the French health care system keeps you healthier. We're talking about health care. I think there are a lot of people who would say there's some things about it they'd rather be in France for. I'm not sure France is the example you want to be using here.

MITCHELL: Yes, it is an example. It's an example of big government leading to economic stagnation. The per capita GDP, the living standards in France are 30 to 40 percent below America. Now, if I inherited the Oscar Mayer fortune, I wouldn't care, maybe, if 30 or 40 percent of the ordinary people's income disappeared. But I think it's an outrage that a bunch of limousine liberals are going to put in place policies that don't affect them, because they have all the accountants and lawyers, but are going to affect the middle class people who want to climb the economic ladder.

The real outrage is we're going to put in place these taxes in order to have a bunch of politicians start denying us the ability to get our family health care.

(CROSS TALK)

ROMANS: We have to leave it there before Ali and I start singing the Oscar Mayer jingle, which we're going to do as soon as we go to break.

VELSHI: Or I cancel my trip to France where I'm on my way to.

ROMANS: He's on his way to France, now.

VELSHI: You're wrecking it for me, Dan.

ROMANS: I have a feeling -- because it's my theory that indeed the rich is the new tobacco we're going to discuss this some more over the next couple of years.

VELSHI: Let's have you both back on. I appreciate the passion that you both bring to this.

(LAUGHTER)

We'll need it over the course of the next few months.

COLLINS: Thanks, Ali.

VELSHI: Chuck Collins is co-founder of Wealth For The Common Good, a senior scholar at the Institute for Policy Studies. Dan Mitchell is senior fellow at the CATO Institute. Both of them bringing strong opposing views to this issue, but it's important that you know what they are.

ROMANS: My baloney has a - looking for a plus, one. We know where all the high earning singles are hiding. That's right, high earning singles. If you're looking for one we'll tell you where to find one next.

(COMMERCIAL BREAK)

VELSHI: All right. Relax, guys, there are no single ladies in this room despite the song. Both of my colleagues here were once single. ROMANS: Once single. And one of is us, Donna Rosato, senior writer for "Money" magazine here with a list of the top cities to find rich singles.

VELSHI: It's part of the whole top 10 list that you guys do at "Money." This is the one everybody gravitates to. Tell me about this.

DONNA ROSATO, SR. WRITER, "MONEY": This is one of our most popular list. We look at the best places to live. If you are looking for the best place to find somebody who is rich and single this is how you do it. We took the place that had people of median family income of at $100,000, or greater, and a population of - a percentage of population that was a high percentage of singles, then we ranked them by that percentage of population. We also took the median age -- nobody could be less than 30, by median age, so that we got rid of the college towns, as well.

VELSHI: Right, OK.

ROMANS: Yes, nobody wants a 19-year-old guy if you're like a successful 35 - well, normally that is.

VELSHI: So, this is the place for rich singles.

ROSATO: That's right.

VELSHI: Let's look at the number one place in the United States.

ROMANS: I would live here. I would live here, Hermosa Beach, California.

ROSATO: That's right. This is a classic California beach town. It has a terrific biking path, the strand. You can take a volleyball class. One of the people we interviewed there says it's a great way to meet people in the Hermosa Beach.

ROMANS: Good. Stay out of the bars.

ROSATO: Drawback (ph) though, average home there $1.5 million.

VELSHI: You had to interview somebody for that. For the second one you didn't have to interview anybody, Arlington, Virginia.

ROSATO: That is where I met my husband, so I can attest this research is excellent. There is a wealth of young single people in Arlington, Virginia.

That's not a surprise, really, if you look at the unemployment rate there. It's very low in the whole of the D.C. metropolitan area. You have folks, of course, in Congress, Capitol Hill. You've got media, technology, military. There's a lot of -- it attracts a lot of professional folks there.

VELSHI: Again, it hasn't seen a big drop in house prices either.

ROSATO: That's right. But 40 percent of that population there is single.

ROMANS: Now we're going back to Cali, because number three is in California, too.

ROSATO: That's right. We have another, this is Coronado, California. This is a San Diego beach town. It is actually on a peninsula. You can see the skyline of San Diego from Coronado. It's a beautiful place. You can see people surfing. You can go sailing. And if you really want to have a little fun in the night life, take the ferry across to San Diego and go out in the Gas Light District.

VELSHI: The next one is one you can see from here, which is actually interesting for people who like New York, Edgewater, New Jersey. Literally, if you could walk across the Hudson River, it is right on the other side.

ROSATO: That is right. Another fabulous view of the New York City skyline. It is the edge of the Hudson River. Million-dollar townhouses there, a lot of young professionals. Folks meet each other at the Trader Joe's, they go to the Whole Foods, organic section, and they meet folks. It's a really fun place. Of course, you are just a five-minute ferry ride from all that New York has to offer.

ROMANS: That's how Ali meets girls in New York.

VELSHI: Go to the organic food section. I don't know why I missed that trick.

All right. Number five on your list - by the way, you can go to the website CNNmoney.com and see all these lists and give yourself time. It's like being on Facebook. It's a total time suck. You just read through it.

ROSATO: Look at your town, see how your town rates.

ROMANS: And in Santa Clara, quickly, that another one in California.

ROSATO: Yes that is in Silicon Valley. So there are a lot of professionals there in the tech industry. Intel is headquartered there, Sun Microsystems. But it's a really great town. And the percentage of singles there is almost 40 percent as well. So that's if you want to meet your smart, rich, single intellectual there that's where you will go, Santa Clara.

VELSHI: Until now that area hasn't seen many layoffs. We have just seen in the last week, some layoffs in that area. But property values were holding up very well because those companies have been very steady for some time.

ROMANS: I want to be very clear. We're not advocating taking money over love. We're advocating taking money and love.

VELSHI: Yes, right.

ROSATO: Right, right, right.

VELSHI: If you happen to have a job offer in Arlington or Coronado. Thank you for that, Donna.

ROMANS: Donna Rosato, thank you.

VELSHI: Now, look, some small businesses, many small businesses have already been very hard hit by this recession because people aren't shopping or they can't get money. But there's another big blow that's coming. When we come back, I'll tell you what this little shirt has to do with it all.

(COMMERCIAL BREAK)

VELSHI: You probably have heard a lot about this story. Struggling small business lender CIT is in big financial trouble. It's not getting more money from the federal government. CIT had already drawn $2.3 billion from the bank bailout last December, but what's souring loans and its ability to raise money, there's a real possibility the company may cease to exist.

With around $65 billion in managed loans, CIT is just a fraction of the size of some of those financial titans that toppled last year like Lehman Brothers or Bear Stearns or Washington Mutual or AIG. So by comparison the fallout from a failure of CIT appears to be minor, but that may not be the case.

Here is why CIT matters. I'm going to show you on this screen.

Here's what happens in at perfect world. Retailers sell things and get them from suppliers. Some of these suppliers are relatively small businesses. Let's say this is a shirt manufacturer, shirt supplier. They send a shirt over to the retailer and the retailer immediately pays them, allowing them enough money to manufacture shirt number two, for which the retailer pays the supplier, and that allows them the money to buy the materials and have the employees to manufacture shirt number three. In a perfect world, that would be how it works.

But the world doesn't actually work that way. Let me show you where CIT comes in. First thing I'll do is I'll return all this money to where it belongs. Here's what really happens.

CIT is in the middle. The supplier sends the shirt to the retailer. That shirt sits on the shelf until it gets sold and that retailer may take more than a month to pay the supplier. How does the supplier keep on making shirts? Well, CIT loans the supplier money. and that allows the supplier to make shirt number two and send it to the retailer. That shirt could sit on the shelf for awhile, the company may not pay. CIT, again for a fee - it is kind of like a cash advance, pays the supplier, and the supplier ships shirt number three, and so on and so forth.

Whoa! Let's get that under control.

So what happens is the business cycle continues. Now, with CIT about to -- or at least having major, major problems, it's off the scene and this relationship becomes very tricky. Some of these suppliers simply won't have the money to be able to deal with the money that they need to continue to supply companies. So CIT calls itself the bridge between Wall Street (AUDIO GAP). The Obama administration has decided not to step in and to keep the lanes on that bridge open.

ROMANS: It's already drawing charges from small business advocates the White House is now favoring the big behemoth banks over the little guy. After all CIT is the largest lender to minority and women-owned businesses in this country.

Let's talk about it more in detail in our "News Ticker". Here with us is Alfred Edmond, editor-in-chief of "Black Enterprise" and CNN Political contributor, Roland Martin.

Roland, you have got to stop the bailout somewhere. But the small business folks are saying it is a little unfortunate they that they stopped stepping in to help business at the exact company that happens to be the bridge between Main Street and Wall Street.

ROLAND MARTIN, CNN POLITICAL ANALYST: Also keep in mind, which I think that jumps out here -- that is they put forth these stress tests for this precise reason.

ROMANS: That's right. They stress-tested this company just this week, we're told, and they didn't do so hot.

MARTIN: And the whole point was if you don't have the ability to stay in business, I'm sorry, we're not going to sit here and throw the hand out to you. So, yes, it is unfortunate. Now I think what the issue has to be for the Obama administration is if this company fails, well, then, who do they go to ensure --

VELSHI: So instead of bailing out the company, is there some process by which small businesses can get the financing?

MARTIN: Using federal leverage to go to the other companies and say we need you to step in and fill the gap.

VELSHI: What do you think?

ALFRED EDMOND, EDITOR IN CHIEF, BLACK ENTERPRISE: I think it's absolutely true. Somebody has to fill the gap. It doesn't necessarily have to be CIT. They didn't pass the stress test.

And the other thing is that the whole logic behind the bailout is that you're going to bail out companies if they had failed would cause a domino effect, a ripple effect on the larger economy.

I don't know if CIT Group can make that case or they have made that case.

VELSHI: But as you know from a lot of your readers at "Black Enterprise," the small business that goes out of business because they can no longer supply a chain retailer doesn't care about the domino effect. That's their livelihood -- EDMOND: That's really indispensable, the function of really being able to create a lending model that provides cash flow for small businesses so they can continue to manufacture and provide services, that is totally indispensable. The question is, is CIT Group the only solution to that problem?

VELSHI: Right. And I guess that's a question that sort of came up with AIG. Remember, we used to talk about this, and people say, well, can't somebody else offer that insurance, or with Citigroup or with anybody else?

You know, this is something this government is going to have to -- you notice nobody in Washington is yelling "too big to fail" at this point.

MARTIN: Right, absolutely.

And again, I think the Obama administration, they have to be extremely sensitive, because the last thing you want, two groups who are significant supporters of President Obama in terms of winning -- women and minorities -- the last thing you want to see is those businesses go down, because, also, you cannot talk about economic empowerment, providing of jobs, and all of a sudden these businesses say we can't get loan, now go under.

Now you make the informant issue even worse. Earlier this week we saw black unemployment, Hispanic unemployment is crazy sky high, especially in New York, Illinois, as well as Alabama.

ROMANS: Let's talk about Goldman Sachs, the big banks. Now we're talking about CIT looking like it's in trouble. This is a lender to small business. The big huge banks had good -- they're making money. They are making money.

And everyone wants to hate on the banks.

MARTIN: Here's the reminder to everybody. We are a capitalistic system. It is all about making money. The whole point is you want them to make money because we are largely a nation built upon consumer confidence.

EDMOND: The whole reason behind the bailout was to help people make money again.

ROMANS: But people look at Goldman Sachs and they say they're stealing our money, took our taxpayer money.

VELSHI: They took our bailout.

EDMOND: But this is the deal. If Goldman Sachs and other profits that we're seeing in this quarter turn out to be kind of the harbinger of good things to come for everybody, it's all good.

VELSHI: There you go.

EDMOND: But if it seems like they got over and the rest of us are still hanging out there twisting in the winds, there will be some problems.

VELSHI: We're going to go that way, aren't we, Roland, for awhile. Because we're going to see job losses continue. We're going to see home prices -- maybe they'll stabilize, but it will be awhile.

But even in the long run, we won't get back to 5 percent unemployment by the best estimates -- and that's national -- until 2013, maybe later. And you just mentioned, African-American unemployment, 16 percent across the nation.

MARTIN: Look, you have to have consumer -- you have to have confidence, first of all, on Wall Street before you have consumer confidence all across the country, because, look, we all watch the stock price. We all see the reports.

All of a sudden, if we are hearing down 100, down 200, down 300 every single day, folks say, man, I'm pulling back. So the whole confidence issue, it all builds up.

So we all know also that the job piece always lags, always comes later. It is a reality. I think folks need to stop hating on banks to understand we need American companies making money.

EDMOND: What is the alternative -- we want them losing money? We gave you all this money and you're still losing money? That's not what we want to hear.

VELSHI: Good point to end it on. Thank you so much. Always a pleasure to see the both of you.

And also, you're so snappy with your dress.

(CROSSTALK)

VELSHI: That's why I had to do the ascot.

(CROSSTALK)

I knew you were going to wear something, and alos I'm trying to have confidence wearing an ascot, better than a t-shirt.

ROMANS: And I'm just plain Jane over here.

EDMOND: You look beautiful. A rose amongst some big thorns.

(CROSSTALK)

EDMOND: Clothes make the men, but women make the clothes.

(CROSSTALK)

We have to twitter that one. That's pretty good.

ROMANS: All right, the president's frank words about race and money, racism, achievement, bias, education, the stark reality, and some solutions, next. (COMMERCIAL BREAK)

ROMANS: President Obama speaking bluntly this week about race, about money, and why it matter as he helps commemorate the 100th anniversary of the NAACP.

We wanted to show you just how startling the wealth gap the president's talking about, how startling that wealth gap is between races in this country.

Think of it this way, for every dollar of net worth of white Americans, for every one dollar, Latinos have nine cents, African- Americans have seven cents. Think of that, Ali, the disparity between whites, blacks, and Latinos in terms of their net worth. That's the value of their money.

VELSHI: Which is different from their earnings power. That's something some people I think some people have some familiarity with, that women earn less than men for the same job, Latinos and African- Americans earn less than whites for the same job.

This is different. This is the accumulation of the wealth. This is the end story. So that a big deal. It's an issue we want to get to the bottom of once and for all and to figure out why this exists and what needs to be done, what can be done, and how it's going to be done.

Bill Rogers is a professor and chief economist Rutgers University and he's the former chief economist at the U.S. Department of Labor. Ryan Mack is the president of Optimum Capital Management. Both of you, thanks for much for being here.

Bill, first of all, has this got anything to do with this recession, or has this been the pattern that we've seen over time?

BILL ROGERS, ECONOMICS PROFESSOR, RUTGERS UNIVERSITY: Well, yes and no. Yes because we've seen between $73 billion to $92 billion dollars erosion in African-American household wealth, and it's been largely attributed to the foreclosure crisis.

But, also, wealth -- and wealth's biggest component is home ownership. And home ownership, the difference between the races have been major, very large, for hundreds of years, centuries.

And so there's this cumulative causal piece that just continues to get passed on from generation to generation.

VELSHI: But if African-Americans and Latinos have a smaller proportion of wealth, then aren't they less hard hit by this recession?

ROGERS: No, because wealth constitutes your assets, as Christine said, and those assets during a time of the worst economy since World War II allows you -- provides you savings. It provides you the nest egg. It provides you that hedge against the uncertainty of not having a job, of not having resources. ROMANS: And Ryan, we know that for a huge part of the American population, it's been a recession even when it wasn't a recession. And that means they're just that much closer to feeling it when the hard times hit.

When you look at the subprime crisis, an author of a 2008 study said the subprime lending debacle has caused the greatest loss of wealth to people of color in modern U.S. history.

Think of that, the greatest loss of income and wealth to people of color at any time in the American history. It's incredible.

RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: It all depends how you look at people are suffering from this recession. And where some individuals who might have higher net worth might be suffering by, OK, I might have to skip a bill, I might not be able to go out as much. I might have to take less vacations.

Whereas opposed in a lot of minority communities and black communities, we're talking about, am I going to have my home? Am I going to have to move into subsidized housing for the first time, into these four walls of -- concrete walls all around me in crime-infested areas?

So these are the type of ways that especially a lot of minority communities are facing in terms of how they're hit by the recession.

VELSHI: You're from Detroit. Michigan has now become the first state in a quarter of a century to have an unemployment rate, a state unemployment above 15 percent.

Let's look at unemployment across the country. This is an issue that we deal with. The unemployment rate across the country, 9.5 percent.

Let's look at how that breaks down by race, just by different definitions. Men have an unemployment rate -- white men have an unemployment rate of 9.2 percent, very close to the national average. White women have a substantially lower unemployment rate, 6.8 percent.

African-American men, 16.4 percent, so more than 50 percent higher than the national average. African-American women, 11.3 percent. Latino men 10.7 percent and Latina women, 11.5 percent.

Again, to you, Bill, is that the pattern that it's been for a while, or are minorities suffering disproportionately in this recession when it comes to jobs?

ROGERS: These are facts that have been around or estimates or relations that's been around for decades and that the recession has helped to kind of really make these experiences even much more amplified, much, much more amplified.

But what's fascinating about this recession, though, is in the first few months, because it was largely driven in the financial sectors, that this was hurting whites and highly educated workers. But eventually once it turned into the sort of garden variety, consumption-driven recession, it's now taken on the effect that men, particularly minority men, particularly minority men with the least a education and skills and who are out of school, they're the ones who are bearing the brunt of this recession.

ROMANS: I want to talk about education, because the president in his speech to the NAACP really talked a lot about education, about reducing structural inequalities, and about just fairness and a good education for everyone, and about raising our expect aches for our young people. Listen to what he said.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: They might think they have got a pretty good jump shot or a pretty good flow. But our kids can't all aspire to be Lebron or Lil' Wayne.

I want them aspiring to be scientists and engineers, doctors and teachers, not just ballers and rappers. I want them aspiring to be a Supreme Court justice. I want them aspiring to be the president of the United States of America.

(END VIDEO CLIP)

VELSHI: How do you do that? How do you get them aspiring to be the president of the United States?

MACK: I do a lot of work in the inner city communities. And a lot of times, especially the young individuals that I come in contact with, what they'll say is that I've never seen a financial adviser before. I didn't know what investment --

VELSHI: You and I were out in Harlem a few of months ago at a community event. And some people were really wanting, a lot of parents with their kids, and they wanted them to get a good education.

But we weren't talking about them being the president of the United States. We were talking about how we're going to afford to get their kids to school.

MACK: Right. These are real concerns that these people in the inner city have.

And I really love the fact that Barack Obama talked about that village mentality, that community mentality, because it really is up to all of us to start reaching out to other individuals and start making sure that those students are seeing more than just those people on the corners, seeing more than just basketball players and people on the corners doing rap -- rappers and all the raps and flows and things of that nature, to say we can be an engineer, we can be a scientist.

What is a scientist? What is an engineer? What is an accountant? What is a lawyer? What is a doctor? All these things need to be pumped by individuals like myself and Bill and yourself going to this communities. ROGERS: I also like to talk about advocates for success. That is, individuals who can be your peers, they're your family members, they're your co-workers. They don't necessarily have to have that vertical relationship, but they're a success hinges upon your success.

VELSHI: That's sort of a support group for you.

MACK: Yes.

And the thing that Barack Obama really pointed out in his speech last night, a good dichotomy of understanding the situation. He said the most difficult barriers include structural of inequalities that our nation's legacy of discrimination has left behind. We have to understand that exists.

But on the other side, we also have to say that we have no excuses. Just because you're in a crime-ridden area does not mean you are supposed to be getting bad grades in school.

ROMANS: And he struck that balance of personal responsibility and --

MACK: We have to have that. And so we have to have no more excuses, understand your situation, and understand that there's no weapon that's formed against you that should prosper. That includes racism, sexism, discrimination, classism.

All of these things, while they may be difficult obstacles to overcome, we can overcome them. But you have to put yourself in that good position that you take responsibility for to do so.

VELSHI: Ryan, thank you very much. Bill, good to see you, as well. We hope to continue this conversation with you both.

ROMANS: And we will.

And you can make sure to join us on CNN next Wednesday and Thursday at 8:00 p.m. for the premiere of "Black in America 2." Soledad O'Brien continues our investigation into all of these subjects.

VELSHI: Yes. She's looking at some of the most challenge issues facing African-Americans. Millions watched the original "Black in America" last year. Don't miss "Black in America 2." That's Wednesday and Thursday night, 8:00 p.m. eastern, right here on CNN.

ROMANS: Are the billions in stimulus really saving jobs, creating jobs? I'm following the money to see exactly how your tax dollars are being spent. We found people who actually are touching your stimulus dollars. That's next.

(COMMERCIAL BREAK)

VELSHI: One of the president's top economic brains this week acknowledged what we've said here for weeks, that it's difficult to say for certain how many jobs have been created or saved by the stimulus.

Christina Romer's comments come as critics maintain that the stimulus money is simply filling holes in state budgets, not really creating new jobs or programs.

ROMANS: And Ali, let's forget for the moment the debate about how the money is being spent, whether it's working, whether we need more, maybe another stimulus, whether it was wasteful spending in the beginning.

We wanted to find some people who will actually touch your stimulus money.

(BEGIN VIDEOTAPE)

ROMANS: Walking down this hallway, four people whose jobs have been saved. When these classrooms fill up again this fall, these educators will be among 2,000 Miami teachers whose salaries will be paid with stimulus money.

Anjelica Yanez trains middle school counselors.

ANJELICA YANEZ, MIDDLE SCHOOL COUNSELOR: If we have to depend of the savings of 2,000 jobs for the stimulus money, then so be it. We'll take it. It is better than nothing.

ROMANS: Florida is using $125 million of federal stimulus money to keep 697 guidance counselors, 343 librarians, and more than 900 special-ed instructors in the classroom, and in the library, where Showanda Richardson has worked for 20 years, teaching children to read, to use a computer, to research.

SHOWANDA RICHARDSON, MEDIA SPECIALIST: By saving us, saving our jobs, helping economy, we're helping the children. And it really should be about the children at this point when we are talking education.

ROMANS: Not a surprising viewpoint from a group with a collective 88 years of classroom experience.

HARRY NERENBERG, GUIDANCE COUNSELOR: I don't look at it as my job is saved, but that the people are being helped, that they are being serviced. And I think that's the key to this. I think that we are an important, integral part of the school system. DWIGHT BAILEY, MEDIA SPECIALIST: The kids are a long-term investment, and there is no way of attaching a dollar value to that.

ROMANS: The Government Accountability Office reports that instead of spending on new programs and new jobs, some states are using stimulus money to plug gaping holes in their budgets.

ROMANS (on camera): It's plugging a hole with $125 million, but is it plugging a hole when 2,000 people's lives depend on it?

ALBERTO CARVALHO, MIAMI-DADE SCHOOL SUPERINTENDENT: Look, there is no work force without education. I think we know that now. Underfunding education, creating a position in our country where teachers lose their jobs, where counselors lose their jobs, cannot be defined simply as plugging a hole. A teacher does not constitute a hole in a kid's life, nor does a counselor.

ROMANS: But there is no doubt a hole in funding. And the stimulus is only a temporary fix.

CARVALHO: My concern has shifted to the possibility of a fiscal abyss two years from now when these funds sunset.

(END VIDEOTAPE)

ROGERS: So $13.4 billion of stimulus money is going to Florida. It's starting to move through the system. But, indeed, this is playing defense with the money. This is definitely paying teachers, not starting new programs, because that's the simply the dire straits of the state.

VELSHI: Yes. This is the confusing part of this. You sell it big on the front end, and now we have to decode actually what's happening. Excellent story.

Well, from a dorm room idea to billion dollar empire and all the drama in between -- the surprising story you didn't know about an Internet phenomenon. That's next.

(COMMERCIAL BREAK)

ROMANS: All right, it sure is a juicy story if it is all true, of course. It's the story of sex, betrayal, broken friendships, scandals, all that behind the rise of Facebook. That's the social networking empire, born in a Harvard dorm room back in 2004.

VELSHI: Now, for the rest of the story we bring in Ben Mezrich. He is the author of "Accidental Billionaires, the Founding of Facebook, a Tale of Sex, Money, Genius, and Betrayal."

You may know Ben because he is the author of some other books, including "Bringing Down the House" and "Rigged." Ben, good to talk to you.

BEN MEZRICH, AUTHOR, "THE ACCIDENTAL BILLIONAIRE": Good talking to you, too.

VELSHI: How much of this book is true and how much isn't?

(LAUGHTER)

MEZRICH: It's a true story. The whole thing is true. I write narrative nonfiction, so I take all the facts and my sources and all the court documents and I turn into it an entertaining, thriller-style book. But it's a true story.

ROMANS: The Facebook folks don't seem very entertained, actually. Before we go any further and talk about your book, I want to give their response. They say "Ben Mezrich clearly aspires to be the Jackie Collins or Danielle Steele of Silicon Valley." I don't think that's a compliment, actually.

MEZRICH: You know what, I --

ROMANS: Wait, let me finish. "In fact, his own publisher put it best -- this book isn't reportage. It's big, juicy fun. And we particularly agree with the first part of that and think any readers will concur will concur."

Are they kind of dissing you here?

MEZRICH: They definitely are not happy with the book. I don't mind being called the Jackie Collins of Silicon Valley.

ROMANS: OK, she is very rich.

MEZRICH: They're not thrilled with it, but the reality is, it's a true story. It's just written in my style, which has the salacious element to it.

ROMANS: And what is the story then, what is the story behind the rise? It is not the nerdy kind of starting a -- starting a computer company story that we would think.

MEZRICH: These were geeky, gawky kids at Harvard who couldn't meet girls.

But what happened was Mark Zuckerberg late one night hacked into all the computers at Harvard and he created a "hot or not" website, where you could choose who the hottest girl at Harvard was and vote.

And that ended up crashing all the servers on campus, and he almost got kicked out of school. And that actually led to the creation of Facebook. It was one late night college prank, and it grew and grew and grew.

VELSHI: It's a different kind of book than you normally write. How did you get to it? Who did you find that started you on this story?

MEZRICH: Really, I was sitting at home. And about 2:00 in the morning I got an e-mail to my Web site from a kid who was a Harvard student.

And he said "My best friend co-founded Facebook." And it wasn't Mark Zuckerberg. So I didn't even know there was a controversy about that.

And I went out for a drink with these guys, and it was a guy named Eduardo Saveran. Eduardo was Mark's best friend. They had met at an underground Jewish fraternity at Harvard. And the two of them had been these geeky kids who together co-founded Facebook.

ROMANS: We never about him. What happened to him? MEZRICH: Now you do.

But what happened was their friendship fell apart. As Mark went off to Silicon Valley, Eduardo finished school. Mark became head of Facebook and he kind of got rid of Eduardo along the way. And Eduardo had been expunged from the history of Facebook. For about five years no one had heard that name.

With this book coming out, right before it came out, they re- added Eduardo as co-founder of Facebook, which I think in a lot of ways legitimizes the story I'm telling.

VELSHI: These other stories you have written have been about really brainiacs who figure out how to game the system. And you have written them with some degree of admiration. What is your view of Facebook right now? Is it a company you admire?

MEZRICH: I totally admire it.

I don't think Facebook shouldn't be upset about me, because I'm their biggest proponent. I think it is the next step in human evolution, I really do. I think we have gone from the village to the city of Facebook. Everyone is on it all day long. It is how we live now. I think it's an amazing company.

ROMANS: Do you think everything will migrate to Facebook, because there are other kinds of social network sites. Do you think Facebook will be the platform for e-mails, for business, for advertising, for all kinds of other -- it will take over other ways we communicate?

MEZRICH: That's exactly right. I think Facebook is everything you need. And it will slowly incorporate all the aspects of twitter and MySpace and YouTube that you like about the sites. Slowly but surely Facebook will become all of those things.

VELSHI: And Ben, you might become the guy who everybody goes to talk to about it.

MEZRICH: I mean, I hope so. But Facebook will continue to say that I am Jackie Collins. So I don't know. We'll see.

(LAUGHTER)

ROMANS: No offense to Jackie Collins.

VELSHI: Well, we have a great relationship with Facebook over here at CNN. We use it a lot to get input from our own consumers. So we should tell you we're fans of the company. But we're also interested in your book about what you know about how the company was founded.

Ben Mezrich is the author of "Accidental Billionaires, the Founding of Facebook, a Tale of Sex, Money, Genius, and Betrayal." I just like saying the name.

ROMANS: That should be the tag name for our show. "Your money, a Tale of Sex, Money, Genius, and Betrayal."

Just money.

VELSHI: Ben, good to talk to you. Thank you.

MEZRICH: Thank you guys so much.

VELSHI: Thank you for joining us this week on "Your Money, a Tale of Sex, Money, Genius, and Betrayal."

(LAUGHTER)

You can follow us on Facebook and on twitter. Christine is at Christine Romans and I'm at Ali Velshi.

ROMANS: Make sure you join us every week for Your Money. Have a great weekend.

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