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Your Money
Unemployment Rate Hits 10.2 Percent; Reducing Workplace Stress; H1N1 Vaccine Outrage; Post-Bubble World; Combating Climate Change; Time for 401(K) Reform?
Aired November 08, 2009 - 15:11 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
CHRISTINE ROMANS, CO-HOST (voice-over): The bubble burst. And we got the bill. So what does the post-bubble world look like?
One year ago, President Obama was elected on a promise of change. But are vanishing problems threatening the recovery and the presidency?
A big expansion of that homebuyer tax credit: free money. Sure to help realtors and home builder who made big bucks during the housing bubble. Nothing is really free.
It's time to talk YOUR MONEY.
(END VIDEO CLIP)
ROMANS: And welcome to YOUR MONEY. I'm Christine Romans.
ALI VELSHI, CO-HOST: And I'm Ali Velshi.
Why, if this economy is growing, is the American worker getting crushed? The unemployment rate jumped to 10.2 percent in October. That is the highest it's been since 1983. One hundred and ninety thousand of you lost your job last month.
ROMANS: Since the beginning of the recession, back in December 2007, that unemployment rate has spiked. It has gone from 4.9 percent all the way past double digits.
VELSHI: Now, if you look at the job losses by month starting at the beginning of this year, you can see that the pace of cutbacks is slowing. A hundred ninety thousand jobs, though, lost in October, that's still mark of struggling economy.
ROMANS: Little relief in the hardest hit sectors, construction, manufacturing, of retail, of leisure, and hospitality.
VELSHI: We did see some gains in education and health care. That's pretty common during this recession. There are two sectors that have been holding up pretty well. But, also professional and business services. That's a sector that has not had an easy time during this recession.
Earlier, we spoke with Labor Secretary Hilda Solis. We asked if the labor market is broken and how we'll get to know when it's going to be healthy again.
(BEGIN VIDEOTAPE)
HILDA SOLIS, LABOR SECRETARY: This is a very high rate of unemployment and it's unacceptable. But we knew economists were predicting that we would hit 10 percent or a little higher. But I have to bring you back to where we started, and again, looking at January we were at a job loss of 700,000. Because of the Recovery Act, I believe the president, the administration -- all of us -- have worked to help lay a foundation for that recovery.
As you know, the GDP went up 3.5 percent. We do see that there is efforts to put more capital, to put more lending for those small businesses, to come back to speed. We know that there are investments being made right now for clean energy.
In fact, I was just touring the Nevada Energy Corporation where they are going to be extending a smart grid system to retool households, to lower the cost of energy that will create about 200 new jobs. But there will be other jobs in addition because they'll need to have other support systems there.
So, private -- private industry is coming our way in terms of helping for this job creation.
So, I do believe we are making some progress. Not as much as I would like to see and as quickly. But we are not stopping. The president has his cabinet very focused on jobs, jobs, jobs. So, all of us have been asked to work on coming up with ideas and reforming how we make that program that will help to stimulate and get people back to work.
VELSHI: Secretary Solis, some of the things you talked about, for instance, energy projects. Some of these are further down the line. When we have this immediate look at an unemployment rate that is 10.2 percent and quite possibly will increase from there, but we're certainly not looking at recovery in the job market any time soon.
ROMANS: Yes.
VELSHI: Maybe some of that recovery will come as it has in the past from small businesses, and yet we continue to hear that small businesses have trouble getting the financing that they need that will allow them to expand and to hire people. We need a shorter-term solution as well as a long-term solution. How might that fit in?
SOLIS: I agree. I know the president feels very strongly. And that's why he's asked his small business administrator to help provide assistance for loan relief for many of these small businesses. Well over $15 billion has been made available so that we can help those start-up groups come back and those small businesses that have been hurt very seriously by this recession.
We are also looking at helping to create jobs in the automobile industry. The vice president was just out in Delaware a week ago and was there in the opening of a plant that was closed. They will hire, they say, they expect to hire at least 2,000 workers to create a new hybrid vehicle.
So, I see this synergy happening around the country in different parts. Certainly, we want to see other sectors coming back like construction. We do know that -- today, the president will be signing the unemployment extension that will help dislocated workers that need that help, because we still haven't fully recovered yet in that aspect.
But we also see that there's relief -- relief again, extension of the first-time homebuyers credit and also credit for small businesses. So they cannot have to put their money in paying taxes. So, I think that that's -- those are all positive steps that the president has taken.
ROMANS: In the small business aspect of this is so important, we know, because the small businesses are trying to get credit. They can't feel comfortable about hiring until they can get credit. And we know the administration is working on that.
But also from the big business point of view, though, I talked to labor economists. And they tell me, quite frankly, that there are other businesses that are going to look to expand and grow outside of the United States. They're worried a little bit about jobs being created elsewhere, not necessarily here.
How concerned are you about that?
SOLIS: Well, I think it is a concern. That's why we're trying to do whatever we can to increase and support those businesses here that can export products abroad. And I think that is a big, big effort that the president and the administration will be undertaking. We certainly want to see that we are exporting our goods and that we create profitable and well-paying jobs here at home.
(END VIDEOTAPE)
ROMANS: Ali, she is a politician. She has run for office.
VELSHI: Right.
ROMANS: She was a congresswoman in California. This administration is now -- a year ago was elected. This is now their problem. This is now the administration's problem.
VELSHI: Right.
ROMANS: At some point -- at some point people say, what are you -- are you going to fix it?
VELSHI: Yes.
ROMANS: We hear what you're trying to do. You say we're working at it. We're working at it. But can they fix it?
VELSHI: The other night -- the other night when we're doing election coverage, you know, Ben Stein said this -- no, it wasn't Ben Stein, I'm sorry, it was the former governor of Minnesota... ROMANS: Oh, Jesse Ventura.
VELSHI: Jesse Ventura was saying...
ROMANS: Ben Stein or Jesse Ventura.
VELSHI: You know, they were both on together. They were on "LARRY KING" together. They were having a discussion.
But Jesse Ventura said this is not Obama's fault. This is Bush's fault. I think a year after the election...
ROMANS: It doesn't matter whose fault it is.
VELSHI: ... I don't think that, we acknowledge that this administration was not there at the beginning of this recession. That's clear. That doesn't matter at this point. They are here.
ROMANS: Yes. In "The Wall Street Journal," they have a great view about how a year into it, you own it. You own it.
VELSHI: Right. Right.
ROMANS: Now, you've got to fix it. It's yours to fix. And I think the polls are showing, the people are saying, OK, it's yours to fix.
VELSHI: Right.
ROMANS: Now, fix it.
VELSHI: This was interesting...
ROMANS: Yes. I want to show you this. This is from "The Economist" magazine; it's like a falling baby on the front. But this is in "The Economist" magazine, and if you look in here, they have this -- that's an ad -- if you look in here, they have this fantastic cartoon that I think illustrates what we've been talking about.
There's the recovery. I don't know, you could say that's Air Force One or the American economy. There's the recovery and there's this big huge jobless guy sitting on the back of it -- the "mancession," perhaps, reference there.
VELSHI: And holding it down, holding that plane from being able to take flight.
ROMANS: Holding the plane down.
Peter Morrissey, the professor at the University of Maryland School of Business; Stephen Moore is an editorial writer at "The Wall Street Journal."
Gentlemen, take a look at that cartoon. You tell me. Is the recovery ever going to be able to take off if we have this jobless weight on its tail? PETER MORRISSEY, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: Well, the reason we have a jobless weight on the tale, that's the "Forgotten Man," is that American businesses don't have enough customers. We have a huge trade deficit with China. And the president promised during the campaign to do something about it: the undervalued, overvalued yuan. But he simply hasn't responded.
As a consequence -- and he hasn't done much to help local banks with the credit problem we've talked about. He's been much more about Wall Street than Main Street, about clean energy in Arizona than manufacturing jobs in Michigan. As a consequence, the economy's faltering and people aren't finding jobs.
VELSHI: Stephen, let's just do this. Let's reconcile a market recovery -- a very nice market recovery in recent months, perhaps stabilization in the housing market because of low interest rates and this $8,000 first-time homebuyers credit with this jobless rate above 10 percent -- a number we've not seen since 1983. And, you know, this persistent loss of jobs month after month. The trend is improving.
ROMANS: Yes.
VELSHI: But how do you reconcile that?
STEPHEN MOORE, THE WALL STREET JOURNAL: Well, the trend is hardly improving. I mean, when I saw those numbers came out, it felt like somebody has socked me right in the solar plexus. I mean, these are -- these are really lousy numbers.
And, you know, I listened to the interview with the labor secretary. And I'm sorry. I mean, the administration told us that if we passed this $800 billion stimulus bill, we'd have an unemployment rate of less than 8 percent. Where they said we gain 3 million to 4 million jobs, we've lost nearly 4 million jobs.
What we're doing in Washington right now is not working. The spending and debt is out of control. And I think the problem is that, as more jobs are being lost, it becomes harder for people to pay their mortgages. It becomes harder for businesses to have customers. So, it reverberates throughout the economy.
ROMANS: You know, they try to take credit for -- Congress and the White House have tried to take credit, you guys, for extending unemployment benefits again. They're saying, "Look, you know, we're doing what we can."
I mean, we're going to show you a map where you get 14 weeks extended benefits. That's nationwide. And in the high unemployment states -- that's a yellow -- you're going to get 20 weeks extended unemployment benefits. That doesn't fix this problem.
UNIDENTIFIED MALE: Yes, Christine...
ROMANS: I've said this before. You know, Peter Morrissey...
UNIDENTIFIED MALE: Yes. ROMANS: ... this is -- this is to borrow a phrase from the treasury secretary way back a year ago, this is foam on the runway. But the plane is still crashing and that is the American labor market.
MORRISSEY: That's right. This is -- this is brand new circuses. This is the Roman Empire in the third century.
We've got a president who promised that the stimulus program would be 90 percent private sector jobs. You get it in health care, education, and government. Now, health care and education are always growing because we haven't really tamed health care.
But basically the federal bureaucracy has grown. There are no additional construction jobs. There are no additional manufacturing jobs. This thing's a ruse.
I mean, this labor secretary talks about creating 200 clean energy jobs in Nevada.
ROMANS: I know, we both noticed that, too.
MORRISSEY: Oh, my goodness -- 200?
ROMANS: We were like, we both noticed that and said, 200 jobs.
(CROSSTALK)
VELSHI: We're all in agreement that it is their problem now. And they've been in for a year. What exactly do they do?
Stephen, I'm going to start with you. What is the solution now? When they're looking at this in the White House -- the administration, secretaries, are all gathering around, because she says the president has charged all cabinet secretaries with dealing with this problem. What is it they're supposed to do?
MOORE: Refocus. Refocus. I mean, look, we're having a vote this weekend on a health care bill. I mean, my goodness, Ali, this health care bill -- this health care bill has an 8 percent payroll tax on small businesses that don't provide health care. How in the world is that going to do anything but destroy more jobs?
You've talked a lot about on this show about cap-and-trade. Cap-and- trade is a major energy tax. Any way you cut it, when you put $1 trillion new tax on the economy, that doesn't create jobs. It destroys it.
So, I think what the American people want is a refocus on how do we get jobs back. How about tax cuts for small businesses? That's been absent.
ROMANS: Can we at least all agree that we're glad that it's not 741,000 jobs lost like it was in January?
VELSHI: Like it was in January. ROMANS: I mean, it has been a slow and steady improvement in how many jobs have been lost. At least we can agree that the nation's job loss is slowing.
VELSHI: Peter, you think so?
MORRISSEY: Well, at this point in the cycle, we should no longer be losing jobs.
MOORE: Right. That's right.
MORRISSEY: Even if we're not adding them. But the recovery is so tepid.
You asked what to do. Well, Stephen's correct to a point. But on top of that, we're going to have to readjust or recalibrate trade with Asia. This imbalance in demand where they get all the customers doesn't work.
American businesses need customers, and they need cash. That comes down to trade policy and cleaning up the bad debt on the books of the regional banks. The TARP was supposed to do that. Not buy General Motors and hand it to the UAW, which was what the president did instead.
The president has to get away from feathering the nests of his political contributors on Wall Street and in the unions and so forth, and start focusing...
ROMANS: All right.
MORRISSEY: ... on creating demand for American industrial products.
MOORE: And one thing, why not -- why not use the $500 billion that hasn't been spent out of the stimulus plan that clearly hasn't worked, don't direct that to more of these programs, why don't we use that for small business tax cuts to get them to hire workers again?
ROMANS: All right, guys.
VELSHI: Or even get small business, have them -- let them get the credit they need more usually. Thanks guys.
(CROSSTALK)
ROMANS: What I love you guys is that we can go from TARP to G.M. to unemployment benefits to...
VELSHI: Yes.
ROMANS: ... you know, I love you guys, thanks. Peter Morrissey and Stephen Moore, thanks guys.
MOORE: Take care.
VELSHI: A lot of bad news about jobs. But congratulations if you've got a job. You should feel lucky about that at this point. We're going to have some steps that you can take to reduce workplace stress that could actually put your job at risk.
(COMMERCIAL BREAK)
ROMANS: All right. The unemployment rate in the United States now at 10.2 percent for the 15.7 million -- think of that -- 15.7 million people out of work. A grueling job search for them continues.
But rising unemployment also takes a heavy toll on the employed. A survey from the Center for Work-Life Policy shows 78 percent of professionals cite high levels of stress, 25 percent of professionals say they're working nine hours more a week than a year ago.
VELSHI: And that doesn't necessarily mean people are being paid for that extra nine hours a week.
Sylvia Ann Hewlett is the founding president and chairman of the Center for Work-Life Policy and she's the author of a great book that I've read called "Top Talent: Keeping Performance Up When Business is Down." And that's really the heart of this for our viewers.
You've written this from a perspective of companies that want to learn how to manage talent. But from our viewers' perspective, we need to keep performance up when times are bad.
SYLVIA ANN HEWLETT, ECONOMIST: Right. And I think that individuals are obviously very concerned about their own resilience, their ability to withstand, you know, the pressures out there.
VELSHI: Yes.
HEWLETT: Well, first off, I think it is very good to understand we're in it together. Whether it's, you know, this -- you know, overreaching, overdrinking. The idea that, you know, infertility is going up this year.
VELSHI: Right. A new study has shown this.
HEWLETT: Absolutely.
ROMANS: Really?
HEWLETT: There are kind of ten drum beats that show that many of us are dealing with body blows. It's happening...
VELSHI: So, it's not just demoralization that we think it is...
HEWLETT: No, no.
VELSHI: ... of fear that you're going to lose your job. People are actually suffering physically.
HEWLETT: Right. Blood pressure is going up.
VELSHI: Right. HEWLETT: There's all kinds of things you can measure like, you know, sleep problems.
VELSHI: Right.
HEWLETT: So I think what this book really does, it puts all kinds of strategies on the table...
VELSHI: Right.
HEWLETT: ... you know, for the individual as well as for the company. For starters, you know, take a look and see what your employer is already offering. You know, whether it's smoke enders clinics or help with sleep issues...
ROMANS: Right.
HEWLETT: ... it's surprising what's out there.
VELSHI: Right. Yoga classes or massage.
(CROSSTALK)
ROMANS: You can find out these things. And I just looked at a list for our workplace. I am surprised the number of things that are considered wellness programs that are fully covered.
HEWLETT: Right. Another big secret, you know, volunteering...
VELSHI: Right.
HEWLETT: ... is hugely beneficial for your health. It increases your longevity because, guess what, you're much less despairing, much less depressed if you're in touch with other people's problems.
VELSHI: Get a sense of self-worth because you're doing something useful.
HEWLETT: Absolutely.
VELSHI: One of them that's obvious is, you got on the book, is exercise or meditate.
HEWLETT: Right. Totally critical. Because we all know that those -- you know, those good hormones, you know, do all kinds of nice things for you. One thing I do want to stress is that the networking that people can do is also very important.
VELSHI: Right.
HEWLETT: One of the best ideas here, I think, is creating your own personal board of directors. You know link up with your barely connected friends.
CHRISTINE ROMANS, CNN ANCHOR: Good idea.
HEWLETT: Have lunch once a month. So there's a plan B.
VELSHI: Right.
HEWLETT: Because if you understand that there are roads to perhaps get that next job, you're perhaps a little more less worried about...
VELSHI: Right.
HEWLETT: You know, yours being cut.
VELSHI: And you're less giving off that vibe at the office that you're worried about this. Thank you so much for being with us.
HEWLETT: Thank you.
VELSHI: Sylvia Ann Hewlett is the author of "Top Talent: Keeping Performance Up when Business is Down."
ROMANS: All right, Ali, here we go. I know we both have been talking about this one all week. Are big bad Wall Street bankers bumping mothers and children out of the line for the swine flu vaccine?
VELSHI: What a story.
ROMANS: We'll find out next.
(COMMERCIAL BREAK)
VELSHI: OK. "Businessweek" senior writer, Diane Brady, and journalist and commentator, Stephen A. Smith, are here.
Christine, what is going on in New York with swine flu?
ROMANS: Oh boy.
VELSHI: Things have reached a fever pitch this past week.
ROMANS: They have. They have. And let me tell you this story. Last month New York City began offering the swine flu vaccine to younger school children.
VELSHI: Right.
ROMANS: That was last month. And then to obstetricians and pediatricians. Now some of New York's largest employers are receiving the swine flu vaccine as well. Large employers in the largest city in the country with on-site medical staff can request the vaccine as they do every year for the seasonal flu.
But news that Goldman Sachs and Citibank have received doses of the swine flu vaccine has sparked an outcry. The implication being that greedy Wall Street bankers are taking priority over pregnant mommies and school children.
VELSHI: Ridiculous.
ROMANS: Do we hate...
VELSHI: I mean I've seen press releases from organizations saying they should donate this to community hospitals and all this stuff.
ROMANS: It makes it sound like these big banks have elbowed their way in line and knocked down little kids.
VELSHI: Let's explain why this is necessary. In the city of New York, Diane, they have a system.
DIANE BRADY, SENIOR WRITER, BUSINESSWEEK: They do.
VELSHI: Goes out to school kids first, to go -- and then as part of the...
ROMANS: This is a way to make sure that most people in the biggest city of the country are...
VELSHI: Don't make everybody else sick.
ROMANS: Right.
BRADY: Well, I mean, I can understand the out rage. And here's why. Yes, companies, and not just the Wall Street banks, get their allocation.
ROMANS: Including Time Warner, the parent of this network.
BRADY: Yes.
ROMANS: Nobody's out there screaming because Ali, if he were pregnant, would be able to get this vaccine.
VELSHI: We might.
BRADY: But the reality is...
(CROSSTALK)
BRADY: ... that the most vulnerable populations are people under the age of 25 and children and the fact is they haven't got it yet. So, yes, they have access to it. But the reality is if they get swine flu, adults are not going to die.
ROMANS: But I will disagree you because many school children have received it. And it's already gone through schools. So there's already been the school children (INAUDIBLE). At Goldman Sachs they say that it has been earmarked specifically at the New York Health Department said to women who are pregnant and to people who have very young children or work with young children. Not everybody. No Wall Street banker is getting a swine flu vaccine.
STEPHEN A. SMITH, JOURNALIST: OK. OK. OK, that's fine. But that would be the caveat. Let's be clear about that. Make sure that those people who are supposed to be getting it, if they happen to work at Goldman Sachs, I'm sure any human being, any rational human being would not have a problem with it.
The problem is Goldman Sachs has given the American people every reason under the sun not to trust a single solitary word they say. And as a result of that you suspect...
(CROSSTALK)
BRADY: And my children have not received it.
ROMANS: Are they in public schools?
BRADY: Yes.
SMITH: Could they get it?
BRADY: If -- you know, they will get it. But they'll probably get it in two weeks.
VELSHI: Right.
BRADY: And that may be too late.
VELSHI: Yes.
BRADY: So I'm not panicked by any means. But I can understand the outrage. It's just the system we have in place. And you're right. It's not a case where the fat cats are getting it before everyone else.
VELSHI: Right. Right. It's a distribution method in a city where you've got a...
(CROSSTALK)
ROMANS: But I do think it shows...
VELSHI: This is a city that's actually pretty good at public health so.
ROMANS: I do think it shows that America hates the banks so badly...
VELSHI: Right.
ROMANS: ... that even the idea that somebody at Goldman Sachs -- it doesn't matter who it is. Anybody at Goldman Sachs would get this thing...
SMITH: No, no, no. See, that's what I'm saying. I don't think that's what the American people are saying. Again, you've got that list here people under the age of 25, et cetera, et cetera.
If you know the people who work at Goldman Sachs, those are the people who are getting the vaccine it's not a problem. What you don't want is somebody walking away with a $25 million compensation package or what have you...
ROMANS: Right. Right.
SMITH: ... in his 30s, pretty much healthy, all of a sudden you're getting a vaccine shot at the expense of somebody who may actually need it. That's what you don't want.
ROMANS: Right. I would say JPMorgan doesn't have it yet. They're in the list to get it.
VELSHI: Yes.
BRADY: We apparently -- Time Warner apparently is on this list to get it. But I haven't seen it.
VELSHI: But it's got a lot to do with effective mechanisms for dispensing...
ROMANS: If you have nurses and doctors on site.
VELSHI: Right.
(CROSSTALK)
VELSHI: If nobody has to take time off work.
ROMANS: Right.
VELSHI: Many of us won't do that. The bottom line is that it's more effective to...
ROMANS: Right.
VELSHI: We should be doing this for everybody in America. That's the point.
ROMANS: Right. Exactly.
VELSHI: Or everybody who needs it. All right. There's another issue we want to talk about. We've been talking about unemployment a lot today. More workers -- more work for fewer workers.
The Labor Department says worker productivity is soaring. It's going up. We're all getting more productive. The concern is that employers get more out of a shrinking staff so they're less likely to start hiring any time soon.
Can increased productivity, which we think of as a good thing, really be that bad for the work force? I mean is this a -- is this what we do?
BRADY: I think it's bad because you've seen hours go down 5 percent.
VELSHI: Yes.
BRADY: You've seen output go up 4 percent. What does that mean? It means people are doing more...
VELSHI: Fewer people are doing more. Yes.
BRADY: ... in fewer hours. So they're squeezing more out of employees. And among other things those who are still working are working longer. And that affects morale.
(CROSSTALK)
ROMANS: They can't do that forever, though. They can't do that forever.
BRADY: You can't.
ROMANS: The companies are going to have to start hiring.
SMITH: Christine, you're right. The problem is, is that employers are looking for every excuse imaginable to curb costs. So if you're knowing that you're lowering your work force but they're giving you a higher level of productivity, now you're saying we have the perfect excuse not to hire as many people as we would have.
ROMANS: Well, yes.
SMITH: That's what your problem. When you're talking about a recovery, you're talking about getting back to the way things once were. Well, guess what? That's not going to happen because you've shown them a way, even if -- you know, the recession is completely gone, we completely recover economically, the fact is...
VELSHI: We can do more with less people...
SMITH: ... you have now -- you've...
VELSHI: And Steve, it's these BlackBerries.
SMITH: There you go.
VELSHI: You know the hours that we work. It's a trend and it often happens, and that's why sometimes these recoveries are jobless. This is not the recovery we can risk having -- being jobless.
BRADY: Right. And productivity can be good when it comes through innovation, when it comes through new technologies.
ROMANS: Right.
BRADY: That's when you really like to see productivity gains.
VELSHI: Yes.
BRADY: That's where we really...
ROMANS: Because coming...
(CROSSTALK)
BRADY: Now it's coming because people are doing more in less... SMITH: Allow me to make this one quick point. One of the things that's hurt workers in this sense, too, it shows what we're capable of doing when our backs are against the wall. Which basically means that we've been somewhat lackadaisical...
VELSHI: That's right.
SMITH: ... when we were living in a better situation.
VELSHI: That's a good point.
All right, what the economy and earthquakes have in common. And what it means for you and how you invest your money.
(COMMERCIAL BREAK)
ROMANS: It's been a year since President Obama won the election on a platform of change. And certainly there's been a lot of change particularly when it comes to the economy. Let's take a look.
The economy finally shifted out of reverse last quarter growing 3.5 percent. The economy's growing now. That's about the best economic news of his presidency. The stock market as well has made a dramatic recovery from its March lows. Commodity prices, they have spiked. Look at gold. Also a record high.
But at the same time jobs are still being lost. So are the positive signs we're seeing, the 10.2 percent unemployment rate. Are the positive signs we're seeing false positives due to massive government spending or is this an economy that's been goosed by stimulus is now on the road to recovery?
Here's what President Obama had to say about it.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In every economic recovery there is going to be a lag between the economy growing again, businesses investing again and businesses hiring again.
The need for us to make up a whole lot of job loss is going to require, I think, some bold innovative action on our part, and on Congress's part , and on the private sector's part.
One of our challenges now, and I've been speaking about this for many months now, is how do we get what I call a post-bubble growth model?
(END VIDEO CLIP)
ROMANS: A growth model that is sustainable. What does the post- bubble world look like? How do we get there? The president may first want to consider how to get the economy out of this bubble or at least pass a little bubble aftershocks.
According to our next guest, Rona Foroohar, a senior editor at "Newsweek." Also joining us again, Diane Brady, senior writer at "Businessweek."
I'm looking at gold, I'm looking at commodities, looking at stocks, and I'm saying, wait a minute. We just got out of a bubble. What's going on here?
RONA FOROOHAR, SENIOR EDITOR, NEWSWEEK: Well, we're seeing an echo bubble. It's something that happens typically after a big bubble. Governments come in, they pump a lot of stimulus into the economy and then you see markets go up. And we're seeing that across the board. There's no asset class virtually that's down this year.
ROMANS: So then what happens after that? I mean there's this little bubble and then -- I mean, does history tell us that...
FOROOHAR: Well, that's exactly what happens. Typically an echo bubble deflates, usually it takes about a year. It doesn't go back to the original lows. That implies a Dow of about 7,000, 8,000, maybe not 6,000. But it does burst. Only then can you start a new business cycle.
ROMANS: Is the new gold echo bubble and then we move on -- then we start talking about the post-bubble sustainable growth world?
BRADY: Well, I think the enthusiasm for gold has a lot to do with the view of the U.S. dollar. I think that a lot of the enthusiasm in the market is the fact that companies are, in fact, have cut to the point where earnings look good.
ROMANS: Right.
BRADY: And one thing we're seeing is a lot of U.S. companies are now getting their growth from overseas. So they're less reliant on the U.S. economy. But I totally agree with Rona, there is no question that when you look at the U.S. economy in the long term health, it doesn't give a lot of reason for enthusiasm.
So, yes, we'll probably go back a bit, but it's not quite as dire as you might suggest. There's smart people investing because they see growth that doesn't come from us.
ROMANS: Let me talk about smart people investing in the housing market. Because we're going to hear -- well, the president, this week, signing this new extension of the unemployment benefits which is key for hundreds of thousands of people and also this expansion of the first-time homebuyer tax credit.
So you're going to get more free money to buy a home. But is that also feeding into this idea of another bubble? I mean, we have to pay for it, first of all. We already know that according to the treasury's auditors, children have been getting the first-time home buyer tax credit.
I mean -- you know there's some fraud already in this program. And aren't we just propping up a market that maybe should be allowed to find its own floor? BRADY: There are probably hundreds of thousands of houses in this country that we don't need. And the reality is that yes, $8,000 helps. But if your real wages are going down, there are a lot of Americans who bought hopes that could not afford to be in those homes.
So I'm not sure the extent of the bubble. But certainly when you look at trends with real wages, we've seen wage cuts, benefit cuts, a lot of people who are being rehired or being hired back at independent contractors. That doesn't bode well.
ROMANS: We call them caramel answers, right?
BRADY: Caramel answers and...
ROMANS: That's the word of the day, folks. Caramel answers.
BRADY: And that is the trend. So there's less job security. That gives a lot more flexibility to companies but it doesn't give a lot of flexibility to investing long term in a home.
ROMANS: Let me ask you about that home buyer tax credit. I mean this got a lot of play this week. Do you think it's a good thing or do you think this is the government getting in the market when it should just get out?
FOROOHAR: Well, I think the latter. I spoke to Bob Schiller actually last week. And he see -- he said he's seen the biggest turnaround in home prices in the last 100 years and this is coming at a time of record foreclosures. There's a disconnect there. The real economy and the markets are not moving in sync and I think that is a problem.
ROMANS: And they need to expand it. Now they're expanding it. It should be $6,500 if you already own your home and you're trying to buy a new one. You're going to move out -- you know, you've lived in a home for five years, and you've moved on.
You've talked a lot, Diane, about it. I know you can see more about this, and raise income cap as well. Look, it's not free. We're going to be -- it's going to be, I don't know, $10 billion. I mean, we're going to have to pay for this. It does go on the bill.
And speaking of the bill, you've talked about this reset. This fundamental reset for America. Back to the post-bubble world. What does it look like for us, the post-bubble world?
BRADY: Well, you've seen a lot of industries that are fundamentally changing, manufacturing moving offshore. A lot of these jobs are not going to come back and we've seen a lot of companies that are not just lowering wages, which is unprecedented. They're actually cutting benefits. They're freezing 401(k)s.
So the standard of living for the average American is going to go down. We also don't have access to the credit we once did to, you know, create a standard of living that maybe we shouldn't have had in the first place. So I think it's going to be a long, hard road for many, many Americans, and our education system's not catching up, and one more thing I'd mention is when you look at the GDP numbers, that does not really track the difference between investments in innovation, investments in training, and investments in just hard assets.
And really we need to see the investment in these tangible areas...
ROMANS: Right.
BRADY: ... for this country to really be competitive.
ROMANS: And here's the problem for the president and his team. All of these things Diane is mentioning, he's got be working -- they've got to be working on all of them at the same time.
FOROOHAR: Yes. I think it's going to make for a very tricky election next time. And I think that it's going to change what it means to be middle class in this country. I think it's not going to mean flying abroad and eating wild salmon anymore.
ROMANS: All right. Rona Foroohar from "Newsweek," thanks so much. Diane Brady from "Businessweek."
BRADY: Thank you.
ROMANS: Thanks, ladies.
All right, could a Mac truck be the key to combating climate change? Find out next.
(COMMERCIAL BREAK)
ROMANS: The big three with some big news this week. Ford Motor reported a profit. Yes, a profit in the third quarter. The only U.S. automaker not to file for bankruptcy this year, it earned $997 million compared to a very big loss a year earlier.
Chrysler, which has seen its sales drop by half in the past few years, it vowed to return profitability by the year 2011. The company also says it's on track to pay back billions of dollars in bailout loans by the year 2014.
And General Motors announced its plan to cut up to 10,000 jobs in a restructuring of Opel, a European subsidiary of the company. GM frankly shocked German officials, public officials by announcing its decision to keep the European Opel unit and cancel planned sale to Canadian firm Magna.
VELSHI: That was interesting because one of the reasons involved in canceling that sale was General Motors saying the environment. They're ability to raise money is actually better than that it was when they made that decision to sell. So a bit of an indication that things might be getting better.
Let's also talk about Volvo. It's a company that you may think you know. But I'm not talking about the car company. Volvo sold the car unit to Ford back in 1999. I'm talking about the second largest truck company in the world, and it's not just those Volvo or maybe Renault trucks you may have seen on the road, particularly in Europe or Asia.
Volvo happens to own Mac, which makes trucks right here in America. I recently met with Volvo's Swedish CEO, Leif Johansson. And he says if you're concerned about climate change, then we shouldn't ignore the potential of trucks because they do matter in this debate.
(BEGIN VIDEO CLIP)
LEIF JOHANSSON, CEO, VOLVO: You know, trucks actually run 24/7, and with that, they are actually -- they are a good example of how one can make fuel efficiency a very good business also. Because with all of the use of fuel, if we can reduce by 20 or 30 percent, or even 1 percent, that actually turns into good economics for our customers. So I think we have a good situation here where fuel efficiency and the need to reduce carbon actually is coming hand in hand and doing well.
(END VIDEO CLIP)
VELSHI: So it's interesting because we think about industry. We think about cars. But trucks, as he said, run 24/7 in this country. And this is an opportunity, if you make trucks more fuel efficient, you use less fuel, you help the economy. You help the environment. It's a complete sort of a package.
ROMANS: It's also important, Copenhagen. You're going to be hearing a lot about Copenhagen or Copenhagen. This is -- it's this conference on climate change coming up next month. It's critical for laying the groundwork for what big countries and developing countries...
VELSHI: Right.
ROMANS: ... are going to do about climate change.
VELSHI: So a lot of eyes on this Copenhagen meeting. We'll be talking to you a little bit about this as countries from all over the world will try to agree on standards to reduce carbon emissions. Leif Johansson is going to go to this meeting, not just because it's like a 20-minute flight from where he lives...
(LAUGHTER)
VELSHI: But he was telling me how companies like his stand to benefit but the world can actually come to some sort of an agreement in Copenhagen.
(BEGIN VIDEO CLIP)
JOHANSSON: I think in Copenhagen the real crux there is going to be to have a number of countries sign on sometimes with different commitments. And if I was to be on my wish list, I would say we should have those even if they are voluntary, they should be identifiable, quantifiable and measurable. And we should be able to measure effect. If we could get as far as that, then we in industry would know that we have a scenario all over the world that looks basically the same and the market economy and the companies are typically at their absolute best when they know that there is something coming and we know what the long-term requirements will be and we can do it efficiently.
(END VIDEO CLIP)
VELSHI: And finally, he brought a gar damage truck when he was here.
ROMANS: Did he really?
VELSHI: The city of New York is testing a hybrid garbage truck that apparently belches out air that is cleaner than that which it takes in. So it was here in front. We were walking around, looking at the garbage truck. They're testing it out in New York.
You know these hybrids are particularly good for stop-and-go travel, which, of course, is what a garbage truck does.
ROMANS: Did you get to drive it?
VELSHI: I did not. I like it. It was very clean, though. The cleanest garbage truck I've ever seen.
ROMANS: There'll be numerous violations I'm sure.
VELSHI: If I were driving, yes.
ROMANS: You don't have a chauffeur's license and are probably our insurance wouldn't pay for it.
VELSHI: It would be a problem.
ROMANS: All right, great. It's a great interview. Thanks, Ali.
All right, are 401(k)s safe and secure as they should be? We're going to talk retirement solutions, retirement solutions about your money to help you prepare. That's next on YOUR MONEY.
(COMMERCIAL BREAK)
ROMANS: Only about half of Americans participate in a 401(k) account. And among those, the average account only contains enough money to live on for a few years. Not nearly enough to fund a full retirement.
So is it time for Congress to reform 401(k) retirement savings plans, make it easier for us to invest and maybe make sure that this is a better process for us to make sure we're funding our retirements?
Roger Ferguson is the president and CEO of TIAA-CREF. Let me ask you. What do we need to do to make sure there's enough in our 401(k)s and it's a solvent enough system for us to retirement?
ROBERT FERGUSON, PRESIDENT AND CEO, TIAA-CREF: Well, the first that we have to do is you have to recognize that the 401(k) was never meant to be the primary retirement tool in this country. It was meant to be a supplement. And so we now have to build a retirement system for the 21st century which will have four or five basic components.
ROMANS: How? Tell me?
FERGUSON: First thing is we've got to get to a position where everyone is enrolled in and saving for retirement.
ROMANS: They aren't now?
FERGUSON: And they absolutely are not.
ROMANS: Now you have to opt in now at your...
FERGUSON: Exactly right.
ROMANS: When I talk to young people, when I give speeches or even talk to young people here in the newsroom, I say are you signed up? Are you in? You've got to get in. You've got to get in. The younger you get in, the more money you're going to have.
FERGUSON: And you're giving the exactly right message. So we've got to flip it to what is called an opt-out which is to say automatic enrollment unless you opt out. And the second part is as your income increases, the amount that you save should also be going up. So it's called automatic enrollment and automatic escalation.
ROMANS: Interesting.
FERGUSON: Item one. Item two is they've got to make sure that they are fully and appropriately diversified. One of the mistakes that people make is they say, I don't understand the stock market. I'll never invest in that. Or I'm going to be all in to the stock market.
The reality is broad diversification, and by the way, not just stocks and bonds but also real estate investments.
ROMANS: Right.
FERGUSON: Professionally managed alternative investments. So diversification, item two. Item three is look for good, solid objective advice that's not being commissioned.
ROMANS: Not commission based. Right.
FERGUSON: Because commissions obviously change the incentives. So you want objective advice. Someone who understands you, but it's not being insented by a commission.
ROMANS: Right.
FERGUSON: And the fourth part of a system is guaranteed income for life. The 401(k) focuses in on saving, but not planning to get you through retirement. So you need a system -- we need a system that takes us to and through retirement including guaranteed income for life, in the form of a cheap, fair annuity, and you want to annuities enough to pay for your basic expenses, room and board, if you will. And those are the four major elements.
CHRISTINE ROMANS, CNN ANCHOR: And also you have to talk about health care expenses. This is incredibly important. There is health care reform going on. I don't know how that change things. But you have an interesting stat just to leave the viewers with. The average couple 65 or older without employer provided health care will need to have saved $200,000 to $800,000.
FERGUSON: Exactly right.
ROMANS: Incredible.
FERGUSON: A shocking statistic. It is, of course, if you don't have employer provided retirement.
ROMANS: Right.
FERGUSON: But absolutely the fifth element is to start a position in this country where people can save for retirement health care expenses. This is not going to help people my age. You know, the baby boomers. But for folks who are 25 to 35, even to 40, not too late to start saving for retirement health care expenses as well. Because the number is large.
ROMANS: All right. Some big choices. Well have you come back and talk more how to fix it and how we can urge the right fixes from Congress. Roger Ferguson president and CEO of TIAA CREF, thank you so much, sir.
FERGUSON: Thank you.
ROMANS: All right. Simply organic hair care. Wasn't a booming business when it was founded back in the early '90s. But thanks to the founder's son, it's now seeing green.
Mary Snow reports on this week's "Turnaround."
(BEGIN VIDEOTAPE)
MARY SNOW, CNN CORRESPONDENT (voice-over): It's become a place where Hollywood hair stylists turn to for beauty products. But Simply Organic hair products' rise to fame was far less glamorous. In fact, its start was near disastrous. Gene Martignetti and Joe Mostrom founded the company in 2001.
UNIDENTIFIED MALE: Would you put methylpropyl paragon on your salad? So why would you put it on your skin or your hair?
SNOW: It strives to use plant-based ingredients whenever possible. But the effects of 9/11 combined with a bankrupt supplier posed an almost insurmountable challenge.
GENE MARTIGNETTI, FOUNDER SIMPLY ORGANIC: It got so bad that I had to sell my house. My car. It got to that point where every dollar we could make went back in. JOE MOSTROM, FOUNDER, SIMPLY ORGANIC: Quite frankly, 2004, I said we are not going to recover unless something dramatic happens. Let's step back and take a look at where we are. That's when the boys stepped up.
SNOW: And step up, they did. Their sons Jeremiah, Gino and Corey decided to take over the business.
MOSTROM: They'd taken a beaten down horse and turned it back up into a resource.
JEREMIAH MOSTROM, PRESIDENT, SIMPLY ORGANIC: It was definitely nerve- racking at the very beginning not knowing where our source of money was going to come from.
SNOW: But the boys partnered with a smaller local manufacturing company who gave them discounts on raw materials. They focused on the internet to help drive sales. And they went beyond hair styling products and introduced accessories like lip balm and candles.
JEREMIAH MOSTROM: We literally went from salon to salon telling our story, and building our business that way.
SNOW: The result of all this hard work is a growing fan base.
MICHELE NADEAU, SALON OWNER: I was so excited, because it was a product line that I actually believed in, but then also gave me results.
SNOW: It also pumped up the bottom line. When the boys took over, sales were less than $100,000. This year, the company is on track to make close to $4 million. The future of Simply Organic looks just as promising.
JEREMIAH MOSTROM: I really see this as being something that - that I'll be passing down to my kids some day and really truly building an amazing family business.
SNOW: Mary Snow, CNN, New York.
(END VIDEOTAPE)
ROMANS: Why is your money or the lack of it such a hard problem for the Obama administration? We'll explain next.
(COMMERCIAL BREAK)
ALI VELSHI, CNN ANCHOR: All right. We welcome back "Business Week" senior writer Diane Brady and journalist/commentator Stephen A. Smith.
ROMANS: OK. Two new polls show, once again, it's the economy stupid. And that's potentially troubling for President Obama. The Republicans scored two victories in Virginia and New Jersey this week. Bottom line voters are increasingly concern about the economy.
As you can see, nearly half the respondents in one of our polls say the economy is the most important issue to them. Here is where it gets dicey for the president. A majority of those polled now disapprove of how President Obama is handling unemployment. Is this economy going to determine President Obama's legacy? Or at least the chance of -
VELSHI: We are a year into it.
ROMANS: Or, I would say, or at least his chance to get a second chance.
DIANE BRADY, SENIOR WRITER "BUSINESS WEEK": This is a dicey period. We bottomed out. You know, the jobless numbers are increasing. Of course, there's going to be a bit of a protest. And I think one of the things that people are angry about is he's had a light touch with Wall Street. On the regulatory front, there's a lot of attention on health care. But there hasn't been as much on a lot of the players that really people think got us into this mess in the first place.
STEPHEN A. SMITH, COMMENTATOR: Couldn't have said it better myself. And that's what this really comes down to especially if you have been pushing the agenda you have been pushing. You are focusing so much on universal health care. I'm a guy who grew up in the streets of New York City, the African-American community, grew up poor.
I understand the importance of universal health care. Please don't get me wrong. But if you gave me the choice of having health care or having a job to go to with money in my pocket where I can then determine what level of health care, what quality of health care that I can get, then you know what, I'm going to pick the latter.
At the end of the day, it comes down to understanding that it is about jobs. That it is about the economy. You consider the fact that the unemployment rate in the black community is over 15 percent and you have a black man who happens to be the president of the United States of America that doesn't seem to get that, it's highly offensive.
VELSHI: You don't think he doesn't get though?
SMITH: I'm just saying.
ROMANS: Even before this 10.2 percent unemployment rate, the president said look, I do get it. And we are doing every single thing we can do.
BRADY: I think the reality is the president of the United States does not have that much control over the jobless numbers. You need a healthy economy. You can only put so much stimulus into the system. Yes, there are problems with lending. There's problems with, you know, taxation. But we need companies to be healthy and hiring again.
SMITH: Please let me add this. I'm not disagreeing with a single word you just said. The point that I'm making is that hasn't been his focus verbally.
BRADY: I see. SMITH: And because it hasn't been his focus verbally, even though he's made it a priority this week, he hasn't given that impression over the last few months.
ROMANS: He has too many irons in the fire?
SMITH: Well, probably so. Because he's got too many people to deal with. I think the people in Congress and the House are going to suffer more than he does. I think he's got some time. He's got until 2012.
ROMANS: Right.
SMITH: They are the ones that need to be pushing the (INAUDIBLE).
BRADY: Reagan was popular. He did not suffer, but his party suffered.
VELSHI: Well, speaking of that of the 2010 election, where the House may suffer, the House wants to move up new tough credit card rules to protect consumers. They want it to go into effect as soon as possible. The move is in response to credit companies raising interest rates and fees ahead of the new laws. They know it's coming in. So now they're moving ahead. We have been hearing a lot about this from our own viewers.
The Senate and the president have to sign off on this. Is it an election ploy? Well, probably. But it sounds like they've got to do it.
SMITH: Ali, it's a classic example of the American people looking at Congress and saying, where have you been? How clueless can you be? Here you are, you pass these laws because you want to make sure that you protect the consumer from these credit card companies.
But the laws are going to be enforced in February of 2010 -
VELSHI: Right.
SMITH: And then August, and then you move it up. Well, excuse me. Duh, they have to do something wrong in order to - I mean, you knew ahead of time that they were going to try to circumvent all of this.
ROMANS: It's very hard when so many people have been given you contributions for so many years and suddenly you actually have to be a watchdog.
BRADY: And their earnings are terrific, by the way. Did you see Capital One last week. Credit card companies are doing very well right now.
SMITH: You knew they were going to try to circumvent. I got a cousin, a nephew rather that just came to me and said they gave him a credit card. Rates went up 29 percent.
VELSHI: Yes. Forget it. SMITH: This is what they do. You know they are going to do it. Why would you need to see that in order to enforce them, move up the deadline?
VELSHI: That's the cluelessness that we wonder, don't these people live in the same place, the same America we live in where that kind of thing happens?
SMITH: That's how you know they live in a different world. That's the problem.
ROMANS: All right. Stephen A. Smith, Diane Brady. Thank you both.
BRADY: Thank you.
ROMANS: And thanks for joining us in "Your Money." You know, you can follow Ali Velshi and me on Facebook and Twitter @Christine Romans and Ali Velshi.
VELSHI: And make sure you join us every week, Saturdays at 1:00 p.m. Eastern ad Sundays at 3:00 p.m. You can also logon 24/7 to cnnmoney.com. Have a great weekend.
