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YOUR MONEY

The Politics of Money; Independent Voters' Anger Toward Democrats; Good Week for Stock Markets

Aired October 31, 2010 - 16:00   ET

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


ALI VELSHI, CO-HOST: Less than two days to go until the first polls open, the economy continues to top the list of voter concerns. But can a vote actually put Americans back to work? I'm Ali Velshi. Welcome to YOUR MONEY. Christine Romans joins me as well.

Another change elections appears to be upon us. Voters are angry. But is that anger especially from independent voters being directed primarily at the Democrats. John Ridley is an author as well as the editor of that minority thing.com.

John, why is this happening? Why are the Democrats who came in halfway through this recession, why are they bearing the brunt of the anger of independent voters in this election.

JOHN RIDLEY, AUTHOR & EDITOR, THEMINORITYTHING.COM: Well, you know, historically this is the kind of thing that happened. The headlines is not that the democrats may lose some seats in the House or lose the House itself, basically you've got two parties, you got two people at the dance. You've got these voters who have done the two-step with the other party for eight years. That didn't work out.

The Democrats rode in on a lot of hope, and a lot of excitement. They have had basically two years. Actually, at the house they had a little bit longer than that and unfortunately things have not changed in America. So it's not unusual for the party in power to lose particularly at a midterm election. It happened with Ronald Reagan. It happened with Bill Clinton. It's going to happen with Barack Obama.

The real headline is going to be how big these losses are or conversely it maybe how slim these losses are the way the head winds are changing in the last few weeks.

VELSHI: And they are changing and they will change until the last minute I'll take a little bit of an issue with John, the fact that we're looking at some hard numbers later and show that some things have changed for the better. It may just not feel that way.

Stephen Moore is an editorial writer with the "Wall Street Journal." Stephen, Christine made the point several time that you may just go out and vote on Tuesday because you're mad and it's about the only thing you can do but if you're a voter concerned about the economy really, what are you supposed to do with your vote on Tuesday?

STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL": Well, first of all anger is a powerful inducer to go to the polls, maybe the most important one. And you know, John is right. I think people threw out the Republicans two and four years ago, because they thought they were running the economy in the ground. They elected Democrats on this hope and change agenda. And now people are saying, "wait a minute, you know, where is the hope and where is the change and where are the jobs?"

And so it's amazing to me how quickly people have turned on the incumbent party whether it's Republicans or Democrats. When I look at this election, I think it's three issues. Obviously, jobs is number one. The second is kind of government power, too many bailouts, too much spending and the third bailout is I think this health care is really controversial with voters.

VELSHI: All right. So an old saying that you and I hear a lot is that Democrats are not business friendly. In this particular case, President Obama, we continue to hear, needs to repair his relationship with the business world. Now, does that mean that Republicans are better for business because President Obama doesn't think so.

Listen to this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: They talk a good game about tax cuts, and giving entrepreneurs the freedom to succeed. In fact, they also ended up voting against tax cuts for the middle class. They voted against tax breaks for companies creating jobs here in the United States. When you vote against small business tax relief and you hold up a small business jobs bill for months that doesn't do anything to support small business like this one.

(END VIDEO CLIP)

VELSHI: OK. Two years ago when President Obama took office, there was no currency in being pro business or on the side of business. Everybody hated business. Now, two years in, he is having and this administration is having a remarkable struggle convincing everybody that they don't hate business. Because right now we seem to believe business is going to get us out of this mess, particularly small business.

CHRISTINE ROMANS, CNN CO-HOST: Small business is the important piece here. And look small business needs demand, and the president hasn't been able to figure out how to get demand back into the equation. That's the bottom line. But the sands have been shifting underneath them for two years. Both regulatory sand, you also mentioned health care reform, Stephen Moore, but also frankly the economy is a mess. That's been a real problem for them.

So as long as he's talking about trying to help small business and repairs his image - even at the end of the week on Friday, he's in Maryland and he is talking about what he's trying to do in his proposal for small business -

MOORE: But you know what, when I talk to small business owners, and I gave a talk at the National Federation of Businesses last week, the largest small business organization. What they tell me is they feel like it's a war against small business in this Congress and this White House. They point to, not just the health care bill but the union agenda which they don't like. They didn't like the cap and trade bill.

And when President Obama talks about the tax cuts, remember I'm a big believer that the tax increase that's going to happen next year, that a lot of people who are going to pay those taxes are small businesses.

VELSHI: Let me bring John in for a second. A recent CNN poll of polls, John Ridley, says that 48 percent of Americans disapprove of the president's performance, 47 percent approved. If the Democrats fail on Tuesday, is it because voters used their local elections, their elections for congressman or their senator as a referendum on the White House or are we focused on local issues?

I know that there are some parts of this country where the vote is more local than national but this feels like a national referendum.

RIDLEY: Well, you know, it's a little both. The old saw is every election is a local election. It's about local politics. In this election, the issues are - as everyone has said, it's about jobs, it's about the economy. And everybody is in that together and to a degree in equal fashion. Things are just - if they are getting better, they are getting better in incremental fashion.

I think certainly this bill is about the president or the Democrats or what they have been doing. But it is hitting certain people in the pocketbooks. They are not voting on the national level but they are voting for their representatives supposedly going to go to Washington and hopefully making things better for them.

VELSHI: Again, we're going to look at numbers later in the show that are going to show something we all know, this economy, whether you blame the Republicans or not, collapsed under a Republican administration.

MOORE: That's for sure.

VELSHI: And it is probably due to things that happened in that administration and in several administrations prior to that that led to that collapse. But why do voters somehow think that the Republicans are going to be their answer to solving this conundrum?

MOORE: Well, I think voters have become, they don't tolerate failure for a long time.

VELSHI: Right.

MOORE: And you know, they have only given Barack Obama about 20 months and they're already kind of rebelling against this. I mean, people are afraid. I think that's the biggest sense. It's not just rage, it's fear. And I would say that it's not just the 10% of people who don't have jobs that are angry, it's the 90% of people who do have jobs that are wondering if they are going to have it next year. I mean, the debt is a huge issue to Americans. In fact, we've increased the national debt by three trillion in the last two years. You know, they're saying that the trillion is the new billion in Washington these days. Twelve zeros, by the way in a trillion, that's a large number.

VELSHI: All right. Hold that thought. Because we want to continue this discussion. You've probably heard it said greed is good. What about gridlock? We'll talk about why business could actually benefit if both parties, well, try to share power. We'll talk about that when we come back.

(COMMERCIAL BREAK)

VELSHI: Republicans are poised to take over the House, possibly the Senate. We'll still see about that. The White House is not up for grabs right now. And that means gridlock could likely return to Washington. I'm not sure that's worse or better than things are right now.

Christine joins me. We've had this discussion earlier this week, Christine. Markets have been doing very well. If you've been checking your 401(k), you'll notice that. Some of that is because we think the fed is going to do some things next week. A lot of it is just people thinking, business is thinking, smart investors thinking, we like gridlock.

ROMANS: Right. You've heard greed is good from Gordon Gecko, gridlock is good. I mean, this is the first thing I've ever learned in covering markets is that you want these guys to be divided in Washington, and women, because you don't want them to mess things up for you. And basically, there's been such a sea change of difference for companies who are hiring and investing over the past couple of years. They are still repairing from the crisis that they are looking forward to a period with no new major changes -

VELSHI: Right.

ROMANS: So they can figure out where things stand.

VELSHI: So to that point, let's go to John for a second. John Ridley, there has been change. Christine has made the point that over the last two years, if you're a small business, the sands have been shifting underneath you for the last two years. That doesn't necessarily mean the shifts have been bad but some businesses are just tired of the shift.

RIDLEY: Well, if you're tired of the shift, gridlock is good, you're going to get gridlock. You've got Mitch McConnell and John Boehner basically coming out over the last couple of days and saying, "look, we're not interested in working with the other party. We're going to do what we're going to do." It looks like the Democrats are probably going to hold onto the Senate, obviously, the president is still going to be there.

So you're setting up for gridlock, you're setting up for things not changing over the next couple years. And maybe that is a good thing to a degree. People are a little tired of change. They want to know what's for supper and they want the same meal every day for a while and then we'll see what happens in 2012.

ROMANS: You got to figure out the changes we've made, too. We're still in the regulation -

(CROSSTALK)

VELSHI: There was a lot broken.

MOORE: But you know, I looked at the economy. Think about what happened after that last big Republican election in 1994. You know what happened to the stock market in the next two and a half years? It doubled, they went from 3,000 to 6,000. This combination of a democratic president and a Republican Congress, it's pretty good for markets. You know, it's not just gridlock, it's compromise. I think people want the president - let's face it, he's governed as a pretty liberal president over the last two years. What people want is for him to move back to the center the way Bill Clinton did.

VELSHI: I hear you. But the difference is that that 1994 deal, the contract with America, was clearer and better to find -

MOORE: That's true.

VELSHI: Than what the Republicans have been able to put forward as a platform right now.

MOORE: That's true.

VELSHI: They suffer the criticism from some people they have been the party of no and then their agenda for America is not - the pledge to America is not entirely clear when it comes to specifics.

MOORE: That's true. It does have one theme because I have been around the country, all the way from California to Maine to New Hampshire to Ohio. The Republican message in this election, stop the spending.

VELSHI: Right.

MOORE: And you know what, that resonates with voters because of that debt issue that I talked about. Americans know a great nation cannot borrow its way to prosperity.

VELSHI: Right. Let me ask you, John - sorry, go ahead, John.

RIDLEY: No, I just want to jump in real quick, the other thing is the wild card. You got a lot of these Tea Party candidates, particularly in the House that are going to come in. They have got what seems to be maybe their own agenda. So the question is, if you get the Republicans in there, is it going to be unified Republican -

(CROSSTALK)

VELSHI: Now, that's a good question. That's a really good question. Christine, who am I voting for, if I'm voting for Republicans in this election?

ROMANS: In many cases, you're voting against the other guy.

VELSHI: Right.

ROMANS: And people who are going to be voted in may not have a cohesive -

VELSHI: The republican might be three people. They might be vote against the other guy, and it might be a Republican, a fiscal conservative or even a libertarian -

ROMANS: Right.

VELSHI: And there might be somebody who doesn't want -

ROMANS: And I'm not even sure the people going in there and voting in the challenger necessarily think that they are voting for someone who is going to change the economy tomorrow. I think they are pretty smart and they know it's not going to really happen. They are just getting sick and tired of where we are and it's the only thing that they can do.

(CROSSTALK)

VELSHI: But for you, somebody who is a fiscal conservative. There are people running out there who have nothing to do with the views that traditional Republicans, mainstream Republicans actually share. In fact, for instance, a big push towards social conservatism where there have been some issues that say that's not part of my life.

MOORE: You know, I disagree with you. The thing that I find that's really interesting about this whole election, Republicans have really moved to social issues in this election to the back seat.

VELSHI: The Tea Party hasn't necessarily.

MOORE: Well, but it's mostly about jobs, it's about stop the spending. It's about the debt, bailouts. People are really upset about the bailout of the banks. And people feel like these banks and these big businesses got these breaks and you know, the little guy didn't. And people think it's unfair.

VELSHI: So at this point, I think we all agreed that people are frustrated and they are frustrated about the same stuff. John Ridley, take a look at a poll that we've taken. It shows you that - this is by "Rock the Vote," by the way. It was a poll of 18 to 29 years old. It actually shows that their concerns are very similar to not young people.

96 percent of the kids polled worried about the level of unemployment as well they should be, 93 percent worried about the national debt. I have to say to all of you here, it's a little bit hypocritical for us to worry, start worrying about the national debt and have this national obsession with the national debt in 2010 after we have run it up for decades. MOORE: But you know what I'm worried about? I've got an 18, 19-year- old. I'm worried when they get out of college, they are going to move back in with me and they're not going to have a job and I'm going to have to support them. That's serious though. A lot of people are really worried about that. You talked about that in the show that they move back in with you and never leave.

ROMANS: And I'm telling you right now that the baby boomers who thought they were going to have to be worried about their elderly parents are now worried about their able-bodied 22 years old who are still drinking imported beer out of the refrigerator.

MOORE: That's true.

ROMANS: You know, it's a crazy situation.

VELSHI: Well, it's a shared problem national problem which we have.

Stephen, great to see you in the flesh, in real life here.

MOORE: Thank you.

VELSHI: You're a great friend to the show. Any time you're in New York, please be sure to stop by. Stephen Moore, editorial writer with the "Wall Street Journal."

Hey listen, will these midterms matter? A recovery might be slow. But will voting for change actually bring change? Will it help fix this economy? We'll talk about that next.

(COMMERCIAL BREAK)

VELSHI: As we went to a break, Christine Romans said something to me that was interesting, when you're voting, when you go to the polls on Tuesday and you vote, you decide you want to vote for change, what do you want to change exactly? Are you changing the change that you might have voted for at the last election?

Ultimately, I think we know. We want to change so that the economy does better. We know the economy is issue number one. So we want a change that is going to improve the economy. Fundamentally, that's the role that some of these midterm elections have played in history.

So we want to bring in Lakshman Achuthan. He is the managing director of the Economic Cycle Research Institute. Lakshman, if you look at the numbers that you study, the economy as it feels out there, the economy as it looks outside your window, we are, according to your measurement, better off than we were when we elected President Obama two years ago.

LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, ECONOMIC CYCLE RESEARCH INSTITUTE: We are better off because we've started to recover.

VELSHI: Right.

ACHUTHAN: We went to the - first when he got elected, the economy still was tanking. It bottomed in June of '09 at a very, very deep pit.

VELSHI: Over a year ago.

ACHUTHAN: Over a year ago. And we've been crawling out

VELSHI: Right.

ACHUTHAN: We've probably crawled out maybe a third roughly, if you look at both production and employment.

VELSHI: We're not back to where we were.

ACHUTHAN: Nowhere near it. Nowhere near it. So you are worse off. The economy is worse off than, say, before the recession started, which was December '07. So we hit this peak, gone into a big hole, we're not out of the hole yet.

VELSHI: OK. So now do we want to be changing directions economically? Are we going in the right direction?

ACHUTHAN: The direction we're going in is right, because we're in a business cycle expansion. That means we're healing, we're getting bigger, the economy is actually growing. It's growing at a little bit slower pace. But we don't have any new recession. OK. There's no new hole in front of us.

VELSHI: And all you do is study this and have for the last quarter of a century.

ACHUTHAN: Yes.

VELSHI: And you believe there is not another recession coming.

ACHUTHAN: No, the double dip debate should be put to the side. The forward-looking indicators are just telling us, continued slow growth, which we'd like it to be stronger but no new recession. So directionally on a business cycle basis we're going in the right direction but we're still in the hole.

ROMANS: Jobs, jobs, jobs.

VELSHI: Well, this is where it goes from economy to politics. Let's bring in Mark for a second. Mark Preston is CNN's senior political editor. Mark, the issue here, and Lakshman makes on Cnnmoney.com is that you may have good reason to be angry, you may only be able to exercise your vote as a manifestation of that anger but ultimately it may not do what you needed to do to fix the economy.

MARK PRESTON, CNN SENIOR POLITICAL EDITOR: Yes, Christine said it, it's about jobs, jobs, jobs. You know, Ali, there are a lot of Democrats that got elected in 2008 because of President Obama. They rode his coattails into office. There's going to be a lot of Democrats that lose on election night because of President Obama.

You know, he has an approval rating below 50 percent. You're talking about a national unemployment rate of 9.6 percent. If we were looking at an unemployment rate of about six percent, I guarantee you that House Democrats would retain the majority. We pretty much think that they are going to lose the majority now of the House. In the Senate, you know, we're talking about seven or eight seats they are going to lose, Democrats are. Very likely they wouldn't lose that many seats if the economy was doing a lot better.

ROMANS: Yes, I would say the most important number, no matter what, Mark, you talk about polls, you talk about how many seats in the House, the most important number is the jobless rate, and this is the most important number for president going into next year. And 9.6 percent unemployment just is not palatable for any kind of politician.

Now, can a big change in a few days change that number? You and I have talked about this many times, it takes months and years for policy to start to make changes that we can feel. So people are really itching for something to happen fast and nothing is going to happen fast.

ACHUTHAN: Yes, just to put it in perspective, if the economy is kind of normally all right, it's going to be able to reduce the unemployment rate by about half a percent a year.

ROMANS: It's two percent GDP growth, which is the third quarter growth rate was. Is that enough that - you can't add jobs with that.

ACHUTHAN: We need to reaccelerate in order to bring the unemployment rate down. If we reaccelerate, we get closer to three percent, which is not our forecast. We don't see the acceleration yet, OK? But if we were to do that, the economy can drop the unemployment rate by about half a percent a year. It peaked at 10.1.

VELSHI: Half a percent a year.

ACHUTHAN: A year and so it peaked at 10.1, we're at 9.6. We're down half a percent, OK but when you're at 10, who cares half a percent. That's a rounding error, right? We want it down at seven or six and that's going to take, if you do the math, a handful of years.

VELSHI: Mark, why can't the Democrats capitalize on this conversation that Lakshman is having? That the idea that this is a big, deep seated problem, you might like Democrats better for the economy, you might like Republicans better for the economy but your angry vote one way or the other is not going to make the economy a better place a month from now, three months from now, quite likely a year from now.

PRESTON: Well, we're Americans, Ali, right? We want everything to happen right away. We expect immediate satisfaction. But you know what, you know, look, these are people who have lost their jobs. These are people who are getting kicked out of their homes. And they're looking at Washington, we hear President Obama talk about I'm going to bring hope and change to Washington.

Well, there isn't any hope and there hasn't been very much change. And look, he shouldn't be responsible for everything or for the situation that we're in. But the fact of the matter is, he is the president. Democrats are in control. They are the ones that are going to pay.

ROMANS: Does the White House do a better job of selling the improvement in the job's situation over the president's tenure. I mean, has there been a sales job that they have missed here?

PRESTON: I think they have missed a sales job on everything. Let's go back to health care where they kind of let that go quiet, you know, after he gave that grand speech when he was inaugurated. And then, look health care was going to be a centerpiece of his policy goals. And it became a centerpiece but if you remember in August of 2009, he did a terrible job of selling that. The Tea Party came out of nowhere. And then look, after that, it was like they were on defense. That's exactly what happened with the stimulus. They did a terrible job of selling the stimulus.

ACHUTHAN: I mean, I was going to say, in a way the flip side of this is going into this election, the Democrats win because of the economy tanking in a way. So you want to switch parties.

VELSHI: Right.

ACHUTHAN: Right. Here the recovery hasn't been anywhere near sharp enough and so he's switching parties again.

VELSHI: All right. Lakshman, good to see you, thanks very much. Lakshman Achuthan is the managing director of the Economic Cycle Research Institute. Go to cnnmoney.com, take a look at Lakshman's article. It's quite remarkable. Great easy to understand sense of why we're not going into a double dip recession but why this economy is still not out of the woods.

OK. They believe they can unseat the president in 2012 and call themselves the conscience of the Republican Party. But one of their leaders is a rebel with a cause. We'll talk to him, next.

(COMMERCIAL BREAK)

VELSHI: For a long time in this country, a third party has been talked about. And this year, many of us believe that we are seeing the making of one. But is a rebellious conservative group, we're talking about the Tea Party really a party? They are making their mark on these midterm elections and whether or not their candidates get the votes, they have certainly shaped the debate or helped shaped the debate.

Mark Skoda is the founder of the Memphis Tea Party. Mark, we know where the Tea Party differs from the traditional Democratic Party and to this administration on the economy. How is the Tea Party platform different from that of the Republican Party?

MARK SKODA, FOUNDER & CHAIRMAN, MEMPHIS TEA PARTY: Well, I think if you look at the traditional planks of the Republican Party we're not so different. I would suggest the Tea Party has moved the Republican Party back to its original planks. Small government, fiscal responsibility and free markets. For too long the Republican Party was basically Democrat light. And I think that this is the antagonism that you saw in the early days of the movement with respect to the Republican Party.

VELSHI: All right. But this financial crisis we're in, Mark, there's no disputing, it was born out of a lack of financial regulation. In fact, even our polling which shows so many Americans want less regulation in most areas, not in financial regulation. Has the Tea Party understood that this notion of deregulation rolling back some of the financial reforms, it might be dangerous for us?

MARK SKODA, FOUNDER & CHAIRMAN, MEMPHIS TEA PARTY: Well, I think so. Ali, I think what's very interesting is when you look at some of the genesis of the financial implosion, a lot of that was because there was a wink and a nod that Fannie and Freddie were basically guaranteed by taxpayers. Not officially but intrinsically. When you think about restructuring, you know Fannie and Freddie need to go back to being private enterprises. I think the regulation that has been put in place is necessary to a degree. For instance the consumer advocacy department formed out of the Federal Financial Reformation Act, this thing can't even be defunded ever again. It's taken on a life of his own.

VELSHI: I get around the edges where you're talking about this stuff. Ultimately do you not agree that we need better consumer financial protections than we had going into this thing?

SKODA: Well, you know, I look at the way loans were processed, the way that moneys were given out with no docs, that was clearly problematic. I think then the way they were bundled and subsequently sold with the whole idea of basically monetizing an illiquid asset, problematic. Absolutely, at the highest levels in major financial transactions, unquestionable more regulations required. On the other hand at the consumer level the problem really was that the necessary controls at the local banks were also not in place. So certainly I'm not disagreeing generally with the idea that we need regulation.

VELSHI: All right. So what happens, Mark, and I love to have you on the show. I like to press you on the stuff, but if your people get elected, a Tea Party backed candidate get elected, generally is Republican, in this midterm election you're feet are going to be held to the fire. What you've been doing to other people for the past two years will happen to you guys. Can the Tea Party movement withstand scrutiny about the policies that they are trying to espouse?

SKODA: Ali, that's very important. I believe so. I've already begun to write and to speak on the issue of the proposed $100 billion cut that John Boehner, who wishes to be the leader of the Republican Party in the House subsequent to the win is suggesting. That is timid. It's inappropriate. We had a $2.5 trillion federal budget and $1.3 trillion federal deficit for almost $4 trillion to spend and the Republicans are now banditering about $100 billion.

This is barely, as we say a drop in the bucket. I think what you're going to see is the Tea Party press for greater control, greater cuts in spending and I think to be much more aggressive in this respect. Look the EPA has now cut 20 percent across the board, 500,000 political federal boys cut, and 100,000 in Russia, Greek austerity measures, France's austerity measures, look we need to tell the people the truth. I think what Tea Party is doing to do together with forcing the Republican hand, is at the very least, say look let us be straight with the people of America, identify what the issues are and let it be very aggressive both in terms of cutting and in fact reapplying some of the regulation in the appropriate fashion.

VELSHI: Mark Skoda, good to talk to you as always. Sounds to me like we'll have things to talk about regardless of what happens in this midterm election. Mark Skoda is the founder and chairman of the Memphis Tea Party.

Let's continue this discussion about the Tea Party. Christine, you heard what Mark said. I guess the point I'm trying to make, is they have definitely tapped into some passion in America, some frustration, some anger. But ultimately if the solutions were that easy, someone else smart would have thought about them.

ROMANS: There's some contradictions in there too are you against a consumer financial protection agency but you are also against the big bailouts. Well the consumer protection agency is supposed to protect us against us against too big to fail and the big bailouts.

Also, we mentioned the U.K. and Greece and a lot of other places where they are talking big austerity, but many of these Republicans around the campaign trail they know too much austerity when you really might need more spending in certain areas might be the best thing for your party as you're trying to get a recovery under way. So you can catch the tail --

VELSHI: There are a lot of contradictions. I guess part of the problem when you have a movement like this is that you've got to establish where you stand on certain things. And the reality that you and I have learned over the last few years, that lots of people stood in the wrong place at various times. Those sands do shift.

Let's take it back out to John Ridley. John, how much of this movement -- let's just put this elephant in the room to rest if we can. How much has got to do with the election of Barack Obama as the first African-American president? They seem to have moved away from that issue, but it's been there. We've seen those rallies, we see those ugly signs. We saw the racism that the Tea Party Express Movement certainly embodied. I've been to those rallies; I'm not using hearsay on this one. Would there have been a Tea Party movement like this if John McCain had been elected president of the United States?

JOHN RIDLEY, AUTHOR & EDITOR, "THATMONORITYTHING.COM: In my opinion, no of course not. The economy is in a very bad place. But too much spending, big government, all those things have been going on for the last eight to ten years. And you didn't see people quite frankly who didn't know the difference between the debt and the deficit a couple of years ago arming up and getting their guns. The economy is bad but it's basically become a platform for a lot of irrational fears gussied up about politics, it is about headless bodies in the Arizona dessert that don't exist, it is about gays and lesbians brainwashing our children, whether the president is a Kenyan anti-colonialist, or whatever that means. If John McCain were president of course this wouldn't be happening. Because on the one hand you wouldn't have Republican operatives who are using this kind of irrational fear in an irresponsible way. And Democrats for all their failings and believe me, they have plenty of them, they don't operate in this fashion. More importantly if the situation were reversed and you had blacks and Hispanics and Muslims getting their guns and talking about taking their country back you would have martial law declared in the country tomorrow.

VELSHI: Let me bring Mark Skoda back into the conversation for a second. Mark you and I have had this conversation several times over the last several months, what would be done about that component and I know it is not you, I'm not blaming you, it's a loose movement. What has happened to that group?

SKODA: Well look. First of all we've been very clear, and extricated those kind of people from the movement and called them out. Let's get off the rhetoric about Barack Obama and the black presidency. Fifty six percent of the people in this nation voted for him he won the keys to the proverbial car as he likes to say and he got them. Now the fact of the matter is we changed because greatly President Bush spent too much money. This movement began well before Barack Obama took the presidency and well before Rick Santelli's (ph) rant.

VELSHI: I hear what you're saying. But it didn't really. It didn't have a name, it didn't have a bus, and it didn't have rallies.

SKODA: That's right. I think. As I said, two things that lit the fire. One is you had a Democrat Congress come in and immediately what do they pass? They talked about jobs, talked about changing the economy. The first thing that passed was cap and trade. The second thing they passed and they forced down our throats was health care. Neither had to do with jobs at all, this was problematic.

The president's own choices with Nancy Pelosi and Harry Reid to make those decisions. Now that animated a lot of behavior and animated a lot of anger. And quite frankly if they had been focusing on jobs, perhaps the Tea Party Movement would have been more tolerant. But at the end of the day we recognize very clearly that the spending that took place up to this point, and all you have to do is look at those actions they did not meet the rhetoric. And so I think people are arguably animated about this and very clearly have articulated that this was supposed to be about jobs and economy. Those 56 percent, which included a lot of those white voters and Tea Party people put this president in the seat.

VELSHI: Let's just hope -- you made an interesting point when you said Barack Obama asked for the keys to the car and he got them. I hope the same situation doesn't happen now. We may just hand over the keys again. I wouldn't want to be anywhere near running this economy right now, nor would I want to do it when Barack Obama took it over in the first place.

All right. Mark thanks very much for that. Mark Skoda joining us again, founder and chairman of the Memphis Tea Party. John Ridley is the author and editor of That Minority Thing.com. Lots of Tea Party talks this midterm election. But in the end will the Tea Party end up hurting the Republican Party by splitting that conservative vote? We'll talk about that when we come back.

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VELSHI: OK. Before anybody here starts e-mailing or face booking here that we're spending too much time talking about the Tea Party. We are spending a lot of time talking about them. Because in a couple of days from now they are going to have a major influence on these midterm elections. Now there are some Americans, by some measures a majority of Americans who believe that this nation needs a third major party.

Let's bring Mark Preston back into the discussion, CNN senior political editor. Mark we just heard from Mark Skoda of the Memphis Tea Party and a founding member of the Tea Party Movement that the Tea Party isn't a party really, it's a movement. Are Americans starting to look toward them as a party? Are they looking to the Tea Party as a remake of the Republican Party? What do you make of the Tea Party?

MARK PRESTON, CNN SR. POLITICAL EDITOR: You know Ali; I think the fact that we call it a party, Tea Party makes people think that it is in fact this monolithic organization that it is based here in Washington, D.C. with chapters all across the country. When, in fact, it isn't. What it's a movement as you said. It's a disparate movement. Some believe one thing, some others thing. Some Tea Party groups that are right next door to each other in some states don't agree on anything. It's not monolithic group. It's a strong movement but it is not a political party as we know it like the Democrat Party or the Republican Party.

VELSHI: Talk to me about the poll that we did the CNN Research Corporation Poll, polled Americans about their opinion of the Tea Party, 43 percent said that they find it too extreme, 41 percent say that they are mainstream, 16 percent are unsure.

PRESTON: That just shows you that the country is very much divided. Let's take the Tea Party and say what they are. The fact is they are very conservative and they align themselves with the Republican Party. They are Republicans. They are not Democrats. When you look at polls based upon Democrats and Republicans you're looking at the same numbers. Ali, you are looking at the country is divided on Democrats and Republicans. It just so happens right now heading into this midterm election that Democrats are in power and they are going to be the ones voted out of office.

VELSHI: Let's talk to Diane Swonk; she is the chief financial economist at Mesirow Financial. She helps us understand some of these things. Diane, we know and have been talking for years about the fact that the economy is issue number one in this election, in this electorate, in the American population, what is the influence that the Tea Party has had on what we're likely to see happen on Tuesday?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: We know the real issues are what's going to happen in terms of the winners and whether or not they have winner's remorse or not. What you brought up in this broadcast is that once they get in, whoever gets in has to now come up with some solutions. If there's a silver bullet to be shot, believe me there is a lot of people who would like to have shot it already. If there was any easy solutions to this economic situation we would have been picking that low-hanging fruit. There are not easy solutions out there. That is the reality.

We do need to come up with some compromise. Gridlock is not good at this stage of the game. I actually argue the exact opposite. We need to see real policymaking done in Washington not by one party, by both parties. The only way to deal with the deficit over the longer hall, is have a long-term plan is to have a bipartisan effort, almost an oxymoron now in Washington. I often joke that you know I've been going to the National Association for Business Economics meetings and been a president of this association for years. We used to invite people from Congress to speak on economic policymaking. We don't invite them anymore. Because they don't seem to be that focused on economic policymaking anymore.

ROMANS: That is such a good point Diane because I think too what people talk about is what they mean is Congress can't mess it up for them making bad policies for political reasons instead of good policies that are better for the people --

VELSHI: Don't you think we need to look at the world through a different prism. We try -- we don't want regulation because we don't want government messing up. We want gridlock because we don't want Congress to mess it up. What is wrong with us that we have this whole thinking that government and Congress is so bad that we don't want them near any decision making.

ROMANS: Diane, in the crust in the heat of the worst parts of the crisis remember. I mean all these economists who were talking about what should we do to get our way out of this, economists were saying we know what we should do or what we should try but it's politicians who are going to be doing it, so it will be politics not necessarily good policies and good economics. That's what the American people should be worried about, right?

SWONK: Exactly. And I think one of the critical issues here, gridlock was good when we set up spending rules and we couldn't spend. And we had raised taxes and we had done a situation that was bringing the deficit down. So it helped us to not to mess things up further. But we don't have any plan now. When you don't have any plan, gridlock is not good. You need to come up with a plan. We need to have an intelligent conversation in this country.

I know that's not the easiest thing to do. But I do believe that Americans are more intelligent than politicians give them credit for. We need to stop scapegoating. I mean let's face it everyone is looking for a scapegoat, an easy person to blame. The Government gets in on blame; Wall Street gets in on blame. But the reality is we all participated in this, we voted these people in, we created this situation and now it's going to take all of us to undo it.

VELSHI: Diane, good to talk to you. Thanks so much. Diane Swonk is the chief economist at Mesirow Financial. Mark Preston is our senior political editor, thanks very much to both of you. Hey listen, continue to talk a little bit Halloween. It is going to be history by elections on Tuesday. But politics is playing a big part in trick or treating this year. We'll explain when we come back.

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VELSHI: Halloween is what you say? Halloween will be over but Tuesday is going to be scary. We're going to have to wait until Tuesday to see if the Tea Party is a big winner at the ballot box. When it comes to Halloween, the vote is over already. Costumes sales are soaring, colonial costumes in particular have been a hot seller. "John Kings USA" off beat reporter Pete Dominick and host of CNN's "What's the Week" joins us now. In costume dressed as himself. Pete tell us about this. Christine and I were talking about this earlier, it's fascinating.

PETE DOMINICK, HOST, CNN'S "WHAT THE WEEK:" It's very true Christine and Ali. I mean I'm proof of it. I just purchased or really created my promiscuous founding father Ben Franklin costume, my wife is dressing as sexual provocative Betsy Ross and a scandalously tight American flag, my five-year-old, will be a cannon ball, my three-year-old, rockets' red glare. So we are proof of it. The truth is I think guys in this tight economy people want a costume for dual purpose, so they can dress as a colonial founding father and then they can wear it to a Tea Party as well. It's kind of hard to get your Chilean miner rescue costume out again next year.

ROMANS: Uncle Sam costume jumped up 138 percent. If you don't have any money in your pocket, at least you can go as Uncle Sam.

VELSHI: Here is the question, if these Tea Party oriented colonial costumes are big is it because there is a surge in the Tea Party? Is it because people are making fun of the Tea Party? Or is it that all of this talk about the Tea Party has made us think about the time when America was grand and it was founded and we actually want to be that? What do you think?

DOMINICK: Well I don't think we want to be that time. I don't think African-Americans want that time, women want that time. Some might, I don't think most of them do. You make a good point that some people might be making fun of the Tea Party by dressing up as a founding father with a silly sign or a message or whatever. I think it's obvious, there's a little nostalgia for the founding fathers and certainly the achievements they created. So I can understand why people are dressing up. I just want to wear a wig for whatever purpose.

VELSHI: You and me both Pete. Any excuse to wear a wig. I'm in New York; I thought to myself I might want to be a bedbug this year. But it is like the Chilean miner rescue thing, a year from now this may not be as big a deal. Whereas the Tea Party, I'll get some use out of. Pete Dominick stick with us. Christine and Pete forget about Tuesday, we're going to be talking 2012 in a minute.

But first farming can actually be a pretty frightening business. In this week's "Turn Around" Stephanie Elam takes us to a small farm where scaring people has become their business.

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STEPHANIE ELAM, CNN CORRESPONDENT (voice over): For Randy Bates the family farm never raked in the hay.

RANDY BATES, ARASAPHA FARMS: We always worked on the farm but the farm never produced enough money to provide for the family income. I always had another job or two or three jobs.

ELAM: So Bates got creative turning his 82-acre farm into a Halloween experience. This is not your average pumpkin patch.

BATES: We opened the haunted hayride in 1991 almost as a social event with friends and family and we built it into what it is today.

ELAM: And expanded hay ride, a haunted motel and a haunted corn maze followed.

BATES: We hope to get 60,000 people this year. It's amazing to me. I can't believe the numbers we're doing these days.

ELAM: Big crowds along with some corporate sponsors means big profits.

BATES: Our annual gross is right around a million dollars.

ELAM: No more second job for Randy Bates. He now runs Agritainment (ph) incorporated full time.

BATES: I saw potential this would be something that would help save our family farm. My kids are on the payroll. My wife and I make our annual salary in the month of October.

ELAM: And while Bates will always consider himself a farmer, he isn't looking back.

BATES: I think the most important thing about changing your business to be with the times or finding an alternative method of income is to be unique. You've got to do something different. You've got to think of that one unique thing that's going to set you apart from your competitors and go with it.

ELAM: Stephanie Elam, CNN, New York.

(END VIDEO CLIP)

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VELSHI: President Obama was a rock star in 2008. Two years later some say he's become a political liability to members of his own party who are running for re-election. Plenty can change in two years. Pete Dominick joins us again. What does 2012 look like for the president? Because we're not thinking about 2012, you know he is.

DOMINICK: Well guys I think you probably understand this is a lot better than I do, being the money experts that you are. The overwhelming issue is jobs and the economy. Of course from the earlier part of your show, it seems like that's going to get better, it is going to take a long time. But by 2012, if people have jobs and the economy gets better I think and I hope it will focus on the issue that we haven't focused on in this campaign, which is war and conflict.

If things are going better with the economy and we can figure out a way out of Afghanistan and Iraq, I think the guy will get re-elected. There is the question of a third party, maybe a Bloomberg that could hurt 2012; I don't think they have talked about the wild card.

ROMANS: There is also the idea that if people take it out on the party in power now, that maybe by 2012 they realize it can take a long time to change and that could be an advance to the president. The party loses but the president actually gains for 2012. I think something I think is interesting is that politics swings so viciously and fast, doesn't it?

Just two years ago this guy was an international celebrity and now his party is really expected to take a drubbing. This is how American politics works.

DOMINICK: I don't know why John McCain or Barack Obama wanted to be president knowing what they were about to have happen. Whoever is in office gets blamed for whatever is going on. I think Mark Preston and so many people earlier have talked about we want instant satisfaction. Is there an app for that, can I get an app for a job, for hair, or maybe the Cowboys can get a win?

VELSHI: Pete Dominick is the offbeat reporter for "John King USA" and the host of CNN "What the Week.:" Peter a pleasure to see you. Thanks for the optimistic note.

Remember; stay with CNN the leading up and through Election Day. We'll be here late into the night on Tuesday giving you all the results. By the way, early to the morning on Wednesday explaining what it might mean to the future of your money. Christine and I will be on that beat the whole time.

In the meantime, make sure you stay connected 24/7 on twitter@Ali Velshi, @Christine Romans. Tweet us your thoughts. We really do read every one of them.

ROMANS: Next week we are back on schedule Saturday at 1:00 pm Eastern, Sundays at 3:00. Have a great weekend, everybody.