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Bringing Back Opportunities For the Middle Class; Job Market for Millennials; The Dilemma of School Lunch Programs: What's In It and Who Should Pay?

Aired September 17, 2011 - 09:30   ET

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

CHRISTINE ROMANS, HOST: If you're part of America's middle classes, now question, there are fewer opportunities. So, how do we bring them back?

Good morning everyone. I'm Christine Romans.

Plus, is the job market not working for Millennials, or are they just not cut out to work in this tough job market?

And almost 32 million kids eat lunch at school every day. It's a captive audience. What are we feeding them? And who should pay for healthier options?

First, the American economy depends on the middle class, and the middle class is falling behind. Income for the average American family has fallen now for the past three years and is now at 1996 levels. Bankruptcy filings by those holding a college degree are up 20 percent in the past five years. College graduates, the fastest growing group of people filing for bankruptcy. And one in six Americans lives in poverty.

Rick Newman is the chief business correspondent at "U.S. News & World Report." And Tamara Draut is vice president of policy and programs at Demos

Rick, I want to talk first about how we can fix this problem. What does it mean for our economy if the middle class is falling behind? Can we have a meaningful recovery without having a recovery for the middle class?

RICK NEWMAN, CHIEF BUSINESS CORRESPONDENT, "U.S. NEWS & WORLD REPORT": It's obviously bad news. And we got new data recently that confirms what a lot of people already know. Mainly, incomes have been falling, real incomes after inflation, for the last are 10 years. That was going on before the recession.

ROMANS: Yes.

NEWMAN: And the recession intensified that. And this is a national problem. I mean, we do have a problem that affects the whole economy. This even affects people in the upper tiers because we need an entirely productive economy, not just an economy that's productive in small segments. ROMANS: I'll going to push you into politics for a minute. You hear all these people saying that it's the president's policies that are hurting the middle class. You're saying this has been going on for a very long time?

NEWMAN: Absolutely. This trend predates anything President Obama has done. Frankly, I think we put too much importance on the ability of politicians to either fix it, or the blame we give them for making it worse. There are two major trends that are mostly behind this/ It is globalization and digital technology. Those two things are rapidly transforming the workplace. And we're probably only at the beginning of what is really a revolution in the global economy.

ROMANS: And you throw --

NEWMAN: And we're feeling the pain of it right now.

ROMANS: You throw a financial crisis in there, and a recession, in it really hurts, a great recession.

Tamara, 5 percent, the top 5 percent, of earners are responsible for 33 percent of all consumer spending. So you've got sort of the very top holding up the economy. We've heard how many times that this is a consumer-led economy. Can we recover if the middle class isn't feeling better?

TAMARA DRAUT, V.P. OF POLICY & PROGRAMS, DEMOS: No, we can't because everybody I think agrees with the notion that the middle class is really the engine behind this economy. We're not going to see the type of economic growth and consumer demand we need to get out of this economic stagnation unless the middle class has money to spend and right now they don't.

ROMANS: Let's talk about how to get that money flowing, talk about solutions and whether the president's job plan could help the middle class.

Some of the provisions the president wants to include are a payroll tax cut for middle class Americans. The white house tells us that would amount to about $1500 a year. There are measures to help more Americans refinance mortgages at today's historically low interest rates. They want to find the frictions that are keeping people away. They use the word "frictions". Keeping them away from a 4 percent loan and helping them get it. And also extending the deadline to file for federal jobless benefits, all the way through 2012.

Rick, the White House says it's about increasing demand. Will these measures going to increase demand, in your view?

NEWMAN: They're right, but anything the government can do at this point will frankly have a very small impact on demand. If this passes-and we need to keep that in mind-

ROMANS: Big if, big if, in capital letters.

NEWMAN: This may go nowhere.

Yes, it will put a little more money in people's pockets. But this is not the kind of thing that's going to make people run out to the department store and splurge on stuff. We need -- what we really need is consumers and businesses who are starting to feel more confident about the future, feel good about their job security, see jobs coming back. We need the private economy to get back on its feet, is really what we need.

ROMANS: How does that happen? What is the thing, Tamara, that is the spark that brings the confidence back?

DRAUT: I think middle class families would feel a lot more secure, one, if they had more money in their pockets. The payroll tax deduction is definitely a good step in that direction. But they'd also feel more confident if when they dropped their kids off at school they weren't going do overcrowded classrooms because teachers have been laid off. When they walk past the fire station that's empty because firefighters have been laid off.

You know, anytime, everywhere they turn, they see layoffs all around them, their neighbors are sitting in homes that are worth less than their mortgages. All of that is sapping everybody's confidence.

ROMANS: Do you think they need another year of unemployment benefits? Because when you talk about this, conservatives go crazy. They think three years of people on unemployment benefits is just - it's too much.

DRAUT: It is, exactly. It's a moral tragedy that we have that many people who have been out of work for that long; which is why the Republicans, and everybody else in Congress, has to get serious about doing something. We have got to do more federal spending right now because the federal government is the only person left that can stimulate the economy.

NEWMAN: I'd like to take maybe a different point of view on that.

Policy is important, but it's not the only thing people should be talking about. There still are people getting ahead. There still is a lot of opportunity in America. It's harder to find, but there are a lot of things people can do to improve their own situation.

ROMANS: Like?

NEWMAN: Go out and find prosperity. One of the biggest problems in the labor market right now is too many people don't have the right skills.

ROMANS: Right.

NEWMAN: Too many people are waiting for jobs to come back that aren't there anymore. There are things you can do to improve your own skill set. They range from small things like boning up on-

ROMANS: There's an investment in that.

NEWMAN: Boning up on technology to big things like job retraining and maybe going back to school.

ROMANS: Tamara is shaking her head. She say, no, no, no, you can retrain but there are no jobs.

DRAUT: We still have a jobs deficit. That is the big thing here. I mean, let's keep in mind, all of these people were gainfully employed just two years ago. Now all of a sudden everybody is under- skilled and doesn't have the right training for jobs that are coming back?

ROMANS: Well, one of the things I worry about, we talk about this new knowledge-based economy and we get a new report this week that shows the average SAT score is 1500 and you have some of the lowest readings ever on some of the components. Wait a minute, how are we supposed to be the knowledge-based economy if we are not even educating our kids?

NEWMAN: We can talk about what is good for the economy as a whole, but most individuals can't do anything about the economy as a whole. All they can affect is their own personal economy.

ROMANS: True.

NEWMAN: And Tamara is right, we don't have enough jobs. But we also have companies who say we do need some people, we just can't find the people with the right skills in the right place.

ROMANS: All right. Rick, "U.S. News & World Report," thanks so much.

Tamara, stick around.

Millennials are known by many names, Generation Y, Generation Next. But my next guest calls them Generation Me. Why she says they're just not cut out to work in this tough new job market, that's next.

(COMMERCIAL BREAK)

ROMANS: Just who are these Millennials? That generation born after 1981, defined as young people 18-30 years old. There are more than 45 million of them, their current unemployment rate around 13.5 percent. According to research from Pew, they are less religious, less likely to have served in the military, and they could be the most-educated generation in American history.

But is this new tech-savvy generation cut out to compete in this rough job market? Back with us, Tamara Draut, who is also the author of "Strapped: Why America's 20s and 30s-Somethings Can't Get Ahead"; and Jean Twenge, a professor at San Diego State University and an author of "Generation Me."

Jean, wow, these kids are confident. They are entitled. They were raised in a fast-paced, rewards-based environment. Are they cut out for this new job market?

JEAN TWENGE, AUTHOR, "THE NARCISSISM EPIDEMIC": The good news is, of course, some of them are, some are hardworking and have realistic expectations, and so on. But there is a reasonably large segment who grew up in this time of plenty when, you know, for their childhood they would just show up and they got a trophy just for participating. They've really come to have these very high expectations.

What we found in the research, you look at baby boomers, Generation Xers, and the Gen Me, at the same age, the biggest generational difference in terms of attitudes toward work, is Gen Me says, I don't really want to work that hard. I don't want to work overtime. I want a job with a lot of vacation. They still say they want the status and the prestige and the money. That's the problem. That's where you really run into trouble, is when you have not just the desire for the status and prestige, but you say you don't want to work hard to get there. That's where you are really seeing the disconnect with this group.

ROMANS: You know, it is interesting because someone once described it to me, Jean, as you know this is the first generation that knew more about self-esteem than self-discipline. They've been taught all the time not to be disappointed, and you're special and you're the best, maybe because the generation before them had to work so hard or didn't get as much attention.

TWENGE: It's possible. And this is an overall cultural change. That's the other thing you have to keep in mind. Generations are about culture. So, Gen Me didn't just wake up one day and say, Hey, I'm awesome. Just give me the job and I don't want to work. They got these ideas from somewhere. They got them from their parents, their teachers and so on.

This really is a whole cultural change. Mostly toward focusing on the individual, which can have really good things, but I think it's been taken too far, in emphasizing self-esteem, which really doesn't cause success, we know from the research.

ROMANS: Right.

TWENGE: And not as much of this self-control and self- discipline, which really does lead to success.

ROMANS: Tamara, let me bring you in. Because you have written about this as well. Whatever the qualities, they simply haven't had a chance yet. And there aren't really the opportunities for them to even try it out. On one hand, they say they're not cut out for the new workforce. Maybe the workforce isn't caught out for them yet?

DRAUT: Yes, this economy certainly has dealt a raw deal to young people. You know a couple of things that we look at. Do young people want jobs? Absolutely. The latest research shows that 40 percent of 20-somethings in college degrees are working in jobs that don't require a college degree. So they're eager to work.

You know, when I think about the heartbeat of this generation, if you can generalize about a generation, which is hard to do.

(LAUGHTER)

DRAUT: I think of the quintessential Generation Me person is getting up every morning, taking a full load of classes at the community college, going her waitressing job at night, then hitting the books till the wee hours of the morning. And getting up and doing it all over again. If you go to any community college in America, you will see young people who are desperate to get a toehold in this economy.

ROMANS: But it's interesting because Pew did a study last year and they asked representatives of all the major generations from the Silent Generation, World War II, Boomers, Generation X and Generation Me. Generation Me, or the Millennials, is the only generation not to put work ethic in their top five descriptors. That says something.

DRAUT: It may say something, but I think actions speak louder than words. And what we certainly see is this generation is working- will be expected to work longer hours for less pay than their parents' generation. There's no indication that they're sitting at home twiddling their thumbs. When Chrysler had a couple of hundred--

ROMANS: No, they're working on their iPad, they are a planning vacation.

DRAUT: Maybe they're using their thumbs on their BlackBerrys or iPhones.

ROMANS: They are drinking their parents' imported beer because they still live at home. That's the stereotype, I know.

DRAUT: That's the stereotype. But really the more accurate stereotype, we have to remember that only about a third of young people in their 20s have bachelor's degrees, or more. The majority of this generation, two-thirds, don't even have the bachelor's degree. They're out there trying to get a job, any kind of job. And the reality is we have an 11 million jobs deficit in this country.

ROMANS: That's the thing, Jean, just to wrap it up for us, the class of 2009, 2010 and 2011, they're all competing for the same jobs at this point.

TWENGE: I know. And I feel for them. I completely agree with Tamara, the majority of this generation really does want a job, does really want to work hard. The problem is we have this increasing minority, that's the stereotype. But it's true. We know there are more of these folks out there who say, I don't want a job that isn't perfect. And if I don't get that perfect job and I don't get that job who has all the tinge things I want, I will just go home and live with my parents. That is the minority, but there are more and more of those entitled folks and they're giving everybody else a bad it name. That's the problem.

ROMANS: All right. Jean, thanks so much. Tamara, really great discussion. Nice to see both of you. Have a great weekend. You know, a college degree may be the best insulator against unemployment but the debt that comes with it can weigh you down for decades. What are your options if you're struggling with student loans? We have the answers for you, next.

(COMMERCIAL BREAK)

ROMANS: A growing number of Americans are starting their careers deeply in debt, a result of all the money they had to borrow to pay for their education. For many, education loans have become a de facto mortgage payment that could take decades to pay off. CNN's Allan Chernoff explains.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN SR. CORRESPONDENT (voice over): Rebecca Billante is living her dream. She's made it to New York City working in fashion for retail giant J. Crew.

REBECCA BILLANTE, TECHNICAL DESIGNER, J. CREW: Accomplished, definitely. I would say that's a very good word to describe how I feel.

CHERNOFF: Accomplishing her dream, though, has been costly. To earn her master's in fashion design at Drexler University, Rebecca had to take on student loans from the federal government and private lenders, even with help from her parents. The three-year program left her with debt approaching six figures.

n BILLANTE: I have some really dark moments about it, that's for sure. It it's overwhelming. It's overwhelming. And it's extreme, it's a lot of money. And I just have to try to ultimately stay positive to know that I will get through it, and I will make it work.

CHERNOFF: The working world often requires ambitious responsible Americans like Rebecca to assume mountains of debt to gain the education their careers demand. That debt load for students at graduation is $27,000 on average. Adding education loans their parents take on, the figure jumps to $34,000. Pile all those loans together, and student loan debt now exceeds credit card debt.

MARK KANTROWITZ, PUBLISHER, FINAID.ORG: Student loan debt is having an impact on how people live their lives, causing delays in getting married, buying a car, buying a house, having children, saving for retirement.

CHERNOFF: It squeezes Rebecca's lifestyle. She lives in a small Manhattan studio. Watches her spending and is sure to pay her credit card bills in full each month.

(On camera): How long do you think it might be before you actually can pay it all off?

BILLANTE: Well, I would say 25 years, 25 to 30 years. There are repayment plans that let you extend it and that's what I thought about when I was doing it.

CHERNOFF: Student loans are Rebecca's educational mortgage.

(On camera): But Rebecca says she doesn't regret it. Borrowing was the only way to achieve her career dream. Allan Chernoff, CNN, New York.

(END VIDEOTAPE)

ROMANS: Wow, 25 to 30 years. We're told the only way to compete in this new lean, mean knowledge-based economy is to be educated. We also know education is going to cost you more than ever and take years to pay off. Kids are graduating, as Allan said, with $27,000 in student loans. Job prospects at the same time are still pretty slim.

It doesn't mean you shouldn't make that investment. I want to be clear. It just means you have to manage it.

John Ulzheimer is with SmartCredit.com.

You know, many spring grads are going to get their first student loan bills in the mail in I think November or December. What happens if you don't pay, John?

JOHN ULZHEIMER, SMARTCREDIT.COM: Well, not paying your student loan is bad news. It's the loan we don't think about we are acquiring for the four or five years it takes us to get out of college. If you don't make the payment, then lender is going to quickly start reporting you as being 30, 60, 90 days delinquent on the loan and will eventually put it in default. Defaulting on a student loan is very, very different than defaulting on any other type of consumer loan, such as a credit card or an auto loan.

ROMANS: Why is that? Is it because the federal government backs so many of these loans?

ULZHEIMER: That's exactly right. A federally guaranteed student loan is not statutorily dischargeable in bankruptcy, unlike credit card debt that you can just wipe away in a Chapter 7 bankruptcy. You cannot wipe away federally guaranteed student loan debt in bankruptcy. You will pay it. You're either going to die with it, or you're going to pay it.

Another thing to keep in mind is most negative debt stays on our credit report for between seven and 10 years. Depending on what it is. Bankruptcy and tax liens stay on 10, default on credit cards stay on seven. Defaults on federally guaranteed student loans, seven years from the date you pay it.

ROMANS: John, college tuition costs are up 400 percent in the last 30 years. People really have to weigh which investment is going to make sense for them, a traditional four-year, private liberal arts college, or a community college, or a public college. This is an awful lot of money and it's going to be really important to make sure it remains good debt. ULZHEIMER : Yes. I think that's very important. To expect an 18-year-old is savvy enough to know what they're getting into when they start signing those loan papers and then four years later are going to understand how to get out of 15, 20, even $100,000 of debt depending on where they've gone. I'm not sure that's really responsible for parents to allow them to do that without asking them to put in the effort to understand the ROI they're going to get on that degree.

ROMANS: The return on investment, it is.

ULZHEIMER: That's exactly right.

ROMANS: It is an investment you are trying to get a return from.

So let me ask you this, what do you make of this new in debate that a college degree isn't worth it?

ULZHEIMER: I have to be honest with you, I have one. I don't have one from an expensive school. I have friends that don't have degrees, who do better than me. I have friends that have very expensive degrees that do much better than me. So I think it is all going to be very individualized. I think there is a fantastic argument for going to community college and then transferring into a more expensive school.

ROMANS: I do, too.

ULZHEIMER: Because, frankly, who cares that you took English 101 at Duke? They care that you got your law degree at Duke.

ROMANS: John Ulzheimer, SmartCredit.com. Thank you so much, John. Nice to see you.

ULZHEIMER: Yes, Ma'am, thank you for having me.

Coming up, you want your kids to eat healthy at school, but who is responsible for that, you, the school, the government? From cost to quality, we'll talk about it next.

(COMMERCIAL BREAK)

ROMANS: The average kid will eat 3,000 school lunches, school meals, between kindergarten and 12th grade. They are a captive audience. What can we do to feed them better food? Does healthier eating cost more? Does it have to, and who swallows the bill, the government, the school, or you? With me now is Amy Kalafa, the author of the book "Lunch Wars."

So the USDA-welcome to the program.

AMY KALAFA, AUTHOR, "LUNCH WARS": Thank you.

ROMANS: The USDA says that almost 53 billion schools lunches were served last year, more than half of those paid for by the government. Those are free lunches right there, you can see, reduced price lunches, about 9 percent of them. Full price lunches, about 35 percent. We've got these kids, we are feeding them, the government is feeding them. What are we putting into them to make sure that longer term we don't have an obesity problem, we have healthy kids going off to the workforce?

KALAFA: Well, you just said it. We're spending $9 billion a year on this program. We should be providing these kids with food that is going to make them healthy. What happens in schools is kids may be getting lesson in the classroom. But when they get to the cafeteria, they're often able to make a lunch out of a giant cookie, a giant pretzel, and chips and fries, and a fuzzy drink. And nobody is really reinforcing those lessons that parents are trying to teach their kids at home and schools are teaching in the classroom. We need to connect the cafeteria with the classroom.

ROMANS: I think the awareness is coming, though. Michelle Obama, the first lady, just last week; she was talking about healthy eating in the schools and healthy eating among parents. We know there's a Healthy Free Hunger Kids Act that is directing the USDA to set new nutrition standards for all school foods from lunch to vending machines, and if you look, here is a comparison of a typical pizza Friday lunch, before and after implementation. Some of these changes are things like whole wheat pizza, no more chocolate milk.

Amy what are these new federal rules mean? Are they coming in slowly? Are you happy that it's happening?

KALAFA: I'm always happy that our federal government is supporting good eating for kids. I think the government's job is to provide basic regulations on nutrition and I call it a floor rather than a ceiling. But this is really a local mission. So the USDA, which runs the school meals program has mandated that every school district that participates in the program has a wellness committee and a wellness policy. It's a great opportunity for parents to get involved on the local level. It's a grassroots kind of thing where you can advocate for what you want to see going on in the lunchroom, in the classroom, and even in terms of snacks and other activities that kids participate in, in school.

ROMANS: It really is a captive audience. I keep going back to that. We're told that it was the Department of Defense initially that started the school lunch program because so many of the recruits, quite frankly, were not up to snuff, you know? And now it's the reverse. We're almost overfed the wrong things.

KALAFA: That's it. Nowadays, American kids are overfed and under nourished. It's a sad situation, the statistics on all kinds of childhood diseases are increasing. And this is predicted to be the first generation that will live shorter lives than those of our parents.

So school is really a missed educational opportunity right now. And there are schools that can do wonderful things about that and is they're hiring chefs, they're able to turn it around and make the economics of the program to work.

ROMANS: Amy Kalafa, the book is called "The Lunch Wars." Thanks for being here.

Thanks for spending time with us this morning. Let's continue this conversation online. Find us on Facebook or Twitter. Our handle is "CNN Bottom Line." Find me @ChristineRomans. Really love to hear what we have to say.

Back now to "CNN SATURDAY, "the latest stories making news. Have a great weekend.