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Broken Government; Fixing Unemployment; Chris Christie: Will He or Won't He?; Government Gridlock, Unemployment, An Ailing U.S. Economy, What Can Politicians Do?; Medicare Is Out of Control, But Only Because Health Care Is Expensive; Nissan CEO Says 2012 Auto Sales Will Out Run 2011 Sales

Aired October 1, 2011 - 13:00   ET


ALI VELSHI, HOST: Americans are counting on Washington to fix the economy, but public trust in the government is at an all-time low.

Welcome to YOUR MONEY. I'm Ali Velshi.

Only 15 percent of Americans today say they trust the government to do what's right always or most of the time. That's the lowest on record since 19 -- since the 1950s.

Robert Riech is a professor of Public Policy at University Of California Berkeley. He's also the author of "After Shock, the Next Economy and America's Future."

Bob, good to see you. Thank you for being us. Well, talk about not trusting government. You recently wrote that the Republican Party wants to keep the economy lousy through Election Day.

Let me ask you, if the president is really serious about fixing this economy, wouldn't he have drafted a jobs plan that he spoke about a few weeks ago that would be more likely to garner partisan support and get done?

PROF. ROBERT REICH, PUBLIC POLICY, UNIVERSITY OF CALIFORNIA, BERKELEY: Well, the problem the president is facing I believe, Ali, is that the Republicans have said basically no to everything so far. I think that they will agree to certain provisions, certain tax cuts in the president's plan, but it's going to be like pulling teeth for the president.

When I said that Republicans want a lousy economy on Election Day, I certainly didn't want to paint with too broad a brush. It's not every Republican. But undoubtedly the just say no policies of the Republican Party do tend to lead one to believe that a lot of Republicans wouldn't mind a bad economy on Election Day because that is almost a sure way to get rid of President Obama.

VELSHI: There is a danger, though, with that. This economy, which is shaky right now, takes another turn, another very clear turn downward, the next president of the United States, if it's not Barack Obama, is going to have a worse situation that they inherit that they might not be able to get out as easily. REICH: Well, that is true. But presidents, generally speaking, like to have a very bad economy at the beginning of their four years or their eight years because that usually means, given the business cycle that by the time their four years are up the economy is much better.

Now we may have a new normal. That is after the great recession, it may be unemployment is going to stay up at 9 or 10 percent for a very long time. That's absolutely right. It is a great danger politically, but it's also a huge danger to the economy and to our society because I don't think that is sustainable socially.

VELSHI: Right. All right, Robert, hang on there. Peter Morici is a professor at the University of Maryland School of Business. Peter, economists surveyed by Bloomberg believe that President Obama's jobs plan not only reduces unemployment, but it would also keep the U.S. from sliding into a recession in 2012.

First of all, do you believe that? Because if you do, that would be something we should all support.

PROF. PETER MORICI, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: Well, I don't know how many jobs it will create. It certainly will create some, but you know, providing the states with additional money to pay for school teachers while you subtract money on the health care side, so you trim Medicaid or Medicare in some way to pay for it doesn't help a great deal.

Where we really have a difference of opinion between the two parties is whether spending more will get us out or whether taming the budget deficit will get us out. The Republicans were elected last time to tame the budget deficit. So they see what the president is proposing is something that --

VELSHI: Let me ask you this though. You're right. You're absolutely right. That's what they got elected on. That doesn't mean that's the answer.

MORICI: Absolutely not. Cutting the deficit right now would not be good medicine for the economy. If they want to move forward, though, I think they will have to look outside the government for real stimulus.

The president's program may provide some. But to really get the economy moving, they have to find a way to get to private sector spending. For example, opening up more oil and gas development, which provides the same kind of spending that construction does.

VELSHI: Bob, let me ask you this. Most economists, most smart people sort of agree that raising tacks right now is probably not ideal. But the taxes will have to be raised not only on the rich, but possibly the middle class down the road.

That maybe stimulus is not a bad idea right now. Cutting deficits and budgets are going to be a better idea down the road. Why is that not a normal part of the discourse coming from moderate Republicans and moderate Democrats? Why are we having discussions on the extremes, particularly on the Republican side?

REICH: Well, one problem, Ali, is we don't have many moderate Republicans. All that many moderate Democrats, but certainly there are more moderate Democrats than abundant Republicans.

I mean, if we had a normal political dialogue right now, politicians would certainly be in sync with most of the economists and policy analysts would say right now don't cut the deficit.

Spend more. Don't impose taxes. Later on cut the deficit and impose taxes. It's a sequencing thing, right now you want growth and jobs.

VELSHI: That's a good point. It is a sequencing thing. Bob, good to see you. Bob Reich is the former Labor Secretary, is now at the University of California Berkeley and the author of "Aftershock."

Peter, stay there. I want to bring in Diane Swonk into the conversation. She's the chief economist at Mesirow Financial. Diane, when it comes to fixing the economy. Tell me what you see as the biggest road block.

Because we like to blame gridlock in Washington, but we also often say that there's only so much influence that the government actually has over the economy, so what's really holding us back?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, we have over a trillion reasons to stimulate on corporate balance sheets. We just validated the reasons for not using, redeploying those funds that they have been hoarding in the month of August and September because of the political gridlock and political malfunction we've seen.

So although I don't think government is the only solution, it can certainly help on the margin one direction or the other. When your economy is only growing marginally and you got a crisis of confidence, it certainly can play a major role.

In the larger debate about stimulus versus austerity, if we had a credible plan where we had vision going forward on what the deficit and austerity plan would look like over the next 10 to 15 years, a credible plan, we knew what our potholes were, businesses can deal with that.

As long as they knew where the potholes, where the changes in tax code, what the changes in spending coming, so could households, and then that would free up in the near term some room for some of the stimulus debate that we're also talking about.

The rush to cut and offset any spending increase or any tax cut immediately with spending cuts is really dysfunctional. The gridlock in Washington is having a much outsized effect because the economy is growing so marginal.

VELSHI: So the work needs to be done to fix this economy outside of Washington in the private sector. But the idea there is a road map, there is some destination and there are some agreement as to how to get there is the thing that is going to help businesses make those decisions to employ people.

So ultimately the gridlock you're saying, Diane, is a large part of the problem. Peter Morici, what's the logical fix to that? Do we have to wait for 14 months for an election to finally have the people somehow send the message that you guys have to get something done in Washington?

Are we still going to see this reactionary politics that plays its way all the way down to the voter who now is going to vote on choices that affect them personally?

MORICI: The fact of the matter is we're going to see marginal action on the president's plan. Even the Democrats in the Senate are putting it off. My feeling is there will be a package. It won't be nearly as comprehensive as the president likes.

But a basic problem we have is that when the Republicans win, they think they should get everything their way and the Democrats think they should obstruct. When the Democrats win, they think they should get everything their way and Republicans think they should obstruct.

The reality is folks do want government -- Americans are moderate. They want solutions in the middle. Until politicians are willing to do that, we're going to have this seesawing in elections. I mean, that's all there is to it and we're going to be a country divided.

But I think there are real solutions to getting the private sector going. We haven't had a clear vision from the White House how to do that beyond stimulus. And frankly on the Republican side, cutting taxes and deregulating doesn't warm me up.

VELSHI: All right, we're going to talk about solutions. You just mentioned solutions so Diane and Peter stick around because the solution we need is unemployment. We're going to talk solutions right after we come back. You're watching YOUR MONEY.


VELSHI: I promised you we talk solutions. Let's talk solutions. One of them that we keep on hearing is tax reform. Do we need tax reform to see economic growth and subsequently job creation?

Senator Pat Toomey who's a Republican member of Congress, he is on the "Super Committee" and he's charged with reducing deficits. He thinks tax reform is the answer. Listen.


SENATOR PAT TOOMEY (R), PENNSYLVANIA: This is the most pro-growth thing we can do is to fundamentally reform our tax code.


VELSHI: Peter Morici, is he right?

MORICI: It's important. The corporate tax is too high in the United States. There are too many loopholes. A lower corporate rate with fewer exclusions and loopholes would be beneficial.

But America fundamentally is held back by a lack of demand due to credit overhang from the housing crisis and the debt people have and the trade deficit and so forth. Those are largely problems that need fixing in the private sector that requires public initiative to get there.

I'm not hearing that from the White House. Frankly, I'm not hearing a lot of that from the Republican candidates as well.

VELSHI: Diane, you know, this is going to become a catchphrase for many, many months. We've heard it about comprehensive tax reform. I mean, as Peter says American corporate taxes are high, but a lot of Americans believe that on balance a lot of companies don't pay taxes so we've got those loopholes.

Corporate tax reform could mean different things to different people. We know that the president wants to expand the payroll tax cut, which he says is going to save the average American family about $1,500 a year.

Now, from an economists' perspective, how direct is the link between tax cuts like that one or others, and job creation?

SWONK: Well, the issue on the payroll tax cut is if you don't extend it, it would actually be a payroll tax increase for Americans at a very fragile time for the U.S. economy. So It is one of the things that would affect demand issues.

The problem with tax cuts right now is that we're not sure how many Americans especially at the wealthiest level would save or use that to restructure their debt rather than spend. So it gets back to the demand issues that Peter is referring to that I think are very important.

I do believe in fundamental tax reform. I do think we need to dramatically change the behavior distorting deductions, lower the tax rates, broaden the base, and do a lot of changes to the corporate tax rate as well as personal tax rates.

But that is not our single issue, I agree with Peter on that. That there are much larger issues and the biggest issue out there is you cannot move forward on the economy until we heal from the fundamental thing that got us here, and that was the housing market bubble and bust.

VELSHI: All right, that's still sometime away.

SWONK: Yes, it's still sometime, but there is some opportunity for changes in policy that can help accelerate our process through that that we're not doing at all.

VELSHI: All right, let's talk about this for a second. Federal Reserve Chairman Ben Bernanke referred to unemployment as a national crisis this week. Peter, would you say this is the time for, you know, infrastructure projects? What's the kind of stuff that we should be doing if it's not just fundamental tax reform to get things going?

MORICI: Well, infrastructure projects are a bridge to the future. They give you a temporary boost in employment. But to get us going, we need to do something about the debt that people have. You know, we have helped out the banks. We need to start to restructure these mortgages.

Frankly, we need to start writing down some debt by perhaps making the banks partners in the houses where people are underwater so they can refinance. We really do need to develop more domestic energy. It's great to develop alternative vehicles, electric vehicles and al that but they are not going to solve energy dependence right away.

We have a lot of oil and gas. We're going to be using oil and gas we need to develop that now. There's the trade deficit issue with China that needs to be resolved. There's the issue of regulation on Wall Street. We've added to the cost, but I don't think we've solved the problem. There's got to be a more effective and efficient way to get that done.

VELSHI: But ultimately as you and Diane both point out, sure, there are things holding businesses back, creating uncertainty and not permitting them to hire. The other side of that equation as you just eluded to, Diane, is demand.

OK, so the $1,500 that President Obama says the tax cut -- the payroll tax cut is going to give people, ultimately we need something that is going to cause people to say I need to pay down my household debt. I need to get my debt situation under control and I need to spend enough to create demand. What's that sweet spot?

SWONK: There is no -- we've been saying this for ages, Ali. If there is a silver bullet, it would have been shot already. We're still working through this process, but I do think Peter makes some important points about the changes, what we could do to move forward, the correction in housing.

And to get through that process, you know, the foreclosure. We've not changed foreclosure laws yet. You know, this is a major problem in the United States. I think they take your first child in Sweden if you don't make your payment on your mortgage. That's an exaggeration, of course.

But, you know, the reality is we don't have the kind of recourse here. We have to change the incentive structure. We've got to heal and do it more productively. I also agree that, you know, regulations just thrown sort of, you know, without a lot of thought behind them.

We have not consolidated regulatory agencies. There's going to be a huge surge in SEC filings for hedge funds. They are not staffed for that. I hardly see anyone spending money to have the SEC be the hire of last resort, to staff up, to deal with those increasing fillings from hedge funds and trying to deal with the regulatory issues. That they have to deal with there so we've got a lot of things that are just mismatched in this economy that we need to think more holistically about the consequences of.

VELSHI: Think holistically about the consequences. Peter, that's not exactly what I think about when I think about what Congress is up to these days. Thanks to both of you.

SWONK: Congress doesn't do that.

VELSHI: One of these days we'll just have the two of you making decisions. That will help us out a lot. Diane Swonk is the chief economist at Mesirow Financial and Peter Morici is a professor at the University of Maryland School of Business. Good to see both of you.

All right, let's talk about what some people think is a solution, can Chris Christie, the governor of New Jersey save the Republican Party and the American economy? We'll check it out next.


VELSHI: Welcome back to YOUR MONEY.

The "Chris Christie is going to run for president" speculation does not seem to be dying even though the New Jersey governor has said several different ways he won't be running.

Our friend Stephen Moore is an editorial writer with the "Wall Street Journal." Stephen, what is the fascination with Chris Christie? He's fiscal conservative, we get that part. He's made major budget cuts in New Jersey.

Not entirely loved in his home state for making those moves. But the idea he's a budget slasher, is that what's appealing to you conservatives?

STEPHEN MOORE, EDITORIAL WRITER, WALL STREET JOURNAL: Well, Ali, you know, it's sort of like remember when you were a teenager and you went out on a date and you said, well, not this one and another date, not this one. I think that's a little of the problem right now for Republicans.

They are not enthralled with the currents choices. So there is a lot of fascination with other choices. The one I hereby far the most is Chris Christie. In addition to the things that you said about him, look, I think that he has a couple of characteristics that are very appealing to conservatives.

By the way, he's not as conservative as Ronald Reagan by any means, but number one is his toughness. The fact that he kind of a plain spoken, that he stood up for fiscal responsibility, is something conservatives would really like to see with this $1.2 trillion deficit.

The other issue about Chris Christie is, you know, I've been around politicians for 25 years, Ali, and I would say he's a political phenomenon. He has a special gift of communicating with people that's very much like Ronald Reagan or Bill Clinton. I think he's of that caliber and that's what Republicans are looking for.

VELSHI: He's unvarnished in some ways, which is very appealing. In the current Republican race, those candidates who are unvarnished somehow say things that are a little shocking. Those who are a little too varnished don't say the things that are necessarily so appealing.

So he lives in that middle ground as, Stephen, do a lot of people who haven't either won a presidential race or haven't committed to running. It's always different when somebody is signed in.

Let's bring in our good friend, Joe Nocera, "New York Times" columnist. Joe, Chris Christie has got fiscal conservative credentials, socially, he's relatively moderate. He doesn't wear his religion on his sleeve. Used to be pro-choice, he flip-flopped when his wife was pregnant.

He's for civil unions. He's for gay people though against gay marriage. He's got no foreign policy experience. Is this economy so bad that budget slashing and deficit reduction is the kind of stuff that trumps everything else?

JOE NOCERA, COLUMNIST, "THE NEW YORK TIME": It may well be. We're in a process right now where the country is basically coming to the conclusion, urged on by the Tea Party and most conservative elements in the Republican Party that the thing that matters most is deficit reduction, cutting government spending and you know, reforming entitlements.

Whether they are right or wrong, it has become the preeminent issue with the possible exception of jobs. So here you have a generally blunt spoken governor who has done exactly that in his home state without fear or favor.

The fight as always in any presidential election is for the independents. The independents have now turned against Obama largely. They are looking for a candidate. They are not going to find Rick Perry appealing or certainly not Michele Bachmann. But they could well find Chris Christie appealing.

VELSHI: More so than Romney.

NOCERA: Well, you know, Romney is the default candidate. I mean, they are looking for somebody else to fall in love with. Romney has been around for a while. People don't feel like they are going to fall in love with him. They are going to grudgingly accept him as their nominee if it comes to that, but in the meantime, you know, it is, it's first date time.

VELSHI: Are Democrats worried about Chris Christie getting in this race? Should they be worried about Chris Christie getting in the race and doing what Joe Nocera says, starting to appeal to those moderate independents who Barack Obama used to appeal to?

MOORE: Yes, look, I think one of the things that's interesting about Chris Christie, in addition to the things that Joe was saying, is that if you listen to the speech that he gave this week at the Reagan Library, he talked about solving problems, you know.

He said, look, we solved problems in New Jersey that haven't been solved in Washington. That's a very practical message. It's not a conservative message. It's a practical message. Don't forget one other quick thing about him. He represents a blue state. If Republicans can win in a place like New Jersey, they can win anywhere.

VELSHI: He did bring that point up, Joe. He said we have made -- in New Jersey we have made divided government work, because so many Americans right now think that the whole concept of divided government is one that can't work. What we used to think fantastic about checks and balances now seems to be coming back and biting us in the ankles.

NOCERA: Well, Americans right now find the idea of a pragmatist very appealing because pragmatism is exactly what is not happening in Washington today. Now the question of whether Chris Christie could go to Washington and be a pragmatist just as Obama thought he could go to Washington and bridge the partisan gap, you know, certainly remains to be seen.

You know, running a state, creating consensus in a state, in a state where every state by law has to balance their budget, it's a very different ball game. By the way, I think Chris Christie is doing the right thing kind of staying away from this and saying -- I know he made speeches lately that made him appear more presidential.

But the fact of the matter he hasn't been governor very long. You know, there is a question, in my mind at least, whether he's jumping in before he's really ready for prime time.

VELSHI: Let me ask you this, Stephen, because "The Wall Street Journal," you guys had an editorial where you really put forward a good endorsement of a particular plan by Jon Huntsman, an economic plan, an energy plan by Jon Huntsman.

Sadly that didn't move the needle. The folks who you're influencing are not the people who vote in primaries for the Republican Party unfortunately.

But that is to say that people who come forward with good solid economic plans, relatively moderate, as Jon Huntsman, almost all of his policies are, are not catching fire in the Republican Party.

MOORE: Yes, but the guy who is catching fire this week is Herman Cain. He has quite an ambitious plan out there right now. So I think that -- you know, my reading of the electorate is, yes, Joe is right. People want problem solvers. I agree with that.

But you know, I think the American people think these problems that we're facing as a country are bigger than the politicians do. I think they see these as supersized problems that need supersized solutions.

That's one of the things whether you like what Herman Cain is saying about this 999 plan or not, it is a pretty bold and radical plan and he's rising in the polls.

NOCERA: I thought you were going to say Stephen need supersized people, which is, of course, what Chris Christie alludes to now and again.

VELSHI: Well, he does face up to it. He talks about his struggles with his weight a fair amount. But he's making so much sense to people, they look right by it. The fact that Chris Christie reflects so much of what so many of us are in America might actually be some of his appeal.

Who is actually to blame for everything that's going wrong in Washington and with our economy right now? Our two guests are back right after this break.


VELSHI: Americans criticize the government for being broken, but at the same time American people are pretty divided on what they want from Washington and what they think is best for the country.

Stephen Moore, still with me, how much weight do you give this whole notion that the divided Congress is a reflection of a divided nation. In other words, when we're mad at Washington, should we be mad at ourselves?

STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL": Well, there is no question the Congress does reflect a big divide right now, in this country, in terms of where to take it. You see it in the polls. The Democratic Party has moved to the left. I don't think there's any question, under Obama. The Republican Party is more of a conservative party than it's been at least since the 1980s. That does reflect divisions among the public about what to do about this country. It's interesting, because normally when you have divided government in Washington, usually the economy does very well. The economy usually likes divided government. It's the checks and balances-

VELSHI: Because it is the checks and balances that brings things toward the middle which is where most people live. In this case we have gridlock that pushes us to the edges.

MOORE: Right. The deals aren't getting done. There's been no progress. What you've got is paralysis now not deals.

JOE NOCERA, COLUMNIST, "THE NEW YORK TIMES": It's not even paralysis I think. I think it's worse than that. I think the debt crisis, which was so utterly avoidable had actually a destabilizing effect on the economy, on the way other countries thought about our own stability, and it caused S&P to lower our debt rating.

VELSHI: Although, strangely, and unexpectedly it actually lowered our borrowing costs in the United States. I will ask you this, Joe, what is it that we're supposed to do? You almost said it under your breath a little earlier ago. You said this whole discussion about the debt made the debt and deficit and budgets the most important in this country, most important issue save perhaps for jobs. Jobs still should be the most important issue?

NOCERA: They certainly should be. Certainly if you're President Obama and going into election with 9 percent unemployment, you've got a big, big, big problem, but putting politics aside, people need jobs. People want jobs. I look at our discussions about the debt and deficit and I know Stephen is going to disagree with me here. I think about 1930, 1931 when that's all Herbert Hoover ever talked about. Meanwhile, the economy just collapsed. Do we need to do something about entitlements? Yes. Do we need to get the deficit, ultimately, under control? Yes. Can we be, you know, ultimately, free spending insanely? No. But the notion that we should just tighten the vise on government right now, at a time when we have so much trouble seems insane to me.

VELSHI: Let's bring-

MOORE: Joe, I don't disagree with that. I mean, you are right, jobs is priority number one. It is just that President Obama hasn't really put anything on the table, as a conservative, that I believe would actually create jobs. That's why there's gridlock.

VELSHI: Let me bring our friend, Roland, in. Roland Martin, CNN contributor, is in here.

Roland, we feel bad for you, my friend.


VELSHI: An Aggie got into the presidential race, national race, got on the national stage for about 72 hours, started to flame out. Now we're talking about Chris Christie. Are Democrats worried about Chris Christie? And should they be worried about Chris Christie attracting, as Joe said, the very independents that Barack Obama used to be very attractive to?

MARTIN: This is real simple for any Republican watching: Stop wasting your time with somebody who is not in the race. The problem with this conversation, from day one, it has been -- first it was will Newt run? He gets in. Then it said, OK, will Pawlenty run? He gets in. Will Palin run? Will Trump run? Will Christie run? I swear, literally, if they could somehow go into a shop and create a Ronald Reagan, they would try to create a Ronald Reagan robot. It's a ridiculous conversation.

You don't have a discussion until somebody is in the race. So here is the deal. Perry on paper looked great, wonderful. When you go into a debate it's a whole different deal. I remind people also, you can be all concerned right now. The reality is this, at this juncture in 2007, then-Senator Obama was down 31 points to Senator Hillary Clinton. Things change over a period of years. Bill Clinton in Iowa, he was dead on arrival in New Hampshire. What happened? He rebounds. So Republicans need to stop trying to find a perfect candidate and say let me deal with who we have. If Christie gets in, great. But he's not in. So suck it up and confront who is in front of you.

VELSHI: Well, I will tell you this, though. I will tell you this: What I like, what I hear from Chris Christie, is that unlike so many other people in the race, who just about being made and blaming, and extreme situations, Christie says he wants to come in, and that he's been in a place where there's been divided government and he can somehow get through this. What is the solution? I hear what you are saying.

MARTIN: But, Ali, he can say that right now.

VELSHI: You hear you don't want to say anything nice while your Aggie friend Rick Perry is in the race.

MARTIN: No, no, no, it is very easy to say that when you're not in the race.

VELSHI: Oh, yeah, I hear you. You're not in the race either and I want to know what you think is going to help this economy get further, because we're in a mess.

MARTIN: I recall President George W. Bush coming in, in 2000 saying I want to end partisanship in Washington, D.C. What happened? I heard President Obama, then Senator Obama, say in 2008, I want to come into Washington, D.C. No politician, Democrat or Republican, they have to be able to confront the problem that you have few moderate Republicans, and you have a decreasing number of conservative Democrats. As long as you have people who are on the extremes, you cannot bring folks together. We still are a split nation. That's the fundamental problem that we have.

VELSHI: That's exactly where this conversation started, Joe. We are. So how do we, who vote for these governments that are divided, how do we expect a solution? What is that solution likely to look like because we've got about 14 months to solve this?

NOCERA: We're not going to solve it in 14 months. The actual solution is prosperity. If we had a growing economy and people felt like they had job prospects there would not be a Tea Party.

VELSHI: OK, let's get there. That is a good point. The actual solution is prosperity. Prosperity comes to most people in three different ways. There are two extra ways, you can marry rich or rob a bank. But to most people it means the value of your stocks or investments going up, the value of your home going up, or the value of your wage increasing.

Joe, none of those are consistently happening.

NOCERA: That's correct. I think the failure of Obama administration to get its arms around a reasonable, sensible housing policy-


NOCERA: -to help restart the housing economy, is the single most negligent thing the administration has done.

MOORE: They tried, Joe, I mean, they tried a lot of housing -

NOCERA: They have not done anything.

MARTIN: No, no.

NOCERA: No, they tried a lot of small bore solutions. But in terms of figuring out what do we do about Fannie and Freddie?

MOORE: Well, I agree with you on that, Joe.

NOCERA: How do we restart the private housing market? How do we keep cheap housing from continuing to drop?

VELSHI: We have 4.24 interest rates if you're trying to buy a house, and if you have good credit. What more, Joe, can they do?

MARTIN: No, Ali, here is where the fundamental problem was. Have you to go to the banks and say, look, we bailed your butt out. You have fattened up your bottom lines. It is time to restructure these loans that were absolutely crazy. Because you can't just keep sitting here and saying we're going to hold onto the assets until things get better. If you don't force the bank's hands you have no shot at doing it. Joe, is absolutely right. They have failed to do so. The current foreclosure program of the Obama administration-

VELSHI: But the folks holding this up-the folks holding this up, and I'm looking at Stephen Moore. He looks very sad right now. This is not a guy who is going to want further intervention into what is happening. Robert Reich was on the show just before you guys, said the same thing that Joe is alluding to, same thing Roland is alluding to, Stephen. And that is somehow we have got to figure out how to deal with existing mortgages. Deal with underwater mortgages. Deal with better rules for mortgages and help people out from the situation they are in. Your guys are not going to support that.

MOORE: I think, Ali, right now the housing foreclosures is more a symptom of the bad economy than it is the cause of the bad economy. Look, when people get back in jobs. When they have jobs that are paying them an income, they can pay their mortgages. You'll see a big drop in foreclosures and then you are going to see housing values rise.

The biggest problem, as I see it, Joe, with the economy right now. It is something you have written about at "The New York Times". We write at "The Journal", $2 trillion businesses are sitting on right now, Ali. They want some incentive to invest. They want this kind of anti-business atmosphere in Washington to go away.


MARTIN: Come on! How about the $2 trillion?!

VELSHI: Is that incentive going to come from demand, come from people with jobs saying I'm going to spend something. Joe?

NOCERA: I thought "Crossfire" was not on the air anymore.

(LAUGHTER) MOORE: Those were the good old days.

NOCERA: Where do you get growth? Where do you get growth? Government can work on the margins. There is a huge amount of capital on the sidelines waiting to get in. I don't necessarily think it's because of, quote/unquote, "anti-business" sentiment or anti-business climate, I think it's because there's not enough demand.

MARTIN: That's right.

NOCERA: It's such a chicken and egg thing. I think the government should be doing everything it can on the margins to help create jobs. But I also think the organic economy itself has to start to revive on its own. There's only so much government can do. We can't expect government to just come in and fix everything. It would help if the government could start to create some programs that made people feel like there was hope.

VELSHI: Stay tuned. We have to take a break but, "Crossfire" will be right back.



VELSHI: Welcome back to YOUR MONEY. With me Chrystia Freeland, global editor at Reuters Digital, and Joe Nocera, still with us right now.

Let's talk about markets for a minute. To say that the stock market has been volatile would be an understatement. One day the market is up 300 points, the next day the Dow is 200 points. Wild swings almost every week now.

Chrystia, to understand the markets these days, I don't know whether we need an analyst or shrink.

CHRYSTIA FREELAND, GLOBAL EDITOR, REUTERS DIGITAL: And do we need to be in New York or in London or in Berlin?

VELSHI: Right, right.

FREELAND: Right? So, I think part of what's going on is we understood that the world economy is very interconnected. There are lots of big things happening outside the United States. I think the big driver of the latest volatility has been Europe. People have realized that what is happening in Europe has the potential to be another Lehman. They have also realized there is the possibility of a political solution. I think the markets are following that very closely. What you're having is people thinking, OK, the Europeans have it figured out. Oh, no, they don't have it figured out.

VELSHI: That's exactly right. Because everyday, we say, European markets, Asian markets were up, on the hopes that there might be a looming solution to the European budget crisis. And then the next day markets down. Why? Because we're worried about what's going on in Europe. Make some sense of this for us.

NOCERA: Well, there is no question the potential for contagion is there. Not just in Europe, for Europe, but to jump the Atlantic. No question. It happened in the 1930s. Austrian bank folds in 1931 or so, and the domino affect causes bank failures in the United States.

VELSHI: And we were less interconnected then than we are today.

NOCERA: Right.

And of the matter is, if Greece is Lehman, and if the bailout, the ongoing bailout, is their version of AIG, right? Which was the backdoor bailout of many banks, the prospect of a Lehman-like failure is very, very scary. So, the markets, volatility like this even on a good up day is bad. It's bad psychologically for investors. It signals a kind of un-sureness and instability by market participants. It's just very unhealthy.

FREELAND: And they should be unsure. Right? If you are not, it is not just about, you know, if they all did a lot of yoga. If all traders did yoga, everything would be OK. There is a lot of uncertainty in terms of what's going to happen to Europe. What I would add to what Joe was saying, it's not just about whether European banks will survive this crisis, it's more existential than that. It is about whether the euro will survive this crisis. And people really need to focus on the facts that the collapse of one of the world's three major currencies, that would be a very big deal.

VELSHI: Let's talk about another big problem. For those particularly who are working, in this country, we know unemployment is high, it is over 9 percent. The housing market, as we discussed in this show continues to be troublesome. There is very little growth in the economy. A little more than we thought there was but still slow.

But the cost of employer sponsored health insurance went up 9 percent for families this year. That is according to the Kaiser Family Foundation.

Joe, let's talk about this. This is a major, major problem in a time of slow growth, time of slow economic growth, where we've got all sorts of challenges for middle class families and private health insurance continues to get more expensive every year.

NOCERA: Because health care gets more expensive every year. Because as a country we realize, intellectually, that we need to hold down health care costs, but individually nobody wants to hold down their own health care costs. Why would they?

So, insurers-

FREELAND: The only reason I'm going to stop you there, is when you say, why would they? I think there is a fundamental intellectual mistake that Americans make about health care. They have this view that more health care is like more shoes. So I personally think I can't have too many pairs of beautiful shoes. If I could afford an infinite number, that would be great. You can actually have too much health care. This is what I think is so perverse about America today. Health care is wrecking family budgets; it is wrecking company budgets, but the outcome is not that great. It's worse than of countries that spend less on health care, partly because Americans are over treated.

NOCERA: There's another part of this?

FREELAND: Don't you agree with that?

NOCERA: I do agree with that. We don't know how to solve that because nobody is willing to step out and say this treatment we don't need. In fact, it's just the opposite. There's so much pressure on the FDA to allow $80,000, $100,000 drugs that extend life by six weeks, and so on. These are all drivers.

Now, the other way to think about this, is the government understands they need to do something about Medicare. Right? So there's a big movement to get that entitlement under control. What is driving the rise in the cost of Medicare? It's not the government per se, it's the fact that health care costs are rising uncontrollably. But nobody in the government is saying let's fix the health care problem, they are actually saying let's fix the Medicare problem, which is not going to fix the ultimate problem.

FREELAND: But that is why I think part of what you need in America is a fundamental national cultural rethinking of your attitude towards medical care. It needs to be more focused on prevention.

VELSHI: Which, in theory, we were going to have in 2009.

FREELAND: Right, that was the idea.

VELSHI: In theory the whole discussion about health care was going to be about all these things about health care. It didn't end up being that, it ended up getting very polarized, very quickly.

FREELAND: And very technical and not very fundamental. No one has ever said to Americans, you know what-and to American doctors, by the way-you know what, doing every single test you're capable of doing, that's actually not the way to have the healthiest possible people.

NOCERA: Well, doctors do that also because they are afraid of getting sued.

FREELAND: Right. And because they want to get paid more.

VELSHI: All right. Good discussion from both of you.

NOCERA: We solved that one for you.

VELSHI: You solved that one for me.

Chrystia Freeland and Joe Nocera, always good to talk to you. Thanks so much.

NOCERA: Thanks for having me. VELSHI: A clue into what could drive growth in the U.S. in 2012. Coming up next.


VELSHI: We know the uncertainty about the economy makes consumers hesitant to spend money, it makes companies less likely to expand. But what does it mean for the auto industry? I sat down this week with Carlos Ghosn, he is the president and CEO of Nissan Motor Company. And asked him about strongest influences in the American car market right now?


CARLOS GHOSN, PRESIDENT & CEO, NISSAN MOTOR COMPANY: I think without any doubt one of the reasons for which the market is growing again is because there's a lot of innovation. I mean, new styles, new concepts. At the same time the cars are much more efficient. That means competition is picking up. So, it's a very exciting time to be in the car industry today in the United States. And the choice which is being offered to consumers is tremendous. And this is going to only increase in the next year.

VELSHI: Let me take you back into your global CEO perspective for a second. When you look at what's going on in the world, tell me a little bit about your concerns for the United States.

GHOSN: Mainly uncertainty. That's all. There's no particular concern. The U.S. is growing. Not at the level we would love. We would think one pre-occupation is the fact that there is not enough jobs created. Because we know at the end of the day it ends up affecting consumers. This is a situation we don't like.

But if you take the year 2011; 2011 for the car industry has been a year of growth compared to 2010. In any scenario we are foreseeing in the 2012, in the U.S., higher for the car industry, higher than the year 2011. So, we're doing fine. But we're far from the potential that this market has sold 16, 17 million cars a year. Obviously, we don't expect this to come back.

VELSHI: Because it's a mature market.

GHOSN: Exactly. We are still very far from it. We are expecting, this year, to be around 12.8 to 13 million cars, and next year we'll see another growth. So, that means no particular serious concern for the U.S. market, but some pre-occupation that this uncertainty should not stay a long time.

VELSHI: We've talked in the past about how sometimes it's uncertainty about individual jobs that stop people from buy a new car, but lately it's been just the lack of availability of credit. What your seeing? Your seeing greater availability of credit for people who have the money, who are employed in the United States, who want to buy a car?

GHOSN: I don't think credit is a problem in the U.S. I don't think there is a pre-occupation about the functioning of the financial system like we saw in 2008, 2009. This may be a concern in Europe, as you know.

VELSHI: Right.

GHOSN: Because of the latest scares that everybody-everybody had. Now, the U.S., the only major question is about, you know, when are we going to have a little bit more significant growth for the U.S. market? That's the main question.


VELSHI: Why a double dip recession, if it happens, will be felt differently by each of you out there. I'll explain next in my "X, Y, Z".


VELSHI: Time now for the "X, Y, Z" of it.

I won't predict if whether we're headed for a double dip recession, although economists are raising the odds lately. What I can tell you is this: A double dip will not be felt equally across this country. You see, there are currently two U.S. economies, at least: One for people with good jobs and good credit, and one for people who have neither. If you're lucky enough to count yourself among the first group, you might not realize it, but this lousy economy actually presents some opportunities.

Yep, the stock market's recent plunge has been painful. But it also means that Wall Street is on sale, giving you the chance to snag quality stocks that pay good dividends at a discount.

Secondly despite low mortgage rates home prices can't seem to fine their bottom so scooping up property now, if you're prepared to sit on it, could bring big returns when the housing market eventually comes back to life.

That's the story of the haves, the story of opportunity. If you're living in the have not economy, as so many of you are, yours is an entirely different story. Bargain stocks and cheap real estate don't do you much good if you're struggling to get by. Instead you have to do what you can to protect yourself. You have to build that emergency fund even if it means cutting 401 contributions for a while.

Don't take on any new high interest debt. And even though I know it is daunting, consider relocating, or retraining. There are jobs out there. They may not be in your backyard, they may not even be in your specialty. You got to find them. You may have to retrain for them.

But no matter what keep this in mind. If this economy does take another leg down we're not likely to count on Washington for help. The political will just isn't there. We have all got to forge our own path forward no matter which economy we live in.

That's it for me. Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday 1:00 p.m. Eastern, Sunday 3:00 p.m. You can also catch Christine Romans on "YOUR BOTTOM LINE" Saturday mornings, at 9:30 a.m. Eastern. Stay connected 24/7 on Twitter. My handle is @AliVelshi and the show hand is @CNNYourMoney. Have a great weekend.