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YOUR MONEY

Millions Out of Work: Will It Get Worse Before It Gets Better?; A Review of GOP Candidates' Economic Solutions, Strategies; Stephen Leeb Says US is in an Economic War with China

Aired October 9, 2011 - 15:00   ET

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


ALI VELSHI, HOST: Millions of Americans are still out of work. Could things get worse before they get better?

I'm Ali Velshi. Welcome to YOUR MONEY.

Nine out of ten people say this economy is in poor shape, that's according to a CNN/ORC poll and that number has been rising steadily throughout the summer.

Lakshman Achuthan is the managing director of The Economic Cycle Research Institute. We sometimes think of Lakshman as our economic groundhog. When he's around a lot it means there are months more of recession. Lakshman, you came on this show very early in 2008. You were the first person on our show, on our network, to call that recession.

You told us when we were out of it and now you say we are either headed for a new recession or we're already in one.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE, MANAGING DIRECTOR: Right. Absolutely, and this is based on the forward- looking indicators of the business cycle. That's all we do is watch those indicators, monitor them, and there's a -- a very overwhelming message when we look in those indicators that is consistent only with a new recession that is starting around here if you think back to 2008 when we made that call, then, it was -- prior to the Lehman crisis --

VELSHI: Right.

ACHUTHAN: -- economists were looking backwards at GDP and all they saw was positive GDP --

VELSHI: Once we saw the Lehman crisis everybody was on board with the fact that there was a recession but, before that, there was some question.

ACHUTHAN: -- correct, so when you see GDP numbers positive or jobs numbers or other numbers positive you say there is no recession and you're going to get a lot of pushback and time will tell.

VELSHI: All right. Harvard Professor Ken Rogoff is the former chief economist for the International Monetary Fund. Ken, you and Lakshman have been on this show before. Your point of disagreement was that you -- you say that a lot of people feel the recession never ended. Now we are four years away from the official start of this recession. It started in December of 2007. We're certainly three years into the worst of it. Where do you think this ends?

KEN ROGOFF, FORMER CHIEF ECONOMIST INTERNATIONAL MONETARY FUND: Well, I think we may be going very slowly for a long, long time and Lakshman is right. It could get worse before it gets better. It was a pretty mediocre jobs report. It's hard to distinguish this from whether we are or we're not already in a recession.

VELSHI: All right, the -- I want to -- I want to take this to some of the frustration that people are feeling. The Occupy Wall Street protests are going on three weeks now and they're spreading to other cities. Unfocused as they may be, the movement even got the attention of the president.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You're still seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on abusive practices that got us into this problem in the first place. So, yes, I think people are frustrated and, you know, the protestors are giving voice to a more broad-based frustration about how our financial system works.

(END VIDEO CLIP)

VELSHI: Chrystia Freeland is the Editor of Thomson Reuters Digital. Chrystia, here's the thing, the president actually alluded to this in a different part of his speech. How about taking these protests and picketing the lawmakers who are blocking the Consumer Financial Protection Bureau from fully functioning.

It was designed to protect people from the banks that got us into this financial mess in the first place. Whether that's the solution or something else, how -- how do you focus the anger, the random anger, of these people occupying Wall Street into something meaningful that could actually result in positive change?

CHRYSTIA FREELAND, THOMSON REUTERS DIGITAL, EDITOR: Well, I think you're right, Ali, to point to the fact that this is a movement at the moment which is about protests and -- and anger and frustration with the way the economy works, with the way the economy is structured. It is less a movement that has a very clear agenda for how to fix it. And, in that way, I would contrast it with the Tea Party. You know, I think in some ways I think the grievances are the same.

VELSHI: By contrast, but --

FREELAND: Contrast, yes --

VELSHI: -- not -- not to compare it within terms of similarities.

FREELAND: Exactly, I think the grievances are the same and I think the grievances are really legitimate. You know, I think the bottom line is the American economy right now is not working for a very broad swath of the American middle class. That is not the deal in America. It's not part of the American social compact and people are angry about it and they're right to be.

The difference is, the right has a very clear point of view about the culprit and how you fix it. The view on the right is government is too big. If government shrinks, everything will be o k. The view on the left is the economy isn't working. Bankers are probably getting too big a share but there is a less coherent answer as to how you fix this unbalanced economy.

And I think that that's why we're seeing that the Occupy Wall Street protest has a less clearly defined agenda on the changes that they want.

VELSHI: Although, can -- it -- it starts to look like class warfare because there are some who say the -- the part that's broken about our economy is that everybody doesn't have a chance to become prosperous. It's disproportionate. Whereas, on -- with these protests what you're seeing is things that -- direct hate toward the rich, hate toward the banks which we know need to operate.

So, we're getting into this weird situation where maybe it's high unemployment or maybe it's -- it's inequality in the economy but it is developing into -- into class warfare. I mean, we really didn't think we'd see protesting in the streets in America the way we're seeing.

ROGOFF: Yes, I mean, if we have unemployment drag on, teenage unemployment they reported is almost 25 percent, when you have so many young unemployed without hope, discouraged, it's a very, very volatile situation. Sure, you know, if we get better in a year or two it will be fine but I do worry about where this will go.

I think Chrystia is absolutely right. There is a huge undercurrent of anger. You see it in the Tea Party, you see it in the Wall Street protests. You see it when you talk to people. And where will that go in our political system? What will it bring in the election? What will it bring? I think that is a very, very tough question for America.

ACHUTHAN: And then, just jumping on that, with the -- with the teenage unemployment, with the long-term unemployed, I think that's really the issue. I'm not getting into the politics but when you look at business cycles and more frequent recessions, which is what we have in front of us --

VELSHI: Yes.

ACHUTHAN: -- we're not going to have the unemployment rate go way down anytime soon and it's about -- it's right now about to jerk back up noticeably. So, that kind of unrest or -- or -- or idle hands, as it were, you're going to get --

VELSHI: And we're --

ACHUTHAN: -- a lot of pushback.

VELSHI: -- we'll talk after the commercial a little more specifically about jobs and how to solve them but Lakshman, let me ask you, for the people occupying Wall Street or the streets of these other cities right now --

ACHUTHAN: Yes.

VELSHI: -- they probably think the conversation that you and Chrystia and Ken and I have about whether it's a new recession that we're going into or -- or it's the same one highly academic. How do your forecasts show things changing on the ground for people, separate from unemployment --

ACHUTHAN: Exactly.

VELSHI: -- are there going to be other measures that people are going to feel if we have a new recession?

ACHUTHAN: Absolutely. Look, I will not debate, this is a bad economy, even prior going into a new recession. Make no mistake about it, when you go into a new recession, even if it's mild, it's a lot worse so jobs are weaker, sales, income, production, all of those are going to be slipping. And, news flash, it's happening around the world. It's not just here.

VELSHI: Yes.

ACHUTHAN: This is a global issue as well and -- and, so, we're not going to get out of this very easily.

FREELAND: I think the other element which is --

ROGOFF: You're showing for recession too.

ACHUTHAN: Yes.

FREELAND: -- the -- the other element, which is really important and -- and that you alluded to, Ali, is it's not the same for everyone.

VELSHI: Right.

FREELAND: The pain is concentrated in a particular group. With your unemployed it's really bad --

VELSHI: And for some people --

FREELAND: -- and if you don't have job security it's really bad.

VELSHI: -- but -- but for some people they didn't feel the recession the first time it came around.

FREELAND: For some people it's actually terrific. You know, look -- look at luxury good sales --

VELSHI: Yes.

FREELAND: -- those are fantastic. There are some people --

VELSHI: All those prices are low.

FREELAND: -- who are doing incredibly well with the technology evolution with globalization.

VELSHI: All right.

FREELAND: And, that's part of the reason you see the anger in the streets.

VELSHI: But --

FREELAND: People see that.

VELSHI: -- but, we all agree that if we had a lower unemployment number, if we had greater job creation it would certainly get us a long way to the solution that we are all seeing so all of you just stay there for a second.

Ken, Lakshman, Chrystia, just stay where you are.

Jobs report came out, as Lakshman said, better than expected but is it meaningful enough to put this recession talk on hold? We'll talk about it after the break.

(COMMERCIAL BREAK)

VELSHI: Eight point seven million jobs lost since the recession began, and numbers like we saw in September won't do much to aid the meaningful recovery that we all so desperately want and need.

Let me show you the September jobs report.

There were an increase of 103,000 jobs. That was actually more than economists had expected. The numbers for August and July were typically, they are always revised, they were revised higher so it painted a little bit of a better picture.

The unemployment rate still remains stubbornly high, 9.1 percent, but this far into a recession while that is a politically popular number to talk about, it's actually less relevant than the number of jobs that were actually created in the private sector, and that's where we want to see more of these jobs created, 137,000 jobs were created. The government continues to shed jobs, 34,000 jobs were lost in the government.

Lakshman, in a recovery, not the recession that you think we might be in or going into or the one that Ken agrees has never really improved since this recession substantially, in a real recovery, what does jobs report look like? Not only the number of jobs created -- number of jobs created but where and what type?

ACHUTHAN: Well, I mean, across the board, in a recovery it's going to be pervasive so it's not going to be limited to one area of the economy. That's key. It has to be pervasive. And, I think we saw what it looks like at the beginning of this year between February and April the economy was creating about a quarter million jobs a month and that's about as good as it gets for the U.S. economy if you look over the last 10 years. Whenever we've kind of reached that pace that's about as fast as we can go on jobs creation so it's critical that we have a long expansion.

VELSHI: Right.

ACHUTHAN: And, here, in -- in this recovery that I believe is ending, we had over two years of GDP being positive and we, since the beginning of 2010, have created about 2 million jobs. In your lead in you said we've lost 8.7 during the recession. That's the problem. We didn't have enough time to recover that.

VELSHI: But I think -- but I think you've told me in the past we've never -- you know, it takes a long time to ever recover all of the jobs you lose in any recession.

ACHUTHAN: Absolutely, and, see, this is the thing, all of our recent memory is about the 2000s, the 1990s, the 1980s. The 1990s was a record-breaking length of expansion. It was a decade long, you made over 20 million jobs.

VELSHI: Right.

ACHUTHAN: That's what we -- that's our goal, we need to see something like that.

VELSHI: But you -- you often said --

ACHUTHAN: However, we're getting --

VELSHI: -- that that's not really likely.

ACHUTHAN: -- we're --

VELSHI: That is just not (inaudible).

ACHUTHAN: -- the fundamental problem is we're not going to get that anytime soon. We're back to short expansions and that's actually normal, from 1799 to 1829, 90 percent of expansions are three years or less. From 19 -- in the '70s it was the same way. That's where we live now. That's the big problem.

VELSHI: Well, OK, then this is going to make, then my next question to Ken particularly complicated. Ken, when we started this recession, unemployment was at 5 percent. It is a term that many economists use to represent full employment. You can argue whether that's right or wrong but we were at about 5 percent.

In the recession, the projections from the Federal Reserve were that we would get down to that 5 percent level by about 2013 and everybody gasped and said oh my goodness that's a long time away and then Ben Bernanke started to sort of stretch that out a little bit. The newest numbers indicate -- the newest -- the projections indicate around 2017 before we are there. Is there any way to -- to -- to make that glass look half full? ROGOFF: No, I'm afraid not. I mean, I think after you have a deep financial crisis this kind of contraction recession is very typical. It's hard to come out of it. You know, frankly, if you talk to businesses, they're not seeing much sales growth, maybe 1 or 2 percent. They don't need to hire more people. They can buy some iPads or something to get the extra output and, so, I think we're not going to see rapid growth.

Consumers are hurting. Their housing prices have collapsed. They're over-indebted. They're worried about their work. You're not going to see that demand that's going to feed into the businesses wanting investment and our exports have not been as good as we'd like.

VELSHI: Chrystia, so, we've heard from the economists. Now, create a picture politically because we know that demand is what causes jobs to grow. We know that indebtedness can only be solved by an increase in income and you only increase income if you've got more jobs. So, we know that we're not going to get back to where we are for a long time.

The president wants better job numbers if, for nothing else, than to save his own job. Is there anything in this jobs bill that he is presenting that would significantly -- significantly bring down unemployment in this next year we're talking about, this next politically important year because I'm not really hearing that from these two guys.

FREELAND: Well, I -- I think, actually, the jobs bill is a good bill. I think that it would make a difference. I don't think it would move the dial sort of hugely but it would help. The bigger issue is, I think the political chances of that bill being passed, certainly, in its entirety and maybe even in part is not that great.

So, you know, I think the political issue that the President faces is how does he present that? And, I think that the choice that we've seen him make is the choice that I think a lot of people feel he should have made a year or a year and a half ago --

VELSHI: Right.

FREELAND: -- which is rather than seeking compromise behind closed doors to go publicly and aggressively and say this is my program, if we were able to pass that program we could improve things. I think the real dilemma for the president is what Professor Rogoff was pointing to, which is, you know, his fluent research on financial crises and what happens afterwards is the recovery from those crises is longer and more painful than the typical recession we are familiar with. And that is something really, really hard politically to deal with.

VELSHI: Yes.

FREELAND: On top of that, I think that there are big structural issues in the economy, structural issues that tend to make unemployment a more difficult issue to grapple with and we kind of didn't feel those structural issues because the credit bubble hid them. The credit bubble meant there were lots of construction jobs, it meant there was lots of consumer spending because you had your house as your ATM and you could easily borrow money on your credit card. That's all gone and, really, America is now coping with how to restructure its economy in an age of globalization in the technology revolution when, as Professor Rogoff said, you just buy a few iPads instead of hiring more people.

VELSHI: All right. Thanks to all of you. We'll continue this discussion. Ken Rogoff, Professor at Harvard University and former Chief Economist with the IMF. Chrystia Freeland, Editor of Thomson Reuters Digital, and Lakshman Achuthan, the Managing Director of The Economic Cycle Research Institute.

It is not all bad. We're going to show you which cities have jobs right now and what those cities are doing right, next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Unemployment stands at 9.1 percent nationwide but, depending on where you live, the story can be quite different. Let me show you on a map. As of August, unemployment in El Centro, California, and Yuma, Arizona, was around 30 percent, Las Vegas and Vero Beach around 14 percent, still well above the national average. Rocky Mount, North Carolina, almost 14 percent.

Now, on the opposite side, take a look at some of these places, Bismarck, North Dakota, 3 percent. Portsmouth and Burlington, Omaha, Nebraska, Midland, Texas, all under 5 percent. Richard Florida is the Senior Editor at The Atlantic. He -- let's -- Richard, tell me about these cities that are doing much better than the rest of the country, half the unemployment rate of the national average. What are cities like that doing right or are they doing anything right at all?

RICHARD FLORIDA, SENIOR EDITOR, THE ATLANTIC: Well, Ali, as Chrystia just said, it is a structural unemployment challenge we face as the economy transitions from this older industrial economy to this newer more knowledge driven -- and also resource driven. So, what you see is that structural transformation that Chrystia and Ken talked about imprinted on America's economic geography.

So, places that are way out on the coast that had, you know, economies that were in the sun belt, built up on the housing boom and the credit bubble, Las Vegas, Riverside, California. Even the places in Arizona, like Yuma, which are over 30 percent and those old manufacturing centers like Detroit, tragically, 15 percent and, in the city, the mayor has said it could be as high as 50 percent.

VELSHI: Wow.

FLORIDA: But -- but, you have this other thing going on where college towns, right next door to Detroit like Ann Arbor, have very low rates of unemployment with medical centers, education technology, Boulder, Colorado. And, down in Florida, Gainesville, as well. And in the knowledge centers of the economy, Washington, D.C., performing very well. And, then, what's really striking is the plains.

Bismarck and Fargo and Lincoln and Omaha, Nebraska, and Oklahoma City in that belt. So, you have this new geography of America emerging where some places almost don't feel the recession and others have been just whacked with long-run structural unemployment and -- and no -- no new job creation.

VELSHI: And like -- it's very interesting because, like that conversation that we just had with Chrystia and Lakshman and Ken, talking about two economies and people feeling the recession differently, geographically, we have two economies as well. Richard, hang on for a second.

Christine Romans, my colleague and host of CNN's "YOUR BOTTOM LINE."

Gallup finds that in the Midwest and the South, 14 percent more companies are hiring than laying workers off and that is more than anywhere else in the country.

But, Christine, the idea of packing up and moving to a -- to a -- to a job, to a place that is more prosperous than where you are, is that strategy sensible. You know, you and I have argued about this.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: We have.

VELSHI: I think people should and you're saying maybe they sometimes can't.

ROMANS: Well, there's two pieces of conflicting advice I can't square here. One is that there are these places in the country that are doing so well the opportunities are there, you talk about Ann Arbor, North Dakota, Iowa, some parts of Texas. Great. Go in there. Get a job.

On the other hand, you know that people are hiring people they know. The most important way to get a job right now is networking. If you don't have a network somewhere, how are you going to be the one who's going to break in. If you can square those two pieces of advice, I say, yes, move. If you are not beholden to a house that's 25 percent underwater and you can move, if you know the schools are good where you want to go, fine, move.

But, remember that we know that the way to get a job in this economy is knowing someone who knows you or knows someone who knows you who is helping you get in a place that is a good fit for both you and the company.

VELSHI: Now let's take it back to politics for a second. Richard, many of the states with the slowest recoveries and the highest unemployment are swing states that could decide the election. Clearly, the president has motivation to dramatically improve the unemployment situation in places like that.

But, as we just heard in our previous conversation, there may be very little that he or any politician can actually do. Although, we will, for the next year hear about the fact that if you vote for so and so they're going to improve the economic and job situation in the given geography.

FLORIDA: Yes, yes, I don't think the president can do much. This is a -- and I think this is what Washington, both sides of the aisle, have to understand. That, as you just heard from Chrystia and Ken and everyone, it's a structural challenge. This isn't just, you know, we're going to stimulate the economy and bring jobs back. How are you going to stimulate a construction section that is completely dead in the water? That's what was covering all the sins of our economy, as Chrystia said. That credit bubble provided lots of low-skilled jobs in construction.

But, in politics, I mean, I think this is where the president, I've written on this, faces a huge, huge problem where unemployment is high, where we have older industrial economies. Those are the states that are turning redder. And, in the past he was able to -- to take those states but, now, with unemployment surging, what -- what I've seen in looking at is approval and disapproval rates and correlating that to our economy.

That's where he faces his biggest challenge. He's got the states that are blue, those knowledge economy states on the east coast --

VELSHI: Right.

FLORIDA: -- California --

VELSHI: Right.

FLORIDA: -- but it's the states that are struggling with, not only unemployment, which are struggling with the structural transformation from an old manufacturing economy to a new knowledge and service economy. Boy oh boy, that's where we see the -- the -- his approval and disapproval ratings really being challenged.

VELSHI: And, Richard, you do write about that. You can read what Richard writes. He's a Senior Editor at The Atlantic. He's the author of a great book called The Great Reset, and he's a Professor at the University of Toronto and, of course, you can see Christine every morning along with me on American Morning and on Saturday mornings at 9:30 on Your Bottom Line. Thanks to both of you.

Well, Mitt Romney is re-emerging as the frontrunner for the Republican nomination so how does President Obama plan to challenge the former Massachusetts Governor's economic record. That's next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Sarah Palin and Chris Christie officially took themselves out of the GOP presidential race this week. And a recent CNN poll of polls shows Mitt Romney is the current front-runner among Republicans.

Democratic Strategist Donna Brazile is a CNN political contributor.

Donna, it's going to be a tough economy for President Obama to run on. If the opponent end up being Mitt Romney, I don't know if you think that is the case, what weakness could the president point to in Romney's economic record?

DONNA BRAZILE, CNN CONTRIBUTOR: There's no question the president can point out Mitt Romney's record as governor. As governor he was ranked 47 out of 50 states. In fact, his job record was so bad that he was unable, in many ways, to use that in his bid back in 2008.

I also think that Mitt Romney's economic plan to get the economy moving again is a prescription for going back to the past policies that pretty much got us in the mess we're in now. What Mitt Romney, and many Republicans have going for them right now is tragically is the high unemployment rate, the economy stalled. But I do believe things will get better and the president will be able to campaign on his vision for the future. On an economy that is, albeit not growing jobs as fast as most Americans would like them to grow, the economy is showing some signs of life. We've just got to do more to get things moving again, like pass the Americans Jobs Act.

VELSHI: Will, as a CNN contributor, Will Cain, and as a conservative, based on Mitt Romney's past, do you think-I'm not talking about whether he can campaign to say he's going to turn the economy around- do you think he's got what it takes to turn the economy around?

WILL CAIN, CNN CONTRIBUTOR: I think he has a better vision for how to turn the economy around than does Obama. I think Mitt Romney's economic plan so far though, Ali, is a very hard thing to evaluate. It's hard for me to come on here and defend it as an economic policy, I see it largely as a political document at this point.

The reforms Mitt Romney has said he won't enforce, that's a good thing. He won't enforce Obama care. He won't enforce the Dodd/Frank financial regulations. The reforms that he won't put himself out there in favor of, such as tax reform, or Medicare reform, those are the parts that are concerning-that's why I can't give you a really 100 percent solid answer, about whether or not he can turn the economy around. But I am confident he's a wiser choice than Obama.

VELSHI: As Perry slips in the polls, however, Herman Cain starts to benefit a little bit. Part of the former businessman's economic plan is to do away entirely with the existing tax code and replace it with what he calls 9-9-9 Plan. That is a 9 percent corporate tax on corporate income, a 9 percent on personal income, and 9 percent sales tax. Really nifty in debates, because he uses it all the time and in interviews.

Rick Newman is a chief business correspondent for "U.S. News & World Report."

Rick, critics say this is another Republican plan that protects the wealthiest and puts an unfair burden on the poor. You've looked into this. Do you agree?

RICK NEWMAN, CHIEF BUSINESS CORRESPONDENT, "U.S. NEWS & WORLD REPORT": It's clearly a populist plan. I mean, 9-9-9, it sounds like a two-for one pizza special. I has this sort of nice ring to it.

I don't think we should just dismiss this idea. I don't know about his numbers. Herman Cain says he could start out by raising the same amount of revenue the government has now while totally revamping everything. I mean, I think that is way too oversimplified. Here is one of the main things he wants to do. Usually you hear conservatives say we need to just cut income taxes and the economy will magically prosper. Herman Cain is kind of saying that. But he's also saying he's going to make up the difference with this national sales tax on the other side. This sounds radical. And it actually is radical but there's soundness to the concept, anyway.

VELSHI: Right.

NEWMAN: Which is let's stop-or let's lower the taxes on running companies, starting companies, and working and let's raise the tax on consumption, which would encourage people to save money.

(CROSS TALK)

NEWMAN: The principle is economically sound.

VELSHI: The principle might be interesting. But, Will, you've just written on this to say that while the principle may be sound, you've got a problem where this would go.

CAIN: From a conservative perspective I think 9-9-9 Plan is absolutely terrible. Let me just tell you why with three other numbers, 7-7-7. In 1913 the United States government enacted permanently the income tax. Within seven years we went from a top marginal tax rate of 7 percent to 72 percent. There's no way you can give the United States government a new stream of revenue, a new taxing power, and expect it be kept at 9 percent. Supporters say, hey, we'll have a constitutional amendment. It will require two- thirds supermajority vote.

VELSHI: That doesn't make sense to put a percentage --

CAIN: I say look at history and look around the world. France has 20 percent VAT, U.K. has a 21 percent VAT, Italy has 20 percent VAT, why do you think we'll be at 9 percent?

VELSHI: Although Canada has kept its very low.

Donna, let me ask you this. People like Herman Cain. Doesn't mean they will necessary vote for him for president. They may just want him to be their grandfather. But the fact is people do like Herman Cain and Herman Cain gives interviews where he says things like this. He takes simple ideas, the type that Ron Paul has, but somehow Herman Cain makes them sound nice and appeal. It is not President Obama's shtick to do that. But does he need to come up with some shtick like this. To be able to say here are some major changes I'm going to make that are somehow going to make you feel like I've turning this engine around.

BRAZILE: Look, he's the common sense candidate. I don't know if he'll win the Republican nomination but he is getting the nice guy vote at this hour.

The 9-9-9 Plan is a recipe for disaster. For starters, we cannot raise the revenue necessary to pay for the government that we currently have, let alone the government we might want five, 10, 15, 20 years from now. That's the first problem.

The second problem, it will disproportionately hurt the poor and middle class. The national sales tax at 9 percent. Of course, the wealthiest 1 percent of Americans will see their taxes reduced. But for middle income Americans who have seen their wages stagnate, this is a prescription for more fiscal pain. So, it sounds good. I agree with one of my colleagues here on the panel, it sounds like a plan to order pizza this weekend, but it is not a recipe for an ailing economy.

VELSHI: All right, Donna, Will, Rick, stick around. We're talking about Occupy Wall Street next.

Which side are you on? Do those folks even know what they are protesting? We're going to take a look at it after this.

(COMMERCIAL BREAK)

VELSHI: Well, we know the major theme of Occupy Wall Street protests is a general discontent with corporate America. The president made the point this week that the Consumer Financial Protection Bureau was designed to help protect consumers from financial institutions and their actions.

Will, why don't the protesters turn their attention to lawmakers, in this case conservative and Republican lawmakers, who are holding back Consumer Financial Protection Board from getting started?.

CAIN: I don't know. The protests and that bill actually go hand in hand in my mind, Ali. It's really hard to criticize or support the Occupy Wall Street protest because I can't define them. I don't know what they are about. I can tell you this. I feel like the tone is about a lack of responsibility, a displeasure with responsibility. I don't like my student loans. I don't like my credit card debt. And I don't want to have to pay them. I think the Consumer Financial Protection Bureau would help them in that respect.

That bill, when came out, my critique of it was you're here to help us with the voluntary contracts we made with credit card companies. We don't like them. Can you help us out Elizabeth Warren? I think the Consumer Financial Protection Bureau ought to be with the Wall Street protestors-

VELSHI: So whether or not you agree-whether you like the bill or not, the fact is they made that (UNINTELLIGIBLE) very well.

CAIN: I don't.

VELSHI: They could go actually to Massachusetts, Donna Brazile and think about helping Elizabeth Warren run for office. We'll get to that in a second.

Despite the myriad of reasons given for the protests, Representative Peter DeFazio, of Oregon, thinks that the movement boils down to a central issue.

(BEGIN VIDEO CLIP)

REP. PETER DEFAZIO, (D) OREGON: Corporate profits are up, jobs are down. CEO pay up. Jobs are down. Bonuses on Wall Street, whoa, six figures, up. Jobs down. It's time to rectify this. I think the young people and the others who are joining them on Wall Street get it. They may not be totally focused, but they know if isn't a country that gives them a fair shot at the American dream anymore. It's a stacked deck.

(END VIDEO CLIP)

VELSHI: Donna, your thoughts. Your thoughts on whether the Left or Democrats are trying to get Occupy Wall Street into part of their movement. Whether they are being co-opted by others, whether it makes sense, or whether we should worry about whether they are not all that strategic.

BRAZILE: You know, I think conservatives can look at this movement and say, you know what, they are trying to hold everyone accountable for the mess that we're in. Liberals can look at it and say, you know when, they are fighting to protect 99 percent of Americans who feel like they haven't gotten a break. And 1 percent of Americans seem to have gotten a pass.

So, look, the way I like to look at them, it's organic movement. It's a bottom up movement. They are not affiliated with Democratic Party, the Republican Party, Tea Party, or anyone else. They are frustrated. They are angry. The misery index has gone up. Yet they want some results.

They are also aiming their ire not just at Wall Street, three years after the collapse of Lehman Brothers, they are also aiming some of their fire against Washington, D.C. for not working on behalf of average Americans. They think politicians are beholden to their corporate donors, and not beholden to average ordinary Americans, who are working hard each and every day to make ends meet.

VELSHI: So I've talked about Consumer Financial Protection Board. We have talked about Elizabeth Warren. Will you mentioned that.

Rick, you have written and I love reading what you wrote. I don't know why we are all trying to go out of our way to try and find a focus for this group. They will find it themselves. But you have written that there are very specific economic problems that America should be protesting and actually written about solutions to them, five of them.

NEWMAN: I think what is happening with these protestors-I think these protesters represent something fundamental that's going on in America. Which is that people know that something is wrong. They feel they are falling behind. The data shows that people are falling behind.

The whole question is what do we do about it? The answers are not simple. What's really happening here as incomes are falling for the typical family, that is crystal clear. Income inequality is getting worse, which means it actually is true. The data clearly shows that the haves have more, and have nots have less. We have a dysfunctional situation in Washington. Nobody is doing a thing about these problems.

This-you know, the way we get out of this, is we make the economy grow by more than people -- the economists say it's likely to grow in the future, and we innovate. We come up with new ideas, the kind of stuff that Steve Jobs did so terrifically, and many other people do well, too. We're getting no leadership on this right now. This is all stoking what we're seeing down on Wall Street and it's now spreading to other cities.

VELSHI: Will, we're going to bring Herman Cain back into this discussion for a second. When asked about Occupy Wall Street this week, he told "The Wall Street Journal" that the protesters should not necessarily blame Wall Street, or the banks. He said, and I quote, "If you don't have a job and you're not rich, blame yourself."

Rich, as our resident conservative?

(LAUGHTER)

CAIN: Is there truth to this, by the way, Ali, yes, there is. If you want an answer to why Herman Cain is rising in the polls, you just gave it. That is why Herman Cain is rising in the polls. I have substantive problems with his 9-9-9 Plan. I have a lot of problems with Herman Cain.

VELSHI: But you like his straight talk. You like the fact he says people can pull themselves up by their bootstraps and get them out of the situation instead of, stay on the streets and protest and get arrested.

CAIN: Individual responsibility is at the core beliefs of conservative values and Herman Cain gave voice to it very well right there.

VELSHI: Donna Brazile, I have to say, in following the Tea Party and how it grew out of a grassroots movement, albeit, with some money and support, I don't recall a Tea Party protester ever being arrested or sleeping in the rain.

BRAZILE: Well, these individuals are motivated. Look, there are a lot of Americans right now who are looking for work. They lost their jobs through no fault of their own. Their company decided to move overseas, where they could get work-cheaper labor. Their factory closed down because sales were down. Look, there are many Americans, our fellow citizens, our neighbors, our family members, they want to work. Let's stop making excuses on why we can't get this economy moving and find them jobs.

I applaud those who are out there exercising their First Amendment. I applauded Tea Party Republicans when they went out there and they exercised their First Amendment. This is America. We should allow people to protest peacefully, and to try to get government and corporate America, and others to listen to them. VELSHI: I think we agree on that, Donna. Thank you so much for being with us. Good to see you, Donna Brazile is a CNN political contributor and a Democratic strategist. Will Cain is a CNN contributor. Rick Newman, is the chief business correspondent with "U.S. News & World Report."

We're on a mission. We want to find the driver that will turn this whole economic mess around. What could it be? We'll look in to it, next.

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VELSHI: Some days the market goes way up, some days, way down. You can thank economic data that is all over the place and a looming debt crisis in Europe for that. Look at this chart of the Dow in the third quarter. The third three months of this year. It's an absolute whip saw over the past three months of the Dow, S&P 500 and Nasdaq each lost more than 12 percent during the period, making it the worst quarter since the 2008 financial crisis.

Investigators are worried that we could be headed for another bear market. Stephen Leeb is the president of Leeb Capital Management and the author of a new book, "Red Alert: How China's Growing Prosperity Threatens the American Way of Life".

My colleague, Christine Romans, is back as well.

Stephen, this volatility is starting to look like the new normal. What needs to happen to get this market moving again?

STEPHEN LEEB, CHIEF INVESTMENT OFFICER, LEEB CAPITAL MANAGEMENT: Ali, I think we need a policy called, "Growth", in this country. You listen to these budget debates that we have had, and continue to have. The word "growth" is really not mentioned ever. I can't help it, but I have to contrast it with China. China is spending literally, at least half a trillion dollars a year, and over the next five years will spend many trillion of dollars, about what we spend on World War II, on new industries. We need to create new industries and be willing to pay a temporary price for that.

VELSHI: When you say new industry, do you mean like Solyndra and the solar industry in the United States?

LEEB: Yes.

VELSHI: Because we put half a billion dollars into that and got into a lot of trouble for it.

LEEB: Right, but take another solar company, Evergreen, traded at $100 share, was the bellwether solar company in 2008. It is bankrupt today. That's because China is funding their solar companies to the tune of, you know, massive amounts of money. Much, much more than we're willing to and now China controls the solar industry. They basically do. And with their monopoly on rare earth, they can probably control the wind industry, too. ROMANS: Their investments have been targeted and consistent in part because there's not a democracy. Somebody can make this decision and flood the money. They are also a surplus. They have the cash.

They don't have to call the CEO before Congress and testify as to what they knew-

LEEB: OK, but, but-

ROMANS: You're right. Our investments have been haphazard, right?

LEEB: Totally haphazard.

ROMANS: And they have been not consistent.

LEEB: Totally.

ROMANS: And there's no national strategy for how we are going to compete, when other countries have national strategies. In the Solyndra case, you're absolutely right. By the time we came in and said this is going to be our strategy to loan money to these companies, China had already done it for too long ahead of us, and already had the advantage.

LEEB: Right. Just one quick point. We can do it. We did it during World War II. We were willing to come together, industries, government, et cetera, and if you look at debt as a percent of GDP, at the end of the Second World War, much higher than it is today.

ROMANS: Right.

LEEB: But we had set the stage for a generation of growth. If we're willing to spend correctly, we can. The only way we're going to do it, someone has to wake up and say, we're not shooting at China, but we're fighting a war for our role in the 21st century.

VELSHI: OK, Will Cain has left. He was here in the last segment. He's left. We lost him. I'm going to try to represent his view.

ROMANS: You going to channel Will Cain?

VELSHI: I'm going to channel him. Will is going to say, despite what Stephen says, why should our government, as opposed to simply private industry, be in the business of deciding what's going to succeed? And what the future is going to be? Stephen's response would be because China is doing it.

LEEB: We're at war with them, de facto.

ROMANS: You think we're at war with China?

LEEB: Yes, Absolutely. This is a war for our survival and for our way of life, in my opinion. There's no guns fired, but the same consequences. Losing this war will be at least as bad as losing World War II.

VELSHI: You have articulated this. China, in an area in which they want to compete, you have named solar and you have named rare earth.

LEEB: Wind, rare earth, et cetera.

VELSHI: They not only go and develop these industries, and subsidize them, but they go and buy other companies around the world, and shut them down as competitors.

ROMANS: Right. They have five-year plans, that are part of 10-year plans, that are part of 50-year plans. That's the way the Chinese government operates. They're in I thin, the third five-year plan of their current longer term strategy. The U.S. thinks in election cycles. It's the difference between a command and control economy and a democracy. We prefer democracy, right.

LEEB: I do.

ROMANS: But you have to have a democracy looking at what's happening around the world and responding in kind. I feel as though we have been caught off guard by the rise of China. Its U.S., and multi- nationals, it is private industry that has set the rules for globalization. Now suddenly we are like, oh, wait, other people get the benefits of globalization at a time when the U.S. has stagnated. That's an uncomfortable place to be.

VELSHI: All right. So a philosophical conversation, but it does lead right to your first point, Stephen, and that is we do need to have a strategy. We're out of time. Thanks, guys. Good to see you both.

LEEB: Thanks, Ali.

VELSHI: Steven Leeb, is with Leeb Capital Management. And the author of a brand-new fantastic book, that is a must read, it's called "Red Alert: How China's Growing Prosperity Threatens the American Way of Life".

Coming up next, what the United States could and should learn from the life of Steve Jobs. My "XYZ" is next.

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VELSHI: Time for the "XYZ" of it.

It is a difficult time in this country. We all know we need some serious inspiration. The passing of Steve Jobs gave us a little of that this week as we looked back on his legacy.

There's no question his vision changed the world. Comparisons to Thomas Edison, Walt Disney and Henry Ford are not overblown. This is a guy who turned a geeky hobby into a technological revolution, creating things we never knew we needed, and making them indispensable extensions of our lives.

Steve jobs was a concrete example of what true innovation looks like. Jobs and Apple didn't just create cool products. He changed the way a business was run. He was the CEO who knew what you wanted before you knew what you wanted. When was the last time you remember the passing of a CEO that generated so much emotional response from people who had never met the man?

Steve jobs started Apple in his garage with one other guy and very little money. His partner from those days, Steve Wozniak, says rather than hampering them, those financial constraints pushed the bounds of their creativity and drive, causing them to make smart decisions that would turn their little computer-making operation into the Apple empire.

It's a lesson that should resonate with the current generation of would-be innovators especially in this lousy economy. You don't need loads of cash to come up with a new idea, start a company, and build something the world has never seen before. If you're onto something, the money will come. In the replay of a speech you've probably read or seen in the last few days, Jobs warns Stanford graduates, quote, "Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma, which is living with the results of other people's thinking. Don't let the noise of other opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary", end quote.

I want to end with the last line of that speech, one that brings a smile to my face for its simplicity and depth, "Stay hungry, stay foolish."

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 and Sunday at 3:00 p.m. Make sure to check out my new book with Christine Romans, "How To Speak Money." It's available for preorder online. It's a step by step understanding of the language of money with everything you need to know. Head to Amazon.com right now. You can stay connected to us 24/7 on Twitter my handle, @AliVelshi. The show's handle, @CNNyourmoney. Have a great weekend.