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President Urges Congress to Pass Payroll Tax Cut Extension; Congress Debate Extending Unemployment Benefits; Newt Gingrich Surges in Recent Polls; European: On the Brink?

Aired December 11, 2011 - 15:00   ET


CHRISTINE ROMANS, HOST: Higher taxes for almost all working Americans. That possibility could become reality in less than one month if Congress remains unwilling to compromise.

Welcome to YOUR MONEY. I'm Christine Romans. Ali Velshi is off today.

Here's what's at stake for the 160 million of you taxpayers. In your paycheck you pay a part of your earnings to the government in a payroll tax. Last year there was a payroll tax holiday. You paid a lower rate resulting in maybe 50 bucks extra per pay period in your pocket.

Now, if Congress can't agree to extend that tax cut by the end of the year, the average American making $50,000 a year stands to pay $1,000 more in taxes in 2012. There seems to be bipartisan support for extending it, but as usual, no agreement on how to pay for it.

Candy Crowley is CNN's chief political correspondent and anchor of "STATE OF THE UNION." Candy, political theater aside, you think Congress will eventually get this done?

CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: I absolutely think Congress will eventually get this done, particularly because we have seen Republicans now saying we even the Senate Republican leader Mitch McConnell said even if you don't believe that this actually helps the economy, it certainly will help the people that get the break from their payroll taxes. So this is just not -- you don't want to go home at Christmas and having raised everybody's taxes.

ROMANS: Especially when it is your point of view that you are never going to raise taxes on anyone for any reason. That's a little hard to square that.

Also with us this morning, former "New York times" columnist, Bob Herbert, a Demos distinguished senior fellow, also Stephen Moore, an, editorial writer at the "Wall Street Journal." Candy dealt with, you know, whether Congress will extend the payroll tax holiday, and it will be ugly. But she thinks it will get done. What about the idea of whether they should? Bob, does a payroll tax holiday -- does it make sense when there is a growing concern about the solvency of Social Security and Medicare?

BOB HERBERT, "NEW YORK TIMES" COLUMNIST: It makes sense from a political point of view, which I agree with Candy that it will get done. I don't think that it makes a great deal of sense in terms of what's going on fiscally in the country. I think it is potentially harmful to Social Security, potentially very harmful.


HERBERT: Because you don't have guarantees that this money going to be made up. I mean, when you look at your FICA taxes, that money is supposed to go into a Social Security trust fund. Obviously, that money gets shifted around. But what's going to happen here is that you are going to get a gross decline in the amount of money. And I think that the conservatives will look at it a year from now, two years from now and say -- oh, my goodness. There is an even bigger hole in Social Security than we thought. So we need to do some cut.

ROMANS: Stephen, explain to me, isn't that why it costs $200 billion? Because isn't basically the taxpayer stepping in for those FICA taxes.

STEPHEN MOORE, ECONOMICS WRITER, "WALL STREET JOURNAL": Well, that's right. By the way, I think, Candy, as usual, got it exactly right, Christine, that this is going to get extended. There's all this last- minute gymnastics that always goes on Capitol Hill.

ROMANS: Gymnastics is something that's fun to watch.

MOORE: Exactly.

ROMANS: This is not gymnastics.

MOORE: Maybe a mud fight or something like that. But it is going to happen. And the real question is should it happen. And, you know, believe it or not, I agree with Bob. I'm not so sure this should happen.

I think that -- if you look at the results of this, over the last year, it is really hard to point to the evidence that this actually created jobs. We had some job growth. We had a pretty good number last week. But it's still not the kind of robust job growth we would expect. What Republicans are saying, by the way, is I think their message over the next year will be, look, let's stop tinkering ask. Let's blow up the tax system and start over.

ROMANS: You would think they could agree on $200 billion on tax holiday, you think they can agree on how to blow it up and start over?

MOORE: First they have to decide on a candidate.

ROMANS: You talk about tinkering around the edges and payroll tax holiday and what the economic impact would be. You are right. There is a lot of division about just how important -- some say that it has meant a thousand -- hundreds of thousands of jobs. Others say maybe it is hard to measure a negative, what would have happened without it. We do know people would feel it, Bob, people would feel it in their paychecks if they didn't have this money.

HERBERT: People would feel it. I think it is more important to extend unemployment benefits than the FICA tax cut because the unemployment benefits would go directly to assist people. I don't think that tax cuts do much in terms of job creation. I don't think that it does a great deal to stimulate the economy. Maybe, you know, maybe very modestly.

But given the deficits we have and given the investment deficits we have in this country, I just don't think it is a wise move. I actual think we need to be raising taxes on people and not just on the rich, and then making investments that would, in fact, help develop a self- sustaining economy.

MOORE: Now you have disagreement between the two of us. Let's go to the issue whether we should cut the payroll tax or raise unemployment benefits. Here is the reason I think Bob is absolutely wrong on this. When you raise unemployment benefits you are actually giving someone a payment for not working. At least with the payroll tax cut, Bob, you are giving a tax cut for people who do work. So the incentive under the one system is not to work, and at least under a payroll tax cut you are giving people more back for working.

HERBERT: I don't think it is much of an incentive not to work.

MOORE: You would be surprised.

HERBERT: It might be very mild incentive but the people out work are in deep, deep trouble economically. Many are facing destitution. So the point of giving them extended unemployment benefits is not to boost the economy but to give a little help to people.

ROMANS: Candy, just -- they are on polar opposites just like the body of congress.

CROWLEY: Let me tell you something. They are going to pass an extension of the unemployment benefits. You know, it is Christmas. It is an election year. What more do you need? Both those things are going to pass.

MOORE: Washington is always Santa Claus.

ROMANS: Isn't that what led us to this in the first place? Every time you turn around it is like you can't disappoint your constituencies and you can't -- I mean, this is where -- that's why we are where we are today, because no one can give a temporary tax break and then take it back. No one can give expanded unemployment benefits and take it back because people rely on it.

HERBERT: But after a while it doesn't make any sense at all to talk about deficits because if you are not going to raise taxes and 23 you are going to take people who are really hurting on safety net issues and that sort of thing, there's no way to reasonably bring down the deficits in any sustained way.

MOORE: We can't cut spending? Look, we have a $4 trillion budget. It's grown by leaps and bounds over the last couple of years.

And, you know, Christine, I think you made the key point that what has been happening over the last stop, three or four years under Democrats and Republicans, we keep providing these short-term pieces of candy that taxpayers. We never have way to pay for. We're talking about now a one-year tax cut, paid for in the future, we never do any of the stuff in the future. So why can't we cut the deficit now?

ROMANS: Candy, it is interesting. You talk about that piece of candy. Some worry that having a piece of candy tied in any way, shape or form to Social Security is dangerous. That's what some progressives really worry about. They want the -- they want the -- extension of the unemployment benefits and certainly want the payroll tax holiday to continue but they are nervous about tying it to Social Security.

CROWLEY: Well, they are worried about long-term solvency of Social Security and saying look, not that we don't spend Social Security funds anyway on other things, but this is just something that sort of adds to it.

And Social Security, what's inning to me about Democrats, some Democrats saying I don't know, I'm uneasy with taking out some of the revenue or giving back revenue, payroll tax, is that the Democrats have really been the ones saying, you know, Social Security right now isn't adding to the deficit. This isn't what we should be looking at right now. I think more and more you are seeing Social Security is coming into play.

I think that when you are talking about the sorts of things we have been talking about, this really ends up being small bore stuff. I know $1,500 over the course is big, but in order -- anybody I have talked to and including both these guys know it is going to take something big. It is the structure, not these little things we keep doing.

MOORE: Well put.

ROMANS: I hope it is not something big that hurts, that's bad.

HERBERT: Bring the troops home from Afghanistan.

ROMANS: There you go.

HERBERT: That would be something big.

MOORE: Get rid of the Department of Education.

ROMANS: Geez, here we go.


ROMANS: Candy, Bob, Stephen, stay right where you are.

Both President Obama and his potential Republican opponents say they are committed to helping the middle class. So why are both sides talking about class warfare this week? That's next on your money.

(COMMERCIAL BREAK) ROMANS: Falling home prices, stagnant wages, high sky levels of unemployment, they've all dealt a brutal blow to the middle class. Should wealthy Americans do more to prop up everyone else? It is an issue that promises to be central to a presidential election now less than a year away.


BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: This isn't about class warfare. This is about the nation's welfare. It is about making choices that benefit not just the people who have done fantastically well over the last few decades but that benefits the middle class and those fighting to get into the middle class and the economy as a whole.


ROMANS: You know, this was an important speech for this president. A lot of these at the same time policies, the same sort of, you know, we can't wait policies, we have seen before, Candy. The material is not new but the way it is framed is new. It is almost like a reset and a definition of what this election is going to be about for him. Is that correct?

CROWLEY: Yes. It is almost like campaign speech.


CROWLEY: Absolutely. I mean, listen, the -- I think that -- let me say the one big fallacy driving me crazy about this is this idea that somehow the election is going to settle these questions. You know, like how much more should the wealthy give? And what exactly is wealthy? And do you believe in what Republicans see as a redistribution of wealth to a certain extent?

I mean, the idea that somehow that's what this election is going to be about, and it is, that's true. But anybody who thinks that comes -- you know, the end of next November, this will all be settled and American people have spoken, are smoking something, because it is not going to be settled. It is never settled. It's an ongoing struggle about the rise of the government and the role of the electorate.

ROMANS: And what is the fair share? The rich people don't pay their fair share. There is a lot of discussion this week after that speech, Bob, that -- about not paying their fair share. People say is it not fair if you are 58-year-old person who made a lot of money over the course of your career, you are putting your money in muni bonds and parking them there and getting tax breaks of because of muni bonds you are investing your money or putting money to charity because you are trying to lower your tax bill. And that starts to become a question of -- class warfare question that people in the middle start to struggle with because success, is, after all, what the American dream is about.

HERBERT: I disagree with the president in the sense I think this is about class warfare. I think there has been class warfare for the past 30 years or so. And it has been a war against the working classes and the poor. And I don't think that the wealthy have paid their fair share. I think that clearly it is documented there has been a sustained war, a successful war, against labor unions. Workers have not been paid for an increase, they haven't shared in the benefits of increased productivity. And the tax system is out of whack.

That being said, I think we are in such a state now that taxes probably do have to go up across the board, not just for the wealthy.

ROMANS: Has the president helped or hurt that situation that just laid out, because that's what he will be judged on?

HERBERT: I think he's helping it, but I agree with Candy. I don't think that the president with the policies is really going to follow through with the rhetoric that was in that Kansas speech, and I don't expect, however the presidential election goes in 2012, I don't expect to get a real change in the class dynamics in this country over the next couple of years.

ROMANS: Stephen, I want to you listen for second. GOP presidential contender Mitt Romney says when the going gets tough that President Obama, watch out for class warfare.


MITT ROMNEY, (R) PRESIDENTIAL CANDIDATE: Many think that because of his staggering failures, President Obama will be easily defeated. But as you know, incumbent is rarely turned out of the White House and he will resort to anything. As you know, class warfare and demagoguery are powerful political weapons.


ROMANS: So Stephen, did President Obama make valid points this week? Or do you also see this as straight from the class warfare playbook?

MOORE: I thought that speech the president gave on Tuesday was a very important speech. I doubt it was one of the pessimistic speeches by a president since Jimmy Carter's malaise speech. It was basically saying the middle class can't get ahead any longer.

And he did -- it was -- Bob is right. It was class warfare. It was a call to arms for liberal democrats, saying look, we are going to pit the middle class versus the rich. We will see whether that campaign theme works. Throughout history it hasn't worked very well. It is a real question of whether Americans go for the theme of envy or they go for the theme of aspiration.

You know, I'm a big believer that Americans don't hate rich people. They want to become rich. They don't hate people like Steve Jobs and Bill Gates. But we will see about that.

I will disagree with Candy about something. I think, Candy, this election is going to be a rough run and on exactly what Barack Obama talked about on Tuesday. And whichever party wins there is a big ideological difference between the two parties. Whichever wins the party will determine which direction this country goes. And, by the way, if you look at --

CROWLEY: It's some party gets 60 votes in the Senate, I would agree with you.

MOORE: You know, look, Candy, look, we had a big election in 2008. Barack Obama moved the country dramatically to the left. We had a massive increase in government spending and government takeover the health care system. That was because of what happened in the election. Elections do have consequence.

HERBERT: I think it is important, though, to take issue with the word "envy." I do not believe the poor and middle classes are envious of the rich. I would substitute for the word envy the word "fairness." I think that this is going to be an issue about fairness going forward.

ROMANS: Stephen Moore, remind us how that speech turned out again.

MOORE: Look, here we had this whole discussion for the last 10 minutes or so about the deficit. Nobody in Washington, even Republicans, are talking about cutting spending. The thing that's so amazing to me is we just had an election a year ago, remember that, where the electorate said overwhelmingly stop the spending, stop the bailouts and get the department under control. And all we are talking about now is raising taxes before a dime of spending has been cut.

ROMANS: Many people say nothing has been done, nothing has been done since America lost the AAA credit rating, nothing.

HERBERT: In the real world taxes are not being raised. People may be talking about raising taxes. But we are talking about extending tax cuts.

ROMANS: We have to leave it there. Stephen Moore, Bob Herbert, Candy Crowley, nice to see all of you.

CROWLEY: Good to see you.

ROMANS: All right, 30 day ace go polls showed the Republicans had a candidate defeating President Obama. So why is there now yet another front-runner in the race for the GOP nomination, one that the White House may even be rooting for? We will tell you all about it next.


ROMANS: Welcome back to YOUR MONEY. Just one month ago a CNN-ORC poll showed Mitt Romney defeating president Obama for first time. It seemed simple -- a Republican with a business background defeats an incumbent in bad economy, right? But now it is Newt Gingrich, not Romney, wearing the hat of front-runner. Polls show Gingrich is leading the pack by double digit margins in three of the first four states that will hold GOP presidential contests next year.

CNN contributor Will Cain is with us now as is Pete Dominick, host of Sirius XM's Stand Up. Will, the same poll that showed Romney beating Obama a month ago showed Gingrich trailing the president by eight points. If Romney is the candidate with the best shot to beat Obama, do these latest polls show Republican voters now more concerned with beating Mitt Romney than President Obama?

WILL CAIN, CNN CONTRIBUTOR: Yes. That's actually a pretty decent analysis, more concern with beating Mitt Romney than President Obama. I would add a caveat. What they want is they want to beat President Obama in a debate, apparently, and want to beat President Obama stylistically.

I stand by this analysis that Newt Gingrich's rise has nothing to do with substance. All the substantive critiques you have as a voter of Romney exist for Newt Gingrich. It is not about character. The reason you fled from Herman Cain to Newt Gingrich can't be an increase in character. It is about style.

ROMANS: Democrats want it because that style comes with distractions and -- there's this phrase, every rise of Newt Gingrich is followed by the fall of Newt Gingrich.

PETE DOMINICK, HOST, SIRIUS XM STAND UP: It reminds me of the villain in "Scoobie Doo" where he's real mean and he scares the heck out of Scoobie and the gang, but in the end he loses when they take the mask off. That happened to him in his career.

And what will has talked about, what is that style? It's certainly something Mitt Romney is missing. And I'm speaking generally here, but the Tea Party extremists, certainly a lot of Republican primary voters love that Newt Gingrich goes after President Obama. A lot of people hate President Obama. Newt Gingrich calls him names and --

ROMANS: From the beginning, would other --


ROMANS: He was the one that was constantly refocusing the fire on the president and away from the other people on the stage, and he was sort of looking like, you know, he was going to stand up and be the grownup who was going to bring it all back to the president.

DOMINICK: And he also disdain for the media and experts.

CAIN: Right. Right. I mean, played it wonderfully. He's played the whole thing wonderfully.

ROMANS: Can you believe six months ago, seven months ago, we were talking about how his campaign staff left him because he was on a Mediterranean cruise with his wife. No one thought -- no one --

CAIN: It happened because Rick Perry and Herman Cain absolutely imploded. That's why.

ROMANS: All of this talk about this -- ever changing Republican field or the front-runner in the Republican field, it takes some of the focus away from the economy. Maybe for president, maybe the White House likes this searching and trying to find the leader in the Republican Party.

CAIN: Yes. That's a good -- that's another good point and question then becomes how long will it last, right. The traditional political analysis is by mid-January, early February you will have what they call bandwagon effect. One guy goes in, wins two or three states, the voters coalesce behind him. And the thought is that if Newt can hang on for that long, six weeks, eight weeks, then he can be the guy that has the bandwagon effect.

But I'm not sure. There is no cohesive candidate that can pull everyone together in this field. What if you have a fractured electorate for months into the summer, late spring? We won't be talking about the economy for quite some time.

ROMANS: Another Republican presidential candidate, Jon Huntsman, says it is too late for President Obama to fix this economy.


JON HUNTSMAN, (R) PRESIDENTIAL CANDIDATE: The president had two years to get this economy right, to infuse a little bit of confidence in our direction. He has failed. That door has closed and it doesn't matter whether he goes to Illinois, Ohio, California, or New Hampshire. Nobody cares. Nobody is paying attention.


ROMANS: Pete, President Obama's campaign seems to be heavily focus order the idea don't blame me, blame Congress. Blame the fact it was the worst economic downturn since the Great Depression. John Huntsman saying you had two years to fix it. It is not better.

DOMINICK: There is a lot of truth to that, what the Obama campaign saying. Nobody wants to make this argument. It is not a great political argument. The Obama campaign has said it. But the Arab spring, what's happened in Japan, you have talked about these issues a lot because you are not focused as much on politics as economics, these things affect the world economy. What happened in Europe affects all of that affects our economy and does not have as much to do with politics as politicians would like to make you think.

ROMANS: But things are getting a little bit better in the economy, Will. They are getting a little bit better. The unemployment rate is 8.6 percent. You are seeing companies start to hire again. We had very low interest rates. But this president really can't try to say, oh, things aren't less bad. Vote for me.

CAIN: That can't be the election strategy. I think you are right it was at some point going to be let's blame everything on Congress, not on me, which has historical president. That's Harry Truman's election strategy in 1948. It worked, but barely. Remember when he held up the newspaper.

We know this week after Obama's speech he may have another strategy. That's to invoke Teddy Roosevelt, as we all know by now, and say this economy is failing most of you. It is failing the middle class. He will point to inequality. I personally disagree with that wholeheartedly. I think that's not just the opposition but single great thing in the economy, the concept of it, capitalism. That seems to be his new strategy.

DOMINICK: Will and I have this huge disagreement. We both agree --

ROMANS: I see steam coming out of your ears.

DOMINICK: We both agree there is a tremendous economic inequality, that there is large gap between rich and poor. Will thinks so what. I think where it has happened in any society in government, you are seeing social breakdown. That's a huge, huge problem for any civilized society.


ROMANS: Can I say, I should add one caveat. I don't think you can find one historical example of a country whose economy is based on system fulfills his cliche.

DOMINICK: You argue that we are such a meritocratic system. I would say we might have been at one point --

ROMANS: Can I ask you about -- I want to ask quickly about Jon Huntsman, because there are people who are -- Republicans, Wall Street Republicans in particular, who will say to you, you know what, if Gingrich can rise like this, why can't Huntsman?

CAIN: Wall Street Republicans, I don't know if that's --

ROMANS: No, I would say -- wait. Washington Republicans who really are kind of Democrats but they are Republicans.

CAIN: There are so many loaded things there. Let me say I'm glad we are talking about Huntsman. We should be talking about Huntsman in the same breath we talk about the economy. He has absolutely the best tax plan out on the table.

ROMANS: Why is he polling --

DOMINICK: Because he's too smart. Because they don't care about expertise. They don't care about content.

ROMANS: Who is they?

DOMINICK: Republicans. Tea Party extremists. They don't care about expertise. Jon Huntsman is a brilliant guy. I don't agree with most of his economic policies, but these voters reject experts. They reject people that understand these issues best.

ROMANS: It sounds like you kind of like him.

CAIN: I have to say this. The one other substantive thing, why challenge you on Wall Street, is he's the only one, Republican or Democrat, to address too big to fail. If the bank is too big to fail, it is too big to exist. Break up the banks. He is the only one to say that.

DOMINICK: He doesn't believe President Obama wasn't born here, he's a socialist Marxist, some anti-colonial, Kenyan --

CAIN: He has taken too far.

DOMINICK: No, it doesn't. That's Newt's rise. That's what Newt's rise is.

CAIN: I said style. You said birtherism.

DOMINICK: That is style. That's a style, a choice. Newt Gingrich says these things and people get fired up. Romney saying the president, he is a good guy, he just doesn't know what he is doing. That doesn't fly with primary Tea Party extremist voters.

ROMANS: Do you guys think Huntsman could have a rise? Or do you think Huntsman -- this is as far as he goes?

CAIN: It is too late because he's not taking the tactic that works. It is sad.

DOMINICK: It's a Hail Mary pass through New Hampshire. It's a small sliver, small chance.

CAIN: It would be great for America if it was Huntsman versus Obama on their ideas.

ROMANS: Guys, thank you. Birtherism.

DOMINICK: Was that sincere?


ROMANS: That was. They are hugging it out. They are hugging it out. No kissing. It is family show.

The Eurozone crisis, it's a situation that's euro driven and euro driven nations need to fix. But if they don't it will mean something to every American family. We'll explain next on YOUR MONEY.


ROMANS: Europe's debt crisis threatens the global economy and could drag the United States back into a recession.

Richard Quest, host of CNN's "QUEST MEANS BUSINESS" is in Brussels where European leaders gather this week to keep this European family together.

Richard, a majority of European leaders, though not all, agreed to create a new intergovernmental treaty to increase fiscal unity and help stabilize the euro zone.

What's the feeling there? Did European Union's leader -- European leaders, did they do enough? Is everybody at the dinner table happy? RICHARD QUEST, HOST, CNN INTERNATIONAL'S "QUEST MEANS BUSINESS": I think that they felt on the immediate crisis they have at least put together enough money, couple of hundred billion, more euros for the IMF to give to Europe.

They've increased stability fund. So I think that on the question of putting out the media fire they are quite happy. They are delighted they have so many of the European countries, the 17 plus 6 or so to come along on their fiscal combat.

Of course, it is only the U.K. standing on the outside basically saying no, but I don't think the U.K. is going to be able to derail this.

Fiscal unity or coming together is so crucial to the successful working of the euro, to improve the dysfunctionality if you are like this currency, that this is a train leaving that's station.

ROMANS: Gillian Tett is the U.S. managing editor for the "Financial Times." I want to stay to that theme quickly about the U.K.. David Cameron, this is not a good deal for the U.K. It is -- they are standing on the sidelines. The train has left, but they certainly are a very big and important player here.

GILLIAN TETT, U.S. MANAGING EDITOR, FINANCIAL TIMES: Well, absolutely. And Britain has had a very tortured, tangled relationship with continental Europe now for decades. This just crystallizes attention building for a long time.

There are many people in the city of London extremely unhappy with the direction of regulation and in the rest of the European Union. They're saying very clearly we do not want to be part of that.

For David Cameron to not have taken a stance would have been incredibly popular domestically. At the same time, I think the scars of this confrontation are going to last quite a long time. I mean, Nicholas Sarkozy did not even shake David Cameron's hand. I think a lot of resentment right now.

ROMANS: It is amazing when you think that over the past 60 years Europe has been trying to come together after a very painful period. And now some of these animosities and strains and rifts, I mean, this is money causes problems among friends and family, Gillian.

TETT: This is a crucial issue. One of the things that Americans and non-Europeans have often failed to understand is a single currency project really was about politics, not economics.

It was about healing the wounds of World War II and trying to bring Europe together. Now the (inaudible) dynamic has been at work in the last few weeks is that we have seen signs of actually the Eurozone project, which was supposed to heal the wounds has reopened the wounds in a dangerous way.

Maybe, just maybe, this latest deal is going to actually create some type of stability and at the same time, we are still seeing very big fishes between north and south Europe and of course, between the U.K. and continent.

ROMANS: So then, Richard, the Americans come to them. Treasury Secretary, Timothy Geithner, toured Europe this week, highlighting how important it is for the United States that Europe succeed in all of this.

Does that tell you just how important Europe is for the U.S. when instead of the -- treasury secretary here trying to sell the president's payroll tax holiday and working on that front, it affects every working family in America, he is in Europe.

QUEST: The European Union is the single largest economy in the world bar none. It's bigger than the United States. And it is -- the U.S. is single largest trading partner. The statistics could just go on and on and on if you take the totality of the union.

Anything that jeopardizes the economic growth on this side of the Atlantic is going to be of serious concern. And that's why the fed came in with its cheap dollar swaps and that is why Obama, the president, has said how serious it is.

It is why Tim Geithner came over here. And I think ultimately it is why the U.S. wants the European Union, the Eurozone, to work as an efficient mechanism. But the truth is, Christine, the truth is that they -- cannot get over because what they will not ask, they can, Gillian may agree on this.

What they dare not ask the public of Europe is do you be want to move to a -- united states of Europe, a federal states of Europe inch by inch, that is what they are moving towards. But it is the truth that dare not speak its name.

ROMANS: But isn't that, Gillian, the whole -- there the very beginning, there were people in this whole experiment, detractors called it an experiment and people who support it will say this is an evolution for Europe and eventually that is where it was going. Slowly, very slowly, but eventually that has to happen.

TETT: Well, that is the argument you have been making. It was very interesting because the former president of the European Central Bank came to New York a few weeks ago and he made a very powerful point to a group of bankers here, which is if you look at the differential between unemployment rates and growth across the U.S. today, the regions, is actually larger than in the E.U. area.

Astonishing fact and the key point is that if you had a much more coordinated system, federal states of Europe, you would actually have good chance of creating a much more stable union and real single currency zone.

Problem, of course, is there isn't a single treasury. There isn't a single issue of bonds and that is a fundamental issue that hangs over these talks. As Richard says, you know, no one's really dared to ask the question.

Because they know that if they were to put that question to a vote, if there was actually a referendum on that crucial question across the Eurozone today, it would show just how incredibly divided the Eurozone is on that fundamental --

ROMANS: Different richer cultures, different languages, different experiences and different allegiances over the past even 100 years.

TETT: But also different divisions about where the U.S. treasury should be going and the irony is if you ask the question now you would end up reopening the wounds, not healing them.

You'd end up seeing that Finland doesn't feel much affinity with Greece. Portugal feels angry with Germany. You really would reopen so many intentions that the euro zone would conceal.

QUEST: And -- I think that when you then look at what happened here, just in the last 24 hours, the way in which Britain has stood up for a national interest, nearly derailed the project, which is going to be cobbled together because that's what they have to do now.

They're going to have to make it up as they go along. They can't use the European Union treaties to get physical compact up and running. It is going to become a dog breakfast of legal niceties as they try to make this thing work.

ROMANS: A dog's breakfast. Richard, you always leave me with a wonderful little -- OK, but you are staying. Gillian, Richard, stay where you are.

In less than a year, we will know if President Obama has four more years or if a Republican will take over the White House. Either way any control the president has over the economy, it may be out his hands. We are going to explain next on YOUR MONEY.


ROMANS: Welcome back, everybody. Many European leaders agreed to create a new intergovernmental treaty this week in an effort to stabilize the euro zone.

Richard Quest is there. You are in Brussels where the meetings took place. Is there a feeling there that this will actually help solve Europe's debt crisis in a meaningful way, Richard?

QUEST: If you look at what they decided on the core question, Christine, of the financial crisis, as strengthening the stability fund, the bailout fund, lending money to the IMF so they could lend it back again, doing all of those sort of things, then they may just have bought themselves some time.

The general view here is that it may not be the big bazooka of the ECP, the European Central Bank coming in to do things, but it is the best they were able to get. The bigger, more serious, and difficult question, of course, is the longer term and reform of the euro.

ROMANS: We have already, Gillian, established that it is a huge head wind to the United States. I mean, no question. I mean, the treasury secretary is there right now. Not here.

Is there anything that President Obama and Congress can be doing at home right now, Gillian, to better position the U.S. to deal with the potential fallout from Europe?

TETT: Well, I think there are three key things that they should be about. Firstly, it is very important that the U.S. gets behind the IMF right now.

And actually shows that the IMF can play a very important role in helping sort out the Eurozone mess. That's tough for a lot of congress members to agree, but it's important.

Secondly, it is very important that they reopen discussion about fiscal stability and about measures to deal with American debt problems. Otherwise, you can guarantee the next year that will be a lot of discussion about whether the U.S. had heading in the same direction and, say, Greece, or something like that.

Thirdly, these issues to do with the payroll tax reforms, stimulus questions, I mean, if the U.S. economy is softening and the data in recent days has been mixed, then it is going to be very important that the folks in Washington show that they can actually take the initiative and provide some type of reassurance at a time so many consumers and businesses are feeling very scared.

ROMANS: The word you use, initiative and reassurance, Richard, it is so interesting because on both sides of the aisle and both sides of the Atlantic, there's this sort of gridlock.

I mean, when you look at the progress made in Europe, this with a -- it took like five big summits in nine months and took credit rating agencies weighing in on all of this before you get action there. Same thing here. I mean, what's this dearth of political leadership?

QUEST: Christine, I hate to correct you, but the numbers are eight summits, five plans, and 19 months of negotiation and still they have not succeeded. Look, I -- I smiled a second ago.

Gillian has touched the third rail as you may say of this issue. She has compared potentially, potentially, Gillian, the United States their problem with Greece, but that is the unspoken.

That is the unknown. That is the great fear that if the U.S. does not deal with its debt crisis, eventually, not now, not when it is the only game in town and safe haven much bonds and currency, eventually Gillian's right. It comes to -- the waters lap upon the shores.

TETT: That's a long way down the road. But you know, you have seen the last few weeks just how easily competence can disappear from financial markets. It is absolutely critical that Washington acts to make sure that does not happen here.

ROMANS: Gillian Tett, thank you so much. Also Richard Quest, have a wonderful weekends, you guys. The Eurozone crisis threatens the world back into another global financial recession, but you wouldn't know looking up the stock market. Is this your last chance to get out of stocks before it is too late? That's next on YOUR MONEY.


ROMANS: We've been talking about Europe's debt crisis and the effect it could have on the United States. Some are drawing comparisons between Europe's potential collapse and the collapse of Lehman Brothers in 2008. Here's what happened to the Dow in the six months following Lehman's collapse. You can see there. It was a very, very rough time.

Matt McCall is president of Penn Financial Group. Matt, there have been some good days and some bad days. But recently even in the face of Europe's uncertainly, the Dow has been above 12,000. Is this your last chance then to get out when you see history like this?

MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: Well, I look at this chart and I have a couple of different views. One, it makes me a little bit sick. But then I also look that back in March, we actually were below 7,000 and a year and a half later, you doubled your money. It's tough to kind of time it.

ROMANS: And now that market is right back up to 12,000 where we started.

MCCALL: And a lot of people were running for the exits right there in March. We're not near the lows now so we're not in that same type of predicament.

But there's a good chance we could have a major pull back if something doesn't happen in Europe. Even here in the United States, you know, political landscape right now is causing a lot of concern for investors.

Our confidence has been falling. The housing market has been falling apart. So last chance to get out? I don't know if you want to talk about that, but you have to be nimble and start looking at your portfolio thinking, you know, if you're concerned and you're a little too risky, start selling.

ROMANS: So let me clarify it a little bit. If you need the use of your money in the next year, should that money be sitting in an e- trade account?

MCCALL: You should not be in that chart right now I'll say that. Your money should be in a savings account. Unfortunately, you're not getting much interest on that, maybe half a percent if anything.

But in the next year you have to have cash. If you have a 20-year time (inaudible), sure you can be in that chart because there's a good chance you bounce back several times. Dollar cost average in on the way down. ROMANS: There are other things we've talked about before we talk about commodities. They were moving late this week as well. You got interest rates have been moving. I mean, the stock market doesn't move just by itself.

It's a very interconnected kind of situation. What kind of ties do you see as we go into the end the year? Do you see commodities down? The stocks may be up a little bit because they are relying on governments to keep things afloat? What do you see?

MCCALL: I think stocks will be up only because I believe something will happen in Europe in the next couple of days if not the next couple of weeks.

There's this artificial rally where they kind of flood the market with money and that's going to push stocks up for probably six to 12 months.

So I think you want to be in the market, but you have to be kind of ready to get out. You know, we may be talking again in a few months I'm saying this, but I'm saying, you know what, let's start selling and taking a bit of our gains.

ROMANS: One of the things that's interesting is that sort of treacherous. I mean, markets are treacherous right here because people who have been doing this for a very long time are looking at just kind of a situation we've never seen before, you know.

I mean, the European currency is only what 12 or 15 years old. So to talk about how you'll fix it whether it's a two-tier euro or one tier euro and the international trade treaty law ramifications. I mean, we just never see -- we don't know what kind of as they call it a headline risk there is over the six months.

MCCALL: Well, that's a great point that you make the headline risk, because a lot of investors out there right now that aren't in the markets, it's not their jobs, but they have 401(k)s. They make their decisions based on these headlines that come out.

You and I do this for a living. It's tough for me to decide for what the headlines are right now so --

ROMANS: So bottom line for some with the 401(k) is what?

MCCALL: Do not make your long term decisions based on these short term headlines because it's tough enough for you and I to decipher it. The average person at home is going to make most of the decisions and they're selling when that chart is down at 6,000 and they're trying to buy back at 12,000 unfortunately.

ROMANS: We know a lot of people did that after Lehman. A lot of people did that after Lehman and lost. They just made it very big, but they lost a lot or they got out and they're just thinking about getting back in again.

MCCALL: Exactly, it's tough for the individual investor. You have to somewhat weather this. I've been in this about 12 years. It is the roughest year for me. Just because we've had all these gyrations like you just mentioned.

It's tough to wake up and see the market down 300, the next day it's up 300. You don't know what to do from day to day. As an investor, I almost want to tell you just to kind of wake a nap for a year, wake up and your portfolio will be higher.

ROMANS: Your beard is really long and you have more money maybe. Matt McCall, Penn Financial Group, nice to see you.

All right, both the U.S. and Europe are desperately trying to avert another financial crisis before it's too late. But is the real problem not a budget deficit national debt, is it deficit of leadership? My XYZ is next.


ROMANS: You're familiar with America's growing debt and deficit. The national debt now topping $15 trillion. The size of our debt is forecast to be bigger than our entire economy by the year 2021.

There's another deficit we can't measure in numbers and dollars. It's the deficit of leadership in Washington. More dangerous to America's standard of living and our growth prospects than anything else facing us right now.

Noted economist, Diane Swonk, laments that it is impossible to make economic assumptions and forecasts almost because Washington has left us standing in quick sand. The very body that led to us to a AAA credit downgrade has done nothing in the last three months to fix it.

Their 12 person "Super Committee" was a super failure, an embarrassment for the country and for the Congress. The jury of 12 every day Americans does better than that in courtrooms around the country every single day.

Consider the difficulty Congress has in passing an extension of the payroll tax holiday. It affects every working American. Both sides say yes we should extend it, but they are stuck in the quick sand of their own making.

This week we saw a true rare moment of bipartisanship. Senators Claire McCaskill and Susan Collins introduced a measure to pass the payroll tax holiday extension and that measure, something each of them didn't like and they admitted it, but they would accept it for the good of working Americans.

If only their common sense would extend to their fellow members of Congress, it would make for a priceless Christmas present. Unfortunately, I feel like a lump of congressional coal is coming our way and that's my XYZ.

Thanks for joining in the conversation this week on YOUR MONEY. Ali will be back Saturday 1:00 p.m. Eastern, Sunday at 3:00 p.m. and be sure to check out my new book with Ali, it's called "How To Speak Money," a step to step guide to understanding this language of money. Everything you need to know to speak it fluently.

Head to right now to be one of the first to get you want. You can stay connected with us 24/7 on Twitter. The show handle is @cnnyourmoney. You can follow me @christineromans. Have a great weekend everybody.