Return to Transcripts main page

Your Bottom Line

Crawl Through 12; Third World America; Coming Home; Til Debt Do Us Part

Aired February 11, 2012 - 09:30   ET

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

CHRISTINE ROMANS, HOST: One-third of Americans live in households receiving some sort of government assistance.

Good morning, everyone. I'm Christine Romans.

So, is America the land of opportunity or the land of student loan debt and jobless checks? We'll explore.

Plus, from the battlefield to the office, we show you how returning soldiers are honing their war skills for the civilian workforce. And forget about the box of chocolates. A dozen roses, please. The best gift for your honey is getting out of debt. We're going to help you have the talk.

But let's start with the youngest victims of this economic downturn. Shrinking budgets have slowed or even stopped public pre-k programs in some states. As a result, many three and four-year-olds aren't going to preschool. Studies show that a poor child who has not attended a quality preschool enters kindergarten 18 months behind their peers. And what's worse, many will never catch up. Research also shows they're more likely to need special education services and more likely to drop out.

Sam Wang is a professor at Princeton University. He's also the co- author of a book called "Welcome To Your Child's Brain: How The Mind Grows From Conception To College."

Sam, do we need to rethink the K through 12 public education model to be more like crawl through 12?

SAM WANG, CO-AUTHOR, "WELCOME TO YOUR CHILD'S BRAIN": Well, I think that's quite possibly the case. I think the big picture here is thinking about how research and our knowledge about the developing brain can influence how we think about children learn from, as you say, from crawling all the way through high school. And pre-k years are certainly very important for that.

ROMANS: Your research has found that it is. And why is it so important? You know, because we think of sending your kid to school when they're five years old. What's going on in their brain well before they're going to school?

WANG: Well, as we wrote in "Welcome To Your Child's Brain," it's important to think about birth through age five as a time of churn. Synapses, the connections between neurons, are being born, being eliminated. So it's a time of great learning.

Also, the brains are social learners. And those babies, even when they're sitting there looking at you being cute and not saying anything, they can still understand what you're saying. And so they are absorbing information. And that's why pre-k is very important.

ROMANS: You know, Sam, Newark's mayor, Cory Booker, he calls it earlier childhood education. Listen.

(BEGIN VIDEO CLIP)

MAYOR CORY BOOKER (D), NEWARK, NEW JERSEY: We, as a nation, are falling behind because we fail to recognize the urgency of education. And we've gone down dramatically from the number one country in America percentage of population graduating from college, now to eight or nine. We're seeing much decline in the -- especially in the science, technology, engineering, math areas. So we have a lot of work to do as a country.

But it doesn't start at the college level. It really starts with our kids. And if you have a resource that's so valuable, oil or coal, you see the efforts that people go through to get that resource fully cultivated. We've got to put that same effort, that same determination with our young people at the earliest of ages because those investments will pay dividends to our country for generations.

(END VIDEO CLIP)

ROMANS: You know, Sam, that's an interesting comparison. Our children as natural resources. The bottom line is, spending money earlier saves money later, right?

WANG: That's right. So, for instance, the number of words a day a child hears before the age of three is predictive of school discuss. Children are social learners. They learn from grownups. They learn from children around them. And what that means is that social engagement, that back and forth, is very important for a child's development in the pre-k years and beyond.

ROMANS: But the quality of the pre-k is what's important here, I suppose, because I bet that it's very different across the country, isn't it?

WANG: That is very much the case. Certain features of pre-k are known to be more effective in fostering cognitive development. One is, for instance, tricks of teaching self-control. If a teacher or a parent says, honey, when you're holding this picture of an ear, it's your turn to listen. This picture of a mouth, it's your turn to talk. Certain kinds of education instills self-control. And that self- control can pay off for many years afterwards.

ROMANS: A quick question as a parent. Say you are watching this program and you can't get your kid into one of these programs or you can't afford one of these programs, what can somebody do at home to try to really be feeding the word count and feeding that little brain before kindergarten? WANG: Well, a simple step is to simply have more than one adult in the household or have people over if you're alone in the house with a child because, as I said, number of words per day seems to be really important. And so conversations between grownups, talking to the child, getting excited when he or she says things to you. That social back and forth is a big driver of learning in the school and in the home.

ROMANS: Thank you so much.

WANG: Thank you.

ROMANS: All right, up next, did you get your check in the mail? One- third of Americans live in a household receiving government assistance. What it really says about America might surprise you. That's next.

(COMMERCIAL BREAK)

ROMANS: Would you believe a third of Americans live in households receiving government assistance. A third. A new report from George Mason University shows more than one in three live in households receiving Medicaid, food stamps and the like in 2010. Add in Social Security, Medicare and jobless checks, it's nearly half of American households. That's 148 million people.

So it raises the question, is America the land of opportunity or the land of student debt, jobless checks and food stamps? With me now, Arianna Huffington, editor and chief of the AOL Huffington Post Media Group. She's also the author of a book called "Third World America: How our Politicians are Abandoning the Middle Class and Betraying the American Dream." Also with us is CNN contributor Will Cain.

So, Arianna, the expanded safety net, is it a sign of weakness in the American economy or a sign of strength? It was designed to catch and maybe it's doing what it was supposed to do.

ARIANNA HUFFINGTON, EDITOR IN CHIEF, AOL HUFFINGTON POST MEDIA GROUP: Well, it's actually a sign of what a terrible state our economy is in and how the impact of the financial disaster is still being felt very widely. Because when you look at food stamps, for example, they are no longer just for people who are out of work. A lot of families are supplementing their income with food stamps.

ROMANS: Right.

HUFFINGTON: We did a study of food banks. People go to food banks to supplement their income. Suburban poverty is up in the last 10 years by over 50 percent. Much more than inner city poverty. So there's something very fundamental happening, which is the downward mobility trend in America, which is the exact opposite of the American dream that the immigrants like me were the beneficiaries of.

ROMANS: Now Will doesn't really buy into 100 percent this idea that there's this big income inequality and people at the bottom are really getting hurt so much more, or the middle class is getting hurt so much more.

WILL CAIN, CNN CONTRIBUTOR: No, no, I -- it's not that I don't buy into the existence of inequality, but whether or not inequality is a problem. That's what I don't buy into.

HUFFINGTON: You agree that downward mobility is a problem.

CAIN: What I agree with, as Arianna just said, that we've had a hard economy couple of years that has increased some of these statistics you're talking about. But it has been a problem that's baked longer in the cake. And I don't think you'll disagree with me on this. It's been something being baked in the cake since the 1970s. We've had jobless recoveries for 40 years going now.

Now, we might disagree on why. I think, Arianna, and I've read the book --

ROMANS: Yes.

CAIN: Would suggest there's been some kind of increase in greed and decrease in corporate empathy. I would say we've had a huge transitional economy, moving out of jobs that supported middle class and lower wage income into some new kind of economy. We've got to figure out that tradition.

ROMANS: We've also had this housing collapse that has really hurt people who thought that they were building and investing in the American dream.

CAIN: Right.

ROMANS: And I want to just show you really quickly because late this week we got word of a landmark settlement. The biggest settlement between an industry and states in the government since the big tobacco settlement in 1998. A lot of you are asking me, who gets money and how. I want to show you specifically.

Underwater homeowners who are behind on their payments, they could get about $20,000 in principal write-downs. All right, so underwater homeowners who are current on their payment, there's about $3 billion in this plan to help refinance at lower rates. And for people who, because of shenanigans of the servicers, were in foreclosure and weren't supposed to be or they weren't helped when they were in foreclosure, this is the time period, September 2008 to December 2011, they're going to get $1,500 to $2,000 in cash.

But, Arianna, here's the thing. One million underwater homeowners is what the government, the states are trying to help. But there are 11 million people underwater on their loans.

HUFFINGTON: Christine, I think this is one of the major tragedies, because we already have had 4 million homes in foreclosures and we have these 11 million homes underwater. And the problem here is that all the tricks and traps beyond people's lack of financial accountability that got us into this problem. And there has not been real accountability. You know there -- nobody has really gone to jail for all this fraudulent ways of dealing with home mortgages.

ROMANS: Right. But, you know, I want to bring up something that Carmen Reinhart said in "Money" magazine, for Will in particular. You know, she wrote the book "This Time Is Different" with Ken Rogoff. A fascinating study of all of these financial crises. She said consumers were enjoying huge increases in their perceived wealth between 2001 and 2006. Housing prices in the U.S. rose by more than they had risen in the preceding 130 years. So now we're talking about giving people $20,000 in a write-downs on their mortgages. A lot of people took a lot of money out of their houses and --

CAIN: They were using them as piggy banks.

ROMANS: right.

CAIN: They were using their houses as a piggy bank. It was fueling consumption. Let's be clear --

ROMANS: So what's the way to fix housing --

CAIN: There are three ways. And, by the way --

ROMANS: In two minutes or less.

CAIN: Yes. Well, there's three ways. Massive market liquidations and defaults, which we underestimate. Conservatives (INAUDIBLE). But we underestimate that it could suck the entire economy down.

Two, big principal reductions. Big. Write down the value of people's homes. But this is not that.

And this is the third way. You muddle along. Look, this is $26 billion. The home market is 17 trillion --

ROMANS: Yes.

CAIN: With 11 trillion in mortgage. You muddle along and you hope that three years from now houses are worth more than they are today.

Let me just say this. That seems a little optimistic. Will houses be worth more than they are today in three years? No one can make that guarantee.

ROMANS: Well, and we know just this week Zillow said that home prices are going to fall again this year. Another 3.7 percent. They're down 24 percent from their peak. And even as we talk about fixing the housing market, you know --

CAIN: We're seeing the end of this life cycle of pushing credit, of pushing government assistance. In Europe, you're seeing the pushing of government assistance coming to an end. Here you're seeing the end of credit coming to an end (ph). These things have life spans.

ROMANS: Well, we can talk more about whether more people are going to be in the safety net or fewer people will be in the safety net and how, you know, how America grows from here. Growth is the most important thing. How we get there is the big argument.

Arianna Huffington, Will Cain, nice to see you. I wish we could go on forever. Thank you. Have a great weekend, you two.

All right, coming home. We're going to introduce you to some veterans who have served our country in Iraq and Afghanistan. They're now retraining for civilian life. That's next.

(COMMERCIAL BREAK)

ROMANS: Two million men and women have served in the Iraq and Afghanistan wars and tens of thousands of them have been streaming home at a time when the jobs market is barely beginning to recover. For those veterans, coming home from war means translating battlefield experience to the civilian world.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: You guys are working in groups. You have a project. You have a deadline. You have defined responsibilities and someone is being a problem.

ROMANS (voice-over): A typical workplace issue. But this isn't a workplace. It's a class for veterans making the switch from military to civilian work life.

UNIDENTIFIED MALE: Doesn't show up for meetings. Doesn't do anything. Literally like the black hole.

ROMANS: Workforce Opportunities Service is a program that pairs classes with a paid temporary job. So here, and here, is where former Army combat engineer Tom Richardson is learning a new language, corporate speak. He served in Iraq and came home in 2003, with a military background and posttraumatic stress disorder.

THOMAS RICHARDSON, VETERAN: You join the military thinking, when you come out, people are going to be throwing jobs at you. You know, lining up outside of your house. And it's the total opposite.

ROMANS: The jobless rate for Iraq War veterans, like Richardson, is 9.1 percent. For very young vets, many who don't have a college degree, it's more than double that.

RICHARDSON: I was unemployed for two years. And it's really hard, I know, for veterans because a lot of us, you know, came back PTSD and stuff and it's hard to really stay focused and upbeat.

UNIDENTIFIED MALE: I think one thing that worked, at least in my group --

ROMANS: This program has three semesters in the classroom teaching communications and technical skills, among other things. And it gets the veterans temporary jobs with companies it's reached out to as a potential path to full time employment. Brian Watson is an instructor and mentor. BRIAN WATSON, DIR. OF BUSINESS OUTREACH. WORKFORCE OPPORTUNITY SERVICES: It's very much a culture shock for them. You know, having to get dressed up in the way that they do, and working in corporate environments, corporate offices, skyscrapers, whatever it is, they have a lot of skills and a lot of talents that they learn in the service. But one of their hardest challenges is actually learning how to adapt to the corporate environment.

ROMANS: Richardson is in his third semester. He'll finish at the end of March.

RICHARDSON: From where I was just a year ago to now, it's night and day, you know? It's definitely a game changer.

ROMANS: And it's why it's so urgent to get veterans, like Richardson, into the workforce.

RICHARDSON: Why hire a vet? That's a hard question. I put everything into my job, you know? If something's expected of me, I want to deliver. It's just something that is engrained in a veteran because every day you lived the military 24 hours a day.

(END VIDEOTAPE)

ROMANS: All right, Brian Watson is the instructor you saw in that piece. He's the director of business outreach with Workforce Opportunity Services. He joins us here this morning. Chris Lawrence is CNN's Pentagon correspondent, also a Navy reserve veteran. He joins us from Washington.

So, Brian, I want to start with you. You know, Sealed Air (ph) is the global packaging company that Tom works for. Prudential Financial. We're going to show you in part two next week about that company. These big companies want to work with vets. You talk to these corporations about combining veterans who have been trained and getting them trained actually working in their companies. What is the important skill or skill set of a veteran to translate for these companies?

WATSON: Too often times they focus on what they did in the military from an operational standpoint. I operated a machine gun. I drove a truck. And they don't really talk about the values that they learned.

ROMANS: And that's the veteran.

WATSON: You've got it.

ROMANS: Have to learn how to say, look, I ran a machine gun, but -- I don't even know if that's the right terminology, but I was a machine gunner, right? But this is how what I learned doing that is going to help you solve problems and save money in your workforce.

WATSON: Exactly. Right. What we try to do with them at first is try to teach them through what you're going to be doing in the corporate environment, let's start first by talking about how you did it in the military. Get them comfortable. Help them understand what it's all about. Right?

Then we start to draw sort of connections between -- I'll tell them, well, this is the way it works in the corporate world. There's a lot of similarities. There's a few things that are very, very difference about it that they have to get used too.

ROMANS: Right. There's a lot of leadership you learn in the military, too.

WATSON: Absolutely.

ROMANS: I mean, and that's something that's really important.

I want to ask Chris Lawrence about that. Because, you know, as we're talking about drawdowns and we're talking about reshaping our military and ending potentially two wars here, I mean there must be a lot of discussion in Washington and the pentagon about how to transfer these people into the labor market that's not really robust.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, exactly. I mean there's a lot going on with that right now, Christine. I mean Congress just passed legislation that offers up to a $10,000 credit in some instances for companies that hire some of these veterans. Each branch of the service has its own sort of alumni program to try -- sort of try to teach them some of these skills before they actually get out.

But it's been very, very tough. I mean they're constantly going back and looking at some of these programs to see how they can be improved and to do more before the service member actually is out in the workforce.

ROMANS: You also have the issue of PTSD. And it's really interesting because you've got people coming home. They've been in war for so long. And now they're coming to a completely different environmental.

Brian, what is the culture shock like and how do you kind of help them get over that culture shock so that they can interview and be forceful and use the right kind of language?

WATSON: Well, again, it goes back to really kind of try to teach them how to bring out those values that they already understood. When it comes to situations of PTSD, there's obviously a lot of different counseling mechanisms and things that they're going to need --

ROMANS: Are companies worried? Do they hear "veteran" and they worry about PTSD?

WATSON: Absolutely.

ROMANS: They are?

WATSON: Absolutely. When you ask companies really what their biggest problem is or what their -- maybe the biggest challenge that they think they're going to face in hiring veterans, they'll talk about these transitional issues. Transitioning their skills, transitioning into a culture. ROMANS: But that's not their issue. That's not their issue.

WATSON: But, at the end of the day, there is this stigma around PTSD or other mental health issues or even physical disabilities, which is another one that comes up a lot.

ROMANS: Right.

WATSON: You know, a lot of the time it's really just educating them and trying to get them to understand that you can be a fully functioning person and have post-traumatic stress.

ROMANS: You know, Chris, you know -- and you're somebody who's transitioned back and forth and you know that communication is what's really important here too. I mean being able to speak the language of, you know, the office, when you've been speaking the language of the battlefield and the military.

LAWRENCE: Yes, it's a great point. I mean when you -- when you're in the military, you're taught to give short, terse answers. Well, that's exactly probably the last thing you want to do in the interview when you want to expound and really flesh out what's there on the page in front of the resume.

Also in the military, you're not taught to praise yourself. You're taught to be a part of the bigger group. You know, people who praise themselves and look for, you know, individual awards, that's not valued in the military. Whereas in the civilian world, you've got to break out of that group think and really bear down on the individual.

And I think another good point about this is, look who's going into the military. Where are they coming from? They're coming from these small, rural towns. From rust belt areas. So when they get out of these deployments, where do they go? They go back home. And some of these areas are some of the last to recover, you know, during a really bad economy like we're in right now.

ROMANS: Guys, thank you so much. Brian Watson, Chris Lawrence, really nice to see you guys. And we're going to keep talking about this in our "Coming Home" series all year. Thanks.

WATSON: Thank you.

ROMANS: Next, are you cheating on your spouse financially? It's time to come clean. How to get out of debt but stay in love. That's next.

(COMMERCIAL BREAK)

ROMANS: All right. When it comes to money, my friend Ali Velshi and I speak two different languages. And that's OK because thankfully we're not married to each other, we just work together and we wrote a book together called "How To Speak Money." Couples in debt, one of the topics we talk about in that book. It's a big strain on relationships. And Ali's here to talk about it. In fact, I want to talk a look at some of this data from Jeff Due (ph) over at Utah State University. He said wives who had no debt were 12 percent more likely to be very happy in marriage than wives who had between $10,000 and $20,000 in debt. Makes sense. Husbands, apparently, if you look at that --

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: They don't care.

ROMANS: They're happy no matter what. And, look, one thing that we have talked about and what we wrote about in our book is that a lot of couples aren't honest to each other.

VELSHI: Right.

ROMANS: (INAUDIBLE) debt. And I wanted to ask you, is it ever OK to hide spending, Ali, or to hide debt?

VELSHI: Is anybody listening to my answer?

ROMANS: Your wife could be watching the program as we speak.

VELSHI: No, no, it's not. And there are two issues. When you said men don't care, there's two issues. One is, do you care about your habits on spending? And a lot of guys don't care. And then it's the, are you completely honest about what your debt situation is? And both of those are important. So you can't just know about your partner's debt.

ROMANS: Right.

VELSHI: You actually have to know about how they answer that question. You know, how comfortable are you with debt? Because one of the issues is, people, you know, pay off credit cards, for instance, with cash that they've got available. How many times have you had somebody e- mail you and ask you that and then they run the credit card up again.

ROMANS: I know. I know.

VELSHI: So you not only need to know what debt that have --

ROMANS: It's about -- it's about underlying behavior.

VELSHI: Behavior.

ROMANS: And we know from that Jeff Due research, and he's a great researcher on this love and money stuff.

VELSHI: Yes.

ROMANS: He has said again and again, when they poll people, no matter how much money you make, even if you don't make very much money, if you don't have any debt --

VELSHI: Right.

ROMANS: You're happier.

VELSHI: That's exactly right.

ROMANS: OK, the next question I want to ask you in honor of Valentine's Day coming up, by the way.

VELSHI: Yes.

ROMANS: Is it OK for one person to handle the finances in the relationship?

VELSHI: Yes, absolutely. Let the better person do it. In my -- believe it or not, in my family, you know it, my wife is better at this stuff. And so she sort of takes the lead on it and it gets done better than -- now, look, there's an issue about responsibility about money. The other partner should have involvement in it so they know about it, but I think it's totally OK for the smarter, better one, the more organized one, to handle the finances.

ROMANS: All right, so how do you have the money talk? This is -- and you and I have disagreed on this --

VELSHI: Yes.

ROMANS: Because I think that -- I personally think that student loan debt is so big that young people who are courting --

VELSHI: Yes.

ROMANS: That sounds -- I sound like an old lady -- you know, you can use student loan conversation --

VELSHI: To get into the big --

ROMANS: To find out how much student loan debt you have --

VELSHI: Right. Because if you're in your early 20s and you have debt --

ROMANS: How are you going to pay it off?

VELSHI: You've got a built-in excuse.

ROMANS: Right.

VELSHI: (INAUDIBLE), right.

ROMANS: And everybody's got it.

VELSHI: Totally right. Have it early. Have it there. I don't -- but this is where we do disagree. I don't know if the dating process, if you start off -- if you're older and you get --

ROMANS: You're telling me you would dump me if I asked you how much student loan debt you have?

VELSHI: No, I don't think we get to a second date.

ROMANS: You would dump me for other reasons.

VELSHI: As to why not get to the third or fourth date and then say, listen, this is working out really well. There's something I've got to tell you, because at least then you've got some background. I don't think you should rush into the conversation. But you've got to have it. You've got to have it. You've got to have it within the first few times that you're talking seriously about your relationship.

ROMANS: All right. Can you have separate checking accounts?

VELSHI: Yes, I think if you --

ROMANS: I think you can too.

VELSHI: If one person is going to get really irritated by the way you spend, maybe you should.

ROMANS: I know. But I think you should talk to each other once a month, sit down, just talk about your goals, where you are.

VELSHI: Have a money date and start on Valentine's Day this year.

ROMANS: That's right. And, you know, take the $109 for the dozen roses and maybe, instead, sit down together and invest it.

VELSHI: Yes. Yes.

ROMANS: That's what I say. But we're nerds.

VELSHI: Read a book. There's some good books on this topic.

ROMANS: Oh, yes. What's your -- you're right. I think there are. And we're going to tell you about it in a quick -- in a minute. What's your best advice for getting out of debt? You can share it. We may just air it on the show next week. And if we do, Ali Velshi will personally send you a t-shirt or --

VELSHI: And one that I've worn.

ROMANS: Ah. Or he'll send you a copy of the book.

All right, don't for get to Facebook us or tweet us. Our handle is CNNBottomLine. My handle is @ChristineRomans.

Back now to "CNN SATURDAY MORNING" for the greatest headlines.

Have a great weekend.