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Are You Changing Your Spending Habits?; Student Loan Debt Crisis; The Richer Sex; From Producer to Pie Maker

Aired March 17, 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: Good morning, everyone. I'm Christine Romans.

There are four surefire ways to lower gas price quickly -- have a depression, drain out the strategic petroleum reserve, scrap all clean air rules, overnight peace in the Middle East. Easy, right?

CNN's Lizzie O'Leary joins us. Lizzie, Newt Gingrich promises he can lower the price of gas to $2.50 a gallon. The president calls that promise phony. Who's right?

LIZZIE O'LEARY, CNN AVIATION AND REGULATION CORRESPONDENT: Probably a little bit more on the president's side. $2.50-a-gallon gas is a bit of a fantasy if you're thinking about it right now. I mean, it just simply doesn't work.

You name the things that would happen quickly or could happen quickly, they don't really work. You could lower gas prices eventually by increasing the oil supply. You certainly hear Republicans call for that. But it wouldn't do anything in the short term.

This is way too big an oil market. And as you know, the bulk of what makes up the price of gas is the price of oil.

ROMANS: Oh, and it's all a lot of tradeoffs, too. I mean, certainly, you don't want a depression so you can have $2.50 gas, right?

O'LEARY: Exactly.

ROMANS: I want to look at this. Gallup polled consumers and found the price at which they significantly change their behavior is $5.35 a gallon.

Richard Florida is author of "The Great Reset." Richard, no economic statistic more immediate than gas prices, and consumers are feeling it. Is the frustration justified?

RICHARD FLORIDA, PROFESSOR, ROTMAN SCHOOL OF MANAGEMENT, UNIV. OF TORONTO: Yes, well, I think it -- you know, that Gallup poll says 50 to 60 percent of us start to change our behavior when that gas price goes above 5 bucks a gallon, where it may be heading.

And really, it means Americans have to change the way we live. That's the fifth factor, you know, that you and Lizzie were talking about. And it may seem painful in the short run, but we have to change the way we live.

We have to become less dependent on the car. We have to move closer to where we work. Increasing numbers are walking and biking to work or downsizing that house. If we want to make the American economy thrive, we have to make the American economy less oil-dependent. And that means the most important thing the president can do and we can do is change the way we live.

ROMANS: You know, there's how gas prices change your behavior and how you change the way you live. And then there's how gas prices change your vote.

Lizzie, the president's approval rating has dropped in the past month as gas prices have risen. A CBS/"New York Times" poll shows that among people who make among $75,000 or more, the president's approval rating was unchanged.

But for people making $30,000 to $50,000 a year, their approval of the president dropped 16 points. Lizzie, this is evidence for me that there are two Americas. You've got stocks up 11 percent this year, but you got people making $50,000 or less feeling nothing but gas prices.

O'LEARY: Yes. They're feeling nothing but gas prices. I mean, obviously, there are a whole host of other economic factors that play into that "two Americas." if that's the only legacy of John Edwards, we can keep that line.

(LAUGHTER)

O'LEARY: But yes, absolutely. That is the price point and the income point where gas prices bite and they bite the most.

One thing that's probably important to remember is that even if you have a 401(k) or a retirement account, most people actually have some sort of oil-related or gas-related something in there...

ROMANS: Right.

O'LEARY: ... even if they don't realize it. And so while, yes, it hurts at the pump, yes, you hurt it -- you know, you feel it immediately, you might actually be sort of lining your own pocket on the other side.

ROMANS: That's a good point, too.

Now, I want to talk about housing. I mean, this is a -- this is a really important part of the puzzle for people and their monthly bills. And if you've been living in your house and not paying your mortgage -- and you know who you are -- things are about to change.

Richard, the mortgage deal means banks are going to have to ramp up foreclosures again because now they've got some clear signs from the government about what to do. Let's talk about the big mortgage deal. Are we going to see more foreclosures now?

FLORIDA: I'm not a big fan of the mortgage deal. I think we've got to let the housing market reset itself. In my view, it's too little, too late.

You know, housing prices in America are back to about 2000 levels. And I guess we could subsidize everybody back to the level -- you know, the gap between that and what they paid for their house.

It took 25 years after the Depression to get the housing market going again.

ROMANS: Oh!

FLORIDA: I think in America, we got to get our attention out of housing and mortgages and get our economy back on track, and this just isn't going to cut it.

ROMANS: You know, Lizzie, a lot of -- a lot of people have been screaming about the mortgage deal, saying that it was good for the banks, maybe not good for home owners.

O'LEARY: Yes. And certainly, it depends on the home owner. Look, people who have a mortgage that is now held by Fannie Mae or Freddie Mac -- that's half of the mortgages in the country -- they're not eligible for this.

FLORIDA: Yes.

O'LEARY: It's a very small group of home owners who are eligible. And if you think about it -- I mean, someone used the phrase of a $25 billion drop in a $700 billion bucket.

ROMANS: Right.

O'LEARY: That's the overall value of underwater mortgages, people who owe more than their home is worth. If the goal is to change the housing market, it doesn't do very much.

ROMANS: Thanks so much, Richard Florida, Lizzie. Nice to see both of you.

O'LEARY: Thanks.

FLORIDA: Thank you.

ROMANS: All right, some are calling it the next housing crisis, and this one could be a complete catastrophe. Why you could be a part of it and not even know it. That's next.

(COMMERCIAL BREAK)

ROMANS: What if I told you the next housing crisis will be student debt? A bankruptcy attorney group calls it the "student loan debt bomb." Here's why. Americans have more outstanding student loan debt than they do auto loan or credit card debt.

An average graduate leaves school more than 25 grand in debt, and four out of five bankruptcy attorneys say they've seen a rise in student loan debtors and their parents seeking help. Are you behind on your student loans? One in four of you are.

Anthony Carnevale is director of the Georgetown University Center on Education and the Workforce and Ali Velshi CNN's chief business correspondent and host of "YOUR MONEY."

Tony, you look at student loan debt, and it feels like you can't afford to go to college. You look at earnings for college graduates, and you can't afford not to go to college. It's a really terrible paradox.

ANTHONY CARNEVALE, DIR., GEORGETOWN UNIV. CENTER ON EDUCATION AND THE WORKFORCE: The only thing that's more expensive than going to college now is not going to college. So there's an affordability problem, and we're not really clear how to solve it. The risk is that more and more, college will be something that is only affordable for those who are more wealthy in America.

ROMANS: Wow. So if it's some sort of a luxury item in this country, that means the gap between the haves and have-nots just gets that much more defined.

CARNEVALE: Yes.

ROMANS: You know, Ali, it's not just getting a college degree, it's what you major is that matters here. Eight of the top ten majors with the highest media earnings are engineering.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT, HOST, "YOUR MONEY": That's right.

ROMANS: The other two are pharmaceutical sciences and math and computer science. At the other end of the scale, counseling psychology majors earn a whopping 29 grand a year. Theology majors earn 38. Ali, you majored in religion...

VELSHI: Yes.

ROMANS: ... but you wrote a column in the March issue of "Money" magazine calling on students to go into stem (ph) fields. And the response was, So, what does Ali Velshi have against liberal arts majors?

VELSHI: Yes. In fact -- and I don't think I made it clear that I am one of them, and as a result, I got a lot of hate mail about it.

(LAUGHTER)

VELSHI: Let me tell you a couple things. That $29,000 for counseling psychology, it's not an average, it's the fact that a lot of people with that degree just won't get a job.

So the issue here -- and it was after a conversation with Tony, actually, that I wrote this column because the information is out there for parents and their kids. What tends to happen is parents work really hard on getting their kids into university. They have tutoring and they have SAT (ph) -- SATs tutoring. And then they go ahead and study these things that don't have any relationship to getting a job.

And then, Christine, you and I see them when they graduate. They're trying to get a job, and I feel like saying, I get it if you really wanted to be a poet or you really wanted to study theology, like I did, but did you really think about this...

ROMANS: Right.

VELSHI: ... because there's really no work in this particular field.

ROMANS: We got a lot of kids in school, Tony, who don't look at statistics like this. Instead, they're finding themselves. The world has changed, hasn't it.

CARNEVALE: It used to be in the 1970s, prior to the end of the 1980- '81 recession, that college degrees in and of themselves were valuable. They gave you lots of choices. They don't anymore.

What you take pretty much determines whether you'll work and what you make now. That's what hasn't caught up with most students.

ROMANS: I want to ask both of you -- Tony, you first. Is college worth it, or is it is college worth it with an asterisk? It depends. You finish that sentence for me. Is college worth it?

CARNEVALE: It all depends on what you take. In general, college is worth it. If you get a four-year degree, you'll make $2.3 million over a lifetime. But that distinguishes between people who make little more than a high school graduate, the counselors you were talking about, and people like medical doctors, who will make $7 million or $8 million. So there's a huge variation now.

ROMANS: Ali.

VELSHI: Yes, college is worth it. But like a lot of things that are worth it, including a house and a car, you do have to do your research. A house might be worth it, but not if you're overpaying for it.

There are ways to figure out how to pay the right amount for college and get a degree that is going to pay you when you're out. And again, notwithstanding all of that, if you want to study something that's just interesting to you, go right ahead. Just go in with your eyes wide open.

ROMANS: I think so many people think, Oh, I'm going to try to study something, but the economy is changing so fast. It's changing faster than our skills do, which is why vocational training, three-year college programs -- there's so many different things.

VELSHI: Yes.

ROMANS: And we'll continue to talk about that. Tony Carnevale, Ali Velshi, thank you so much. Have a great Saturday, guys.

Four out of ten working women, including Ali's wife, surpass their husbands in this. What is it? Next on YOUR BOTTOM LINE.

(COMMERCIAL BREAK)

ROMANS: Four out of ten working women surpass their husbands in what category? Earnings. The "Mad Men" days are over in the workplace. They're over at home.

My next guest says by 2030, a majority of working wives will out-earn the men they're married to, if this trend continues.

Liza Mundy is a contributor for "Time" magazine and she wrote the cover story this week on this topic. She's also the author of the book "The Richer Sex."

Nell Merlino is founder and president of Count Me In for Women's Economic Independence, and Dr. Robi Ludwig is a psychotherapist.

Liza, women are increasingly becoming the breadwinners, and that was inevitable.

LIZA MUNDY, AUTHOR, "THE RICHER SEX": It's been steadily climbing. The percentage of working women who out-earn their husbands has been steadily climbing since the late 1980s. There was a market acceleration, actually, at the beginning of this century, this...

ROMANS: Before the recession.

MUNDY: Before the recession, well before the recession, there was a jump. And then, of course, the recession, which was called the "man- cession"

ROMANS: Right.

MUNDY: ... accelerated it. But it did not start it.

ROMANS: And what's driving it? The women are more educated? Women know they can do it?

MUNDY: Right.

ROMANS: Now it's three generations of women at work, I guess?

MUNDY: Right. Right. Strides that have been made in the workplace and pay. Women are outnumbering men on college and university campuses. Expect -- that's expected to continue, that trend. It's also expected to accelerate.

And then the changes in the economy that were illuminated by the recession in terms of, you know, declining manufacturing base and sort of industrial jobs, an economy that's changing to be a knowledge economy...

ROMANS: Right.

MUNDY: ... which some say favors women.

ROMANS: Now, Robi, in your line of work...

ROBI LUDWIG, PSYCHOTHERAPIST: Yes.

ROMANS: ... this doesn't have to be a bad thing for men.

LUDWIG: No.

ROMANS: It doesn't have to be an ego hit for men.

LUDWIG: Right. And I have seen in my practice that -- now, granted, I'm in the Northeast and I treat people in New York City. Men actually like women who can be good earners, and during the dating process will look for women and perhaps even choose women that will make good wives considering what kind of salary will they...

ROMANS: Gold diggers! They're gold diggers!

LUDWIG: But they're not -- no, those are men, and they are there, too, who say, Do they -- do these women come from a wealthy background?

But it's really nice to see. And we see men saying, Hey, I realize if I choose a woman who's successful, I'm going to have more options in my life and it's going to make my life easier.

ROMANS: Well, in Liza's piece, you had some really great comments from younger women who were dating, who actually were lying about what they do for a living because they didn't want to get in a conversation about law (ph) with a guy they were just meeting or they were actually downplaying their earnings and their success. Why?

MUNDY: Right. I think women have gotten the message. They don't realize this yet, that it is -- it is a positive attribute, earnings and education. They're a little concerned about that. And so they will sometimes lie about what they do.

And I interviewed a software consultant who says -- tells men she teaches music. Or they'll kind of downplay their earnings. I interviewed one woman who carries around a lot of $1 and $5 and $10 bills so she can sort of discreetly pay for parking and tips without having it seem that she's paying.

ROMANS: Interesting. All right, I want to bring in Nell because, Nell -- you may not know this -- in 1993 is one of the women who invented the Take Your Daughter to Work Day. And Nell, I mean, this trend on the day that you started taking our daughters to work -- now our daughters are paying the mortgage.

NELL MERLINO, FOUNDER & PRES., COUNT ME IN: Absolutely. It's -- it is -- it is one of the things that I hoped would happen. And I think it's great for men and women that that -- that fathers -- you know, men have choices now that they didn't think they had 20 years ago, where they actually can maybe work less, stay home, enjoy raising children.

ROMANS: But women working full-time earn a median wage that is still 81 percent of what men make. That's according to the government. Women are becoming the breadwinners, but they haven't closed the pay gap yet, Liza. And that's something that's a concern.

MUNDY: Right. And it actually is extraordinary that that high a percentage of working women out-earn their husbands, even though in the workplace, they're not earning perhaps what they should be.

And one can expect, as the gender wage gap closes, that even more women will be out-earning their partners. And a lot of couples are going to trade back and forth, just what they've said. It opens up options for men and women to experiment, to try new things, and to trade back and forth.

LUDWIG: And also to play to each other's strengths...

MUNDY: Right.

LUDWIG: ... so that if a woman has a really, you know, career -- great career that she feels passionate about, and the husband prefers to be more nurturing and work part-time, you know, that might work really well for a couple because they are recognizing each other's strengths and what they each bring to the marriage.

ROMANS: One of the things, Nell, that -- what if everyone's working harder? I mean, we have this economy that's built on you have to have two wage earners. Now it takes two people to earn, I guess, together as a household only a little bit more than only one person did 40 years ago. Everyone's working harder...

MERLINO: Everyone...

ROMANS: ... and you're trying to raise your kids and save for college.

MERLINO: They're working harder, and it still speaks to the fact that haven't developed a system that allows couples to work. There still isn't enough quality affordable child care.

There are lots of issues that come up here because in other countries, both people in a couple can work and raise children because of the child care that's available and the understanding on the part of employers because in the area that I work in, a lot of women start their own businesses because they can manage their schedule better, and therefore, you know, are able to pursue...

ROMANS: Right.

MERLINO: ... a career that allows them to take care of kids and manage a marriage and all those things.

ROMANS: I heard someone say to me recently that every household needs a wife. And by that, it doesn't mean a woman who is a traditional wife. Everyone needs a wife. And that's the husband or the wife. Or sometimes, it's a nanny or a grandma or an aunt or someone who's the person who's the glue in the middle. Do you know who I mean?

(CROSSTALK)

UNIDENTIFIED FEMALE: Running the household. ROMANS: It's -- one and one equals three, in a way.

LUDWIG: And where the resentment can come in is if you have a woman who is the breadwinner and then goes home and feels that she has to take care of the kids and clean the house. Then she has two jobs. That's where resentment can come in, and of course, have a ripple effect on the family.

ROMANS: All right. It's a fascinating conversation. The article is wonderful, so I encourage everyone to take a look at it. So nice to see all of you. Thank you.

(CROSSTALK)

ROMANS: Have a great weekend, ladies.

All right, attention 99-ers. Are you out of work? Do you know someone who's out of work? Chances are, one of those applies to all of you. How to reinvent your job in this do-it-yourself economy next.

(COMMERCIAL BREAK)

ROMANS: We live in a do-it-yourself economy. Dave Tuttle lost his job, burned through his savings, and then he found inspiration in a random dinner party conversation that changed his life.

(BEGIN VIDEOTAPE)

(voice-over): Dave Tuttle has a passion for pie.

DAVE TUTTLE, TUTTLE'S HOMEMADE: Let's face it, pie is wonderful stuff, makes people feel great.

ROMANS: A passion that was born of necessity in 2009 after this former film and TV producer couldn't find work in an industry that was shedding jobs.

TUTTLE: For about a year, I really made it full-time to try to find a job, to get back into the business, because that's what I had known for 20 years.

ROMANS (on camera): So you were living on your savings, living on your 401(k).

TUTTLE: My 401(k). And it came to a point where I, you know, was depleted all of our funds.

ROMANS (voice-over): Then an idea.

TUTTLE: We were sitting at a dinner party one night, and I had brought one of my pies, and sitting around with our friends. And they said, You know, David, you really should start to sell these pies. My wife's, like, Yes! You need to something!

(LAUGHTER)

TUTTLE: And I said, Well, OK. That's cool. You know, maybe I'll try it.

I'll bake on the average of 16 to 18 hours straight. I'll use only what's in season here in the Hudson Valley. I do everything by hand. I'll peel my apples, I mix all my crusts, roll them out by hand. The name of my company is Tuttle's Homemade.

ROMANS (voice-over): His unique cost-saving measure, bartering for kitchen space at local restaurants.

(on camera): So you pay for the space with pies.

TUTTLE: Bingo.

ROMANS: Which also is more advertising for you.

TUTTLE: Bingo!

(LAUGHTER)

ROMANS: So you're selling those pies...

TUTTLE: Bingo! Right.

ROMANS: Brilliant.

TUTTLE: Right.

ROMANS (voice-over): He sells and hand delivers up to 200 pies every month, most locally. But now Tuttle's ready to take the next step.

TUTTLE: I can definitely see Tuttle's Homemade right up there.

ROMANS (on camera): Tuttle's Homemade.

TUTTLE: No problem. And, like, a sign coming out of here, you know, "Fresh baked pies." I wouldn't (ph) have to do a lot of work to it...

ROMANS: But it's going to take money, though. Going to take money.

TUTTLE: It's all going to take money.

ROMANS (voice-over): A hurdle as years of unemployment and living on credit cards hurt his credit score. And he's not alone. Demand for small business loans is up, but lending is still tight.

Tuttle says he could help the economy grow, if given the chance to grow his business and start hiring.

TUTTLE: Our government needs to take advantage of that. There's a huge, huge amount of people doing this.

ROMANS: While he hopes his business will continue to heat up, Tuttle says the experience has given him a new recipe for life.

TUTTLE: Before, it was about making that paycheck. Now it's more about family. It's about being connected back to my community. What I was doing before wasn't -- it was great, but it wasn't as real as what I'm doing now.

ROMANS (on camera): There's nothing more real than a real good apple pie recipe.

TUTTLE: Exactly!

(LAUGHTER)

TUTTLE: Exactly!

(END VIDEOTAPE)

ROMANS: I love his story. Back with us is Nell Merlino. And Nell, I wanted to talk to you about this because you advise people how to take their business to the next level, not just to employ themselves but to make it really become a business.

What does he have to do to grow?

MERLINO: He has to let go of all the details. I know he -- like a lot of the women that I meet, he thinks if it's going to be homemade, it literally means his hands have to touch every piece of it. And he can't go beyond what he's doing. He can't make enough money to support his family if he doesn't start to involve other people.

I would also suggest that he probably needs to expand his product line, to make different pies or maybe something with apples that isn't a pie...

ROMANS: Right.

MUNDY: ... that might be easier to transport and stuff that he could, you know, mail because maybe he needs to get on line. I mean, bigger distribution, I think, is an opportunity.

And I think if he wanted to really make some money and he saw the bigger distribution, he might be able to let go of some of the day-to- day details and the baking and all that stuff because you can't continue to do that every day and grow a business. He's maxed out now.

ROMANS: This is what a lot of people do. They make the job, they create the job for themselves in what is a do-it-yourself job market, but then they're stuck. It's one person, one job, and there's not a lot of room for earnings growth.

MERLINO: Yes.

ROMANS: What I told him was think of the brand, you know?

MERLINO: Very good.

ROMANS: Tuttle Homemade -- think of the brand, and that's the important thing here and figure out how you can build this little brand. I like the idea of another product, that you have other products.

MERLINO: Another product. And there are opportunities in big-box stores locally for small businesses.

ROMANS: Oh!

MERLINO: Sam's Club does a road show where you can go in, they test your product. If they like it, they do these -- they don't do them all the time, but he'd have to go and look and find out when they -- because there are a bunch of them in the Hudson River Valley.

ROMANS: Right.

MERLINO: He can go and sell his product for a week and really get a sense of the kind of volume he could do because he can stay there, he can -- he can offer people tastes of the product. He can really sell it and get a sense of the customers' reaction and maybe try some of those other products.

ROMANS: You're right.

MERLINO: So I think there are a lots of different ways for him to approach this that aren't all about him needing money right away. He needs to understand that he's got a bigger customer base and build his brand.

ROMANS: All right. And a brand that certainly is resonating with the customers he has. Nell Merlino, nice to see you this weekend. Thank you.

All right, here's what you told us last week. Ed Robinson via FaceBook said, "Campaign promises plus promises equals lies." And Michael McGowan, also via FaceBook, wrote, "We can have lower gas prices if we nationalize the oil companies or if we have a depression. Otherwise, Gingrich is full of hot air."

I'm sure you're going to be talking about gas prices more. Send us more of your comments on everything. Find -- you know where to find us, FaceBook, Twitter @christineromans and @cnnbottomline.

Back now to "CNN SATURDAY" for the very latest headlines. Have a great weekend.