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Your Money
The Economy Election; Europe's Debt Crisis; Bair-ish on the Fed; Student Debt Soars, Who Pays?; X PRIZE, Finding Solutions; Ford's Road Ahead; The Cost of an iPhone
Aired April 29, 2012 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: President Obama wants to make sure he keeps his job. But to do that, it's your job he needs to worry about.
I'm Ali Velshi. Welcome to YOUR MONEY.
I want to take you beyond the politics and show you the facts. These are the jobs that have been lost and gained during President Obama's term. It was an economy in free fall when he took over. Beginning with the president's first full month in office, February of 2009, the economy lost 4.3 million jobs in the first 13 months of his presidency. Employment spurted for much of 2010, but beginning in October of that year, America began to gain jobs.
A painfully slow, but steady job recovery has now taken hold for the last 18 months. And here is the key, if you want to bring it back to politics. If the economy adds just over 100,000 jobs per month between now and the election, America will have gained back every single job lost during the Obama presidency.
Mort Zuckerman is the editor in chief of "U.S. News & World Report." He's also an extremely wealthy and successful Democratic businessman. And he wrote this week, President Obama's economic programs have failed.
Mort, the economy is on pace, as you saw, to get back every job lost under President Obama, about a recession that he didn't start. Why? Why are you saying it's failed?
MORT ZUCKERMAN, EDITOR IN CHIEF, U.S. NEWS & WORLD REPORT: Well, let me put it this way. In the first place, those numbers are slightly misleading. We need 125,000 to 150,000 jobs every month just to take into account the new people coming into the labor force.
VELSHI: Absolutely, but that's not the criticism.
ZUCKERMAN: Wait a minute there. I haven't finished.
VELSHI: OK.
ZUCKERMAN: You're just -- I'm not debating you. I'm just trying to give you some facts.
VELSHI: All right. ZUCKERMAN: OK. You compare this to any previous recovery from any previous recession, whether it was in the 1970s or the 1980s. At this point, the economy was growing somewhere between 6 and 8 percent. With the largest stimulus program, both in terms of monetary policy and fiscal policy, we are having the slowest job growth. If this is a recovery, we need a recovery to recover from the recovery.
VELSHI: Mort, even --
ZUCKERMAN: And --
VELSHI: Even if he is not growing that rate --
ZUCKERMAN: I'm not comparing us to India. I'm just talking about the policies.
VELSHI: Right.
ZUCKERMAN: That this administration has put into effect. The stimulus program that they put in, which was $800 billion was badly directed and badly formed and almost every economist will tell you that. That's number one. Number two, the health care program cost, according to studies by both the University of California and the University of Chicago, somewhere between $2 million and $2.5 million jobs. And it is true that there are jobs being created. These jobs are mostly part-time jobs, rather than full-time jobs.
VELSHI: Let me ask you this. Let me ask you this. Point taken on everything you've said. You know your stuff, you've done the research. Would somebody else have done a better job?
ZUCKERMAN: I don't -- I don't know know.
VELSHI: If --
ZUCKERMAN: You'll never know.
(CROSSTALK)
VELSHI: If John McCain were elected, would we be in a different situation?
ZUCKERMAN: I doubt it. I didn't vote for John McCain. As you know, I supported President Obama.
VELSHI: Right.
ZUCKERMAN: And my newspaper --
(CROSSTALK)
VELSHI: So you're blaming him for something that you're not sure could've been solved a different way?
ZUCKERMAN: No. Excuse me a second. I do think he went in with the wrong programs like, frankly, I think he made a huge mistake with the health care program. When over 80 percent of the country wanted health care costs to be got under control and he focus on expanding the coverage to 30 million people, which blew out the Medicaid and Medicare deficits even longer.
Number two, he wasn't able to deal with the deficits because he couldn't reach an agreement with the Republicans. I'm not going to get into a blame game. It's up to the leadership and the president to make that happen. And he didn't. And as far as the stimulus program was concerned, frankly, it was a bust. He did much, much less than he should have been done and it was badly focused.
And finally, he alienated the whole business community and the business confidence has just collapsed in terms of their view of this administration. Not all of these were necessary, if I may say so.
VELSHI: All right. We'll get back to that in a second. President Obama is the incumbent. He has a record.
Van Jones was a special adviser to President Obama, focused on green jobs and innovation. Van is also the author of "Rebuild the Dream."
Governor Mitt Romney, Van, reached back into the Clinton years this week and stressed that it is still all about the economy.
Van, what does President Obama have to do to point to successes in the economy, in the face of those criticisms, and the kind that we're hearing from Mort Zuckerman, a Democrat?
VAN JONES, AUTHOR, "REBUILD THE DREAM": Well, I mean, first of all, it's interesting to me. I think we all are frustrated with the economy. The reality is that when you talk about the stimulus package, a third of the stimulus package was tax cuts. Conservatives say they're for tax cuts. A third of the stimulus was tax cuts. Ninety-five percent of Americans got tax cuts under the stimulus.
Another third, he was saving cops, teachers, firefighters from being thrown out of work in the hundreds of thousands across America. If your kid went to kindergarten and a teacher was standing there to welcome them in those years, thank President Obama. The president was going uphill --
VELSHI: Hey , Van, let me interrupt you for a second. Let me interrupt you for a second.
JONES: In the full --
(CROSSTALK)
VELSHI: Van, Van, let me -- Van, let me stop you for a second.
JONES: Yes, sir.
VELSHI: Again, like Mort, you're making good points. The president seems to struggle getting that message out there. Is that going to change in the course of the next few months? Because that's the kind of stuff that he's going to have to have people remember about teachers and about firefighters and about how bad it could have been, if the stimulus weren't in place, as unsuccessful as some people say it is.
JONES: Well, I mean, this is the most important thing, I think, he can say. Now he's finally -- fortunately, we have a president who's honest enough to be in Washington, D.C., trying to solve the problems, not just out there, making a case for himself. Had he been taking his eye off the ball trying to explain all this stuff to people, things would have been worse.
Here's what you've got to admire about this president. That stimulus package was as big as it could have been. You've never had an economic crisis like this. Two wars, an ecological crisis going on, and the -- and lockstep opposition from the opposition. The president put forward ideas that Republicans liked until he adopted them.
VELSHI: Right.
JONES: They said he wanted tax cuts. He put them in there. They stopped him on that. They said they wanted individual responsibility in the health care system. He went with that and then they took him to the Supreme Court.
You have lockstep opposition from the Republicans.
VELSHI: Right.
JONES: And yet -- and still -- and the last thing I want to say is, he volunteered to be the captain of the "Titanic."
VELSHI: All right.
JONES: After it hit the iceberg.
(LAUGHTER)
VELSHI: OK. That's a good point.
Mort, Mort --
JONES: After it hit the iceberg. And we're still floating. We're still floating.
VELSHI: Van says President Obama volunteered to be the captain of the "Titanic." Let's look at -- forget history for now, let's look at the current stuff. Let's look at a poll of what people think about how things are going today. Forty-three percent think that things are going well today. This is a new CNN/Opinion Research Corporation poll.
In February, Mort, 40 percent thought so. In December, 30 percent thought so. And last August, which, as you recall, was a tough time, we were dealing with the debt debacle, we were dealing with what looked like very serious problems in Europe, 24 percent thought so. Are you out of step with the reality here about the way things are going? I mean win talk to CEOs every day. They don't sound as negative as you do, and you're a Democrat.
ZUCKERMAN: Yes, well, first place, corporate America is doing a lot better than the economy as a whole.
VELSHI: They are. Yes.
ZUCKERMAN: Why? Because they have control over their costs.
VELSHI: Right.
ZUCKERMAN: And one other ways they control their costs is, A, they let go of a lot of people, and B, they're not hiring. Which is why the hiring numbers are so weak. OK? So that's the way --
VELSHI: But the hiring numbers have been extremely strong.
ZUCKERMAN: No, no, no. The hiring numbers have been very, very -- it's the weakest recovery in terms of hiring that we've had from any recovery. It's not even close in terms of the number of jobs that are created.
VELSHI: And if you don't like what this administration has done, what is the answer?
ZUCKERMAN: If I had one thing to do, and assuming I had the power to implement it, which I think is appropriate, I would revise the tax code. If you revise the tax code --
VELSHI: Right.
ZUCKERMAN: -- by eliminating a lot of the special provisions that good lobbyists have been able to get for all kinds of different interest groups, you would have the following. You would have lower corporate rates and lower individual tax rates. It would stimulate both the consumer and business.
VELSHI: You know, I have a tax code --
ZUCKERMAN: That is the one thing that has to be done.
VELSHI: I have a tax code in this building. It is 173 pages long.
ZUCKERMAN: Yes.
(CROSSTALK)
VELSHI: I full agree with you. Republicans didn't fix it either.
ZUCKERMAN: I'm not saying -- I'm not justifying the Republicans.
VELSHI: I get that you're saying you're frustrated with how things have gone, but why is this on President Obama as opposed to the Republicans who have never fixed the tax code and Democrats, by the way, who have never fixed the tax code? ZUCKERMAN: There is a very good reason. This country relies on the leadership in politics and economics on the president, not on the Congress. We all know the way that Congress works. It takes presidential leadership. In 1983, Ronald Reagan, when he was president, and Tip O'Neill, the speaker of the House, reformed Social Security. Why? Because he had relationships with Tip O'Neill and the two of them worked together to get it done.
This president has no relationship with the Congress. If you go to the Congress, and I just did, at the end of --
(CROSSTALK)
JONES: But who's fault is it?
ZUCKERMAN: -- session of one of the committees, there is absolutely no relationship. The Senate leader, Mitch McConnell, with a front page story in the "New York Times," had not had a private meeting with the president in 18 months.
VELSHI: Right.
ZUCKERMAN: So this is a real political --
VELSHI: I'm not sure if Mitch McConnell had insisted on having that private meeting, that he would have got it. I mean I think we're partisan to the extreme in a way that we have not seen possibly ever.
ZUCKERMAN: I agree with that. And I think that is part of the problem. But the kind of presidential leadership that we need to get out of this mess did not come from this president and a lot of people believe that.
(CROSSTALK)
JONES: I disagree with that. I disagree with that.
ZUCKERMAN: I supported him, I endorsed him. I'm telling you, it's just a disappointment.
VELSHI: All right. Van disagrees with you, but Van, we're going to have a little more chance to talk about this.
Mort, always a pleasure to have you on the show.
ZUCKERMAN: Thank you.
VELSHI: Thanks so much. Mort Zuckerman is the editor in chief of "U.S. News & World Report."
Van, stay where you are.
The woman in charge of protecting your bank account during the financial crisis now says it is time for the Federal Reserve to declare victory in this recovery, putting her directly at odds with Fed chairman Ben Bernanke. (BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: I'm declaring victory -- I think it's a little premature to declare victory.
(END VIDEO CLIP)
VELSHI: Shelia Bair makes her case on why it's time to loosen the grip and let interest rates rise, coming up next.
(COMMERCIAL BREAK)
VELSHI: This week, the Federal Reserve once again said it plans to leave interest rates at a record low until late 2014. Just as it has for the past four years. But there are those who say that now is the time to start raising interest rates.
Well, if we do that, here's what it means for you. The pros are that you get a better return on your savings and some of your non-stock investments. Plus, there's less chance of inflation, which really worries central banks. Now the cons is that the interest rate on your mortgage or other loans could go up, and some banks can get discouraged from lending.
Shelia Bair is the former head of the FDIC, the Federal Deposit Insurance Corporation. When our country was in the thick of the financial crisis, she was tasked with shoring up our banks, a job she did very well. Now, she wrote in "Fortune" this week that if the Fed does not raise rates soon, America could be heading for another bubble.
Fed chairman Ben Bernanke was asked about this in Congress, and he responded.
(BEGIN VIDEO CLIP)
BERNANKE: I think that keeping interest rates low is still appropriate for our economy. As for the bond bubble, interest rates are low for a lot of reasons. They include monetary policy, of course, but they also include a weak economy, low inflation expectations, and safe haven demands for U.S. treasuries. So, of course, interest rates will arise at some point. We hope that they do, because that would be an indication that the economy is recovering and strengthening.
(END VIDEO CLIP)
VELSHI: If interest rates rise, it's an indication that things are recovering and strengthening. Sheila Bair joins me again.
Always a pleasure to see you, Sheila. Thank you for being with us.
SHEILA BAIR, FORMER CHAIRMAN, FDIC: Thank you, Ali. Glad to be here.
VELSHI: Let me just show our viewers. When we talk about GDP, it's the broadest measure we use, it may not be as effective as other things, but it's the broadest measure we use.
Back at the end of 2008, the economy, the GDP contracted by 8.9 percent. After that, it was 6.7 and then 0.7 percent. Then it started to grow. We got up to 3.9 percent. It was very strong. And then into the 2's and 2011, we had sort of a dodgy year. And now we've got brand-new numbers that show that the economy is growing at an annual basis of 2.2 percent.
So it's going to be 2.2 percent bigger in 2012 than it was in 2011. That's not much, particularly when you compare it to a lot of other nations. So is your idea that interest rates should go up a signal that you think we're OK? You're confident in this recovery and we're not -- we're not going to be set back again?
BAIR: I think it is a signal that this has gone on long enough and that there's only so much you can accomplish through monetary policy. Our economy is still struggling, but I think the way to fix that is through fiscal policy, better leadership from the president and the Congress to clean out an exceptionally laden tax code to fix our entitlement problems to provide some certainty to business about what the future trajectory of our economy will be.
There's only so much the Fed can accomplish with monetary policy, and keeping rates at extremely low, near-zero rates, does create inflationary pressures later on. There are risks that are involved in this. And I just don't think we're getting much further bang for the buck on it. So now I do think that it's time -- I've said that the Fed should let the market bump interest rates up a bit and not intervene, if that's the direction the market wants to go, and I think that would be a healthy thing for the economy.
It could have some positive effects, too. You mentioned that it could help savers. You know, it might actually help the mortgage market, because I think some people are on the sidelines now with all the excess inventory in housing. But if they know mortgage rates are going to start going up --
VELSHI: Sure.
BAIR: -- they might come in to lock in those low rates.
VELSHI: And I've maintained that position for a long time.
BAIR: Yes.
VELSHI: You know you might be worrying about home prices dropping another 5 percent, but if your mortgage goes from 4 percent to 6 percent, over the court of a 15 or 30-year mortgage, that's going to be more impactful --
BAIR: You're going to make up for that. Absolutely.
VELSHI: But what is -- so right now interest rates are -- the Fed rates are around zero.
BAIR: Right. VELSHI: The prime rate's around 3 percent. A 30-year fixed mortgage, if you put 20 percent down and have good credit, can be had for 4 percent.
BAIR: Right.
VELSHI: What's the right amount of interest? What's the kind of interest that controls inflation, allows savers to save, but doesn't crush the economy?
BAIR: Well, I think you need to have the market making -- is part of the decision making on this. Right now the Fed is controlling everything. Now you know, when I go out and speak to investor groups, the first thing I hear is, are we going to have QE3. So much economic activity is being geared towards what the Fed is going to do as opposed to, you know, what is our broader economic situation and what is our fiscal situation.
I think another reason it would be healthy for interest rates to bump up a little bit is to send a signal to Congress and the administration, frankly, that they need to get our fiscal house in order. So a little bond market discipline, I think, would, perhaps, be helpful there. So I would like to see the market have a little bit more of a say on what interest rate, the corporate interest rate level is because clearly, our fiscal situation is very troubled, and it does not justify these extremely low yields on treasuries right now.
VELSHI: Shelia Bair, always a pleasure to talk to you. Thanks so much for joining us.
Sheila Bair is a former chairman of the FDIC. She's now a senior adviser with the Pew Charitable Trusts.
Coming up on YOUR MONEY, how President Obama's re-election bid may hinge more on what happens in Europe than what happens in Ohio. That's next.
(COMMERCIAL BREAK)
VELSHI: Could Europe's economic crisis push our fragile recovery into reverse? Europe's unemployment numbers are downright alarming. Spain's jobless rate, now above 24 percent, sparking riots there this week, and its debt has just been downgraded.
Greece, Portugal, and Ireland all above the 10 percent mark, in terms of unemployment. Meanwhile, austerity measures in France haven't won president Nicolas Sarkozy many friends. He's facing a runoff election in one week. Greek voters crushed by cutbacks also head to the ballot box on the same day, May 6th, and could throw their leaders out.
There's a lot at stake here for the European economy and ultimately the global economy, ultimately the U.S. economy.
Nina Dos Santos joins me now from London. She's my co-anchor on CNN International's "WORLD BUSINESS TODAY." Jim Bittermann is CNN's senior European correspondent. He joins me now from Paris. Jim, let's start with you. As the architect of Europe's recovery plan, French President Sarkozy has proven to be unpopular. Is that why he's facing this runoff in the battle against a relatively little- known socialist?
JIM BITTERMANN, CNN SENIOR EUROPEAN CORRESPONDENT: I think that's right, Ali. The fact is that he's running about eight points behind in the public opinion polls right now with only about nine days to go before the election. So yes, I think that the economy is the big issue. There's no question about it. People talk about unemployment. He just got some more bad news yesterday. The unemployment numbers are up here, almost touching 10 percent, and they're at the highest level since 1999.
So that's one big concern and the other is buying power, which many citizens feel has gone down. They can't afford the things that they used to afford here. So, yes, I think the economy is the big issue as far as many of the French people are concerned -- Ali.
VELSHI: It's a point that Sheila Bair just made with me that inflation is the big concern because it erodes your buying power.
Nina, for decades, France has been a major global economy. Greece has not been a major global economy for about 2,000 years. Why do we care so much about the situation in Greece? Tell us what's happening and why it worries us.
NINA DOS SANTOS, ANCHOR, CNN'S "WORLD BUSINESS TODAY": But it has been a member of the eurozone, although according to recent comments made by the Bundesbank, the German faction of the European Central Bank, that governs monetary policy across the Eurozone, while perhaps Greece shouldn't have been part of the party anyway.
As you just said, it's going to be heading to the polls on the same day as the French elections, perhaps being a little bit eclipsed by that, because of course France is a major economy, the world's fifth largest.
But what they're going to be facing in Greece, whoever gets in here, Ali, will be not just a specter of the worst recession that they've seen in recent memory, also one of the most painful ones, but the specter of ungovernability here. Because a lot of people have been saying they're going to be heading to the polls to punish the politicians who got them into these situations in the first place.
VELSHI: All right. Let's just -- for comparison's purpose -- look at the different economies, major economies, in the world. GDP, Gross Domestic Product, is the broadest measure that we have of economy. So what you're looking for is how much GDP goes up by or down by in a given year.
These are the projections for this year, 2012. China is expected to grow by 8.2 percent. India by 6.9 percent. Brazil by 3 percent. The United States, 2.1 percent. Same thing in Canada, by the way, 2.1 percent. The United Kingdom, which is in recession right now, is maybe going to get to 0.8 percent. Spain, negative 1.8 percent. In other words, it's shrinking by 1.8 percent. And Greece is going to be almost 5 percent smaller by the end 2012 than it was at the beginning.
So, Nina, this becomes a discussion worldwide about whether austerity is a better policy than stimulus or whether the reality is somewhere in between. Are we learning any lessons between France and Greece and Spain and Italy?
DOS SANTOS: Well, economists would say that you should put your eggs in the basket of austerity, but politicians are already learning the lessons from that. What we've seen, Ali, is at least 10 governments have changed over the last two years or so, since this European financial crisis got going. Even with some of the most fiscally prudent nations like the Netherlands, seeing their government collapse amid ongoing backlashes against austerity.
And that just puts it into perspective, doesn't it? The same time, what we see is countries like Spain trying to push these really painful austerity measures, and still, Standard & Poor's decides to downgrade their credit rating.
VELSHI: Yes.
DOS SANTOS: And put it on a par with emerging markets like Karoon in Kazakhstan.
VELSHI: Great to see that the same conversation we think is -- you know, that we have here in the United States plays out in different ways in all of these different places.
Jim, always a pleasure to have you on the show.
Nina, always great to spend more than just the hour or day with you on TV.
And remember, we've got a live special next weekend. We'll be covering those Greek and French elections during our time slot here on YOUR MONEY.
Well, student loans have not only entered the presidential race, but they've also entered late-night comedy.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Now is not the time to make school more expensive for our young people.
JIMMY FALLON, HOST, "LATE NIGHT WITH JIMMY FALLON": Oh, yes. You should listen to the president, or as I like to call him, the preezy of the United Steezy.
(END VIDEO CLIP)
VELSHI: We're going to get a whole lot more serious about whether taxpayers should actually pay for soaring student loan debt, next on YOUR MONEY.
(COMMERCIAL BREAK) VELSHI: Soaring student loan debt, as tuition grows and employment remains murky at best, the debt burden is crushing young Americans from the moment they step off campus.
Christine Romans joins me again with a closer look -- Christine.
CHRISTINE ROMANS, ANCHOR, CNN'S "BOTTOM LINE": Well, Ali, interest rates on those federally subsidized student loans are set to double on July 1st. The president and Governor Mitt Romney agreed that they should be kept low. There's some politics involved in the last minute about how to make that happen, but some say keeping interest rates low, that doesn't go far enough.
(BEGIN VIDEOTAPE)
ROMANS (voice-over): The ball and chain of the middle class, student loan debt. An offshoot of "Occupy Wall Street" wants to forgive all student debt, $1 trillion of it, more than car loans or credit cards.
ANDRE ROSS, LEADER, OCCUPY STUDENT DEBT CAMPAIGN: It's a crisis, and it's not going away, and the current reforms that President Obama is proposing out there on his campaign trail, are like putting a band-aid on a tumor.
ROMANS: The theory goes, this is a bailout for students that would also be an economic stimulus, because money meant for loan payments would be spent in other ways. It's a far left battle cry, to be sure, but student loan experts say it's unrealistic.
MARK KANTROWITZ, PUBLISHER, FINAID.ORG: I don't think all loans are going to get forgiven, because it's just to expensive. There are much more effective ways of stimulating the economy, if that's the goal.
ROMANS: And you the taxpayer would pay for it. Because 85 percent of student loan debt is backed by the federal government. Experts say the focus should be on limiting how much money we're borrowing in the first place. Some experts advise planning for college like this. If possible, parents pay for a third, students pay for a third, and the students borrow a third. Too much student debt limits your choices later.
KANTROWITZ: You're still going to be paying back your own student loans when your children are enrolling in college. You won't have saved for their college education. You'll be less willing to borrow for their college education, because you'll still be up to your eyebrows in debt.
(END VIDEOTAPE)
ROMANS: It's a middle class nightmare, really, rising tuition, doubling interest rates, and too few jobs for new graduates. And that's what's really important here. Just too few jobs. It's not exactly what you and I had to deal with when we came out of school. How are you going to start a small business or buy a home if you're carrying this much debt? That's exactly what the issue is all about. But who pays for those low interest rates, Ali? Who pays for forgiving debt?
Look, that's a long shot. They're not going to forgive student loan debt.
VELSHI: All right. We should be clear, that number you're looking at, that 16.4 percent unemployment is the unemployment rate for 16 to 24-year-olds. Once you -- that number is very, very different if you have a college degree. So if you're 20 years old or 21 years old with an undergraduate degree, it is a quarter of that, if not lower.
ROMANS: True, but a big chunk of recent college graduates are either underemployed or unemployed.
VELSHI: Right. Right.
ROMANS: They've never even been in the labor market, Ali, so they're not even counted yet in the overall unemployment rate. So that's what they're talking about, this lack of opportunity on the front end.
VELSHI: Yes.
ROMANS: But who's fault is that? Do you the taxpayer, Ali, want to pay for your neighbor's kids' five-year anthropology degree at a private school? \
VELSHI: Yes. Yes. I don't know. I want to -- I want to -- I'm totally fine with paying for my neighbor's education if it's going to help society, and the question about whether it's an anthropology degree or petroleum engineering degree, may be the bigger question.
Let's bring Van Jones back. He's a former special adviser in the Obama administration. He's the author of "Rebuild the Dream,"
Will Cain joins us as well. CNN contributor, with a slightly philosophical -- conservative philosophical bent.
Gentleman, good to have you into the conversation. There are two separate issues here. One, as Christine said, is the issue of loan forgiveness. The other, which Congress, is dealing with is keeping interest rates on federal subsidized student loans low, into next year, at a price tag of $6 billion.
Van, bottom line, can we afford either of these proposals? The Democrats say we should take money from big oil subsidies. The Republicans say it should come from a special health care fund. What do you think?
JONES: Well, first of all, I think it's good that the young people themselves started this conversation, saying, and Jesus, what's going to happen to us, you're going to be doubling the interest rate. Every kid about to graduate from high school is staring down the barrel of a 6.8 percent interest on the Stafford loans.
They started yelling and screaming, the president listened. Romney followed the president's leadership. Now both parties are trying to figure out how to solve the problem. That is a good thing. You can certainly keep the interest rate at 3.4 percent. You're not talking about a giveaway. The president's not talking about a giveaway. He's saying, everybody else is getting their money for almost zero percent, let the kids get it for 3.4. That's fair.
Here's the bigger question. It used to be the case that -- we didn't see it as your neighbor's kid or somebody else's kid. Education wasn't about somebody else's kid's career, it was about the country.
VELSHI: Right.
JONES: You educate a whole generation of Americans so we can be the greatest country in the world. In California, it was free to go to college, KUNI free, and you created huge, huge advantages for our country. Now it's about somebody else's kid. That's the wrong way to look at this.
VELSHI: It's always -- it's about somebody else's unemployment check, it's about somebody else's kid, we're in a country where it's always about somebody else these days.
(CROSSTALK)
JONES: When you make it impossible, when you make it that hard for the kids to get educated, it's not just bad for the kids, it's bad for the country.
VELSHI: Right. Right.
JONES: So I think we've got to start with recommitting.
VELSHI: Yes. There is --
(CROSSTALK)
JONES: That we want to educate a generation of Americans.
VELSHI: There is a valid discussion. As Christine alluded to, there's a valid discussion to be had about whether we should all be subsidizing everybody's kids studying anything they want versus the things we actually need. But that's a discussion for another time.
JONES: Fair enough.
VELSHI: Let's hear what our Nancy Pelosi had to say about the Republican idea.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D), MINORITY LEADER: It's like they rub two stones together and they're playing with fire. They ought not to do it. This prevention saves lives, saves money, and there certainly are plenty of other polices to go in the budget.
(END VIDEO CLIP)
VELSHI: Will Cain, this is a tough discussion. It's a real discussion, and Van makes the point that people can get loans, if they can, for no money at all, and students are about to pay, I don't know, double what you pay for a mortgage --
JONES: 6.8 percent.
VELSHI: You know, in some cases --.
JONES: 6.8 percent?
VELSHI: To get an education. I mean --
(CROSSTALK)
VELSHI: How do we fix this? Because I took -- and to van's point, this isn't really about somebody else's kid, right? It's about our society.
WILL CAIN, CNN CONTRIBUTOR: I'm not going to concede to the premise here. I'm going to say that I think this is a completely overhyped, overstated issue that's being used for political purposes. The average student loan debt is somewhere between $18,000 and $25,000. Van or somebody else, if they wanted to, could tell horror stories about people with $200,000 in debt, but the bottom line is, that's just not the norm.
The norm is that students have a very manageable level of debt. And I would ask you this. Why does the current generation, why are they exempted from the obligations and contracts that every previous generation has made and paid off their student loans, and presumably all future generations will as well unless you make a decree (ph)?
JONES: Because the demands are higher. The demand is higher.
CAIN: But let me ask --
VELSHI: Twenty-five years ago, you graduate with a college -- a high school diploma, and get yourself a job that put you into the middle class for life. Today, not possible. Right? Agreed? Virtually impossible to come up with a -- so you have to go to college.
CAIN: I don't know. We have a president of the United States, and I would ask you and Van this --
VELSHI: Who has more than a high school degree.
CAIN: Who says he paid off his college loans eight years ago. What's wrong with that story? Why is this generation deprived of that success story? Tell me the difference.
VELSHI: Because it's a lot more money. What do you think, Van?
JONES: I'll tell you one great difference. You have Virginia Fox, who's the most important Republican on this. She leads the committee in Congress. She says she doesn't care about these kids who have all these big loans, screw them. Well, she didn't say that but --
CAIN: No, she didn't say that, Van.
JONES: But she said basically I don't care. I take it back. But she did say that, "I don't care about them." And I think the thing about it is the number she picked, $80,000, is exactly the amount of money that it costs to graduate from UNC Chapel Hill, where she graduated in 1968 for maybe a fifth of that or a fourth of that.
VELSHI: Let me -- let me address that question.
JONES: The cost of education has gone up so much. When kids -- when kids --
(CROSSTALK)
VELSHI: Yes. Let me address that directly.
JONES: -- graduating with the manageable debt that we had graduated with, now it's , much, much bigger.
VELSHI: Let me take point. House Budget Chairman Paul Ryan is a deficit hawk who wants to attack the problem of student loan debt from another angle. Listen.
(BEGIN VIDEO CLIP)
REP. PAUL RYAN (R), WISCONSIN: Rather than have taxpayers subsidize faster tuition, let's look at why is tuition growing at such a fast pace relative to any other thing we buy in society, in our economy.
(END VIDEO CLIP)
VELSHI: Is that the issue we should be dealing with? Maybe Paul Ryan has a point.
CAIN: Well, both he and Van have a point in this respect. College -- the price of a college education is rapidly rising. In fact, there are only about three things in our society where inflation has outpriced the Consumer Price Index.
VELSHI: Right.
CAIN: The free market has done an amazing job of lowering prices from everything from your car to your phone sitting on this table. But it has failed in health care, housing, and education.
(CROSSTALK)
VELSHI: Which by the way are the three --
CAIN: And those, by the way, are the things that our government subsidizes.
VELSHI: They're also the things you need the most of.
CAIN: Well, they're the things that our government subsidizes so I ask you this. Coincidence? VELSHI: Well, I suspect, Van, Will and I are not going to agree on this one but it is an important discussion. On that we agree. This is a bit of a problem, although Will thinks it's less of a problem than it is.
Good to see -- good to see all of you, Will Cain and Van Jones.
All right. Innovation is alive and well in America despite what Mort Zuckerman said earlier. We'll tell you what you get when you put some of the smartest minds in the world in the same room as some of the most successful entrepreneurs out there. That's next.
(COMMERCIAL BREAK)
VELSHI: Every year, the X PRIZE Foundation gathers a group of more than 100 scientists, engineers, developers, entrepreneurs, , and simply put, big idea people, in one location for what's called Visioneering. The aim of the intense two-day series of workshops is to try to tackle some of the world's biggest problems using competitions that pay cash prizes for success. After covering the event in the past, I took part in this year's session in Los Angeles as a moderator.
(BEGIN VIDEOTAPE)
VELSHI (on camera): Come up with ideas that might be possible, might not, but they might just be your dreams.
PETER DIAMANDIS, CHAIRMAN X PRIZE FOUNDATION: If you can come up with a prize concept, that would enable that vision or that breakthrough to occur.
VELSHI (voice-over) : At Visioneering, everyone is an equal participant. Even if you're Anousheh Ansari, sponsor of the very first X PRIZE completion back in 2004. That you ushered in a new era in private space travel when it awarded $10 million to the makers of Spaceship 1, the first privately manned aircraft to fly in suborbital space.
ANOUSHEH ANSARI, CEO, PRODEA SYSTEMS: I look forward to these visioning sessions over year, because this is the only place that you get to meet a lot of people from different places that are not afraid to explore impossible things.
VELSHI: Peter Diamandis, engineer, doctor, entrepreneur, and now author of the best seller "Abundance," is the architect of the X PRIZE.
DIAMANDIS: We're living in a day and age where small teams are more empowered that governments and large corporations were 20, 30 years ago to attack these problems. And ultimately, all of the multi -- the newest billion-dollar companies coming out of no place, they're the touching hundreds of millions if not billions of lives, were started by a couple of guys.
VELSHI: Visioneering participants break up into groups and come up with problems they'd like to see solved.
DMITRIY TSELIAKHOVICH, CTO, ESCAPE DYNAMICS: I would like to see hypersonic transportation that can get me from here to Sydney in two hours.
VELSHI: Then they come up with parameters for the competition and a prize purse to make it worth it. The Visioneering teams include a combination of really smart and really wealthy people with a shared interest in making a difference.
Nicholas Negroponte, head of the famed MIT Media Lab and founded with One Laptop Per Child.
NICHOLAS NEGROPONTE, CHAIRMAN EMERITUS, MIT MEDIA LAB: It's a very noisy phenomenon. Both the people and the process, and all you need to do is get two or three ideas in a day and a half, and that's success.
VELSHI: In the end, the gathered group chooses a winning prize concept to be studied further and potentially launched as an actual contest. This year's winner, the idea of developing mobile phone technology that will boost literacy on a large scale by making users pass basic literacy tests to turn the phone on and use it on a regular basis.
Other concepts that made it to the finish line included an affordable on-demand electricity generating system, specifically for rural and poor areas, using whatever is available as a fuel source. Ratan Tata heads Tata Group, one of India's largest conglomerates, which includes the auto companies Jaguar and Land Rover.
RATAN TATA, CHAIRMAN TATA GROUP: Some of the thoughts are audacious. They take form because you have enough creativity, enough experience, and enough reality behind what some of the people are saying that in a short period of time, they're adding flesh and bones to it. It's a learning experience the likes of which I have not had and stimulating beyond all belief.
(END VIDEOTAPE)
VELSHI: The fact that such gathering can make Ratan Tata awestruck says something. The hugely successful Indian business executive heads a multi-national conglomerate conducts business in more than 80 countries. That said not every idea proposed during these Visioneering session ends up in an X PRIZE competition, but the sessions do bring together talent across disciplines with entrepreneurs and big thinkers under one roof.
You get to see how ideas germinate, how business plans form, and really smart solutions to life's challenges actually develop.
Well, coming up next, I'll ask the man behind Ford if slowing customer demand in Europe and China means a return to tough times for the recovering automaker.
(COMMERCIAL BREAK) VELSHI: Hey, this week Chrysler reported its biggest quarterly profit since 1998. Now, Ford reported very different first quarter results, but this was no surprise to Wall Street. Ford saw a steep drop. Sales slipped about 2 percent, which Ford largely blamed on a slowdown in Europe and China. But make no mistake, Ford's story and quite frankly that of the big three U.S. automakers isn't a sob story.
Take a look at Ford's stock. A far cry from November of 2008, when it bottomed at $1.01. The company was bleeding $83 million a day when the auto market collapsed.
As you remember, CEOs at Ford, Chrysler, and General Motors went before Congress at that time, calling for a federal bailout. Now Ford didn't need the money itself, but needed the other automakers to survive. Ford's new slogan is "Go Further."
I talked with CEO Alan Mulally this weekend and asked how much further he sees his company going in 2012.
(BEGIN VIDEOTAPE)
ALAN MULALLY, CEO, FORD MOTOR COMPANY: What's amazing, Ali, is that around the world that the customer requirements for quality, fuel efficiency, safety, and really smart design, like SYNC and MyFord, have really coalesced. And the customers want all of those best in class, no matter what the size vehicle it is, whether it's a Fiesta all the way up to an F-150 like you said.
So the neat thing about the Ford brand promise is, that when you walk into the Ford showroom, you're going to get the vehicle that works for you, whether it's a car, utility, or truck, and you're going to get it more affordably because we then use our global resources to deliver that for you.
VELSHI: And -- and on many of these levels, you've delivered, your car sales were up in the United States. Retail sales were up. Some fleet sales were lower because you've got some capacity constraints. So I'm worried that you've got a bit of an issue in the U.S., probably a short-term issue where all those cuts that you had to make in 2008- 2009 are stopping you from selling as many cars as you possibly can.
MULALLY: Well, that is exactly right. And you know we made that judgment call nearly five years ago, as you well know, to size our production to the real demand with this full family of best in class vehicles. What has happened is, the market this year has come back about a quarter, maybe two quarters, faster than what we had anticipated. So we're going to be a little short for the next few months. But as we bring our capacity back on by the third to fourth quarter, we will have our vehicles in the volumes that people really do want.
VELSHI: You've got what might be the opposite problem in Europe, where you've not lost market share. Sales were down in Europe, but sales overall were down. But you can't idle and close factories in Europe largely because of labor laws. So I guess I'm interested in how long you think this European problem is going to go on for and whether that's going to start to bleed into your bottom line from the cars you're selling here in the United States?
MULALLY: Well, with respect to the market itself, we see it stabilizing on the GDP. You know, relatively flat. But looking like a stabilizing for the industry. We still see a very robust market around 14 million units.
Now, in Ford's case, Ali, one of the neat things that we've done over the last few years is that six out of the last eight years we have been profitable, because of the One Ford Plan of matching production to the real demand and then taking the necessary actions to deliver the vehicles profitably.
So clearly the slowdown is a little bit more aggressive than we've seen in the past. But as you pointed out in the first quarter, we have taken very decisive action to reduce our cost structure and we're going to also be bringing in more new vehicles, one for (INAUDIBLE) vehicles in that second half of the year, which will help us on the revenue side also. So it's a tough situation. But we're taking decisive action just like we did in North America earlier.
(END VIDEOTAPE)
VELSHI: All right. If you've got an iPhone, hope you can do this along with me. If you don't, take a look at this. Turn it around and look what it says on the back. I got to take my glass off. The part that says "Designed by Apple in California," that's not the problem. The part that says "Assembled in China" has some people fired up.
Now Apple says it cannot afford to build the iPhone in the United States. A new report, though, says it actually can. When we come back, I'm going to take this apart and show you what every component inside costs, next on YOUR MONEY.
(COMMERCIAL BREAK)
VELSHI: How much does an iPhone cost? If you're buying one off contract, prices start around $600 for Apple's latest device, the 4-S. But the cost of all the components is one-third of that, around $200. The folks at UBM Tech helped us put this together to give you a sense of what it costs.
Let me show it to you. The memory, which is this over here, it says Toshiba on it, it's made in Japan, costs about $38, 32 gigabytes costs Apple about $38. The cellular radio, this is the cell, and the connectivity, this is the Wi-Fi, those pieces cost about $29. The camera over here costs about $18. And this over here is the battery, it costs about $5.
Now, when you take the battery out, what you have underneath it is the processor. This is the brains of the operation. This part right here. And the associated parts. The processor alone costs about $26.
Now, here's the part that you get to enjoy mostly when you've got an iPad, and that is the display and the case. The display and the touch screen, this part here, costs about $31. The enclosure, the PCBs, which are the printed circuit boards, they're the little electronic parts inside, and supporting materials ends up costing about $56.
So let's take a look at what the total operation ends up costing us. Hang on a second, I'll just get that going. The total cost here is $203 for a unit that costs $600 if you buy it without a contract. If you buy it with a contract, Sprint, Verizon or AT&T are actually subsidizing the cost of the unit to you.
Now, why does it make sense for Apple to make this product in China? Let me show you. When they make it in China, the assembly cost, OK, those are all the parts I gave you, now, they're putting it all together in China costs $7.10 a unit. If they were to assemble this here in the United States, $165.67.
Now, here's the issue. When you sell something, you have a gross margin. A new report from the Center for Research on Sociocultural Change says Apple can in fact afford to assemble the iPhone in the United States. The Center calculated that each iPhone takes eight hours of labor to assemble. That's that, eight hours of labor.
And in the United States, this is what eight hours of labor would cost. It's more than 23 times the price. Gross margin is what Apple makes on it. When they make it in China they have a gross margin per unit of 71.7 percent. That's their margin, that's their profit before other expenses. If they made it in the United States, the 71.7 percent would drop down to 46.5 percent.
Now, Apple isn't hurting for cash. The company took in $39.2 billion in revenue for the first three months of this year. It sold 35 million iPhones. That's 16,000 iPhones an hour.
Christine joins me now.
Christine, is it fair to say Apple can afford to assemble the iPhone in the United States?
ROMANS: Absolutely. I mean the company at the end of the quarter was sitting on $110 billion in cash, Ali. And the company had the challenge of figuring out what to do with all the money it was minting from making these products.
When you're looking at the different between a gross margin of 72 percent and, say, 46 percent, what that tells you if they were making those products in the United States they'd still be making an awful lot of money. But that's not the question it seems for Apple. Apple has applized the supply chain. It's going to invent those things here. It's gong to make them overseas and the jobs -- the bulk of the jobs it creates selling its products are going to be low wage retail jobs, quite frankly.
The people who benefit from Apple are the consumers who get a very good value, a life-changing technological piece of equipment for a relatively low cost, right? Low cost because it's made overseas.
VELSHI: Right.
ROMANS: The other people who benefit are the shareholders who get a very high priced piece of stock and make a lot of money on their investment. Workers are not part of the equation. Unless you are one of the relatively few brainiacs in Cupertino who's designing this stuff.
VELSHI: Right.
ROMANS: Workers are not who get rich in Apple.
VELSHI: Right. All right, Christine. Thanks a lot.
If you got a question on the economy or something in the world of business that Christine and I don't deal with in our book, "How to Speak Money," e-mail us or tweet us. We'll tackle it next week on this show.
And this Thursday at noon Eastern, Christine and I are launching an online show where we'll respond to your questions on all things money live. Hope to see you there.
Have a great weekend.
(END)
