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Finally Feeling The Economic Recovery; Will Positive Economic News Downplay Political Controversies?; Does Rebuilding Make Economic Sense In Oklahoma?; Memorial Day At The Shore, Post-Sandy; Real Compromise In Washington

Aired May 26, 2013 - 15:00   ET


CHRISTINE ROMANS, CNN ANCHOR: Welcome to a 4-year-old economic recovery that you may finally be starting to feel. I'm Christine Romans. This is YOUR MONEY.

For the first time since 2008, more Americans now say the economy is getting better than getting worse. Gallup has tracked Americans' economic confidence every week since the financial crisis and it now stands at a 5-year high. Why? Well, first, stocks are at record highs; that's boosting everyone's 401(k)s.

Fidelity said the average account is now $80,900, up a whopping 75 percent from the market low in 2009.

For employees 55 and older, the average account now holds $255,000. That's nearly doubled over the past four years.

Next, home values are rising. We hope that's making you feel a little richer. We learned this week the median price of a home sold in April jumped 11 percent from a year ago. It's the 14th straight year over year pricing increase and the fifth in a row in the double digits.

And finally, unemployment, 7.5 percent, the lowest since December 2008. Yes, it is still too high, way too high; millions of Americans are out of work; they are underemployed, but the signs point to an improving labor market.

So is this recovery, four years in now, solid enough for most Americans to feel it, and not just the best earners? And what does it mean for President Obama?

CNN's chief political correspondent Candy Crowley is the anchor of "STATE OF THE UNION".

Candy, the president has been knocked off message lately, controversies over Benghazi, the IRS targeting the Tea Party, the administration going after reporter phone records.

Will a positive economic message ultimately drown out those controversies?

CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: Likely not, to tell you the truth. First of all, we're not at the end of the IRS controversy. So it's still playing out. Certainly, there are elements of Benghazi as well, and there is the AP; in this new report now, that they went after another reporter who revealed something about North Korea.

So these things will be ongoing because Congress keeps them ongoing. And as you know, this is a town that is sort of driven -- actually, it's a country where great news, I think the economy, you'll see the president out there kind of talking about it and pushing it.

But on the other hand, good news is not where headlines go. The headlines still are on the IRS and things like that. It's just hard to get this off the table. It certainly helps the president, it strengthens his hand as you move forward with legislation; I don't think it erases the headlines.


Stephen Moore, an editorial writer for "The Wall Street Journal" with us also today.

Stephen, you admit you're seeing signs of a pickup in the economy.

Does the president deserve any of the credit for it?

STEPHEN MOORE, "THE WALL STREET JOURNAL": Well, you've been waiting to ask me that question for a long time, Christine.

ROMANS: About three years, actually.

MOORE: There's no question the economy is picking up. I'm feeling pretty bullish about the economy. You did a nice summary about the good news in the economy. And, by the way, let's not get carried away. It's still, for middle class and lower income people, they're still really struggling. We haven't seen wage increases and salary increases.

In fact, if you look at the median wage over the last four years of this recovery, it's fallen a little bit, not risen. And unemployment is still too high, but you talk about the good things in the economy, and I would point to a couple things. One is those low interest rates out there are really providing a boom to the stock market and a boom to the housing market.


ROMANS: You're going to point out that's not the president's doing?

MOORE: Well, look, the president gets the credit because he's there when it happened. Reagan gets credit for the boom that happened under his term. Obviously Bill Clinton got credit for the boom under his.

But the other thing is one of the reasons the president might not get total credit for what is going on right now is that the biggest boom sector right now is the oil and gas industry. There's just no question it's been carrying the rest of the economy on its back, and let's face it, Christine, he hasn't been the biggest advocate of oil and gas. In fact, he's, if anything, tried to hold that sector back.

ROMANS: I want to bring in Rana Foroohar. She's the assistant managing editor at "Time".

And he brings up a very good point, not everyone is feeling this.

And I wanted to show the statistic. Demos, it's a left-leaning policy group, says a third of Americans are paid less than $24,000 a year. A third of American workers earn less than $24,000 a year.

Can you have an American recovery where a third of the people who are working are making so little money?

RANA FOROOHAR, ASSISTANT MANAGING EDITOR, "TIME": No, I don't think you really can have a truly robust recovery. I mean, the fact is, we're still in a 2 percent economy.

The private sector is recovering. In fact, if you stripped out the government, we'd be in a 3 percent economy, in part because of, as Stephen mentioned, oil and gas, but also housing and some other sectors.

But, ultimately, if you look at the fastest growing job categories in this country, they are low wage jobs. Eight out of 10 of the fastest growing categories make very low wages. And when you have a 70 percent consumer economy, as we do, it's really hard to imagine how we're going to go back up to historic growth levels unless we can get these middle class jobs going.

ROMANS: And that brings back to Candy, where, you know, our own CNN/ORC polling, not quite as rosy as the Gallup polling I gave you earlier.

Two-thirds of Americans still say the economy is in poor shape.

There are a few glimmers of optimism, though, when you dig in these numbers. Here's one: the number of people who say conditions are poor, the worst option offered is at the lowest point in over a year.

So, Candy, what is the administration's strategy on the economy as it's knocked off message here?

CROWLEY: In terms of actual policy, they're now around the margins of this. They push jobs for veterans, legislation like that, much of what the president is going to do or wants to do was put in his budget.

This is still an economy that doesn't have a government with a lot of money to spend. There's still that big old debt, Republicans are still concentrated on that as is some Democrats. So there's not a lot of, hey, let's really prime this some more and throw this money into a stimulus program. There's not that kind of money left.

So there are some things that he's doing and has proposed to increase the job rate among various groups, but you're not going to see anything major. I think this is one of those things where you will hear the president continue to talk about this certainly so long as those numbers continue to go up.


ROMANS: Go ahead.

MOORE: You know, what's interesting about that, Candy, is that, as I talk to businessmen and women, they are feeling more optimistic, no question about it. And these are people who hire Americans.

One of the things that's interesting is they're not as afraid of President Obama and the policies that are coming out of Washington as they were in the first term. I mean, think about the first term. We had, you know, the stimulus, the huge debt, ObamaCare, you know, there was talk about union card check, and cap and trade laws.

Those kinds of threats from Washington have really subsided and I think that's one of the reasons the private sector is starting to take off.

CROWLEY: Sure, absolutely. Businesses, in general, love it when Washington isn't doing anything.

MOORE: That's right. Exactly, bingo.

ROMANS: Except when they bring you to the brink of paralysis because of our debt ceiling and all that stuff.

I mean, there is the conventional wisdom, Rana, you know, a gridlock in Washington is good for business, but it doesn't feel that way this time.

FOROOHAR: It certainly doesn't feel that way. I think it's going to be interesting to see how the markets react and just how much of the wealth that we've been feeling is down to the Fed and how much of it is down to the real economy.

ROMANS: I know. And the Fed -- oh, I think the Fed and the discussions happening within the Fed and about the Fed are going to be so important in the months going on.

Candy, Stephen and Rana -- thank you so much all of you.

CROWLEY: Thanks.

MOORE: Thank you.

ROMANS: Coming up, less than a week after deadly tornadoes tore through more Oklahoma, residents vow to rebuild. But does that make sense economic sense? That's next on YOUR MONEY.


ROMANS: Twenty-four dead, hundreds of buildings destroyed, billions of dollars in property lost but residents of Moore, Oklahoma, have seen this before. This is the third, the third time in 15 years that tornadoes have carved a path through Moore. So, after three tornadoes, you might be surprised by this response.


GOV. MARY FALLIN (R), OKLAHOMA: We will get through this. We will overcome, and we will rebuild.


ROMANS: We will rebuild. Again, she says.

I want to bring in Jerold Kayden. He's a professor of urban planning and design at Harvard's Graduate School of Design.

So nice to see you. Thanks for coming by.

You know, rebuilding really heals psychological wounds. We've heard again and again people say this is my home, I'm going to rebuild. We are strong. We will get through it.

But is it smart to rebuild in the same place where disaster has struck so many times?

JEROLD KAYDEN, PROFESSOR, HARVARD GRADUATE SCHOOL OF DESIGN: Smart is, of course, in the brain of the beholder, and some people will say it is smart and others will say it's the opposite of smart.

Look, we are a resolute, some would even say, stubborn people. As you just said, we're going to rebuild, we're going to show that storm, even we're going to show the terrorists that we rebuild in the same area. Nothing is going to stop us.

Also, we have to recognize these are people's homes, their streets, their neighborhoods where they grew up, where they have memories. We're very attached to place, so where we see the images of a desolate, destroyed area, they're actually seeing their street still.

Yes, it's their destroyed house, but this is where they grew up, this is where they want to continue to live. So we're a compassionate people and we honor that sort of rebuilding effort, sometimes in unwise ways.

And that's where it actually isn't smart. It can indeed lead to unwise behavior and it's a question of both government policy and individuals recognizing that we have to be smarter in the future.

ROMANS: So if we rebuild and we rebuild in better ways or we learn lessons in the rebuilding, that's what's really a key, I think, here.

You know, in 1999, President Clinton urged Moore's residents then to invest in safe rooms, reinforced spaces that can resist tornadoes. Listen.


WILLIAM J. CLINTON, FORMER PRESIDENT: If you don't remember anything else I say today, remember this, for goodness sakes, build a safe room in your house when you rebuild. Go in and do the -- any kind of alterations you have to do. It will be the cheapest $2,000 you ever spent.


ROMANS: And, you know, since 1993, FEMA has paid more than $57 million for 12,000 private and public safe rooms in Oklahoma. But still, it's not everyone. It's not everywhere.

Vital places like Morris Plaza Towers Elementary School, they were not protected when those tornadoes came.


MAYOR GLENN LEWIS, MOORE, OKLAHOMA: It's about the money and the statistics. An F-5 tornado is very rare. It's 1 percent to 2 percent of the tornadoes. Same reason they don't have safe rooms for earthquakes, they don't work all the time.


ROMANS: My question to you is whether it's safe rooms for tornadoes, earthquake proofing, flood prevention measures, who pays for it? Who should pay for it?

KAYDEN: It's really the central question now going forward. I think on smaller types of things that are manageable by a middle class family, it is not unreasonable to ask at a minimum that they share, if not pay for the entire cost.

No one hesitates when government imposes a regulation, for example that, going forward, requires homeowners to install smoke alarms or carbon monoxide detectors. The reason nobody objects is first of all it's smart for safety but also it's a very small cost.

The issue here is the cost is slightly more and yet we should be asking people to bear some of that burden and if government can provide some assistance, particularly in the aftermath of a disaster or over time to help people contribute to this, then it may be reasonable to do that of course given budget constraints.

ROMANS: That's a key point, that given budget constraints, because you hear on the one hand people talk about big government and government intrusion, too much regulation and this and that, and then something like this happens and you hear with almost unanimity, why wasn't there a safe room in that school? Because it costs money to build these things and the public has to pay for it.

KAYDEN: Right. But it's a two-step dance. After the disaster, people understandably say, Government, come here and rescue me. Government, come here and give me money to rebuild.

And then when government says, yes, but in the future you will not be able to rebuild in certain areas or in the future you must install a safe room or a basement in terms of tornadoes or whatever it may be, then you hear people say, no regulation, no government.

So, it's this dilemma between wanting government and not wanting government.

ROMANS: Let me ask you this. EQECAT -- it's a disaster modeling firm -- it says that it estimates, that, you know, the insured property losses from these tornadoes will be between $2 billion and $5 billion.

And the cost of the disasters is rising. So, in the '80s, major extreme weather costs less than $20 billion in damage each year on average. Since 2010, the average yearly damage has been $86 billion.

So, what's driving this? Is Mother Nature getting nastier or is human nature -- are we're building bigger things and there's more of us building in the same spots?

KAYDEN: It's a combination of all of those things. I mean, there does appear to be more high-risk storms, flooding, tornadoes, weather- related incidents that are occurring more and more and more, not earthquakes but weather related incidents.

And then, in some cases, we do have building, not even rebuilding but building in areas that are vulnerable, although I will say also that government has enacted laws in a variety of places which begin to restrict building in vulnerable areas and we're simply going to need more of that.

This is not simply a matter of individuals being protected against their own unwise behavior but it's society rescuing them, which puts them at risk.

BERMAN: So nice to meet you, today. Jerold Kayden, thank you very much for your insight on that. Of course, our thoughts and prayers with those people in Oklahoma as they prepare. It is clear, over the past 15 years, they have done much in that town to try to protect themselves. I'll give them best of luck as they try to do more.

Thank you so much, sir.

ROMANS: The Jersey Shore is open for business this Memorial Day weekend. According to a survey from AAA Mid-Atlanta, 79 percent of shoregoers say Sandy hasn't changed their summer vacation plans. Some even say they'll make an even greater effort to give their business to some of the places hit hardest by the storm.

Will the businesses be ready?

CNN's business correspondent Zain Asher took a trip down to Asbury Park.

She joins us this morning.


You know, it's not just a big weekend for businesses. It's also a big weekend for the city of Asbury Park itself. You got to remember the one-third of the city's revenue actually comes from beach tourism and so, Memorial Day weekend is unbelievably important to that.

Also, you know, these businesses are seasonal and so if they don't make enough revenue through Memorial Day, then they will have a tough time through the winter.


MARILYN SCHLOSSBACH, OWNER, LANGOSTA LOUNGE, ASBURY PARK: You feel like you're walking on the ocean.

ASHER (voice-over): New Jersey restaurant owner Marilyn Schlossbach always worries about the forecast.

SCHLOSSBACH: When we're open for business, every morning the first thing I look is at the weather.

ASHER: But it was the weather nearly destroyed her business.

SCHLOSSBACH: The window frames from these pavilions all blew in to the other side, so every surge of water that came up after that ended up in here.

ASHER: The rebuilding began almost as soon as the waters receded. She landed a $250,000 loan from the Small Business Administration and was able to reopen here in April. But it's been a challenging year to say the least. Schlossbach now survives on one-tenth of her salary and is struggling to make ends meet.

SCHLOSSBACH: Basically, I went from almost no debt to having about $25,000 in credit card bills and my entire savings wiped out.

ASHER: But she's hoping to see a turnaround and so is the rest of Asbury Park. On a gray day ahead of the holiday weekend, there's a sense of anticipation.

TOM GILMOUR, ASBURY PARK DIRECTOR OF COMMERCE: I think a lot of people will come to the shore this weekend to sort of check it out, see what it's really doing, but we're open, we're ready. We have great music here all the time. We're always partying. This is the place to come.

ASHER: You might say Asbury Park is one of the luckier spots on the Jersey Shore. Its music scene made famous by rock legend Bruce Springsteen, who got his start at the Stone Pony across the street, has kept Asbury Park in the spotlight in the aftermath of Sandy.

In the lesser-known and harder-hit town of Normandy Beach, Schlossbach has another restaurant, Labrador Lounge, which has also reopened, but she says customers are nowhere to be found.

SCHLOSSBACH: I'm dying down there. I've been open for a month; I have no customers. Everybody thinks the island is closed. You drive through there and you see houses on top of houses, restaurants and businesses aren't reopening, and I'm really scared because that's my home. ASHER: Memorial Day weekend is the shore's first big chance to bring business back and reward months of hard work. Schlossbach is back to worrying about the weather.

SCHLOSSBACH: To us, the weather is everything. If it is 90 degrees and sunny, we'll be packed. If it's raining and cold, we're not going to be busy.


ASHER: And you know, Christine, we've talked about the fact that 11.7 million Americans are out of work and that the unemployment rate is 7.5 percent.

But what's interesting is that she's actually having the opposite problem. She's looking to hire, but she says she cannot find workers. She says people sort of still have it in their mind that the Jersey Shore was completely destroyed by Sandy.

But, of course, you know, now that's really true anymore.

ROMANS: The last shore town I visited last summer with my kids is Asbury Park, and was so beautiful and so great. And it's changed so much over the last 10 years, so I really hope people get out there and spend some money on the shore because it really matters.

ASHER: It does.

ROMANS: Thanks, Zain.

Coming up, protecting your property before disaster strikes. The ins and outs of insurance, next.


ROMANS: Thousands of Oklahomans are picking up the pieces after this week's deadly tornadoes. The painful process of rebuilding for them starts now. It's one that's all too familiar to homeowners on the New Jersey Shore. They have spent the last seven months rebuilding their homes and their lives dealing with reconstruction and insurance claims, a process that's not always easy.


ROMANS (voice-over): More than 2,400 homes damaged or destroyed by the devastating tornado that rocked Moore, Oklahoma. For homeowners forced out of their properties by a natural disaster, the painful process of rebuilding and insurance claims starts now.

Mary and Tom Walls know a thing or two about that. Seven months ago, their New Jersey home on the shore was flooded during Hurricane Sandy.

TOM WALLS, LAVAILETTE, N.J., RESIDENT: I think that there was a certain shock when the water was coming in my house. I couldn't believe it. It didn't knock the front door down. It just kind of rose up through the -- MARY WALLS, LAVAILETTE, N.J. RESIDENT: Bubbled up through the carpeting.

TOM WALLS: Immediately we walked around with my son, and that was my first thought of insurance actually.

ROMANS (on camera): What's the first call you make? The first call you make after everyone safe, is it to the person who sold you the insurance policy?

JEANNE SALVATORE, SR., V.P., INSURANCE INFORMATION INSTITUTE: Well, the first thing you should do is get in touch with your insurance company. Let them know the extent of the damage and where you can be reached. That's the most important thing to do.

ROMANS (voice-over): Jeanne Salvatore represents the insurance industry. She advises all homeowners to know what's in their insurance policies before disaster hits.

SALVATORE: There's a lot of disasters that are covered in just standard policies. I mean, you are covered for wind damage, for fire, for falling objects. The two big disasters that are not covered, one is flood and the other is earthquake. And you need to get separate insurance for those types of disasters.

ROMANS: The Walls home is covered for flood damage and they contacted their insurance company immediately after the storm. But they were frustrated by their carrier's slow response and decided not to wait for an insurance check to start the rebuilding process.

MARY WALLS: I had no clue what goes into this whole process. I actually had to say to a couple guys, what exactly takes place? Like break it down for me and tell me how this works. It was very foreign for me.

TOM WALLS: There were people that just experienced so much worse than we did. You know, my insurance company didn't pay for everything, but in the final analysis, I was satisfied with the dollar amount.

ROMANS: They spent most of the past seven months displaced, but were able to move back into their home last month.

TOM WALLS: Keep the faith. Things will get better.


TOM WALLS: You need family and friends and --

MARY WALLS: And don't be afraid to ask for help.


ROMANS: Best of luck to the Walls and also to everyone starting to rebuild now in Oklahoma.

A rare round of cheers in Congress this week as senators actually came to an agreement. A landmark immigration bill now headed to the floor. I'll explain what that could mean for your job, your paycheck, next.


ROMANS: A surprise in Washington this week -- real compromise. I'm Christine Romans. This is YOUR MONEY.

Twenty-seven years -- that's how long it's been since the United States overhauled immigration law. But this week we got a step closer.

On Tuesday, members of the Senate judiciary committee reached an agreement on a landmark immigration bill. Three Republicans joined the panel of Democrats in voting for the measure. It now moves to the Senate floor for a full vote.

Immigration touches every aspect of American life. It raises heated controversial issues about national security and cultural identity. But make no mistake, make no mistake. At its core, immigration is 100 percent about jobs.

Under this bill the number of highly skilled foreign workers admitted to the country would rise from 65,000 a year to 110,000 and possibly more, depending on the unemployment levels. That's a major win for big tech firms. Tech company CEOs say they can't find enough talent at home to fill the positions they need.

The legislation also scraps regulations requiring companies to make a good faith effort to find American workers before hiring from abroad. That now only applies to companies that hire foreign nationals for more than 15 percent of the workforce.

At the other end of the spectrum, millions of undocumented workers would be granted registered provisional immigrant status, meaning they can stay in the country legally. They can work in this country legally. After a decade, they would become eligible for a green card and three years later full citizenship.

The bill also establishes a new visa program for low skilled workers on America's farms and elsewhere.

Judiciary Committee member Jeff Sessions, a Republican, he voted against the measure. He is worried authorizing millions of undocumented workers to take jobs legally will push down already stagnant wages. That hurts low skilled Americans, he says, the most vulnerable people in this workforce right now.

As he put it, quote, "My Republican colleagues seem oblivious to the free market."

Ana Navarro is a CNN contributor and a Republican strategist.

Ana, you are a Republican in favor of immigration reform. You got to tell me, how divided is your party on this issue right now? How do the factions stack up here?

ANA NAVARRO, CNN CONTRIBUTOR: You know, Christine, I think the division is highly exaggerated. I don't see the level of division that I saw in 2007 or that I have seen in the past.

Most Republicans agree that what we have right now is de facto amnesty, that it is a broken system and that it needs to be resolved. There are some differences on how to resolve that, but there is almost consensus on the first part.

And I would tell you that the Republicans that matter, the ones that draft policy, the ones that shape the agenda, are very committed to moving something and passing something.

ROMANS: I will say you do not see the heat and sort of the public interest and also misinformation that you saw in 2007. This has been moving quickly and sort of under the radar, wouldn't you agree?

NAVARRO: I think a few things are happening. First of all, there is a lot of things going on at the same time. It is almost hard to keep up with the scandal du jour in Washington.

But I also think having my senator, I think having Marco Rubio in the mix is making a huge difference because he is uniquely situated to explain this and to talk about this bill and the benefits of this bill as a Hispanic, as a Republican, and as somebody that really understands and communicates and identifies with the base of the Republican Party.

ROMANS: He doesn't agree with another senator that has a voice on this, too.


NAVARRO: -- conservative host.

ROMANS: When you look at the two different positions of Senator Cruz and Senator Rubio, it sort of illustrates what Republicans are grappling with right now.

NAVARRO: You know, I have been somewhat surprised by the attitude and the votes of Senator Cruz. I think he has changed somewhat from when he was back in 2000, working in the Bush campaign, but also, he is -- at this point he is in the minority in the Republican faction of the Senate. You're seeing that this thing is moving along.

What we saw this week is we saw the four members of the Senate Gang of Eight who were also members of the Judiciary Committee stick together and protect the integrity of the deal they crafted. They swatted away anything that would be a poison pill amendment.

On -- both two Democrats did it as well as the two Republicans that were in the committee. So there is great commitment to getting this deal through.

ROMANS: All right, Ana Navarro, nothing more interesting and controversial than when you put politics, jobs and immigration all in one discussion. Certainly this discussion will only get louder and more interesting over the next few weeks. Thanks, Ana. NAVARRO: Thank you.

ROMANS: Some in government want to take a bigger bite out of Apple.


SEN. JOHN MCCAIN, (R) ARIZONA: It is past time for American corporations like Apple to reorganize their tax strategies, to pay what they should and invest again in the American economy.

SEN. RAND PAUL, (R) KENTUCKY: I frankly think the committee should apologize to Apple.


ROMANS: Is this a greedy company, a broken tax system? The truth about big corporate tax loopholes, next.


ROMANS: I have here in my hands the U.S. tax code. This big binder is one of 16, 16 binders, 74,000 pages is the U.S. tax code. It is a confusing maze for both individuals and corporations.

The top tax rate for businesses is 35 percent. But many companies don't pay that. They don't pay that because within all of these books, within all of these words, within 74,000 pages are scores, hundreds, thousands of loopholes for companies. And companies don't pay those top tax rates, including Apple.

This week a Senate committee grilled Apple CEO Tim Cook on the company's tax practices. The committee wrote a scathing report that found Apple uses subsidiaries in Ireland to avoid paying taxes, all legal because of all of these books here behind me.

Senator John McCain coauthored that report.


MCCAIN: America's tax system is broken and uncompetitive and I have long supported efforts to modernize it. However, I will not allow that position to be used as an excuse to turn a blind eye to the highly questionable tax strategies used by Apple.


ROMANS: But Apple CEO Tim Cook defended his company.


TIM COOK, APPLE CEO: We pay all of the taxes we owe, every single dollar. We not only comply with the laws, but we comply with the spirit of the laws. We don't depend on tax gimmicks. We don't move intellectual property offshore and use it to sell our products back to the United States to avoid taxes.


ROMANS: Apple isn't doing anything illegal. It is simply doing what every U.S. company does, take advantage of all of these loopholes that Congress itself created. It is a point Senator Rand Paul made during one of the hearings more fire-breathing moments.


SEN. RAND PAUL, (R) KENTUCKY: I frankly think the committee should apologize to Apple. I think that the Congress should be on trial here for creating a bizarre and byzantine tax code that runs into the tens of thousands of pages, for creating a tax code that simply doesn't compete with the rest of the world.


ROMANS: So this is that tax code, and Paul went on to say that Congress doesn't need to be having a hearing. It needs to be looking in a mirror. It needs a mirror because it is time for Congress to take a good look at itself before castigating companies for legally navigating the system.

David Cay Johnston is a columnist for "Tax Analysts"; Jeanne Sahadi is a senior writer for CNN Money.

David, Congress creates tax laws, and now senators are grilling Apple over loopholes in the laws.

Is that fair? Isn't tax reform really the answer here?

DAVID CAY JOHNSTON, COLUMNIST, "TAX ANALYSTS": Well, of course tax reform is the answer. But, remember, the companies are the ones who go and give campaign contributions and hire relatives of lawmakers to get all these complexities.

For 100 million of the 140 million tax returns filed in this country by individuals, it's so simple you can put it on one page. In fact, I have written you could eliminate tax filing.

But companies like Apple engage in strategies that are, to cite the title of my book on the subject, "Perfectly Legal," but have the same effect of not paying taxes. And that means you and I either have to get less government services, pay higher taxes or have the government take on more debt while Apple defers its taxes.

And I have a column laying out how this hits your pocketbook, how Apple is costing you money; that's at the today.

ROMANS: And you can draw that direct connection, you draw the direct connection with complicated and sometimes not very complicated tax strategies, usually involving Ireland, that keep a company's tax below and my tax bill where it stands now?

JOHNSTON: And here is the simple way to think about it. Imagine if, instead of having your taxes taken out of your check before you got it, you could keep that money and pay the government 30 years from now.

If you invested that money at 3 percent, it would be 2.5 times as large in the future, but the taxes would be the same. It is a zero interest loan. You would actually make money off the tax system.

And that's what Apple and other big companies do. The tax system is a profit center, and indeed Enron called its tax department a profit center.

ROMANS: Jeanne Sahadi is here with me, and I have to say that when I talk about taxes and budgets, Jeanne is the one. We just chat about taxes and budgets all the time. Apple's complex tax strategies really draw -- it's an example of what's wrong with our tax code. Explain to me how U.S. multinationals take advantage of these loopholes in the system.

JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: Well, one of the big things that we discussed on Tuesday when Apple was on the Hill was something called a cost-sharing agreement. U.S. multinationals choose to share things like the costs of research and development, whether they are offshore subsidiaries that are located in low tax or, in the case of Ireland, it's in no tax countries.

What the problem with that is, tax experts say, is that they give the offshore subsidiaries a sweetheart deal that they would not give an outside party. So if I am going to invite you in to get in on the ground floor of my next great product, I will make you pay for that.

What happened in the case of Apple is that they -- the offshore subsidiaries pay a little bit more than 50 percent of the costs but they earned about 15 times the profits on their investment; whereas the U.S.-based operation only earned about eight times.

So that sort of raises a red flag to tax experts, saying is that really a fair market price that you charge your subsidiaries?

And that offshores profits that then, as David noted, don't get paid -- U.S. taxes are not paid on that for years and years and years because they don't bring the money back home.

ROMANS: David, what this all tells me, what I learned week, listening to those hearings, listening to fire-breathing senators angry about a tax code that they created, what it just cements, in my opinion, is that executives in charge of tax departments at major corporations are probably the most important people in business today.

Do you agree?

JOHNSTON: They're certainly very, very important. They are very well paid. GE has it is estimated more than 800 tax lawyers. This is a huge waste of human capital we should be putting into other things. But what we shouldn't do is just cut tax rates, because if we just cut tax rates, everything that's wrong will stay in place.

We need to have real fundamental reform. We should have, I believe, something called signal company accounting that would end the practice Jeanne described, by the way, much better than any of the newspapers I read this morning.

And we should end deferrals. We require companies to keep two sets of books, one for shareholders, one for the IRS. I think we should go to unified accounting.

ROMANS: All right, well, let's come back and talk taxes again sometime soon because I think it is not going away. One thing certain, death, taxes, and fighting about the taxes. Thanks so much, David and Jeanne.

Coming up, Yahoo! CEO Marissa Mayer promises the company won't screw up Tumblr. But what do Tumblr users really want to know? What happens with all of that adult content? That's next.


ROMANS: It is official. Tumblr is becoming part of Yahoo!. Now what? Yahoo! bought the blogging website for $1.1 billion this week, but Tumblr might be worth even more to Yahoo!. Yahoo! CEO Marissa Mayer promised Tumblr users that her company, quote, "won't screw this up," but users are skeptical.

CNNMoney's technology correspondent Laurie Segall sat down with Tumblr CEO David Karp this week.

And I think it is so interesting this kid didn't even go -- didn't even finish high school and now he is negotiating with Marissa Mayer, probably one of the most famous female tech executives, for his company. What was her role in all of this?

LAURIE SEGALL, TECHNOLOGY CORRESPONDENT, CNNMONEY.COM: Marissa Mayer has for some reason this charge in the tech industry. You see, all of these young entrepreneurs going to Yahoo! now, and Yahoo! wasn't able to get a lot of these younger start-ups to get involved. It wasn't cool to be acquired by Yahoo!.

And I will say this. David Karp really defines cool. He is a New York-based entrepreneur. He used to drive a Vespa around the streets; he's got this beautiful girlfriend.

ROMANS: A gray hoodie.

SEGALL: Yes, exactly, he wears a hoodie. He is very much cool. And so Yahoo! really wants to be cool. When I spoke to him -- I sat down with him and he said really it wasn't just about Yahoo!. It was Marissa Mayer, formerly Google and now she's at Yahoo!. Listen to what he said to me. Christine.


DAVID KARP, FOUNDER AND CEO, TUMBLR: Not only is she a genius of the geniuses, she is something that I really value, which is she was one of the most uniquely happy and productive people I have ever met, certainly in this industry. And that's something that we just strive for in our team is that sense of eternal optimism and purpose. She just brings that in a profound way.


ROMANS: So interesting because, you know what, I think people think he's made maybe $250 million of his own money on this.

Here's a kid, born and raised in Manhattan; his parents let him drop out of high school because, you know, high school wasn't really feeding his brain. They let him work on his own and make his own programs. This is not your typical kid.

SEGALL: Absolutely not. I will say when he showed up to the interview, he brought his mom. They're from the Upper West Side here. He said he doesn't suggest that entrepreneurs should drop out. You hear this and you say, OK, maybe everyone should drop out and got sell their company for $1 billion.

But he said this has been a full time job since he was 14. He said his parents were very different than many other parents because they supported him leaving. He actually told me a little bit about it. Listen to this.


KARP: I give both my parents so much credit for this. It was, in fact, their idea. I knew what I wanted to be working on. I wasn't really getting it out of school at the time. My parents saw that. They helped me find opportunities where I could pursue that.


ROMANS: We have been hearing about Tumblr users, though, jumping ship all week.

What is the status of what the users are saying about this acquisition -- sorry, partnership?

SEGALL: Sure. Exactly. Look, people are worried. The Tumblr users, there is a certain user base. They have fiercely independent people pouring their hearts out on these blogs. And a lot of people went to WordPress, which is their biggest competitor.

And I had the opportunity to sit down with the founder of WordPress, Matt Mullenweg. They're looking at the 10th anniversary. Believe it or not, they have been around for 10 years.

And he said, look, people jump ship any time this kind of thing happens. We'll see if it sticks. But what he said that was very interesting is they didn't sell for enough. Listen to what he told me.


MATT MULLENWEG, FOUNDER AND CEO, WORDPRESS: Yahoo! needs somewhere to work and they need a social network, and really, the only criticism I have for the whole deal is I think they sold for too little. Like I said, blogging platforms have huge potential, and they have fantastic engagement as well.


SEGALL: So if you look in the future, could Tumblr have sold for not $1.1 billion but tens of billions of dollars? That's what Matt says. And he says that this was very bittersweet, because this kind of platform, you look in the future, it could have -- it could be very, very successful and for advertisers, too.

ROMANS: We know there is a lot of adult content on Tumblr. Should users expect big changes?

SEGALL: I asked him that. And I will say this. He was a little bit awkward about that answer. I thought maybe it was because I was asking him about the porn problem on Tumblr in front of his mother.

But what he really said was nothing is going to change. Those guidelines are strict. But I think we're -- honestly I think it will take time. We'll look, because people are posting a lot of times illegal material on Tumblr. Now it is part of a big public company. You just can't ignore that now.

ROMANS: Yes. All right. Laurie Segall, such an interesting interview. I'm glad you got us a chance to sit down with him. We'll talk to you again very, very soon.

And coming up, most days they grade tests, they assign book reports, but this week teachers in Oklahoma put their lives on the line to protect the children they teach. Our look at the courage of the profession, the courage of teachers, next.


ROMANS: When you drop your child off at school in the morning you never think it is the last time you will see your little boy or little girl. But as we've learned too often in the past few months there do come days when is it just might be.

I want you to listen to something. It's the sound of 25 terrified children huddled inside in an elementary school bathroom as a massive tornado rains debris on them. You can hear sixth grade teacher Lynne Breton trying to reassure them.


LYNNE BRETON, TEACHER: You're OK. You're OK. You're OK. You're OK.


ROMANS: You're OK. This week as the full horror of the deadly tornado in Oklahoma emerged, so did story after story of heroic teachers who put themselves between their tiny charges and the fury of that twister.


UNIDENTIFIED FEMALE: His teacher is in the hospital. His teacher saved his life.

UNIDENTIFIED MALE: Who is his teacher?

UNIDENTIFIED FEMALE: Ms. Lowe (ph). I have no doubt God and his teacher, they lifted a wall off of these kids, several kids.

UNIDENTIFIED MALE: Me and four other guys pulled a teacher out. She was on top of three kids. The kids were fine. She was hurt pretty bad.

SUZANNE HALEY, TEACHER: It is nothing anybody wouldn't do. These children, we see their smiles, their tears, every day, in and out. And we love them. And they're our babies.


ROMANS: This isn't the first time teachers have bravely stood up in the face of terror.

Nearly six months ago in Newtown, Connecticut, six teachers died trying to shield their students from a gunman bent on mass murder.

In February, President Obama posthumously awarded those educators the Medal of Freedom.


BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: They could have taken shelter by themselves. They could have focused on their own safety, on their own well-being, but they didn't. They gave their lives to protect the precious children in their care.


ROMANS: Away from the headlines, teachers are called on every day to exhibit a quiet heroism that can change lives. We depend on them not only to educate our kids, to prepare our kids for the rest of their lives but also to detect whether a child is being abused or to intervene if a child is being bullied.

Let's not forget, more than 355,000 teacher jobs have been lost since June of 2009, when the recession officially ended. Since the recession ended, the average starting salary in education, about $40,000 a year.

College grads who start in communications or health sciences are making more. Someone who gets into teaching clearly isn't doing it for the money. They are doing it, we know, to shape young lives, to provide the knowledge that will enable the next generation to compete in the global economy.

But sometimes in between a mundane math quiz or a lesson on subject- verb agreement, they're asked to sacrifice their own safety. When they do, so often they say they were just doing their jobs.

We wanted to take a moment to say thank you to this country's teachers. That's what they're doing in Moore, Oklahoma.

Just listen to David Wheeler, who says his son, Gabriel, is alive today, alive thanks to the actions of his third grade teacher Julie Simon.


DAVID WHEELER, TORNADO SURVIVOR: She is a member of our family for the rest of our lives. And she will be a part of it forever. There is nothing that we can give to her that will repay her. We just thank you, Julie, and we love you.


ROMANS: The largest profession in America and none more important, our sentiments exactly.

Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday at 9:30 am, 2:00 pm Eastern, and also Sunday at 3:00 pm. Until then you can find me on Facebook and on Twitter. My handle is @ChristineRomans.