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The Obama Economy Revisited; Obamacare vs. The Obama Economy
Aired June 1, 2013 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: In 2012 Republicans attacked the so-called Obama economy, but now the economy is rewriting that script.
I'm Christine Romans. This is YOUR MONEY.
"A.P." phone records, IRS targeting conservative groups, talking points on Benghazi, that's the conversation in Washington. But the economy is stronger than the D.C. talk is letting on.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: There's a lot of reasons for to us feel optimistic about where we're headed as a country.
ROMANS (voice-over): Obama's economy, the sequel.
Today, stocks are soaring to record highs, home prices are rising, the unemployment rate is falling, and your confidence in this economy is the highest it's been in five years.
But none of that was in the Republicans' script for this movie. In the run-up to the 2012 election, they promised a horror show.
REP. PAUL RYAN (R), WISCONSIN: Obamanomics is not working.
MITT ROMNEY (R), FORMER PRESIDENTIAL CANDIDATE: Under the president's policies, middle income Americans have been buried. They're just crushed.
ROMANS: Despite those warnings, voters bought a ticket for another four years of the president's policies. But now, an improving economy is the background music in Washington and the plot line has turned to other controversies.
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: My question isn't about who is going to resign. My question is who is going to jail over this scandal?
ROMANS: The Obama administration under attack as questions surround its handling of the Benghazi attack, journalist phone taps and IRS audits targeting conservative groups. But could the economy, the Republicans hoped would sink the president in 2012 now be the reason he appears impervious to GOP attacks?
(END VIDEOTAPE) ROMANS: Mort Zuckerman is the editor-in-chief of "U.S. World and News Report".
Don Peebles is a member of President Obama's National Finance Committee. He's the CEO of the Peebles.
And my colleague John Berman is the host of "EARLY START" on CNN.
Gentlemen, welcome to the program.
Mort, I want to start with you. In 2008, you supported President Obama's campaign the first time around. The second time around, you called the president's policies, quote, "our economic Katrina."
Are you ready to give him any credit for what we're seeing in the markets, in the economy, the recovery that we're seeing today?
MORT ZUCKERMAN, EDITOR IN CHIEF, U.S. NEWS & WORLD REPORT: Well, let's just assess what is going on in the economy. We've had four years of the most stimulative fiscal and monetary policy in our history. We have a $1,300,000,000,000 deficit in fiscal policy. We have $1 trillion a year investment in monetary policy.
ROMANS: And that's the Fed.
ZUCKERMAN: That's the Fed, nevertheless that's encouraged by the White House.
And we are sitting in a country where for the last four years, we have averaged a GDP growth of 2 percent, maybe 2.1 percent. In previous, seven previous recessions in the four years coming out of a recession, we've averaged 4.2 percent of growth.
So with way more fiscal and monetary stimulus, we are growing at about half of the normal rate. That to my mind is not an adequate recovery for the amount of debt that we are accumulating that we sooner or later have to deal with.
ROMANS: The president on Friday said that, you know, look, we are making progress here but he said we're not making enough progress for regular families. He said he doesn't count progress in the economy from examples of stock market highs and for the top folks, he says -- the top earnings folks doing well. It's the middle. It's the regular folks that he's still worried about.
What do you think about that?
ZUCKERMAN: I think it's another way of just trying to make a political point out of this thing, using the divisiveness of politics, attacking the 1 percent or what have you. That's not the issue.
The issue is exactly 24 million people in this country who have lost their jobs, who are out of work, who have part-time work when they want to work full time, or have given up looking for a job. We've never had that kind of level of unemployment in this country. That to me is the key issue and we are not making much of a dent in that, in part because of the nature of our economy and in part because frankly the failure of the policies of this government for the last four years.
ROMANS: What policies do you say failed?
ZUCKERMAN: In my judgment, OK, we should have had a major infrastructure program that would have at least as we did in the early part of the 20th century when we had the railroads that became a national transportation structure or the highway system, OK, that is the interstate highway system. Both of those we had something to show for the money we spent.
And secondly, you know, we had a dramatic difference in what that did to the GDP growth. We did not have those kinds of programs in place. I believe that it was a good idea to try and do these kinds of programs. We just didn't do them well.
I would have done a much larger infrastructure program particularly for airports and airplanes because that's the new method of transportation of goods and people. I would have done something to the patent office which is blocked. I would have added the H1-B visas four years ago when these are people who create and help the high tech industry. And therefore, that's the best part of our economy.
ROMANS: I'm going to bring in Don now because he's talking about infrastructure build out and these new things. But cuts in government spending are what dragged down growth in the first quarter of this year. Consumers are spending more, but the government spending decreased 8.7 percent.
So we've got forced spending cuts, we've got a spirit if not doing austerity in Washington.
How is that hurting or helping what's going on here?
DON PEEBLES, MEMBER, PRESIDENT'S NATIONAL FINANCE COMMITTEE: By the way, I pretty much agree with most of what Mort said. If we look at the job growth now since this recession ended in June of 2009 and compare it to the first 46 months of the end of the 2001 recession, our economy's produced 2.5 million more jobs in the same time period compared to recessions.
What's happening here, though, is the GDP, as you just pointed out, is being brought down by a reduction, a significant reduction in government spending. And so, we're going to have to incur -- frankly, I'm a believer that the government should spend less money on entitlements, much more money in infrastructure, less money and controlling health care cost and looking to pull back and let the private sector begin to take more responsibility for this, for our recovery.
ROMANS: Both of you guys are talking about long-term structural big plans and we know that Washington isn't capable of doing that right now. We don't have a budget. We are the biggest economy, the biggest business in the world, we don't have a budget.
John Berman, instead the conversation is about Benghazi. It's about "The A.P." wire taps. Look, these are legitimate questions to be asked. Is that overshadowing progress in the economy?
JOHN BERMAN, CNN ANCHOR: If you listen to Washington last month, you would think these are the only things going on in the world. Some Republicans have even used the word impeachment.
You know, what's interesting, though, is looking at how this affects the president's poll numbers. And the latest look we have is from Quinnipiac University which shows the president a tiny bit underwater. His approval rating now is 45 percent. That's a little bit lower than it was a month ago. So maybe some impact there.
But really the most fascinating number we're seeing out of this poll is on the economy right now, where 26 percent of the Americans now say the economy is good for excellent. That may not sound a lot to you but that number is way, way up from what it was a year ago and it keeps on improving there. And it shows Americans are getting more confident by the day in the economy.
So, the question is what's going on here? Because usually you see these improving economic numbers right now and that would boost the president's approval rating.
There are two competing theories what's going on with these economic numbers. Some Republicans, including Mitt Romney's former pollster, Neil Newhouse, say what's happened here is that voters are delinking the economy from the president, those numbers that would normally boost his ratings are no longer boosting him. We may feel more confident what's going on but doesn't mean we like our president more.
ROMANS: It's interesting because during the election, some of the exit polling we found that they blamed prior administrations for the economic collapse more than they blamed this president, maybe they're not giving him the credit as it's coming back just like they didn't give him all of the blame.
BERMAN: The other theory, which is very interesting also, Christine, is these economic numbers are propping him up. There are people suggesting that the scandals really would be dragging him down if not for these positive economic numbers, and they may be creating this floor for the president, that no matter what happens to him, they may not be able to lay a glove because Americans do feel better how things are going.
ROMANS: We've got more to talk about this. Mort, Don, John, don't go away, because up next, just in time for the summer blockbuster season, here comes Obamacare. Could the signature achievement of the president's first term end up derailing the sequel?
ROMANS: It's coming, the bulk of Obamacare kicks in next year. Starting in January, millions of Americans who don't get health insurance through their employer can buy it through an exchange. Those exchanges, online portals, where you shop for a plan, and they're supposed to be up and running this October.
Next year, all citizens and legal residents must have health insurance or they will pay a penalty, and firms with 50 or more full time employees are required to provide it.
Now, opponents say this is a jobs killer. It will cripple the economy. And Republicans are hoping implementation is such a nightmare that it wins them undeniable control of Congress in the midterm elections.
Don Peebles, Mort Zuckerman and John Berman are still with us.
Mort, the House has voted to repeal Obamacare 37 times. There will be more. Now, we've got this IRS controversy, and the IRS has the role in enforcing Obamacare. So, some Republicans say it's proof of more problems with health reform.
Has the IRS become such a lightning rod politically that it helps this case that Obama care is rushed, not well thought out and it's going to be a disaster?
ZUCKERMAN: I don't know -- maybe I'm sort of out of this -- I don't feel there is that much of a connection between the IRS, the Internal Revenue Service, and the scandal that has befallen that agency of the federal government, and Obamacare. Both are two separate issues.
The issue that I have with Obamacare is that it implies that anybody with 50 or more employees is going to be mandated to have a certain kind of health coverage, but it's going to add a lot of costs to a lot of small businesses. So what are they doing? They're finding some way not to have 50 or more employees. Restaurants, for example, they'll have part-time employees, they'll let people go, do anything to avoid that additional cost because they can't afford it in what has been a relatively weak economy.
So, I'm not sure that while it accomplishes one thing which I think is to the good, which is wider health care coverage I just don't think it was affordable at this particular time on companies that have 50 or more employees.
ROMANS: Motive is good, timing terrible.
Some economists, Don, I'm talking about this evidence he's talking about. They saw Obamacare in April's jobs report, a big jump in part- time employment increasing by 278,000. They say it means that employers are going to go for part-time workers over full time workers.
Could health care reform derail the Obama recovery or add to all of these people who are working and not getting really full time wages? You know, a third of the country makes $24,000 or less.
PEEBLES: Yes. But 97 percent of the small businesses in this country have more than 50 employees. It's only 3 percent are going to be affected, and more than 70 percent of that 3 percent already provide some form of health care to their employees.
Businesses are innovative, just like we, businesses look for favorable tax treatment and shelters. I think many will do what mort says and convert people to part-time, they'll create other entities to have their employees. But some will not.
But also, we're the wealthiest country in the world, and we should provide health care for our citizens.
How we go about doing that, you know, is another story but I don't see this as wrecking the economy.
ROMANS: Let's talk about how the public embraced or not fully embraced this John. A recent CNN/ORC poll finds 54 percent of people surveyed opposed Obamacare, huge partisan divide. Nearly three-quarters of Democrats favor the law, only 16 percent of Republicans.
We know implementation is happening differently in red states versus blue states. Obamacare is still the law of the land but I'm not sure the fight is going to end, 37 times the House voted to repeal this.
BERMAN: The fight's just starting. Really, you have two games that are going on right now and will go on now for years. There's the political game and there's the "what's best for the health of Americans and the American economy" game and right now --
ROMANS: Why can't those be the same thing in?
BERMAN: They're in conflict right now and that's the problem.
The White House will spend this summer trying to pump up this plan, to promote it, social media, personal appearances. The president is going to go hard to try to get as many people ready for enrollment in October when open enrollment begins because the whole success or failure of the plan depends on that. So, they'll be out there pumping the plan the best they can.
The Republicans, 37 votes, ready to appeal it. I'm sure you will see more. But more than that, you're going to see trying to hold up the implementation process wherever they can, funding issues, whatnot.
The real problem here is that Congress can't do anything on Obamacare. Nothing is going to pass. Usually with major legislation like this you see modifications, you see tweaks as the plan gets rolled out, Social Security, Medicare, you saw this.
Nothing is going to get tweaked with Obamacare because Congress cannot pass anything on this right now. Republicans and Democrats just can't seem to get together. So there's no possibility of it getting any better at all, whether you're for it or not.
ROMANS: John Berman, excellent perspective.
Quickly to both of you, just a letter grade on the economy as it is right now. You both -- you've made your fortunes in this economy.
Don Peebles, letter grade?
PEEBLES: I'd say it's a C-plus.
ROMANS: What do you think, Mort?
ROMANS: You got it.
All right. Don, John, Mort, nice to see all of you.
The housing market and the stock market, two bright spots in our economy right now. Up next, I'll tell you how to cash in on both at the same time, and you don't have to buy a house.
ROMANS: So it's not a housing boom, but it is definitely a recovery. We got a bunch of data this week that show exactly what I'm talking about. Home prices jumped 10.9 percent in March from last year. That's according to S&P Case Shiller. You can see how far we have come from that big drop in 2009.
RealtyTrac says the number of foreclosures fell 22 percent during the first three months of this year. That's compared with last year.
But mortgage rates are climbing. The 30-year fixed rate hit its highest level in a year. It's now averaging 3.81 percent.
Also, new signs of housing may be turning into a seller's market. A survey from Century 21 finds a third of Americans looking to buy a house have been on the hunt for more than a year. Many are willing to compromise to close the deal. Meaning, things like price or location or items on buyers' wish lists are becoming less important. That's good for you sellers.
Of course, buying a home isn't the only way to invest real estate. If you're smart about the housing market, you too can ride the recovery.
ROMANS (voice-over): Home prices are rising, demand is back. But it's not just home buyers and sellers who are cashing in. When you buy a house or build a house, you're fueling an entire industry and creating opportunities for investing. And not just in the real estate itself.
SARAT SETHI, MANAGING DIRECTOR, DOUGLAS C. LANE & ASSOCIATES: Consumers feeling better. Their balance sheets are getting better. Their home equity lines, they can take out more money. So, what are they going to do with that money?
ROMANS: Shares of Home Depot, Lowe's, Williams-Sonoma and Sherwin Williams all up more than 20 percent this year.
But when stock charts look like this, is it too late to get in? Maybe. But there are other places to cash in. STEPHEN LEEB, CHAIRMAN & CIO, LEEB CAPITAL MANAGEMENT: If you own a home, it's a near certainty that you have a car. When people buy houses, they buy cars. Now, the car industry has been doing very well lately. But there's still room, I think for further growth. They're not expensive stocks.
ROMANS: Making stocks like Ford, GM, Honda and Toyota more attractive.
There are also tiny components in your house.
SETHI: Companies that make the chips, the micro controllers that go into dishwashers, into washing machines, into garage door openers, company like a Microchip which makes those, has a good 4 percent dividend yield, has global exposure and especially when housing improves, they're going to start doing even better because more products are being bought into the house.
ROMANS: Also ripe for the picking, supermarkets.
LEEB: As home ownership becomes bigger and more prevalent and grows, I think you'll see people eating in more. Any grocery chain is likely to benefit.
ROMANS: Leeb likes Wal-Mart and Whole Foods. An updated kitchen, a new grill, a spacious dining room, those things entice homeowners to eat at home. So, if you don't want to buy a house, but you want to buy into housing -- that's how.
ROMANS: All right. Of course, do your own homework on all of these suggestions. The most obvious way to ride the recovery without owning property is something called a REIT, or real estate investment trust. You buy into it like a stock. It returns you money.
Like some of those housing-related stocks we just saw, many of the best REITs are posting big returns this year. So, maybe you've missed a big run-up.
The Fed led by monetary warrior Ben Bernanke has helped prop up the housing market. And now, you, too, can control interest rates and the printing presses at the Central Bank. Introducing, the Federator. "The Wall Street Journal" calls its game a cross between jet pack joyride and the Humphrey Hawkins Act.
Players take to the skies with a bald head, gray beard and a cash dumping helicopter. But don't pull that lever too hard or you might upset the inflation fish and threaten the fragile recovery. So, check it out and fulfill that dual mandate.
Up next, paying back Boston. Restaurant-goers make good on their bills more than a month after the Boston marathon bombings.
ROMANS: Six weeks after the Boston marathon bombings, some business owners are hearing back from patrons that day.
Zain Asher joins us with more.
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Hi, Christine.
One restaurant owner I've spoken to said he's gotten back nearly $1,200 from people who are dining at his restaurant who suddenly had to evacuate without warning. He says that since the attacks, people across the country have been calling him. They described where they were sitting when the bombs went off, what they ate and then, of course, the checks came rolling in.
TONY CASTAGNOZZI, OWNER, RATTLESNAKE BAR: Marathon day typically is the busiest day of the year. And we were full --
ASHER (voice-over): With thousands of spectators crammed on to Boylston Street, wait staff were expecting to make a fortune.
GIA BARRY, WAITRESS: I was told it was service -- to walk out of here with anything between $500 to $1200 in one day.
ASHER: Those expectations suddenly cut short.
CASTAGNOZZI: You can feel the building shake. This building's never shook in 23 years. We didn't even think about collecting tabs or anything like that. We had to make people get out of here.
ASHER: It wasn't until the restaurant owner Tony Castagnozzi came back to the establishment a few days later that he realized just how much he had lost.
CASTAGNOZZI: It was about $2,800, $3,000 that was out there in outstanding checks.
BARRY: Bombs are going off, hop skip and a jump away, really money is the last thing on your mind.
ASHER: A week later, a few honest customers started settling up.
CASTAGNOZZI: The Monday after, I started getting phone calls saying, you know, I was there on Monday. I'm calling to see if I can pay my tab. I said, really? Wait a minute. OK, hold on a second. They would go over, the menu with me.
BARRY: The fact that people will call up and say I was in your establishment and we were evacuated. Here's the money I owe you.
ASHER: Castagnozzi says that since the attacks, he's gotten 10 phone calls and several letters from customers across the country wanting to pay their bills.
BARRY: Being a server in Massachusetts, we make $2.63 an hour. And so, they wanted to make sure that we were compensated.
ASHER: Now, they've made back a third of what they lost.
LIZ ROBISON, CUSTOMER: It's fantastic that people would be so kind to do that.
CASTAGNOZZI: It makes you believe in this Boston Strong thing. They're good people. They outnumber the terrorists by a lot.
ASHER: The Charles Mark Hotel located two doors down from where the first bomb went off was also swarming with patrons that day.
JEFFERSON RYDER, HOTEL MANAGER: Unpaid bills is the last thing we were thinking of.
ASHER: And although their customers are calling to pay up, the hotel is saying this one is on them.
RYDER: What we said to them was thank you so much for that. Why don't you come back and we'll start fresh.
BARRY: I have never been more proud to be a Bostonian. Boston is like a big family.
ASHER (on camera): And, Christine, there were other restaurants on Boylston Street that did lose money. With all the support coming back to the area, many say they have made the losses back several times over -- Christine.
ROMANS: Thanks, Zain. What a great story.
Thanks for joining the conversation this weekend. We're here every Saturday 9:30, a.m., 2:00 p.m. Eastern, Sunday at 3:00 p.m. Until then.
Please find me on Facebook and on Twitter. My handle is @ChristineRomans.