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Obama's Economy: The Sequel; Are Washington Scandals Overshadowing Progress In The Economy?; Housing Market Starts On The Path Of Recovery; China On A Buying Binge; Chinese Citizens Spread Their Cash Around The Globe; Capitalism, Meet Your Conscience; What To Do About College If You're Low Income And High Achieving

Aired June 2, 2013 - 15:00   ET


CHRISTINE ROMANS, CNN ANCHOR: 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.

AP 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 being 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?


ROMANS: Mort Zuckerman is the editor-in-chief of "U.S. News and World Report".

Don Peebles is a member of President Obama's National Finance Committee. He's the CEO of the Peebles Corporation

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 going to have to deal with.

ROMANS: The president on Friday said that, you know, look, we are making progress here but he said that 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: Well, 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 the 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 actually 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 says, except statistics say many different things.

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 when 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 AP wiretaps. 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 all affects the president's poll numbers right now. 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 Americans now say the economy is good or 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 that Americans are getting ever 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 about what's going on with these economic numbers. Some Republicans, including Mitt Romney's former pollster, Neil Newhouse, say what's happening 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 about 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 that 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 really lay a glove because Americans do feel ever 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?

(COMMERCIAL BREAK) 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 ObamaCare is rushed, not well thought out and it's going to be a disaster?

ZUCKERMAN: You know, 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, they'll 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 say they saw ObamaCare already in April's jobs report; there was 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 ultimately 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 they will 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 ever 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?

BERMAN: They're in conflict right now and that's what'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 on this to try to get as many people ready for enrollment in October when open enrollment begins, because the whole success or failure of that plan depends on that. So, they'll be out there pumping the plan the best they can.

The Republicans, 37 votes, are ready to appeal it. I'm sure you will see more. But more than that, you're going to see them 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 in 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 actually 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 brought 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 popular housing-related stocks we just saw, many of the best REITs are posting big returns this year. So, maybe you've already 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 QE lever too hard or you just might upset the inflation fish and threaten the fragile recovery. So, check it out and fulfill that dual mandate.

Coming up, China is bringing home the bacon. It's buying a U.S. pork producer in what would be the biggest takeover ever of an American company by a Chinese buyer.

Could your food safety be compromised, and is pork national security? We'll talk about that next.


ROMANS: China is on a buying binge, and it wants one of the last things still made in America, our food.

I'm Christine Romans. This is YOUR MONEY.

Call it China Inc., Chinese companies working with their government, buying assets around the world: natural resources, technology, ports, real estate and now the U.S. food supply.

This week a Chinese meat producer agreed to acquire Smithfield Foods, the world's largest processor of pork. That deal, valued at nearly $5 billion, would be the biggest purchase ever of a U.S. company lock, stock, and barrel by a Chinese buyer.

And it is just the latest example of China's buying spree in the U.S. Chinese investment in the U.S. is headed for another record year. As of April about $10 billion worth of deals were pending. Last year the record was nearly $6.7 billion.

We already know China is the biggest foreign buyer of U.S. debt, holding more than $1.2 trillion in U.S. treasuries. Now its government may be targeting U.S. properties. "The Wall Street Journal" reports the manager of China's currency reserves is setting up offices in New York City to explore, quote, "alternative investments." We're talking about real estate, private equity, U.S. assets.

Whether it worries you or not, China has an economic strategy. America lurches from one manufactured crisis to the next. America doesn't even have a budget. China has central planning. The United States has central bickering. How can we compete?

Peter Navarro is a professor at UC Irvine and author of "Death by China."

Ann Lee is an adjunct professor at NYU and author of "What the U.S. Can Learn from China."

Welcome to both of you. Peter, let's broaden it out to the bigger picture about China, the U.S. and business. You have a government report this week that found that Chinese hackers gained access to the U.S. military secrets. What is a bigger threat, China hacking or China buying up U.S. assets?

PETER NAVARRO, PROFESSOR, UC IRVINE: Well, both, because when the Chinese buys up our bonds, for example, they are able to use their political power to stop us from, for example, not branding them a currency manipulator, which has basically translated into the loss of 5 million manufacturing jobs and 25 million people unemployed. So that's a big threat.

The hacking itself, I don't understand why we as a country would allow China to basically have their way with not just the Pentagon but also our businesses and our homes. If your neighbor came in at night and stole everything from your house every day, you wouldn't be real friends with that neighbor. But China, the latest report --

ROMANS: But if the neighbor owns the mortgage on your house, if the neighbor is the one that gives you the mortgage on the house --

NAVARRO: Christine, the problem is as you point out, look, we're getting deeper and deeper into debt with a country that does not have our best interests at heart. This is not Canada. This is not Great Britain. This is not Europe. It is a country which is growing the biggest military in the world to challenge us. And every day it is hacking our Pentagon and hacking out --

ROMANS: China, by the way, says it doesn't need to hack us, that it can do all of this stuff on its own and that we're delusional to think that they would try to be getting into a mess; they don't need it.

I want to bring in Ann. What can we learn from China?

ANN LEE, AUTHOR, "WHAT THE U.S. CAN LEARN FROM CHINA": Thompson Reuters just published an article on May 21st, saying that the U.S. is the largest hacker in the world. We buy the most hacking technology than any other nation to spy on other nations. And so we do plenty of the same things that China does.

And this is really about the two elite groups coming together to work out what sort of rules of the game they want to abide by. But it would be very difficult for us to preach and tell them you can't do this if we're actually the biggest offender. And so we need to have a strategy about how we want to approach this in a smart way.

ROMANS: I think the thing that concerns the people at the Pentagon is that we have the military secrets to be stolen. There aren't really military secrets we're trying to steal from China. You know what I mean, the playing field, Chinese eager to level the playing field, the U.S. eager to keep its own stuff in house.

LEE: True. I would say that we are more advanced in many of these things, but let's not forget that China also invests a great deal in R&D. And companies like Huawei, for example, spend so much of their budget on R&D now that they file more international patents than many other of their competitors, and this is how they have been able to dominate the telecom industry and beat out Erickson as the number one.

ROMANS: It is so interesting, especially you talk about the rhetoric that the political, different political cultures of the two countries, it is fascinating to watch.

Last word for a paranoid Peter Navarro.

NAVARRO: More like outraged Peter Navarro. Ann lives in a very different world than the real world here on this matter, because the U.S. does not steal intellectual property from other countries.

China excels at stealing intellectual property, whether it's weapons system or whether it is Google source code or anything in between. They're the biggest threat right now to this country in terms of our long-term economic future.

And a lot of the reason is because companies like Huawei and others steal our stuff. And for us to put up with that, it is outrageous, as outrageous is the stuff that comes out of Ann's mouth on this issue.

ROMANS: I am going to leave it here and say the Chinese government, the Chinese foreign ministries and these companies have all said again and again and again, for years as I have been covering this, that they do not do any of this. That's the response from those companies.


ROMANS: And the government --

NAVARRO: Never happened.

LEE: So many other trite, predictable things coming out of Peter's mouth, too.

ROMANS: Well, let's come back and discuss it again, because I found you both rather unpredictable. Ann Lee, Peter Navarro, thank you so much. Have a great weekend.

So it's not just Chinese companies and the Chinese government on a shopping spree. Did you know that Chinese citizens are also spreading their cash around the globe? They took eight times as many trips last year as they did in 2000. And Chinese citizens outspent every other country. Richard Roth is here to explain.

Hi, there.


That's right, summer weather has arrived in New York City after a chilly spring. And that also means tourist season growing more visible on the street in tour buses, tourists from China, a country providing an increasing number of visitors to New York and the USA. (BEGIN VIDEOTAPE)

ROTH: It's hard not to run into Chinese tourists on the sidewalks of New York. Large Chinese tour groups are everywhere and ready to spend. From Lady Liberty in New York Harbor to the top of the Empire State Building, the Chinese tourist is ever present.

UNIDENTIFIED FEMALE (via translator): We actually see New York City all the time in the movie and TV, on TV, and we really wanted to come here.

ROTH: How come you don't have a sign in Mandarin saying "Beijing this way"?


JEAN-YVES GHAZI, EMPIRE STATE BUILDING OBSERVATORY: Because Beijing is actually here in New York City right now, right here with us.

ROTH: First it was Chinese business travelers, now relaxed visa rules and a strong economy back home brings busloads full of vacationers.

GEORGE FERTITTA, CEO, NYC AND CO.: The Chinese tourist is clearly an incredibly growing market. Over the last year we have grown about 22 percent.

UNIDENTIFIED MALE: So now we're driving to the eastern part of Manhattan.

ROTH: And 40 percent of all Chinese visitors to America come to New York City.

UNIDENTIFIED FEMALE: I love New York. We're on the East Side, and this is the East River.

UNIDENTIFIED MALE: Every single Chinese people have heard about New York when they heard about America, so we just want to come and see.

ROTH: Would you be interested in buying a piece of the Brooklyn Bridge? I can sell you that. That is a New York tradition.


ROTH: L&L Tours shows them a good time. Ten years ago tourists brought their own food and didn't want to buy anything.

RICH SUN, V.P. L&L TRAVEL ENTERPRISES: The purchasing power has grown dramatically. Now we have the customers who are here to buy their iPad, iPod, different computers, and all of the luxury brands.

LILY FAN, CHINESE TOURIST: I only got -- I know that my friends spend, I think, $10,000 by shopping.

ROTH: Luxury goods stores like Tourneau make sure to have Mandarin speaking employees to watch out for that growing clientele. LARRY BARKLEY, V.P. OF RETAIL, TOURNEAU: We sent key members of our marketing team to China in order to reach out to the different groups that are organizing tours to come to the United States.

ROTH: One U.N. study said the Chinese spent $102 billion last year in their world travel, surpassing the U.S. and Germany.

UNIDENTIFIED MALE: (Inaudible) nice place or it's going to make everyone happy.

ROTH: Any final thoughts?

GHAZI: Welcome to New York City.


ROTH: Stores and hotels here cater to the Chinese clientele with special rooms on lucky floors and breakfast thrown in.

Shopping is number one, though, for the visitors. New York hasn't had complaints about tourist behavior from these visitors, but this week back in China authorities were furious when a Chinese school boy defaced an ancient Egyptian temple in Nanjing.

In April China established a new law which warned tourists against committing uncivilized behavior. Chinese vacationers should be more polite, they were told, and don't spit and don't talk too loud. It sounds like what the neighbors in my apartment building tell me. But always good behavior when you go anywhere as a tourist.


ROMANS: Absolutely. And so many of the CEOs of the big leisure and hospitality companies, they have been -- just like that guy from Tourneau, they have been studying what kind of rooms, what kind of amenities, so that they can cater to that growing middle class there. It's so interesting. Richard Roth, thanks, Richard.

Up next, the U.S. economy may be improving, but could today's recovery have a dark side tomorrow? And what's your role in it? Find out next.


ROMANS: Americans with jobs but struggling with stagnant wages. Is our consumer culture to blame? Getting the best price may come at too high a cost not only half a world away, but here at home.


ROMANS: Capitalism, meet your conscience. You're up for a bargain, but there's a high cost to chasing cheap. In places like Bangladesh, the clothes we wear made by women paid with some of the lowest wages on the planet, working in some of the shoddiest factory buildings in the world. And here in the U.S., once secure jobs that paid Americans a living wage and offered a hopeful future exported abroad. Today one-third of U.S. workers make less than $24,000 a year. What's left for Americans? Increasingly only low wage work with no benefits and no way to make a living.

But that's not all. Colleges, the most American of institutions historically open to all, now increasingly out of reach for many. Seven million students are bracing for a surge in their student loan rates. Tuition is sky rocketing right when high paying jobs are dwindling.

The one vehicle that helped generations of Americans raise themselves out of poverty and build wealth in our society is now a pipe dream for too many.

Capitalism, this is your conscience speaking. Are you listening?


ROMANS: Terry Savage is a nationally syndicated financial columnist and author of "The Savage Truth on Money."

Elizabeth Cline is the author of "Overdressed: The Shockingly High Cost of Cheap Fashion."

The feel more wealthy, this middle class, on this illusion of grandeur with all of this debt was buying cheap manufactured products from around the rest of the world. So maybe your wages were stagnant but you could still fill your house with stuff. Maybe you had to borrow money to send a kid to college. But you could still finance a new car.

We were building this life, helped with labor from around the world. Wal-Mart has been criticized for not signing onto a global pact to improve worker safety in Bangladesh. Now more than 100 Wal-Mart employees across the U.S. are walking out. They've also raised money to bring two Bangladeshi garment workers to a shareholder meeting next week.

The reason why we are talking about this is because Wal-Mart sells the stuff to make the middle class feel better, but it is made with people who are working under conditions I think most middle class families would not abide by.

ELIZABETH CLINE, AUTHOR, "OVERDRESSED": Right. And I wrote a book about the fashion industry, and one thing that was so shocking to me is that if you look back, as recently as 1990 we made half of our clothing in the United States. And now we make between 2 and 3 percent in the United States.

The garment textile industries were two of the fastest dying industries of the last 10 years. And that job loss has been felt acutely.

And we don't make the connections as consumers when we walk into Wal- Mart and buy the product from Bangladesh, we're not thinking, oh, I am not supporting a job in my community or in my own country. But really we do need to start making those connections.

ROMANS: You really don't have a choice, right? Sometimes people blame the middle class and say they want cheap and they want to live high on the hog. But you're not given a choice. It is not like you go to a store and in this lane you can pay more but you know it is supporting a middle class job wherever here or somewhere else.

You can't go to this lane and say this will cost more because it is made and the water isn't being poisoned. Over here you can pay really, really cheap and somebody will die in the rubble of a factory.

CLINE: We sort of shopped our way out of a choice. If you look back 20 or 30 years ago, certainly we could choose between a domestically made product and one overseas.

What we're seeing now is a turning point where there is actually an increase in domestically produced clothing. There are more ethically sourced fair trade fashion brands. In the next couple years we are going to see more consumer choice out there in the market.

And what is going to be interesting to see is if consumers actually support it, and I think they will. I think that we're actually at a turning point in this issue.

Terry, shopping, fast fashion, shopping at places like Walmart, everyday low prices, that's helped Americans have more when they're earning less. And that's what those companies say. You know, they say we make the middle class better and stronger because the middle class can have these things.

Is it as simple as that? Is that the tradeoff we have made?

SAVAGE: Well, the interesting thing is that's true. It's been true ever since the Industrial Revolution. We can make products more efficiently and less costly and free up resources of the family either to work less and have more leisure or to have more things. So if you have less expensive clothing, that's a benefit to the American family.

What I think Elizabeth is correctly pointing out is that we're in this fashion frenzy, this instant disposable fashion. And I agree that as we understand the drain on our resources and the frenzy of stuff we use, throw away, that goes out of style, that we are actually financing with debt, that that's not a positive thing.

Let me point out, when we take a look what's going on in the factories in Bangladesh, which we all abhor, we are now exactly 102 years here in America from that horrible tragedy of the Triangle Shirtwaist fire that took place in a sweat shop in New York City where American young girls were making clothing at the same kind of low wages that we saw now around the world.

That's not to make it say it is right. What I am saying is that maybe as our conscience becomes more aware that we don't have to follow fashion frenzy. We will take advantage of the lower cost of things but buy them more sensibly.

ROMANS: It is not about bailing out of Bangladesh. They can go someplace cheaper so you can rush and go to India and find new sources. It's about fixing the mess you made, Big Companies. That's the message.

SAVAGE: Exactly.

ROMANS: Terry Savage, Elizabeth Coastline, it's nice to see both of you.

Coming up, your mom, your Aunt Bertha, even the president have told you about the importance of college.


BARACK OBAMA,PRESIDENT OF THE UNITED STATES: You're going to need more than just a high school education to succeed in this economy.


ROMANS: But if you're from a low income family, how do you pay for it? We'll show you one solution next.


ROMANS: The Supreme Court is expected to make a decision soon in an affirmative action case. The court could outlaw any consideration of race in college admissions. Opponents of affirmative action say colleges should focus on a different kind of diversity: income diversity.

Seventy percent of students at elite colleges come from the top income quartile. Those are top earning families with all the spots, 70 percent of the spots at top earning schools. They outnumber low income classmates 14 to one.

So why aren't low income students getting into the best schools? It turns out they're simply not applying.


LORIZBETH GUZMAN, DROPPED OUT OF COLLEGE: I grew up in Washington Heights.

ROMANS: Lorizbeth Guzman didn't grow up with much, but she always excelled in school.

GUZMAN: My SAT scores were around the 1400s.

ROMANS: But her small high school in the Bronx had limited resources.

GUZMAN: We only had one school come and visit, which was Mercy College. Everybody in my class applied, and almost everybody got accepted. We're like, all right, we have never heard of this school, but if they're all accepting us, why not? ROMANS: According to a new study from The Brookings Institution, only 34 percent of top low income students apply to the country's most selective colleges. That's compared with 78 percent of top high income students. The college Lorizbeth went to just wasn't the right fit. After her second semester she dropped out.

GUZMAN: I wanted to go back in just a few months after I had left Mercy. But everything happens and I was working full time and then I got pregnant.

CAROLINE HOXBY, PROFESSOR, STANFORD UNIVERSITY: Low income, high achieving students thrive at very selective colleges and universities once they get there; whereas if they attend one of the non-selective postsecondary institutions that they tend to apply to, they have about a 50 percent chance of graduating on time.

ROMANS: Meanwhile, Lorizbeth is still paying off her loans. She says she didn't have enough information to make the best choice.

GUZMAN: I heard about scholarships and opportunities you can get so I would research, but there are so many out there. So I never knew which one would fit me.

HOXBY: For very high achieving low income students, the more selective the college or university they attend, the less they will pay.

ROMANS: A lot less. The most competitive colleges have more resources and can offer more scholarships, so low income students usually don't come even close to paying that scary sticker price.

FAUSTO JIMENEZ, COLLEGE GRADUATE: I understood that I needed to go to school for free because my parents would not be able to afford it.

ROMANS: Fausto Jimenez grew up in Harlem, not far from Lorizbeth.

JIMENEZ: There were often shootouts while we were walking down the street. There was actually a drug factory essentially right across the hall from my apartment.

ROMANS: He always dreamed of going to Columbia University.

JIMENEZ: And I remember saying I want to be here. I want to come to Columbia. I think my mom chuckled at the time.

ROMANS: Thanks to the Gates Millennium Scholars Program he was able to get that Ivy League education for free.

JIMENEZ: I don't have loans. All I had to do was concentrate on my studies.

HOXBY: It is important to apply to some of the most selective colleges you can get into if you are a low income, high achieving student. Narrow in on a set of colleges and apply to several. If are you a low income student, you can get application fee waivers, so you should not have to pay application fees. JIMENEZ: Attending Columbia has been a transformative experience in my life. I may still live in Harlem but I know I now understand Harlem a lot better.


ROMANS: Fausto works for a New York City organization helping kids get into top colleges like he did, and Lorizbeth is planning to head back to school in the fall. She wants to make a better future for her young daughter. This time around she'll be applying for lots of scholarships.

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.



One restaurant owner I've spoken to says that he's gotten back nearly $1,200 from people who were 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): And 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 Christmas -- to walk out of here with anything between $500 to $1,200 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 just had to make people get out of here.

ASHER: It wasn't until 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 stepping up.

CASTAGNOZZI: The Monday after, I started getting phone calls saying, you know, I was there on Marathon 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, hey, I was in your establishment and we were evacuated. Here's the money I owe you, we're like...

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 about 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 these terrorists by a lot.

ASHER: The Charles Mark Hotel located just 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. But why don't you just 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. But 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. YOUR MONEY, we're here every Saturday 9:30 am, 2:00 pm Eastern, Sunday at 3:00 pm. Until then, please find me on Facebook and on Twitter. My handle is @ChristineRomans.