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The Real Labor Market; Buying and Selling the Economy; Crisis of American Middle Class Analyzed; Swearing at Work Examined

Aired June 9, 2013 - 15:00   ET


CHRISTINE ROMANS, CNN ANCHOR: One hundred seventy-five thousand jobs created in May. The unemployment rate ticks up to 7.6 percent. Those are headlines. But there are numbers you don't see every month and you need to pay attention to them.

I'm Christine Romans. This is YOUR MONEY.

The most important number of all is your unemployment rate. It's either zero percent or 100 percent. Either you have a job or you don't. But outside your personal statistic, here's what's going on in the labor market.

Over the past 12 months, the economy has created 2.1 million jobs. That's an average of 176,000 a month. Good, but not good enough to push down the unemployment rate meaningfully.

The unemployment rate, that rate actually ticked up a little bit to 7.6 percent in the recent months but the underemployment rate is much higher, 13.8 percent. That number includes all Americans looking for work plus those working part-time but want to be working full-time and others who recently stopped looking.

And, finally, the percentage of Americans who have a job is just 58.6 percent. You have to go all the way back to 1983 to see numbers that low.

Mohamed El-Erian is the CEO of PIMCO.

Austan Goolsbee is an economics professor at the University of Chicago Booth School of Business. He's former chairman of President Obama's Council of Economic Advisers.

Two people I'm very glad to have with us this morning, today, to talk through and walk through what's happening in the economy.

Let me start with you, Mohamed.

The labor market, I mean, it's a slow and steady crawl, but it is moving in the right direction. What's the biggest thing standing in the way of it performing even better than this?

MOHAMED EL-ERIAN, CEO, PIMCO: A couple of things are standing in the way. One, there isn't enough demand in the economy. And second, we have structural impediments. And the two things together means that the unemployment situation is getting better but not getting better fast enough, and that's a problem not just for the numbers you cited, but we have 4.4 million Americans that are long- term unemployed, and the longer you're out of the jobs market, the harder it is to get back in.

ROMANS: I think that's absolutely right and something that a lot of economists and frankly politicians have really worried about, too, about what that means for America, with so many people out of work for so long.

So, let me bring in Austan.

You know, you've heard Mohamed say that probably the biggest problem in the labor market is the long-term unemployed. In May, 37 percent of the unemployed are without a job 27 weeks or longer. You know, I will point out, and you can see that chart -- it's getting better, I mean, December 2011, it was 40 percent; that was the highest since World War II, but still, nearly 4.5 million people.

Austan, how do we solve that?

AUSTAN GOOLSBEE, PROFESSOR, UNIVERSITY OF CHICAGO BOOTH SCHOOL OF BUSINESS: You know, it's a tough thing to solve when the growth rate is only modest, as you're pointing out. I thought both of your comments were right on the money.

And it's made harder by the fact that whatever our growth rate is, the rest of the advanced world is well below the United States, so that's dragging us down. And then you've got a very substantial fiscal drag from higher taxes from the sequester, from a lot of stuff coming in negative from the government.

ROMANS: Mohamed, let me give you this piece of, I guess, positive data. Gallup poll out this week showing that more businesses are hiring, at least that's the perception of 37 percent of people surveyed said their companies are planning to increase payrolls, 37 percent, that's the highest level in five years.

So, what does it take for companies to start hiring? What does it take for them to look at the cash in the bank, to look at these very low interest rates and to look at an economy that's slowly healing and say, I'm going to hire?

EL-ERIAN: So, think of it very simply. If you are a CEO and you're asking yourself should I invest in new plant equipment and hiring, you ask the following question: what's the cost of investing and what's the return on my investment?

The cost of investing is very low for the large companies, not so for the small companies, but for the large companies, it's very low. That's not the problem. The problem is the perception of the return on investment.

And there's two issues here. One is the lack of demand. People are worried that the household is stretched, that unemployment remains high and that the rest of the world, as Austan said, is not doing that great. So they're not going to buy a lot of our goods. So, they're worried about who is going to buy what I produce.

Second, they're worried about the framework. There's a lot of question about what will the tax system look like? What will Congress do?

So mix the low anticipated demand with the uncertainty and people are not investing enough. And as a result, the corporate sector is not using all this cash it has on its balance sheets.

ROMANS: You know, Austan, I have to ask you this question because right after the jobs report came out on Friday, you saw the first sort of wave of the press releases from Republicans who said that the jobs was good but not great and it's not great because of President Obama's policies, because people worried about ObamaCare and the implementation of ObamaCare, and because -- you know, because it's the fault of this administration and its policies coming up from the recession that's holding back the economy.

I want -- I want to give you a chance to respond to that.

GOOLSBEE: Well, two things. One, they had that press release filled out every month since the recession -- since Obama came into office rather than since the recession began. So I don't think the political interpretation should be the one we look at.

My only view on whether policy is the thing holding things back is you see this same behavior of companies sitting on cash nervous to invest all around the world, in places where there was no ObamaCare; they haven't followed the same policy prescriptions as in the U.S. And that overwhelmingly makes me think it's not about policy in the U.S. It's about fear there might be another worldwide recession, fear there might be another worldwide financial crisis. So we got to get past that.

In a way uncertainty is the good news, because if it's being driven by uncertainty, most of that uncertainty is going to get resolved over the near term and they could just get back to investing. I fear it might last a little longer than that because it's not really about policy.

ROMANS: Austan, what's your letter grade on the economy? I mean, just quickly, give me a letter grade on the economy, you think.

GOOLSBEE: I don't know, on the economic conditions I'd say modest at best. The rest of the world is no higher than a D. So this is one where your neighbor's great, it's kind of like a joint lab project or something. The other guys getting a D is dragging us down.

ROMANS: That's such an academic way to look at it.

Mohamed, what's your letter grade on the economy?

EL-ERIAN: I would give our economy a B to B-plus. It's getting better but not fast enough. I would give Europe a D. I would give China a B- plus and the global average is probably around a C, and that's why there's the sense of uncertainty out there.

ROMANS: I give both of you a solid A for this particular broadcast. Thanks, guys, Mohamed El-Erian and Austan Goolsbee, nice to see you this weekend.

Coming up, investors couldn't make up their minds but homeowners may need to be more decisive if they want to get in on the record low mortgage rates. We're going to tell you why, next.


ROMANS: Over the past week, the stock market hasn't really looked like itself. The Dow dipped below 15,000 in the middle of the week and bounced back after the jobs report. The S&P 500 has kind of been struggling here, the NASDAQ also dropping. Volatility is back.

While stocks are busy bouncing around, mortgage rates were rising. The average 30-year fixed rate mortgage 3.91 percent, that's up 0.1 percent from last week. But check out the rise from early May when it was 3.35 percent.

Fannie Mae's chief economist Doug Duncan says it's unlikely that rates will ever be that low again. So, buyers and sellers taking notice.

The housing and stock markets have been the bright spots in our economic recovery. Is the luster starting to fade?

Jeff Kleintop is chief market strategist, LPL Financials.

Stephen Moore is an editorial writer at "The Wall Street Journal."

Nice to see both of you this weekend.

Stephen --


ROMANS: -- are these bad signs of the economy or part of the growing pains of a slow and steady recovery?

MOORE: A little bit of both actually. You know, it is true that as the economy picks up, everyone expected -- including myself, I've said it on the show -- that as the economy picks up and people start to borrow more money and there's more demand for credit, that interest rates would rise.

But, of course, the conundrum here, Christine, is that as those interest rates rise, they kind of cause some economic problems. The mortgage rate rises -- and let's not forget when that interest rate rises, don't forget who the biggest loser is: the federal government, because the United States is the biggest debtor in the world.

ROMANS: Yes, that's true. You know, Jeff, so here's -- let me bring in Jeff, I want to ask -- I want to know what Wall Street wants, because here's the real frustration for me: when you have signs of economic strength, suddenly people start freaking out, thinking that means the Fed is going to pull back, right?

But if you had too much economic weakness, Wall Street will freak out because the economy is not strong enough.

So it's really hard to kind of tell what investors want to see here.

JEFFREY KLEINTOP, CHIEF MARKET STRATEGIST, LPL FINANCIAL: Well, it's easy; they want to be Goldilocks. They can't be too hot and they can't be too cold. The problem is, of course, you're usually not Goldilocks for too long, right? You're either too hot or you're too cold.

Today's jobs report was kind of right in the middle and the interest rates are now a little bit right in the middle, particularly on housing. They bounce back a little bit, reflecting better growth in the economy, but we're not yet to that 4.5 percent rate on the 30-year mortgage, which is the rate at which housing started to recover.

Once we crossed down below that, we started to see housing really begin to turn up and show some strength.

And so that's helped the labor market; it's helped the economy. It's helped confidence come back among investors and consumers. So, it's really critical, and we're not quite there yet, so maybe half a percent away.

And I think it might be a while till we get there, given that we're still not too hot and we're not too cold, either.


MOORE: Christine, I can say something about this issue?


MOORE: I have never seen in my 25 years as a professional economist an economy that's too hot. I mean, I just reject that whole idea that somehow more people working, more investment is somehow bad for the economy.

Now, I know there's this kind of superstition on Wall Street that, somehow if we have good jobs numbers or if there's an increase in investment and spending, somehow that's going to cause Ben Bernanke to take the punch bowl away.

But look, I think -- look, in the early 1980s when we had a big expansion, we had economic growth rate reach 7 percent, 8 percent, 9 percent. We can do that without the economy crashing again.

ROMANS: Seven percent, 8 percent, 9 percent -- we are so far away, 7 percent, 8 percent, 9 percent, are you kidding me? MOORE: We did, look it up.

ROMANS: No, I know we did it, but I mean every period in history is a little bit different.


ROMANS: You don't exactly mimic every (inaudible) and the factors are different. We have the Fed issue here, (inaudible) you have the Fed pumping $85 billion into the economy and raising questions about what the exit's going to look like.

And, you know, Stephen, this week, former Federal Reserve Chairman Paul Volcker, this is what he said about the Fed's recent moves. I want you to listen.


PAUL VOLCKER, FORMER FEDERAL RESERVE CHAIRMAN: Now I know it's fashionable to talk about a dual mandate, that policy should somehow be directed toward two objectives of price stability and full employment. Fashionable or not, I find that mandate both operationally confusing and ultimately illusory.


ROMANS: Now, two things I'll say about Paul Volcker, he is so tall. I mean, look how -- the podium is like 2 feet below him, first of all.

Second of all, consumer prices, relatively stable. There's no question the Fed's moves are helping stock prices.

But, Stephen, what will the history books say about whether this is a boost or a bust to the broader economy?

MOORE: Well, first of all, the history books are going to say that Paul Volcker was one of the great Fed chairmen of all time. He's the one who brought inflation down, remember, from 14 percent to about 3 percent or 4 percent.

But amen to everything he just said; that's one of the most brilliant things I've heard from anybody involved in government for a long time. I've always said that the Fed should have only one mandate and that is to keep prices under control. And, actually, you got to give Ben Bernanke some credit for that because, you know, as you just said, inflation has been very tame for the last four years.

ROMANS: Jeffrey, what's your gut on what happened on stocks here? You know, you've had this pullback, you got all this to-and-froing about what the Fed is going to do and when.

I mean, does the stock market after this little June swoon, does it come back? What are you telling your clients?

KLEINTOP: You know, we're seeing it. We're seeing the volatility come back into the stock market. We didn't get that in the first half of the year. We're starting to get it now.

So, I think it's a move from a gallop higher to a grind higher, but higher -- modestly higher here in the second half of the year on a lot of volatility, as each data point gets scrutinized, just as we saw today with the labor market.

Is it too hot or is it too cold?

And the question about when will the Fed end that QE program? Remember, when they ended QE1 and QE2, stocks fell because the economy wasn't yet in a self-sustaining recovery. So, every economic data point will get that scrutiny here between now and the end of the year.

ROMANS: I'm going to ask both of you this next question.

So, Jeff, you get to think about this question while I ask Stephen first.

Stephen Moore, what letter grade do you give the economy right now?

MOORE: You know, I'd give it about a B-minus but I'm optimistic about the future. I mean, when you take into account the fact that corporate balance sheets still look beautiful, they're -- American companies are lean, mean fighting machines, right now; you've got the low interest rates, you've got the housing recovery -- I'm pretty optimistic that we may see that B-minus turn into a B plus.


OK, Jeff, your turn.

KLEINTOP: Yes. You know, I'm right there, too. I think a B minus -- this economy has held up well. One of the things I'd point out, which maybe I grade it on a curve a little bit here, maybe it's more of a C plus than giving it a B minus, because the government sector is fading -- remember, government job growth is fading. Government is a drag on GDP; minus 1 percent was the contribution to GDP in QE1.

The private sector is actually doing well, (inaudible) 3.5 percent private sector GDP growth, roughly 200,000 job growth in the private sector. As the government sector is shrinking, the private sector is growing.

MOORE: Exactly.

KLEINTOP: So, we're giving it a little bit of a boost there because the private sector is coming back stronger, despite the sequester and the fiscal cliff.

MOORE: It's an anti-Keynesian recovery.

ROMANS: You know, and I will say something about trying to give it a letter grade, too, because I'm going to get all this mail from people who are going to say, I can't refinance my mortgage, so I give it an F.

MOORE: Right.

ROMANS: I don't have a job, I'm going to give it an F.


ROMANS: I have $28,000 in student loan debt and I just got a job at Starbucks, I'm going to give it an F.

So you know, it's one of those things were there's the economy that's doing something and there are a lot of people left behind. And that's what the argument has been about so much.

Stephen Moore and Jeffrey Kleintop, nice to see both of you.

All right. Golden opportunity: is it now? Or is it over? As the stock market rises, investors are dumping money into stocks and pulling out of gold.

Check out this chart. Gold peaked above $1,900 an ounce in 2011, but it has since fallen hard. So has gold lost its luster?



ROMANS (voice-over): America's latest gold rush. When even reality TV fans are watching shows like "Gold Rush" and "Yukon Gold," is that a signal that the bubble has burst?

For centuries, investors have depended on gold as a safe store of value, in the face of rising prices. But now, the precious metal's luster seems to be fading. Gold prices are down more than 20 percent since September.

What's going on? And why now? Is gold still a safe haven?

Economic growth numbers out of China are reason enough for investors to worry. Slowing growth in the world's second largest economy would mean lower demand for precious metals with industrial uses like gold. But some aren't buying it.

STEPHEN LEEB, LEEB CAPITAL MANAGEMENT: A lot of people are taking that as evidence the world is slowing. No inflation. Commodities are dead. Get out of gold.

That is not the deal. This is real desperation on the part of the West to set off some sort of panic so no one will ever go near gold again.

ROMANS: The move out of gold would suit many central banks just fine, because lower gold prices imply higher confidence in their monetary policies which right now could be summed up in two words: print money.

That confidence may have pushed investors away from gold and into stocks, which are now trading near all-time highs. But it can't last forever. All that extra money in the financial system could fuel inflation, and would make gold attractive again as a safe hedge against rising prices.

T. DOUG DALE, SECURITY BALLEW: My suspicion is that gold is looking for a bottom either this month or next, and you'll likely see gold resume its upward trend in coming years.


ROMANS: It costs around $1,200 ounce to extract gold from the ground. And some gold miners say as long as prices stay low, digging for gold just isn't worth it.

But Nouriel Roubini, known in economic circles as Dr. Doom, he predicts that gold will continue to fall. He says it could reach close to $1,000 an ounce by the year 2015.

Coming up, see this? See this? You know what this is, but now it could be illegal to bring this into the U.S. I'll tell you why after the break.


ROMANS: Has Apple lost its shine? Competition, lawsuits, congressional hearings.

It is still the most valuable brand in the world but this stock's super nova has been falling to Earth, tumbling about 40 percent since last September. Still, every hour for the last year, 11,000 iPhones, 8,000 iPads, 3,000 iPods and 2,000 Mac computers are sold. That's every hour.

But Apple has been fighting lawsuits all over the world. And now, the company that changed the world is not allowed to sell several models of its most revolutionary products. An international trade body ruled against Apple, saying some older iPad and iPhone models on the AT&T network use a chip based on Samsung technology.

That's right. Right in here, in a device that may have made the personal computer obsolete, in here is technology that Apple took from its biggest smartphone competitor. That's according to International Trade Commission.

Now, Apple is vowing to fight the ruling in federal court, but Samsung isn't just challenging Apple in the legal world. It's challenging Apple for its very dominance.

New research shows Samsung may have overtaken Apple in the U.S. smartphone sales in May, coupled with scrutiny from Congress over corporate taxes, could this Apple be headed for its expiration date?

I'm joined by Andy Hargreaves, senior research analyst at Pacific Crest Securities.

Andy, can Apple recover or are the glory days over? ANDY HARGREAVES, SENIOR RESEARCH ANALYST, PACIFIC CREST SECURITIES: Well, depends what you think your glory days are. Is it going to be the growth engine that it once was? No. I would be shocked if it ever was again.

ROMANS: About the patent issue in particular -- I mean, the idea that they can't import any more of these and they are made in Asia, right? So, they can't bring them in because an international trade body said they can't.

You think it has minimal impact on the bottom line for Apple?

HARGREAVES: Yes. I mean, the practical implementation of the ruling is that Apple can't sell iPhone 4s and iPad 2s to AT&T. By the time the ruling actually goes into effect, if it's not vetoed by the Obama administration, the iPhone 4 probably won't be for sale very much longer.

So, the reality is that it's going to have very, very little impact on what Apple sells.

ROMANS: Let me show you Apple versus Google chart as you can see, the tale of two tech companies. You know, a lot of people tell me -- people who ask about the stock market, should I buy Apple or should I buy Google?

You know, what does this tell you? This chart, what does it tell you about both the fortunes of Google and fortunes of Apple?

HARGREAVES: Well, it tells you that the future of the industry is in software and services. People perceive Google software and services' offering to be better than Apple's.

ROMANS: Could Apple surprise us again? I think we have counted them down before and, led by Steve Jobs, they really had a renaissance.

Can that happen under Tim Cook?

HARGREAVES: Yes, yes, sure it can. Look, the reality is they set the bar so insanely high, right? I mean, they created the two most successful products in the history of consumer electronics in a five- year period. That's really hard to replicate. And so, people expecting them to do it again isn't really fair to a certain extent.

But this is an incredibly innovative company, in my mind. It's got a massive engine of internal software and hardware development and really loyal customers. So, yes, they can do it again.

ROMANS: Loyal customers and now a dividend so maybe their shareholders may be more loyal.

HARGREAVES: And buyback.

ROMANS: Yes, exactly. Andy Hargreaves, senior research analyst, Pacific Crest Securities, nice to see you. Thanks, Andy. Coming up, the economic recovery is turning four years old. But are you celebrating? We'll get to the bottom of it with Ariana huffington and Fareed Zakaria. That's next.


ROMANS: Happy birthday, economic recovery. You're now four years old, but too many Americans aren't joining in the celebration. I'm Christine Romans, this is YOUR MONEY. June 2009 marked the end of the great recession. Four years later, the gulf is growing between those who are doing well in the economy -- and those are doing well -- and those still struggling to get by.

Maintaining a foothold in the middle class is no longer guaranteed. It's time for some repositioning, America.


ROMANS (voice-over): It's one America, but two economies.

FELICIA TAYLOR, CNN CORRESPONDENT: It's a milestone day for the U.S. stock market.

ROMANS (voice-over): For the stock market, it's the best of times, but for America's middle class, not so much. Household incomes down $4,000 since the year 2000 because, in today's economy, the American dream sometimes feels like a pipe dream.

Higher paying jobs that once built up this country's middle class are disappearing, stagnant wages and low paying jobs the new normal in America with one-third of Americans now making less than $24,000 a year.

While all of that may boost Wall Street's bottom line, it only squeezes U.S. workers.

So how do you get ahead in today's economy?

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: Still good advice for members of America's future middle class, but not all college majors are created equal. Degrees in engineering and health care are in high demand.

But fields that once helped transform this country through their innovation and creativity -- architecture, anthropology, film -- increasingly just add to America's jobless lines. As America repositions itself following the great recession, what does your future hold?


ROMANS: Arianna Huffington is the editor in chief of Huffington Post Media Group.

Fareed Zakaria is of course the host of CNN's "FAREED ZAKARIA GPS."

Fareed, too many graduates coming out of school with a mountain of debt, and they might not really have a major that's going to be rewarded. Some degree categories, there is 50 percent unemployment for these kids. Is America eating its young?

FAREED ZAKARIA, CNN HOST: I think it is, and I think that there are two sets of solutions to it.

One, the kids have got to get smart and they have got to realize if you are getting degrees with all due respect in social psychology and stuff like that, you are not going to be as employable as if you do it in engineering or any technical discipline. So the young really have to focus on the skills they need and that may not always be a four- year degree. It may be a two-year degree.

The piece we're really doing, which is destroying the gateway to the middle class, is what we're doing with affordable education. State universities used to be these gateways; you used pay almost nothing to go to universities like Berkeley and Michigan.

Now you pay tens of thousands of dollars; all of that is producing student debt. And that makes -- the whole idea of these state universities was that they provided people who really didn't have the opportunities, couldn't game the system, didn't know how to get into the Ivy League with a path into good-paying jobs. And that -- we, the public part of that bargain, has collapsed.

ROMANS: For a long time we have sort of had this mirage in America, that a thriving middle class meant kids to go to college, maybe the first or second generation of their family ever, Ariana, and they could find themselves there. They could take five years. They could have a major maybe the economy wasn't going to reward, because in the '90s, we created 24 million jobs in this country. Those days are over.

You talked to politicians and CEOs and leaders.

What do they want their kids to be when they grow up?

ARIANNA HUFFINGTON, EDITOR IN CHIEF, HUFFINGTON POST MEDIA GROUP: Clearly not what's happening to the majority of kids, because even the kids that have jobs often have jobs that are not relevant to what they got their degrees in. I mean, my daughter graduated from a great college, Yale, last year, and a lot of her friends are waitressing. This is even with an Ivy League degree.

And then the burden of debt is something incredibly significant. We have about $30,000 of debt per kid. The amount of student debt now is a $1.1 trillion.

ROMANS: More than credit card debt.

HUFFINGTON: More than credit card debt, more than auto loan debt.

ROMANS: So what that means for the economy and this is why we are focusing -- we talk about repositioning America, is we have to focus on the young people, because they're going to buy a house later. They may be less likely to get a mortgage.

They're going to buy a car later. They're going to have household creation. They might get married later. The Millennials could change the pattern of the American economy because of all of these factors.

ZAKARIA: The first thing, the most dangerous thing that might happen is they might not get a job. If you look at what has happened in a place like Europe, cyclical unemployment becomes structural unemployment.

What do I mean by that? I mean if you have been unemployed for two or three years, you are less attractive to some employer who's looking around. When they look around at people, they tend to look for people who have five years of good experience at work or somebody fresh out of college or with a diploma, because those people are cheap.

If you have been out three years, four years, five years, and you don't have either, you have neither the experience nor do you have the fact that you are fresh out of college, that sort of feeling of novelty, you may not get that job. And then you become permanently structurally unemployed.

You also lose work habits. People don't think about this, but the act of actually going to work every day makes you better at it. Like anything in life, the more you do it, the better you get at it. It is a huge problem and you could end up with people who, as in Europe, have been unemployed for a decade, two decades.

ROMANS: We learned this week that 4.4 million people are long-term unemployed. We saw the government labor market statistics. That's been kind of a stuck, stagnant number.

HUFFINGTON: But also half of them are young people. That's the interesting thing. It is not just the tragedy of over 4 million people being long-term unemployed, but half of them being young.

And it breaks with the natural cycle of things. If you play by the rules, you do everything right, you graduate with a good degree and then you can't get a job. That's why I think one of the interesting phenomena is how many young people now are doing it, are going into unconventional careers, either doing their own start- up or joining with friends to create their own start-up.


ROMANS: I think entrepreneurism should be taught in every college. A lot of these kids are not going to work for the same company for 20 years. They're going to work for a lot of different companies or they're going to have to make it for themselves. So I think that is something that a lot of universities are trying to really embrace.

Don't go away, because we have more to talk about. Fareed and Ariana, stay right there, because the world's two biggest economies are coming face to face. President Obama meeting with China's new president. How does America reposition itself as China's influence grows?

And then what do Beyonce, John Legend, Madonna and Fareed Zakaria's wife have in common? The answer, next.


ROMANS: Earlier we talked about a birthday; the U.S. economic recovery just turned four years old. Now let's talk about an anniversary -- 24 years ago this week Chinese soldiers gunned down unarmed protesters in Tiananmen Square. The iconic image of that crackdown, a lone man facing down a tank, who can forget that?

Much has changed in China in those 24 years. There is a rising middle class with real money to spend. Much has stayed the same, though, too. Economic reform has been divorced from political reform.

Fareed Zakaria and Arianna Huffington are still with us.

Fareed, the OECD says China would overtake the U.S. economy by 2016. That's the backdrop that the president has when he meets with China's new president.

How does America reposition itself when we have central bickering and they have central planning?

ZAKARIA: China has been amazing at industrializing itself better than any country in the world. But just take a pause. So when you see that 2016 figure, that's on the basis of something called purchasing power parity. It is too technical to get into. But the simple fact is China has a $6 trillion economy just in dollars. Ours is $15 trillion.

Because of their size they will catch up for sure but actually not by 2016, much later.

The point is China is not a superpower yet. Their military spending is a quarter of ours. And most importantly they don't have that broad mentality of thinking to themselves, what is good for the world? How do we provide stability in Asia? How do we provide stability in the Persian Gulf? How do we keep the sea lanes open? They're not doing any of that stuff.

So we should recognize they are rising. We should be respectful. We should try to get them to help us uphold this open world economy and this open world system. But, you know, for now and for a long time for the future, the United States remains the guarantor of peace and stability in the world and we need China to come in.

HUFFINGTON: But there is one area where we are clearly lacking, and that's infrastructure building.

I mean, the other week we had a bridge collapse which went beyond the bridge collapse. It is symbolic of what the president spoke a lot about during the campaign. Remember, he would stand in front of bridges and talk about the need to rebuild our infrastructure. But it is not happening. And that is absolutely critical. Public investment is necessary right now, and it is not happening, and there is no real focus on it in Washington.

ZAKARIA: And it ties into the earlier part of our discussion. The single biggest way you can produce jobs, real jobs in this economy, would be an ambitious plan along the lines of what Arianna is saying, build out our infrastructure, revamp the airports, the ports; we need our ports to be better to be able to take the new big ships that are going to go through the Panama Canal.

That's going to produce real jobs, high-paying jobs. You can't globalize this stuff. You can't outsource the building of infrastructure. This is the area where you have the highest --


ROMANS: It sounds wonderful, but they can't agree on whether to drink Coke or Pepsi in Washington. They can't agree on anything.

HUFFINGTON: But it has to be a priority. And a lot of the hardest things that have happened in this country, whether it was the Civil Rights Act or any major shift, does not just happen without at least one leader, in this case the president, just staying on top of it day in and day out.

ZAKARIA: There is one rare thought, which is there is this new book out, called "The Metropolitan Revolution." It points out politics is broken in Washington, but at the level of the cities, actually a lot is happening.

Look at Rahm Emanuel. Rahm Emanuel is trying to create this public- private infrastructure fund which will repair Chicago's infrastructure. Chicago's water pipes are 100 years old. They have 25 percent leakage. Some of them are made out of wood. So you have to fix that.

ROMANS: And you've got such low Treasury bill rates. Interest rates are still so, so low. To borrow that money, but you can't talk about borrowing money in Washington.

Before the break, we asked what these people had in common.

All four took action to advance the role of women in the global economy this week, it was Beyonce, John Legend, Madonna, headlining a London concert for women's rights. Mrs. Fareed Zakaria, Ms. Zakaria spoke at the "Huffington Post's" first-ever women's conference.

Ariana, tell me about how women can drive a real economic recovery?

HUFFINGTON: Well, the point of the conference was to redefine success, that women need to lead the way, to redefine success beyond money and power, because now the American workplace is fueled by burnout, 24/7 work, sleep deprivation. And the results --

ROMANS: Have you been talking to my staff? (LAUGHTER)

HUFFINGTON: And to your husband.

It is not good for our well-being, 75 percent of health care costs in America are because of chronic preventable diseases. It is not sustainable. It is not good for wisdom. It is not good for the decisions our leaders make. (Inaudible) actually, Ehud Olmert, the former prime minister of Israel, just gave this advice to future leaders: get more sleep.

I know it sounds prosaic, but the truth is that if you're sleep- deprived, if you're not connected with your own center of wisdom, you are not going to make wise decisions. And we have incredibly smart people running governments, running businesses, making terrible decisions.

ROMANS: So your takeaway from today, everyone, is get more sleep and do a big infrastructure build. That is what your takeaway from this program.

Arianna, Fareed, so nice to see both of you. Thank you.

You can see more of Fareed on his show, "FAREED ZAKARIA GPS" every Sunday at 10:00 am and 1:00 pm Eastern. This week in the wake of President Obama's summit with Chinese President Xi Jinping, Fareed will talk to the American who perhaps has spent more time with President Xi than any other, Henry Kissinger.

In "1984" George Orwell imagined a world where the government spies on its citizens with hidden microphones and tele-screens. He published that novel 64 years ago this weekend. Today evidence the U.S. government is looking at your phone records, online communications, maybe even your credit card transactions. The tradeoff between your liberty and your security, that's next.


ROMANS: Your liberty versus your security -- since September 11th the two have been in heated conflict, and that conflict came into sharp focus this week.

We now know the government obtained a secret warrant in April ordering Verizon's business services division to turn over data on every call going through its system. It is the extension of a top secret program that's been going on for years. The Obama administration says the national security agency is just compiling data.


OBAMA: Nobody is listening to your telephone calls. That's not what this program is about.


ROMANS: But it looks like this data mining, the collection of vast amounts of information, went beyond simply phone calls.

Reports followed that the government is tapping directly into the servers of nine leading Internet companies, including Microsoft, Yahoo!, Google, Facebook, AOL, Skype, YouTube and Apple.

Several of these companies deny they've handed over any information but the government now admits that for the past six years it has been collecting information on foreigners overseas from the nation's largest Internet companies.

And now a report the data mining may have also included credit card transactions. That's according to reporting in "The Wall Street Journal."

Tom Fuentes is CNN's law enforcement analyst and former FBI assistant director. He joins us now through Skype.

And, Tom, I really wanted to ask you first, unpack this for me.

What is data mining? What are they doing with all of this information they're collecting?

TOM FUENTES, FORMER FBI ASSISTANT DIRECTOR: Well, data mining basically is like coal mining.

They're getting shovelsful of information and putting it in a big bucket, and it is sitting there until they have a reason to try to look for a particular nugget and analyze it in terms of a given phone number, who that number calls or is receiving calls from once there is a suspicion about the number or about the person that subscribes to that number.

So right now what we're talking about, it sounds like the phone companies, at least Verizon in this case, is turning over probably 80 to 100 million phone calls per day to NSA and they're going into NSA's computer system for storage.

Later if there is a particular number that comes up as suspicious or an individual that comes under investigation for a possible -- being involved with terrorism, let's say, then they can go to that number and analyze all of the calls to and from that number.

ROMANS: And they might need a court order to do that. So now it's sitting in the warehouse --

FUENTES: They already obtained the information as far as the bulk information by court order in the first place.

So already you have three branches, all three branches of the government involved, the FBI and NSA from the executive, Congress of course passed the law and has said that they think it is legal, and then you have a FISA court judge, Foreign Intelligence Surveillance Act judge in Washington, issuing the court order to the phone company to say turn those records over to NSA.

ROMANS: You can imagine a situation, for example, the Boston bombings -- and I am not saying I know that this is related to the Boston bombings. It may not be. It may be. But in that kind of a situation it could be that the government wants to make sure it has access to all of that information while it is trying to follow the threads for a major terrorism or even any terrorism investigation.

FUENTES: Right. Instead of having to go to 15 different companies or 20 or even 100 separate phone companies with subpoenas for that information and then find out that that information may have been purged already and no longer in their system, this way it is one-stop shopping for the counterterrorism analysts to say, OK, all of the information is in the computer system of NSA and can be accessed at a much later date.

So if you have someone like Tamerlan Tsarnaev from the Boston bombing, you can say, OK, we want to go back on his cell phones two years, three years, and look at every call he made, every call to him.

Where did they come from? Where did they go to? How long were those calls, if it's a cell phone, where was the cell phone at the time of the call, which can also be determined by the phone companies.

ROMANS: Tom Fuentes, CNN law enforcement analyst, nice to see you this weekend. Thank you.

Coming up, whoops, you said a four-letter word at the office. Well, they got away with it.


JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: This is a big (inaudible) deal.

GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: There's Adam Clymer, major league (inaudible) from "The New York Times."

CAROL BARTZ, FORMER CEO, YAHOO!: Nobody is (inaudible) doing anything.

ROMANS: So is it ever OK to swear at work? And what does it say about you?


ROMANS: Every drop an F-bomb at work? Sports stars, CEOS, Oscar winners, politicians, they have all put money in the office swear jar. But cursing on the job, it can hurt your career.


UNIDENTIFIED MALE: You (inaudible) don't watch us play throughout the year.

ROMANS (voice-over): You hear it in sports. Sometimes there are fines. In corporate America there are reprimands. Potty mouth just earned the CEO of Scott's Miracle-Gro a unanimous reprimand from the board. We don't know what he said, but he apologized for, quote, "colorful language" in this statement.

Of course politicians have been known to drop F-bombs at work. After the passage of health reform, Vice President Joe Biden whispered one in the president's ear.

BIDEN: This is a big (inaudible) deal.

ROMANS (voice-over): And in 2000, George Bush colorfully described a "New York Times" reporter.

BUSH: There's Adam Clymer, major league (inaudible) from "The New York Times."

Melissa Leo let the F-bomb fly when she accepted an Oscar.

And Yahoo's former CEO Carol Bartz was famously foul-mouthed.

BARTZ: Nobody is (inaudible) doing anything. And so -- excuse me, I knew that would slip out one of these times.

ROMANS (voice-over): Even the e-mail antics of some Goldman Sachs execs got them into trouble.

UNIDENTIFIED MALE: Boy, that timber wolf was one (inaudible) deal.

ROMANS (voice-over): So is it ever OK to swear at work?

ROBERT NOBILE, EMPLOYMENT ATTORNEY: An occasional F-bomb is not going to become a Supreme Court case. But the reality is it's where the conduct is ongoing or pervasive, and under most companies' policies these days, offensive language, including swearing, is prohibited.

ROMANS (voice-over): And your boss is listening. A Career Builder survey finds 57 percent of employers would be less likely to promote someone who swears in the office. Still, 51 percent of workers admit to doing it, even people paid to watch their words like New York City broadcast legend Sue Simmons and Ernie Anastas have sometimes let them slip.

UNIDENTIFIED FEMALE: What the (inaudible) are you doing?

UNIDENTIFIED MALE: It takes a tough man to make a tender forecast, Nick.



ROMANS (voice-over): Of course newsrooms are notorious for naughty language.

UNIDENTIFIED MALE: Everybody calm the (inaudible) down.

NOBILE: The culture does play into how the conduct is viewed in the workplace. For example, in the construction industry it is much more common, and many financial services companies on the trading floor, you know, people using the F-bomb is pretty common.

ROMANS (voice-over): But in most workplaces, watch your (inaudible) mouth.


ROMANS: And it is interesting, some people say, look, sometimes there are situations there is not a word that is better than a curse word. Others say it lacks imagination and it shows immaturity at work. Got a potty mouth boss? Career Builder says 25 percent of employers admit to swearing at their workers. It's a damn shame.

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