Return to Transcripts main page

Your Money

A Fix for the Middle Class; Rebuilding Middle Class Jobs; The Color of Money

Aired July 27, 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: President Obama says she seeking a better bargain for the middle class -- a bold economic agenda or another speech for the dustbin of history?

I'm Christine Romans. This is YOUR MONEY.

Good paying jobs and affordable college education, investment in infrastructure, a secure retirement. This week at Knox College in Galesburg, Illinois, the president laid out the cornerstones of middle class security.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: When the wrongs on the ladder of opportunity grow farther and farther apart, it undermines the very essence of America.

(END VIDEO CLIP)

ROMANS: It's not the first time President Obama has spoken at Knox College. Eight years ago, in June 2005, when the president was then a newly elected senator, with less gray hair, he delivered the commencement address there. In it, he laid out his economic vision for the country, expressing the importance of education for combating the job, threatening forces of globalization and technology -- familiar themes, yes, but a very, very different time.

Back then the unemployment rate was 5 percent. Today, it's 7.6 percent. GDP was growing at annual rate back then up more than 3 percent. Today, it's 1.8 percent.

In 2005, tuition at Knox College was $24,960. Today, it's more than 38 grand. That's a rise of 53 percent. It's something you have seen nationwide.

The president says this country has cleared away the rubble of the financial crisis but he also says there is much more to do. The question, will a renewed laser focus on the middle class change the conversation in Washington?

Kevin Hassett is a senior fellow at the American Enterprise Institute, and was a key economic adviser for Mitt Romney's presidential campaign.

Stephanie Cutter will be a host of CNN's "CROSSFIRE" when it debuts this fall. She was also, of course, President Obama's deputy campaign manager in 2012.

And Jessica Yellin is CNN's chief White House correspondent.

Jessica, we want to start with you.

By my count, Wednesday's speech at Knox College is the third major economic push or reframing of these economic issues since his re-election. A new NBC/"Wall Street Journal" poll shows the majority of Americans disapprove of how this president is handling the economy, and here is the Republican reaction.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: The speech turned out to be all sizzle and no steak. That's assuming that there is any sizzle left after you re-heated this thing so many times.

(END VIDEO CLIP)

ROMANS: All right. So, no new policy in this speech, but the president here is trying to re-set, he's trying to reframe for what?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: He is looking ahead to the debt and spending fights that are going to happen in fall when Congress sets out to set next year's budget out and deal with the debt ceiling. So he is using his mega phone to try and start the conversation in a different pitch this time, Christine, and to focus not on the numbers but on the notion.

So, instead of having a conversation about the size of the deficit and bringing that down, it will be more about things like education, jobs, retirement savings. It's the White House's view that the president does better when he can focus on those kinds of topics that the American public can understand and relate to than when it's entirely about the deficit. And that's also I should add one of the reasons they think his numbers come down whenever he is locked in battle with Congress in Washington, you see his numbers come down. When he goes out to the people his numbers tend to rebound.

But I would just throw up a note of caution here, which is that, look, this is a little bit of the same dynamic we have seen before. One person -- he has been out there attacking Congress this week, and Congress is accusing him of being an engine of division. It's a little bit of role reversal but it's same old dance we have seen for a lot of years.

ROMANS: I know.

Kevin, let me bring you in. The president calling out Republicans for not tangoing, saying you can't just be against something, you have to be for something. And Democrats are passing around bumper stickers like this on Twitter. I hope you can see it, Republicans accusing the president of not creating job. It's like Lucy accusing Charlie Brown of not kicking the football . In other words, Republicans are Lucy in this scenario.

(BEGIN VIDEO CLIP)

CHARLIE BROWN: This time I am going to kick that football clear to the moon. Aah!

(END VIDEO CLIP)

ROMANS: Kevin, the president called for universal pre-k infrastructure, universal investment, lots of other middle class friendly objectives. The deficit has been coming down. So, why not?

KEVIN HASSETT, SR. FELLOW AND DIRE. OF ECONOMIC POLICY STUDIES, AEI: Right. You know, the interesting thing looking at the speech was that it was pure campaign mode. He was very insulting and condescending towards Republican opponents and he was blaming them for obstructing his great ideas, but then didn't offer any great new ideas but he promised that in the next few weeks, he would. It's a very odd speech.

The TV show that jumps to mine is -- I thought he was kind of like Dazzle and Fawlty in "Fawlty Towers" and Manuel, the silly stupid waiter as the Republican, and that's the attitude that he had towards them, which isn't really a great way to start a negotiation.

But I think that the real news this week is that it's related to the economy improving and the deficit going down because of the improvement in the economy, is that the debt showdown in the fall, which might go into the winter, is probably going to be a lot different than the other ones because the deficit will have been declining as we go into it.

And so, what's going to happen is that there's going to be kind of a Christmas tree bill, and the president posing and getting ready for a Christmas bill, where we -- you know, we have maybe the Keystone pipeline and a few of the things he likes. Those are going to be the things that get the debt limit lifted, this time probably not some kind of a big deficit showdown. I think that's what the speech was signaling, as he was getting ready for a Christmas tree bill.

ROMANS: I want to bring in, Stephanie.

I heard a lot of verbs in there that I think Stephanie is going to take issue with, that he was insulting to Republicans, that he was posing for something. You know, look, he has a lot that he wants to accomplish on the economic agenda, and he said it, but he can't do it without Congress.

A lot of these big goals can't happen without bipartisan support, if he can't find a way to work with this Congress, he's not going to get these things done.

STEPHANIE CUTTER, CO-HOST, CROSSFIRE: Well, you know, let's put this all in context because I think that's important. Over the course of his first term and now, six months into his second term, I don't think Congress has been refusing to work with him because they're insulted by his rhetoric. They're refusing to work with him because they think it's a winning strategy to just oppose everything he does.

I mean, let's look at what the fundamentals of their economic plan are, repeal and cut. We know that doesn't work. The purpose of the speech this week I think was to remind the American people who is fighting for them, because right now, the president stands alone in that regard. Republicans in Congress, particularly in the House of Representatives are fundamentally opposed to working towards middle class equality, and that's a problem. And that's a hurdle for the president getting this done.

That doesn't mean he is going to stop trying. He is going to try until the last day of his presidency. That was the purpose of this speech, to remind everybody, if we want to grow the middle class, if we want a strong economy, if we want growth for years to come, we have to take care of these fundamental things that we know work.

ROMANS: We have another block to talk about this, guys. So, don't go away. Jessica, Stephanie, Kevin, stay right where you are.

Jobs are coming back, but they are not the jobs that built the middle class.

(BEGIN VIDEO CLIP)

OBAMA: The first cornerstone of a strong and growing middle class has to be, as I said before, an economy that generates more good jobs in durable, growing industries.

(END VIDEO CLIP)

ROMANS: Does the president or anyone really have a way to fix it?

(COMMERCIAL BREAK)

ROMANS: We're not there yet.

President Obama touts the progress his administration has made on jobs since the Great Recession, but he also acknowledges more needs to be done. Now, the economy has added 6.6 million jobs since the labor market hit bottom in February of 2010. But nearly 9 million jobs were lost overall during the recession, and the jobs that are coming back are not -- not all of them, the same quality, as the jobs that were lost.

Today, a third of U.S. workers make less than $24,000 a year, a third.

Jessica, the issue of stagnant wages, it doesn't get that much attention, much play in Washington, and one of the things I worry about is that no one really knows how to fix it.

I mean, you look at Knox College where the president was speaking, the problem with stagnant wages and losing good-paying jobs started before this financial crisis, and we haven't fixed it yet.

YELLIN: That's true. It used to be when productivity rose and so did wages and last year wages were the lowest percentage of our annual gross domestic product than they have been on record. Look, I think that part of the problem is exactly what you say, is that nobody really knows how to fix this problem.

I think this administration would tell you that a big part of the challenge is that health care costs now eat up much greater portions of everybody's wages and so more money goes into the health care talk instead of take home pay. And if they can bring down the cost of health care that will make you get more money in your paycheck in the future.

So, Obamacare is a big plus in that regard. Not everybody is going to agree with that. A lot of people take issue --

ROMANS: This is something that, I mean, American -- millions of American families, it is their reality, and it has an affect across the economy.

And I feel like we can't be an economy, Kevin Hassett, we cannot be an economy that has all these people who are doing great, but then you have this vast middle that doesn't have an out let or doesn't have a place, and that's something that neither party has really been able to fix, Kevin.

HASSETT: Right. But I disagree that we don't know how to do this. There is a big economics literature that sort of I think documenting where the wage slowdown is coming from. You know, if you've got a lawn mowing business, and you want to make more money, you need a faster lawn mower. You need more capital.

And right now, we've got a really unfriendly environment for capital in the U.S. And we are chasing all the jobs and all the machines that could lift wages here in the U.S. overseas.

I think the president correctly said he wants to do something about that. People in the House have said they want to do something about it, but they haven't been able to get it done.

I think if there's going to be hope for the middle class, if you really want to have a middle class agenda, which is not a focus of the president's speech, then the way to do it is to try to get people the machines they need, the tools they need so they can earn a higher wage. And to do that is to really have a corporate tax reform.

ROMANS: I would agree with you that you need corporate tax reform, you need tax reform. I would disagree with you, I think that the focus of the president's speech was middle class issues, and he was appealing to middle class voters. You and I will disagree about that.

But let me bring, Stephanie, because in both of these speeches at Knox College, the president mentioned the local Maytag factory that shut down back in 2004. Knox actually tracked more than 400 of the workers who lost their jobs, and found that those workers are making 10 grand less now than when working at Maytag. And it's interesting, those jobs left there, left Galesburg, they went to Mexico and South Korea. And after that, they moved again and they went to China.

I mean, this is a globalization story and how American workers were hurt and then hit by the financial crisis.

What should we be doing about the focus on the quality of these jobs?

CUTTER: Well, exactly what the president said this past week. The president's tax reform plan cuts the manufacturing tax rate to 25 percent, and for one specific reason, to bring manufacturing jobs back to this country because those are better paying jobs.

The president's proposal on universal pre-K, that's to create better skilled workers over time, to fill those high skilled jobs. Those are better-paying jobs.

Infrastructure has a lot to do with creating better-paying jobs. First, it brings jobs back to this country because companies know they can ship their goods all over the world, if they have good infrastructure here. Number two, it pays higher paying jobs. It creates higher-paying jobs.

ROMANS: It's such well-worn territory. Everybody, thank you so much for dropping by this weekend. Really nice to see you. And we'll do it again, very, very soon. As you can see, there is a lot to talk about, agreement and some disagreement, too. Thanks, guys.

Despite Martin Luther King Jr.'s incredible achievements, his ability to tackle poverty in the African-American economy was cut short by his tragic assassination. It was nearly 50 years ago now. With so much progress since the days of MLK, overwhelming racial in equality in the economy, in money, is still the norm today.

So, the next question we want to ask: is it fair -- is it fair to expect President Obama to do more about it?

(COMMERCIAL BREAK)

ROMANS: We have seen President Obama take strong stands for many causes -- immigration, gun control, and his support of gay marriage even led "Newsweek" to dub him the first gay president. But President Obama has done little to ease racial inequality when it comes to America's pocketbook. The U.S. is the country where the unemployment for African-Americans has long, long been doubled the rate for whites.

In 2012, the median net worth of Americans was -- white Americans -- was more than $110,500. That's almost 18 times, 18 times, the median net worth of African-Americans, just shy of $6,000, just about $6,000. That gap grew significantly in the wake of the financial crisis.

But since President Obama took office, he has mostly steered clear of these issues, rarely addressing topics like affirmative action, mass incarceration and racial profiling. That changed following the protests over George Zimmerman's acquittal in the shooting death of Trayvon Martin.

(BEGIN VIDEO CLIP)

OBAMA: Understand the challenges that exist for African- American boys. The poverty and the dysfunction that we see in those communities can be traced to a very difficult history.

(END VIDEO CLIP)

ROMANS: Former "New York Times" columnist Bob Herbert is a distinguished senior fellow at Demos.

Bob, 95 percent of African-Americans voted to put President Obama in office in 2008, 93 percent voted to keep him there in 2012.

There is a question, this president has really steered clear of the color of money until recently.

BOB HERBERT, DEMOS: Right.

ROMANS: Do African-Americans, does the black middle class and the black electorate, do they want more from him on these issues?

HERBERT: Yes. You know, I had extensive conversation was people across the country and working on the book. If you talk to African-Americans privately, you will sense feelings of disappointment.

But you will very seldom see them expressed publicly because people are torn -- on the one hand, they'd like to see the president do more. On the other hand, a lot of blacks are resentful of the way Obama has been treated by the Republicans, by sort of the racial tenor of the criticism of him and that sort of thing.

So, black people are sort of in a push-pull situation.

ROMANS: It's interesting, because you can say the same thing about the LGBT community and the president sort of delivered for them. You can say the same thing about people who wanted to get out of the wars in Iraq and Afghanistan, want to close Guantanamo, but they still support this president.

He's tried to be a president for all Americans, not a president for different actions. Even as he has turned -- policies tailored to specific groups, should he have policies tailored to specifically African-American. He mentioned young men, young boys -- African- American boys.

Does he immediate to come out and do something?

HERBERT: Even before you get to the policies, you have to address these issues. You have to talk about them. And -- you know, he is, obviously, the president of all Americans but that means that if there is a problem over here with women, if there is a problem here with gays, if there's a problem with African-Americans, you have to address those problems honestly and, you know, I think vigorously.

You know, too often when it comes to African-Americans, that hasn't really happened. It is not -- it is not just with this president but, I think, this president may even have been more reluctant than some other Democratic presidents with issues related to blacks, I think, in Obama's case.

ROMANS: Why do think so?

HERBERT: I think that in Obama's case, he feels that it is -- harmful to him politically to address the race issue very often at all. That will be -- there will be -- will be pushed back from the white community, certain percentage of whites, whatever it might be, we'll say, oh, hey, he's there to give everything for the blacks or something along those lines.

I think that's a mistake, by the way, but that's the calculus he's made.

ROMANS: When you talk about -- the president talked about poverty, especially poverty for young black youth, 35 percent of blacks live in poverty in this country. Compare that to 13 percent of whites. Before this segment we posed the question -- is it fair to ask the first black American president to do more for black Americans in their money? Is it fair to expect more from him on this?

HERBERT: You know, it's a question of what you mean by to expect more. What I would expect from Obama is not more nor less. What I would expect from him is to look at the issues as they are -- as they prevail right now and to address them. Address them forthrightly.

I don't think that President Obama has.

ROMANS: All right. Bob Herbert, we'll talk about it again. Thank you. Nice to see you.

HERBERT: Yes, great.

ROMANS: A rare glimpse at modern life -- if you call it modern -- inside super secretive North Korea.

(BEGIN VIDEO CLIP)

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: These kids, we talked to some of them. They love things most children love -- cartoons, rollerblading. When you ask them what they want to be when they grow up, many of them say had want to be soldiers to protect their country.

(END VIDEO CLIP)

ROMANS: Our Ivan Watson with remarkable access to North Korea's economy, right after this.

(COMMERCIAL BREAK)

ROMANS: Around the world, this is pretty much a universal sign of progress. The lights are on, everywhere really except for here.

Look at that. It's dark. In North Korea, the country is dark -- the secret repressive hermit kingdom. Just south of the border in South Korea, the average worker earns 19 times his neighbor to the North, with far more creature comforts than freedoms.

The Heritage Foundation calls North Korea the world's most repressed economy. The vast majority of North Korea's economic output comes from state-run industries and profits are used to support country's massive military. It is rare, incredibly rare, to get a glimpse inside of this country. A country that has walled itself off from the rest of the world, probably the closest you have ever been to a North Korean export is the chance handling of a counterfeit $100 bill.

But our Ivan Watson is there.

As North Korea marks the 60-year anniversary of the end of the Korean War, its leaders are allowing carefully guided access to the most secretive regime on earth.

(BEGIN VIDEOTAPE)

WATSON: Welcome to the Kim Il-Sung and Kim Jung-Il flower festival. A big pavilion devoted to two flowers named after the founder of the Democratic People's Republic of Korea and his son who also ruled this country until his death.

Now, these flowers are a big source of pride in this country. We are told that nearly every institution in North Korea has a greenhouse devoted to growing these flowers and that's taking place in a country with very cold winters.

North Korea is very well known for its lavish patriotic displays. That's taking place in a country that's had a rather rough economic time over the course of the past 20 years.

Now, in our short very controlled time in Pyongyang, we are definitely not seeing any of the signs of the terrible famine of the 1990s which killed hundreds of thousands of North Koreans due to starvation. In fact, experts are telling us that they are seeing more cars on the roads than before and that people seem to have better clothes as well.

And -- this is despite the fact that their strong, crippling United Nations sanctions against North Korea. It is very hard to get economic statistics on this country. System is very opaque here. We rely on figures coming from the central bank of South Korea which says that the economy has, in fact, grown in 2011 and 2012.

We also know that a big chunk of North Korea's international trade comes through one center, the Kaesong industrial park. That's in North Korean, South Korean industrialists, they run factories there that use North Korean labor. Just last April, the North Korean government shut down that industrial center because of a crisis in relations with South Korea and much of the international community.

And that just goes to show that even now economics takes a back seat to politics in North Korea.

Ivan Watson, CNN, Pyongyang.

(END VIDEOTAPE)

ROMANS: Coming up on a brand-new YOUR MONEY at 2:00 p.m. Eastern: the American energy boom. It was supposed to put money in your wallet, right? Instead the money is going right out your car's tail pipe and escaping out the windows of your home. I'm going to tell you why an American energy boom has not resulted in lower gas prices. That's on the brand new YOUR MONEY, coming up at 2:00 p.m.

"CNN NEWSROOM" starts right now.