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Will Business Firmly Take Sides In the GOP's Internal Division?; Latest Deal Still Leaves Need For Grand Bargain; Washington's Dysfunction Felt Thousands Of Miles Away From U.S.

Aired October 19, 2013 - 14:00   ET


CHRISTINE ROMANS, HOST: Economic catastrophe averted for now but the damage to the economy and to the Republican Party may already have been done.

I'm Christine Romans. This is YOUR MONEY.

This is no way to run a business, let alone the world's largest economy. And now business itself is pushing back. The dysfunction in Washington has some trade groups and executives re-evaluating conventional wisdom about the close relationship between business and the GOP.


ROMANS (voice-over): Pop quiz, which is the party of business? Republicans or Democrats?

UNIDENTIFIED MALE: It had been assumed that business and Republicans were in bed together. Now all of a sudden you see the new breed of Republicans, mostly from the Tea Party, who are not all that friendly with Wall Street or banks or big business. It's really scrambled traditional thinking.

ROMANS: A belief in low taxes and less regulation has united business in the GOP for decades, a philosophy famously articulated by President Ronald Reagan.

RONALD REAGAN, FORMER PRESIDENT: Government is not the solution to our problem. Government is the problem.

ROMANS: And embraced by the party's standard bearer in 2012.

MITT ROMNEY, FORMER GOVERNOR OF MASSACHUSSETTS : Corporations are people, my friend.

ROMANS: But a willingness by the GOP's right wing to threaten default and shut down the government is threatening to damage that historic alliance.

GREG VALLIERE, CHIEF POLITICAL STRATEGIST, POTOMAC RESEARCH GROUP: I'd say a lot of Republicans, mostly all Tea Party Republicans, who may not get their phone calls answered when they ask big business for contributions. ROMANS: Those contributions have kept Republican war chests flushed with cash. The $32 million spent by the U.S. Chamber of Commerce in 2012 went mostly to elect GOP candidates. The majority of financial sector contributions also benefit Republicans. So could Democrats now benefit from a split within the party?

FRANK KEAGIN, CEO, AMERICAN BUSINESS ASSOCIATION : We are not going to blindly endorse one party over another.

VALLIERE: I think it would be a stretch to say that all of a sudden Democrats will get along much better with business. The basic interest of Wall Street and banks and business still is better represented by Republicans than by Democrats.

ROMANS: Case in point, Obamacare, the President's signature health care reform. Small business highly critical of the Affordable Care Act. Now that's health care. On Wall Street they are no fan of his financial reforms. Remember this 2009 interview.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES : I did not run for office to be helping out a bunch of you know fat cat bankers on Wall Street.

ROMANS: Those fat cat bankers have deep pockets. They could choose to back (AUDIO GAP) candidates in GOP primaries. Some retail and manufacturing trade groups have already said that's their plan. Former Republican Senator Olympia Snowe told me business groups who want to see more moderate Republicans elected to Congress must speak up and contribute to those candidates.

OLYMPIA SNOWE, FORMER U.S. REPUBLICAN SENATOR FROM MAINE: They have to get engaged. They can be detached or aloof from what's transpiring in Washington because it affects them and their employees each and every day and it's affecting the future of this country.

ROMANS: So, will business firmly take sides in the GOP's internal division? David Frum is a CNN political commentator and contributing editor for "The Daily Beast." He's also a speech writer for President George W. Bush, so he knows a little something about the Republican brand. Will Cain is a conservative contributor and an analyst for "".

David, let me start with you. You've said Tea Party extremism contaminates the whole Republican brand. Should big business come to the rescue here?

DAVID FRUM, CNN POLITICAL COMMENTATOR AND CONTRIBUTING EDITOR FOR "THE DAILY BEAST": Republicans need business help. You know one of the things that I think needs to be stressed, even in the package you just did was that the impending default was not so much a strike against Wall Street as it was a strike against government suppliers. The interest on the debt was probably - would probably have been paid in that eventuality. What would not have been paid are the invoices -

ROMANS: Right. FRUM: -- that come from when people provide meals to the military. The U.S. is the biggest supplier - sorry, purchaser - of goods and services on planet Earth, and the people who provide that would have been in a line, instead of being paid in 15 days, who knows? And those are the people who would have been stiffed. Businesses, big and small that are federal contractors, and those are businesses that can make their voice heard and can support Republicans that want to say we want to run the government, not close the government.

ROMANS: I mean do you hear privately some of these trade associations and people in business saying that they were too lackadaisical last time, that they are going to be a lot more aggressive in primaries to make sure the right candidates are in the right place, to make sure something like this doesn't happen again, David.

FRUM: Well, the Republican - the Tea Party candidates in 2010 and 2012 - the bad candidates that won Republican primaries, probably cost five or maybe even six Senate seats, and that's the difference between a Republican majority in the Senate and Republican minority today. We could have had Mike Castle voting to run the government instead of having Christine O'Donnell play her part in helping Republicans lose the ability to run the government.

ROMANS: Well I want to show you some polls here - the rift within the government - the Republican Party, rather, growing. In four months, just four months, moderate Republican's views of the Tea Party have dropped 19 points. Many business, they do support the Tea Party principles, right?

FRUM: Right.

ROMANS: Of less government spending and ending Obamacare. So is this more a disagreement over tactics than goals?

FRUM: It's 100 percent a disagreement over tactics, and a disagreement over short-term versus long-term. The Republican Party needs to be about markets, not businesses. Not some businesses who get Obamacare waivers, who get payments from the government. We need to represent markets as a whole. That is the goal. And the difference on the Tea Party versus Republican brand right now and businesses ultimately supporting principles you talked about, what we're looking at here is short-termism. Businesses have a normalcy bias and a short-term bias. They want everything to go well right now. But in the long-run, Obamacare and government spending the economy have a depressing effect and you have to sometimes look at long-term implications.

ROMANS: But it is interesting because you know I was at the Fortune Most Powerful Women Conference this week, you guys, and I will tell that those business leaders were not looking short-term, they're looking long-term, and the dysfunction of the U.S. government right now and how they think that's going to play out over the weeks and months and how that's not good for the American economy. So they are looking long term. David, I want to bring this up -- $24 billion is how much the 16-day government shutdown took out of the U.S. economy. This is the estimate of Standard & Poor's. We could be back here in three months. How bad is this for financial markets for consumers?

FRUM: I don't know how --

ROMANS: On everyone.

FRUM: -- I don't know how anybody comes up with quantifying it, but here's what I do know - that -- I will use the term default because a contract with the United States is constitutionally protected under the Fifth Amendment. It is just as sacred an obligation as a debt instrument is. If you don't pay the grocer, you go just as bust as if you don't pay the mortgage. So, the United States under - had things come to the worst, would have not paid people with Constitutionally- protected obligations. The risk of that used to be zero. Today, the risk of that is not zero. What that costs, I don't know, but going from zero to a universe of the United States as a riskless commitment and the United States as not a riskless commitment - that is an epical change and it happened in 2011, it's happened again now, it is disturbing and any business owner would be concerned about it for the long term of the country and for the long term of American business.

ROMANS: All right, we're going to be a little heavy hashing this out, I'm sure at least three of those calendar dates between now and February. Will, David, nice to see you. Thanks guys. Everyone has advice for Washington these days including Israeli Prime Minister Benjamin Netanyahu.

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER : With all its flaws, the American political has a lot riding for it. It's probably the best political system in the world. But we (inaudible) on one thing.

ROMANS: Up next, I'm going to tell you what that one thing is and how that one thing could end the dysfunction in Washington.


ROMANS: Another deadline narrowly avoided by a last-minute deal but the deal just creates more deadlines, thus the need for a grand bargain. The idea - solve all of our major fiscal issues all at one. Reform entitlements like Medicare and Social Security improve and update the tax code, slow the rapidly-rising debt and shrink the deficit seems impossible but it may be essential to break the gridlock in Washington.

So how does it get done? I'm going to give you three possible (pacts). Number one, lock them up. Lawmakers only, no aides, no press no food. How about that? In one location - maybe the White House, a resort somewhere, I don't care - the woods. They can't leave until they come up with the best plan. Hey, but they can use all these other deficit reduction plans as their guy - maybe just pick one. Or we should adopt a system using Israel. Here's Prime Minister Benjamin Netanyahu telling our Piers Morgan how it works there.

NETANYAHU : See, in our case, if you don't get a budget by December 31st , an automatic budget goes in 1/12th of last year's budget each month. And if you still don't get a budget six months later, we all go to elections. You know what, Piers? We always get a budget. ROMANS: There you go, that's solution number two - throw them out if they don't make a budget. Now, hold elections after six months without a budget - that'll get lawmakers talking for sure and could help produce a grand bargain. Finally, solution number three - your idea. What's your idea? Maybe the answer comes from the people, not from the people who the lawmakers who haven't been able to figure out. I want you to Tweet me @christineromans, I want you to post on my Facebook page your idea because Washington needs some fresh thinking.

And for some more of that fresh thinking, we've invited CNN's political analyst Ryan Lizza, Washington correspondent for "The New Yorker." So, Ryan --


ROMANS: Do these solutions work or do you have a better one?

LIZZA: Well, I like the Israeli solution but you know they have a parliamentary system, right. I mean, the problem is that we have a presidential system, and in our system the opposition in our system opposes. We need a political reform commission. We need a commission that would look at all of the political processes in this country and come up with some solutions that are practical and you know stuff that doesn't require a Constitutional amendment, so on my list would be actually five things, OK? Return a little bit more money and politics - yes, more money and politics. Allow John Boehner to buy votes. They got rid of earmarks, they got rid of pork, and what does that do?

ROMANS: That does not give - that takes away one of the tools of the leadership in the House to actually grow the votes. The parties need to be - have more money. The parties need to have more influence in elections because when the parties don't an influence on elections, all of the influence flows to these outside, very ideological groups. So if you could raise the contributions that parties were allowed to give candidates, you would empower the parties a little bit more, Christine -

ROMANS: That's interesting.

LIZZA: -- yes, because the parties are moderating influences, right?

ROMANS: Well, here's the thing, you know we've been complaining about business as usual for so long. You know, complaining about it and then you get business as not usual which is, you know, the Tea Party influence and Senator Ted Cruz and his influence, and then we're complaining about the upstarts. So no matter what -


ROMANS: -- if the American people who don't like what the solution is. Let me bring you - let me give you another solution - there's this idea in Tech, right, in Silicon Valley - disruption innovation. Harvard business professor Clayton Christiansen coined this phrase, it defines - I'm going to give you the definition. "A process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors." The idea is to disrupt, get rid of the status quo. So on the one hand you want - you to disrupt and get them to get a solution, on the other hand, I think Tea Party supporters think that's who they are. They are the disrupters who are creating better change.

LIZZA: That's absolutely right. That's the most disruptive influence in our politics since 2010 has been the Tea Party. Unfortunately, the core ideology of the Tea Party is no compromise. That is the problem, right. And in our system, our system is premised on compromise. If we don't have compromise in Congress, nothing gets done because we have this separation of powers where Congress and the presidential - and the President are co-equal branches of government. Very, very different than Netanyahu's parliamentary system.

ROMANS: Right.

LIZZA: And if you have one party that at its core says no compromise, then you can't get anything - you cannot get anything done.

ROMANS: So let me bring this to you, because I'm going to get screaming, raging e-mail and Twitter about how no one's holding the President accountable. How's he going to be able to go into the next round of budget negotiations which started in you know, now --

LIZZA: Now, yes.

ROMANS: -- and how is he going to be able to lead better or differently than he led the last time?

LIZZA: I hate to be so pessimistic, but this is the ninth committee conference supercommittee commission that is trying to get the elusive grand bargain. The silver lining is that maybe out of this last chaotic situation both Boehner has a little bit more credibility with his radicals and he can sell them no a deal and the President has a little bit more interest in his - burnishing his legacy and getting - and finally getting a deal. But look, I hate to say this, but it's - the problem that's been a little -

ROMANS: Then don't say. Leave me with the silver lining and don't say anything else.

LIZZA: There you go.

ROMANS: Cut his mike. Ryan Lizza calling for more money in politics, more earmarks, well just leave me with that. Ryan Lizza from "The New Yorker." Nice to see you again.

LIZZA: Thanks, Christine.

ROMANS: All right, Al Gore may not have invented the internet but he did try to buy Twitter. The former vice president told Bloomberg TV he and former Current TV co-founder Joel Hyatt went after the social network. Twitter has remained independent. But pretty soon you're going to have the opportunity to buy a piece of the company. Give me 60 seconds on the clock - it's "Money Time."

(BEGIN VIDEOTAPE) ROMANS: A hidden cost for the 'want-fries-with-that?' economy? Low wages and you pay. A new study finds 52 percent of fast food workers' families get government aid. Programs like food stamps and Medicaid. Twitter is heading to the New York Stock Exchange. The stocks November debut drawing a lot of attention. It's a big loss for the NASDAQ following last year's Facebook botched IPO. Apple just hired its only female executive, Burberry CEO, Angela Ahrendts will had up the retail arm starting next year. She will join nine men in Apple's executive suite.

Netflix might not be cable's archenemy after all. The online video service reportedly in talks with Comcast and others to make Netflix available on cable boxes. Quid pro panda? Do China a favor, and you could be rewarded with a bear. Beijing has 50 pandas on loan to zoos around the world. Those loans tend to follow major trade and investment deals with China. And finally, congratulations to a good friend of the show, economist Robert Shiller. He won a Nobel Prize this week for predicting the housing and dotcom bubble.


ROMANS: All right, just because nothing was accomplished as a result of the shutdown doesn't erase the fact that the shutdown did matter.

CAT HENDERSON FROM SEATTLE, WASHINGTON : We traveled all the way here to see . . . the cemetery, and we get this.

ROMANS: Washington dysfunction felt thousands of miles away from U.S. One of the most sacred sites for families of military veterans shut down. That's next.


ROMANS: The government shutdown is over, but it mattered. And with the government only funded through January 15th, another shutdown may be looming. That's why it's so important to remember the effects of the shutdown that were felt far from U.S. shores in some of the most sacred places for America's veterans and their families. Two dozen military cemeteries closed, but groundskeepers in Suresnes, France, they kept mowing the lawn even though they were technically off the clock. Jim Bittermann has the story.


ANGELO MUNSEL, SURESNES CEMETARY ATTENDANT: We take pride in our headstones and in the grounds. We want to do this also for the men and women that are buried here. These people sacrificed their lives for our country, OK? The least we can do is take care of them. And so -

JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: In normal times, the cemeteries which are operated by the U.S. Battle Monuments Commission and stretch from Normandy to the Philippines, attracts hundreds of thousands of visitors each year. Relatives and friends of the fallen plan their trips to pay homage long in advance. But in recent days if they didn't' see the brief notice on the Commission's web site or hear about the shutdown ahead of time, they were in for a disappointment. At the big military cemetery in Normandy near Omaha Beach, emotions over the past two weeks have run high.

CAT HENDERSON FROM SEATTLE, WASHINGTON: We traveled all the way here to see . . . the cemetery, and we get this. I am never voting for Republicans again . . . ever.

BITTERMAN: And it's not just Americans who have been put out by the closings.

STEVE WOOLLEY, BRITISH TOURIST: This is a problem between the different parties. Why should it affect a cemetery.

BITTERMANN: Sverker Weisglas from Sweden drove his ailing father her to visit the D-day beaches and cemetery. One of his last wishes which Weislas now thinks may not be fulfilled.

SVERKER WEISGLAS, SWEDISH TOURIST: If there's time, there might be a possibility, but I doubt it.

BITTERMANN: The shutdown felt around the world has already taken not only an economic toll but an emotional one, far outside America's borders. Jim Bittermann, CNN, Suresnes, France.


ROMANS: Thankfully that cemetery is now open but it is little consolation to those shut out by the shameful shutdown in Washington. Up next, three-year-old Malachi Rhodes got a lesson in government this month. A lesson he didn't deserve. More on why our political leaders are failing some of our neediest kids. Next.


ROMANS: Short-term thinking, long-term problems in Washington and families everywhere suffer. Here's an example. President Obama has made it a goal to expand early childhood education but he and Education Secretary Arnie Duncan are playing defense in Washington, not improving or expanding early childhood ed, but managing through cuts. The forced budget cuts known as sequester shut out 57,000 children this fall from Head Start day care and preschool programs. These programs serve low-income families.

This is Malachi Rhodes. He has autism. He's been getting regular speech therapy from this Head Start program in Bridgeport, Connecticut. He was luck he did not lose his spot there because of the sequester, but then when the government shut down, his school shut down too. Thanks to a private donation, he got back to class after a few days, much sooner than our elected officials were able to reach a deal. I recently asked Secretary Duncan about this climate in Washington.

ARNE DUNCAN, EDUCATION SECRETARY : Politicians think short term. They think about the next news cycle, they think about the next election. Early childhood investment is the best investment we in the country can make. The President and I are absolutely convinced of that. Also the ultimate long-term investment as you know.

ROMANS: Long term but so few people in Washington are focused on the long term, and that sort of thinking prevents some parents like Malachi's mother Melanie, a single mom, from planning long-term in her own life. She was worried she'd have to give up her new job as a school bus driver to take care of her son when he lost his spot. She has a message for Congress.

MELANIE RHODES, MOTHER, HEAD START PROGRAM STUDENT : They need to work together, stop you know fighting amongst each other. Think about us, think about the single parents, think about the ones that need daycare to take care of our children.

ROMANS: We couldn't agree more and hope everyone keeps that in mind as these new deadlines loom. Now Secretary Duncan, a Democrat, recently told me how he loves getting out of dysfunctional Washington. Similar distaste from a Republican I interviewed this week - former Senator Olympia Snowe from Maine. She retired because the atmosphere is so toxic. At Fortunes Most Powerful Women Conference she told me this new class of 'podium-thumping belligerents' she calls them is hurting the country. Also at the Fortune conference, Sheryl Sandberg, Facebook's chief operating officer, the author of the book "Lean In." I wanted to leave you with this exchange.

SHERYL SANDBERG, COO, FACEBOOK : Please raise your hand if you were called 'bossy' as a child. Keep your hands up. Please keep your hand up if your brother was called bossy. Please raise your hand if you've been told you're too aggressive at work. Please raise your hand if your male colleagues have been told they're too aggressive. That's what "Lean In" is trying to change.

ROMANS: Interesting, right? Something to think about. All right, that's it for "Your Money." We'll be back tomorrow at 3:00 p.m. Eastern. See you back then.