Return to Transcripts main page

Your Money

U.S. Economic Recovery Analyzed; Family Suing GM for Daughters Death; LAPD Deploys Controversial Tracking Technology

Aired June 07, 2014 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CHRISTINE ROMANS, CNN HOST: We've now gained back all the jobs less in the recession, but most of you still think the American dream is out of reach. I'm Christine Romans, and this is the new "CNN MONEY."

And 217,000 jobs created last month, and a milestone moment -- 8.7 million jobs were wiped out during the financial crisis. Now, more than four years later, the U.S. economy has finally gained them all back, and even added a few more.

Don't feel like popping the champagne? I don't blame you. At four years-plus, the longest jobs recovery since 1939 and we're still years away from full employment. And 59 percent of Americans polled, nearly six in 10 say the American dream is impossible to achieve. Yes, the jobs market has made a decisive turn, but is it too late for the American dream?

Rana Foroohar is CNN's global economic analyst and "TIME" assistant managing editor. Mohamed El-Erian is the chief economic adviser to the German insurer Allianz. Mohamed, let me ask you this. Jobs are coming back. Is that enough to jump-start the American dream and help people feel better about the economy again?

MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: It's an important component, but it's not enough. I mean, it's great news that we created 217,000 jobs last month and that, as you say, we're back to the prior peak. Now, that peak was in January, 2009, and it took us a long time. So people feel that it's taking too long.

But importantly, it's the quality of jobs. It's the fact that wage growth has been really anemic, and it's also the fact most people feel they don't have the same opportunities, and that's why the survey shows that people are worried about the American dream.

ROMANS: More than just the job market. There's a whole lot of things that we're watching here that make us feel good or feel cautious about the economy. Rana, we are starting to see some solid middle class jobs coming back. When I look at the last couple of months in particular, I'm not ready to declare a trend, but I do see a broad mix of different kinds of pay scales and different kinds of sectors. That's good.

RANA FOROOHAR, CNN GLOBAL ECONOMIC ANALYST: That is good. This is the fourth year now of really solid -- excuse me, fourth month now of really solid job growth. As you say, it's across manufacturing, retail, health care, travel, tourism. So there are this, you know, broad range of jobs created.

But I have to agree with Mohamed, that it's not just about quantity. It's about quality, and the fastest growing categories, frankly, are still at the low end. You're still seeing a lot of low-end retail job, clerical jobs, service jobs, travel and tourism. And wage growth is very flat still. We're not feeling this in our wallets yet.

ROMANS: Yes. We gained maybe five cents an hour, the average wage, Mohamed, in the most recent month. They say don't spend it all in one place. Wages have been going flat for middle class jobs for some time.

Let me ask you this. The White House, Mohamed, says there's more work to be done and policies to enact to help people in the jobs market, specifically, raising the minimum wage. Do you think there more that Washington can do, policy initiatives that need to be done, especially now a tail wind of a growing jobs market?

EL-ERIAN: Oh, it is a lot more than Washington can do. Right now it's mainly the Fed that is acting. Congress has been polarized, and Congress actually has done very little in terms of policies that promote growth and employment. My worry is that we are going to hit a wall at some point. Not now, but later this year when we get to the long-term unemployment, where issues about competitiveness, education, productivity, become absolutely critical. And we are doing very little right now to address long-term unemployment. What we are mainly doing as a country is addressing short-term unemployment through a very active and experimental Federal Reserve. So there's a lot more that Congress can do, but unfortunately it is not likely it will do much between now and year end.

ROMANS: The job market, as one economist said, the economy is back and moving in the right direction, but tell that to the overeducated and underemployed millennials. And 63 percent of Americans polled say most children in the United States won't be better off than their parents. Young people aren't getting the right degrees. They're taking on too much debt to get the wrong degrees. Rana, this is still a really big problem, because even though you've now recovered all the jobs lost in the recession, tell that to the class of 2008, 2009, 2010, 2011, 2012 and '13. There weren't jobbed created for all of those people.

FOROOHAR: Sure. Jobs are coming in when wages are flat, coming in at a disadvantage pay-wise, and statistic show that you never make that up in the course of your lifetime. If you come into a really weak labor market you're going to take a pay cut the rest of your life.

Also it's worth saying more millennials than ever before in recorded history are living with mom and dad. That says something about the economic state these kids are in.

ROMANS: Living with mom and dad, Mohamed, they have all of this student debt. They're coming out of school with all of this student debt, many call it a bubble. They're taking out all of these loans chasing after degrees that aren't necessarily going to get them jobs. What do we do about that? EL-ERIAN: So first and foremost we deal with the education issue and

we deal with educational reform. And it's about the knowledge economy. You know, the world has changed, and our education system isn't changing fast enough.

What we need today is an education system that teaches you not what to think but importantly how to think, because things are moving quickly. We need to do something about education. Student debt is going to become very important. There's a notion of a debt overhang. When you have excessive indebtedness, that stops the system from adapting quickly. And student debt is becoming the next problem to solve. So there are real issues. It's good the economy improved, but there are these longer term structural issues that need a lot of attention and need sustained attention.

ROMANS: You know, Mohamed, the last couple of weeks we've explored whether the availability of student loans, so much student loans, actually encourages universities to take that money, not reform the kind of education that they're giving students, and just raise tuition. Is it making the bubble worse, all of the student loan availability?

EL-ERIAN: That's a tough question. It's a good thing that students loan are available because people then can get education that's not constrained by how much money they have right now. But there's a more fundamental issues. What's pushing our universities, and what's pushing our schools to reform? And the push isn't strong enough for the set of schools and universities as a whole.

ROMANS: All right, Mohamed El-Erian, thank you so much. Rona Foroohar, nice to see you both. Have a nice weekend.

One of our favorite websites got an upgrade this week, ours. The new CNN Money has what you need to know about business, investing, the economy, tech, and personal finance, plus our new sections, luxury and media, and two new features. Big Money shows how the rich and the ultra-rich spend their millions, and check out #newjob. It's an Instagram collection of people starting a new gig. That's all on the new CNN money and the new CNN money app.

Up next, General Motors says there was no conspiracy or cover-up. It says 13 died because of a pattern of incompetence and neglect. But some families are taking issue with how G.M. is counting victims.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Her death is not being counted, it means like it doesn't matter. To us, that's what it feels like. It does doesn't matter to GM that she died in this car.

(END VIDEO CLIP)

ROMANS: One family's fight for justice, next.

(COMMERCIAL BREAK) ROMANS: No cover-up, no conspiracy. An internal probe at General Motors says the long delayed recall just the result of bad management. The company says 13 deaths were caused by the faulty ignition switch but acknowledges that number could grow. One Georgia couple says their daughter's death was caused by the defect, that family pledging to keep fighting.

(BEGIN VIDEOTAPE)

MARY BARRA, GM CEO: The pattern of incompetence and neglect.

POPPY HARLOW, CNN MONEY CORRESPONDENT: GM CEO Mary Barra admitting the auto giant's failures.

BARRA: In short we misdiagnosed the problem from the very beginning.

HARLOW: But those words aren't enough to the parents of Brooke Melton, who died driving a 2005 Chevy Cobalt on her 29th birthday.

BETH MELTON, MOTHER OF BROOKE MELTON: I kept thinking that this is not possible. It's her birthday. It can't -- this can't have happened that she died.

UNIDENTIFIED MALE: When I touched her hand it was cold. I knew in my heart and gut there was something wrong with the car, that it wasn't her fault.

HARLOW: It was here that Georgia State Patrol says Brooke Melton's 2005 Chevrolet Cobalt hydroplaned on a rainy evening four years ago. The car spun out and was struck by another vehicle and then dropped 15 feet into this creek. The accident report says Melton was driving too fast for roadway conditions, causing her to lose control of the vehicle.

She was driving 58 and the speed limit was 55. Do you believe that that could have caused the accident?

BETH MELTON: No. I believe that she lost power.

HARLOW: It's now known the ignition switch on her Cobalt was defective. This analysis of the car's data report provided by the Melton's attorney shows the switch was in the accessory position at the time of the crash, shutting the engine off and disabling the air bags, power steering, and anti-lock brakes.

LANCE COOPER, ATTORNEY FOR THE MELTON FAMILY: We believe the evidence is overwhelming that the defects in this key system resulted in Brooke's loss of control and her death.

HARLOW: GM would not comment on the data recorder information. The defect led GM to recall 2.6 million cars, but before the recall the Melton's settled their case with GM for an undisclosed amount. Now they are fighting an uphill legal battle to reopen it.

COOPER: They thought they had the truth when they settled their case. We now know they had some of the truth but not all of the truth. HARLOW: In a new lawsuit, the Meltons allege that GM hid key

documents from them and say a GM engineer lied in a sworn deposition.

UNIDENTIFIED MALE: Were you the design release engineer for the ignition switch in the '05 Cobalt?

RAY DEGIORGIO, ENGINEER, GENERAL MOTORS: Yes, I was.

HARLOW: The Meltons attorney gave him part of the deposition of Ray Degiorgio, who denied approving any changes to the ignition switch.

DEGIORGIO: There was never a work order that I saw outlining this.

UNIDENTIFIED MALE: So if any such change was made, if was made without your knowledge and authorization?

DEGIORGIO: That is correct.

HARLOW: But in 2006, Degiorgio signed this form authorizing a fix to the ignition switch making it harder to turn inadvertently.

UNIDENTIFIED FEMALE: This subcommittee will come to order.

HARLOW: GM's CEO was questioned by Congress about this.

UNIDENTIFIED FEMALE: You know he lied under oath.

BARRA: The date in front of me indicates that, but I'm waiting for the full investigation.

HARLOW: That full investigation came out on Thursday, and Degiorgio is among 15 employees dismissed from GM. He did not return CNN's calls. GM declined an interview with CNN but denies the assertion that it fraudulently concealed relevant and critical facts in connection with the Melton matter, and GM denies it engaged in any improper behavior in that action. The automaker admits 13 people died as a result of the defect but won't release those names. GM's list only includes frontal crashes where airbags didn't inflate.

General Motors says 13 deaths, 47 crashes.

BETH MELTON: And they're playing with numbers that they don't count Brooke's death, and she's dead because of that ignition switch.

HARLOW: Why is General Motors only counting frontal where air bags did not deploy?

DAN AMMANN, PRESIDENT, GENERAL MOTORS: What we've done is analyzed all the information available to us based on one specific definition, as you describe, we've counted 13 people.

UNIDENTIFIED MALE: Her death is not being counted, it means like it doesn't matter.

HARLOW: Poppy Harlow, CNN, Marietta, Georgia.

(END VIDEOTAPE)

ROMANS: GM says it's prepared to raise the death toll based on the criteria set by Ken Feinberg. He's the compensation expert the company has hired him to pay out claims by those who have killed or injured in accidents.

Coming up, cops in Los Angeles are using an innovative computer program to fight crime, but it's also rising privacy concerns. We'll take you inside a city of tomorrow, next.

(COMMERCIAL BREAK)

ROMANS: The LAPD is watching you, if you're in Los Angeles County. A cutting edge computer program is tracking every car on the road and bringing together pieces of information into one database. CNN's Rachel Crane takes us inside this technology and explains why some feel it's violating your rights.

(BEGIN VIDEOTAPE)

RACHEL CRANE, CNN CORRESPONDENT: Since the early 1990s, crime rates have steadily declined across the country. One possible explanation -- smarter data-driven policing. Here in Los Angeles, the LAPD is embracing new technologies and big data analytics like never before, changing the way we fight crime.

Watch Commander Sergeant Kennedy show us how big data analysis is changing the force.

SGT. SCOTT KENNEDY, LAPD: This is our license plate reader. We have three cameras attached to the light bar.

CRANE: License plate readers installed on patrol cars have become commonplace, and they automatically scan every license plate they drive by.

KENNEDY: Palantir goes through the Sacramento database to check for California vehicle systems to see if it's stolen or if there's a want on it for some reason. Be on alert, $30,000 warrant on the parked car we just passed that's right behind us.

CRANE: Over the course of the day, the LAPD can scan tons of thousands of license plates across the city. At the LAPD's real-time analysis and critical response division, those license plate scans are fed into a game-changing data mining system, a powerful application that can claim the CIA as an early investor.

CAPTAIN JOHN ROMERO, LAPD: It's a federated search system. Palantir combines disparate datasets, allows us to access them quickly. With a single key stroke you get the effect of a 30-person task force.

CRANE: After searching over 100 million data points, Palantir displayed an impressive wealth of information on one burglary suspect linking into cell phone number, arrest records, known associates, and past addresses. They could even track the suspect's past locations based on previous license plate scans. ROMERO: If we are searching for him, we don't have to search all of

L.A. County. We know where he frequents.

CRANE: Anybody who is a vehicle owner is then in Palantir?

ROMERO: Anybody who's a vehicle owner in a public place and has passed a license plate reader will be in our dataset. We cannot just go searching for you or anyone else without a reason, because we have a lot of data for people who have done nothing.

CRANE: For those people who have done nothing, the ACLU of Southern California believes the LAPD license plate readers may be violating civil liberties.

PETER BIBRING: A system of license plates readers that's pervasive enough to really track the movements of every car in the city in reasonable detail would effectively substitute for GPS trackers for everybody. The public should be the ones deciding what the proper balance is between their privacy rights and their public safety.

CRANE: The LAPD believe the public wants Palantir on their side.

ROMERO: You want to have the effect of 30 detectives working that burglary or that auto theft. It is hugely important to make those cases solvable.

(END VIDEOTAPE)

ROMANS: Fascinating stuff.

Coming up, forget driving to the airport, waiting in line, dealing with flight delays, and all the hassle with air travel, Imagine stepping into a pod, zooming through a city, and then you're loaded right into your plane? The future of air travel is next.

(COMMERCIAL BREAK)

ROMANS: All right, every time you book a flight, the airline makes an average of $5.42. That's a profit margin of only 2.4 percent. That's according to comments this week from the International Air Transport Association. So no wonder why your last flight was jammed-packed. Cost-cutting, rising fees, aging fleets, it has many passengers are frustrated with air travel. But the next generation of planes promises convenience and ease and bigger profits for the airlines. CNN International's Isa Soares flies us across the skies of the future.

(BEGIN VIDEOTAPE)

ISA SOARES, CNN INTERNATIONAL CORRESPONDENT: In the 1970s, the future of air travel looked supersonic. Concorde heralded a time of fast and luxurious travel. While it remains a shining example of brilliant engineering, the economics just didn't add up.

Concorde speed came as a price. It was a noisy gas guzzler, the very characteristics that today's plane-makers need to cut. Efficient, green in performance is what's steering 21st century production.

GREGOR DIRKS, CORPORATE INNOVATOR: Well, the energy problem is one of the major drivers of us, of course. So we have to do something about it. Reducing fuel burn is one way we do everything, very successfully in the past. Another one is to switch to electric drive, is one concept.

SOARES: A vision of the future, the concept plane packed with engineering dreams -- bionic see-through skins giving panoramic views, materials which don't corrode, and radical plans for speedier boarding.

Taking a plane could be as simple as taking the subway.

DIRKS: In the future we could think about city center check-in and actually transport little pods to the airport where the passengers are already in, and just get with the pod, slide it into the airplane in order to have a seamless experience of flight.

SOARES: Cheaper flights have driven the growth, and with air traffic predicted to rise by more than four percent a year, the prospect of free flights is on the horizon.

DIRKS: The airlines may not take the money from the passenger directly. It may be from somebody who has an interest of you flying somewhere. Medical services, for instance. You are confined in a space sitting on a seat which might be quite technical, might sense body behavior for quite a while, and somebody might be willing to pay for this type of thing while you fly.

SOARES: The final assembly line of the A380, the world's biggest passenger aircraft and the flagship of the Airbus fleet. Now, so far 132 of these planes have been delivered to customers around the world. Now, you'd have thought that once production starts, innovation stops. Far from it. This is about constant redevelopment, making production smoother and improving performance.

DIRKS: Today we have flying parts today built on 3D printing materials. This is an organic bionic shape which we couldn't do with traditional manufacturing in a cost effective way. This is the big revolution. Passengers won't see it.

SOARES: While the sun may have set on supersonic passenger flights, the speed of the manufacturing revolution is gathering pace, bringing with it the prospect of a greener, smarter, and more sustainable future for flight.

(END VIDEOTAPE)

ROMANS: Wow, all right. Thanks for being a part of the new CNN "MONEY." Each Saturday 2:00 p.m. eastern, we're going to feature the money news that matters most. So set your DVRs. Also check out the revamped CNN money site and upgraded mobile app. There you're going to find everything from jobs to cars, the inequality debate and how the rich spend their millions.

Have a great weekend.