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Capitalism: On Trial; Inequality In America; Economic Optimism: Is It Justified?; The Road Back; Money Moves for 2012

Aired January 14, 2012 - 13:00   ET


ALI VELSHI, HOST: It is 2012 and capitalism is on trial. I'm Ali Velshi. Welcome to YOUR MONEY.

Mitt Romney under attack this week from fellow Republicans questioning the wealth that he gained as a successful businessman, which begs the question, is anyone still defending America's economic system?

Capitalism on trial and you are the judge and jury.


MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: President Obama wants to put free enterprise on trial. And in the last few days, we've seen some desperate Republicans join forces with him.


VELSHI: Republican presidential frontrunner Mitt Romney under fire from critics who claim he made millions while handing out pink slips.


NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: This is not about capitalism.


VELSHI: Anger rising over an economic system that has rewarded some, but leaves many feeling left behind.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: This is the defining issue of our time.


VELSHI: "Occupy Wall Street" focused anger on the wealthiest Americans.

The Tea Party drove Republicans to a 2010 midterm victory, warning that President Obama would destroy capitalism as we know it. Is capitalism working for most Americans today?


PRESIDENT OBAMA: The basic bargain that made this country great has eroded.


VELSHI: If you're rich, capitalism is probably working just fine. It's only broken if you're not. As you can see, the top 1 percent, that top line here, is doing pretty well, but what about everyone else.

Look at median income. That's the bottom line there. It shows that earnings for middle class Americans have remained roughly flat since 1970 and even worse in the last decade, middle class incomes have actually dropped by 7 percent.

I've got a panel here to discuss whether or not it's capitalism that's the problem. Fareed Zakaria is the host of "Fareed Zakaria GPS" here CNN, Arianna Huffington is the editor in chief of AOL Huffington Post Media Group and Mort Zuckerman is the editor in chief of U.S. News and World Report.

Thank you to all of you. Fareed, is American capitalism the problem here? Is it broken? Is it doing what we expected it to do?

FAREED ZAKARIA, HOST, CNN'S "FAREED ZAKARIA GPS": I don't think American capitalism is broken, but I think that there have been fundamental changes that have taken place over the last 20 years.

If you look at the American economy over the last 20 years we have created net no new jobs in what is called the tradable sector of the economy, the part of the economy that is subject to global competition.

The only jobs we've created have been in health care, in government and in fields like construction, which are not really subject to outsourcing. You can't outsource the building of a New York skyscraper. So something has happened and I think it's a combination of technology and globalization that is pressing down very hard on the average American worker.

It becomes very difficult for him to find a way to raise his wages or her to raise her wages. So that's real and I think it's a huge problem for an economic system, which has been able to provide enormous rewards to capital corporations. But it's finding it much more difficult to provide those rewards to workers.

VELSHI: That's interesting. What you're talking about here is what we thought of as upward mobility, which is we think about it as capitalism and free enterprise.

But really part of the American dream, Arianna, has been the ability to come here and leave this earth in a better socioeconomic position than you started, that upward mobility, that your work will be rewarded. ARIANNA HUFFINGTON, EDITOR IN CHIEF, AOL HUFFINGTON POST MEDIA GROUP: Absolutely. As an immigrant to this country, this accent is for real. I've lived the American dream. I remember growing up in Athens and walking by a statue of President Truman, who was revered because of the Marshall plan, and there was a sense that you could move to America in search of a better life. That was always identified with America.

And I think what happened goes even beyond technology and globalization. I think it's two things for me. The role of government in misallocating resources, because you have basically the role of money in politics, the role of lobbies, the role of influence has meant that we have so many rewards being given for the wrong reasons.

Whether you are -- whether it's sugar subsidies or whether it is the attempt as happened recently to regulate for profit colleges, which was undermined by for profit colleges spending $16 million to basically water down the regulations.

Again, education is at the heart of the American dream. If you can't go to a good school and if you can't afford to go to college, that's a central undermining of the dream.

VELSHI: So let's take a look at this Pew study, Mort. Pew survey recently found that 46 percent of Americans believe most rich people are wealthy because they came from wealth. They came from a wealthy family or they have great family connections.

So that's 46 percent, 43 percent believe people become rich primarily as a result of their own hard work and education. So Americans are roughly divided on whether making money in this country is as a result of hard work.

This is at the core of some of the debate that we're having right now. You hear a lot of the Republican candidates saying that Democrats are not rewarding work. This issue of whether work pays is central to whether capitalism works.

MORT ZUCKERMAN, EDITOR IN CHIEF, U.S. NEWS AND WORLD REPORT: Let me just say I really support what Arianna has just described. I think there are huge problems in this country and a lot of it, in my judgment, stems not from capitalism but from the government.

I'll focus on the first one, which is we have done a terrible job in providing enough education for the children of this country. There's a whole mismatch in terms of the number of people coming out looking for jobs and the qualifications that people need for jobs, particularly those who are educated, particularly in the world of science and technology.

There are shortages of people, there are literally millions of open jobs because we don't train --

VELSHI: But why does the free market not solve that problem? ZUCKERMAN: Because the education is a government function. If there ever was a public function in this country from the days it started, it's public education and we've done a lousy job. Part of it is frankly because we have lousy teachers.

Part of the reason we have lousy teachers is we have teachers union that say won't deal with those issues. So there are lots of reasons why education is not being properly handled in this country.

But to me if I could think of one thing that would change it, it would be to change our system of education and make sure that our children were properly educated.

VELSHI: OK, let's go full circle here because I know you've talked about this, Fareed, this idea if we're educating properly, it should lead to less -- we have a mismatch.

Let's say we have 15 or 16 million people unemployed. We have probably 3 million job openings in the United States and we've had that consistently for some period.

Because the people with the 3 million job openings say we can't find the talent to fill it and the 16 million looking for jobs don't have the skills to fill the 3 million. So we got a mismatch.

ZAKARIA: The 3 million job openings are slightly deceptive because there's always a process of jobs being available that people aren't filling. I think I want to go to the central point you were asking, which is -- and what Mort was talking about, the role of government.

I think it's very important to understand there is no such thing as just capitalism and socialism. There are varieties of capitalism and the crucial question is are we providing the kind of investment in human capital and physical capital that are going to make it possible for broad-based economic growth, or are we instead subsidizing a bunch of industries here. That is the crucial issue.

We have to find a way to get the role of government to be pro-growth, pro-middle class and we're not doing that right now because of lobbies and frankly, the American public want very large and lavish subsidies for the health care. They don't want to invest in science and technology in education.

Even things like infrastructure are much less popular than expenditures that consumption, Medicare, Medicaid, things like that. So I think the crucial pointing is not -- you can't cut your way to a new generation of prosperity.

People who think you can have austerity and budget balancing are crazy. You need an active, energetic government, but it's got to do the right things.

VELSHI: So the role of government in providing the ability for the individuals to change their situation, to improve their economic situation is central. I want to hold on that a moment because we've got a good, robust conversation here, but part of our deal is we actually have to pay the bills too.

The land of opportunity no matter where you come from is the United States. It was what it was built on. Do Americans still have the upper hand in their own future or do Europeans and Canadians actually have a better chance to move up the economic ladder than Americans?

We're going to talk about moving up that economic ladder, upward mobility and you, next on YOUR MONEY.


VELSHI: All right, there are euphemisms we use such as the American dream or the American way of life, but perhaps none more important than the land of opportunity.

It means no matter where you started, there is an opportunity for you to improve your lot in life if you work hard enough. Mitt Romney spent the week driving home the point that nowhere else in the world is there a system working better than the one in the U.S. right now.


ROMNEY: The Obama administration is going to work very hard to put free enterprise on trial. But you know what, it works. Look around the world and you'll see nations that are trying other models that haven't worked and they're coming back to free enterprise and capitalism.


VELSHI: Recent studies have concluded that your ability to move up the ladder is actually better in many other industrialized nations. A look at parents' incomes as a predictor of children's incomes shows that you have a better chance of changing your economic status if you're born in Denmark, Norway, Finland, Canada, Sweden, Germany or France than if you were born in the United States.

Mort Zuckerman, these studies are saying that you have less mobility, less upward social and economic mobility in the U.S. than you do in other countries, which we wouldn't hold up as the ultimate examples of a free market. They're modified free markets.

ZUCKERMAN: I have to say those numbers leave a lot out in terms of what makes for mobility, OK. One of the things we were talking about before was education. We have a much poorer educational system than a lot of these other countries.

We have a whole different racial makeup in this country, which frankly makes it more difficult for African-American children and Hispanics who are immigrants. We have a much larger immigrant population.

In fact if I may point out, all four of us are immigrants and, frankly, there is no country that comes even close in my judgment to offering the kind of opportunity and mobility that the United States offers. It's not even close and I've looked at a number of these countries.

VELSHI: Even in Canada where you're from.

ZUCKERMAN: Absolutely. Canada now has a much better government, a much more intelligent and much more serious government. They have avoided a lot of the economic crises and financial crises than we have because they've much more intelligent systems of managing their banking and home mortgage systems.

They have a very, very good program of education. They bring in a lot of immigrants who are qualified and let them stay.

ZAKARIA: But, Mort, as an immigrant myself, I feel my heart is with you, but I've looked at these studies and the data is overwhelming. We are actually at the bottom of the industrialized world in terms of social mobility right now and it's for the reasons you are describing. Imagine a poor child in the United States.

That child is going to have very bad malnutrition problems because we have no programs to deal with those kinds of things. That child is going to get a terrible education. That child is not going to be able to find ways to get into elite colleges, which are now fabulously expensive.

So there are so many areas where countries, particularly in Northern Europe, focus on early childhood nutrition programs, our kids by 16 if they're very poor, they're just massively disadvantaged.

HUFFINGTON: But here, even when you graduate from college in 2011, the average student graduated with $27,000 in debt. So you start life burdened with debt, but I think there's a more fundamental problem.

This is a double standard in so many areas of our life, the coupling of risk and reward, which we saw in the bailout of Wall Street without any strings attached, which is exactly contrary to private enterprise.

I mean, Adam Smith and Alfred Marshall and the people when I started economics a thousand years ago would actually have seen that as a complete attack on private enterprise --

VELSHI: Because the risk is eliminated.

HUFFINGTON: It's the whole thing of socializing risk and privatizing gain, which is incredibly dangerous. And the other element here is that even with all the rhetoric that President Obama is using, the truth is he has not ended too big to fail.

He has not reinstated the abolition of -- having been instrumental in the financial crisis so he can use that rhetoric but what has fundamentally changed to make our capitalist system work for the sake of everyone.

One more thing which really troubles me, which is the fact that when Citigroup and Bank of America are caught defrauding the consumer through, for example, packaging toxic securities and then shorting against them.

What happens is that the SEC gives them a fine, but they don't have to admit wrongdoing. That has to change.

VELSHI: And that is changing, by the way. They are saying that they're going to have to --

HUFFINGTON: They are conducting a crusade against it, but why is this happening.

VELSHI: You have been very vocal about what this administration has done in terms of poisoning the well for businesses, for people with money, people like yourself who would like to invest or should be doing things to create jobs in this country. What should they be doing to fix capitalism? What's the government's role?

ZUCKERMAN: The first thing that I would do is I would transform the income tax code and take away all the special privilege that a lot of these people who don't deserve special privileges have managed to embed in the tax code.

I would widen the base and lower rates for everybody. We need that on two levels, A, it's fairer, so that the special interests do not benefit from it. B, it would stimulate the economy, which we surely need now.

That's one of the things that I feel very strongly about that we should have done. I'll give you a second thing that we could have done. Well, I don't want to go into everything that the Obama administration could have done, we don't have enough time for that.

But I do think we are in a situation where it's not so much the capitalist system, it is what Fareed was suggesting. Our government has failed. In part it's because in a sense the government is being bribed, legally bribed but being bribed in so many ways.

Nobody seems to have had the courage to get up there and say this is what we need to do. I think if we found a leader like that, some of us thought Obama would be that person, he has not been, I think it would transform the country and make it fair and open up opportunity.

But we are going to still have fundamental issues here because we have a very different population makeup and we have a much larger immigrant population here, which is a much more difficult thing to absorb, very different than Europe, frankly.

I just think we have an open society in some ways, but we have really closed the door in other ways.

VELSHI: So we have a blank canvas. Let's assume that we are admitting that capitalism is not terrible, in and of itself it is not the problem, it's the way it is being executed and the role of government. I'm going to take a break here. When we come back, if capitalism isn't broken, what do we have to do to make it work better? Who's got the answer?

Our guests might just surprise you with the best solutions they have heard coming up next on YOUR MONEY.


VELSHI: Solutions to problems can come from surprising places. Our guests, this amazing panel, has access to an amazing array of influential folks from world leaders to CEOs, but maybe the answer to what ails America's economy is as simple as something they once read in a fortune cookie.

I've asked each of them what the solution, the best solution they have ever heard is for fixing America's economic problems. If capitalism is on trial here in America, let's call this the verdict.

Let's start with you, Mort. What's the best idea or set of ideas you've heard to fix our economic ills?

ZUCKERMAN: I would stop eating fortune cookies and assume that you can learn anything from them. Look, my own view is that if there's one single thing that has to be done in this country, it is to transform the system of education.

If you don't prepare this country for a world in which education and technology is going to be enormously predominant and which we're not going to be able to compete either in agriculture or indeed in blue collar work, OK, industrial work in other words with the rest of the world, there are areas where we can compete and we have to train people.

If we have 3 million jobs today that are available to people who if they had the education and the skills and technology they would be able to have that kind of a future. This to me is the single most important thing in this country.

I've always believed it. Not just elementary education and high school education but making college education affordable to everybody. That is the single most important thing I could recommend. It's not a quick-acting solution.

VELSHI: Sure, but it's necessary.

ZUCKERMAN: But if we don't prepare our children for the future that they are going to be facing, which is going to be even more driven by what you have with education and understanding technology, they're going to be even more irrelevant.

VELSHI: It's a little unsexy for a campaign, but it's very, very important. It's crucial and I agree with you.

ZUCKERMAN: Every family knows that's true of their children, that they have to have better education and they know what's wrong with the education system and yet we still cannot seem to do it.

VELSHI: Arianna.

HUFFINGTON: Three people, I'm going to look for solutions, a businessman, James Stangel, whose new book, he was the marketing head of Procter & Gamble and he's written this marvelous book about the need for businesses to align their bottom line with the social impact they're having and their values.

Roger Martin, professor at the University of Toronto, his book "Fixing The Game" is about how our shareholder value theory has put traders rather than customers at the center of business decisions. We need to change that. And Judge Rakeoff, I love Judge Rakeoff because he has the gumption to say that the double standard we're having and the way we hold operations accountable has to end.

VELSHI: Very good suggestions, excellent suggestions and I would recommend in addition to the Judge Rakeoff, James Stangel and Roger Martin, very interesting suggestions on how we change how we're oriented to make money in this country. Fareed.

ZAKARIA: I think there's no easy fix. I look at history and I look at the Asian countries, these amazing tiger economies and what you see in every country that has been able to sustain growth, broad-based growth, it is based on investment.

Our economy has become one that is based overly on consumption, and what we have to do is to change that. We have to move towards greater investments, investments in human capital, education, but also investments in physical capital.

We have a crumbling infrastructure, we have a bad digital infrastructure, we're behind the rest of the world in almost all these crucial areas.

And yet, you know, we have a system where we are doling out enormous amounts of money to people for what are essentially consumption.

We have to make that distinction that we believe that the government should be investing for our future. We don't believe in pure spenders for consumption. It's tough because to be honest it's popular.

VELSHI: Credits and deductions and things like that as opposed to building things, like South Korea had a digital network or countries that are building infrastructure.

ZAKARIA: It's as simple as when you go to the gym. No pain, no gain. This is stuff you've got to do now.

VELSHI: The commonality with all of you is that the things that we need to fix the system aren't quick fixes. They are all things that need rethinking of our investments, of our society and our infrastructure and of our education.

But the fact is the answers are not simple, and I appreciate the time that you've taken to share this with our viewers. Fareed, Arianna, Mort, thanks very much for being with us.

All right, optimism on Wall Street. In the media, on the streets, it's everywhere, but is it justified? I'll look deeper, next on YOUR MONEY.



ALI VELSHI, CNN ANCHOR: Is it finally time to feel optimistic about the economy? Let's ask my good friend, Stephen Moore, he's an editorial writer for the "Wall Street Journal." Stephen, let me layout the case.

The economy in the United States has added 1.6 million jobs in 2011. That is the highest number of jobs added in a year since 2006. Jobs have been created for 15 months straight.

Now, a CNN Money survey shows that a consensus estimate of people who track markets suggests 7 percent is what the rise in the S&P will be in 2012. That is not record-breaking by any measure. It's not even average, but it's nothing to sneeze at.

U.S. manufacturing activity, something that's very important to us, accelerated in December at the fastest rate in six months, but it's been going up.

So Steven, in your words you have expected that GDP growth in the United States will be about 3 percent to 4 percent in 2012 and the biggest headwind right now is probably Europe.

And again in your words, Europe is an inconsequently continent because the action will be in the United States and in Asia. When you put all this together this has got to be a very inconvenient set of circumstances by conservatives set on preventing the re-election of President Obama.

STEPHEN MOORE, EDITORIAL WRITER, "THE WALL STREET JOURNAL": Well, Ali, first of all, I agree with almost everything you just said, believe it or not. I do think the economy has ramped up and I do think Americans are feeling a little bit better about things right now.

Obviously, the unemployment rate has fallen by half a percentage point in the last four months or so. We are seeing, you're exactly right, manufacturing is picking up, even in the old industrial rust belt states like Ohio and Pennsylvania and New Jersey. That's all very good news.

The real question that I would pose to you and the one that every economist is asking is, is it sustainable? Will this continue to last through 2012? Look, I hope so. I am not rooting against the American economy, though I do agree with you that if the economy is better in 2012 than it was in 2011.

And if Americans are feeling optimistic, even with, you know, 8 percent unemployment rate, I think Barack Obama is likely to get re- elected. But a lot is going to change come this summer when you're going to have all these political issues, you're going to have the issue about what we do with taxes. You have to add that into the mix in terms of how this will all affect the election.

VELSHI: And another thing that you have pointed out is that housing continues to be an unknown.


VELSHI: It continues to be an overhang. Let's ask Diane, Diane Swonk is the chief economist at Mesirow Financial. Diane, I think Stephen poses a good question.

OK, the three of us can probably agree that at this moment in this window, things are looking optimistic. Are they going to be enough to offset continued political uncertainty here in the U.S., continued fallout from Europe?

Continued problems in the housing sector? Do you think it is safe to be optimistic about the U.S. economy right now in 2012?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: I think optimism is kind of a relative concept, you know, compared to a growth recession in the first half of 2011.

Yes. You know, I mean we're coming of very low levels here and we're still trying to recoup ground lost in the labor markets and it's going to be very uneven in the year ahead.

My own forecast for growth is significantly lower, 2, 2.25 percent growth and I'd love to eat crow on that. I would absolutely welcome a much more robust recovery.

And I do think political uncertainty is one of the primary hurdles going forward in the U.S. and I don't discount Europe. I think Europe is extremely important.

We have over $2 trillion in exposure to European bank debt, nonbank debt and sovereign debt in our banking system alone. So that added to the exposure of money market funds and the risk of contagion. As long as the Eurozone doesn't completely fall apart, it will only --

VELSHI: Let me ask you that --

MOORE: Can I add something?

VELSHI: Go ahead, Stephen.

MOORE: Let me add two little risks. We talked about what's good about the economy, the fact of the manufacturing. I see two risks. One is too much of this economic expansion to the extended expansion is being build on debt. We're borrowing a trillion dollars a year to a trillion and a half. You can't keep doing that forever obviously. At some point --

SWONK: You know, it's going down. Did you know that, Steve, it's come down recently?

MOORE: It is coming down because -- yes -- well, we'll see. I bet you're wrong about that. I think we'll have another trillion dollar deficit this year.

But the other factor is easy money, Ali. We've talked about this on the show for the last couple of years. The fed is deluging the economy with money. My only point is you can't keep doing that. You can't keep borrowing and printing money to create prosperity.

VELSHI: Right, but we probably can for the immediate future. I would say I think it's fair to put that down as a risk. I think it does come in as risk number three though.

Europe and political risks are probably a little bigger. Let's talk about Europe, Diane. You don't think that the euro zone is going to fall apart. You don't think the euro is likely to fall apart.

So let's talk about the contagion and the banking sector. How are our viewers likely to experience any further deterioration in Europe? Are we going to see a credit crisis like we did in 2008 and 2009 where we stopped being able to borrow?

SWONK: That is exactly what the risk is. Now, we hope it doesn't occur and certainly central banks around the world unlike politicians have taken lessons from the past and are trying to prevent that at all costs.

With the European central bank even exploring some of the ways that we have used, that Steve may not agree about, the Federal Reserve has used to stabilize the financial markets after the near nuclear meltdown in 2008.

So the risk is that we have a run on European banks that spreads to the U.S. and that that then puts the crunch again on credit. Remember how the spigot turned off entirely on credit.

The good news is we have more of a cushion than we did in our banking system than we did back in 2008 and it looks like we are better situated to weather it that way. The bad news is we have fewer tools in our policy pocket.

We don't have anything at the fiscal side and we don't have as much on the central banking side to offset a crisis should one take root. Unfortunately, the ECB, the European Central Bank does not look likely to actually act until we get to a crisis, which may be too late.

VELSHI: The good news, although Stephen worries about our debt levels, our consumer debt levels have started to come under control, although recently consumers have decided that they have propensity to spend and borrow again.

So we will watch this all very closely with both of you, Diane Swonk is the chief economist at Mesirow Financial. Stephen Moore is an editorial writer with "The Wall Street Journal." Two good friends of our show whom you will see all year long as we track this economy. All right, you want another optimistic sign for the economy? Big trucks are back. We'll look at what else is driving the shocking comeback of the U.S. auto industry up next.


VELSHI: Well, almost exactly three years ago, we were talking about the American auto industry on life support. But now in 2012, things are looking up. Take a look at the big year for the big three.

Chrysler saw sales in the U.S. jump 26 percent, in fairness from a very low base. General Motors was up 13 percent and Ford gained 11 percent.

Micheline Maynard is the senior editor of "Changing Gear," she has a new blog, "Voyages" that you need to check out on Like myself, Mickey, you're a car fanatic and you were at the Detroit Auto Show where I desperately wanted to be.

What was the mood in Detroit? Was it making you feel like a return to the good old days for the U.S. auto industry is underway?

MICHELINE MAYNARD, SENIOR EDITOR, "CHANGING GEARS": The mood is much better in Detroit. I think people feel like the last five years have been just awful and now they're coming out of the clouds. It's like when you fly through turbulence and it's finally over.

VELSHI: You know, I really did want to be there. They gave a plum assignment, however, at CNN to Peter Valdes-Dapena who joins us as well.

Peter, listen in to a conversation I had with Nissan Renault CEO Carlos Ghosn. He told me recently that within the next decade electric cars are going to make up about 10 percent of all cars purchased.

So I had him on my CNN international show, "WORLD BUSINESS TODAY" this week and I asked him if he felt the same way. Listen.


CARLOS GHOSN, CEO, NISSAN: The demand from customers is very strong. The problem today, there is not enough offer. So hopefully we are ramping up production and bringing new products, a new offer in order to fulfill this demand.


VELSHI: Peter, you were saying it's all about fuel economy at the Detroit Auto Show this year. If so, is Ghosn optimism about electric cars still valid?

PETER VALDES-DAPENA, SENIOR WRITER, CNNMONEY: Well, if he's talking about purely electric plug-in battery-only cars, no, I don't see 10 percent. Yes, more than we have today for sure, but not making up 10 percent of the market. If you take all what the industry calls electrified cars that includes hybrids, plug-in hybrids and electrics, that whole area that could maybe make up 10 percent.

But right now we're looking at cars that get 40 miles a gallon and it's not uncommon on the highway and that fuel economy was going to continue to improve over the next few years.

These more fuel-improved gasoline powered cars are going to take away some of the incentive for people to make that jump to a plug-in car. So I don't know anyone, but Carlos Ghosn who thinks that they're going to make up 10 percent of the market in any kind of time period like that.

VELSHI: So Mickey, we're all a bunch of gear heads here, but one thing I was looking at in my world as a business correspondent was when those auto sales numbers for December came out and for the full year.

I was quite taken aback by the fact that at the end of the year, truck sales were very, very strong. Ford was one of the big three that didn't take a bailout from the government.

I'm a truck lover. Ford saw truck sales jump almost 25 percent in December and almost 11 percent on the year. Now, I asked Ford's CEO Alan Mulally if he felt that this was signaling a larger story about the economy as a whole, and here's what he told me.


ALAN MULALLY, CEO, FORD: Our best estimate right now is that we'll see a continued expansion of the U.S. GDP in the range of 2 percent to 3 percent. We're seeing all of the durable orders, also the construction and the demand for the pickup truck increasing.


VELSHI: Mickey, the idea here is that people keep their cars for a long time in America these days because they would have replaced them in 2008 or 2009, but things got tough and credit got hard to come by.

Now they're seeing a pickup in the economy and pickup trucks are what you need if you're a contractor. Do you think there's a correlation or do you think people are just buying cars because cars are cool and they have got some money?

MAYNARD: Well, there's a couple of things going on, Ali. First of all, contractors, small businessmen, there's about 10 million people in this country who have contracting businesses who buy pickup trucks.

Now, you think about pickup trucks, they do run for a long time. You beat them up, you expect them to go, but people weapons inspector through the recession and said I've got to keep my truck and now they are saying I have to get a new truck.

So some of it is just that these vehicles that people have hung on to have worn out. The other thing is incentives. We saw a lot of incentives at the end of 2011. I think if this market doesn't sort of keep revving in 2012 that by spring, by summer we'll see even more incentives.

VELSHI: All right, good to talk to both of you. Peter, Micheline, good to have a conversation about cars and good to see things are going in the right direction. Have a great weekend to both of you.

Coming up next, Suze Orman is in the house. We're going to talk about the smartest moves you can make with your money this year coming up on YOUR MONEY.


VELSHI: Whether you've got a little bit of extra cash or absolutely no savings at all, Suze Orman is here to tell you how to take some steps to make your money work for you in 2012.

She doesn't really need an introduction, but it's courteous to give one when someone is in your studio. So I will tell you. She is a best-selling personal finance author. She has a new show called "America's Money Class" on OWN and she is the creator of a new card, an approved debit card.

Suze, great to see you, welcome. We'll talk about all the other stuff, but the first thing I want to tell you because my viewers are going to want to know, if you've got Suze Orman in the house, tell me what I do in 2012 to make my financial situation better.

We've talked during the show about whether capitalism works or not, what markets are going to do, whether you should be optimistic, but ultimately you are a believer that you're mostly in control of your financial life.

SUZE ORMAN, PERSONAL FINANCE EXPERT: Yes. The truth of the matter is when you have to say what do you do with your money, the real question is what money? People don't have money out there.

They're in credit card debt. They're in all kinds of debt. So if you happen to get money, the first advice currently is get rid of your debt until you're on solid foundations.

Now, maybe you have a 401(k) plan that matches your contribution. All I'm asking you to do is be very, very careful about target funds. I'm asking you to be careful about bond funds within your 401(k).

VELSHI: Target funds are ones that have a date associated. So if you're going to retire in 2040 so you're lazy, you just throw your money in.

ORMAN: But the older you get, the more they put you into bonds. Then if interest rates go up, Ali, where are interest rates going to go?

VELSHI: So as an investor, you've got to do what you recommend people do in their own finances, you have to take some charge and read some books, you have to do something. ORMAN: So I will always and forever love for the next year or two exchange traded funds or individual stocks that pay a high dividend yield. I have been saying that now for three years. I'm going to continue to say that.

VELSHI: So you can be in some stocks.

ORMAN: You can be in stocks. You can as long as they pay you a dividend of 4, 5, 6 percent.

VELSHI: All right, let's talk about credit ratings. How do you get your credit score up? How do you fix credit right now in a tough time? What should your priorities be?

ORMAN: Now, you know, you can fix credit very simple by always if you have credit cards, not everybody does, but if you have credit cards, pay your credit cards on time. Never go over your credit limit.

Just really be there with them and pay down your credit. Because the thing that counts most on Fico scores, 30, 35 percent is your debt, what you owe to your credit limit ratio.

So if you pay down your debt, your credit limit ratio goes down, your Fico score goes up.

VELSHI: We have been working down the ladder of people and their financial situations. Now we're going to talk about those probably almost one in two Americans who have virtually no money, if none at all, can't get access to credit, they have lost a lot of stuff, they can't get a credit card or can't even get a secured credit card?

ORMAN: They can get a secured credit card obviously, but here's the problem with secured credit cards that people just aren't understanding about them. To get a secured credit card you have to put a sum of money, $100, $500, $1,000 to secure the card.

VELSHI: Right.

ORMAN: Now you have a card and you can go out and charge. You charge $200 on it. They don't take the money from what you put down, they say now you owe me $200 and the person goes, well, I don't have $200. I'm in poverty.

They go OK, you pay me $20 a month at 19 percent interest. So now here we have this person again getting themselves into trouble on a secure card. So I don't like secure cards.

However, if it is your only alternative to build a credit score right here and right now because there aren't any other alternatives, if you can't get a regular credit card, it's one way for you to go.

VELSHI: OK, now you've come out with a product that's supposed to help people who don't have any access to credit. It won't immediately help them build credit, but you've got a bigger goal in mind. Tell me about this. It's gotten a lot of press this week. ORMAN: Yes, so many people are thinking small, I'm sorry to say. They're thinking why don't you just get a secure card. I don't want people to simply get a credit score in the way they always used to get a credit score.

There is nothing wrong with having a debit card. There is nothing wrong with paying for things in cash. But when you pay for things in cash or on a debit card, you do not report to a credit bureau.

So therefore, it is impossible to generate a score. So for the first time in history, I have created a card called, "The Approved Card" that will share information with Transunion, one of the three major credit bureaus in the hope that in 18 to 24 months from now.

And I hope also that Experian and Equifax joins me in this, they will look at the information and can they then determine that when you use a debit card, can it give you a Fico score? If it can, we have just changed the scoring methods.

VELSHI: You're working with them to try to get it to happen. What's the best way to use "The Approved Card?" Because there's been criticism about fees, what's the fee situation?

ORMAN: If you use it like this, it will not cost more than $3 a month and that $3 a month is up to four cards. All you have to do is sign up. It is simple. It is easy. As long as you sign up for direct deposit of at least $20 a month, that's all.

You can go to any of the 35,000 ATMs in the all-point system, the largest all-point ATM system in the United States and you can withdraw any money you want from the ATM out absolutely free.

You can pay bills online absolutely free. You can do card to card transfer absolutely free. You can do anything on that card essentially that makes sense absolutely free. So it should not cost you more than $3.

But for that $3, Ali, you are getting unlimited credit scores, unlimited credit reports and unlimited credit monitoring by Transunion. I am providing you with identity theft.

Why, because people who don't check their credit reports and think they don't have money, they're targets for identity thieves. So I have created a card that every time you swipe, you get a text that says you spent $30, you have $50 left.

You get a text every morning telling you how much money you have. You have my education on it. I think I've created the greatest thing. I think that there's a misconception about the card.

VELSHI: Where is the thing that someone will get caught up that they don't know what they're doing and then end up saying, why did I get all the fees?

ORMAN: If you do not sign up for direct deposit and then you go to an ATM, you're going to pay the ATM fee. So if you're not signing up for direct deposit, don't get this card because then you might as well just keep your cash. But if you simply sign up for direct deposit, there is no other charge.

VELSHI: Does the direct deposit have to come from your employer?

ORMAN: No. It can come from your bank.

VELSHI: So you can have your own direct deposit into it or Social Security or places like that.

ORMAN: The goal here is to provide you a prepaid card for the least cost, the most services and really eventually hopefully one day it will generate a score for you. Not now, but maybe one day.

VELSHI: OK, keep us posted on your work on that. That will be interesting, if people who only use debit cards can finally get a credit score, you're right, that will change the world. Suze, great to see you. Thanks so much for being with us.

ORMAN: Any time, Ali.

VELSHI: And for giving our viewers your good advice. I have an important message for everyone out there, if you're frustrated President Obama hasn't created enough jobs or hoping that a GOP candidate can do a better job of it, don't waste your time. I'll explain next in my XYZ.


VELSHI: Time now for the XYZ of it. We are steep in a discussion today about whether capitalism itself is broken. My view is that so much of what we think isn't working properly in our economy, has been broken for a long time.

Income inequality, the wealth gap, undue political influence wielded by moneyed special interests. All of this has been going on for generations. What makes it different today is it's all happening in the face of the intractable challenge of our time, the absence of real job growth.

Here is a fact. No sitting president has won re-election since World War II when the unemployment rate has been higher than 7.2 percent. Right now it's 8.5 percent, although it appears to be trending lower.

Now you will hear that fact and other useless facts like it repeated often in the next few months until and unless, of course, the unemployment rate actually does drop below 7.2 percent in the next few months.

In fact, that's exactly what happened in 1984. President Ronald Reagan's first administration saw huge job losses and a stalled economy. The unemployment rate rose to 10.4 percent in 1982.

Just as the primary season was kicking off, roughly where we are today in this election cycle, the jobless rate was still pretty high, 8.3 percent, just about where it is now. So what happened then? Like now, Americans began to see and feel the economy gradually, slowly, almost imperceptibly improve. New jobs were added steadily throughout that election year. President Reagan won a second term. He had jobs and he had hope on his side.

As we head into this election year, the economy appears to be ticking up steady. Europe could still wreck that. But in the U.S., jobs have been created every month for the last 15 months.

Of the 4.6 million jobs lost on President Obama's watch, two-thirds have been recovered. If job creation continues at its current pace, every single job lost since President Obama took office in January 2009 could be recovered. It's not obvious that that's going to happen, but it is possible.

Notice, though, that I am talking about actual job creation numbers, not the unemployment rate. For two years I've been asking people to try to ignore the unemployment rate because so many of the long-term unemployed are simply not counted by it, which makes it a largely inaccurate reflection of what is really happening in the labor market.

In fact, as hope returns to the job market, people who had abandoned their search for a job will start looking again, and that will cause them to be included in the unemployment rate, and that means that as things improve and more people get jobs, the unemployment rate could actually increase.

So ignore that number and the historians and pay attention to that which pays your bills, puts food on your table and helps you save for retirement. The number of jobs created over the next few months. That's my XYZ.

Thanks for joining the conversation this week on YOUR MONEY. We're hear every Saturday at 1 p.m. Eastern and Sundays at 3 p.m. Make sure to check out my book with Christine Romans "How to Speak Money."

It's a step by step guide to understanding the language of money with everything you need to know. Head to or barnes& right now to pick up your copy.

You can stay connected to us 24/7 on Twitter. My handle is @alivelshi. The shows handle is @cnnyourmoney. Have a great weekend.