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The "Unhappy" Economy; GOP Identity Crisis; Huntsman and the Republican Party; Tackling the Debt Problem; Deficit of Leadership; The Economy Election
Aired September 02, 2012 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: You are not happy and you're taking it out on the U.S. economy.
I'm Ali Velshi. Welcome to YOUR MONEY.
For starters the U.S. economy is barely growing. Now this is about GDP. And don't change the channel.
GDP, Gross Domestic Product, is important. It is the broadest measure of the value of everything we produce as an economy. And as those bars go up, we feel better.
Now this week we learned that in April, May and June the U.S. economy grew at a rate of just 1.7 percent. That means, as an economy, we produce 1.7 percent more value than we did in the same period a year ago. That and four bucks will get you a cup of coffee because what that doesn't tell you or me is how Americans are feeling about the economy and how you're feeling decides whether or not this economy is going to get weaker or stronger.
So I have compiled some numbers on the five economic indicators that have the greatest effect on you. Think about this as the real feel of the economy. You can read about it in depth in my column in the current issue of "Money" magazine. But I'm going to give you the clip notes right now.
I've used government numbers from the past 30 years to score economic performance in that time between one and 10. One indicates the worst level that that indicator has been at over the last 30 years. Ten is the best. So take a look at where we stand right now on the things that you feel.
Unemployment, above 8 percent, is a 4.3 on the scale. Personal income, adjusted for inflation at the low end. It's a 1.5 on the scale because median wages fell last year. That's what happens when too many people are out of work pushing demand for your services down making your wages drop. Personal savings, the thing that saves you and your family and your house, not that good either right now. I can't tell whether that's because you're not trying to save or whether low interest rates are discouraging from you saving.
Home price appreciation. Home values are finally bottoming out. But it's still just a 3.5 on the scale. And there's one very bright spot in these measures. Something called industrial production. The increase in what the economy physically produces -- oil, buildings, machinery, airplanes, the stuff that makes you feel like the economy is chugging along the busy highways, cranes and smokestacks.
Well, this measure currently scores 7.6 compared to where it's been over the past 30 years. But even that's not cause for celebration because manufacturing is such a small part of America's economy. Much smaller than it was 30 years ago.
So the average score, the real feel on the economy if all of these five indicators, well, some measly four out of 10. That's pretty bad given that we're more than three years out of a recession. But this four is going to seem pretty good if we go into another recession and that could happen if Washington fails to act to avert the so-called fiscal cliff very soon. We may be headed lower than this.
So did we hear any of that from Republicans during the party convention last week in Tampa? No. We heard speeches. We saw platform about bringing back the gold standard, defining marriage as being between a man and a woman. We did -- hear about cutting taxes and cutting entitlements.
What about jobs? Nothing is more important to our economic recovery than job creation. I would have thought that's the main thing they talked about. Well, in fact, thankfully Mitt Romney did talk about that.
(BEGIN VIDEO CLIP)
MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: And unlike the president, I have a plan to create 12 million new jobs.
(END VIDEO CLIP)
VELSHI: Are you kidding me? I'll wear a dress for a week if after four years we have averaged a quarter million jobs per month. That is an average, 250,000 jobs a month every month -- every month for 48 months in a row. It is not impossible. My next guest is going tell you it's possible. I agree with him it's possible. But it is highly unlikely and while I applaud big thinking, there is a fine line between big thinking and saying things so that people will vote for you. And the Romney camp knows that.
Joining me to discuss that remarkable and historic disconnect between the Republican Party and what is going on in America is Stephen Moore. He is an editorial writer at the "Wall Street Journal." He was at the convention.
Now, Stephen, if I wanted to insure that I was not lying to the American people or making promises that are not impossible to fulfill but are highly unlikely, like the promise of 12 million jobs over four years, which is at best a cynical effort to win votes by duping unsuspecting voters and at worst a lie, what would I really have to say to do -- to say and do to level with them?
STEPHEN MOORE, EDITOR WRITER, WALL STREET JOURNAL: Ali, I'm going to hold you to what you just said. I want to see you wear that dress four years from now and a wig with it.
Look, I think it is a grandiose promise. But you know what, that's what president -- presidential candidates do. I mean Barack Obama said he was going to cut the deficit in half and create millions of jobs. So candidates make these kind of promises. Sometimes they come true. Sometimes they don't.
But you know I think it's unfair to say that he doesn't have a plan. He does have this tax reduction plan to restructure the tax system, make it more pro growth. He has a plan to cut spending to bring the deficit down. I think his energy policy of more production means more oil and gas jobs here in the U.S. So I think it's achievable.
And by the way, Ali, I want to say. I think it's a good thing when these presidential candidates, and I hope Barack Obama does it, too, they set a target, something we can shoot for. Let's shoot for 12 million jobs. Maybe if we only get 10 million we'll still feel pretty good about the economy.
VELSHI: Why don't we shoot for 20 million or 30 million? And the point is leveling with them -- you know, the economists which is a relatively economically conservative publication like the one that you do work for.
VELSHI: -- called Mitt Romney's 59-point plan like "50 Shades of Grey" without the sex. I mean it does need a little bit of meaning. It needs -- it needs some detail.
VELSHI: If you could tell me how you can get to 12 million jobs, I might believe that. But in the end, in the end -- and we'll hear from Alan Simpson a little later on in the show -- the market will judge whether this is the case. So let's bring in our friend, Mohamed El- Erian. He's the CEO at PIMCO, the world's largest bond investor.
Mohamed, let's do what Stephen say. Let's give the Mitt Romney camp the benefit of the doubt for a moment on creating 12 million jobs in four years, that's once again 250,000 jobs a month. Then you heard my promise that if that comes to pass, I'll wear a dress for a week.
What would have to suddenly change in the economy that we are in, the 1.7 percent growth economy, to accommodate the creation of a quarter million jobs a month?
MOHAMED EL-ERIAN, CEO, PIMCO: A lot. A lot would have to change, Ali. So I agree with you that it's great that jobs are being put as an issue. And I agree with Stephen, let's have a target. But right now that target while desirable is not feasible. So what do we need to see? First and foremost, comprehensive structural reforms to increase the competitor side of this economy. That means better labor markets, better infrastructure and fiscal reform including tax reform.
Second issue, we need upfront stimulus. Third issue, we need better safety nets. We need to better protect our citizens in this structural transition. And finally, the U.S. has to regain its global leadership. Right now the globe is giving us headwinds not tailwinds. That's a long list and so far Romney's platform doesn't get close to taking off the immediate process.
VELSHI: And this is an interesting point you make, Mohamed. Let's bring Stephen back into this. If the world were not giving the U.S. -- the tail winds -- headwinds, if we had tailwinds from the rest of the world --
VELSHI: -- then this is possible because a number of conservatives, like you, Stephen, have pointed out to me, and I'll have another one later in the show, a lot of conservatives on the show today because it's a conservative week, it's the RNC convention week. A lot of people have pointed out to me we have done this in the past. We have had this kind of successful economic growth.
VELSHI: We've had that kind of job creation.
MOORE: That's right.
VELSHI: But that requires a little runway. That requires a little tailwind. That requires things going your way with the highly specific plan. Even you will admit we are not in that place right now.
MOORE: Well, we're not. But you know, I was thinking about this, preparing for this segment. You know I looked at the jobs numbers in the '80s and '90s under Republican president Ronald Reagan and a Democratic president of Bill Clinton. We created nearly 40 million jobs over that 18-year expansion. That is a pretty darn good number.
And what I'm saying, I think Mitt Romney is saying the same thing, is, you know, we can do that again. Now it is true 12 million jobs, 250,000 jobs a month is a lot. But let's not forget this. We're still about 4.5 million jobs short of where we were in 2007, Ali. So just a third of that pick up in jobs that Mitt Romney is talking about is just getting back to where we started from.
I think it can happen. I agree with both of you. You need an ambitious economic plan. I think -- and one last thing. I'm more of a growth hawk than a deficit reduction hawk. And I think that's what was missing a little from the Republican convention.
Tell us how you're going to create those jobs. How are we going to get that 4 percent growth rate?
MOORE: Because if you do that --
VELSHI: Then you'll have -- MOORE: -- the deficit comes down.
VELSHI: Sure. Sure.
MOORE: The deficit comes down when you put more people to work.
VELSHI: I think bottom line is, this is where we all three agreed that growth will solve a lot of these problems.
VELSHI: But how we get there remains the question.
Mohamed El-Erian, always a pleasure to talk you. And my good friend Stephen Moore, great to see you as well.
EL-ERIAN: Thank you.
VELSHI: Coming up next, a man with a plan but not a nomination. Former Republican presidential candidate Jon Huntsman was praised for a strong and clear economic plan. But he dropped out of the race in January. He says the GOP has lost its way. I'll ask him about the party's identity crisis next.
VELSHI: Smaller, less invasive, less intrusive government, lower taxes, balanced budgets. These are traditional conservative values. But the GOP has become a party that appears to give an unnaturally large voice to social conservatives, feels exclusive and at times has championed the idea that compromise with those who don't share your views is a dirty word.
All of this while there is a chance that the U.S. could slip into another recession again. Now that's not just frustrating to voters. It's frustrating to real social and fiscal conservatives like former Utah governor, Jon Huntsman, who while having one of the strongest economic plans of all of the Republican candidates for president, never polled into the double-digits nationally an ended his campaign in January.
In September, "The Wall Street Journal" called his economic plan, "As impressive as any to date in the GOP presidential field and certainly better than what we've seen from the frontrunners."
What's more, he's also served as U.S. ambassador to China before entering the race. China is the U.S.' biggest economic competitor but many in the GOP ignored how that experience could help our troubled economy. Instead, focusing on the fact that he served under President Obama. That he took a job under a Democratic president and that maybe he didn't say crazy things.
Jon Huntsman joins me now.
Pleasure to see you, Governor Huntsman. Many people looked to you as somebody who has -- you are socially conservative, you are fiscally conservative but have views that seem to be in sync with the biggest challenge of our time right now, the intractable difficulty of our time, creating jobs and economic growth.
Why didn't it work?
JON HUNTSMAN (R), FORMER PRESIDENTIAL CANDIDATE: Well, I'd have to say that it was very restive Republican base. Far more than I'd ever seen before. If you cross a partisan divide as I've done to serve a Democratic president, that isn't always seen as a good move if you're going to run for higher office. In the old days, it was seen as something that was patriotic, something that was akin to putting your country before party, which is what I believe in personally.
I think the American people want that. But in the early primary phases of presidential politics, that isn't always respected and looked upon favorably. So I think a lot of the ideas that I brought to the forefront that were tied immeasurably back to what I had done as governor, I thought I'm going to run for president. I want to make sure that I've got a track record as governor that speaks to what --
VELSHI: Where you cut -- where you deficits? Where you --
HUNTSMAN: Well, we --
VELSHI: You addressed the jobs issue, you addressed immigration in Utah.
HUNTSMAN: We created a flat tax, for example. We had the number one jobs related economy in the country. We did an alliance with higher education in terms of making the most of our brain power in our state. We reformed immigration because nobody else would at the federal level.
All of the things that speak to growth and competiveness is what we focused on. And as a result the state came to life. And I'm here to say that the country is just like a state. The population is larger. But the needs are the same. And we've got to speak to the marketplace in way that's allow us to create jobs, expand the base. And let's face it, we're never going to be able to pay the bills going forward or take care of all of those legitimate needs we have on the social program side until we can expand this economy.
VELSHI: You didn't end up going to Tampa to the convention. I know -- I know your -- I believe your daughters did. And somebody else did.
I want to bring in conservative columnist Kathleen Parker, a good friend of mine who did attend the Republican National Convention. She's still there.
Kathleen, I have -- it's great to see you first of all. I pointed my finger at a lot of politicians on this show recently. Who do you blame for this disconnect? Governor Huntsman calls it a restive Republican base. Who do you blame for this disconnect between some of the nonsense that is coming out of the Republican Party and some of the real problems that need to be solved in this country that the Republican Party could be competitive about solving?
KATHLEEN PARKER, SYNDICATED COLUMNIST: Well, it's hard to put your finger on one person or one group. But the -- obviously the social conservatives are determined to have -- have their message heard over the economic message that Governor Romney and Paul Ryan are trying to get through to the people. And by the way, this is a very frustrating thing for a lot of people within the Republican Party including and especially women who are -- who feel like some of the men in their midst are going out of their way to be aggressively hostile to women.
And that's not to say, excuse me. It's not to say that a lot of Republican women aren't necessarily on board with some of the philosophies and some of the -- for example, pro-life positions. But they do feel there needs to be room in the party for differences of opinion. And when you are aggressively building a platform, for example, that declares, you know, life in terms of no exception for incest or rape, things like that, women just simply can't identify with that even if they're pro-life.
I mean there's a point where you have to say, look, we have differences of opinion. We are a big party. We have big issues and serious concerns. And these kinds of issues are overshadowing and blocking and distracting from the very message that the -- that the nominee wants to get across.
It's so interesting that the narrative of the Democratic Party has advanced, it's now the narrative that Republican Party is also advancing. With the exception, I should say, of a nominee himself. I don't think he cares one wit about this conversation and does not want to have it and should he become president --
VELSHI: I heard that.
PARKER: It won't be discussed.
VELSHI: I've heard that from people. I've heard that from women who say, you know, very frustrated with the platform. Very frustrated with the Todd Akins of the world. But they don't think Mitt Romney is part of that. So how do you reconcile this very key message that Republicans want to put forward and fiscal conservatives typically put forward that government get out of my way so that the economy can do well except government gets in the way when it comes to many of these social issues?
PARKER: Well, that's the question du jour, Ali. You can't. You cannot reconcile it. You either believe that the -- that the government stays out of your personal business or you don't. And you can't sort of hand pick and choose which of those things that the government wanted to intervene on and that's why the Republicans have lost a lot of women's support but it's within and without the party.
Some of the women I spoke to for a recent piece I wrote for "Newsweek" magazine specifically said, you know, we feel like these people are no longer on our team. They're no longer listening to us. And women within the Republican Party, within the Congress and the Senate are actually now organizing to have their voices heard and to sort of try to offer some balance to the perception that the Republican Party is anti-woman.
VELSHI: We're going to talk a little bit about how to broaden than message and how to broaden that base in the face of this scathing criticism.
Governor, stay right here.
Kathleen, great to see you. And the column is remarkable read. Very insightful. I appreciate it.
Kathleen Parker joining us.
PARKER: Thanks so much.
VELSHI: From the Republican National Convention.
OK. UP next, why the word bipartisanship has become a campaign killer on the path to the presidency.
VELSHI: Former presidential candidate Jon Huntsman is a two-term Republican governor from Utah. He didn't attend the Republican National Convention this week because he thinks his party has lost its way. Huntsman entered the race last June with solid ideas to turn this economy around, a resume to back them up and a tone of compromise for the greater good of the country.
But in this Republican Party reaching across the aisle, setting aside some differences for the good of the country is a no-win situation.
Jon Huntsman rejoins me now.
Why are you not -- tell me in your words. I just characterized it. Why -- why didn't you go to Tampa?
HUNTSMAN: Well, let's face it. It's Governor Romney's show. And it ought to be. He earned it and he deserves it. And his team is there and they're doing their thing. And that's the way it ought to be.
I've been to every convention almost with the exception of maybe one since 1984 when I was a Reagan delegate.
HUNTSMAN: And I'd have to tell you, increasingly when you have a party that lacks inclusiveness, that is not focused on real solutions and delivering the bread and butter bottom line issues that the American people are looking for, that lacks the sense of optimism and the big picture strategic thinking about America's role in the world, all of that is so desperately needed today.
And my comment when asked was as soon as my party -- as I know it will -- returns to that sense of inclusiveness, that big bold confident optimistic message about broadening the tent and our role in the world which is always been a very confident role, we don't articulate messages based on fear. We articulate messages based on opportunity.
VELSHI: But, Governor, all the messages in this campaign have been about fear and about why the other guy is worse.
VELSHI: We really have -- and look, I know this has been going on for years. And I know that these are effective techniques and campaign strategists have mastered that. But it almost seems like you ran a campaign absent of those cynical strategists and it didn't get you anywhere.
HUNTSMAN: Right. Well, lesson learned. If I had to do it over again, I'd do it the same way because it's who I am. And I think it's what most of the American people are looking for.
VELSHI: Then you'd lose again. So when you say and Kathleen says --
HUNTSMAN: You probably answered whether or not I'd ever do anything like this again.
VELSHI: But that's the sad part because I spoke to a woman this week, a pro-choice Republican woman who used to have to go to these conventions with bodyguards and she says she measures success that she didn't have to this time.
VELSHI: And I said, why do you bother? Why do you go back? And she said because it's my party first. I don't want these fringe issues taking over my party. So in some ways you not being engaged or you not running again says they've won.
HUNTSMAN: Well, no announcements here, obviously. But what we must do, Ali, we must expand participation in the party. We've got to figure out somehow some way what to do about highly exclusionary early caucuses and primary events. So if you got a fraction of the population turning out in some of the early states at the exclusion of the majority who would otherwise feel differently about the issues, that's not our democracy in action. And I'm here to tell that you if we can break open the level of participation by people by going to direct primaries, by somehow making it easier for people to vote, for heaven's sake, and here we live in a world of high technology.
HUNTSMAN: Everything is on an iPad.
HUNTSMAN: Everything is done on iPad except voting.
VELSHI: Yes. HUNTSMAN: And it still takes you a week to go register at the County Commissioner's Office. And it's total nonsense. We ought to be taking the ability to participate in our democracy directly to the people and saying forget about the caucus process. Forget about the exclusionary meetings that tend, I think, to gum up our democracy. Let's move to direct primaries. Let the candidates speak out on the issues. Get big money out of the way.
I'm also of the opinion that the super PACs are completely destroying politics.
VELSHI: You have seen economies. You're a man of the world. You've seen other countries where they have campaign limits in terms of the time that you can campaign, the amount of money you can spend. And yet people manage to get elected in all of these countries.
VELSHI: Why can't America do that?
HUNTSMAN: Well, we can if we set our sights on it. And it's all part of addressing what I would consider to be the trust deficit. So we have a fiscal deficit to be sure. But we have a trust deficit, too. And it's a lot of young people in particular in this country who are losing faith in the direction of their democracy. And they're doing so because too much money, the incumbents always get re-elected, and the lobbyists play too big of a role in the process.
VELSHI: Jon Huntsman, good to see you. Thanks for joining us.
HUNTSMAN: Thank you. It's a pleasure.
VELSHI: Coming up next, U.S. government debt continues to spiral out of control and Washington needs to do something now.
(BEGIN VIDEO CLIP)
REP. PAUL RYAN (R), VICE PRESIDENTIAL CANDIDATE: Simpson-Bowles.
REP. NANCY PELOSI (D), MINORITY LEADER: Simpson-Bowles.
SEN. DICK DURBIN (D), ILLINOIS: I cannot tell you how many Republicans and Democrats have been deflected at the altar of Bowles- Simpsons.
(END VIDEO CLIP)
VELSHI: I'll break down the issue and speak with Alan Simpson, the architect of the plan that both sides of the aisle are talking about but nobody's doing anything about. That's next on YOUR MONEY.
VELSHI: In 2012 alone, the U.S. deficit is projected to be $1.1 trillion. Now to put that in perspective, if you spent $1 million a day, it would take you almost 3,000 years to reach that number. Now this isn't the deficit. The deficit is the yearly budget short fall. The debt is the accumulation of all the deficits and the interest owed on it. America's debt is upward of $15 trillion.
Now you are going to continue to hear calls from everybody who is running for office for a bipartisan plan to tackle the debt. Except we have one. It is called Simpson-Bowles colloquial. It is nearly two years old. It was ordered by President Obama. It's called the National Commission on Fiscal Responsibility and Reform. It was made up of 12 members of Congress appointed by their party leaders.
It also included six nonelected officials appointed by President Obama. The first one was Alan Simpson, former Republican senator from Wyoming, and Erskine Bowles who used to be the chief of staff to President Clinton, hence the name Simpson-Bowles.
Now it put everything, everything on the table and the result was a truly bipartisan plan to reduce America's debt by $4 trillion over 10 years through spending cuts and tax reform. Now you can see that green line is sort of where our debt is going over the next decades to come. And if the commission's proposals had been followed, you're looking at that balloon line, that's what would have happened.
Under their six-temp plan, federal workers would have been subject to a three-year pay freeze and the commission would also reduce the overall size of the government workforce through attrition. The comprehensive tax plan involved would lower personal income and corporate tax rates while broadening the base of people who pay taxes. Capital gains and dividends would be taxed as ordinary income.
Now backdoor government spending for certain industries would also be removed. Things like the government subsidies for the ethanol industry. A portion of the money raised there would go directly to paying down long-term debt.
Now as I've said before on this show, health care is one of the fastest growing costs to the U.S. government. Simpson-Bowles would establish a long-term budget for total federal health care spending. Would also cap the amount that doctors and insurance companies would have to pay out in malpractice lawsuits.
Mandatory practices would be adopted from the private sector to streamline the federal workforce retirement programs, the post office, student loan subsidies and other government programs. Social Security would be reformed as well. Among other things, Simpson-Bowles raises the retirement age from 65 to 69 by 2050 and asks those who earn more to contribute more.
What about congressional negligence? Laws would be established to make sure spending hurdles are met. Penalizing Congress if it feels -- fails to meet the goals.
Now in order for Simpson-Bowles to have made its way to Congress, it needed something called a super majority vote. That's 14 out of the 18 members had to approve. This was to assure that it had bipartisan approval. Now here are the number of people who voted in favor of it. Five Republicans, five Democrats and one independent.
But seven who voted no included four Democrats and all three House Republicans including vice presidential candidate Paul Ryan which is odd considering Ryan's decision to take on President Obama during the Republican National Convention this week.
(BEGIN VIDEO CLIP)
RYAN: He created a new bipartisan debt commission. They came back with an urgent report. He thanked them. Sent them on their way and then did exactly nothing.
(END VIDEO CLIP)
VELSHI: I spoke with former Senator Alan Simpson, the co-chair of the Simpson-Bowles commission. The first question I asked him was if Paul Ryan's comments upset him.
ALAN SIMPSON (R), FORMER U.S. SENATOR: Well, nothing much upsets me at this stage in life. I've seen it all. We went to Ryan afterwards and Hensarling and Kemp. I said to them, look, did you vote against this because you were scared to death of Grover Norquist that he would beat you over the head with a club while he's wandering the earth in its white robe? And they said no.
We voted against it because if you get rid of employer deduction of employee health care premiums, the employers are going to be stunned, they're going to look around, they're going to say what do we do now, and they're going to bloat Obamacare further.
They're going to take their people into the new health care plan. That was their response. That's good enough for me. He can explain himself. He had his reasons. Look at Durbin, gutsy guy. I mean Durbin is the assistant leader --
SIMPSON: -- of the Democrats in the Senate. Think of what Harry Reid must have tried to do to him. Good god --
VELSHI: But we need gutsy --
SIMPSON: You're messing with precious Medicare.
VELSHI: We need that leadership. We need gutsy.
SIMPSON: Sure. But you're not going to get any guts out of anybody.
VELSHI: Simpson-Bowles is a token now that anybody talking about debt or deficit throws around. They actually -- they like it. They say I like Simpson-Bowles. It gives elected officials credibility. We've been politicians on both sides doing this. Mitt Romney's campaign has said that his plan mimics yours. I don't think it does. He wants to cut rates across the board. That's where the similarity ends. Doesn't raise any revenue.
Do you agree with your fellow Republicans who say we don't have a spending -- we don't have a revenue problem, we have a spending problem?
SIMPSON: Sure. We also have a revenue problem. We've never had less revenue coming into the United States since the Korean War. Wake up. 15.2 percent of GDP is the revenue. It's historically been about 19 or 20. So you can't tax your way out of this baby. And you can't cut spending your way out of this, baby, and you can't dream your way out of this baby. You got to get in and do all the heavy lifting. And they won't do it. They being everyone running for public office before November 6th.
SIMPSON: Between November 6th and December 31st will be a whirlpool, a zestful of $5 to $7 trillion bucks floating around in there where if you go too far, you throw it into recession. If you go too little, you throw it into recession. So Merry Christmas. It's going to be a lot of fun before December 31st.
VELSHI: From your lips to the voters' ears, Senator Simpson, a pleasure to hear your straight talk, as always. Thanks for joining me.
SIMPSON: Sounds like a horse whisperer in their ear.
VELSHI: Fixthedebt.org is the Web site. You can go to it if you want more information on the Simpson-Bowles plan or if you'd like to sign Senator Simpson's petition calling on Congress to pass a comprehensive long-term plan by July 4th, 2013. While you're online, visit CNN Money's "America's Debt Challenge" page to see the most up-to-date coverage of this critical issue.
All right, up next former labor second Robert Reich says the GOP's economic plan is a disaster that will actually cost millions of jobs, not create them.
VELSHI: Mitt Romney has not provided much detail for his 59-point economic plan. In fact, the economist refers to it as "50 Shades of Grey" without the sex. But his running mate Paul Ryan has one of his own and he has outlined a little bit more.
Former labor secretary Robert Reich, you see him here, has served under President Clinton and he thinks the Paul Ryan plan is a disaster. Joining me now, Robert Reich, chancellor's professor of public policy at the University of California, Berkeley. He's also the author of a best-selling e-book, "Beyond Outrage: What's Has Gone Wrong with Our Economy and Our Democracy and How to Fix It," available in paperback on September 4th. He is a prolific writer to one of many books that he has put out.
Bob, good to see you. Thank you so much for being with us. You sent me, you tweeted me that video. Paul Ryan echoes Mitt Romney's ridiculous claim that they would create 12 million jobs if four years if elected. Now the trick here, Bob, you were labor secretary. The trick here is if that were true, then that would be a deciding factor for most people. If they can provide 250,000 jobs per month on average for 48 months, that is a dealmaker. Now you say that Paul Ryan's plan, the one that is more detailed and is out there, will lead to millions of job losses in the next two years because it would send America into that European-style austerity trap.
Explain that please.
ROBERT REICH, PROFESSOR, UNIVERSITY OF CALIFORNIA, BERKELEY: Yes. The Ryan budget actually does incorporate the fiscal cliff in the sense that it requires massive cuts in spending right away. I mean basically next year and the year after, and at a time when we have so much unemployment and we have so much underutilized capacity, that's exactly what we don't need.
This is what Europe got into the problem with. Because when you cut that much, when you have so many people unemployed, that means even more unemployment, that means less economic activity. And that in turn means that the ratio of your debt to the total economy is going to get worse and worse because your economy starts contracting. That's what Europe is now facing. And that's what Paul Ryan is going to do to the United States if his plan is adopted.
VELSHI: So people are probably tweeting right now to say Robert Reich is a liberal. Of course he's going to say that you can't cut things right now. But clearly our debt is a problem. Our deficits are a problem. At some point we're going to have to cut spending. When is that point?
REICH: Ali, I would suggest that we have a trigger built into the law, Democrats and Republicans both have to abide by. They build it into the law. That when unemployment gets down to 6 percent and we have growth at about -- about 3 percent, that trigger means we have major severe cuts in spending and also tax increases to deal with the long-term budget deficit.
That means we can be back on the path of growth before we do the cutting. That's the proper sequence. This is all a matter of sequencing.
REICH: It's not a matter of Democrat versus Republican, liberal versus conservative, it's a matter of doing it in the right order. VELSHI: All right. Bob Reich, good to talk you to. Thanks very much for joining us today.
Robert Reich is a professor of public policy at the UC Berkeley.
Coming up next, big numbers, big night. Dueling debt clocks were center stage at the Republican National Convention. But Mitt Romney only said the word debt once in his speech. Does he have a plan to dig us out and create those 12 million jobs in four years that he keeps talking about? We're going to ask one of his economic advisors.
VELSHI: The Republican Party is obsessed with the mounting debt in this country or at the very least talking about the mounting debt in this country.
Christine Romans joins us now about this. You saw that debt clock at the --
CHRISTINE ROMANS, HOST, YOUR BOTTOM LINE: Two of them.
VELSHI: Two debt clocks.
ROMANS: Two of them. Two of them at the Republican National Convention this week. Two debt clocks. Both of them keeping track. One of the lasting images of that convention, these two giant clocks counting down America's debt -- counting up America's debt. One started tallying up the dollars since the convention began on Monday. The other shows the total amount the government owes. It's nearing $16 trillion. An astonishing $16 trillion.
What you won't hear, Ali, is the Republican backed policies that helped run up these clocks. Here are official government statistics, visualized by the Center on Budget and Policy Priorities, Ali. Take a look at this. This is our debt. It's the size of our economy. Right? Look at this. This big chunk of debt here, these are the Bush tax cuts right there. Bush tax cuts. That much of the debt are the Bush tax cuts.
These are wars that began before this administration. Right here, this blue slice right here, this is the crisis. It's slammed the American economy. When growth stopped and in fact contracted, it added to all of this debt.
You see this little thing right here, this little blue line? Right there. That is TARP. Fannie Mae and Freddie. Those are the bailouts. This is the stimulus right here. This light blue. The stimulus that so many conservatives hate. And then this is all of this other debt that were already piling up that is outside of this.
If all this stands as is, the projection is, Ali, by 2019 debt will account for more than 80 percent of our economy or nearly all the goods and services this country produces in one year. Without these programs many of which were backed by Republican lawmakers, we'd be right down here at less than 20 percent. VELSHI: All right, Christine. I want to bring in Kevin Hassett, an economic adviser to Mitt Romney, a senior fellow and director of Economic Policy Studies at the American Enterprise Institute.
As we say, Kevin, we are on this show critiquing a lot of things that the Democrats -- the Republicans have been doing and inviting a lot of Republicans on to the show to set us straight. As Christine just pointed out there was a focus at the convention on the ballooning national debt. Was it fair to hammer the president and the Democrats on that growing tab given what Christine just described to us that a very, very large part of our debt and deficit in this country is a result of GOP policies?
KEVIN HASSETT, SENIOR FELLOW AND DIR. OF ECONOMIC POLICY STUDIES, AEI: Well, I mean, it's a debt that's been built up over many years and of course, there are many policies that contributed to it, but if you look at the increase in the debt under American presidents, then in post-war years President Obama is way out in first place with something about 27 percent using the numbers you were looking at.
Second place was Ronald Reagan in about 14 percent and third place I think was George W. Bush, but the fact is that the debt increase massively under President Obama in part because of the stimulus, you know, you call them the Bush tax cuts but Obama and the Democrats extended them and so if you're going to say that's somebody else's policy, that's somebody else's fault they, you know, kept saying they're destroying the economy but then when the economy was theirs they refused to let them expire because they knew that tax hikes would hurt the economy.
And so I think that President Obama most importantly really dropped the Bowles-Simpson Commission. And so we pushed debt because of all the things that happened, the TARP and the bailouts and all that kind of stuff. We pushed the debt to really uncomfortably high levels.
HASSETT: The academic literature says when it gets that high it's really bad for growth, it's something that you talk about a lot.
HASSETT: And he had a commission that actually came up with a pretty good plan and he just dropped it.
HASSETT: We didn't argue against it. And so I think that that's why it's fair to attack him on this.
VELSHI: Only -- I agree with you on that. We spoke to Alan Simpson just a few moments ago and we also reminded everybody that Paul Ryan who pointed out in his speech that President Obama basically dropped Simpson-Bowles voted against it. He was one of the people on the committee and he voted against it because it wasn't perfect. That wasn't the right thing to do.
HASSETT: Well, I mean, it wasn't up on Capitol Hill. I mean they didn't submit it as a vote because President Obama didn't really work with everybody on the hill to get a plan that people could come behind and support. You know, the fact is that what needs to happen is that you need to have a president that works with members of the other party, comes up with something that he says is going to be gold and then pushes it through Congress.
President Obama hasn't done that. You know, if you walk around into the buildings here in Washington where you have economic staff like at the Treasury, they're all idle. President Obama, you know, people say he's this policy wonk, but he actually never really gets that engaged in policy.
We've never had a point where the White House has said here's the bill that I've negotiated with Paul Ryan and the Republicans. We've written it up into legislative language here at the Treasury, now I'm going to pass it through Congress, and no cherry picking, gentlemen.
He's never done that. He's delegated the policy construction to the people up on the hill and that hasn't worked very because Congress has been broken.
VELSHI: I know you're responsible for part of the Romney plan. I keep bringing up what the economist, a generally conservative publication said about Mitt Romney's 59-point economic plan. They said it reads like "50 Shades of Grey" without the sex. Paul Ryan has a more detailed economic plan and when you look into that Bob Reich and our -- some of our studies over here as well indicate that it could actually end up costing jobs rather than creating the 12 million jobs over four years that I think you were party to writing.
HASSETT: Yes. I don't see how that can be. I mean the fact is that we've got this massive deficit, this massive debt, and that creates a lot of uncertainty and makes people wary about investing into the future. We've got the highest corporate tax on earth except for Ghana and the Congo and -- you know, that makes everybody want to locate their activity offshore.
Governor Romney wants to get ahead of the curve on those things and he's doing so in a balanced manner that broadens the base so that it's not a big revenue reduction when it cuts the rate. And so I think that having lower marginal rates and economic certainty because you're ahead of the curve on the deficit, I don't see how that could fail to produce growth and jobs.
HASSETT: Where is Reich coming from saying that higher marginal rates are going to --
VELSHI: I know you don't probably share a lot of information with the Economic Policy Institute, but they do say that Paul Ryan's plan, again Paul Ryan is the vice presidential candidate, his -- his plan may mean 1.3 million fewer jobs in 2013, 2.8 fewer in 2014. And of course we just got the news from Spain that they have 25 percent unemployment.
So the fact is, the danger is you get yourself into this austerity trap at a time when people aren't spending money. That you just get yourself into this trap where it's important that government doesn't spend money, it cuts government spending. What a lot of people don't remember is that cutting government spending means laying off government workers, more people who are not paying taxes, more people receiving government assistance.
HASSETT: No, I think that the real risk and it's where we are now is that you can get into this kind of debt spiral where you're dependent on repeated Keynesian stimulus and, you know, not actually addressing the big problems that can move us forward. You know the bottom line is that people listening at home know that if they save a little bit more this year, they save a little bit more next year, then they've got money in the bank and they can have higher consumption in the future.
The same is true for a country. And right now what we're doing is we're taking all those pennies that Americans are saving, that they're putting aside so that they can have a secure future and the government's borrowing that and spending it right away. And so that as a nation we're not really saving for the future.
If we don't have more assets to draw from in the future then we're not going to have higher consumption. We're not going to have growth, we're not going to create jobs. President Obama's deficits are destroying capital formation in the U.S., they're destroying jobs and Governor Romney has a proposal that would reverse that, and so I don't see how anybody who's a respectable economist could argue anything else.
VELSHI: All right. But some people are.
Kevin, always a pleasure to have you on the show. Thanks so much.
HASSETT: Thanks, Ali.
VELSHI: Kevin Hassett is a senior fellow and director of Economic Policy Studies at the American Enterprise Institute and an economic adviser to the Mitt Romney campaign.
We've been hard on the GOP in this show. I can already hear you typing up those furious messages to me on Twitter and Facebook. Before you hit send listen to what we'll be doing next week, and I'll tell you about it right after the break.
VELSHI: The economy is growing. It actually is. That's what the numbers tell us, but you're not feeling it. You drive the economy and it can't grow unless you feel confident. You won't spend unless you're sure that you will continue to have an income.
We're producing more goods, but that's only a small fraction of our economy. Wages are stagnant and you are not saving money and with the fiscal cliff looming, there is a real danger that we could slip back into a recession, but the only economic message we heard from the GOP this week was a relatively dishonest claim about job creation.
Now it's true. We were hard on the Republicans this week. It was their convention and we are holding all sides to the truth. So next week, it's the Democrats' turn. We'll be holding them to the truth as well. It's their convention next week. Tune in Saturday at 1:00 p.m. Eastern and Sunday at 3:00.
In the meantime I do want to hear from you. You think you heard a serious economic plan from Republicans? I didn't, but let me know if you think you did. Find me on Facebook.com/al facebook.com/alivelshi, and tweet me, my handle is @Alivelshi. As you know I read them all and I'm ready to debate.
Have a great weekend.