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In the Arena
Total Fear in the Market; New Hope for FAA workers
Aired August 04, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TOM FOREMAN, CNN ANCHOR: Good evening to you on a bad day for the U.S. economy. I'm Tom Foreman. And at this moment, it is morning on the other side of the world. And take a look. The markets are opening in Australia and in Japan.
That's the all important Nikkei you're looking at there which is just beginning to tick. It is going to be a rough start there. We're hearing it has opened down 3 percent and may go down much further. Some predictions say as much as 5 percent today.
Right now, CNN's own Ali Velshi is analyzing what's happening overseas. He will join us in just a moment to explain how Wall Street is sending a shockwave around the planet.
The Dow plunged like an Anvil in the ocean today, 512 points. The worst one-day decline since 2008, one of the top 10 worst ever.
The Dow, the S&P and the Nasdaq have now each fallen 10 percent in 10 day, and in financial circles that has the rumble of double- digit recession growing much louder this evening.
So what does this mean for your job, your house value, your retirement fund, prices at the supermarket and the mall? We will tear through all of that and hear some other stories IN THE ARENA tonight.
(BEGIN VIDEOTAPE)
FOREMAN (voice-over): Only one thing worse than Congress in session. Congress on vacation. There's just one man to turn to at a time like this.
ALAN SIMPSON (R), FORMER U.S. SENATOR: So everybody is waiting to be eaten alive by rats and snails and toads. That's unbelievable.
FOREMAN: Yes, Alan Simpson. Whether it's Washington or Wyoming, he is the wisest guy around.
And, it's Mr. Obama's birthday. The president gets his AARP card, but does he get what it takes to lead? Two reporters who watched him on the rise in Chicago say the lessons he learned there won't work in D.C.
(BEGIN VIDEO CLIP)
SEAN CONNERY: He sends one of yours to the hospital, you send one of his to the morgue. That's the Chicago way.
(END OF VIDEO CLIP)
FOREMAN: Then on the grimmest day on Wall Street in years, the ones who have the most to lose can't spend it fast enough. The rich may be worried about their portfolios, but you wouldn't know it on Fifth Avenue and Rodeo Drive. Luxury is in.
(END OF VIDEO CLIP)
FOREMAN: So much to get to tonight. But our top story is the diving Dow. One trader who was on the floor for today's great drop has been buying and selling stocks for 40 years.
Ted Weisberg has pretty much seen it all, so I thought he was the best person to put today's tumble into perspective for us. I spoke to him moments ago.
(BEGIN VIDEOTAPE)
FOREMAN: Ted, welcome. I'm glad you joined us here. You were there in 1987, you were there in 2008. How does today stack up against all the other bad days you've seen on Wall Street?
TED WEISBERG, VETERAN WALL STREET TRADER: I would say if you had to rank today's selloff -- I guess others I have seen -- I would say it was rather orderly. Disturbing but orderly nevertheless.
Nothing -- quite frankly nothing compares with October '87 when the Dow in one day was down 22 percent. That was clearly an emotional crazy day. I mean down 5 percent is still down 5 percent, but it's not 22 percent.
FOREMAN: When this is happening, at what point do you realize as a trader that this is going to be a bad day? Because the market moves up, the market moves down.
WEISBERG: Well, you know, it's always of course with the benefit of 20/20 hindsight, but the kind of the pieces started to fall into place Monday of a week ago. Continued all last week with the -- we closed down, I think, a little better than 4 percent on the S&P last week which was the worst performance, down performance of the year for the S&P.
But when we got that GDP number on Friday, that very bad GDP number, and then the revision of previous GDP numbers revised downward, it was sort of masked by the circus going on in Washington over the debt ceiling problem. But that number to most traders has sent a very, very scary message.
FOREMAN: So if that's what you're looking at over the past few days that led to this problem today, what are you going to look for tomorrow?
WEISBERG: Well, you know, tomorrow, unfortunately, we can't escape the numbers. Tomorrow we're going to get an unemployment number, which we hope of course that will be better than expected, but you know in the environment we're in, it's possible that it will be worse than expected.
And if it comes in -- and it's an if. And if it comes in worse than expected, clearly that could reinforce the negative bias. But a lot of today was also I think the problem of -- continued problems in the euro zone, and particularly surrounding Europe.
And so we had a strong dollar today, the weak euro, problems in the euro zone, on top of all the other problem that we're dealing with here in the U.S. domestically. And clearly today was a bad day. Now whether it was a selling climax, I think it's a little too early to tell.
I would sense that the market clearly is probably getting a little oversold, if not very oversold. But the other problem is they don't ring a bell and they don't give us a crystal ball, so you never know where the bottoms are and unfortunately they don't tell us where the tops are either.
FOREMAN: I'm guessing this is something that's very different from the beginning of your career to now. When you talk about a global economy, we hear so much talk about that here, very often these days when you look at what's happening in our market, you are looking around the world, and the world is looking at us. More so than they would have been 40 years ago.
WEISBERG: There's no question about it. Everything is -- everything is interconnected. And nobody -- there's literally no place to hide anymore.
FOREMAN: I know one of the things that people have to worry about is the notion that you get a wave going where one side of the world reacts badly, then the other side reacts badly, and they feed off of each other.
When you consider all of that and all the numbers you've been talking about, do you see any positive signs out there that are going to stabilize us and move us up other than just saying we've bottomed out, it's time to move up.
WEISBERG: I think that the U.S. economy has basically stabilized. But as long as we have 9.2 percent unemployment and a housing market that can't get out of its own way, I would say to you that the U.S. government has a lot more hard work ahead of it to get things stabilize and get growth back into this country.
FOREMAN: All right. I think you may be right. The voice of experience.
Ted Weisberg, thanks so much for joining us.
WEISBERG: My pleasure.
FOREMAN: And we're taking a shot again now of the Nikkei which just opened in Japan about 6 1/2 minutes ago. The numbers there have already dropped, we're told, 3.5 percent, and it's still dropping at the moment.
So Ali Velshi standing by. He's looking at that. We'll talk about that more because it's not just what happens here, it's the question of how much it ripples out through this global economy, the very thing we were talking about minutes ago.
One point, though, you have to keep in mind as we dig into in financial news is Wall Street is just one small street in New York. It's important, but it's not the whole economic story.
Our house economist Ben Stein takes a broad view of today's no good, very bad day on Wall Street. He joins me now.
Ben, thanks for being here. What do you make of all this?
BEN STEIN, ECONOMIST: My pleasure.
FOREMAN: There's talk from some people. I've heard a lot of people saying this is the market reaction to the debt deal. It's 1937 all over again. Washington cut spending then and the country spiraled back into the great depression. Do you buy that?
STEIN: No. Not at all. The 1937 recession was caused by monetary policy and not fiscal policy. Well, part of the reason the markets fell so much today is that traders can make money by selling. I mean traders don't operate as economists, traders operate as traders.
They see we can sell the cash against the futures. We can sell the futures against the cash. And that's technical, but it just means it's a phenomenon confined to Wall Street and confined to the traders. There's front-running going on. That's confined to the traders.
But that being said, there is bad news about the economy. That being said, let me ask you this, my friend, if someone had said to you on March 6th, 2009, when the market was in the mid 6000s, that by August -- early August of 2011, it would be up almost 80 percent, you would been a very happy guy.
FOREMAN: I know. I know. Look, you're totally right.
STEIN: And even with all the --
(CROSSTALK)
FOREMAN: Nobody back then thought it could happen.
STEIN: Even with all -- even with all the falling that's happened in the last 10 days, the last couple of months, it's back to where it was in the winter of 2011. That wasn't that bad. We didn't think we were that badly off. So let's try to put it in perspective.
It's a large point drop. It's not a particularly enormous percentage drop. We've had a fantastic stock market recovery from the lows. We may very well be heading for a double-dip recession, but so far things are not that terrible. Let's -- I mean, the media, with the exception of you, of course.
FOREMAN: Of course.
STEIN: Likes to sell panic. The people who make money in the stock market sell, take your long-term perspective, riding these things out and buying when it's low. I mean the media is selling you exactly what you don't want to buy if I may respectfully say so.
FOREMAN: You know what? I'm not so certain that you're not right about that. On the other hand, I think one of the things that confuse people out here is the very point that you spoke to. The behavior of the market and the behavior of our economy are not always the same thing. And you sort of buried the lead a minute ago.
STEIN: Right.
FOREMAN: You said we may very well be headed towards a double- dip recession. That's the real world --
(CROSSTALK)
STEIN: We may well be. We may well be, but the stock market is a barometer of corporate profits. It's not a barometer of what some poor family in Detroit or some poor family in Sacramento is going through because they're unemployed and they're losing their home, which is very, very sad.
It is a barometer of corporate profits. And corporate profits so far are still extremely strong. The corporate sector is loaded with cash. They're very liquid. They're in a very strong balance sheet position. This doesn't look anything like the financial panic that we saw in late '08 and early '09. It doesn't look anything like that.
It looks like it's going to be a long, grinding crawl out of the pit. And the fact that the Tea Partiers have taken away any possibility of government stimulus is a bad thing, but this doesn't look anything like the financial panic. I mean that being said, I'm often wrong and I could be wrong this time.
FOREMAN: Well, you've talked about this notion of the politics of all of this. I must say, Ben, I'm not sure where the politics fits in sometimes. I think when we talk about the economy and the markets, it's like the old joke, it's like weather, everybody talks about it, nobody does anything about it.
But I wonder if it's just so big now that nobody really can. The markets move their own way, the economy overall moves its own way, the politicians move their way.
STEIN: I don't --
FOREMAN: And nobody can predict what's going to happen.
STEIN: I think it's -- I think it's a little bit worse than that. I think people don't know what to do. That is, I think if you took all the smartest, most highly decorated Nobel Prize-winning economists in the world, they couldn't point to a solution. There is no solution that's an easy solution at this point.
We have roughly, very roughly 150 million Americans in the labor force and owning small businesses and shares in large businesses. We rely on their hard work, creativity, ingenuity, adaptability and flexibility to get the economy moving again. There's not going to be much government stimulus, it's going to have to come from the ingenuity of the American people, and it will come.
It might not come tomorrow, it might not come this year, it might not come next year but it will come.
FOREMAN: You make a good point, though, when you said we shouldn't be selling panic and people shouldn't be panicking out there. But against a backdrop of so much uncertainty, what do you think normal people should be thinking out there about their 401(k)s and their house value and their job security and everything else?
STEIN: They should have -- they should have at all times a fair amount of liquidity in the form of cash or short-term government bonds. They should have a diverse -- they should not be too heavily leveraged on their houses. They should not be buying things they cannot afford, but they -- and they should be buckling down and doing their jobs as well as possible so they don't lose their jobs.
But a good amount of household liquidity is an extremely vital part of the world. And I think buying annuities is an extremely vital part of the world. I mean we all get annuities in the form of Social Security, but annuities you can buy from insurers it seems to me are a very, very good bet.
I'm not employed by them. They don't even know me. I'm sure if I walked through the door, they would think I was homeless person. But I think it's a good thing to have.
(LAUGHTER)
FOREMAN: That what I usually I think when your walk in the door.
Ben, it's always great to have you.
STEIN: Yes, exactly.
FOREMAN: I appreciate your perspective.
Coming up, the Asian markets opened just minutes ago. We told you, you're looking at a live shot of the Nikkei Stock Exchange there in Tokyo. It's down 4 percent now just after the open.
Ali Velshi is watching the overseas market. He'll tell us who the 500-point freefall here on Wall Street is being felt around the world. And we'll get his take on whether we should be worried about all of these. Stay with us.
(COMMERCIAL BREAK)
FOREMAN: We're back now with our developing news tonight. Today's deep dive on Wall Street and what's in store tomorrow. You're looking at a live shot of Tokyo's stock exchange where trading opened just a short while ago, about 16 minutes ago. And already the Nikkei is down nearly 4 percent.
Chief business correspondent Ali Velshi has been following the early morning trading and he joins us now with the latest.
Ali, let me start off with this question. Ben says, don't worry, this is just the markets doing what they do. Do you think Ben is right or wrong?
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: I think Ben is much more right than wrong on this. In fact I think he's right. I think one of the things that I hate sometimes is I hate the Dow because we have to look at it.
Lots of things happen in the financial world that you never see. Bond yields going up and down. The bond market globally is twice as big as the stock market and the Dow is one market of many, but it's got that big sign, that big board that we watch. So we -- you know, it's imagining your gas prices going higher and higher. Just gets your blood pressure going.
(CROSSTALK)
FOREMAN: So tell me about Tokyo this morning. You're watching this closely.
VELSHI: OK.
FOREMAN: Is it bad, worse, about the same?
VELSHI: Well, the bad news right now is that the Tokyo Nikkei 225 Index is off 3.68 percent. The good news is that it was off 4.06 percent. So it's actually in about the first 15 minutes of trading, it went down, it didn't go down as far as U.S. markets did, and then it pulled back a little bit.
Kyung Lah, our correspondent in Tokyo, spoke to a trader who was sort of expressing some of the same confusion that some of us in the United States were expressing, and say, why did this happen? Why did we see this remarkable reaction?
As Ben Stein told you a few minutes ago, this -- what we saw in the Dow today is certainly not a reflection of the 30 companies in the Dow or the 500 companies in the S&P 500, which did worse. We have record profitability. Companies are actually doing very well. They're flushed with cash and selling stuff to people in parts of the world that are growing very rapidly.
So there's a remarkable disconnect between what happened on the Dow today and what's really going on. But --
FOREMAN: So talk to me about Japan. Why do I care?
VELSHI: Right. FOREMAN: I'm an American out here. I have a job.
VELSHI: Yes.
FOREMAN: Why do I care what the Japanese are doing?
VELSHI: Because what's happening there is the same thing that was happening in Europe this morning and in America today. We don't buy stocks in our own countries anymore the way we used to 15 years ago. Now it's all one big sort of global market.
Money moves around. So what we want to see is whether or not this is over or it's continuing. And what I didn't want to see was a massive drop on the Nikkei when it opened. But more importantly I don't want to see more of a drop than we saw in the United States.
The Dow closed 4.3 percent lower. The S&P 4.7 percent. As long as we're not at that point, I think we're seeing a bit of an improvement. As I said we're about 3.6 percent lower, but I need to see it stop at some point because these Asian markets bleed into U.S. -- European markets, and then back into U.S. markets.
So does the cycle continue or do we get some peace before tomorrow morning's unemployment report at 8:30 a.m. Eastern which is going to cause more trouble for us?
FOREMAN: Australia is open, too, at this point, right?
VELSHI: Yes. Yes.
FOREMAN: Any idea what's happening there?
VELSHI: We're also lower there. I haven't got the percentage point just yet on there. But it is -- it is -- the Nikkei is now trading about 3.6 percent lower. So it's active but it's not crazy.
FOREMAN: So one of the concerns, it sounds like you're saying here, is truly the psychological aspect of these markets.
VELSHI: Yes.
FOREMAN: Simple truth is if everybody in the world starts saying we have to sell, sell, sell --
VELSHI: Then everybody starts selling.
FOREMAN: We start selling.
VELSHI: Yes. That's exactly why.
FOREMAN: And when it's buy, buy, let's buy. And sometimes it doesn't have a whole lot to do with whether or not I have a job, job, job.
VELSHI: Are you talking to Ted Weisberg in a little bit?
FOREMAN: Yes. We talked in a little bit earlier.
VELSHI: OK. Ted has this great expression where he said that the stock market is the only place where they hold a sale and people don't come.
FOREMAN: Yes. Yes.
VELSHI: And all these stocks are at a remarkable discount. What makes McDonald's or General Electric, Microsoft, these companies worth 5 percent more than they were yesterday? There's been no change to the way they do business. So if you thought these were good companies that you wanted to invest in, they're a whole lot cheaper today.
Now if you don't think the world is going to grow and you don't think these companies are going to do anything, then you shouldn't be in the market in the first place. But it's unclear as to what the connection is between what's going on in this global world and your investments.
FOREMAN: Wow. It's an interesting time, though. And nonetheless, when we see these big waves, you know, everybody gets nervous and wonders what's going on.
VELSHI: Yes.
FOREMAN: Ali Velshi, it's good to have you help put it into perspective. Always good talking to you, my friend. .
VELSHI: My pleasure, Tom.
FOREMAN: Still ahead, good news in Washington. No, that's not an oxymoron. For tens of thousands of furloughed workers it may just be true. Keep your fingers crossed and your tray tables up. When we come back.
(COMMERCIAL BREAK)
FOREMAN: A stunning turnaround right there on Capitol Hill tonight. For days we've been telling you about yet another standoff in Congress. This one over funding the FAA. The result, tens of thousands of workers shut out of the agency without work or a paycheck for what could be weeks.
So what did Congress do? Believe it or not, they hit the road. They left the capitol for a vacation.
Well, after days of public outrage, it looks like the stalemate is finally over. We'll get to the details in just a moment. But first take a look at the reaction of one FAA worker who learned of the deal today.
Evelyn Martinez is a safety inspector who's been working on her own dime since the shutdown began more than a week ago. Take a listen.
(BEGIN VIDEO CLIP) EVELYN MARTINEZ, FAA SAFETY INSPECTOR: Well, I just -- I think most of us didn't expect to it to get this. And working for the federal government, you just expect more.
UNIDENTIFIED REPORTER: And your tears?
MARTINEZ: Well, I -- they're out of relief.
(LAUGHTER)
(END OF VIDEO CLIP)
FOREMAN: Yes, imagine that relief. Tens of thousands of times over. So what exactly is in this deal?
Chief political analyst Gloria Borger joins us from Washington.
You all know everything, Gloria. How did this thing happen and what's in it?
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, first of all, I think -- as you point out, they were just completely embarrassed by this situation. The public saw it as maddening, how can you -- how can you possible lay off these 4,000 workers for no particular reason. And so they came up with what they usually come up with which is a patch.
It's not a long-term solution. It doesn't solve their larger issues, but it's a patch through September 16th so that when Congress returns, they'll be able to grapple with the issues, the larger issues that are really underlying all of this.
In the short term, the problem was that Republicans wanted to cut about $16 million to rural airports. The Democrats said you can't do it. Kind of interesting. One of those states affected, Nevada, Harry Reid.
FOREMAN: Sure, sure, sure.
BORGER: So they said no. But they considered it a stalking horse, if you will, for a larger issue, which is collective bargaining rights for airline workers. And that's the big issue underlying all of this. But short term, tomorrow the Senate holds what's called a proforma session.
They will rubber stamp the House bill. And the transportation secretary, Ray LaHood said OK, I'm going to deal with these waivers myself, I have the ability to deal with these rural airports and I'm going to go over them one by one by one to see which gets funded and which doesn't.
FOREMAN: So they're taking the House legislation which included the stuff about this other funding.
BORGER: Yes. Right. FOREMAN: They're saying OK to that, but then administratively basically rolling over that and saying now we're going to put that on the burner until September --
BORGER: Right.
FOREMAN: -- when we're all back in town.
BORGER: Although the transportation secretary hasn't exactly said what he's going to do. He said he was going to look at it in a case by case basis. But if I had to bet, what do you think is going to happen to that airport in Nevada?
(LAUGHTER)
FOREMAN: I guess it's probably going to be OK.
BORGER: Yes.
FOREMAN: Senator Reid said today the agreement doesn't resolve these key differences --
BORGER: Right.
FOREMAN: -- over this thing like collective bargaining out there. Are we just headed towards another stalemate over this when we come back?
BORGER: Yes. And you know, it's interesting. And I didn't know this until I really started looking into it, which is that the FAA itself has not had a real authorization bill, which is a spending bill. Since 2007, they've had all of these stop gap measures.
And the reason, Tom, is because of this issue of collective bargaining right for airline workers. And the Democrats, of course, want to make it easier for workers to unionize and Republicans are on the other side of that issue.
So that's an issue that remains. It's going to be fought another day. But in the meantime, they were so embarrassed I think by themselves that they had to figure out a way out of it and Ray LaHood came up with it.
FOREMAN: All right, well, good for the worker. I mean glad they got something going on.
BORGER: Yes.
FOREMAN: Got some kind of agreement.
BORGER: Exactly.
FOREMAN: But that sound you hear, Gloria, is the sound of a lot of cans being kicked down the road there.
BORGER: Exactly. On this and everything else. FOREMAN: Yes. Exactly. Always good to talk to you, Gloria. See you when I'm back in town.
Up next, what really is wrong with Congress? Where to begin? Well, for one thing Alan Simpson isn't there anymore. But even from as far away as Wyoming, he can see what needs fixing. He'll join us when we come back.
(COMMERCIAL BREAK)
FOREMAN: President Obama signed that debt this week that calls for a "Super Committee" to decide where the budget cuts will come from in the near future. To us, it sounds a lot like second was the same as the first.
Didn't the Bowles-Simpson Committee do the same thing last November? Come up with the areas we needed cuts in? Last week, we spoke with one of the men who led that effort, former Senator Alan Simpson about his prescription for the deal.
I have to tell you, the response from all of you was enormous. I've rarely seen such an outpouring from viewers about an interview and how excited they were about it. He's one of the smartest men who's ever served in Washington I believe.
So we're bringing him back to get his opinion on the compromise made. Senator, welcome back from Cody, Wyoming. I'm glad you could be with us tonight.
ALAN SIMPSON (R), FORMER U.S. SENATOR: Right here from the Athens of the west, Cody, Wyoming.
FOREMAN: It's a beautiful place. I love Cody. Look, the Dow today saw one of the largest point losses in its recent history, and all of history, really. Some economists say this is the time to pump money into the economy, not to be talking about cuts at the government. What do you think as you look at the deal that was struck?
SIMPSON: Well, I think the deal that struck was disappointing, especially when you had this group of ours, worked for 10 months, it took us three months to establish trust. Five Democrats, five Republicans, one independent agreed with it. That's 60 percent. That would get you anywhere in the senate, at least.
I think the think that's disturbing is that you haven't come to where the commission came up. We said $4 trillion in 10 years. The president then went in and said $4 trillion in 12 and then they come up with a convoluted thing where it's $2.1 then a new group of 12 and then going into $1.2.
And then, you know, slicing in half and half to see which -- how you're going to give a bee sting that will hurt the most to one side or the other and then pretending that all Republicans won't cut defense, which is a phony that all Democrats won't touch entitlements. That's a phony. It's a dysfunctional place and now we have what I think the markets see as we didn't do anything. If you're going to go, either go bigger, go home. I mean, that's where it is.
FOREMAN: You think that these kind of cuts are necessary now no matter what's happening with the economy, it's just simply too important, you can't keep delaying it.
SIMPSON: Well, you know, it's like asking for a constitutional convention, constitutional amendment. That takes 5 to 10 years. It's too late for that. We kept asking in our commission, where is the tipping point?
The tipping point is when the guys that hold our paper say I want some money for my paper and that's happening right now. I really believe it. They say this is impossible. They labored and gave forth, what, not much, nothing in a sense.
The toughest part of it is when the people who hold all of these marvelous securities are just going to say well, we will do one other thing for you. You've raised your limit now to $17.1 trillion, and Now we're going to continue to loan you money, but the interest rate is going to go up.
FOREMAN: I know you support the idea of cuts to defense and entitlements. Defense Secretary Leon Panetta said today that across the board defense cuts under the so-called trigger mechanism would be completely unacceptable. I want to play a little tiny bite from him about that. Let's listen.
(BEGIN VIDEO CLIP)
LEON PANETTA, DEFENSE SECRETARY: It would result in a further round, of very dangerous cuts across the board. Defense cuts that I believe would do real damage to our security our troops and their families and our military's ability to protect the nation.
(END VIDEO CLIP)
FOREMAN: Senator, do you buy that?
SIMPSON: Let me tell you, Leon Panetta is a prince. He's one of the greatest guys I've ever worked with and a very dear friend. Let me tell you. He's saying the correct thing because you don't just come along with a hammer after he's trying to get $300 billion or $400 billion out of it.
You can't do that and that's what he's saying. He's not saying he's rejecting defense cuts. He's just rejecting the sense of when it comes to the hammer, and they haven't done it, then bam. Half of it goes to defense and half of it somewhere else.
That is -- give him a chance go in and pick around. Give him a chance to mess with Tricare, which is an unbelievable health care system which takes care of 2.2 million military retirees who pay $4707 a year premium, no co-pay and it cost $53 billion a year. Let him toy with that stuff, and he will, and he'll do some good things.
FOREMAN: It sounds like you have some real concerns about this general notion of saying that because we don't have the political will to wrestle with specific cuts, let's put in a trigger that drops the guillotine on a lot of things. So we can say well, that was the trigger, that wasn't us.
SIMPSON: That's what's going to happen if the 12, the Super 12 can't make up their minds and you want to watch that one. If they don't put the gang of six into the Super 12, you're watching leaders who are going to juice that thing up so it will fail.
Unless they take these six wonderful people, three Dems and three Republicans, all guided by Joe Biden through the swamps over the last month and leave them off of the Super 12 then you know on both sides they've picked a sure structure for failure of the Super 12.
FOREMAN: Without particular names, what kind of Congress members do you think need to be on this from the left and from the right?
SIMPSON: Well, the gang of six, the three Dems and the three Republicans and then pick people of goodwill not people who are so -- I like to say they're as ridge as a fireplace poker, but without the occasional warmth.
They just show up to vote no or they vote yes and they're just like robots. They usually march along with Grover Norquist, a kind of warriors of the world united. And Grover is going to be --
FOREMAN: He corralled all these GOP congressmen with his no taxes pledge that sort of thing. Interestingly enough, after all this is said and done, he's one of the people who comes out looking golden in this because he said what he wanted to get and we got it.
SIMPSON: Sure, well, I think we need to think of Grover as being president. If he's more powerful than the president and the Congress when he is right now, but he went and got all those signatures when things were roses, 20 years ago, 25, signed this.
Anybody who would sign anything before they go to Congress, before they go to a hearing or listen to the evidence, listen to the testimony, have the debate is a robot and he's got them.
And as they say, but he's a phony baloney if he's saying something when Coburn goes in there and pulls $6 billion out of ethanol, which is used to feed animals and humans all over the world and you stick it in your gas tanks, nuts. So he goes in, takes $6 billion out there and Grover calls that a tax increase, and Coburn says that's ludicrous. I call it deceptive.
FOREMAN: You were on this committee last year. You mentioned 10 months of work, a lot of work. You came up with a comprehensive report. You threw it out there. It got pushed aside. How much faith do you have that in three months in this environment, 12 members of Congress can come up with a deal by Thanksgiving that's going to fly?
SIMPSON: Well, I think it will be because they won't have to sit down and say we need to gather evidence. We need to gather testimony. We need to have these things together and they don't need that. They've got the Obama plan and the Ryan plan and they've got the Reid plan and they've got the Boehner plan and they got the commission plan and the gang of six. Everybody is in the game. They don't need to sit down and hash up a bunch -- they got the actuary studies we gave. So it's a different game.
I think they can come up. But I tell you, they've got to look now that this is the world. These early reports, I was listening to in your program before, this is not about America. This is about Greece and Ireland and Portugal and Spain.
And now Italy is on the cusp and Berlusconi is not doing anything. He says the foundations in Italy are good. Well, they're not good. Trajectory of deficit and interest is chaotic all over the world. It's different, we're bigger, but the figures are all the same.
FOREMAN: I kind of feel like we're on a wobbly bicycle, heading down one of the hills there in Wyoming. Alan Simpson, always great to talk with you and get your insights.
SIMPSON: Well, thank you very much. But it's a troublesome thing because now we've taken the debt to $17.1 trillion from $14.3 trillion, and meanwhile, the great big bang of the universe started only, let's say 13 billion 600 million years ago and we outstripped that 80 million to 1. So hop aboard. We'll all hop onboard into the universe and find out what Saturn's moons are made of lost airline luggage.
FOREMAN: You never know. Thanks, Senator. We appreciate you being here.
Coming up, the president has a lot less 50 candles on his cake and a slew of problems on his plate. I'll talk to two journalists who knew him when. They think he might just be wishing he was back in sweet home, Chicago.
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FOREMAN: There he is, the honored guest, President Barack Obama turning 50 today. That's Jennifer Hudson serenading him last night in Chicago. Congratulations, Mr. President, quite a milestone, but you might say his cake is bittersweet. The dough has not risen so well.
What a toll this has takes on any president. Take a look at him in the inauguration and him earlier this week. Look at the change there. Maybe it's just the photograph, but you see this in presidents all the time. It looks very rough. Here's a look at the president's extraordinary trip so far.
We're going to be joined by two wonderful Chicago natives in Washington tonight, Scott Simon host of NPR's "Weekend Edition" and in Chicago, Laura Washington, columnist for the "Chicago Sun Times."
Thank you both for being here. Look at this right now, Scott, you look at the pictures of the president from when you knew him back before and now, do you think Chicago really prepared him adequately for this job in Washington?
SCOTT SIMON, HOST, NPR'S WEEKEND EDITION: Well, you know, I think in many ways, to be a Chicago politician is to be prepared for anything. Because, you know, the world comes to Chicago and you learn how to deal with it.
As I've reflected on it over the past few months, I think there are two things that might have upgraded against him. One is in Chicago, there's only one side of the aisle. It's an intense political atmosphere, but it's a hot house for liberal Democrats.
No doubt about it and I think he maybe doesn't have the experience in dealing with the other side of the aisle, but he might have gotten elsewhere. Secondly, in many ways, even more importantly, with the exception of one congressional race he lost, he's lived a charmed political life.
You know, he's really been very important in his choice of opponents. He's been elected against great odds, but in the end, rather easily. He's never really been electorally in a tough race he lost. And there are lessons that way.
And I think we might see in some of the battles he's had or really the past couple of years, his difficulty in getting hold of that. And of course, absolutely, I think it's fair to point out he has a lack of administrative and practical experience and hasn't been able to get his hands around the unemployment rate. Neither has Congress for that matter.
FOREMAN: Yes, let me turn to you with that, Laura because certainly you can say that of anybody who's takes the presidency. No one is really prepared for it. Do you think Chicago really gave him the training he needed to come into Washington?
LAURA WASHINGTON, COLUMNIST, CHICAGO SUN-TIMES: I think that what he learned in Chicago and why he came in Chicago was he learned the art of compromise. Chicago is really a wide open town and as the song says if you can make it here, you can make it anywhere.
He knew that there was a political system that he could easily access. He knew there was a civic community. He knew there were community organizations and the business community was -- it was very easy to travel in all those circles at the same time and to build bridges.
So he practiced the art of compromise particularly with the say legislators group. He worked with Republicans. He worked with much more regular mainstream Democrats. He was a progressive independent Democrat and he learned to build bonds and build trust there.
And I think that's what he hoped to bring to Washington with this change mantra. The problem is Washington is not interested in compromise which we just saw and the experience he just went through with the debt limit.
And certainly the Republican Party is not really interested in building bridges with him especially going into this next campaign.
FOREMAN: You know, Laura, you hit the nail on the head there. I often said, Scott, that Washington is one of the few cities in this country that has no interest in change generally.
I'm a little surprised that he keeps going back to the mantra of change, change, change. When he's been there long enough that now when you're the president there this long, you are the insider. No matter how much you may want to think otherwise.
SIMON: Well, you know, he was elected with that mantra, and I think every public opinion poll will disclose that's what the American people say that they want. The problem is obviously always in picking the kind of change you want when it gets down to the nitty-gritty of policy.
And that's where I think not only President Obama, but the Congress has had a hard time. I mean, I'm not sure anybody as we've seen is willing to compromise at this point. So you've got a situation now where when the president, I think, really does demonstrate a willingness to compromise, that's not necessarily seen -- it's often dismissed as a kind of tactic.
And it's not understood as being even handed. And I'll go back to what I said. I mean, he had a lot of practical experience and reached across the aisle in Springfield, but the stakes were entirely different.
And Illinois even, not as much as Chicago is a different atmosphere that didn't prepare him for this stage. Look, in many ways he's beautifully prepared for the international stage.
FOREMAN: Laura, tell me just a memory that you have on this 50th birthday of Barack Obama back before he was president that you think of often now with him being the president.
WASHINGTON: Well, I think that he learned -- he's a really quick study. I'm not too worried about the fact that it's taken him a little while to implement this change. He even said last night, you know, this has been a lot tougher than I thought it would be, but we're going to get there.
But when he was on the campaign trail he was often seen especially early on, before he's became a U.S. senator, is an elitist. He came from Harvard. He has a law degree. He lived in exotic places like Hawaii and Indonesia. People particularly from his own community, African-American community didn't really understand that.
They saw him as an elitist and I remember an uncle of mine saw him on the campaign trail and said he's wearing this $1,000 cashmere coat. What's he doing with that on? Who does he think he is? I talked to him about that afterwards, and he said well, the coat wasn't $1,000. But he got the point.
He changed his style and he realized he needed to be able to relate to Chicagoans and the voters. I think that's what he's going to try to do in this election. He's going to try to go around the politics of Washington again. Try to go around the Republicans and reach out directly to voters with that change message.
FOREMAN: Scott, I love the picture we had on a minute ago. That looks like a million years ago. What about you? Do you have any moments that you really remember from before he became president that you look back on now and say it's interesting to see how he was?
SIMON: I remember meeting him, improbably enough, he was a state senator and he had to listen to me give a speech before a group in Chicago. I often told people I would like to think when he addressed the Democratic National Convention a few years later that he stole my oratorical style. And that really set his national political career in motion.
I would say only when you look at him up close I think when he was in - even before that. I think it's safe to say that people in Chicago knew, if there was a Chicagoan you would nominate with a really good chance to be president, it would be him.
He was seen with premium material, even before the moment he was elected to the state senate. I think there were big-name law firms and muddied interests and political interests in Chicago who always viewed him as a national candidate and somebody who would arrive on the national scene because of his intelligence, because of his oratorical skills, because of his political skills. I think in a way, you know, he's operated under national scrutiny, even before he was elected to the Senate.
And I think that's something that he wears very comfortably. And anybody who comes within his aura, even much earlier is amazed at how poised and comfortable he was with the level of attention that he's given for years now.
FOREMAN: Laura, let me ask you something. Put aside all the politics, all the left and right, all of that sort of stuff. The man turned 50 years old. He's in an extraordinary position in this country, if you could him a birthday wish as a human being what would you wish for Barack Obama on his 50th birthday?
WASHINGTON: I would wish that he would step back for a moment, catch his breath and think about, you know what he needs to do to lead. Being a compromiser is one thing, but in that shark infested Washington scene, he needs to try to figure out a way to politically maneuver around his enemies because those enemies aren't going anywhere.
They're out for blood. It was interesting last night. He didn't even mention the word Republican and I think that's a good strategy. You need to go directly to the voter, the same people who put you in office before and remind you why they put you there.
FOREMAN: Scott Simon, last thought to you. Same question, it is shark week, by the way, when you talk about the shark tank in Washington. What do you wish for the president as a man on his 50th birthday? SIMON: You know, I think tonight, he's entitled to be entirely personal. He's got a wonderful family. I'm the father two of daughters myself. You can't but look at that family.
He was born in a state not longer after it became a state and he went from there, he grew up single mother, family of not terrific means, interracial family and winds up being president of the United States.
People will be naming grammar schools for him for a century afterwards. I think he wants a presidency that deserves the kind of national reputation that he has and the kind of historical prominence it will have.
And I guess that would be my wish for all of us, that he's able to marshal those extraordinary political skills in a way that will give 30 million more Americans jobs.
FOREMAN: Hopefully a good wish for the whole nation on this president's birthday. Scott Simon, Laura Washington, really appreciate you both being here with us tonight.
Talk about counter intuitive, the market tanks, the recovery stalls. What are the people with money doing? Well, they're spending it like there is no tomorrow. Stay with us.
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FOREMAN: Panic on Wall Street. That's the story we've been following all day. As we reported, the market plunged today with investors afraid for our economic future. It's a scary picture, but not everyone is living it, as is so often the case, this is the story of the haves and the have nots.
Those doing business with the haves, business is still pretty good. Sales of luxury goods shot up by more than 11 percent in July. That's the largest increase in more than a year. Sales are up for brands like Tiffanys and Louis Vitton.
Take a look at the car industry. BMW sales up 16 percent. Porsche first half profits up 59 percent. Mercedes-Benz saw a huge jump in their S-class vehicles. For those saving up, this could run more than $200,000. That's for a car, not for a house, you might think that, but it's not.
Stores like Wal-Mart and places like the Price Club like that, they won't raise prices by more than a few pennies because they're afraid of losing customers, but these high-priced stores are raising prices and they're still selling out.
You can now order a pair of, look at these, Christian Louis Vitton boots for almost $2,500. I think for another $2,500 you can get the other leg covered as well. And over at Bergdoff Goodman, you can buy this bottle of (inaudible) facial cream for $1,600, $300 more than it cost in 2008. I know you're thinking these people are crazy and maybe they are, but this is worth remembering. Some argue that this crazy spending may actually help turn the economy around because the top 5 percent of income earners actually make up 1/3 of this country's spending.
So gang, keep buying, at least for the rest of us. Thanks so much for joining us IN THE ARENA. Good night from New York. I'm Tom Foreman. "PIERS MORGAN TONIGHT" starts right now.
