tv Your Money CNN September 15, 2012 10:00am-11:00am PDT
coming up in the 2:00 eastern hour, katherine middleton's topless photos and a discussion about the duchess of cambridge's right to privacy. also, the pope's visit to lebanon. it's only the third time a pontiff has been there. live pictures right now. you see the popemobile arriving there in beirut. i'll talk to vatican expert about the pope managing the fine line between christians and muslims amid a backdrop of violence spreading the globe. that's at 3:00 eastern time. i'm fredricka whitfield. "your money" starts right now. that economic storm i've been telling you about is still there, still approaching u.s. shores, and still able to do a lot of damage to you. i'm ali velshi. this is "your money." and as long as your politicians won't tell you the truth about the economy, i will. they want you to believe that 12 million jobs will magically appear within four years if you put one of them into the white house. what i want them to do is level with you, because you could get duped into voting for someone
o promises sunshine in america in the face of an approaching economic storm that they may not be able to stop. the storm clouds are coming in from a europe, a continent that is still in recession, that can't afford to buy american products and services. that storm has reached asia, where factories that made exports for europe continue to shut down. it's slowing things down here in america. last month, america lost 15,000 manufacturing jobs. there's only so much washington can do about that storm. but with some real work, they could help avert the storm that's being created in the nation's capital. that second storm started a year ago when the president and congress made a deal with the devil. buying a deal to cut the deficit or subject america to a scorched earth policy of reckless across-the-board budget cuts. it's called sequestration, a stupid name for an equally stupid idea. $1 trillion of mandatory spending cuts that may shed a million jobs when we need them
most. and right now nothing is more important to our country than creating jobs. but there's more. a series of mandatory tax hikes that will hit us all, middle class, working class, and wealthy alike, we'll all pay more after january 1st if congress doesn't act soon. but congress won't act now, before the election, because that would mean bipartisanship and compromise. two things that don't seem to get votes these days. even the chronically understated ben bernanke keeps warning congress that it has to deal with unemployment. this week, the fed christened the good ship qe3, it's not a ship, but it's the third round of quantitative easing. yet another entirely counterintuitive phrase to the unwashed masses. the goal is to do something for the economy that politicians in washington should have done, but won't. so america, you could get pushed over that fiscal cliff that i think will wreak havoc on the economy. well, stephen moore is an editorial writer at "the wall street journal." stephen, you'd rather cut off
your toe than increase america's debt. so why shouldn't we put that -- why should we be putting that off until after the storm? >> look, ali, i have to say, i'm frustrated with this discussion. because, you know, this fiscal storm that you're talking about, the economic storm, you're right, it's here. i think a lot of americans think it never left, from 2008. but, look, at some point, you have to pay the piper. and what frustrates me is, ali, when we discussed this three or four years ago, you were all in favor of the big $830 billion stimulus bill, and many of these other programs -- >> yep. >> and what you're essentially saying right now, ali, is, boy, whoever thought this was going to happen, we have to pay the piper. and of course that always happens. and it seems to me what you're saying is, let's continue to borrow, let's continue to have what ben bernanke wants, which is easy money, and i just don't think that works anymore. i think we do have to get serious about bringing this overspending problem, this debt problem down. you don't tell somebody with a personal financial problem who's
got enormous debts, well, just put it off for another year. and my frustration, ali, it seems to me, that's what your advice is to the congressmen and to the president. put it off for another year, let's keep borrowing, let's have another drink. >> you know, you'll be interested to know, i actually think that the fed action disguises what congress should do. it gives them a little bit -- >> okay, so we agree on that one. >> we actually agree on that point. let's bring austin into the conversation. austan goolsbee is a professor at the university of chicago booth school of business, a former economic adviser to the white house, to president obama. austan, you were part of the administration that has been accused of not using its full political capital to create jobs when it had a chance. how do you respond to that criticism? >> look, i don't think that's fair, and that's coming at the president from the left, and you just heard stephen saying, he wished they hadn't done anything. i mean, i think though it may have no implication for the election in 2012, historians are going to look back and avoiding
the great depression in 2009 was -- is going to be viewed as a major, major accomplishment. the financial crisis and the economic crisis at the end of 2008 was bigger than the one in 1929, that led us into the first depression, and finance is a bigger share to have the economy now than it was then. so i think if you don't think it could be worse, you were not paying attention to what was going on. >> christine romans, host of "your bottom line," christine? >> all this looking in the rearview mirror is driving me crazy, because i'm so scared looking forward. we have to figure out in washington how we can fix the right now and look longer term to cutting our debts and deficits. why can't we do both, stephen moore? why can't we do both at the same time? i'm not convinced that washington and party politics will allow us to do -- we have to be juggling a lot of balls, it and can't just be debt reduction, and it can't just be near-term stimulus. it has to be all of that, and more. >> yeah, look, christine, i
agree with you that it would be wonderful if we could do both. if we could stimulate the economy, and then have these conversation and senators turn into fiscal saints and then, you know, and then cut the spending. i've been in this town f 30 years -- >> i'm sorry. >> all i ever hear is put out the punch bowl and let's party. they never put the punch bowl away. that's what i have a problem with what the three of you are saying. i believe that this is a real financial crisis. this is not a fire drill. this is a really important component as to why the economy is doing so well. austan, i'm not saying we shouldn't have done anything in 2008 and 2009, you're right, the president inherited a great economic crisis. the crisis we have now is, here we are 3 1/2 years later, the census bureau came out with numbers this week that are a disaster, the income rate is still falling, the poverty rate is at a record high. those policies they put in place didn't work very well and all we've got to show for it now is this fiscal cliff.
>> austan? >> look, we agree that the fiscal cliff is a problem, though you should recognize that in your saying that you're afraid of the fiscal cliff, stephen, you're contradicting your own point by saying, well, i'm real estate nervous if they raise taxes and cut spending at a point like this, it's going to tank the economy. i think if you want to try to blame policy, then you have to explain, why is it that in europe, in japan, and in the rest of the advanced world, where they're following different policies than what they followed in the u.s., they're actually growing slower than they are here. the u.s. is among the fastest growing of all the countries in the advanced world. ali, i think you're 100% right. this is a tidal wave that's sweeping the world economy. this is a tough struggle to get out of. i'm not advocating 100%, just short-run stimulus. in my view, the role of the government is the main driver of recovery. it should not be a permanent basis.
that's absolutely not the sustainable way to do it. that was the thing that you have to do when the private sector's in free fall. but at a time like this, we should be doing everything we can to encourage exports, investment, and a return to private sector growth. >> but one of the things -- >> wait -- >> hold on, stephen. he said -- and i was absolutely right, so he gets to -- no, i'm joking. christine, go ahead. >> ali didn't hear anything after, "you're absolutely right, ali." but the issue here too is that we've got so many problems in the very near-term, and we can't even agree on -- basically all they can agree on is running the government for, what, the next six -- or six months, right? and there are also these mistakes that both parties have made and i don't see anyone owning up to mare mistakes. austan, early on, i don't think anyone really knew how bad the economic crisis was. and that's not a knock on the administration, because i don't think the republicans knew how
bad it was too. and after that, it's almost as if the me thinking assaging andy to get a targeted jobs plan through just evaporating. and we're spending all this time looking backward and lost the ability to look forward together. >> stephen, the bottom line, last week we both agreed, you are not as obsessed with debt as some of your republican colleagues are. and i'm using that word. it is absolutely a dangerous and misguided obsession. it's a serious problem. >> yeah. >> jobs is where the obsession should be. creation of jobs and -- >> there's no question about it! and see, here's the point. first of all, austan, i agree with you. i think the tax increase cliff is a disaster. i mean, you put it right. we've got an investment problem in this country, we've got an export problem in this country. why in the world would you want to raise taxes on investment? if president obama wants to raise e capital gains tax, the dividend tax, the small business tax, i'm against that. if i actually believed, ali, that spending another $1 trillion of debt would get us out of this economic rut we're in, i would be all in favor of
it. i think it's the wrong thing to do. i think the government spending is actually making the economy weaker. >> all right. you're going to watch the rest of the show, stephen, because i have an idea that you might actually support and then we'll talk about it again. >> i'll be all ears. >> stephen, good to see you, as always. thanks very much. austan, stay right where you are. christine, stay where you are. i've told you that the economy could create 12 million jobs in four years, i will wear a dress for a week. coming up, i'll introduce you to someone who thinks i should start shopping now. and later, in new york, second avenue subway, you're helping foot the bill no matter where you live. i'll tell you why projects like these could help jump-start the economy. ♪ ♪ [ male announcer ] its lightweight construction makes it nimble... ♪ its road gripping performance
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[ male announcer ] you've been years in the making. and there are many years ahead. join the millions of members who've chosen an aarp medicare supplement insurance plan insured by unitedhealthcare insurance company. go long. the most important election issue this year is jobs. but you could end up basing your vote on a lie. it all started with the romney camp, claiming that a president
romney could create 12 million jobs in his first four years as president. that's 3 million a year or an average of 250,000 jobs a month. i have asked mitt romney's advisers how they came up with that number. they've had vague answers about economic growth and tax reform. then instead of calling out the romney campaign for making claims with scant evidence, the obama campaign gave it legitimacy by repeating it, calling it a low bar. well, if it were such a low bar, why didn't the obama campaign come out with it first? both sides have made the following cynical political calculation, selling you an optimistic view of the economy is more important than telling you the truth. 12 million jobs in four years has happened before in america, twice in the last 50 years. the economy added 12 million jobs between 1983 and 1987 when ronald reagan was president. the average economic growth in those years was 4.5%. it also happened between 1996 and the year 2000, under president clinton, while the economy was growing at 4%, or
4.3%, on average, each year. so far this year, the economy has grown at 1.7%. next year, if we're lucky, and the storm doesn't hit, and we don't go over a fiscal cliff, and nothing else goes wrong with china or europe, maybe we'll hit 3%. that's optimistic. nowhere near where we were the last two times that america created 12 million jobs in four years, 3 million jobs a year, or 250,000 jobs per month. austan goolsbee is back with me. the former chairman of the council of economic advisers and a professor at the university of chicago booth school of business. austan, you have a chance, right now, to call out the biggest lie in this campaign. please tell my viewers that they will not be seeing me in a dress, which is what i promised if 12 million jobs were created in four years, they won't see that. because this economy is not going to allow for 12 million jobs in the next four years. >> look, ali, i learned a long time ago not to make forecasts, because all you can do is look dumb.
so i would be a little careful. i mean, the private sector, even in the last two years, which has been, as you say, modest growth, has added something like 4 million jobs over two years. so it would have to speed up, but it wouldn't have to speed up to something unbelievable to do that. >> all right. let's bring in a guy who's made the forecast, actually. moody's analytics chief economist, mark zandi, is the author of "paying the price: ending the great recession and beginning a new american century," which at least is an optimistic enough title to think that we're going to create lots of jobs. mark, i'm very in favor of big ideas and optimism in this election. we don't see enough of it. the nonpartisan congressional budget office predicts that the economy will create 9.6 million jobs in the next four years. so that is higher than the average we've seen in the last two years that austan was talking about. that would be 8 million. substantially lower than the 12 million. you are on side with this idea of 12 million jobs in the next four years, regardless of who
becomes president. and you make an interesting argument, that housing is going to drive this. >> yeah. well, i think you should start shopping for that dress, ali. i think it's very do i belie believable we get 12 million. over the past year, and the year before that, we created 2 million jobs in each of those years, and this is obviously in a very tough economy. and also in a period where government is laying off lots of workers. and that's not going to continue for four years, a year or two down the road, the government will stop laying off and hiring again, so that's going to add a little bit of juice. but the real thing that's going to be the kicker is the housing and construction cycle. as you know, coming out of every other recession in the post world war ii period, it's housing and construction that provides the real boost, where a lot of the jobs come from. it's not happened this go-around, because housing was ground zero for our problems. but housing's going to kick in. it's already started to kick in. and a year or two from now, it's going to be in full swing. that's a lot of construction jobs and manufacturing jobs, think about all the things that
have got to be produced to build those homes. transportation, distribution, landscaping, home depot, lowe's, you can go on and on and on. and that will get you to that 12 million number. so it's very, very doable. >> and when we've looked at some of the silver lining around the clouds, the markets are doing well and th housing sector is doing well, as mark said. you can get a 30-year loan for 3.8% and home affordability is at the lowest it's been. what -- people still don't have jobs. how is that going to solve this problem? >> well, look, if the mechanism that mark described kicks in, that we finally turn the corner and we kind of plow through these 5 million vacant homes that got overbuilt in the bubble, normally, the job creation, as mark highlighted, is up to a third of the typical expansion coming out of recession. it's coming from either construction or housing-related
stuff. so, i think you could start seeing some jobs from that. and look, you could start seeing the jobs coming from an increase investment and an increasing shift to exports. the fundamental problem of why it's taken so long to get out of this downturn is we can't go back to doing what we were doing right before the recession began. normally in the v-shaped recoveries like 1983, '84, you just go right back to what you were doing before. but what we were doing before was building -- over-building housing and consuming more than we were earning, and you can't go back to that. >> mark, you say, and clearly, you've said this, because you've made this prediction, that this doesn't depend on who becomes president? >> right. right. and it doesn't. i mean, the key working assumption, and you've been talking about it all morning, is that we're able to reasonably, gracefully navigate through the fiscal issues we'll have to struggle with after the election. the fiscal cliff, the treasury
debt ceiling, we'll have to come up with spending cuts, tax revenue increases that allow us to get to something that's close to fiscal sustainability. so we've got to do these things. but my view is, regardless of who wins the election, the policy makers are going to come together, because it's in their interests and it's in the economy's interests, and they're going to reasonably, gracefully address these issues. it's going to be tricky and soft next year, and i'm not saying we're incurring a lot of jobs over the next 6, 12 months, we're not, and unemployment isn't going to klidecline very h over the next 6 to 12 months. but this time next year, and particularly into 2013, '14, and '15, the economy will be in full swing. and the private sector, if you look at american companies, american banks, american households, we've still got some issues with foreclosures, but outside of that, the private sector is in very good financial shape. the only missing ingredient is confidence and we're going to get that confidence back if we nail down these fiscal issues. and again, i think we will.
>> you boys are optimists. i appreciate it. thank you both for being with us. and if i do end up having to wear that dress in four years, it's going to look an awful lot like a three-piece suit and a shirt and a tie. thank you both, austan goolsbee and mark zandi, what a pleasure. coming up next, are the central banks saving the world or making things worse? and later we'll get ron paul's take on the latest move by the federal reserve, an institution that he calls dishonest and immoral. everyone tells a little white lie now and then. but now she wants my recipe [ clears his throat ] [ softly ] she's right behind me isn't she? [ male announcer ] progresso. you gotta taste this soup.
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have more fiber than other leading brands. they're the better way to enjoy your fiber. this week the federal reserve announced a new round of quantitative easing. $40 billion in bond purchases every month meant to get banks to lend more to businesses and individuals here in the united states. in the same week, the european central bank cleared a major legal hurdle to its permanent bailout fund. italy and spain, two big countries considered too big to fail in the ongoing eurozone crisis could get bailouts going forward to bring down their borrowing costs. both are interests of central
banks initiating action when the political will to act the lacking, whether in washington or in europe's capitals. joining me now to debate the topic is richard quest in london. he's the host of "quest means business" on cnn international. richard, welcome. today's q&a question is, are central banks saving the world or are they making things worse? i'll go first, richard. give me 60 seconds on the clock, starting now. richard, central banks are doing the right thing by taking action to shore up our troubled economies, but it is only half the equation. when there's a world financial crisis like the one we witnessed four years ago when lehman brothers collapsed, two things need to be done. number one, central banks need to step in with emergency fiscal moves. two, you need smart political decisions and that's what's lacking in the united states and in europe's capitals. america today is not in a crisis, but it is facing this upcoming economic storm that you people are blowing out of way, by taking crisis-style emergency action this week, like the fed
did, it showed that the real problem ailing america today is a complete lack of political will and leadership. in other words, the fed provided cover for washington's useless politicians. so can central banks save the world? yes. but -- and this is a big but -- they can't do it alone. you need the right political decisions as well, and in washington, richard, our politicians have abdicated their responsibility to uphold the public good. richard, your turn. >> well, one's never surprised with the -- with your views, and here we go! the core question, shave or skuper. are the central banks doing what is necessary to prevent a bad situation becoming worse? and the answer is yes, and for one very simple reason. they are the only game in town. you're right, ali, up to a point. the u.s. congress has abdicated its responsibilities.
in europe, the country's governments, they know what they want to do, they just can't get re-elected if they do it, and they can't agree. so in this scenario, it is only, only, only the central banks that can really make progress. but, and here's the difference between the fed and the ecb. what price do those central banks exact. in the ecb's case, they've got economic reform. they get commitments. they make sure they only buy the bonds after they've got promises. as for the fed -- >> yeah, keep printing money -- >> printing away. >> -- without any reforms -- >> they are printing away without any promises or reforms to show for it. >> that was 1 minute, 15 seconds, but nonetheless, you make a strong argument. richard, always a pleasure. you've heard from me, you've heard from richard, and now you're going to hear from this man -- >> i would give the federal
reserve a very, very low grade. i don't know whether it's an "f" or an "f" minus, but it's very, very bad. >> congressman ron paul is certainly not turning to the fed. i'll find out who he believes just who can help america to protect us from the economic storm that could be headed our way. with the spark cash card from capital one, sven's home security gets the most rewards of any small business credit card! how does this thing work? oh, i like it! [ garth ] sven's small business earns 2% cash back on every purchase, every day! woo-hoo!!! so that's ten security gators, right? put them on my spark card! why settle for less? testing hot tar...
i just told you about the federal reserve's latest attempt to stimulate the economy. and my next guest doesn't want the fed to save the economy. in fact, he doesn't really want the fed to exist at all. ron paul, a name you know. he's a congressman from texas, a three-time presidential candidate, and he calls the federal reserve system, quote, dishonest, immoral, and unconstitutional. now, as richard and i just discussed, the federal reserve has two mandates, keeping prices stable, that's inflation, and promoting full employment. congressman, welcome to the show. our number one economic issue is jobs. if everybody's employed or lots of people are employed, a lot of these problems go away, because you're not supporting people, people are paying taxes. your fellow congressmen are not helping the situation, and you
don't trust the fed. so what's the fix? >> well, they haven't done their job. and you know, they're supposed to have full employment or take care of unemployment, and they've done a lousy job, so i don't know why we can trust them to do something that quite frankly they're incapable of doing. they can't practice central economic planning through management of money and credit, and i think we're seeing the results. they can create a bubble, and they can -- you know, they can create times that look good, but they're artificial, they're distorted, there's malinvestment, and you do have inflation now that people don't admit to. and you know, you said that i don't want the fed to fix the economy. i want to fix the economy, but we could fix the economy if we had not had the fed trying to manage the economy for a long time. so, yes, i believe in the market, and most people, you know, who are investors and believe in the free enterprise system, believe in the markets, but not in money. why -- money is half of the economy. so you want price fixing with
the money? and that's the interest rates. and price fixing doesn't work anyway, so tell me, why would it work with money? >> let's just for a second put aside with the what you would do with the fed question and go back to, the fed was trying to fix things in the economy. you say they're not an effective tool to do that, but they're trying to increase unemployment. congress isn't really helping on that front. do you believe congress could have a bigger role in supporting and growing employment in this country? >> oh, absolutely. congress is a culprit, and they're allied with the fed, because the congress is always too involved. too much regulations, too much taxes, too much spending. but the spending wouldn't occur if you didn't have the fed. because the members of congress are politicians, and they spend money, and they won't cut, because they're afraid they're going to lose the next election. but if you have the fed standing ready, they are the moral hazard, because they're always ready to buy the debt. so there's no incentive under these circumstances for a politician to spend less. so if you want to be the -- run
the american empire around the world, no reason to back off for economic reasons. if you want the welfare state forever, no reason to back off, until the collapse comes. so i'm trying to come back to a sane policy, and trying to prevent the collapse of the dollar. >> let me ask you this. you've refused to fully endorse mitt romney. he says, by the way, he supports an audit of the fed. he says he wouldn't reappoint ben bernanke as fed chairman. he's criticized the latest round of fed stimulus, qe3. is there something mitt romney could do to get your support? >> probably not at this stage, because i'm concerned, as much about the foreign policy as domestic policy and monetary policy. but i feel good that he and i have had discussions on the fed, and he has made some statements, and he supports, you know, this position now about auditing the fed. so i would say that is very good. but there -- you know, we had a lot of debates and we got along quite well, but we had a lot of disagreements on the policy or what the role of government ought to be. >> you don't like his foreign policy position. do you like barack obama's any
better? >> not much. because i don't like the foreign policy since woodrow wilson, you know? because we have become, you know, this policemen of the world. and we're broke. and we have an empire, and just look at what's happening in the middle east today. 11 embassies have been involved in anti-american demonstrations, that people around the world are sick and tired of us telling them what to do and propping up dictators they don't like and prompting these demonstrations. so it's the woodrow wilson idea that we're going to make the world safe for democracy, we're going to fight a world to end all wars, and just look at what's happened. hundreds of millions of people have died, you know, not that that's our fault in our policy, but we have been trapped into believing that we have to be just like the economic planner, the fed at home, overseas, it's a foreign policy that supports an empire that we cannot maintain. it's bad policy and we don't
have any money. >> ron paul, it was a pleasure to talk to you. thank you for joining us. >> thank you, ali. coming up next, the economic storm is coming, but there is a way out. we can prepare for this one and other economic storms that will inevitably come our way in the future. i'll show you how, next, on "your money." [ male announcer ] what if you had thermal night-vision goggles, like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin.
parts of america are crumbling. parts of america are simply not keeping up with the rest of the world. we need to upgrade, our roads, our ports, our bridges, our railways, our pipelines, our power utilities, our broadband capabilities. all of it! it's how you attract and keep business. you spend the money now to give america the tools to grow for decades to come. and in the process, you create jobs to build it and living
wages that allow americans to thrive. now, this is a big idea. it sounds a lot like what many thought the stimulus of 2009 was supposed to be. at the same time, it wreaks of deeper government involvement in the economy. that's why no one's really talking about it. it also won't do anything about this economic storm that could hit in comes months, but it would be the best storm shelter money could buy for the future. a recent trip i took to china reminded me that there are parts of the world that are simply working better and smarter while america is struggling to keep up. in post-war america, fdr's new deal and the interstate highway system under eisenhower created millions of new jobs and great infrastructure, but, boy, they cost a lot of money. since world war ii, there have been thing in the u.s. economy that have been major drivers of growth and employment, growth that usually centers around the middle class. think about manufacturing and then cheap credit and housing, technology, all of it made the
middle class richer. infrastructure could be the next big driver of that kind of prosperity. now, the american society of civil engineers does a study every four years on everything from train lines to the electrical grid and drinking water. here's their breakdown of how america is doing well. well, the part of infrastructure you probably think of first is transportation. here's the grade. bridges get a "c." rail gets a c-minus. aviation gets a "d." transit gets a "d." roads get a d-minus. demand for energy is also rising quickly. it gets a d-plus. our dams, many of which also produce power, receive an even lower grade, a "d." you take all those areas and a few more into account, that's what america gets, a "d." not failing grade, but pretty poor. i want to bring in fareed zakaria. he's the host of "fareed zakaria gps" here on cnn. fareed, if we spend the money
required now, and it's a lot of money, to upgrade america's infrastructure to the point that it is actually competitive, that it attracts business and it keeps business here, what do we think the return on that type of investment could be? >> historically, the return has been extraordinary. if you think about the eerie canal, you thi about the land grant colleges, you think about eisenhower's interstate highway system, you think about the state universities we built, california, after all, was built with the greatest highways, the greatest public parks, the greatest state universities, and that produced everything from silicon valley to hollywood. historically, this has been a huge multiplier. so we should look upon it as laying the foundation, as you were saying, for the next generation of growth. >> part of the problem with the stimulus in 2009, while it was supposed to lay the foundation for the next generation of growth, it was also supposed to provide immediate jobs. and a lot of people said that much of the stuff in there was too complicated, there was too much red tape or didn't create the jobs. is there a way to do this efficiently? to employ, let's say, $1
trillion, in a way that really builds the things that we just talked about, efficiently, and yet creates jobs? >> there is. remember, the stimulus was one third a tax cut, one third went to local governments to stop them from firing schoolteachers and firefighters, and a third of it, or a little less than a third, was stimulus. that piece of it actually worked pretty well. the best thing we could do is to create a national infrastructure bank. because then you take public capital, that is state government money, and you attract private capital. you get all these big funds, hedge funds, private equity players, and they come in and we do it together opinion there is something odd in the united states. we build infrastructure in this country in a more socialist fashion than any other part of the world. >> ie, government builds it. >> government builds it, owns, it, oeperates it. the way they do it in europe, the private sector will build roads. think about the way airports work now. that's the only place where we have a public/private
partnership. the government owns it, jfk or whatever, but we lease out a lot of it to private operators. we say to them, you pay us something back, you make money off of it, we both win. that's the best way to do it, because the government doesn't have to put up tt whole $1 trillion. they will only have to probably put up a tenth of it. with money as cheap as it is now, remember, you can borrow 15-year money, 30-year money, if you're the government of the united states, essentially at no interest rate, this is the time to do it, and this is also the time to do repairs. that's another very important piece. >> fareed, good to see you. thanks for coming. >> a pleasure, as always. coming up, we've made the case and now it's on to how much it's going to cost you. i'm going to put a price tag on the suggestion that fareed just made. you're watching "your money" on cnn. [ male announcer ] wouldn't it be nice if there was an easier,
cost. well, the group estimates that we need to spend $2.2 trillion over five years to bring everything into good condition. that's their word. now, that includes projects already in the works, like president obama's american recovery and reinvestment act, what you'll know as stimulus bill. but everything in place only accounts for about half of that $2.2 trillion. so either the public or the private sector is going to need to come in and invest. one of the ways to do that is to create an infrastructure bank. you heard from fareed talk about it. it's an idea that's already on the minds of lawmakers. it's in the jobs bill that president obama produced. well, here's how it would work. first, the government would create a bank. and they'd fund it. they'd put about $1 trillion in. let's just say. that's a made-up number. but, essentially, this would make the bank part of the federal budget. this would be taxpayer money. the next thing is that states or cities or towns or private companies would submit proposals for projects. those proposals could be an
energy grid, it could be airports, bridges, high-speed rail, whatever you want. the bank would evaluate these projects and select certain ones, based on the cost and the benefit that they would get for that investment. then the bank would issue a loan guarantee or a line of credit to help start the project. once the project's done, fees, taxes, tolls, and other revenues would be used to pay the bank back. at the end of the day, everybody wins. the government gets paid back, states, cities, and towns get the upgrades they need, and businesses make money. they put people to work building these projects and they put people to work as these projects need maintaining over the course of years. christine romans is the host of "your bottom line," and christopher leib runs leib capital management. i just came back from china, which really underscores the difference between shanghai and new york or chicago or san francisco or dallas.
they have infrastructure there that works. now, putting aside theact that the chinese do things in a way sometimes that we wouldn't want to ever do here in the united states, the trains run on time, the bridges are better than ours, the roads are better, the buildings areinfrastructure is . is this the way to get it done? >> it has a lot of advantages to it, but china has a cupp advantages we don't have. first, they're starting from scratch. that sometimes can be a big advantage. it's easier to put up a smart grid from scratch than to replace an old grid. more important, china has also prioritized things. this is a terrific idea, the infrastructure bank. if you think the biggest infrastructure project this country has ever had was world war ii. the priorities were crystal clear. we had to develop, i think it was $3 trillion worth of infrastructure to win that war. we did, and guess what, we also built the foundation for prosperity there after. if we can set the priorities
from my point of view, energy would be number one. somebody else may disagree with me. if we can set the priorities right, get the politicians aboard, this infrastructure bank makes a lot of sense. >> tell me the difference between the united states and china, china is a communist country. there's a policy that decides what the national strategy is going to be. we have far more people involved. that's number one, i don't think anybody is ready to trade a better bridge for a communist political system. number two, china has cash, american dollars, lots of them, money we have been sending them for years. we send money to china, we buy chinese good, those dollars go back to china. they're using cash. in this country, we have to borrow the money to put in the bank and that gets tricky. >> i know you're going to be mood at me for citing china, but let's bring it back to america. show you a study that was released by the national league of cities. and it says that 48% of cities
are still cutting jobs. 43% are still raising fees like tolls, 25% are cutting spending on public safety and human services like parks and recreation and libraries. bottom line is we are not prioritizing whether it's the war or china, we're not prioritizing things that make life better, things that make people want to have their businesses here, things that make businesses want to stay here and not go elsewhere. >> because stimulus has become a dirty word because of politics in washington. you can't get a democrat to say the word stimulus because they're worried for getting hit for borrowing money america can't pay back, but the issue really here is the same congress that brought you the fiscal cliff, we're asking them to have vision and leadership and figure out a wi to invest in the country for the future. no way, that has to be reincarnated to a different group of people. >> but there was a time in this
country where the top businessmen used to get together, they didn't conspire to do anything, but they did try to set priorities for the country. we can re-create that kind of environment again, and maybe that should be the top priority that would lead to an inf infrastructure bank because private enterprise must be involved in the project, and we have to get them all together and say, hey, guys, we have a massive problem in the united states of america, but if we roll up our sleeves like we did in the second world war, we can win. >> we're going to talk about this a lot over the coming weeks. maybe someone will hear and decide they're going to make infrastructure and a bank part of their campaign platform. good to see you. thank you. coming up next, one of the nation's largest public works projects. doesn't matter where you live, you're still paying for new york's latest and most expensive subway line to be built. what goes into building a subway? i went underground to find out.
infrastructure, one of the biggest public works projects in american history at a caisse of $4.5 billion for the first mile and half. new york's new second avenue subway line. complete the line that could run nearly the length of manhattan would cost between $22 billion and $24 billion. what's behind the mammoth tab? i went ten feet below the surface to get to the bottom line. backhoe excavators that can cost $700,000 apiece. man lifts that sell for up to half a million bucks. see that hydraulic drill jumbo, they can go for $800 grand a pop. these are the machines of modern day civil engineering. new york city has them working full speed ahead on its new second avenue subway line. subways are expensive, just to give you a sense of perspective, way back when, the first subway in manhattan was 21 miles and it cost $35 million.
this one, about a mile and a half for about $4.5 billion. that's more than a billion dollars a stop. >> and that's just for phase one. we went digging ten stories below manhattan to find out what goes into the bottom line on a new subway line. >> it's a bargain. it's a bargain. $800,000 a pop. >> the most massive piece of equipment is the tunnel boring machine. the last time new york built a subway t used the cut and cover method, digging from street level. boring is much more efficient and disrupted life above ground much less. >> this is a little over two stories tall. it can go on average about 50 foot a day. >> one of these costs $12 million and requires 20 people to operate it. at 50 feet a day, it takes a long time. >> this is a linear project. you must do the tunnels before
you do this. >> and highly specialized laborers are the ones doing that. sand hogs or urban miners work alongside operating engineers who drive and maintain the machinery. >> on average, we pay a guy about $1,000 a day, and that's base salary plus benefits. >> it's putting people to work in a tough economy. the metropolitan transit authority expects phase one of the subway, three and a half stops and a new tunnel at a fourth spot to create 134,000 jobs with an impact of $18 billion over the nine years of construction. >> new yorkers keep asking why does it take so long? it is normal. >> it is normal, it is what it takes. >> all the while, americans are footing the bill, no matter where they live. >> second avenue right now, $1.3 billion comes from the federal government. and the rest of $3.15 comes from new york. >> the portion from new york cos