tv Your Money CNN September 21, 2013 6:30am-7:01am PDT
a spending bill passed yesterday to defund obama care. >> the american people don't want the government shutdown and they don't want obama care. >> "your money" starts right now. america's economy facing another eminent and self inflicted threat. i'm christine romans. this is "your money." how does this play out? i'll be joined by candy crowley in a moment. we have a long-term debt deficit problem, but the problem is the folks in charge of fixing it. welcome to washington. a city where politicians agree on one thing. disagreeing. >> i cannot remember a time when one faction of one party promises economic chaos if it
can't get 100% of what it wants. >> without an agreement on spending, the federal government shuts down midnight on october 1st. >> it is hard to imagine how thinking positive comes out of this. >> so what is driving washington to the brink of a shutdown again? some republicans pushing for a repeal of president obama's affordable care act. the president says he won't negotiate. the last federal government shutdown started in 1995, well before obama care and the tea party. >> republican leaders in washington have put ideaology. >> he has to try to create a phony argument about fantasy cuts that do not exist in order to frighten people about problems that aren't real. >> the result of the stalemate,
800,000 federal workers stayed home for five days. offices and parks closed. >> that makes us mad. real mad! >> after congress failed to approve the spending measure, the government shutdown again in december. that shutdown lasted 21 days. the final cost? $1.4 billion. senator john mccain warns republicans to remember who the voters held responsible. >> rightly or wrongly, congress gets blamed. we have seen the movie before. just some of them were not around at the time. i was. >> the most recent cnn poll shows history is likely to repeat itself. 51% of americans say congressional republicans are to blame for the shutdown. 33% would blame president obama. with the biggest government operating without a budget since 2009, there is not much optimism. i want to bring in candy crowley. this fight is not between the
left and right this time. listen. >> we will do everything necessary and anything possible to defund obama care. >> it would be good political theater to watch them self destruct. >> candy s the gop at war with itself? >> sure. it has been for some time. especially on the house side with the conservative and moderate republicans. they are. they lack a, if you will, a party leader in the sense that the president leads the democratic party. so basically, they are and this happens to the party that doesn't own the white house. it all really boils down to the house not even the senate and what john boehner can deliver and what he will need nancy pelosi to deliver. >> a report from the congressional research service finds that if the government shuts down, obama care would go
ahead and the i mplementation o obama care. many if not most federal offices would shutdown. parks and museums would close. you would see federal contractors to issue paper work to departments and projects delayed. some critical services would stay open. air traffic control and food and services and border patrol. anything essential to the banking system. that means the government will issue bonds and you do need to pay your taxes. the postal service would still deliver mail. the government would pay out medicare and medicaid and social security benefits. they are not effected by a shutdown. the government workers would be affected. it is unlikely. we don't know for sure. the president, his appointees and members of congress, anyone else working during the shutdown would get paid, but the paychecks could be delayed. the furloughed federal workers
may get back pay after the government starts up again. it is not guaranteed. in a shutdown, federal contracts slowed. workers would not get paid on time. they would not spend. muhammad, how long until all of that drags down the economy? >> if it happens, christine, it will have a negative impact pretty quickly. in addition to everything you cited, the direct impact, there are three impacts. it increases uncertainty, which makes companies less willing to invest in plans and hiring. second, it forces the fed to deal with policies which are uncertain and it lowers our standard in the economy. the immediate effects and indirectly which are critical which are self inflicted problems. >> mohamed, since this, stocks
have gone up. people say i'm not going to worry about the washington craziness. stock market is doing great. even with the dysfunctional congress. what do you say to that? >> i say they are right in the sense that the assumption in the markets, it will not shutdown. once again, they will find a compromise. let's remember the summer of 2011 when they got so close to a technical default that they actually ended up by really undermining the economy and market. the assumption in the market is at the end of the day, these are just games and they will sort it out. if they don't, if they get too close and can't pull back, the markets will get hit really hard. >> candy, the markets are assuming there are grown ups working in washington right now. meantime, we continue to see these games. the house has voted to repeal obama care more than 40 times. it hasn't worked. they keep doing it over and over again. it has virtually no chance of
making it through the senate. the president will not sign away his signature law. is this a fund raising exercise somehow? what are they doing here? >> understand the makeup of the house. they are not elected statewide. they are elected within their district. conservatives and tea party members on the house side and republican party will say to you this is what my constituents want. this is what they expect me to do. they argue that the biggest single drag on the economy is actually obama care. the businesses are laying off workers or moving them to part-time in advance of the registry and going on and forcing folks into health care. the fact is in the house side, these conservatives are doing what they believe their constituents want them to do. at the same time, speaker boehner, the leader of the republican party and nancy pelosi, who heads up the democrats, both understand the price to be paid if the
government shuts down. you have to think of the votes for the next couple of weeks not as final, but as part of the process. it is real ugly to watch as we all watched it before. as you said, we have seen this movie before. in the end, when you look at who has what to gain and lose, the leaders on both side understand the stakes. i think that is why people think that is the washington game. we will pay attention. >> the biggest issue is people who want jobs and that's some big debt drama. you only have the fed which is the only grown up in washington. coming up, the taper. it is not any of these three things. five letters that mean more to your job and investments than anything else right now. i need to redeem some venture miles before my demise. okay. it's easy to erase any recent travel expense i want. just pick that flight right there. mmm hmmm.
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taper. the word of the week on wall street. maybe the word of the year, too. everyone was ready and then the federal reserve departmeidn't d. i love this headline. keep calm and taper on. to understand that, you need to know what we are tapering. fed chief ben bernancke and company are pumping $85 billion a month in the economy. the fed started the latest round of stimulus in september of 2012. since then, the s&p 500 is up 20%. it has given a boost to your stocks and etfs. next, your home. have you refinanced lately? the fed had a lot to do with those savings. why have rates been rising over
the past few months? in anticipation the fed will slow down tapering the bond-buying program. if you have not refinanced. low rates, increased demand which prices are up 12% in the past year. your job, 2 million people have been hired since the bond-buying program. it is the largest gain over a 12-month span before the recession. the fed says it needs to see more evidence of a stronger economy overall the before it tapers. guaranteeing you will hear this increasingly irritating word. >> hollywood has "it" girls. wall street has "it" words. >> stop with the bond buying and taper. >> taper is the latest "it" word. >> the top ten list. >> it won't make letterman's top ten list. >> taper? i don't know. >> politics?
>> what say taper? >> it is not a zoo animal or a cnn anchor or the way to wear your jeans. it is federal reserve chairman ben bernancke's challenge. it is likely the final challenge for this chief. >> stayed a lot longer than he wanted. >> he has done what no fed chief has done before. he is holding a fire hose. spraying $85 billion a month in the economy. taper as unlikely wall street lingo joins a list of quantitative easing and sequester and tarp. if he were a little rascal, he would throw money from the window. the dilemma for the fed, take away the training wheels too soon and the economy could crash. fail to taper and the economy could not take fly. tapers is likely someone else's
job. ben bernancke is expected to step down at the end of the year. he is not ready to announce his plans next with larry summers removing his name from the list, janet yellen is likely to be the rich. we found out when ben bernancke does nothing, stock markets hit record highs. what happens to your money when the next fed chief starts to take their foot off the gas? that's next. tinese in with premium service like one of the best on-time delivery records and a low claims ratio, we do whatever it takes to make your business our business. od. helping the world keep promises.
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reserve would pull back on the $85 billion a month bond purchasing. >> i don't recall we with do anything particular in the meeting. >> no, the fed is not doing any particular, but flooding the market with $85 billion a month, stocks have soared. job creation has stalled. that is the opposite effect. the definition of insanity is doing the same thing over and over again and expecting different results. we have the head of risk management. keith, the market is up. why is this bad news? >> anytime you get a central planner, it could be now or 200 years ago. it has been happening for 200 years or more. anytime a central planner devalues the currency, that is not a good thing. i have been very bullish on
stocks up until this week. i really liked was the concept of letting the purchasing power of the american people, god forbid, go up. that is the value of the u.s. dollar. alongside that interest test test unfortunately, ben bernanke disagrees with that, and he's pandering to nonsavors that i don't think will play out so well. i think what he did this week was borderline un-american. >> you call him a central planner, but at least someone is planning in washington, because no one else is, keith. >> exactly. >> and that's the truth. look, what happens now? >> from here, you're in a really tough spot, because, of course, now what ben bernanke did was he put a huge systemic level of risk into the bond market, because if you're not going to taper now or you're not going to tell us or you're not going to go with what the market actually expected -- in other words, ben bernanke's decided not to respect the market, which is a very difficult position to take, i think -- i think all of a sudden into october you get that taper talk again.
so whether it's called the october taper or whatever people make it out to be, that become as big risk, christine. for us, i think it's a great spot. if you've been long stocks, it's a great spot to sell some. >> keith, great to see you. have a great weekend. >> thanks. investors are jumping into the u.s. stock market. one big-name endorser could be jumping out of the u.s. shoe market. here's "the score." boston celtics point guard rondo is reportedly dropping nike and joining anta. "boston globe" says after the nike contract ends, he will join kevin garnett as an endorser. a lot of attention on rondo's new shoes this season. ease coming from back surgery to repair a torn acl. and red sox let fans into the park for $1 if they had a beard. beards are somewhat of a tradition among red sox players. now, it's the fans' turn to grow one, draw one, or wear a fake
one. the $1 ticket sold out quickly. the promotion reminded us of this picture of cnn anchor and die hard red sox fan john berman. isn't he cute? he would have gotten in, but he was too busy working here at cnn. staying with baseball, marcus strohman, a top pitching prospect, but we love him for paying off his mother's mortgage and posting a video of her reaction on instagram this week. >> marcus, what did you do? >> oh. >> he included the caption, wouldn't be where i am today without my parents parents, #familyfirst. my three little boys are watching that egg isment. and the cleveland browns are looking for the first win of the season. but some fans will be losing for months to come, because six of the players featured in the team's 2013 calendar are no longer with the team. trent richardson is one of the
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♪ the all-new 2014 lexus is. it's your move. the poverty rate has barely budged in three years, and the rich are richer than ever before. are we one america with two economies? headlines this week certainly seem to make that case. more than 46 million americans live in poverty. 15% of the population. it has been four years since the recession ended, but the poverty rate virtually no improvement, because wages fell last year. at the same time, wealth among the 400 richest americans is climbing. the annual "forbes" list finds the combined net worth hit a record $2 trillion. that growing wage gap between the rich and the poor coming to the forefront this week. the s.e.c., the securities and exchange commission, wants companies to open their books and show exactly how much their top executives make compared to the rest of their staff.
it will be an interesting look under the hood of companies, usually you see their earnings and their revenue, but you would see the disparity between the average worker and the ceo. >> yeah, this is originally part of dodd-frank. the s.e.c. has come out and unveiled the pay ratio proposal. so they'll reveal three things. how much the ceo makes. number two, the salary of the average worker at that company. and number three, probably the most interesting, the ratio between the two. you know, christine, we talk about, you know, the wealth gap between the rich and the poor and how the wealth gap has risen during this recovery. let me give you numbers. the average ceo in america makes roughly $12 million. the average worker, wait for it, $35,000. you know, a huge disparity between the two. i'm going to throw out names for you now. larry ellison, for example, ceo of oracle, makes $96 million, elon musk of tesla, $78 million. and mike jeffries of abercrombie & fitch, for example, reportedly makes 1,600
times his average employee. this is obviously controversial, because people are saying, is this really useful information? number two, what's the point, other than to publicly humiliate corporate ceos? and people are saying the information will be difficult to compile. some companies have workers spread out across the globe. and what might be the repercussions? even if we know the wealth gap, what will we do about it? >> very interesting. another piece of information about companies and their workers. thank you so much. for more on the stories that matter to your money, give me 60 seconds on your clock, it's "money time." college enrollment falling. student debt soaring. the result? some private colleges are slashing tuition by as much as half in some cases. if that's not enough of a deal, wharton's elite mba program can be yours online for free. you won't get the degree, but you will save 200 grand. of course, college isn't for
everyone. harvard dropout bill gates heads "forbes" list of the richest americans for the 20th year in a row. zuckerberg makes an appearance thanks to facebook's rising stock. a new study finds more americans are ruling out retirement. nearly one in six workers plan to spend their golden years at the office. the late fashion designer gianni versace's mansion sold for $41.5 million. it will become a hotel. he was shot and killed on the doorstep in 1997. after a deadly wreck almost two years ago, the costa concordia finally upright. it's no small task, requiring massive pulleys, cables, and a 500-person crew. the total price tag? $800 million. and is a big endorsement deal enough to cheer up this grumpy cat? the internet sensation is the spokescat for friskies. [ buzzer ] i'll be back with a brand-new "your money" at 2:00 p.m. coming up next, the rainfall in colorado has been called
biblical. a 500-year flood that's left damage that's truly unbelievable. so who picks up the tab? fema or private insurance companies? we'll tell you what you need to know if a disaster like this strikes your home. that's next in the "cnn newsroom." if this legislation is not enacted and we embark on a government shutdown, the consequences are severe. >> closed for business. that'll be the message from washington if congress doesn't pass a budget in the next nine days. we'll explain exactly how this is going to affect you. a colorado town devastated by floods, thousands forced to leave, and at least one dead. but the worst is not over. we have just learned the entire te