Transcripts For CNNW Your Money 20120812

but to be fair politicians make a lot of promises to get your vote that they don't keep. maybe they intend to keep some of them. maybe they don't. politifact.com tracked more than 500 promises that president obama made during his campaign in 2008 when he was candidate obama. he's kept 37% of those promises. he's working on 23% of them. he's broken 16% outright and compromised on 14% to get the job done. the rest, some of you like to tweet me a lot and point out the many promises that he hasn't kept. some of those broken promises can be blamed on congress. they are stalled because your lawmakers won't do a thing about them. i have spent the last few months blaming congress for things, but it's not congress who is going to stand in the way of romney's ridiculous promise. it's the state of the u.s. economy. 12 million jobs over four years, that's what romney is promising. that's 3 million jobs a year or an average of 250,000 jobs per month every month for an entire presidency. i'm going to save my next guest some time. he'll say not only is it possible, but that it's been done before -- most recently during president clinton's second term in the late '90s. but that was a very different economy. one that was growing at an average of 4.2% a year. ours is crawling at 1.5%. you see companies need to be on solid footing to be confident enough to hire that many people. i'm all for big thinking on and off the campaign trail, but instead we get big promises that often end up being lies. i'm joined now by david gergen. cnn's senior political analyst. but i want to start with kevin hasset. he's an economic advisor to mitt romney. he's one of the authors of the "12 million jobs in four years pledge." kevin, good to see you back here. you authored this claim. please give me a solid economic basis for creating 12 million jobs in four years, three million a year. 250,000 jobs a month, on average, starting in january 2013. >> right. if you've looked at the study and it sounds like you have a strong opinion and i know you base those on your own analysis. but the fact is, there are lots of countries around the world that have been tinkering with their economic policies and then we have lots of data. what happens when they do that. so for example, governor romney proposed we cut the corporate tax rate from 35 to 25. now we're about the highest on earth. two countries have higher. but other than that, everybody has a lower rate. clinton increased it by 1% in the '90s, we were in the middle of the countries around the world. so we have had 50 countries changing every two or three years and we watch what happens when they do that and seen a lot of job creation. if you look at our study, we look at the individual proposals that governor romney made and go to the academic literature, just like if you're a sports show, you go to the videotape. and then if you add it up, you get that big number you mentioned. of course, it's very important to mention that's conditional on everything happening. everything happening that he proposed. >> right. conditional on everything happening. later in the show, i have them lined up. i have the entire u.s. tax code lined up here. all 73,000 pages of it. that's not going to change in january 2013 no matter what mitt romney wants. here's my question to you. i'm not saying it's impossible to create 250,000 jobs a month. we have done it before. i'll point that out. the issue is in order to do that, you have to change things, which means it's not going to happen in the first month or probably not going to happen in the first six months, which means you're going to have to be creating even more jobs. what economic circumstances in this country changes the day mitt romney takes office that would allow for immediate job growth at that pace? we still have slow economic growth and there are no forecasts for substantially faster economic growth over the course of the next few years. we still have a bloated and inefficient 73,000-page tax code. we still have foreclosures and edit problems. so how is it that the world somehow changes and the economic sun shines through the storm clouds because mitt romney becomes president? >> you listed a lot of the major things that we need to address and that governor romney is talking about on the stump. it's absolutely right that if governor romney is elected and then he goes into the white house and nobody wants to adopt any of his policies in congress, then one wouldn't expect that all of a sudden businesses would start investing again, people would start buying houses again and all those things that need to happen to lift the economy. but if romney is elected and he has a congress he can work with, which i think is highly likely, he's worked with democrats and the republicans in the past very successfully -- then what's going to happen is he's going to start listing the problems and knocking them down one by one. and a lot of them are kind of easy to legislate. for example, the corporate rate reduction isn't that complicated. it is not the kind of thing that will take a staff 10 to 15 months to write a bill so we can all look at it. we could cut the rate today. we could cut it from 35% to 25%. there's a heck of a lot of stuff that could happen right away. once it does, this is something we talk about in the paper. it's going to bring a lot of certainty back, which we don't have now with the tax code expiring. >> there are a lot of americans that are not going to be interested in you cutting corporate taxes without dealing th the loopholes that make up the 73,000 pages and that's the thing where it gets bogged down. kevin, you're always so cheery. >> sorry about that. >> no we like that. david gergen, politicians make very big promises in election times. sometimes after they're elected. president bush said read my lips, no new taxes. president obama and this is the one he keeps getting held to, the stimulus would make sure that unemployment never rose above 8%. some people will tell you he never said that, but his people said it and they published it. is this the kind of thing that could come back and bite a president romney? >> absolutely. just like it come back to bite mr. obama. but i do think this. kevin has got a legitimate credible argument that we could be doing a lot better than we're doing now. there are enormous number of businessmen, as you well know, who are sitting on cash right now, cash is on the sidelines because of the uncertainty over the election, uncertainly over the fiscal cliff after the elections. uncertain we're going to get serious about simpson-bowles and tackling a debt. serious about tackling a debt. if you did those things and undertook them in a bold way, you could unleash a lot more economic growth in this country. but the notion of getting 12 million jobs over four years is a great dream. but most economists will say that's a pipe dream. because the fact is, whatever we do, we are caught at the tail end of a very different kind of recession. as you know, they go back to the rogoff-reinhart analysis of this. financial recessions are deeper than you expect and they last longer than they expect and leave you a hangover. that's what we're experiencing. plus we're in a new global economy. this is hard to compete to create jobs. this is not like the '90s. i think all of us believe we can do better. >> we may disagree on the number of 12 million jobs over three months, kevin, but what we agree on is that we can do better so we want to discuss how we do better. where is the plan that backs up these claims, even if the claims don't live up to the expectations. i want to talk to you about the plan. the romney campaign says under president obama is not getting better fast enough. sounds like a great case for change. obama is not getting better fast enough. plus whether you own your home or squat in your parents basement, i'm going to show you how people are making money off the real estate recovery. you don't need a down payment or a loan. stay with us. there are a lot of warning lights and sounds vying for your attention. so we invented a warning you can feel. introducing the all-new cadillac xts. available with a patented safety alert seat. when there's danger you might not see, you're warned by a pulse in the seat. it's technology you won't find in a mercedes e-class. the all-new cadillac xts has arrived, and it's bringing the future forward. for a "back to school" clothing party. what they don't know is they're on hidden camera, and all the clothes are actually from walmart. let's see what happens. they feel really soft. i like it. i feel like i could wear this with almost anything. we love the material. so far all the material is phenomenal. these clothes are all from walmart. what? 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[ earl ] would you now? yes! walmart has great brands that make great looks. you'll love them, or your money back, guaranteed. see for yourself. ♪ see for yourself. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. would you mind if to be i go ahead of you?omer. instead we had someone go ahead of him and win fifty thousand dollars. congratulations you are our one millionth customer. people don't like to miss out on money that should have been theirs. that's why at ally we have the raise your rate 2-year cd. you can get a one-time rate increase if our two-year rate goes up. if your bank makes you miss out, you need an ally. ally bank. no nonsense. just people sense. i told you why i think mitt romney's claim that he can create 12 million jobs in four years is false. now let me show you how hard it would be to do that. romney, like many other politicians, goes on the offensive here using the rising unemployment rate against president obama. >> in july unemployment went up again and the president is running out of time. under obama's economy, it's just not getting better. >> that is at best a misrepresentation of the unemployment situation. the unemployment rate is a favorite talking point amongst politicians. i have been consistent about this for many years. it's a secondary measure of the health of the labor market. it follows a group of people moving in and out of the job hunt. the monthly payroll numbers, the job creation or loss numbers, are a much clearer gauge of what we are, where we are. the total job creation number is an absolute. everyone can measure it. everyone can feel it. everyone can understand it. so let's throw that unemployment rate out the window. i have been saying this for years and look at job creation numbers. you can see the deep cuts. this was during the recession. at the height of the recession, the end of 2008, 2009 losing somewhere in the neighborhood of 800,000 jobs a month when president bush left office and president obama takes off. in 2009 you can see things started to improve. job growth fluctuated but started to improve. a lot of that had to do with the stimulus bill. we saw a peak in the beginning of 2009. in 2010 we started to see losses again, and then the end of 2010 all the way to now, we've seen about two years' worth of net job gains. my point here is, romney's promise of 12 million jobs over 48 months means this economy would have to create 250,000 jobs every single month. that's about this level over here. it doesn't happen very often. we have only seen a handful of months with that kind of job growth over the last four years. it would take a sharp, sharp turn-around in the economy to all of a sudden be at a steady pace of 250,000 jobs a month. i'm rejoined by david gergen and kevin hassett. kevin is an economic adviser to mitt romney and an author of this claim that 12 million jobs can be created in four years. kevin, you and your co-authors wrote, quote, that americans took a wrong turn in economic policy, end quote. does this mean we can see stronger job creation simply from a political policy change in washington? because as you know from being on this show before, i think there's something else at play here including this massive storm coming in from europe that washington can do very little about. >> what we have to do is focus on the things that we can have an impact on and other things could happen. europe could blow up and then there could be some months that are bad. the fact is think about the problem this way. suppose that the economy was really struggling like it is now. every policy was perfect. we had a brilliant tax code. the government had a balanced budget, everything was perfect and we weren't growing. then we'd be scratching our heads. it's like, oh, my gosh, are we going to be able to improve this. but the fact is that if you look at pretty much any of our policies it's indefensible. right? so the tax code is indefensible, deficit sin defensible, everything is broken. and that's kind of almost our best asset. if we go in and do obvious fixes, we can turn this economy around and deliver a lot more jobs than we have. think about it. president obama hasn't fixed anything. so instead of saying, being the highest corporate tax on earth is a bad thing, let's fix that, he decided to spend money on the stimulus and leave big problems untouched. i think that's why the growth is so low. >> kevin makes an interesting point. there's so much not working that if you fixed that we could see stronger job numbers. does it get you to the numbers that romney is talking about? >> no, i don't think they do. but we could do a lot better. i actually thought you were sugar coating where we are when you said we've improved a lot over the last two or three years. the fact is our economy is back to where it was in terms of gdp from before the recession and we have 5 million fewer jobs. that's not exactly impressive. we can do better than that. i do think some of the things that kevin is talking about have to be done, like tax reform, getting the deficits under control. but i also think it's true that republicans have not been very helpful. in fact, they have opposed the president when he's tried to fix some of these things. like the deficit. it's been hard for him to deal with getting the deficit under control. he wanted to go for the big bang sort of theory approach to getting the deficit under ntrol. the president ought to do more right now. bill clinton said why don't you extend the bush tax cuts for a year? do that before the elections, give people more certainty. will mitt romney join president obama in trying to do that? i don't know. kevin, i don't know how you guys -- what leadership will you show on the fiscal cliff, for example? if you're elected, at are you going to do about the fiscal cliff? >> governor romney has a very detailed plan. he goes after medicare, medicaid, social security. >> would you push that? >> he has all these things on the table. unlike obama. but the thing i disagree with, davi is that i think you're being too kind to president obama. the fact is he had a super majority in the senate. he could have done anything he wanted and he decided to take fixing things off the table. if we made a list of the problems he had when we took office, that's still there. we have a lot less money. if he had a tax reform that stimulated the economy, broaden the base, lowered the rates and stimulated that way, we wouldn't have the hangover we're having right now and we would have a much better economy because we wouldn't have so many problems. >> we can do better. the three of us are agreed. but there are complicated things. maybe the president is getting too much blame and too much credit for what he can do. love to see you author something that talks about whatongress can do and whether some of this can get done before the election. i will go on a limb and tell people to vote for congressman that make a decision to deal with these things before the election and not after. but i may grow hair before that happens. kevin, good to see you as always. kevin hassett, a romney economic advisor. david gerg gergen, thank you. coming up, thousands of pink slips going out days before the election. why it could happen just as the economic storm approaches. meineke's personal pricing on brakes. i tell mike what i can spend. i do my best to make that work. we're driving safely. and sue saved money on brakes. now that's personal pricing. i've been telling you about the fiscal cliff we are head ed over in congress refuses to act. one rocky area of the cliff is the so-called sequester, which is a stupid name for a stupid thing. $1.2 trillion in automatic spending cuts over ten years. half will come from defense including $55 billion alone next year. jobs will be lost. possibly more than a million defense-related jobs next year. most of them, by the way, are not government jobs. the bulk of the pink slips come om private contractors hired by uncle sam. i don't know if the number is right. but let's say it's in the ballpark. that would be equivalent, take a look at the red bars, to all of the jobs created this year. i'm not willing to take that chance and your congress shouldn't be either. defense companies aren't waiting around. they are already starting to prepare for the job losses. why? because of something called the warn act. the obama administration says the act doesn't apply here and that's triggering a political firestorm. before we get to that, you need to know what the warn act is. i want to bring in poppy harlow. tell us what the warn act is. what does it have to do with defense cuts. >> most people haven't heard of it, but it's important because if you work for a medium to big size company, this applies to you. it's technically called the worker adjustment and retraining act. it was passed back in 1988. it requires them to send out these notices 60 days in advance if they are going to close a plant or have mass layoffs. these are employerwith ov 100 workers. so if defense contractorhave to do mass layoffsthey may need to send out these notices. so what is a mass layoff? 500 or more employees, or if your company is smaller than 500 employees but 100 or larger, 33%, or one-third of your workforce. if you're going to cut that many people, you need to send these notices out. so here's where it gets political. sequester, as you said, a stupid name for a stupid thing. that would take effect if it happens on january 2nd. so what's 60 days before that? when would the notices go out? november 2nd, just a few days before election. so imagine getting a notice saying you've lost your job just as you head to the polls. the big question now is does this apply in this case. the labor department came out this week and said, no. they issued guidance which is this quote and they basically said, well, we don't know if it's going to happen so we don't know if the job cuts are going to come so it would be "inappropriate" to send out a notice. but republicans say, look, that guidance is politically motivated. take a listen. >> the only reason the administration sent out this guidance to employers earlier this week was to keep people in the dark, keep people in the dark about the impact that these defense cuts will have, until, of course, after the election. that's senate minori leader mitch mcconnell. so republicans siding with him on this. the obama administration and labor department saying you shouldn't be alarmist here. we shouldn't send out these notices because we don't know if these cuts are going to come. it's going to be up to the companies themselves whether they want to send out the notices. and as you know, if they don't send out the notices and do layoffs, they could get sued. so it will be interesting to see if the companies are going to do this or not. and it's absolutely political at this point. the obama administration through the labor department saying inappropriate to send those notices out. >> once again, we have uncertainty by employers not knowing what to do and that could end up costing americans jobs. thank you for a great explanation. what are the defense contractors planning to do? lockheed martin, the biggest government defense contractor says it is reviewing the guidance issued by the obama administration. its ceo has said it may have to lay off 10,000 workers if congress doesn't act. another big contractor, bae systems, says warn notices are possible. it could lay off 4,000 workers if the sequester happens. joining me is rick mcneil, the president and ceo of lord corporation, which makes critical parts for helicopters, about 15% of their business is defense. and thomas buffenbarger. president of the international association of machinists and aerospace workers, the defense industry's biggest union. rick, you have 2800 employees worldwide. you say you're not laying anyone off yet. but how does congress' inability to act affect jobs at lord? are there plans for hiring off the table right now? are there contingencies for laying people off? >> yes, we're looking at different scenarios, but it's very difficult to understand where we're going because until $5 million in cuts next year will occur and the cuts beyond that, it's very difficult to plan and decide what you are going to do. so we're not only having an issue, but our suppliers that supply castings and forgings and machinists parts are not hiring, they are not spending capital to expand in areas where expansion is needed. so there's just a lot of uncertainty out there right. >> thomas, critics say the defense industry is sounding the alarm on job cuts and the warn act because its trying to protect its profits. in your case, i imagine, you're interested in protecting jobs. >> i certainly am interested in protecting jobs. and mr. mcneil is absolutely correct about the difficulties he faces, as the union is in the same position. we don't know what to expect. we don't know -- we're confused by the pronouncements of the government as to when this is going to kick in, if it kicks in. we know we have to abide by the law. we're going to represent and defend our members. if there is going to be a significant, catastrophic in my opinion, economic event, we expect warn notices to go out. some states such as new york have a 90-day threshold. so notices could come out in october. this is the weirdest event i have ever seen our congress engage in. the earlier clip of leader mitch mcconnell, who is in large part responsible for the mess that we're in right now, with all the members of our congress, quite frankly, have put an industry, a great industry, one that contributes significantly to our gross domestic product and to a good standard of living in this country. they've put all this in jeopardy in the name of politics. >> over political squabbles. so here's the question. i know that unions and employers agree on a lot of things. we like to paint them as being on opposites but the two of you gentlemen are on the same side of the issue. these are nonstrategic cuts that are going to cost jobs. one way or the other. so what would you prefer happen based on the guidance issued by the labor secretary and the obama administration that the warn act doesn't apply to sequester? should people like rick, you know, issue the warn notices when they they think they might have to lay people off? even if they may not have to because of the uncertainty of what's going to happen? what would you prefer happen in this case? >> i believe in having information and putting it to use. and right now, the notices we have seen come from the government have come from at the lower levels. i haven't seen any elected official's name or signature attached to these, so i'm preparing for the worst. and i think our employer base is preparing for the worst too. if a company doesn't issue a warn notice and we have this event occur, the fiscal cliff, then i'm going to represent our members taking our employers on for failing to follow the law. now do i think it's right? probably not. the employers are as confused as we are about the whole situation right now. >> i think we're all agreed that this is, as you said, thomas, one of the more puzzling -- the weirdest things we've ever seen go on in politics, determining possibility the employment of millions or more of americans. richard mcneil and thomas buffenbarger, thank you. we have a lot to talk about in the tax code. take a look at it. 74,000 pages of legalese, loopholes, tax breaks, exceptions from everyone from homeowners to big oil. that's it. those aren't numerous versions of it. that's the tax code. the u.s. tax code. probably the most complicated federal tax system on the planet. maybe even in the galaxy. we all want to reform this colossal mess. i'll tell you how we're going to do it on the other side. 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[ powers down ] uh-oh, flobot is broken. the "name your price" tool, only from progressive. call or click today. want to comply with the u.s. tax code? no problem. this is just one piece of it. it's 73,608 pages. you just need to quickly leaf through the first one. it's incomprehensible gibberish full of tax breaks and loopholes that congress slips in for interest groups that back them to encourage economic behavior in a way that the government wants. the the last time the tax code was reformed ronald reagan was president and that took years of back and forth in congress to pass. since then, 15,000 changes have been enacted. 14 temporary tax breaks have multiplied into 132 temporary tax breaks that are renewed time and time again. last year the government collected $2.3 trillion in revenue, $1.1 trillion from individual income taxes, $181 billion from corporations. there are many on the right that think that's already too much. so what would real tax reform actually look like? number one on the agenda would be rethinking hundreds of tax breaks that allow a multibillion corporation, let's say general electric, to pay an effective corporate tax rate of 14%. how do you make getting rid of tax breaks more appetizing? you create lower income tax rates for everybody. the theory is that if more people pay lower rates, uncle sam gets more or maybe the same. another point of contention is that the lower tax rates on capital gains and dividends, which are taxed at a lower rate than normal income that most people make. president obama's bipartisan debt commission proposed taxing capital gains and dividends as ordinary income, but at new lower rates. joining us to discuss what the tax code should look like we have steven moore, writer at "the wall street journal" and something of an expert on the issue of wanting lower taxes. from rochester, new york, we a david k. johnson, a columnist at reuters, a pulitzer prize winning win ing journalist who uncovered loopholes in the u.s. tax code. his newest book will be entitled "the fine print: how big companies use plain english to rob you blind." steven, let's start with you. what's the biggest thing needed to be done to reform the tax code? what's the important thing we can all agree on in tax reform? >> thank you for letting me talk about my favorite subject. i love the way you introduced this segment. albert einstein said the most complicated thing in the universe is the federal tax code. i think there is a lot of truth to that. so the idea of simplifying the code and making it more pro-growth as we did in 1986, it worked really well. you and i have crossed swords many times. i've debated david on issues a lot. but i bet the three of us could agree on one concept. low rates, broad base. that's the kind of hallmark for a good tax system. the tragedy is we waited now almost 25 years to see a new reform that brings the rates down and clears out all the pollution in the tax system. david has written on this extensively. we can do much better than the code that we have now. >> david, pick it up from there. do we agreon low rate, broad base? >> yes and no. the most important principle is that it has to be progressive. that's a 2,500-year-old idea and it is the idea that gave birth to democracy. that's the less you have, the lower your tax rate, the more you have, the higher your tax rate. we don't necessarily have to have income as our tax base. there are lots of things we could decide for a base. but progressivety has been argued. as long as we follow that principle, i think, yes, i would agree broad base and lower rates and get rid of the favors across the board including the home mortgage interest deduction. >> i'm going to stop you right there. that's exactly the first place we're going to run into a problem. if i tell my viewers we want corporations to pay more, i bet most of them will say, yeah, the fat cats should pay more. don't touch my mortgage interest rate deduction. that's an expensive deduction and now this is where it becomes political. let me take it back to stephen moore. our tax philosopher. we now have agreement -- low rates, broad base, and progressive. i heard you agreeing with progressive. you think that's okay. now we have to take the 74,000 pages down to, i don't know, 500 pages. that means cutting out a lot of things people want. including people on your side of the ideological spectrum. >> that's right. and i've always believed that this is the ultimate washington versus america issue. america, businesses, households want the simpler system that's easier to comply with that doesn't, you know, take weeks to figure out your tax burden. but nobody in washington, nobody in this town i'm in now wants tax reform. none of the lobbyists want tax reform. none of the members on the tax writing committees of congress want this. if you look back at 1986, you remember this david, people said this can't work. and you know what, a miracle happened.[n gotid of a lot he loopholes the t sys th, anth g t rbut lot of they cut the rates almost in ha 2013, i really believe it's the year when all the stars are going to be aligned and we're going to get this done. in part, because the whole system is a train wreck. >> 2013 is the year i'm going to be mistaken for brad pitt as i walk down broadway in new york. david, let me ask you this -- should the tax code involve incentives put in by the government for people to behave a certain way, to do certain things? >> the tax code inherently does that. if you tax pages and profits, you get a different set of incentives that grow just out of doing that. if you tax carbon which "forbes" magazine has come out in favor of, you get a different incentive. so by its nature, a tax system creates incentives. targeted incentives have gotten completely out of hand and more importantly, little tiny favors. but the number one thing we need to get rid of is we now have a system that favors multi-national corporations over domestic ones. it lets big companies siphon profits and send them to tax havens and requires american companies to pay taxes in full. we need to stop that discrimination against domestic, which tend to be family-owned businesses, in favor of the big multi-nationals. >> stephen moore, should a company that makes computer chips be taxed at a different rate than one that makes potato chips? >> no. absolutely not. every industry should be treated, you know, on a level playing field. i agree with what david said we shouldn't give breaks to multi-nationals. one problem i have with the tax code is what we're doing is favoritism towards a french company versus an american company because companies are generally abroad paying lower statutory rates. but i think that this can get done. i think david is right in a progressive way. in 1986 when we lowered the tax rate from 50% to 28%, we actually saw the percentage of taxes paid by the rich increase. so this can work in a way i think we can all agree on. >> i don't know if we got a solution here, but we definitely had a smart conversation on tax reform. >> it's going to happen in 2013! i'm betting on it! >> i'm going to get a pet unicorn. >> thank you both. coming up, the real estate market is making a comeback. even if you don't have enough for a down payment or enough to pay a mortgage, cash in on that recovery. i'm going to tell you exactly how. write this down next.io you get quality services on your terms, with total customer support, backed by a 100% satisfaction guarantee. so go to legalzoom.com today and see for yourself. want my recipe for healthier hair color? natural instincts! formulated with aloe, vitamin and antioxidants natural instincts has a system that's a healthier way to radiant color. indulge... with natural instincts. less guilt, more gorgeous. i've been telling you about a ray of hope in this economy. that's real estate. most indicators suggest home prices have bottomed out and are heading higher while interest rates, as you know, remain at all-time lows. that's great if you can refinance or buy a house or even sell a house that you've been stuck under water with. but a lot of people aren't looking to buy a home right now. they can't get a loan or aren't ready to buy. maybe they don't have the savings. there are other ways to play the real estate recovery. home builder stocks, for instance. many are sharply higher this year. all beating the s&p 500, which itself is up almost 12% in 2012. but it's not just residential housing showing promise. commercial real estate, at least in some parts of the country, is showing a comeback of its own. most of us in the united states are not in the market for an office park but you can get a piece of commercial real estate through reits. real estate investment trusts. reits are bought and sold like stocks. they have a ticker symbol. they trade like stocks. reits own and operate income-produce properties. office parks, malls, apartment buildings, you name it. they are required to pass along a big chunk of their income to shareholders in the form of dividends, much more than a bank account. i'm joined by steven leib. you say reits can be a shelter in an economic storm. i've been warning of an economic storm. you have to find shelter where you can. reits are i think an interesting idea for people who are not in a position it buy property. >> i think you are absolutely right. and the shelter in a sense like plum creek. they basically cater to the housing market. they produce timber and things you need to build houses. and they have obviously been through the worst of times. i mean, their business has really not been very good at all. one thing has held steady for that company. they are a dividend. you have continued to collect dividends through this entire period of time. and the stock is actually recovered. it never went down as much as the s&p, but even when it was down at its lowest point, you were collecting enough money to pay for the groceries. that can be a valuable thing. >> just a couple weeks ago i talked about the stock, lumber liquidators. if you're building, you need wood. back in our day, when you chose to go to college, it depended on where you might get in. there's a new determinant. it's what the housing looks like. >> american college campuses. this is growing at 25% or 30% a year. huge. they are paying 3%. the advantage you get is not only are you getting the grocery money, that 3%, or that gas money, but you're also getting increases in the rents of up to 20% or 30% a year. as you said at beginning, reits must pass all this money that they make -- >> that's part of the tax structure. >> if the rents are going up or they are putting up more houses everywhere in the country, they are going to pass more money through you. and their dividend has grown 20% a year through these horrible times. so you can afford to step up from hamburger to steak when you start buying at the grocery store. >> and you buy them like you'd buy any stock. you have a stock trading account -- >> the same deal. >> great conversation. stephen leeb, thank you. take a look at reits and how they might help you in your investments. coming up, reits might be right, but the storm clouds in europe and the fiscal cliff on the horizon -- should you be in the stock market at all? we'll talk about that on the other side. ♪ ♪ [ 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. but with advair, i'm breathing better. so now i can be in the scene. advair is clinically proven to help signifantly improve lung function. unlike most copd medications, advair contains both an anti-inflammatory and a long-acting bronchodilator working together to help improve your lung function all day. advair won't replace fast-acting inhalers for sudden symptoms and should not be used more than twice a day. people with copd taking advair may have a higher chance of pneumonia. advair may increase your risk of osteoporosis and some eye problems. tell your doctor if you have a heart condition or high blood pressure before taking advair. if you're still having difficulty breathing, ask your doctor if including advair could help improve your lung function. get your first full prescription free and save on refills at advaircopd.com. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. jonathan horton climbed all the way to the ceiling... in the middle of a department store. some parents might have scolded him. ♪ jonathan's parents gave him... gymnastics lessons. ♪ it's amazing how far you can go with a little help along the way. ♪ td ameritrade. proud sponsor of the 2012 u.s. olympic team. the market is on a roll lately. the s&p 500 up nearly 12% year to date. i read your tweets. i know you don't trust the stock market and you are not alone. money has been rushing out of the stock market and into savings accounts. investors have pulled more than $64 billion from mutual funds since the beginning of the year. hundreds of billions are flowing into checking and savings account. investors have been rattled by the debt crisis in europe, worries about the fiscanical cliff. it is not just macroclouds, there is growing distrust of the market and a feeling that wall street is oo crooked casino where the house always wins, the facebook ipo, the jp morgans bets gone bad. of course you are suspicious. you have very good reason to be. the game is rigged but it does meantime you should sit on the sidelines. joining me from london is richard quest, the host of "quest means business." should you be in the stock market. give me 60 seconds on the clock. the game is rigged but you cannot afford not to be in it. it is time to stop fearing stocks. there are segments of the market you should avoid but hiding your money in your mattress is not the answer. you are funneling the money into savings accounts or cds you are getting nothing. the average one year certificate of deposit is paying 1/3 of 1%. keep listening. stocks are where you can get significant returns. you have to stomach a little risk. we showed you real estate investment trusts worth exploring. market mutual funds are another. the point is there are sectors you should be in right now to protect yourself against the on coming economic storm. you have to do research and pick and choose and allocate wisely and get help if you need it but you must be on the market. richard. >> well, once again you have managed to be the master of stating the obvious with no help, rhyme or reason to anybody else. of course, you have to be in the market but he listens who he says it depends on which part of the market you are in. i will show you exactly the risks and pit falls if you join me at the cnn super screen. think about the olympics and let's look at the market race over the hedges. the u.s. market is up about 10% or 11% so far for the year. brazil is just up 2%. china is out of the game completely. it is negative. the u.k. around 4% but germany that is now 17% up. unfortunately for the average investor who knew which was the best way to invest? so, yes, you do have to be in the market. you do have to take those risks. that much is an obvious statement. >> we will see you next time, richard quest. >> you heard richard and you heard me. get on twitter and facebook and let me know if you are ready to jump back into the stock market. find me on facebook.com. i am reading them all and ready to debate you. up next congress is on vacation but the economic storm is still bearing down on us. what can you do to protect yourself when washington won't? congress is on vacation. the presidential election is less than three months away and audacious claims are being made on both sides. you will eventually decide the outcome with your vote and many of you will cast your ballot with your money on your mind. i believe there is an economic storm heading our way there is hope. i told you about investing in real estate without buying property. there are problems in washington that can darken the economic picture and leave us ill prepared for the economic storm. you drive what we cover on thi

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