along. some neighborhood history caught on video. >> all right. that was david mcdaniel of wesh 2 news reporting. if you have pain, should you pop a pill or put on a patch? we'll give you details at 2:00 eastern time. and no matter how the u.s. supreme court rules on health care reform, there will be winners and losers and wall street is no exception. also this weekend, it's all about fantasy at the box office. "brave" hits theaters and a tip for a new dvd release if you just want to stay at home. "your money" starts right now. here's a storm i've been telling you about. an economic storm that's doing a lot of damage at the center in europe. it's getting bigger and spreading across the world. it started to blow on to our shores. this is "your money." as long as your candidates don't tell you the truth about the economy, i will. right now that storm hangs squarely over greece. it's erratic, though.

spain, italy, portugal, ireland could all be next needing emergency shelter and support n an economic storm, what that means is more bailouts and cut backs with europe means spending less money. that mean's the world factory floor, asia, has fewer things to manufacture. china, an economy second in size only to that of the united states or of europe has slowed. india slowed, too. that means more than two billion people in the fastest growing nations in the world are buying less. this is one big storm. what is america doing about this storm? well, we've got umbrellas. what we need are hurricane shelters. you can't go out and build an economic hurricane shelter yourself. that is something you need help with. government help. congress, for instance, could help stave off the effects of the storm. but they won't because that would mean being honest with you about things that are getting potentially worse and not better. and that kind of talk doesn't win elections. so congress sticks to what it does best these days, partisan

bickering and blame. and then there is an entirely different storm brewing in washington. not the election. it's the so-called fiscal cliff. the series of tax increases and spending cuts that are set to kick in on january 1st. now the conventional wisdom is congress will get to it after the election. by then we could be in a recession. your presidential candidates tell you they can solve -- really they can't. it doesn't much matter who you vote for for president. the president gets altogether too much blame and credit for what goes on in the economy. you can cast a ballot for somebody this fall who can control the weather closer to your home. your member of congress. congress writes and if you believe in miracles, passes the types of laws that can fight off the coming storm. no matter what president obama or mitt romney say, they can only do so much to make you spend money and help create jobs. but congress can and should ultimately the best thing can you do is cast an informed

ballot this fall for your senator, for your representative, for state and city officials and not one based on whether you're a democrat or republican but one motivated by politicians who can put politics or at least partisanship aside to deal with this coming storm. we're covering this storm like no other network can by bringing together the best in the business. christine romans, anchor of "your bottom line" says we'll fall off a cliff if congress doesn't act. candy contrrawly is anchor of "t the state of the union." mark preston covered congress for six years. don't hold your breath for anything to happen any time soon. will cane is a cnn contributor and conservative. the best thing congress can do is maintain the status quo. and harvard economist ken rogoff is the leading authority on financial crisis. he says now is the time to act.

candy, anchor of "state of the union," you follow this more closely than anyone else. you have been candidates since i had hair. within all this nonsense of serious policy debate these days, is there a single word from either presidential candidate that if a viewer who is concerned about this economy should take seriously? >> listen, i think you can take the gist of what they say seriously. we know that in general mitt romney is for not raising revenues and is for cutting spending. but that's he favors more toward the don't raise taxes cut more spending. we know that president obama thinks, yes, some taxes should be cut, should be raised. so you get sort of the generalities of it. let me tell you a couple things about the specifics. and the first is that remember in 2008 when it was candidate

obama, he fought very hard against the idea of an individual mandate for health care insurance. so it depends so much on who he has to deal with by the time a president gets to office. the more specific they get, i think people stand back and go yeah, you have to deal with congress. >> that's a good place to bring mark in. mark, you heard me say congress, along with possibly the federal reserve, holds the keys here. and it would be great if they all got together and said we're not waiting for the election. we're not waiting to see which way the political winds blow. we've got a job to do. it's going to take all the time we need until the end of december to get it done. and you say that i'm smoking something. >> you are smoking something. you're probably living in california where it's legal to do that. but the bottom line this is not going to happen in my lifetime or your lifetime. less than five months before a november election and we're talking about fixing the economy where republicans will tell you is that democrats and president obama have feel over the past

couple years to come to them and tried to cut deals. so what is the urgency five months before the election? what they'll also say is they can hold this off right now. mitt romney can become president if republicans can maintain control of the house. then they can have a better unified effort to try to do things the way that they think they should be done. democrats, saying the same thing on the other side. >> all right. candy, let's talk about this. it does appear there may somebody solutions to be worked out by a congress. but congress is busy blaming the other side. they are all saying that president obama has not done as good a job as he can to either get deals by putting viable deals on the table or being a consensus builder. does this now become an important part of the campaign? not what your economic policies are but whether you can get anything done in washington if you don't control congress? >> when you look at who's going to decide this election as they do every election and that is swing voters, those who can

vote -- can go either way, they have a tendency to go against one another and cross lines. what does that group most want? they actually want a president who is willing to deal with the other side. so i think it's an important issue. i still think that the economy and how it's framed is the main theme of this election and will remain so. but certainly your ability to compromise with the other side was a big reason that a lot of people like the hope and change message of president obama. he, like president bush before him, promised to change the culture of washington. we're all going to get along. we're going to get something done. it didn't happen. but swing voters like that message. >> mark, let me ask you this. i would really like to on that big wall of mine show -- blame everybody. i'd like to put 535 members of congress and the senate up there and say those of who you wait for the election to try to solve this problem are all on this wall. i will take off those faces and those names of who have said i

will not wait. we'll compromise now. we'll hammer out a budget deal. we'll hammer out a debt ceiling deal. we'll hammer out the bush tax cuts. we'll hammer out entitlements now. would i have anyone to populate my wall with if i only chose those who are prepared to compromise? >> there will only be a few left. what you would find is you would find centrist republicans and centrist democrats in the middle who by and large are elected every two years or every six years based on the fact that they represent a state that is more accepting of centrist views if you're a conservative democrat or a liberal republican, those are the folks would are really caught in the compromise at this point. again, it is the base politics driving all this, ali. our liberal democrats, conservative republicans who want their members, their congressmen and senators to really dig in and to hold back and not cut the deals. as much as we're talking about how about the crisis is now, let's talk the day after the election. we have sequestration and all

the expiring tax cuts coming to a head. we always talk about how dysfunctional washington is. wait until after the election. you're going to see dysfunctional. >> ray of sunshine, candy? >> i want to say the fault lies maybe not in congress but in ourselves. more and more what we have seen is, you know, the census comes along every ten years. depending on whether your state legislature is republican or democrat, there are different ways to do this, they're redrawing the lines. what happens, the lines get redder if it's a republican congress that you have in your state. and they get bluer if they're democrats. so we're self-segregating. you're elected by a very democratic district or by a very republican district. we had all the wave elections. the centrists are all but gone. and what is your impetus to say to the folks that elected you, yeah, i know you elected me because i'm a democrat. but i'm going to cross this line. >> you have --

>> that's a fault here. >> absolutely right. mirror, mirror on the wall, who is the most responsible for this economic turmoil after all? it is probably all of us. candy and mark, stay where you are. if your lekted officia lected o until after the election to deal with that fiscal cliff, is that dangerous, irresponsible and coward sfli christine romans agrees with me. but will cane doesn't and we'll hear why. the world's leading commercial expert will join us. [ male announcer ] count the number of buttons in your car. now count the number of buttons on your tablet. isn't it time the automobile advanced? introducing cue in the all-new cadillac xts. the simplicity of a tablet has come to your car. ♪ the all-new cadillac xts has arrived.

and it's bringing the future forward. but what about your wrinkles. neutrogena® rapid wrinkle repair. it has the fastest retinol formula available. it's clinically proven to visibly reduce wrinkles in just one week. "why wait if you don't have to." rapid wrinkle repair. neutrogena®. recommended most by dermatologists. neutrogena®. nno matter what you do. when you're living with moderate to severe crohn's disease, there are times it feels like your life... revolves around your symptoms. if you're tired of going around in circles, it may be time to ask your gastroenterologist about humira.

because with humira, remission is possible. humira has been proven to work for adults who have tried other medications... but still experience the symptoms of moderate to severe crohn's disease. in clinical studies, the majority of patients on humira saw significant symptom relief. and many achieved remission. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. blood, liver and nervous system problems, serious allergic reactions, and new or worsening heart failure have occurred. before starting humira, your doctor should test you for tb. ask your doctor if you live in or have been to a region where certain fungal infections are common. tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. you should not start humira if you have any kind of infection. if you're tired of going around in circles, get headed in a new direction. ask your gastroenterologist about humira today.

remission is possible. oh! [ baby crying ] ♪ what started as a whisper ♪ every day, millions of people choose to do the right thing. ♪ slowly turned to a scream ♪ there's an insurance company that does that, too. liberty mutual insurance. responsibility. what's your policy? ♪ amen, omen the fiscal cliff is the storm within the storm that i'm telling you about. if law makers in washington can't get it together by january 1st, we'll dive right back in a recession according to the congressional budget office. what is this fiscal cliff anyway? christine romans has been

looking into it and breaking it down for us. >> it's bad. i'll see your storm and raise you a cliff. there are two big forces at play, massive tax hikes, massive spending cuts. the bush tax credits, alternative tax fix expires. if nothing changes, your taxes go up. at the same time, medicare doctor pay goes down. at the same time, federal spending is going to be slashed. if current law stays in place, trillion dollars is cut over the next nine years. half in defense and half from nondefense spending. the bipartisan policy center says that those cuts mean a loss of about one million jobs over two years. a million jobs over two years. not just government jobs but job in the private sector as well. many from contractors working with the government. it will almost certainly cause a recession. the cbo says congress drives up off that fiscal cliff, gdp will shrink at 1.3%. we're 1.9% the first quarter. the economy is growing now. they're talking about early next

year seeing the economy shrink again. this is important. it's very rare for the cbo, uncharacteristic for them to say something like this. that chairman ben bernanke who tries hard to stay out of politics has been warning congress about trouble ahead in the economy if congress doesn't act as well. what makes it so scary is this is all happening in an election year. no one expects congress to deal with the big issues until after november 6th. we're also approaching the debt ceiling again. we can hit it as early as december. just another thing to add to congress' to do list. all the while, ali, the bond market, interest rates are super low here. sort of giving cover to the urgency of all this as well. >> absolutely right. still cheap for the u.s. to continue borrowing money. thank you. ken rogov, you know, ten years ago people would say what you are panicking about? elections in november. this happens by december 31st, they'll get it together. we watched the last couple years and we came to that debt ceiling, we don't get budgets done in this country. the basic thing that a

government has to do is get the budget together. and they don't do that. so there's really, i mean, ben bernanke is worried that congress may not get their act together. are you worried or do you think they'll work it out? >> i think they'll work it out but i don't know what they're going to work out. it's hard to imagine that they're going to deal with this before election. there are just so many reasons for partisanship. but they have such different visions. we've been paralyzed for years now. we haven't undertaken fundamental reform. we've been using band aids and tape to sort of keep the economy moving along. and this is a time, a crisis is a time you're supposed to take advantage to do things we couldn't do. and we're still sitting here. i that i is really the biggest issue in america today. >> you mentioned last week you thought if the storm is coming, the federal reserve can play a big role. they did a little bit this week. we'll be expecting them to do that. they have more than they can do. but there is also a role for congress. when i said that congress can help build those hurricane shelters, i'm saying they can

fix a bunch of things. you think that simpson bowls, another term that ow viewers heard, but this gets swept under the table, you think that is something they can fix. >> they can fix the tax system and keep rates low. but make it fair, get rid of a lot of the tax deductions. some of the people you are seeing deductions you like. on the other hand, they can keep rates low. this idea we can't raise anyone's taxes, that's nuts. that's not so simple. fairness is an issue. if you can keep the rates low so people want to work hard and produce stuff, that's what makes america strong. >> okay. we're going to come back to this conversation in a second. i want to bring will back into the conversation. will cane, you say we're headed for a recession if year headed for recession and the best congress can do is maintain the status quo. >> i have been saying maintain

the status quo. towards the end of the year, we're looking at a fiscal cliff. what we do is exacerbate a downward trend in our economy. we must do something. status quo, no bueno, you must do something. however, you must look at this. our economy is it already shaky. it is uncertain. there are storm clouds hanging over. ken talked about this. europe, asia, our current debt situation in the united states. these are all pushing down on the united states economy. so what can we do about that? besides dealing with the fiscal cliff, what can we do about this? we have two theories. my theory is this. i'm going to give you 17th century religious flol if i here, ali. >> that's right. >> the show is called your money, right? >> what he said is in a debate between whether or not god exists and atheism only an irrational man would choose atheism. there is no upside. there is no win if you're right about atheism. you may as well vote for mitt

romney. here's why. if you believe austerity is the way to economic growth, cutting taxes, cutting government spending, well, you got to vote for mitt romney, right? that's what he says he'll do. but if you believe stimulus is the way, government spending the way to economic growth, well, you have to vote for mitt romney as well. why? because president obama says he believes in stimulus, he can't deliver. he had three years and not able to put together another fiscal stimulus package. while mitt romney says he believes in austerity, i think there is a chance he doesn't. i think there's a chance he has no interest in short term government spending cuts and you may as well take that probability chance. you may as well find out. mitt romney, he may believe in stimulus. he could get that through congress. he could call it infrastructure investment, combine it with tax cuts and maybe actually get into congress. president obama is simply a bad bet no matter what you believe. that's what i think. >> wow. you see ken what i got for

goating him and misrepresenting him for the first half hour of the show. >> where am i wrong? >> well, i think when he said at the top about, you know, there are a lot of issues having to do with what congress is going to do is a big question here. and the president is a leader. but they can't do anything without congress. we have a very divided congress. the center is disappearing, by the way. and so it's been very hard to get compromise done. i must say with these storms coming in and you look at history of financial crisis, when you really dig yourself a deep hole is when you get hit with a problem and you're paralyzed. you can't react quickly. and there's a danger we're moving in that direction with the very fractured government that we have. i'm not sure i come to your equation on not trying to be partisan here. it's a great graph. >> i think whether or not congress needs to act, your point is exactly right. romney is the only one that can actually force action. >> all right. 17th century theology to 21st

century economics. we got you covered here on "your money." i'm going to bring christine romans back. i hope christine has something to top that. we're going to continue to talk about how you can make a difference to protect your the storm that's headed your way. sc. the top academic performers surprised some people. so did the country that came in 17th place. let's raise the bar and elevate our academic standards. let's do what's best for our students-by investing in our teachers. let's solve this.

we're back with will cane and christine romans and ken rogoff. i want to give you pakt of what -- a picture of what is going on. the thing that you feel the most, the thing that makes you feel better or worse is jobs lost or created. take a look at the last year. let's take a look at this first of all. this is a poll. it points out something you all know. the economy is the most important issue to 52% of those polled. right after that is deficit and health care.

they have to do with the economy, right? deep pockets, health care is not your problem. we know can you get health care. i'll a little puzzled by the 2% who say the policy towards gay is the most important issue. jobs created in the last 12 months, there have been jobs created every single month for the last 12 months. what i'm telling you about the storm, i'm not telling you we're in a terrible situation. but you know, right before that hurricane wash onz shoes on sho a sunny day. we had a few less in february, march, april and may. it is a trend that is starting to worry us. we hear conflicting things about what happens to jobs based on whether it is barack obama or mitt romney. i heard you say no jobs are going to get created because of either of them right off the top. >> it's demand. it's the things they can do. there are so many levers involved in creating jobs. maybe the president has one of them and that is confidence in the direction of the country, confidence in leadership and

what they can do with congress. there are so many other things. demand for the companies. when i talk to companies big and small, they're looking at europe. they're looking at political issues in europe and a slowdown in europe. they're looking at china slowing down. they're looking, quite frankly, at technology and how quickly it's changing. maybe they don't want to add as many workers this time. maybe coming out of our recession, they don't think they need as many workers as they used to. >> everybody in america has seen this happen, right, ken? they've seen businesses are doing okay. they're getting profitable. they're just not hiring everybody back. what is it? what is that conference that presidential conditioned date can conditioned date can candidate that will make us spend? >> i think can you have a huge difference in laying out a groundwork to build america over the longer term. i don't think there are any quick fixes here. we are in a mountain of debt. we're surrounded by europe with a bigger mountain of debt. there are short term financial

problems. you just have to swim slothroug. there's an issue of where our jobs are going to be, how we're going to have infrastructure. fairness is an issue. there is no doubt that this globalization has really, really helped the richest and, you know, not been as good for the lower income. >> and the consequence of that, many will point out is the rich don't need to spend as much of their income as the poor do. so when you give people lower income levels more money, if you are looking at that as a way to stimulate an economy, it tends to be more effective. >> yeah. that is a canesian rational. this is a longer term thing of what is going to happen to your children and grandchildren. it's a balance between those two things. if people don't feel it's fair, we're going to end up with an even crazier political system. >> we're going from election to election, not talking about the structural changes and how globalization means our grandchildren are going to have a different standard of living or have to -- what if you have a

kid -- what if you have a kid who is average in america? what do you tell an average kid in america what your choices are going to be when we see all this? >> let me ask you this. your analysis was very interesting. if you believe in austerity or stimulus, it equals romney in the end. my argument, and i've been saying this for a few weeks, why don't they tell you the truth? why do i have to believe that you tell me that mitt romney might do the right thing? why can't we all just be honest about the fact that there are storm clouds coming? that's not partisan. that -- i'm not trying to scare anybody. i just want people to know this is not something that either of them on their own can fix. it's -- we're in for long haul. >> i disagree. i don't think they're being dishonest. i think they recognize that romney and obama. they don't want to spend their time sounding pessimistic and raining on everyone. where there is dishonesty is where what they would do to guard us against that downward pressure against that economy. i don't know about romney. i don't know truthfully what his

economic flol if iphilosophy is. >> do you think he is prepared to guide congress through stimulus? i'm not voting for him just because that makes him a liar. >> that makes you a bad better. you bet on certainties. i can tell you one thing for certain. president obama president obama can't execute on his vision anymore. you may as well bet on the probability that mitt romney is not telling you the truth about what he believes. >> fair enough. that's one way to look at it. i want to ask you, ken, you said this many time. it becomes sort of common for you to say it. i associate you with it. you think that there's something to be done on infrastructure. tell my audience again what you mean. >> well, i mean, you look at world rankings of infrastructure and just drifting down them f you go, you know, even to the china but you go to spain, you go anywhere, their infrastructure is better than ours and that affects competing for jobs and manufacturing and many other things. we can improve these things. there are more subtle things like your electric grid, you know, the internet and stuff

that require government money. interest rates are very low. if you can borrow and effectively spend on these things, that's a win. that's a win-win. even though your debt goes up, it helps you grow faster to pay it off later. now, of course, if it's all a pork barrel project as we say, well, you know, it's not going to work. >> nobody is going to use the word stimulus again. maybe if we talk about infrastructure spending -- >> if i'm right there is not that much of a difference in the short term, if christine is right that confidence is important and ken is right that long term issues of what we really need to use to instill confidence, the choices of voters are clear. think about the long term. in the short term, there may not than choice. >> on that note, we agree. ken, stay right where you are. you have to make a deal at this table. the storm raging in europe is starting to hit our shores. does the president need to be tougher on europe? would that even make a difference? [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪

ha ha! over a million people have discovered how easy it is to use legalzoom for important legal documents. so start your business, protect your family, launch your dreams. at legalzoom.com, we put the law on your side. launch your dreams. it's time to live wider awake.

only the beautyrest recharge sleep system combines the comfort of aircool memory foam layered on top of beautyrest pocketed coils to promote proper sleeping posture all night long. the revolutionary recharge sleep system... from beautyrest. it's you, fully charged. [ creaking ] [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, what's next?

[ zapping ] [ clang ] this is the next level of performance. the next level of innovation. the next rx. the all-new f sport. this is the pursuit of perfection. the economic storm raging in europe is very real and is a threat to our own fragile

economy. mitt romney says elect him or the u.s. is headed for disaster. >> if i were to get elected, we would instead in my view become more and more like europe with higher deficits, with debt that can put us in greece or spain or italy-like circumstance. >> did he just say that? joining me now is richard quest. he is the host of cnn's "quest means business." we also have the managing director from pimco joining us. you don't know how big they are? they manage more than $1.7 trillion. what that means is that these guys invest in debt at home and around the world so they know a lot about europe's cash crisis. neil is also the former assistant secretary of the treasury. you'll remember he ran tarp. ken rogoff is here as well. i want to make something clear right now. republicans claim that america is on the path to becoming the next greece. the u.s. will never be like

greece. the american economy is die nyn and designed around a common purpose. the u.s. is not like greece, am i wrong, richard? >> you're right up to a point. but then you conveniently overlooked, yes, you may not be greece per se. but you have the fiscal cliff. you can sleep walk towards it. and if things don't go exactly according to plan, you could tumble over it. in an ideal world, thing goes according to plan. but, these things go wrong usually by accident, as we discovered with the debt ceiling last year. a deadline missed, a decision taken wrongly and all of a sudden, a bad situation becomes worse. >> all right. ken, greece has new leadership. the storm i'm talking about is already ravaging the country. it's been doing it for years by the way. does it now matter to you what greece does or is this story

already on its way? >> the leadership looks a lot like the old leadership. they're basically the same parties that have gotten greece into trouble and nobody has confidence in them. i don't think they have the power to really change things. i don't think anybody does. you can't go through 100 years of evolution and in a few years. so greece is still a problem. eventually going to be leaving the euro zone. but there's spain, there's italy, there is everybody. >> and neil agrees with they that they are eventually don't know when but leaving the euro zone. president obama thinks that europe has the capacity to solve this crisis on its own. listen to what he said at the g-20 a couple days ago. >> even if they can't achieve all of it in one fell swoop, i think if people have a sense of where they're going, that can provide confidence and break the fever. >> he could be caught talking about america, neil.

if people have a sense of where they're going, that could instill confidence and break the fever. he chose to tread very lightly at the g-20. i happen to think he should have been tougher and that europe needs to be made to understand that half measures are of no consequence and they can take the world into a recession. can they? >> richard? is that you? you're not even on camera and you're making noises. >> ali -- they absolutely can. look, president obama is right. they do have the capital to deal with the problem. you're right. they need to be decisive to put out the fire once and for all. but the europeans understand this. president obama lecturing them is not going to motivate them, is not going to open their eyes. they understand what they need to do. the challenge is if they come in aggressively and put out the fire once and for all, it takes the pressure off the greeks, off the spaniards and portuguese to make tough choices. and as ken said, the greeks have been doing this for 100 years. the germans are saying we're not going to put out the fire. we have to keep the pressure on

the greeks to make tough choices. that's why this crisis has dragged on for two years and it's going to drag on for several more years. it's going to be band aids and half measures. >> richard, what is happening to him over there? what's going on? >> i agree fully with everything that is said. i'm going to put in one excuse and it's this. they simply don't have the ability, the structures, the -- if you are like bureaucracy in which they can do this. the way this has been set up is classically your horse built by a committee which turns into a camel. and therefore, yes, in an ideal world you would take those decisions. you cut through. you make them. but you're talking about 17 euro zone, 27 eu countries and it's not that practical which ever way again you want an example. the new bailout, the new bailout

package that they got, the esm that is being set up, even that is now being litigated in the german courts as being unconstitutional for germany. so you get an idea. i was frustrated and angry and i use other words if it wasn't a foul word, the inability to deal with this crisis. but i'm starting to see the enormous nature of the task that they're facing zblchl right. as you point out, some of these things happen by accident. as neil points out, sometimes it only happens when your back is against the wall. he would assume that europe would have felt the wallabee nono -- the wall by now. you remember neil was in the room when decisions were made, sometimes mistakes were made and accidents happen. i'm going to talk to him about how we accelerate this process. in the meantime, it's been accelerated for us. 15 global banks have been dowd grad downgraded. most of them you know. bank of america, citi, ratings agencies may have a bad

reputation. i'll tell why you this is a big deal, why it's hurting the united states and why it's their fault, not the democrats on the republicans but yeah, richard, the europeans. our abundant natural gas is already saving us money, producing cleaner electricity, putting us to work here in america and supporting wind and solar. though all energy development comes with some risk, we're committed to safely and responsibly producing natural gas. it's not a dream. america's natural gas... putting us in control of our energy future, now. syou know, i've helped a lot off people save a lot of money. but today...( sfx: loud noise of large metal object hitting the ground) things have been a little strange. (sfx: sound of piano smashing) roadrunner: meep meep. meep meep? (sfx: loud thud sound)

what a strange place. geico®. fifteen minutes could save you fifteen percent or more on car insurance. mcallen, texas. in here, heavy rental equipment in the middle of nowhere, is always headed somewhere. to give it a sense of direction, at&t created a mobile asset solution to protect and track everything. so every piece of equipment knows where it is, how it's doing or where it goes next. ♪ this is the bell on the cat. [ male announcer ] it's a network of possibilities -- helping you do what you do... even better. ♪

okay. i'm back with richard quest, neil cashkari and ken rogoff. bank of america, j.p. morgan chase and citi, because of their exposure to the global financial system. your deposits are safe in the united states as long as you have less than $250,000 in any one account. if you have more than that, don't waste your time watching the show. turn the channel, watch sports or something else. now back to the downgrade. it wasn't expected but in this

gathering economic storm i keep telling you, it's one more assurance that we're all connected and the crisis in europe actually does affect americans in a big way. the downgrade means the banks which may hold your portfolio might be less profitable because it will cost them more to borrow money. neil, we're not talking about the fact that banks are like greece or like lehman brothers where they are not going to be able to pay back their debts. what we're saying is that some of what americans think are the safest institutions in the country are at some risk of what moodies calls out sized losses if things continue to go down. this is risk management. this is saying if things continue to get worse and worse, some of these major banks could take a hit and be at greater risk for not paying back their debts. you're the expert on the u.s. banking system. is this serious? >> well, look, you're exactly right. it is serious because the banks do have exposure to europe. we don't think the euro zone is

going to fragment into 17 currencies. if it did, it would be very bad for the global economy. very bad for u.s. banks. but we, you know, we're investing our clients' money. we trade with manufacture the ban many of these banks. we do business with them. we assess their credit risk to make sure they are good stable entities to trans aact with. it's an important topic. we're not surprised by it. we've been watching it. we think most of the banks are very healthy. they are at risk. you're right. there's a lot at stake. if europe doesn't get control of its situation, we're not going to be immune to it. it's going to affect our banks. it's going to affect our economy. >> pimco has skin if the game when it come to debt. can the ratings agencies like moodies take a hit to their reputation when they gave high ratings to junk mortgage backed bonds during the financial crisis. moodies has been on a bit of a downgrading spree lately. is this part of a broad

rehabilitation effort or should we acknowledge that there is no value to listening to what they have to say about credit risk? >> to start with, there are a lot of investors around the world that have to listen to these credit agencies. they have funds where everything has to be aaa, aa, something like that. and when the credit rating agencies downgrade them, they got to kick them out of the funds. these are big pools of money, pension funds and other big insurance companies. and so it's very significant what they do. now why are they doing it? there's no question that there's more vulnerability. you have to call a spade a spade. they can't just sit there and keep all their ratings the same. now some people say why these banks? why not are there other banks? why do they do one country and not another country? it takes them time to sort through things. there is no question the risks are heightened as europe is sort of, you know, drifting in the wind here and we don't know what is going to happen. >> use it to underscore what we already know. there is risk out there. these guys are doing research and reiterating the fact there

is risk. neil, do you gr agree with that? >> i do. we do our own credit analysis of each of the banks that we work with and trade with. so we were not surprised by moodies actions. as ken said, it just echoed the analysis that we had done on our own. at the end of the day, we have enough resources and credit analyst that's we don't need to rely on the rating agencies. we can do our own work. the most people at risk are those that don't have that debt, they have to rely on the ratings agencies. so it's a serious situation. >> richard, of course this is not an american story. had. sbc, ubs, deutsche bank and others were downgraded as well. bank that's rely on the confidence of creditors and big k customers in an uncertain economic environment, how much damage does this do to a fragile banking system. i suspect you're saying not all that much. >> not a lot at all. i agree with you and the gentleman about, yes, it's an effect for those investors who have to have aaa because of

their rules and regulations. but it told us nothing that we didn't know already. it was relatively irrelevant in term of the extra amount that they'll have to pay in interest charges for most of the big banks. all in all, it was like somebody saying it was classically, you know, locking the stable door or saying the horse bolted when it's already over the fence and away over the hills. it was just more window dressing from moodies who are a day late and a dollar short. >> a lot of horse references. you are heading off to ride or something like that this weekend, richard? always a pleasure to see you. ken, always nice for you to join us. ken, excellent head cut. cuts closer to home. what cities are doing to survive with less cash and what you do when budgets get squeezed. we'll talk to two mayors making tough decisions next. but their shakes aren't always made for people with diabetes. that's why there's glucerna hunger smart shakes. they have carb steady, with carbs that digest slowly

to help minimize blood sugar spikes. and they have six grams of sugars. with fifteen grams of protein to help manage hunger... look who's getting smart about her weight. [ male announcer ] glucerna hunger smart. a smart way to help manage hunger and diabetes.

. if you think that cutbacks what economists and politicians sometimes called austerity has

nothing to do with you, here in the united states, let's go back to 1955. these vertical lines are recessions. during each recession, city hiring actually increased in the united states. the last one, by the way, the last recession which technically ended in 2009, we also had hiring, but that's the bad news. take a look at the big red block. since the end of the last great recession 400,000 city and county jobs have been lost. these are firefighters, policemen, teachers, health care workers, the services you depend on. this holds back the recovery because more people are not paying taxes. more are receiving taxpayer-funded benefits and you will feel it in one way or another and it's mayors across the country who are making these tough decisions that are affecting our daily lives. philadelphia mayor michael nutter and kansas city, missouri, mayor sly james. gentlemen, thank you both for being with us. >> mayor nutter, i've spent half

of my life in philadelphia. >> when cuts were first made in philadelphia, they were things like libraries and swimming pools and some of those is since reopened and you didn't have to cut emergency workers, police and fire. where do things now stand for you? >> well, all libraries open and none of them actually close and we did reduce some of the service. the summer of '09 we did not have all of the swimming pools open and the summer of. we kept public safety pretty protected and we graduated new police officers just this past march and actually on friday another 26. >> mayor nutter, one of the things we talked about earlier in the show when we talked about long-term solutions for the united states. two of the long-term things we do is one is the federal government can support the

building of infrastructure with the private sector and of course, education. as christine romans said, the average kid in america is not going to be successful in the world. you can't be an average kid in america. so where these things touch most people is in the cities. infrastructure and public education are generally city and county and state responsibilities. you are under great pressure to educate and churn out non-average kids. above average kids in tough environments and how is that forced upon you affect you? >> it's become that much tougher. the situation in philadelphia is the state took over the schools in 2001. as mayor, i'm not directly in charge of schools and i have a couple of appointees to a five-member school reform coaling, last year the commonwealth of pennsylvania cut commonwealth education funding by a significant amount and, and

there's a current budget proposal and we're trying to push back hard on that. our school district in philadelphia is under severe fiscal challenge and fiscal distress. we are working with the city council trying to provide additional funding support from the city side, but the commonwealth certainly has an obligation and a responsibility and when those cuts hit, unfortunately, they start to come down on kids in classrooms or teachers in classrooms where real education and learning takes place. so we need more investment in education if we're truly able to compete, not less. >> mayor james, you and every other mayor in the country understood the cavalry is not coming. i think you'd be happy even if the cavalry didn't show up and nobody did any more harm. >> if they just drove by and waved every now and then that would be a very helpful thing. the problem is that the problems

that we have in the cities are not going to go away regardless whether or not the cavalry shows up so we had to innovate and one of the innovations that we've taken on with regard to the issue of education that you raise is that we have looked at the 14 school districts that comprise kansas city and one of the things that we know that would be extremely helpful in reinvigorating the american, urban, educational landscape is quality, early childhood education making sure that every child reads by third grade level and in kansas city, we've create the turn the page program to address that very issue to get to every single child regardless of what school district they may attend and work with them to make sure that they can read. that's what cities have to do. that's what mayors and cities have to do is to find innovative ways to address complex problems because we can't wait for somebody to show up and that's not going happen in an election year where it seems that the

election-year politics override the need to help the citizens of this country and this city. >> that is exactly the point we've been making for this hour. thank you to both of you. mayor sly james in kansas city. mayor nutter, i'll see you in philadelphia, good to see you both. >> absolutely. thank you. >> let's continue this conversation online. i'll tell you how to do that next. [ normal voice ] so i can trust 'em. unlike randy. are you in good hands? 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. high schools in six states enrolled in the national math and science initiative... ...which helped students and teachers get better results in ap courses. together, they raised ap test scores 138%. just imagine our potential... ...if the other states joined them. let's raise our scores. let's invest in our teachers and inspire our students. let's solve this.