tampa, florida. cnn will have full coverage starting monday night at 7:00 p.m. eastern. mitt romney and his vice presidential choice are in iowa drumming up support for that big event. i'm randi kaye for cnn. your bottom line starts now. >> 48 million people depend on it, workers are taxed to help pay for it, and these guys can't stop talking about it. >> i have strengthened medicaid. >> the president's idea for medicare was to cut it by $700 billion. >> my plan has extended the life of medicare by nearly a decade. their plan would shorten the life of medicare and end medicare as we know it. >> so the differences in our medicare perspective could not be more stark and dramatic. >> the politics may sound petty but it's no small matter, whether you're 16 or 65, it's medical insurance you'll likely

need to rely on at some point. you've likely already started paying for it with every paycheck. this is the breakdown of the budget, how the government spends your tax dollars, the largest piece goes to medicare, medicaid and the chip plan for younger americans. what's the problem with medicare, cost. kaiser medical foundation said medicare covers 48% of all medical care for seniors. while that may seem modest, government is spending hundreds of millions to keep up with rising health care cost. plus a flood of baby boomers about to retire and join those 48 million americans on medicare. something needs to be done. an annual report from trustees of nation's entitlement programs finds medicare costs account for 3.7% gdp in 2007, expected to right by 5.7 in 2035 and will increase gradually every year hitting 6. 7% of gdp by 2086. do you conclude lawmakers must

address these financial challenges as soon as possible? there are no simple answers to what is a complex problem here. you're not going to get simple answers in a sound bite or bumper sticker, are you? >> you really aren't. it's interesting when you gave the statistics about escalating costs. let me toss out another one to you, christine. ght now we're spending about $500 billion a year, that's alabama billion with a b, on medicare even under these republican plans that are supposed to cut the plan within a dozen years, the cost of this program is going to about double. it really becomes a question whether this is going to squeeze out everything else we want from our federal government because the cost is growing so rapidly. >> i want to bring dean baker into the conversation. he's co-founder for the center for economic research. dean, the political focus is on the medicare structure here, but health care costs are what is really driving this thing out of control at this point. >> that's exactly right. our health care costs are hugely out of line with everyone else

in the world. if you take the average for other countries, canada, united kingdom, we pay twice as much per pers as other countries and have nothing to show for it in terms of outcomes. don't have longer life expectan expectancies, breaking the bottom of that. the problem is private sector health care cost. we pay for a lot of that through medicare. if we don't contain private sector health care costs, there's no way to square the circle here. you have to look to do tha arguably the affordable care act takes steps in that direction. clearly you have to go further. the key is private sector costs. >> dean, even calling it a medicare problem, i've heard from a lot of people on the left, we don't have a medicare problem, we have a health care problem. and people, budget cutters want to cut medicare instead of fixing it. >> that's exactly what i would say. if you look at projections we spent 7% of gdp on health care,

expected to go up by 2022, if you look at 2030, 2040, 30% of gdp. this is a devastating cost. if we somehow say we're going to fix medicare, maybe get rid of it all together, maybe the federal budget okay but none of us will afford health care. >> let me ask you, steven moore, your plan, a lot of sniping and fighting, i want to keep politics out and talk about the best ways to address this. there are cynics like me who think a lot of this electioneering is not really about addressing medicare. how do you fix it? >> let me go back to a point de made, that is we do have quality health care in the united states. i don't think there's any question we do. i think we have by far the highest quality health care in the world, in terms of the services you get. if you get cancer or heart disease or some terrible injury, you don't want to go to a hospital in britain or canada,

you want to come here. we're the cutting edge. one of the reasons health care costs are so expensive in the united states, we're the leading innovators and every other country basically takes the innovation that we do and they kind of fall on our back. now, the issue about how to solve this problem. i agree with dean it's partly private sector costs of health care have gone through the roof. it's a question of which is which, is medicare driving private sect or or private sector driving medicare. what i like about the plan is he would allow seniors to shop around in the private marketplace to see if they can get a better deal. we're consumers. that's the way we buy everything, food or housing, we shop around. what's wrong with that idea. >> dean, he just said what he likes about paul ryan's plan. what do you like about paul ryan's plan. >> the fact of the matter is we've tried that. medicare in the '90s, allowed people to shop around. medicare advantage under president bush. of course, that is exactly what

we have in the private sector today. most of us, we get our health care through our employers and employers shop around. unfortunately i'm an employer, i've had that experience. i don't like to do that. that really doesn't work. how many times do we have to keep trying the same thing before we say that really isn't working. >> don't move, stay where you are, we're going to have more conversations on this. most of the people sniping about medicare are years away from medicare. we're going to take the microphone away from the politicians and turn it over to seniors. >> i hate to see it disrupted but if they don't do something about it, my kids aren't going to have it. >> the people behind the numbers. that's next. [ annie ] this is the story of a girl named annie who dreamed she could fly. like others who braved the sky before her, it took a mighty machine, and plain old ingenuity to go where no fifth grader had gone before.

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found in a washington campaign or think tank. it's the people who rely on medicare every day who went to a retirement community in new jersey to bring you the medicare story from people who aren't using it to get elected. >> my wife is dead. the cancer and surgery involving cancer, she's had open-heart surgery, knee operations, the cost to us is virtually nothing. >> i pay a $30 co-pay. i've been to the doctor maybe six times this year. it's all very manageable. >> my wife was diagnosed with cancer. luckily we had medicare. i could have paid for it but it would have wiped out a lot of my savings. it would have been $100,000. >> within the next four years, under either obama or romney -- >> we want to make sure we preserve and protect medicare. >> their plan ends medicare as we know it. >> seniors who can afford it may be expected to pay a little bit

more for their health care. >> as long as we're not talking about tens of thousands of dollars. even if romney gets elected, we're going to have medicare for us. whether we'll have it for our kids and grandkids is another issue. people are concerned about this. >> i really hope there will be medicare because i think it makes old age much, much nicer. >> steven moore and dean baker back with us. steven, i want to start with you. nothing changes under your plan, nothing changes for those 55 and older but their grandchildren's medicare would be totally different, obama says it would be gutted. >> there's no way to say on the path we're on right now, with a bankrupted government. it has to be fixed. i think even dean would agree with that. it's interesting. i was looking at statistics on income over the last five years, christine. what those statistics show is one age group had income while another group fell.

people over the age of 65 actually have done pretty well. younger workers are hurting. that raises the question about fairness. is it fair for young workers with lower incomes to subsidize a health care program for seniors you're interview than generally higher incomes than people paying into the system. >> dean, that is fair? >> i would say you have to look at this a little more closely. let me correct quickly. under governor romney's plan seniors getting medicare would be affected. the doughnut hole and prescription drug benefit would come back, eliminated as -- >> he says he would repeal the president's health care plan. there's parts of the president's health care plan directly related to medicare. let me ask you. i guess i'll start with you, dean. we've seen all these democratic campaigns designed aroun scaring seniors. really this is about younger people. are we using -- are they using -- in washington are they using medicare, medi scare is

what they used to call it to get a vote they clearly want. >> clearly this political season, it's a very, very important political issue. i have to agreeith steve, i don't think either of them are talking about serious answers. maybe steven is going to say he thinks the ryan/rochlz plan is serious. i don't see a plan there. i worry it leads to the elimination of medicare. i think the obama act has something, makes progress, reduces shortfall. clearly you have to do much more. what that more is, he hasn't said. >> i'll ask the steven moore. one thing about paul ryan in particular, he was also an early proponent for privatizing social security. some seniors when you talk about privatizing or giving vouchers for medicare, they say, well, we're really glad we didn't do that for social security, that would happen right before a big financial crisis. that's a real problem. why does he have more traction on this? >> well, i think the crisis is much closer for medicare than it

is social security. the social security problem is maybe 10 or 15 years away. the medicare problem is right upon us. it's costing more than we're taking in with the program. look, it's just a question of what we want in terms of priorities in our budget, in terms of national defense, in terms of education, in terms of roads. do we want the entire budget to go for health care. i think dean and i agree on this point. whether you like paul ryan's plan or not, there's elements of his plan i like and some things i don't like, but the problem is the president really hasn't put forward any plan to deal with the crisis. we're thelma and louise, going right over that cliff. >> if you look at the report, he's eliminated two-thirds of the projected shortfall. you still have a shortfall, you want to eliminate it, that's a lot to do. he did some big, heavy lifting. i think he deserves credit for it as much as i've criticized him plenty on that one. >> nice to see both of you. >> the romney plan for a

stronger middle class. >> this is a make or break moment for middle class. >> we're going to rebud the middle class in america. >> we can't just balance or budget on the backs of middle class families. >> all right. sounds great but what can these guys actually do for the american shrinking middle class? that's next. people really love snapshot from progressive, but don't just listen to me. listen to these happy progressive customers. i plugged in snapshot, and 30 days later, i was saving big on car insurance. with snapshot, i knew what i could save before i switched to progressive. the better i drive, the more i save. i wish our company had something this cool.

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twenty years of wealth erased. that's the story of america's middle class. a pew study found this was the worst decade in modern history to be stuck in the middle. stuck would be better than the

reality. the middle class is falling behind. take a look. from 2001 to 2010, media net worth for a three-person median household fell. part of the reason there's such a dramatic drop income has fallen as well, ging from $73 to $69,000 for a family of three. the other factor devastating the middle class, the collapse of the housing market. their wealth, more than any other group, is tied to their home. it's become a struggle for those clinging to the middle to maintain their standard of living. who is at fault? the pew survey found americans more likely to blame congress, wall street and the bush administration before they pointed the finger at president obama. cnn contributor and columnist for "the daily beast," worst setback since world war ii. interesting the president is pretty far down the list for placing blame. how is that politically?

>> politically it's extraordinary. here he's been there three years, they are blaming wall street, bush mitt romney, because republicans control the house of representatives. >> because there's this narrative, though, on the campaign trail that every minute they're talking about social issues is not good for mitt romney because his strength is perceived to be in the economy, but this pew survey would maybe suggest otherwise. >> well, it becomes what is his argument? his argument always has been in business i was a turn-around artist. that's what i'll do for the country, but the question is what specific solutions does he have for the middle class? you can rebrand your plans all you want, but the problem he's facing is the fault connected to the bain attacks, the association of mitt romney with wall street and the super rich. that drives a wedge between his economic expertise and the middle class, who really should be looking for new solutions to get them out of this problem. >> we've had a lot of rich presidents, though. >> absolutely. >> there are rich people who have appealed to the middle class. >> fdr, absolutely. so, this should not be a disqualifier. it's partly theway the obama

campaign has sought to define it, but you see the fact that folks blame the bush administration more than president obama, that's music to chicago's ears right now. but it becomes the election is a contest for who can win the middle class and it's not bumper stickeers, real policies. >> some of the polls have been showing that quite frankly, when you ask middle class americans who they think is, who they think the president favors, they say obama favors the middle class, while the view of governor romney say he favors the rich. how does mitt romney combat this to win the middle class votes? because you know what, the middle class vote is a holy grail in a campaign, because everyone thinks they're middle class, whether they really are or whether they have middle class values. >> that's right. and in the speech in kansas that president obama gave early in the cycle, basically said this is about a fight who can defend the middle class. that's how he wants to frame it himself. as you said, being wealthy and successful is not a disqualifier for connecting to middle class voters. far from it, it can be a credit,

but romney's got to go beyond bumper stickers. he's got to say what he would do specifically. and he can make a pro-business argument -- i understand how the economy and business works, therefore i will liberate businesses to invest in our communities again and that will end up benefiting the middle class. the problem is, during the bush administration, as the survey shows, the middle class was getting squeezed then. this is not just a symptom of the great recession. >> it's been going on since before the great recession. there's no question about that. >> absolutely. >> i mean, we were talking about the middle class assault on the middle class, quite frankly, back to 2003, when it on the surface, times were good. they also in that survey, some people blamed foreign competition, too. >> sure. >> i mean, there's a lot of different factors at play, but what are these guys saying or doing to say, hey, i can fix it, i'm the one who can fix it? >> so, republicans have a special burden here, because they're not going to say we're going to throw you an extra lifeline, strengthen the safety net, per se. instead, romney can say look, i'm going to take on foreign competition, get tougher with china, as he proposed, more importantly, i'll get the capital off the sidelines and

create an environment of certainty where businesses can invest again in america, and that's the argument he really needs to make more aggressively. but if it becomes a question of who can empathize more with the middle class, romney's got a gap there. you see that in all of the personality distinctions between romney and obama. >> right. >> where obama seems that he understands the problems of people like you. and again, part of the burden is actually the legacy of the bush administration, the fact that it wasn't just the housing crisis, but the middle class folks started getting squeezed when a greater percentage of their paycheck was coming out during the supposed bush glory years. >> and that's congress, too. >> absolutely. >> congress has passed laws and policies for years now with a very short-term -- i mean, they're short-termists, they really, really are. and i feel like people get it now, people get it, that it's been 25 years plus of policies that led them to where they are today, but i'm not sure they're hearing how to get out of it. >> they're not, and this is where it's incumbent upon the campaigns to go beyond bumper sticker politics to actual policies. look, if you believe america is as strong as our middle class,

these numbers should be a wake-up call. talk about a fiscal cliff, the middle class is getting squeezed like never before. their value, their worth has plummeted. so, if we're going to be strong and optimistic as a country, the candidate needs to do like bill clinton in the 1990s, say he's going to focus on the economy like a laser beam and restore the great american middle class. that is the challenge of this election. >> i think when you look in this, we're in the third inning of whatever's happening to the middle class right now and anybody on the campaign trail that's promising you next year they can fix it is just a liar. >> absolutely. and we need to call the liars out. when they're promising to lower the price of gas and they magically -- >> come on. >> it took us a long time to get into this problem. it's going to take time to get out, but it will take a commitment to strengthening the middle class, and that has got to be the policy focus of whatever the next administration is. >> i would vote for you, john. thanks. coming up, just one in four high school graduates is ready for a college and a career, and that's the good news! just one in four. we'll tell you why, next. at usaa, we believe honor is not

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education is vital for america's economic security, and american high school students, they're not ready for college or careers. a new report this week found 28% of high school graduates who took the a.c.t. didn't meet college readiness benchmarks in english, reading, math or science. just 25% met those benchmarks in all four subjects, just 25%! and that's a slight improvement. a.c.t. notes that students are doing better in math and science, but those numbers are still nowhere close to what we need. they're not ready, and companies say they can't find qualified workers. you heard me right. even with 12.8 million americans out of work and looking for a job, industry leaders are bitterly complaining there's a shortage of workers with the right skills, so they're importing talent from overseas.

they'd import even more from overseas if the government would let them. between 2010 and 2011, u.s. companies applied for an average of 301,000 h-1b visas. there's only 80,000 visas available. and while other countries are producing doctors, the u.s. is partying. "the princeton review" released its annual ranking of the top party schools and found american college students who binge drink are happier than those who don't, but at least those kids are in college. what are we doing to get them there? we already know that more than 300,000 local education jobs have been lost in the last three years. more than half of school administrators say that class sizes are getting bigger. they're cutting back on summer school programs and nonacademic programs like drama, band, ultimate frisbee, anything that's not critical, critical to the mission. i'm going to speak with the president's education secretary, arne duncan, on this show next week and find out exactly how he plans to fix