the list is long. jobs, china, debt, the housing crisis, all of these are threats to the u.s. economy and we've got to figure out what to do about them. i'm ali velshi. welcome to "your money." let us start with china. the man expected to become china's next president met with u.s. leaders this week. vice president joe biden made it clear to his chinese counterpart the united states is ready for the challenge. >> as we've discussed, the united states and china will continue to compete and as americans, we welcome

competition it's part of our dna and propels our citizens to rise to the challenge. cooperation as you and i have spoken about, can only be mutually beneficial if the game is fair. >> perhaps we welcome competition, but are we ready for it? business professor peter navarro is the author of the book "death by china." peter vice president biden says the u.s. welcomes competition. you say china is using in your word, quote, weapons of job destruction against america. what is that and what needs to happen for the u.s. to at least compete fairly with china? >> we had ten years now since china joined the world trade organization of unfair trade. the weapons of job destruction are clear. there's five. start with currency manipulation. it acts as a huge subsidy for chinese goods coming in and huge tariff on our products to china.

you have illegal export subsidies which are flat out banned by the wto. i p theft. intellectual property. counterfeiting is rampant. if an automobile or pharmaceutical company basically has its ip stolen that's a cost. the last two, environmental pollution and worker abuses. 16 hour days, seven day a week at the ipod factory and the horrific pollution in china that acts as a a huge cost advantage for chinese producers. it's unfair competition. we don't welcome that, mr. biden. what we welcome is fair trade. >> let me ask you this, if you addressed all of those five issues, if, would china still not have a wage advantage over america? >> wage advantage is really relevant because it's such a small part of the product. that's something that's really misunderstood. the fact of the matter is, the numbers are clear. we've lost over 50,000 factories

to china, over 6 million jobs and over 15 million jobs total because of their unfair trade practice. people in america understand that we can compete with anybody in the world, we can compete with low wage countries, we're much higher productivity. we have the technology and the equipment to compete fairly. this is the single greatest problem facing america the white house and congress has misdiagnosed or economic problems and what we should be doing is trying to balance our trade and getting china to play fair. >> mohammed is the ceo of pimco. we have talked about the rise of china and here is a look at what we're talking about. growth and projections of growth. according to the international monetary fund show china growing rapidly, much faster than the u.s. economy, even though you see the chinese growth slowing down between now and 2013 and u.s. growth actually increasing.

in terms of size of economy the u.s. is still number one, china is number two, depending on how you measure the european union. mohammed, you say the u.s. has to establish us sus stainable economic growth. what is this china effect on u.s. growth. >> what you've just shown and what peter spoke about, we're going to be talking about this for a long time. there's a simple reason. for the first time ever, ever, the world has to accommodate a systemically important country that is a low-income country. we haven't had this before. normally when you become systemically important, when you start influencing what happens elsewhere, you tend to be a high-income country. not this time. china is so large, it's getting there very early on and, therefore, there's a fundamental conflict between its domestic objectives and global responsibilities. and until that gets resolved china will have problems being accommodating in the global economy and we'll be talking ate

this for a quite a long time. >> diane swonk, chief economist at mesereau financial. the u.s. lost 8.7 million jobs as a result of the recession and with the jobs recovery picking up steam we've gained 3.1 million jobs since the low point, but we've got a long way to go, 5.5 million americans have been out of work for six months or longer. and this persistently high unemployment is a threat to the american way of life and that goes from everyone from high school dropouts to college graduates. this problem, what's the connection between our jobs, our manufacturing, our recovery, and this issue of china. >> mohammed makes important points of china being a big country but poor country, even as they become the size of the united states in economic output they'll still have one-fifth per capita income and that's important because we've not had that sort of duality. what we're degree in the u.s. is -- seeing in the u.s. is a

major shift related to what peter talked to. the wages don't matter as much. many companies i'm seeing come back into the united states now and a lot of companies from germany setting up in the united states now, in the manufacturing sector, particularly the auto sector, saying listen, we lost our intellectual property. if we've got an advantage and they set up a plant next door to us and steal that advantage overnight we want to come back. the cost of that loss of intellectual property are causing onshoring, people coming back to the united states. the volume of jobs are not there. as peter accurately pointed out, high productivity growth jobs and they're jobs we've not trained people for. this gets into the issues of community colleges working with the automakers to excel rate three-year apren tigship programs in germany and bring them to the united states. the last issue is most important and you alluded to it in your comments to me, because you know what i'm working on now, that's the cumulative effects of what we've gone through in this great recession. having so many people out for so long, the damages we're seeing to earnings potential not only

of those people who lost their jobs, but to their children, and even college grads who get jobs in this economic environment is lower today than the earnings potential just a few years ago. >> this is important, which means -- >> generational. >> this means that a whole lot of people, even if things were to start going better right now, will end up over the course of their lifetime, and the course of the economy that they live in, putting less, earning less, saving less, investing less money, putting less into the economy, which means we need structural shifts and that brings me back to you, peter. while you articulate the issues clearly, i have heard those issues enunciated by the president, by corporate leaders, all sorts of people, the issues specifically that you talk about. what is the solution? what is preventing us from dealing with those five problems with china that would make it a fairer place to business with? >> ali, let's start with the corporations, the multinational corporations, ge, apple, caterpillar.

these are the companies making money hand over fist in china, the same companies that provide the campaign contributions to the white house, to the congress, and so we get the rhetoric of change from our politicians but don't get any action. for example, the currency manipulation bill, the house passed, but boehner in the senate said no. these are the kinds of things that are going on. now, i think it's time now for consumers and citizens to take control of this situation because the politicians have refused. what we need to do is stop buying made in china. i'm not saying stop buying foreign goods. stop buying made in china until they play fair. >> what do you mean when you say that? because i would be standing here stark naked with no electronics if i were to do that. >> that's a scary thought. >> it is a scary thought. >> as much as we all love you.

>> when we walk into a walmart or a target or whatever store we do, we need to -- we need to look at the label first. when we see that it's made in china, we have to first of all think about our job. because they're not playing fair. they're costing us our job. we also have to think about product safety. a high percentage of the products that are bad from china. the third thing we haven't talked about, which is really important, is that the money that we are paying at walmart right now is going to finance -- is financing one of the most rapid military buildups we've seen in a long time, by a totalitarian country. consumers, i know it will be hard, but consumers have to take control of this. the white house, if it's inse insincere need to brand china currency. >> it's a good conversation and we will have this. we'll have to have it separately. because consumers also like the fact that walmart has given them some of the cheapest goods they have had in decades.

let's continue this conversation. i want to talk about that other conversation you were having a little later. diane mohammed, peter, stay where you are, there is despite this conversation about china, there is a true rise in optimism in the united states. is it justified? i think it is. we'll take a closer look and discuss it with this great panel next on "your money." [ male announcer ] what if we told you that cadillac borrowed technology from ferrari to develop its suspension system? or what if we told you that ferrari borrowed technology from cadillac to develop its suspension system? magnetic ride control -- pioneered by cadillac, perfected in the 556-horsepower cts-v. we don't just make luxury cars. we make cadillacs.

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[ kyle with voice of dennis ] ...allstate. really? i was afraid you'd have some cut-rate policy. [ kyle ] nope, i've got... [ kyle with voice of dennis ] ...the allstate value plan. it's their most affordable car insurance -- and you still get an allstate agent. i too have...[ roger with voice of dennis ]...allstate. [ roger ] same agent and everything. [ kyle ] it's like we're connected. no we're not. yeah, we are. no...we're not. ♪ the allstate value plan. dollar for dollar, nobody protects you like allstate. from economists to voters the message to washington is clear. don't mess up the recovery. we've seen markets and jobs in particular on the rise. the number of americans who think things are going well in this country has steadily risen as well. from 25% in november, look at that, to 40% today. that's a big deal. mohammed i know you are worried about a return to what you call, quote, harmful and dysfunctional congressional economic debates,

the kind we saw last summer. i think we are all with you on this. that was a low point for all of us. we saw the harmful effect of that debate on america's standing with credit rating agencies but in a contentious election year how important is it for the recovery that politicians do not further erode the public's growing sense of optimism? >> it's very important, ali. the good news is, that we have momentum. you see it in the labor market, in the housing market, in the manufacturing number, in the confidence number, so we must not do anything that slows this momentum. what could slow this momentum? first, more political dysfunctionalty. please, congress, don't do it again. second, problems in syria and iran that continue to put pressure on oil prices. third and most importantly, we need this policy handoff so what we are talking about earlier it's not just about china, housing market isn't functioning properly. as diane said, our labor market

isn't functioning properly, our credit markets aren't functioning properly. these are all steps we can take today to fix. it's not an enduring problem. we need this momentum to continue to build and we need to reduce the head winds that are coming from outside, including the head winds that's created in washington, d.c. >> yeah. i think we're all -- we'd almost -- >> we know there's a lot of hot air in washington, d.c. >> your oil comment is well taken because we saw -- while we've seen markets do particularly well in the last weekend for several weeks we've seen oil prices start to sustain above $100 a barrel which major oil producers said they they'd rather keep it at $100 or lower. america's debt is on the rise, so is america's interest in tackling the year to year deficits that add to that debt. a research survey found that the economy remains the public's top priority. that's been the case for some years now. 69% of americans specifically citing the deficit as a top

concern. that is the red line that you're looking at. you can see that the other line, the yellow line, is terrorism, but the economy in general is the most important thing. the big rise in the deficit is a top policy concern has coincided with that big drop in those focusing on terrorism, the yellow line as you can see is headed down a little bit. diane, you say deficit reduction is a great long-term solution. you think short term, the focus should be on more stimulus. tell me what you mean. >> well, it's something i'm borrowing a tag from, peter orszag, who i was on the congressional budget office advisory committee when he was at the congressional budget office and his use he's really into long term covered deficit reduction, but near term, you don't want naked stimulus. you don't want to just put out stimulus without thinking about how we're going to pay for things down the road. i think that's important. there's an opportunity and a severe challenge at the end of the year, the trifecta of the tax cuts expiring from the

bush-era tax cuts, payroll tax cuts they barely were able to agree upon to extend and the sequestration coming through and on the other side we could likely hit another debt limit which if we don't deal with these things in tandem during the lame duck congress we could get downgraded again in our nation's country and in our credit rating which brings up this political instability that mohammed refers to that can be the thread that unravels much of the progress we've made at weaving a more sustainable recovery going forward. >> peter, i have to say, i'm glad that americans are concerned about debt. public debt is one issue. household debt is another issue. politics allowed that to become so central to the discussion that it really waylaid us last summer. theublic said cutting the deficit is a top priority but can we address this without taking the legs out from this recovery, peter? >> i think it's really important to understand that this decade

for ten years we've grown at a rate of 1.6% annually. in the five decades prior to that we grew at a rate of 3.5%. we've lost 2% of gdp growth a year for ten years. that's 20 million jobs. the best way to solve our deficit problem is not to raise taxes or cut spending. it's to have those two percentage gdp growth back and to do that, what we really need to do is solve our structural problems. forgive me but i think diane is wrong. we do not need more fiscal stimulus. that's keynesian solution. we have a strushl problem. we need to raise the investment segment of our gdp and reduce our trade deficit. we don't have to worry about the deficit if we do that. >> in terms of fiscal stimulus more in terms of what ali is talking about fixing problems in housing. deal with our foreclosure laws in housing, change some laws in housing to make it easier for the market to clear.

we have a market that's over shooting in the housing market. i do not support -- i do support changes to the tax laws that make them simpler and eliminate many of the high-end deductions for second homes and things like that. that's just not productive for our economy. i think it's important to understand part of the reason that we had slower growth because we had rising deficits which were crowding out investment in our future. among a lot of other structural problems. i think our structural problems with china are a mere reflection of our own structural problems at home. we let the consumer try to dominate on debt when they no longer could and not invest in our own future through the private sector and export. our solutions on getting there, getting the deficit under control over the long haul is an easier process than having what europe is going through now and having financial markets determine how they make those decisions and when they make those decisions. a sharp tax hike with a sharp decline in spending, which is

what we're set up for right now at the beginning of 2013 is not the solution for sustainable recovery. >> what a fantastic discussion. i would like to continue this with the three of you when you are next available. what a smart and helpful conversation for our viewers. diane swong, chief economist at mesereau financial, mohammed el arian ceo of pemco and peter author of "death by china" and a professor at uc irvine. thanks very much. president obama wants to manufacture a recovery bringing back manufacturing jobs to america. but is that really the way to solve the unemployment crisis? let's talk about that next on "your money." ♪ [ woman ] when i grow up, i want to take him on his first flight. i want to run a marathon. i'm going to own my own restaurant. when i grow up, i'm going to start a band. [ female announcer ] at aarp we believe you're never done growing. thanks, mom. i just want to get my car back. [ female announcer ] discover what's next in your life. get this free travel bag when you join

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...we inspected his brakes for free. free is good. free is very good. my money. my choice. my meineke. american manufacturers are hiring again but the role of manufacturing plays and will play in america's future is in question. since 1990 the u.s. shed a third of its manufacturing jobs. in the last two years, however, american manufacturers have

added 400,000 jobs. but look at that steep dropoff. you first see it in 2001. you see it again right around when we had the economic crisis. president obama made manufacturing a key point in the state of the union address. this week he took his made in america message to milwaukee. >> we've got to seize this moment of opportunity. we can't let it slip away. we've got an opportunity to create new american jobs and american manufacturing, put that back where it needs to be. >> will cane is my good friend and cnn contributor and conservative and i want to ask him why you wouldn't agree with what the president wants to do, bring back manufacturing jobs to america. >> perfect. bring it back. he's the deal. in the big picture in the long run, my argument is when we talk about bringing back manufacturing, we're insinuating we're bringing it back from china, vietnam or mexico and trying to bring it back from the dead. i would ask the viewer one quiz.

do you think we made more steel, put out more steel in 1970 or 2007? in 1970, we put out 91 million tons of steel and took 531,000 workers to do that. in 2007, we put out 106 million tons and only took 150,000 workers to do that. we're making things in the united states, we're just not making manufacturing jobs. >> all right. scott paul is the executive directors of the appliance for american manufacturing. what will did and we've got other charts to show it make the argument for an increase in productivity. there are two reasons we've lost jobs in america. one of them what is will says. we make more stuff with less, fewer people because we use more machines and the second one we have outsourced jobs to places where either rules or wages make it cheaper to make goods like in china. what's your take? >> well, a couple things. we've always had productivity, technolo technology increases. only in the last decade we've seen the steep dropoff in jobs

as you showed, and the reason is not technology. it's china. we had a record $295 billion trade deficit with china and i will say this, it's not because china can do it any better. there are massive state subsi subsidies, currency manipulation as peter navarro mentioned and not a level playing. alan hamilton did a survey 94% of american manufacturing is globally cost effective. our policies have looked towards outsourcing. other countries fight for these jobs and for a reason, it adds a lot of value to the economy. >> i want to slow you down, you are making interesting points but i want to make sure the viewer understands what you're talking about. because the general thinking is that if you take technology and productivity gains out of the equation, the reason we send jobs to places like china, use china as the poster child for this, because workers earn substantially less money per hour or per day than american workers do. peter navarro started making this point and you're making it

again, substantially more than that. do you think if we addressed all the other things, the human rights concerns, pollution concerns, all of the industrial and the intellectual patent concerns, do you think we would not be exporting jobs to china or get all these jobs back? >> of course there would be global trade, ali and we would have imports, exports. that's the way it's supposed to work. you want balance. that's what economics suggest you get to. my point is labor is less than 10% of most types of manufacturing. that's not the issue. the issue is leveling the playing field on currency. it's having smarter tax policies. it's training workers. it's an investing in innovation that will be made here in the united states and frankly, it's for valuing manufacturing. that's why i'm glad the president is talking about it. rick santorum talks about it. mitt romney talks about it. we haven't had this national discussion for a long time. it's been like we can do financial services, the housing industry is going to take care of it, the tech bubble will take

care of us. none of it has worked. get back to what we do well which is making stuff. we are great at making stuff. the only nation in the world that wants to give it away. germany doesn't want to give it away, china doesn't want it given away. we can fight and compete and grow jobs and faster output than we'll grow jobs. we can grow jobs too. >> should we be working hard to level the playing field and see where we go. manufacturing jobs or are we where we're going to be. >> we have two separate conversations one about productivity and globalization and one about long term and short term. scott is right there has been a steep decrease in manufacturing jobs. what i suggest is in the very short term manufacturing jobs are coming back to the united states. rising fuel prices have put jobs back here. when we talk about bringing them back china has no hold on the jobs. manufacturing stalled somewhat? china, being pushed to places like vietnam. manufacturing in the short term will always seek out the lowest wage provider and in the long term, look, productivity is killing manufacturing, killing

it dead. we -- in the united states, from 1950 to 1980 productivity doubled and manufacturing as a share of jobs went from 30% to 20%. >> let me ask scott then. i'm not asking you whether you agree with will but if you take that argument, at face value, why should we go through all this effort to get manufacturing jobs back if as will says, technology productivity is still going to kill the industry. >> i will say we're not going to grow back enhi ford factories. there's no question about that. apple can figure out how to make an ipad here, would employ less than 200,000 workers. wouldn't have to wake them up and give them biscuits and tea. there would be far fewer of them, but they can do it. we haven't had the ecosystem of public policy, of private investment or mbas with the attitude we should make stuff in the united states. i think that's changing. i think that's a good thing for our country. there is no multiplier effect like manufacturing has. let me give you an example, if you locate a walmart in a community, it doesn't mean

you're going to attract other jobs but if you locate a factory in that community it means you're going get a walmart, mcdonald's, a more robust tax base. >> i mean i hear your argument. >> spend money. at the hardware stores. you could be a it tv host, you can change bed pans, flip burgers, none of those are making goods that allow the united states to become more wealthy. that's what manufacturing does and it provides for national security. we can't live without it. >> let me ask you this, my father would like me to ask you this and peter navarro said, if we all just stopped buying chinese stuff, i don't know if you heard me, probably did, you listened to peter's interview, i would be naked and have no technology in my hands. is this a wise thing? should we be buying local, thinking not only of our country but communities? does that have any longer term economic effect? >> no only if you don't like progress. if we adopt these attitudes don't want to deal with anyone outside of our world, don't want to trade, keep our jobs locally we're taking the tact let's

protect the big buggy makers of yesterday. tomorrow is coming we'll have different jobs. >> scott? >> well, i would just say this, first of all you wouldn't be naked. there are plenty of clothes you can find in the united states, ali, if you look for them. made in the garment center just a few blocks from where you are right now. >> right. >> on the other issue it's a bigger one. i don't think we should be absolutist about trade. i don't think we should put walls up around the united states. what i'm saying is we shouldn't give up on manufacturing. it's smart to invest in it. it's smart for economic future. it's smart for people who don't have four-year college degrees which is the majority of americans to provide good job opportunities. >> scott, that's not a solution. the solution to that is to get everybody better education. >> but the reality is not everyone needs or wants -- not everyone needs or wants a four-year college degree. people that want to work with their hands -- >> the economy -- >> their hands and minds haven't had that opportunity in the united states because we've set that aside. we can compete and win. >> you know as well as i do, a

welder coming out there earns better than $100,000, a plumber, oil, natural gas worker. we haven't done away with blue collar work. if you can't outsource it you still have to do it in america. that is a great other conversation for us to have about education and blue collar education, college education versus university education. what a fantastic discussion this has been. i hope you both talk to us a lot more about this because it's an important one we should be having. scott paul the executive director of the appliance for american manufacturing. will cane good friend is a cnn contributor. i want to show you this. take a look at this. we've mentioned this in the last few segments. the tax code, 25 binders, 72,608 pages to be exact or as cnn money's jean za hadedy calls it weekend reading. got to be a better way than 72,000 pages, right? we're going to take a close look at the tax code and what can be done with it. don't change the channel. not going to take too close a look, but a close look. [ kyle ] my bad.

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. look at it. all 72,000 pages of the current tax code are over there in 25 binders. jean, senior writer at cnn money. this is part of her beat and i was joking with her the day they gave out beats at cnn money, she must have been away that day because they gave her fun complicated things like budgets and taxes. give us an idea of what tax reform would look like if president obama got his way particularly when it comes to individuals? >> well, he has sort of proposed a tear two tier approach, put in specific proposals in his budget to reform the current system, primarily raising taxes on the rich and corporations in a variety of ways but i would rather not do that, i would rather reform the whole thing. so if congress does that, let's make sure we obey the so-called buffet rule he named in september to ensure people who make more than $1 million pay a mineral mum of 30% of their income in taxes.

he says i don't want the buffet rule to go into effect now but we're going too get closer if you do the specific measures i took. >> the idea of people will pay more in tax but over time we don't want to effect the recovery is that the point? >> no. he just -- well the white house is kind of having it both ways. they are saying the buffet rule is the principle for tax reform but congress isn't doing tax reform. he's proposed new measures to raise taxes on the ithe rich. he says that will get us clearer to observing the buffet rule. >> ste ven moore, good friend of the show. he also was a founder of the club for growth so we kind of know where he comes from on taxes. if you think the current tax system is unfair, or not pro growth, how do you fix it so it promotes growth? >> let's start with the basic principle of a good tax system. i think almost everyone would agree with, that is what you want with a good, sound, fair

system that is also pro growth to have a broad tax base to you're taxing everything but as low rates as possible so you're not distorting economic behavior. that's what we did back in 1986, as you recall. we got rid of loop holes for investing in wind mills and things like that. we lowered the rates and i think everybody agrees that was a good thing to do. i would love to see us do that again. it harkens to the conversation you had on manufacturing. look if we have the highest tax rates in the world it does put american manufacturers and other businesses at a disadvantage. this is why i would take exception with something that jean was saying, when describing what the president wants to do is, quote, tax reform that's not tax reform that's tax deform, raising tax rates making the system more uncompetitive. if we're going to have a tax reform we want to get the rates lower not higher. the president would actually raise the capital gains tax from 15 to 30% and in his proposal he

would raise the dividend tax ali from 15 to almost 45%. how is that going to make america more competitive. >> can i jump in. >> go ahead. >> tax experts have said his current day proposals are more like tax deform than reform but in terms of talking about real tax reform he, too, says he would like to lower rates broaden the base and get rid of tax breaks. >> david johnston is a columnist at thompson reuters and won the pulitzer prize in 2001 for enterprise reporting that uncovered loopholes and inequality and inequities in the u.s. tax code. you wrote that our individual income tax system is, quote, as out of touch with our era as digital music is with the hand cranked control of music players of 1912. if the current tax code is unfair and again i don't want to get caught up in language whether unfair or not pro growth, what would you do to change it? >> well, fundamentally i think we need to recognize we have a tax system that is allowing companies to earn profits in

america and then siphon those profits out of the country as tax deductible expenses and hold the money offshore untaxed. that's what that 1.4 trillion is offshore. it's invested in the u.s. owned offshore. companies shouldn't be able to take money out of the american profits that's pockets and put it in a cayman islands pocket and pay no taxes on it. we need a system that encourages investment and especially investment in manufacturing and creating things. and there's something we can do outside the tax system that would be far more powerful on taxes and that would be lowering the value of the dollar relative to other currencies which would lead to more exporting and less importing and would have a dramatically positive effect on our economy. >> although that doesn't seem to be something -- god knows we've done everything possible to derail a recovery in this economy and still hasn't hurt the u.s. dollar. jean, steven and david, stick around. what should be in president obama's corporate tax code plan which will be released soon? we'll get some solutions next on "your money." [ male announcer ] if you believe the mayan calendar,

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president obama's big announcement coming out in the next few weeks will be guidelines for reforming the corporate tax code. the u.s. has a top federal tax corporate rate of 35%. that is one of the highest in

the world and many feel that this discouraging companies from doing business in the united states even though most businesses pay a lower percentage because of the way they can handle their accounting. partly because of all the tax breaks and loopholes that fill these 25 bichbnders of the tax e on the set with us. jean, the obama administration is expected to suggest lowering the top corporate rate and also cutting some corporate tax breaks. tell me what you think the president's guidelines will look like. >> you know, i wish i knew. they've been promising this about a year. they're not going to be putting out legislative language so they're not going to have too many specifics. they pick a rate to go down to a lot of rchens want to go down -- republicans want to go down to 25%. if the president can provide service with his guidelines it would be to inject a little reality into the discussion to get below 30% to get the top rate down to 30% you have to cut almost all the corporate tax breaks altogether.

it is a very expensive proposition to make it revenue neutral. people tend to talk about tax reform, it's great, create economic growth we'll all be happy afterwards. it will be a lot of hard decisions and corporations which david has written about this a lot pay a low rate effectively. they don't pay the 35%. so with all the breaks they get they can make between 10% and 15% even. to tell them they're going to 30 -- >> a bit of a canard we hear all the time. even steven is nodding his head. the number is not the case. we all agree there's a relative unfairness to this whole thing. the president is, obviously, watching the show right now, i'm sure that that's what he does on weekends. he still has time to change the plan. what's the key problem with corporate taxes in this country and how would you solve it? >> well, you just mentioned it. we have high tax rates but david is right and jean are also right, that we're not raising much revenue from the tax. i would argue, ali, that's the worst tax system of all. tax system that imposes, you

know, real high burdens on corporations but doesn't raise a lot of money. there was a congressional hearing couple years ago where general motors brought in their corporate tax forms and it was like five stacks of the manhattan phone book. they didn't even pay that much corporate tax. you have companies like general electric that have virtually zero corporate tax burden last year even though they had to fill out all these forms. i bet we could put the four of us in a room and come out with a more sensible corporate tax system in an hour or two. it has to be done. it is really hurting corporations. paul volcker who headed up president obama's own tax reform commission said look this is a disgrace that we have a system that is putting american companies at a disadvantage. >> how about the three of you sit in a room and i'll get pizza and bring it to you. what would you do to fix the corporate side of the tax equation. >> it's important to recognize 99.9% of corporations pay almost the 35% rate. it's the 14,000 corporate giants

paying very low rates generally, most all but most of them. that's where the issues are. we have rules for these large corporations that are unlike the rules [ inaudible ]. we disadvantage family owned businesses, purely domestic businesses and manufacturing companies and favor certain other businesses. we have a system that allows companies that are rate regulated monopolies to force you to give money to pay income taxes that they pocket and nothing is being done to correct this. here's the principle, government shouldn't care what kind of chip you make whether potato or microchips. we should take you the same. we shouldn't let corporate jets have a writeoff faster than other jets. the president needs to process post something that makes him the most pro business president american history. he wants to continue 100 expensing immediate writeoff of new capital investment. the george bush never proposed that, ronald reagan never proposed that, richard nixon never proposed that.

this is what obama is proposing and we had during most of his administration 50 or 100% writeoff. there is movement in the direction of making a system that will be more effective to get more jobs and investment in this country. >> i have a sense if i did leave you in a room for three hours, two hours and brought pizza you might solve some of these problems. what a great conversation. thanks so much, jean, writer with cnn money who got the short straw and has to cover this stuff, steven moore, editorial writer with "the wall street journal" and david kay, columnist with thompson router. one candidate says inequality is a good thing for this country. you heard me right. we'll tell you more next on "your money." as shipping it though. i mean shipping is a hassle. not with priority mail flat rate boxes from the postal service. if it fits it ships, anywhere in the country for a low flat rate. that is easy. best news i've heard all day! i'm soooo amped! i mean not amped. excited. well, sort of amped. really kind of in between. have you ever thought about decaf? do you think that would help?

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okay. the issue of fair necessary and inequality in this country are part of it and the candidates have addressed it in one way or another. but perhaps none were as bold as presidential hopeful rick santorum this week. >> there is income and equality

in america. there also has been and hopefully there always will be. why? because people rise to different levels of success base oddde on they contribute to society as it should be. >> is it simply a by-product of capitalism and something we should embrace as rick santorum says? well benjamin barber is the author of "jihad versus mcwor . mcworld." will, you quoted plato. the first source of equal is inequality. i take it you're siding with rick santorum over this. let's ask this. is capitalism the problem or the way we've been practicing capitalism the problem when it comes to inequality? >> capitalism is the problem when you have only capitalism

and no balance with democratic institutions. you needed political institutions that balanced the deficiencies of capitalism. the fundamental deficiency of capitalism, its virtue is that it's productive, innovative, entrepreneurial. its deficiency is that it produces inequalities out of scale to what it requires. of course, some inequality is in the system. the question is the difference of 400 to 1 in salaries between ceos and the workers who work for those ceos adequate. you quoted plato a couple of weeks ago. i want to quote aristotle. you need a bell-shaped curve that looks like this, a lot of people in the middle, a few rich, maybe a few who are poor. if you invert that poor, some very rich and a lot of people who are poor, what you get is

instability and the possibilities of revolution. you can be complaisant about inequality but when it gets very large and democratic institutions no longer play a role then you get something that's not just bad for democracy and bad for capitalism but bad for stability. you get the possibility of revolution. >> you baited him. you wouldn't do a thing about it but ben made reference to something i want to talk about. in 2010, ceos of some of the largegest companies in the unit states earned 300 times more than the average worker. we've seen it before. in 1980 ceo pay was 42 times the average blue collar worker. is that capitalism at its best? >> i'm going to answer that second. first i want to say. ben equates that --

>> i think he meant this vast gulf leads to it, not any inequality. >> fine. history might support him on that, but what i would say is history has never seen an economy based upon a meritocracy, which the united states is. we've never seen it subject itself to social revolution. what i would argue is -- what is the promote amount to have? 400 to 1? 40 to 1, 10 to 1? i don't know the answer to that. and i would not want to entrust that answer to the greater minds. >> ben, what's the answer to that? >> there's a greater mind among us. it's too much right now. >> when is it not? >> 400 to 1, i mean most psychologists and economists agree that somewhere between 20 and 50 times range between a

worker and a ceo is needed to motivate, to animate. i'll take 100 times even. 400 times -- and also you talk about meritocracy. we're warning bank ceos about the global failure. to me that's a sign that capitalism has gone astray. >> i'd like to convince cnn that we should just have the will and ben hour. this is actually a really good and instructive conversation. >> i would disagree. >> it's a great conversation. i think i'm going to bring you guys back to have more of it. it's basic conversation that we all have to become better versed in. thanks very much. benjamin barber, and will cain, our cnn contributor. coming up next, a way to make yourself smarter about your money this very weekend. sure that we were on schedule.

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