hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo. the economy grow, is it enough in why there could be more taxes in your future. the new man in charge of bp speaks out. my interview with the company's incoming ceo. the challenges he faces preventing future disasters and how he's going to clean up the company's image and the oil spill. plus lessons learned. my one-on-one discussion with the head of the largest teacher's union in the country. how to fix education in america and how to save jobs in the middle of a funding crisis. "the wall street journal report" begins right now. this is america's number one financial news program. "the wall street journal report." now maria bartiromo.

here's a look at what's making news as we head into a new week on wall street. u.s. economic growth slowed in the second quarter of the year. the government released the gross domestic product figures on friday which is the broadest measure of the size and strength of the u.s. economy. it shows growth slowed to an annual pace of 2.4%, the most sluggish showing in nearly a year. the move partly due to weaker spending by consumers. the dow broke a four-day winning streak on wednesday and fell again on thursday. the market's moves mostly following earnings news. most of that earnings news was pretty positive. corporate profits strong and exxon mobil, visa, merck ask dupont. fedex beat expectations as well and it upped its guidance for the rest of the year. the federal reserve survey of economic activity throughout the country showed growth slowed slightly or held stead ney most locations. the fed's beige book also showed labor conditions were slowly improving. encouraging news on the housing front as well. home prices rose for the month of may. according to the kay shiller

home price index. that index measures the prices of homes actually sold and was boosted by seasonal factors. the corporate earnings news was mostly positive, but the economic news has been telling a different story. which one should we be believing in and what does the economy look like for the rest of the year? joining me with some answers is david heal, founder of david hale global economics. good to have you on the program. >> good morning. >> let's talk about the economic recovery. the gdp numbers came out on friday. growth in the second quarter showing a pace of 2.4%. that was down somewhat and certainly somewhat disappointing, but the first quarter was actually revised upward to 3.7% growth. what do these numbers tell you? >> the 2.4% number is very misleading because what drove this number down was a massive increase in imports, far in excess of the domestic united states, which is a one-quarter blip. if we take away the import

number and the growth eight in the second quarter was a growth of 5%. we've had tremendous gains in capital spend are spending. the growth rate and equipment spending was 22%. we had an increase in spending on corporate structures, a global surprise. we had remarkably strong housing numbers given the problems in this quarter and next quarter with the downturn in home sales, but when you add it all up it's strong numbers with strong corporate profits and robust serving. >> what are you expecting for the rest of the year? do you think the employment story turns around in the rest of the year or is it the 2011 affair? >> i think we will get gradually better employment numbers. i would like to think by the fourth quarter we'll have employment gains of 200,000. we may track a few more months close to 100,000, because we still have a problem in two sectors. state and local governments were a massive disaster and we lost a quarter million jobs in the last year and if we don't get help

from washington we could lose 4 to 5,000 jobs and that's 30,000 jobs a month. also the housing quarter is missing in action. during the recession we lost 2.1 million construction jobs and we should be adding 20,000 or 30,000 construction jobs a month in the economy, but because the housing sector is stalled with excess inventory in california, nevada, arizona, and the fact is that we're not going to see housing start res cover very quickly and the consumer sector is bubbling along. the growth rate is tracking 1.5% to 2%. the savings rate is back over 6%, the highest it's been in several years. >> wow! >> the savings rate, and the fact that we're still getting wealth gains in the stock market, token modest wealth gains in housing should set the stage for better gains over the next several months. >> what would you like to see coming out of washington in terms of policies, to get the housing market moving again because you said it's missing in action. >> the answer is there's not a lot washington can do. we currently have the lowest

mortgage rates in 50 or 60 years and not much more the federal reserve can do, they can help people who might default and the reality is those policies have not so far been very effective and we still have in this country, several million people with negative equity and close to 3 million moving into foreclosure. if we could find some way to curb those foreclosures and find some way to help people that would reduce the excess inventory in the housing market. the government programs so far have not been that effective. >> there has been a lot of debate about the bush tax cuts expiring at the end of this year. do you think that the administration should extend those cuts? >> the good case for extending the cuts a further year is a lot of the tax increase will fall on small businesses. we have half a trillion dollars of small business income which would be subject to these higher tax breaks. so there's no doubt this will be a negative for employment growth in capital spending by small business in the first half of next year. i think the administration could

give a tremendous boost. the confidence for the stock market and most importantly the small business confidence by deferring the tax increase for at least a year. we've had a lot of rouse in the last month or two about a white house being hostile to business and the president not liking businessmen. i don't think the president's fundamentally hostile to business. he simply doesn't understand it. he never spent any time in his entire career in the private sector and he's finding his way. the reality is this tax increase when it comes will fall heavily on small business income, if we can prevent that, that would be a positive for confidence and for business spending and for employment creation in the first half of 2011. >> david, great to have you on the program. we so appreciate your time today. >> thank you. >> we'll see you soon. david hale joining us. up next on "the wall street journal report" more than three months after the oil rig spill in the gulf of mexico, the man

cleaning up bp will join me. the head of the largest teacher's union what will cut costs and save jobs in the classroom. as we take a break, take a look at how the stock market ended the week.

can bp bounce back after a three-month oil spill and a 40% loss in market value, the corporation announced a new strategy this past week, revamping safety operations, selling assets and installing a new chief executive officer. robert dudley will replace the embattled tony hayward. the first non-british citizen in the role. i spoke to him about the company's efforts to clean up the gulf. >> there hasn't been any oil spewing into the gulf since the 15th of july. the cap is on there. we just had a tropical storm

come through and a low-impact bull's-eye comeover the site and the cap retained its integrity and they're back in the relief well and we're setting up something called a static kill by next weekend which could pump in heavy mud and cement in the well and we have the possibility of permanently killing it, say, by next sunday. after that the relief well is right there and that's the next step if we need to use that. i'm optimistic that we will see no more oil flowing into the gulf. >> so what is your expectation in terms of containment and restoring the region. tell me what's next. >> so we're all over the gulf. we're here with the coast guard and i talked with thad allen. all of the oil on the surface, of course, the oil has not been flowing for a while, it's harder to find. traces of oil are still around in the gulf and on the beaches and we'll be right there to clean it up. we still have tens of thousands of people ready for the response

and once we clean the beaches we'll be into the marshes and this will be a long-term restoration of the gulf and we're fully committed to that. >> you're committed to that. what's your long-term commitment to the region? you've said you're going to be there beyond, you know, the time that people are talking about this, but here's a situation which is obviously, fatalities, and killed tourism and so many businesses. so what does that mean you're going to be there? what's your long-term commitment? >> it is important for bp, with this, what i think is an unprecedented corporate response to follow through. now that the oil has been capped we still have work to do to make sure the beaches are cleaned, remain clean and then we begin the restoration. that is in the best long-term strategy for bp for it to do business in the united states. it has a lot of businesses in the united states. it has many, many thousands of people that work along the gulf coast. it's in the fabric of the company. we want to be a good, corporate citizen. we want to restore our reputation. it's going to take time. we're going to learn from this accident. we're going to change many

things in bp. the industry's going to learn a lot for it. i think the entire gulf of mexico energy industry will be altered by this accident. we're going to find its people, judgment, individuals, multiple equipment failures of many companies involved and we'll make sure we share all of that as well. >> tell me about the change that you're expecting. there have been so many people who have said there's a problem with the culture at bp. decisions at the top are not necessarily filtered throughout the organization to the person on the ground. so how do you change that culture of bureaucracy? >> well, we must change. i'm not saying it's bureaucracy. what you see is a response to accidents that happened in the u.s. about half a decade ago that have been rolling through and we paid fines and penalties three years ago when tony hayward took over, completely changed the focus of the company on safe and reliable operations. now it's very clear, we have to accelerate those changes and do

a complete analysis of this investigation and look and see what we need to change in terms of our own organizational structure and our own culture and we'll do that and do that quickly. >> how do you empower people on the ground and also hold them accountable. is there too much of a culture of cost-cutting, and cut costs at any cost? >> if you look at what our cost reductions have been in the last two years, it's mainly been an overhead and it has not been in our operations and i don't believe we're cutting corners in our operations at all. what i do know is we've got to understand this very complicated accident. bp's been drilling in the deep waters of the gulf of mexico for 20 years and has had a good safety record, but something about this incident with what we're learning about the well, what we're learning about contractors. a very interesting testimony out of the board of new orleans, gives reliance on equipment and that's one of the things that everyone will look at in the

industry. >> do you think that there are some in washington whether it's congress or the administration who want bp to get destroyed, to pay for this? >> i don't think so. the rhetoric was very heavy a few months ago, and i think what the president has said and what officials now say often is the last thing they want to do is damage bp, a strong and viable bp is in the best interest of the united states and it's in the best interest of the gulf coast. we do have commitments. we've begun a program of divesting assets. we've gotten very good prices for those assets so far. after the asset base in bp is 250 billion, so it's not -- 10% of the asset base, but putting those aside shores up our liquidity and shores up our cash and reduces our debt and that combined with a very visual, constant commitment to meeting our obligations in the u.s., i think, we'll come out of it wiser and stronger and have a

very strong business in the united states. >> some people want to know, look, why are you any different than the way tony hayward operated? i mean, you could say he was a pr disaster. maybe operation alley, talley, leadership did not filter down and a lot of gaps and some say he's become the most hated man in america. how are you going to be different? >> well, i have great admiration to tony. he's committed to the corporate response in the united states and the gulf that was evident from the very beginning. when you talk to tony he says, look, i was the captain of the ship when a terrible accident happened, and i think he and i worked together for a long time. i come from an amicable bp background around the world, and i think i can follow on with that and knit the culture together and make the changes that need to be done with the management team here, and i think the important thing is for a smooth transition to come

through. my thanks to robert dudley. mr. dudley takes over as ceo of bp on october 1st. up next on "the wall street journal report," we take in the view from the front of the classroom. teacher's union and reforming the country's public schools. become a fan on facebook. you'll find us on with orbitz, i know what to expect from my vacation.

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it's ripe with challenges of today's students to the stability of the current educator workforce. the labor union in the united states is the national education association. its 3 million members live in every precinct and county nationwide and make up one of the largest collections of middle class voters. joining me now is nea president dennis van willker. thank you for being on the program. >> thank you for having me. >> it's such an important topic and we want to zero in on education. states are facing severe budget gaps. we know this. there is a funding crisis. how wide spread is that to public schools? where are the students most at risk? >> across the country. more than 40 states are facing huge deficits at the state levels. you have four or five adults trying to plan an activity for two to three hours and now imagine your child's classroom, twice as many kids and one adult, planning complex activities for six or seven hours. i mean, you don't have to be an

expert to understand that the more children you have in a classroom, the less time and attention each one has, and we have to find our way around it. that's what the budget crisis is about. if we have resources to fund bailouts for banks and tax breaks for wall street, we need that money for education. >> how can you balance a funding crisis with ensuring your members' jobs with making sure that you're not supporting failing educational models. for example, some people question the fact that layoffs are typically done by seniority and not by teacher performance. shouldn't everything be tied to performance? >> in the system, we want an excellent teacher in every classroom and if that takes a system we want a system that supports that from the recruitment to the training to the licensure to the evaluation of the professional development. i would -- no one wants a bad teacher in the classroom and there shouldn't be one. if you have a good evaluation

system tied to professional development, no teacher should be in the classroom who is not qualified. >> is pay tied for performance, what's the average salary and is it tied to performance? the average salary in the 40,000 range in the high 40s. starting salaries range from 30 to in some cases 40. >> that's not enough. for our teachers to be teaching our students we need to lure the best people and how can you lure the best people at $30,000? >> you're absolutely right. to be in competition with other professions that require college degrees we're losing ground and we need to be able to recruit more into the profession. >> is it tied to performance? >> it is tied to performance in several different ways. what we're looking at now is to get away from the one test, once a year high-stakes standardized tests. what we need are multiple measures of student growth. all teachers are to be able to show evidence of student learning and not just in math and reading. if i'm an art teacher you'll have to show evidence of

learning from the first of the year to the end of the year. so we need to look at more of the learning of students and how to measure that and frankly, right now we don't have those measurements. >> you've been critical of the president and arnie duncan's race to the top program. let's talk about that. it's a $4 billion competition for the most disadvantaged schools as part of the stimulus program. what's wrong with this? is. >> elementary secondary education act was meant for kids in poverty to level the playing field, to give them the resources they need and so what we see is there's a real danger and a competitive system because we believe all of those kids need to be lifted up and to be given an opportunity. although there are good components within race to the top, we're concerned about the competitive nature. right now two states have qualified. in september we'll hear more, but -- it's not just any age. there are many civil rights groups as well as parents are saying, the kids in my neighborhood need help. we need those resources, too. >> how is the nea issuing a

no-confidence vote in the program impact your relationship with the president and, of course, this is the president that you endorsed and spent $50 million campaigning for. >> we have an excellent relationship both with president obama and the department of education and secretary duncan. i think what's really important in the relationship, number one, you have to come from the same place and the administration and secretary duncan are exactly in the same place. we don't want the status quo. we want change. we want to close these achievement gaps. we want to increase the graduation rate and we want that for all children and not just for some. >> you taught high school math. >> correct. >> what do you think makes some teachers more effective than others. >> i worked as a teacher for 23 years and i know i wasn't equally affected every year in the same classroom so there are a lot of things that go into that, but i do believe what's most important, the professional practice. i consider what i do a profession and it's not simply knowledge and mathematics. i mean, i was there to go in the

classroom and demonstrate on the board to my students that i already know how to do all these problems. the task is how to engage students in a learning environment that they, too, understand and reach for more and that, to me, is the professional skills that go with it. >> dennis, good to have you on the program. up next on "the wall street journal report," we'll check the news that will have an impact on your money and one of lower manhattan's tourist attraction charges on as an icon of wall street.

for more on our show and our guests check out the website, wsjr.com. you'll also find a link to my blog, investor agenda.cnbc.com. i hope you will check it out. now a look at the stories coming up in the week ahead that may move the markets and impact your money. the second-quarter earnings reports from dow companies kraft, pfizer and procter & gamble as well as warren buffett's berkshire hathaway. monday the institute for supply management's index report on the manufacturing sector of the economy. tuesday, total auto and truck sales for the month of july will be released and then the big one on friday, we get the monthly jobs report. the total number of jobs that the economy lost or gained in the month of july as well as the updated unemployment rate nationwide. finally today, guerilla art that takes the bull by the horn. the charging bull statue started its wall street residency as a 7,000 pound surprise in front of the new york stock exchange in

1989. police removed the bovine after just one day, but this symbol of economic optimism relocated to nearby bowling green where tourists rub it for luck. the bull is known the world over. in may a replica was unveiled in a new financial plaza in shanghai, china. the wish for a bull market can be understood in any language. that will do it for us for today. thanks so much for joining us. next week i hope you'll join me for a closer look at the tech industry and the power of innovation. each week keep it right here where wall street meets main street. have a great weekend, everybody.