>> rose: welcome to the program. tonight, the president and the u.s. economy. we begin with alan kruegar, chairman of the president's council of economic advisers. >> the president made clear today that these going to lay out the components of his agenda, how he strengthened the elements of the middle class life-- high-quality jobs, affordable education, affordable housing that's secure, enable people to save for retirement, provide ladders of opportunity into the middle class. he made clear today he is going to use ever lever he has at his disposable. he is going to seek legislation. some things are much easier to do with cooperation of congress. but he's also going to use executive actions.

he described a very important one to connect all schools to high-speed internet within five years. and he's also-- and i think this is important-- going to use his convening power as president to call on c.e.o.s to urge them to give the unemployed another look. too many long-term unemployed have been shut out of the job market through no fault of their own. he praised some companies today, like costco, which have treated their workers very well. and i think you're going to see more of that going forward. and he'll lay out more specifics. >> rose: we conclude with four journalists who often focus on the state of the economy. david leonhardt of the "new york times." robin harding of the "financial times." matthew bishop of the "the economist" magazine, and chrystia freeland of thompson reuters. >> the headline story is, actually, the american economy is the one ray of hope in the global economy at the moment. china is in trouble. brazil is in trouble. europe is practically dead. and america is actually-- as we put on the cover a year ago

everyone sort of believes-- is the comeback kids. america has tremendous advantages and -- >> would we be the comeback kid without the energy equation. >> it woul would in part. >> whether you think it's for good oril he has done a lot. i think there's an open question about how healthy the economy is going to feel. and i think there's a chance when he leaves office we are going to feel, boy, we have had a decade and a half of pretty disappointing economic growth and then i think there is a risk for the democrats that middle class people are going to say, "wait a second. do the democrats actually know how to fix this?" and we could see more fissures in the democratic party of the kind we see in the republican party. >> rose: the president and the economy when we continue.

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: we take a look this evening at president obama who laid out his vision for the economy earlier today.

the president spoke at knoxx college in gailsburg, illinois. it is the site of his first major economic speech as a freshman senator in 2005. today's address kicks off a series of remarks on the economy the president will deliver over the coming weeks. the speeches are intended on to refocus attention on the economy. this fall, raising the government's debt ceiling and setting a new budget will be among the critical decisions facing lawmakers. here say look at some of what the president said today. >> as a country, we've recovered faster and gone further than most other advanced nations in the world. with new american revolutions in energy and technology and manufacturing and health care. we're actually poised to reverse the forces that battered the middle class for so long and start building an economy where everyone who works hard can get ahead. when wealth concentrates at the very top it can inflate unstable

bubbles that threaten the economy. when the rungs on the ladder of opportunity grow farther and farther apart, it undermines the very esespecially of america. that idea if you work hard, you can make it here. and that's why reversing these trends has to be washington's highest priority. ( applause ) it has to be washington's highest priority. ( applause ) and certainly my highest priority with this endless prad of distractions and political posturing and phony scandal, washington's taken its eye off the ball, and i'm here to say this needs to stop. technol and global competition, they're not going away. those old days aren't coming

back. so we can either throw up our hands and resign ourselves to diminishing living standards, or we do what america's always debate which is adapt and pull together and fight back and win. if you think education is expensive, wait until you see how much ignorance costs in the 21st century. ( applause ) if we don't make this investment, we're going to put our kids, our workers, and our country at a competitive disadvantage for decades. so we have to begin in the earliest years, and that's why i'm going to keep pushing to make high-quality preschool available for every four-year-old in america. >> rose: joining me is alan kruegar. he is a princeton professor and the former chief economist of the u.s. treasury department. he is currently chairman of the president's council of economic advisers and a member of the cabinet. i am pleased to have him back here. welcome.

>> my pleasure. >> rose: tell me-- because you know the president. i'm sure you spoke to him about this-- how-- what's going on? how did he approach this, and what should we know from the inside about how they felt-- what they felt was significant and what they're trying to do? >> i think the president firmly feels that we need to grow the economy from the middle out. i think if you go back to the remarks he made in his first speech at knoxx college, he articulated that view. because of the economic crisis, it's taken us some time to get back-- our footing, to get the economy back in a place where we're not just seeking stability but we want to improve middle class security. and the president didn't run for office just to get things back to where they were. he has, i think, a much more ambitious agenda, and i think he believes it's critical, as he said today at knoxx college,

that we take the actions that we can take to strengthen the middle class, to provide more opportunities, more ladders of opportunity into the middle class that will be good for the economy and good for the country. >> rose: there are those who argue there's nothing new in these speeches, that these are the themes the president has been expressing. he simply wants to change or somehow get the debate going. >> i think six months into the new term, four years into the recovery, is a good time to assess where the economy is, how much progress we've made, how we can build on that progress. >> rose: but is there anything new in terms of the ideas to-- to affect the economy? >> the president made clear today that he's going to lay out the comtonights of his agenda, how he strengthened the elements of the middle class life-- high-quality jobs, affordable education, affordable housing that's secure, enable people to save for retirement, provide ladiers of opportunity into the

middle class. he made clear today he is going to use every lever he has at his disposal. he's going to seek legislation. some things are much easier to do with cooperation the congress but he's also going to use executive action. he described a very important one he's taken recently to connect all schools to high-speed internet within five years, and he's also-- and i think this is important-- going to use his convening power as president to call on c.e.o.s, to urge them to give the unemployed another look. too many long-term unemployed have been shut out of the job market through no fault of their own. so he praised some companies today, like costco, which have treated their workers very well. and i think you're going to see more of that going forward. and he'll lay out more specifics in his follow-up speeches. >> rose: and how will this help in the negotiations about the debt ceiling and sequestration if in fact it's seemingly two sides simply have a different point of view, and

they're not moving? >> well, i think it helps in the number of respects, and i think it's important to bear in mind that the budget-- the debt ceiling, all of that is in the context of do weelp middle class in america? and i think the president firmly believes we should look at the actions we're taking and saying are they helping the middle class? so the president's going to continue to explain why his vision is the right vision for america in terms of growing the economy from the middle out. he'll seek ideas, as he said today. un, if others have ideas about how to reduce college costs he's open to hear them. so i think we should view the issues that congress is working through, through the lens of how does this help the middle class? >> rose: if the president had his way, if the president had his way, when would we sigh 3% growth in g.d.p., and an unemployment rate that slipped below seven%? >> i think if you look at the

president's budget-- budget-- when you say the president have his way-- he's very clear what his economic plan is in his budget. if we didn't have the headwinds coming from want sequester and instead replace it with policies that address the long-run deficit, which is the main problem that we face from a fiscal standpoint, i think we would be growing at 3% very soon. >> rose: soon means 2014 or-- >> i think this year would have been pretty darn close. i think 2013 would have been close. >> rose: where do you think it will end up then? >> the congressional budget office has said the fiscal drag, the headwinds created by congress because o sequester and other policy could subtract two percentage points from g.d.p. >> gl that means between one and 2%. >> i think we'll see growth at 2% and if it weren't for the sequester, i think it would have been closer to 3%. next year, when we have the

downward adjustment because of the sequester behind us-- and we'll be robbing the future by not vesting enough next year-- but at least we won't be cutting that much deeper-- although it will be somewhat deeper-- a lot of forecasters are predicting 3% growth. >> rose: there are some who are suggesting it will be a long time before we see 4% growth? do you hold that view? or do you hold the view if we do certain kinds of corrective things you agree with we could be growing to 4%. >> i think we could be growing at 3% to 4%. i think most important in this recovery that we keep it going, that we don't get in the way of the recovery. the recovery has now been going on for four years. it's not as strong as we would like. the average recovery lasts nief years. in the post-warp period, but recoveries don't die of old age. >> rose: that would be this year. >> this coming year, overlet

next year. the armies can be very misleading. recoveries don't dive old age. they die either because of mistakes -- for example, i believe if we have another unnecessary battle over raising the debt limit, go to the brink, that could jeopardize the recovery. what i think is most important, given the crisis we went through, is that we do, as the president said, build stronger foundation to grow the economy from the middle out. that's how we'll have a more durable economy going forward. that's how we'll be able to invest in the future. and i would just emphasize what's important is that we avoid the kind of boom-and-bit of psyche they'll we have in the past while we make these corrective actions to strengthen the economy. >> rose: does history tell us most economies in recovery fail to use enough stimulus? >> it varies. and a lot of countries are different. they come into crises with different debt to g.d.p. ratios and different situations. so it certainly varies.

>> rose: does most history tell us that a strict austerity budget at a time-- at the beginningave recovery is a mistrike or a necessity? >> certainly for a country like the united states, it's a mistake. >> rose: how about a country like greece? >> greece was in a very different kind of situation, but even in greece, you see the excesses. >> rose: how about great britain? >> i don't want to give advice to the whole world while i'm sitting here, but countries are -- >> ...that's where they had a very clear policy and the growth has not been there. >> if you compare the u.s. and great tbrt we've certainly had a better record in terms of g.d.p. growth. but we're focused on taking the steps we can to put more people back to work more quickly and lay the cornered stone, as the president said, so we can have a thriving middle class in the future. >> rose: that's fiscal policy. what about monetary policy? >> monetary policy, asun, is the territory of the federal reserve -- >> when can you begin to speak out on monetary policy? >> you can ask me at the endef

next month when i'll be back at princeton. >> rose: at that time. everybody in the administration, including the secretary of the treasury and the economic advisers in the white house say we don't talk about fed policies? >> i think we've been very disciplined and i think it's actually been good for the economy. i think the federal reserve board is responsible for monetary policy. if you hear too many voices, the administration criticizing them, that's not helpful. we have seen that in our history and seen it unnecessarily raised interest rates and wreaked haik in financial markets? >>. >> rose: if you look at the next six months-- we are now in the beginning of august in a week or two-- and that will take us through-- almost the end of the year. what do you expect for the last quarter, say? >> i think -- >> the economy. i'm not asking for specifics whether it's going to be 1.8 or

2.2 but. >> i think that if we avoid a budget showdown, the brinksmanship over the budget and raising the debt seale ago and after all, you know, the debt sealing is just a fight over whether we should pate bills congress already rang up. but if we can get through that period with a minimum amount of drama, then i think you'll see the economy continue to heal. we're seeing a lot of bright spots in housing in spite of the receipt increase in interest rates, housing remains affordable. manufacturing has weathered the slowdown in the rest of the world reasonably well. we're seeing relatively strong consumer spending. we're seeing job growth in retail trade and sectors which depend on descrgzary spending. i think we're seeing the economy emerge from the recession and that's why we should really focus on what can we do to strengthen the middle schass to have the foundation in place so that our economy is generating

growth and shared prosperity. most of the growth over the past decades have been going to the top. >> rose: how do you generate growth while making a serious effort at reducing the long-term debt? >> the deficit is coming down. what we want to do is get the deficit to a point where it's sustainable. >> rose: what percentage do you use for sustainable? >> sustainable, to an economist, means the debt relative to the size of the economy is not growing and it's stabilized it at a level that -- >> and to you believe it's stabilized for the next 10 years essentially? >> it's pretty close. >> rose: that's the argument made by alan kruegar and people like that. >> the congressional budget office has the debt stabilizing coming down during much of the 10-year window. the problem with the sequester is after 10 years, it goes away, and it hasn't addressed the reforms necessary to lower the

growth in health care costs, to address the growth in entitlements. and it cuts the investments that are going to make the economy more compet tich. those are, i think, the main fiscal challenges that we're currently facing. over the next six months i think you're going to see the economy yield as long as we can avoid unnecessary manufactured showdown over the budget. >> rose: lay into all this conversation, my last question, the idea of income inequality which the president is clearly upset by? >> the president is obsessed by the problems we've had over the last decade in terms of stresses on the middle class, and in trms of the rungs of the ladder of opportunity moving further apart. i have to say i share his concern. >> rose: let me tell you what i mean. he has said himself i wish we could towk more about income inequality without getting caught up in the idea of class

warfare. >> it's absolutely right. it's not about class watch. it's about our own economic welfare and the president said it perfectly today when he said it's not only a moral issue to try to provide more opportunity for those struggling to git into the middle class-- it's an economic issue. the fact that the middle class has been under so much stress has led to excess of borrowing. it's reduced investment in education for talented children from more disadvantaged families. it's not in our economic interest. one of my predecessors once wrote a beautiful book-- "efficient and equality." inequality has gotten to the point in america where we're pacht the point of tradeoff. if we had more opportunity we'd have more growth. if we had more pathways into the middle class that would increase the size of the overall pie. what i think is hreaking to the president sulook at the

trends of the experiences of children from disadvantaged families. robert putnam at harvard has done sphasinating work showing that turn of children who are raised in lower-of income families spend less time on extracurricular activities, less time and athletics. less time eating dinner at home with their parents, less likely to have a two-parent home. that i worry could create an inequality gap. if of. >> rose: a president has to deal with problems across the broad spectrum of foreign, domestic, economic, national security, all of that. 're but it has been part of the conventional lore that certain presidents care more about one than the other. #-r sometimes, as in case of

president bush 41 and 43, you're cast into making a foreign policy because you're so involveinvolved if some issues t caused you-- in this case wars-- did this president in his bone bones,. >> i think he sees them as titly intersected, that our role in the world is jeopardizized if we don't have a thriving middle class. >> rose: if we don't have healthy relations including trade with the rest of the world. >> that's certainly a factor. but our trengz come from historically having had a shared sense of purpose, having had strong growth and providing opportunity opportunity. i think if you speak to the people in the milt. one of the concerns we heard is the sequester by cutting

nondefense spending, by cutting the number of children who are in head start. by cutting investment in core research, that's affecting our military capability so i think they're highly related. >> rose: great to have you here, thank you? >> my pleasure, thank you. >> rose: we'll be back with more on the president's economic speech today and what he might say in the coq2w÷ week. stay with us. >> now some of these ideas i've talked about before. some of the ideas i offer will be new. some will require congress. some i will push sue on my own. ( applause ) some ideas will benefit folks right away. some will take years to fully

implement. but the key is to to break through the tendency in washington to brown from crisis to crisis. what we need is not a three-month plan or even a three-year plan. we need a long-term american strategy base base steady, perst effort to reverse the forces that have conspired against the middle class for decades. that has to be our project. >> rose: we continue our conversation about the economy with the distinguished group of journalists. joining me from washington is david leonhardt. washington bureau chief of the "new york times." and robin harding, the the u.s. economics editor for the "new york times." and matthew bishop, and chrystia freeland, i am pleased to have all of them on this program. i begin with david leonhardt. so what did you think of the president's speech? >> it was-- this is a classic obama speech. i mean, this is a statement of

his economic values, and it's no-- it's no accident that he did it where he did it. people in obama world, including the president himself, think of his knoxx college speech from 2005 as a totemic expression of what he believes in in. so there wasn't a huge amount of what was new here. if you want to get a sense of what he believes should happen and has happened and is happening this is about as good a summation as you can get. >> rose: tell me what this president believe. >> he's deeply worried about inequality and he has been from the very beginning. when i interviewed him on a campaign plane in the midst of his bitter fight with hillary he said what i worry about is we have an economic expansion here that isn't reaching everyone. it's not sustainable and it's not helping everyone. that's before the crisis took hold and the middle class got hammered. his health care bill is an attacks on equality.

he's raised taxeses on high-income people, but the fact is it hasn't really been enough to stem the tide. economic growth isn't that strong and inequality is still rising. some is because of larger forces. some because of choices he's made. some because of things republicans have kept him from doing. and now he's going out there saying, "this is what i think we should do." >> i absolutely agree. some, what that speech showed is the powerlessness of the u.s. president when can comes to the economy. the tooldz are lures that set out the framework for how it's going to work, or budget which dictate the taxation and spending of the government. all of those tools are in the hands of congress. you saw him making this rather plaintiff baerp hug towards

republicans saying please, work with me. it's not an enormous amount of hope but it will happen. he faces a difficult choice when it comes to the budget battle this autumn. he can either cut a deal if he's worried about the short-term propects of the economy and try to turn off the sequester, which is the biggest thing holding the economy back right now. or he request try to win this long-term battle he's engaged in about the size of the states in the u.s. and the role of government. the only way he do that is leave sequestration in place, not cut a deal, and wait until everyone is feeling enough pain that they reject what the republicans oppose. >> what i thought was really important in this speech is the president in some ways cut across people like us, which sjournalismists. to focus on today's fight or ideology and the partisan

divide. he framed some of this story of the u.s. economy and the middle class, in this historic perspective. what he said is globalization and tech lodgedical change have changed the rules of the game and in particular they have changed the rules of the game for the miss class. this is not a long-term process. this is a whole new paradigm, and my job as president-- my job the president said-- is figure out how to respond to that. i happen to think he is profoundly right. i think the financial bubble up to 2008 masked how deep this problem was. i agree with robin, that i'm less convinced that the u.s. president has 11ers to start dreesing this, but he i think he nailed what is the core and very, very big economic question

for america. >> rose: and do you believe, as a leader must do, he was able to explain it in a way that would rally people? >> time will tell. for people focused on this i think absolutely. and i do think one thing he did get at, and again i think in this new york-won bubble you can miss. ordinary people are nnding something isn't working. even as the economy is growth. they're seeing that their own security and their own tarndy of hifg is stagnating. so yeah, i think the president's focus on the middle class, in trouble. i'll bring matte in and his ability to explain things. there are some issues raised and during the campaign led us to call bill clinton the great

explainering. the capacity to plaib where we are in terms of what health care do and what's necessary for the economy. >> i think this has been the greatest disappointment from obama. i still think we're in that position today. he is saying essentially the same things today as eight years ago. he's blaming trends that were in place before he got into office and which he's actually made worse. for example, inequality has grown in america faster in the last four yiers, precisely because of the economic policies he put in place. it's actually one of the ironies that he is right, that he is right, under the surface there is a huge inequality problem that the haunt america for decades if they don't do something about it. the it american committee is the one ray of hope in the global

economy at the moment. america is actually, as we put on the cover one year ago and now everyone sort of believes, he's the comeback kid. >> rose: would it be the comeback kid without the nerks qaigz? >> i think it would in part. the energy equation helps enormously because it turned america into a low-cost. you look at the entrepreneurial spirit here and how well-placed america is in a whole bunch of industries. i think america actually could be the great story of the global economy. is it going to be inclusive over just the 1% or 10% economy. >> david, i think clearly giving they-- ronald reagan gave the same speech for a loang, long time in terms of individual

freems and those kind of things. what does the president have to do now that he hasulated of laid out in a ferngths the unknown, architecture of his pl beliefs. >> i think part of it is repetition. good politicians do, that good journalists do that. >> and a few bad ones. >> and a few bad once. ping part of it is getting a little more specific for people, so there were moreee he said he's going to talk about how to address college costs. he's got eye very nice frame on this. i thought the best lain looib was, "i know education is expensive. but you try seeing how expensive ignorance is in the 21st century. >> that rings true fair lot of

teem. the fact is the staff shows education is hugely important. but what can obama actually do to reduce the cost of college? is he going to say colleges that are-- i think some is getting more granular and detail, even they're not ideas congress is going to pass right now. giving people a sense, okay, he believes education is important. he believes homes are important. what diskly does he need for you to get your kid to go to college, for you to find a home, expect. >>ir do think connect the big are story with the specific things the president said he will do. i think one thing that makes this so challenging is a lot of

what the president has identify read really long-term problems and long-term problems are going to retire long-term solutions. >> rose: and structural. >> and structural. it is tricky to have a okay i'm talking about a sort of epic shift in the global economy, but here's my five point plan that's glg to work in six months. i think it makes the politics remarkably difficult. >> rose: has that game showed no change even though the they the-- >> the rhetoric coming out of of the republicans is they'll shut up to they government.

as scriftia said that's a real tension of what you might want to do for the long term and what he may need to do in the short term. he's saying talk with me to invest. of come oughtam he will be faced with people who want to cut further and he am have to decide whether to compromise with that view in the interest of giving the economy a if you have been forward now, or stand his ground and try to win the vinyl victory in some of these battles on public spending and investment. >> charlie, one thing we heard that was sort of new in the speech that i think we'll hear a lot under of, is his trumpeting the good things that has happened. whether it's on natural economy, whether it's how much health care costs have slowed.

it's not as if all of our problems are solved. it's not as if he deserves anyone approaching full credit for some of these developments, but i think we're going to see him do more of that as he pushes back this republican push that robin is talking about in which they're going to try to defund the government. and he's going to say, hey, wait. why would we stop what we see is working. >> rose: do you think that will change republican mind in the house? >> no. ( laughter ) >> ...offer something practical examples of bipartisanship. the republicans are desperate for corporate tax reform. obama says he wants corporate tax reform but he wants to reform the tax system in a way that increases revenue. you could do a revenue neutral thing and show the republicans you have good will any intend to be bipartisan. so far, the republicans seem to feel every time bipartisanship is talked about, i'm obama. i'm right. and you have to agree with me.

he could offer the grand bargain of entitlement reform and combined with long-term debt strategy. i have very little optimism he will offer that kind of deal. >> rose: because it's not in his nature or because-- >> i think he believes himself in the center and therefore his position -- >> where is the center for "the economist." >> we want to see serious reform at the state to get that tax reform in place. to actually make the american system more competitive. to tackle this pension crisis that is looming at the state level. let alone some of the -- >> is it hard to do that if you're a democratic president because of the economic base? >> if you look at education reform, which i think we would all agree is a long-term

solution the country needs. obama has condition a lot. but compared to what he could be doing. it means taking on the teachers' union which is difficult. obama talked about the manufacturing base, but the manufacturing sector is not where the middle class jobs are going to come from. >> rose: it depends on what kinded of manufacturing, doesn't it? >> modern manufacturing is not mass production. >> with the exception of energy. i think energy is one area where you do have those traditional high-playing, blue collar jobs, andic that's actually a vulnerability for obama. he talked about natural gas, and trumpeted that and talked. oil production but we've already

heard from john boehner that the republicans are going to be pushing on keystone, and i do think that the way want president has laid out this speech leaves him very vulnerable there. you could make the argument from the republican side saying good-faith middle class jobs your priority. >> do we know clearly where the president is going to come down on that? >> i'm not sure that woo do. i'd ask david on is that one. >> rose: but i don't know what question i asked david? >> i think he's leaning toward approving it. the signal suggests he's leaning towards approving it. he has come to believe the actual importance on both side-- economic and environmental-- is considerably less than its symbolic performance and he's not willing to fight a huge

political fight given that. and i think he thinks the regulation of existing coal plant is much more important. i think the evidence is that he's right about that. >> the irony in all this, i think there's a good chance obama will leave office regarded as having one one the best economic records of many presidents. he's been incredibly luck wet shale gas. the housing market is now picking pup of up. he's got the mucs coming in, online universities offering free courses. even if he can't get any policies through washington. it's ironic that there some ways people are very critical of his day to day management, including we at the teak i think people will say we avoid a great depression. i don't think it was brilliantly

handled, but he did the basics. >> i can just disagree with the likely assessment. i think he may get good marks-- i'm sure he will get good marks for avoiding a great depression. but i think you would go out and seeing none of his policy pale. with public investment lower than at any time since the second world war. so in terms of actually achieving his economic goals, then he's really struggling at this point glp do you blame him or the gridin the congress or does he has to-- >> i think you have to blame the congress. the president's job i think is

to try to find ways around that. >> there's-- i can just in here. i would just say, robin, you missed one big thing on the structural inequality file, and that is hiewk. and that is a huge stucteral change, which i think we, the americans around the table, forget about a whata huge jack that has been. ite really big deeg help. >> i'd probably go somewhere between the two assessments and he actually will have done a lot. health care is a great point. he basically committed the democratic party to education reform. that was the open question before. a combination of the environmental stuff. whether you think it's been for goodor for will i think he's condition a lot, vastly much than bill clt does.

>> i think there's a chance when he leaves office we have had a decade and a taif. ask then upon upon woe could see more fissures in the interest they-- may start to show some stream. >> rose: when you look at what he has done, for a while there we kept hearing the republican opposition and all the campaign rhetoric about being a man clearly of the rest and eyes to french for his own good. do you put him a as man in the interest? >> he's a man of the center-left. i think he really is. i've gone back and looked at

some of the things they wrote during the 2008 campaign to try to figure out how much he's moved. and i don't think he's moved a ton. i think on questions of the role that the market should plate, it very much for in edciegz reform. on the question of whether the government should be itself endpainled to fight inequality, he is under of more to the theft upon. he's well to the it some part of the house democratic caucus and liberal activists. >> i think it's a really fair faiment of straement. even though he's chosen in his economic team people of people who are progressive, they're in the from of the progressive state. people who are for --

>> i want to though this out on the table. the president talks about tand everything priepabout it. what's happening to the interest pla. give me a sense of what it means to be middle class and how it's important. ping. when i hear "middle class in converge how different it is than by what we meanaise milt dlas in prp i think one of the amazing strengths of america is just. hojust-- what i associate with e american middle class is a set of things that makes steady progress. if you're in the middle class you have somewhere decent to

live. you have a car. your kids go to a decent school. your income rises a bit every year, and you can look forward to a prosperous-- moderately prosperous requirement. i think the real danger is that kind of contract with society is freying veriy deeply. we have not seen growth in middle come since the 70s-- actually, it goes farther than that upon. the thing the president has not been able to do is find a way to address that trend. >> i agree with that. it does seem to me we are going to find out in the next few years whether the american economy and society can hold together with a hole-- the average family not getting better off economically. i think to some extent, believe the internet and some of the modern communication innovations, their benefit is not being picked up in the economic statistic.

i think they have been enjoying a high quality of life. the big question is whether they can fix the american hospital. >> that, i think, charlie is the key point, and the key vulnerability of the u.s. economy, and i would say all western industrialized economies is we have lived through this folden most war era that their children would do better than their parents. that doesn't doesn't hold examine. one quick point, ask then another one, the first point is income equality about being able to be mobile about your economic

status fiwrote. this huge new and fascinating studying in this which they had acset to all these anonymous warning records and what they found is huge variation in in the south the odds are climbing the ladder are much lower than in the northeast, the great plains, and the west. if you're born poorer middle class in shakes or boston or the west cove, your oughts are not much better than europe. >> rose: what are the consequences for what's happening in china and itson growth rate? just take the u.s. economy. >> well, we tend to think of china as arrival.

we thinkef it almost like a sports team, if they're doing-- that's not how the u.s. economy works. there are some ways a thriving shina is a threat to the united states. there are personal ways they can steal our jobses. if china slowed downs, it could mean that there's instability in asia that could affect other things. there are problems with china doing well, but if we're on the verge of finding out the problems of charla not doing well. >> rose: that is really the question of the moment, if what are the consequences. >> you have a new leadership

team in place saying the right thing but they're untested. and of. >> rose: and it may affect nationalism, right. >> rose: in termed of what the chinese market feendz more europe, especially journey. >> the effect on both germany and u.s. to depend on how the chinesey react to a low down. the big risk is returning to the policiesef trying to drive down that economy to. that would be very bad newsed in the short term and long term for pretty much everybody. >> we're putting detroit on the cover this week.

we think it tells you that america does have a lot of problems aproblem. detroit-- there are two stories. there's the story of the failure, but there's also signs of hope. so we do think this is a classic american restructuring story, and maybe in five years' time it will look a lot better but actually, a lot of other cities and states may yet go the root. >> rose: 27% of pension funds are underfunded. >> at the straight and local level. >> i'm going to quote the two ks-- i'm able to connect them on this whereon which is to say,

creative destruction of an economy includes destruction. matthew was right to point out this assault manufacturing renaissance is only going to go so far. the kind of economy that detroit stood for, is the midof the u.s. economy, the nl of the middle class. you can handle that for the or worse. put the reality is, that's a story of contract, and this is where exchange-- you can say it doesn't matter if you have creative destruction because detroit is-- if you happen to be one of the people stuck in one of the black motts of the u.s. che, you're probably one of the people david was talking about, social mobility.

and part of the job of the president is make sure those people don't get lost. >> some people have gone too farp. and i think that's wrong. i agree with matthew some parts parts-- it's a reminder when you have big sclerotic organizations ---- in this case, the government in detroit and to some can extent the car companiecompanyunions. the educational outpoint in scl were-- eventually, things that can't go on forever don't, and detroit is a lesson in that. gl robin, immigration reform, the president spoke about that, too. >> i think this is one of the

great economic hopes of some policy action that could change things. if immigration reform passes, it includes all manner things because they can get properly educates and move up the ladder. another where there's a possibility ofac is trep. >> charlie, immigration reform-- i think that, look, economists of left and right think this would be ad any thing to do. then you come to the politics and will it happen in the. they're both being politically

rationale in their own interest. i think there's a part of the democratic party desperate to make this happen and there's a that about that. if republicans aren't going to make this happen and run another one, let's have at it. >> isn't immigration reform politically upon. it's incredibly easy for the presidents. if they get immigration reform through their and win support of that scits, that's still tell the thans. >> i think obama views himself as a president trying to bring ever more people into the main stream of american life.

it's a theme that cuts across obamacare where the ununderred. and while i think it could would help his peter, and would probably be deeply doesn't want if he exoont get this dpn. >> >> they are really are going to be up against it. >> it depends-- >> if their party leadership can't deliver immigration reform, they really in trouble. upon i have to end it there. thank you,. thank you for joining us. see you next time.

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