The Exchange | PBS NewsHour | PBS

In a Weak Economy, Why Is CEO Pay on the Rise?

Tue, 04 Oct 2011 18:32:00 EST

PBS NewsHour

Median executive compensation has more than quadrupled over the last four decades, even through the latest financial crisis. Margaret Warner explores how CEOs can still command such salaries and benefits in light of the recession with Michael Faulkender of the University of Maryland and James Stewart of The New York Times.

JUDY WOODRUFF: Next, big-time CEOs and the big paychecks that they're taking home. Margaret Warner has the story.

MARGARET WARNER: The outrage of the "Take Back Wall Street" protesters in New York and others around the country are in no small part connected with huge executive pay. Median executive compensation has more than quadrupled over the last four decades, even through the financial crisis, while non-supervisory workers have seen a 10 percent decline.

Now, from new disclosures required by the Securities and Exchange Commission in corporate reports, we're learning more about what's behind these pay packages, as well as the so-called "golden parachutes" for CEOs who've been fired. One noteworthy example of those, just last week, the fired CEO of HP, Leo Apotheker, walked away with more than $13 million in severance while the company struggles.

For more on this, we turn to Michael Faulkender, a professor of finance at the University of Maryland, who's published major studies about executive compensation, and James Stewart, an author and financial columnist for The New York Times. He wrote about the HP deal last weekend.

And welcome to you both. James Stewart, let me begin with you. First of all, flesh this out for us. How big is the gap now between top CEOs' pay and average employees'?

JAMES STEWART, New York Times: Well, it just seems to get bigger and bigger, no matter what happens. The last numbers I saw from the Bureau of Labor Statistics, which I think covered through the end of 2010, indicated that in 2010, CEO pay on average went up over 27 percent, and for the average non-supervisory worker, it was hovering down around 2 percent. And I know plenty of people who didn't even get that.

So the gap is accelerating. It is bigger than ever. And I think the -- you know, people -- the outrage is bigger because, you know, we're in really hard times. And it's very hard for people to understand why executives, even at companies who are failing, are taking home these multi-multi-million-dollar pay packages.

MARGARET WARNER: So Professor Faulkender, to you. What does explain it? What's the rationale behind these ever-larger CEO packages?

MICHAEL FAULKENDER, University Of Maryland: Well, I think it's important to recognize that the increase in compensation we're seeing is not just limited to senior executives of major corporations, but we've seen it in a lot of industries. We've seen the difference between star athletes and the average player. We've seen increases in the amount of compensation that investment bankers are making compared to the average person in the banking sector.

So when you look at the ratio of what people on the extremes are earning, compared to what the average person in that profession is earning, that difference, that ratio has been increasing significantly over time. And so while on the one hand, it does seem like there are some practices that have led to some abuses, we're also seeing that the top people in numerous professions are increasing their compensation significantly more than people in the middle.

MARGARET WARNER: But now, the companies say it's necessary to either recruit or retain top talent. You, however your -- one of your studies looked at the methodology by which they decide, what's the going rate for the top talent. And you found something that suggested it was a little skewed. Explain that.

MICHAEL FAULKENDER: That's right. There does seem to be some evidence that when firms benchmark themselves against other firms that they select -- they select competitors that are more likely at the higher end of the pay distribution than at the lower end.

So whenever you think about setting pay for an executive, you need to provide them sufficient amounts such that they will stay in the position or want to take a new position with your firm. And in doing so, you compare the pay package you're offering to what people at other firms make.

But what we're seeing is that they're more likely to compare to highly paid CEOs at competitors, rather than the lower paid members of that same industry.

MARGARET WARNER: And sometimes not even competitors in the same business, right?

MICHAEL FAULKENDER: That's right. In fact, what the recent SEC disclosures are telling us is that now that they have to document the firms against whom they benchmark, we're seeing more than half the firms coming from -- that they benchmark against coming from outside of their industry.

MARGARET WARNER: Now, James Stewart, you wrote this weekend with some passion about the HP case and severance packages. Are you seeing the same kind of -- use that as an example, and other ones -- the same kind of thinking, perhaps distortion, reflected in the way severance packages are set?

JAMES STEWART: Well, you know, I think it's just outrageous, and I would think that most people could agree. I mean, maybe people deserve to be paid a great deal of money for succeeding and doing very well and making money for lots of shareholders, but how about out-and-out failures? Should they be paid millions of dollars when they're fired? And yet this is an increasingly common practice.

And it was vividly on display at Hewlett-Packard last week when they fired their chief executive, gave him a severance payment of over $13 million and let him keep roughly $10 million he'd been paid to lure him there, to sign on, for a total -- a grand total of about $23 million for 11 months of work that was, everybody agreed, an abject disaster.

Now what explains that? You know, it's -- the boards have simply, you know, abdicated their responsibility here. They do look at comparative examples where other people get these lavish severance bonuses. And they claim they need to give them these guarantees to get them to leave other jobs.

But in his case, he didn't even have another job. He'd been fired as CEO at his last company. So he didn't need a guarantee to get him out of there. And yet that is the boilerplate that is creeping into these contracts.

MARGARET WARNER: James Stewart, staying with you, up in New York where you are, we have these protests on Wall Street. And people there are comparing, you know, the large salaries to corporate executives versus their own sense that they're kind of falling behind. Is it provable that if CEOs here didn't get these huge payments that there would be enough to raise everyone's salary, or is it kind of a drop in the bucket?

JAMES STEWART: Well, it really is -- it's -- there aren't enough of them. It's -- even though the numbers are huge for individuals, it's a drop in the bucket when you look at total revenues and total payrolls for a giant company like HP or many of the other Fortune 500 companies.

So -- but I can understand why they're so upset. It's the principle of the thing. This system is insane. And why does it only benefit the wealthy, whereas the average working person, if they get fired, they're lucky to get two weeks to take home. They don't get lavish pay. They don't get paid more to fail than if they succeed.

This system has been completely stood on its head. And this, I think, is an abuse. We've been waiting for decades for the free market to do something about it. It clearly isn't working. And I think it's time for government regulation to step in and at least attack some of the most egregious abuses such as pay for failure.

MARGARET WARNER: And Michael Faulkender, as you said, there's new disclosures are now being required. Is there any evidence yet -- fairly briefly, if you might -- that the new disclosures and the outrage that people are expressing is moving, is prodding boards of directors or investor shareholder groups to try to rein this in?

MICHAEL FAULKENDER: I don't think we've seen it yet. There's some hope out there that with the introduction of "say on pay" that we might get more activism on the part of shareholders and shareholder advisory groups to limit some of these packages.

MARGARET WARNER: "Say on pay" is the sort of a checklist that shareholders have to sign off on.

MICHAEL FAULKENDER: That's right. The pay packages of senior executives are placed before the shareholders in the annual proxy statement, and they're given an opportunity to vote on it.

But I have to agree completely with what James was saying, that it's really the pay for non-performance that is the abuse that I think that needs to be addressed and that we have not yet seen regulators -- or, excuse me, shareholders and shareholder groups achieve success in doing that.

So that doesn't indict all compensation packages, nor does it indict the benchmarking process that's been used. But there are some structural issues that are potentially generating the abuses because when -- it's fine to pay CEOs when the firm does well, but when the firm does poorly, as in the case of HP, we really should not see these excessive packages being awarded.

MARGARET WARNER: All right. Well, Professor Michael Faulkender and James Stewart of The New York Times, thank you both.

JAMES STEWART: Thank you.

MICHAEL FAULKENDER: Thank you.

Does Oil Speculation Cause Price Spikes?

Tue, 04 Oct 2011 16:05:40 EST

Paul Solman answers questions from NewsHour viewers and web users on business and economic news here on his Making Sen$e page. Here's Tuesday's query:

Name: KR

Question: Aren't the regulations removed by the Bush administration on oil commodities the main reason for the spike in prices? Since the speculators no longer have to take delivery on the oil, that means more money is put into speculation and the higher the price. Why not report this fact?

Paul Solman: Because it's not a fact. Speculators in the commodities markets (not just for oil) have not had to take delivery for many years. It has nothing to do with the Bush administration -- either Bush administration. Moreover, spikes in price -- or falls in price, for that matter -- are a commonplace in markets going back as long as we have records of them. In all probability, therefore, booms and crashes have little to do with whether or not a speculator has to take delivery, though "cash settlement" does, as you suggest, make betting easier. Finally, speculators bet on downward as well as upward price movements. The more money put into speculation on the downside, the lower the price.

See 'The Effects of Production Turmoil' for a breakdown of what we pay for at the pump. Gas station photo by Flickr user dno1967b via a Creative Commons license.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

Senate Considers Bill to Punish China Over Currency Valuation

Mon, 03 Oct 2011 18:10:00 EST

PBS NewsHour

Watch This Segment

For years, American lawmakers have targeted China's currency, saying it has been deliberately undervalued to give Chinese companies price advantages in international trade. Kwame Holman reports on a Senate bill under consideration that would allow countervailing duties on Chinese good for currency manipulation.

JUDY WOODRUFF: The stage is now set for a Senate debate over punishing one of the nation's most aggressive competitors. A bill aimed at China's currency cleared a 60-vote threshold this evening. The move comes as unemployment here in U.S. remains high and jobs continue to go overseas.

NewsHour congressional correspondent Kwame Holman has our story.

KWAME HOLMAN: The colorful Chinese currency, known as the renminbi or yuan, has been a target of U.S. political leaders for years. They argue it's deliberately undervalued to give Chinese companies price advantages in international trade.

The issue reached the U.S. Senate today in a bill to allow countervailing duties on Chinese goods for currency manipulation. Economic action against China has undeniable political appeal as lawmakers watch jobs moving to China, even as American unemployment sits stubbornly above 9 percent.

SEN. JEFF SESSIONS, R-Ala.: We need to fight for and defend aggressively every single job this country has. As against unfair trade practices, we need to say no.

SEN. CHARLES SCHUMER, D-N.Y.: They use the rules of free trade when it benefits them and spurn the rules of free trade when it benefits them. And for years and years and years, Americans have grimaced, shrugged their shoulders, but never done anything effective to, in large measure, stop the Chinese pursuit of unfair mercantilism.

KWAME HOLMAN: Others warn the bill is not the way to address an undervalued Chinese currency, and it could have unintended consequences.

SEN. BOB CORKER, R-Tenn.: And so the United States Senate, a body of 100 people that are elected for six-year terms, wants to put in place tariffs on a major, growing country that we have growing exports to and create a trade war, a trade war between the two largest economies in the world? That's our response?

KWAME HOLMAN: The U.S. Treasury Department historically has favored negotiations, instead of direct action. And it now says the Chinese currency has risen in value about 7 percent since June of last year.

At the White House today, spokesman Jay Carney said President Obama has not taken a position on the Senate bill yet.

JAY CARNEY, White House press secretary: We're still in the process of reviewing it. We share the goal that it represents, which is to achieve further appreciation of China's currency. We have seen some appreciation since last summer, which has been useful and good, but not enough.

KWAME HOLMAN: The Chinese say the Senate bill is expedient and shallow. In a commentary today, the state news agency, Xinhua, complained: "This has become a common practice. Whenever the U.S. economy is slow, whenever an election is nearing, voices in the United States pressing for the rise in the renminbi are all over."

In fact, the issue has entered the 2012 Republican presidential campaign. But the candidates are divided over how to proceed.

MITT ROMNEY, (R) presidential candidate: We're going to clamp down on China for not living by the rules that they signed up to live by. We're going to make sure they get sanctioned.

JON HUNTSMAN, (R) presidential candidate: What will fix the U.S.-China relationship realistically is fixing our core right here at home, because our core is weak and it is broken. And we have no leverage at the negotiating table.

KWAME HOLMAN: The Senate's debate is likely to consume most of this week, but even if the China currency bill passes there, Republicans in charge of the House say they have no plans to take it up.

If Banks Don't Fail, How Will They Learn?

Mon, 03 Oct 2011 13:42:00 EST

Paul Solman answers questions from NewsHour viewers and web users on business and economic news here on his Making Sen$e page. Here's Monday's query:

Name: Matyas

Question: There was no real real estate crisis where I live: Texas. Why some areas were so severely affected and others not? Is this a result in difference in laws and regulations (or the lack of regulation)? There was a $100 billion bailout of Freddie-Fannie. What would have been the results of not bailing out exactly? My primitive understanding is that if a mortgagee does not pay, the bank gets the property in exchange. If the property is not worth enough, then the bank made a mistake at the time of underwriting and financial forecasting. The bank should pay for this mistake in their profits. Without letting these banks fail, what is the guarantee that they will not make the same mistake again? What is wrong with this simplistic view?

Paul Solman: How quickly we forget. We did let a bank fail -- Lehman Brothers -- and the world economy froze. No one trusted anyone else, so no one would lend. Without lending, a modern economy can't operate. That's the simplistic reality. Without the bailout of the F-twins (or F-bombs, if you prefer), there mightn't have been another mortgage issued in the United States. Foreclosures would almost assuredly have run amok, even in Texas. Do I know this for sure? No. Do you want to take the chance that I'm wrong? I would hope not.

Photo of Fannie Mae by Flickr user futureatlas.com via a Creative Commons license.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

Case on the Latest Case-Shiller Housing Numbers - In Verse!

Fri, 30 Sep 2011 18:01:00 EST

Karl 'Chip' Case of the Case-Shiller Housing Index has long been among our most treasured sources. Today, he graces us with more of his music -- the muse of poetry having inspired him to write on the occasion of this month's Case-Shiller numbers, reported here earlier in the week.

Here is his own introduction:

The following doggerel provides a trip through the events that led to the great housing bubble of the mid 2000s. The S&P Case-Shiller Indexes through July 2011 were released this week. The new numbers show a flat market, a lot better than falling sharply. The month over month numbers for the July composite show July over June up 0.9 percent non-seasonally and 0.0 percent seasonally adjusted. The little engine that could.

Reflection on the Housing Market: Part II

By Karl E. Case

For the last ten years we have shed many tears Living through a recession

The economy's broke and it's not a joke When we talk of another depression

Fifteen million without a job Foreclosures and banks that fail

401ks became 201ks And everything's up for sale

How can it be? What didn't we see That led to all of this trouble?

There is little doubt that the proximal cause Was a bursting housing bubble

But other than that who can we blame? And what do they lament?

Millions of people contributed to This hundred year event

For me it began in '76 With a house on Cleveland Road

At 54 thousand, I thought it a lot, For a small three bedroom abode

But 10 years later that very same house Would sell for four times the price

I was glad that I bought...I remember the thought "this may not be fair but it's nice"

In Boston alone, that boom created 100 billion in wealth

We spent more, saved less, and I have to confess It was good for our mental health

We had to know that it couldn't go on Someday prices would fall

We knew there were risks - to ourselves and our fiscs

If those prices were ever to stall

It all began in 2001 911...the dot.com bubble

The Fed had to act because of the fact A recession would mean big trouble

So the Fed Funds Rate, sitting just below eight Was cut to under two

And you had to know with rates so low That a refi boom would ensue

The volume of mortgages written back then Stunned imaginations

In a single quarter in 2003 A Trillion in originations!

But something happened late that year That caused long rates to rise

And that was the end of the refi boom It came as quite a surprise

With refi's gone so were big fees But banks still had money to lend

And the search for buyers to fill the gap Seemingly had no end

The Fed kept pumping through 2005 To keep short rates very low

And Greenspan gets a share of the blame His halo has less glow

Of course the key for all to see Was a robust housing market

Buyers could borrow lots of cash And a house was a good place to park it

A summer home... a new big house No one seemed to care

Homes were made of bricks and land The value would always be there

It didn't matter what rate you paid Or what you made in a year

For a while liquidity led to stupidity "just sign and see the cashier"

High LTVs* and Option ARMs Negative ams* and more

2-28s with teaser rates And ridiculous FICO scores

Competition was the force That made the music play

As long as prices didn't fall Everything was OK

People could always sell their house For more than they had paid

Defaults and foreclosures stayed quite low And lots of money was made

Fannie and Fred were always ahead Then Countrywide got in the fray

Then Lehman and Merrill and Goldman Sachs Couldn't be kept away

You can guess that MBS Helped make the trading brisk

Investors thought that the paper they bought Was tranched with well-measured risk

To that add leverage and default swaps And then house prices fell

"Smart guys" got hosed as the risks were exposed And that was the closing bell

The very first city to see the drop Was Boston in 2006

Then one by one they began to slip Leaving us in a fix

We tried the tax credit which seemed to work

For a few months the markets came back

But when it expired the markets got mired Resuming their downward track

The inventory of unsold homes Still continued to grow

And we're hardly building any new homes With starts at a 50-year low

A number of problems remain as risks As the markets begin to turn:

The number of loans that still need to be marked Is making stomachs churn

Fifteen million who want to work Don't have jobs today

And slow is the pipeline of loans in default Since no one wants to pay

In the longer run a lot depends On the rate of household formation

That depends in part of course On the rate of immigration

It also matters what kids do Like living with Mom and Dad

Or doubling up till they get a job To pay for their very own pad

Now there's talk of a double dip The recovery is in a stall

Consumers are down and beginning to frown Jobs haven't come back at all

The Euro is falling, the banks are appalling As we wallow in bad sovereign debt

The Europeans are asking aloud Really....how bad can it get?

The guys at the Fed have repeatedly said That their mandate includes employment

But with rates at zero no one's a hero No weapons are left for deployment

QE1 was lots of fun Then along came QE2

We did the "twist" and we took on more risk Not knowing just what they would do

So now we come to the end of this ode Without much to say for certain

I hate to say, that's where we are Not beginning nor final curtain

The truth of the matter at the end of the day Is that markets will make you humble

Just when you think that it's time for a drink They will turn and fortunes will crumble

That free markets work to provide what we want is a notion that's not in dispute

The problem is that once in a while Markets overshoot

Of course there is greed and there is a need For moral hazard and rules

If a player has no skin in a game The rest of the players are fools

Politicians, of course, are starting to shout That they want more retribution

It's better, I think, if they used their time Helping to find a solution

*-Adjustable rate mortgage

*-Loan-to-value ratio

*-Negative amortization mortgages

World Inequality: Trot the Globe Without Leaving Your Seat

Thu, 29 Sep 2011 17:27:00 EST

To accompany our ongoing NewsHour series on economic inequality, we present today an interactive world inequality map based on data from the World Bank. We confess; this isn't exactly "Where in the World is Carmen Sandiego?" But this quiz will test your inequality intuition about different places around the world, and playing around with the graphic will give you a sense of how income is distributed around the globe in 2011.

The Gini coefficient measures a country's distribution of income, where '0' represents total equality (all income is equally distributed among the population), and '1' represents total inequality (one person holds all the income). In the infographic, the figure is expressed as a percentage.

We've broken the Gini index down into 10 equal slices -- the top 10 percent of countries in terms of equality, the second most equal 10 percent, and so on, down to the most UNequal 10 percent. These so-called "deciles" are color-coded on the left. Clicking on a country in the graphic above will reveal its Gini coefficient, as well as countries that have similar income inequality. These countries appear on the map with the same color, and are also listed along with their corresponding coefficients.

Global Markets Rally as Hope Emerges for Greek Bailout

Mon, 26 Sep 2011 18:03:00 EST

PBS NewsHour

Watch This Segment

Global markets rallied on Monday on hopes that European leaders would take steps to rescue Greece from default. Ray Suarez reports.

JEFFREY BROWN: Hope replaced fear, at least for today, as stocks rallied on reports that Europe will try to fix its financial woes. On Wall Street, the Dow Jones industrial average gained 272 points to close at 11,043. The Nasdaq rose 33 points to close at 2,516.

The story was much the same on the other side of the Atlantic.

Ray Suarez begins our coverage.

RAY SUAREZ: European markets were calmer today amid signs of new efforts to stop the debt crisis in Greece from damaging the global economy. At the World Bank in Washington this weekend, the U.S. and other major economies pushed for stronger European action. During an appearance in Mountain View, Calif., today, President Obama spoke about the urgency of the situation.

PRESIDENT BARACK OBAMA: So, they're going through a financial crisis that is scaring the world, and they're trying to take responsible actions. But those actions haven't been quite as quick as they need to be.

RAY SUAREZ: And, today, officials at the European Central Bank confirmed talks are under way on creating a large, permanent rescue fund.

In Greece, the front pages of newspapers and the streets of Athens were abuzz about the possibility of new help for their hard-pressed country.

MAN (through translator): I'm hoping something good will come out of it and they won't allow us to proceed to bankruptcy.

WOMAN (through translator): Everything is gloomy, gloomy. We can only believe things will be OK.

RAY SUAREZ: All 17 countries in the Euro bloc must approve strengthening the debt rescue package before any such plan can be enacted.

According to reports today, it would be modeled on the TARP program used in the U.S. after the 2008 financial crisis. The existing European bailout fund totals just under $600 billion. By some accounts, it could be increased to $2 trillion.

As things stand, without more bailout funding, Greece could run out of money by mid-October. So the Greek government has been imposing more austerity measures and proposing new taxes to make sure it qualifies for the help.

VANGELIS AGAPITOS, economist: I think our European partners, and Germany in particular, they want additional assurances that Greece will deliver on its promises as agreed on the 21st of July of this year, while at the same time Greece needs to have the comfort that Europe will be on time to provide any further installments.

RAY SUAREZ: But the cutbacks in Greece have also sparked new outrage. In Athens today, metro, tram and suburban rail workers held a 24-hour strike. Bus and trolley service was halted for several hours. The Greek police, faced with personnel cuts, also voiced their frustration. A special guard unit hung a banner on the city's tallest hill that reads "The Greek police mourn."

Tomorrow, the Greek Parliament is set to vote on a key part of the austerity package. It's a new property tax that would be paid through electricity bills.

Markets Plunge Despite Latest Fed Efforts to Prop Up Economy

Thu, 22 Sep 2011 18:06:00 EST

PBS NewsHour

Watch This Segment

Markets plunged around the world on Thursday amid mounting fears of a global economic recession. Jeffrey Brown discusses what caused the sell-off and the Federal Reserve's latest efforts to prop up the economy with The Economist's Greg Ip and RDQ Economics' John Ryding.

JEFFREY BROWN: And for more on what was behind the latest plunge, we turn to Greg Ip, U.S. economics editor for The Economist magazine, and John Ryding, co-founder of RDQ Economics, an independent research and consulting firm for investors. He has worked as staff economist for the New York Fed and as an economic adviser to the Central Bank of England.

John Ryding, starting with you, if the Fed action was to some degree expected, what do you see explaining the strong drop today?

JOHN RYDING, RDQ Economics: Well, I think it was what the Fed said.

And the drop started after that 2:20 statement yesterday from the FOMC, where they said that there are significant downside risks to an economy that was already growing fairly slowly. And then the policy response was largely as expected. So it's a bit like your doctor telling you, you are very seriously ill, but he's only got an aspirin for you.

JEFFREY BROWN: So -- staying with you, John, so investors, this is everywhere; investors are terrified of taking any risk at this point?

JOHN RYDING: I think that's right.

The markets this year have been driven by whether people want to take risk or not take risk. They are terming the market risk-on or risk-off. And people started to take risk off after the S&P downgrade in early August of the U.S. Treasury debt and the problems with European sovereign debt and fears over European banks.

And we had a big plunge in the markets and a lot of fear measured by volatility. And we spent the better part of September climbing out of those fears and the Fed pushed us right back in.

JEFFREY BROWN: All right, now, Greg, you watch the Fed.

GREG IP, The Economist: Yes.

JEFFREY BROWN: Go back here a day at least. What did the Fed actually do?

GREG IP: OK.

Well, as you know, the Federal Reserve manages the economy usually by raising or lowering its short-term interest rate and thereby making people either spend more or spend less. But that short-term interest rate has been at zero basically since the end of 2008, so they have lost their ability to help the economy through conventional means.

Since then, they have been trying to help by pushing down long-term interest rates, the kind of rates that affect mortgages, for example, and the borrowing rates of companies. They first did it through what they called quantitative easing. They bought trillions of dollars of bonds. And they paid for them simply by printing money out of thin air.

But there was a lot of negative reaction to that, not just on capital here, but in other countries. So yesterday the Fed did something slightly different. They said we're going to go out and buy $400 billion of long-term bonds, again with the intention of pushing up their prices, pushing down their yields and lowering everybody's borrowing costs.

But instead of paying for it by printing money like we did last time, we will pay for it by selling some the shorter-term bonds that we own whose interest rates are already close to zero. They did one other thing that a lot of people have not sort of picked up on. They also own a lot of mortgage-related securities. And these have been basically shrinking as they mature.

What they have said is as those bonds mature, we are going to buy more of those and that will deliver an extra dollop of help to the mortgage market.

JEFFREY BROWN: Is this in essence pumping in more money or is it just shifting money in the hopes that it goes to the right place and lures investors?

GREG IP: In theory, it should actually have roughly the same impact that their previous quantitative easing operations did.

The idea of both of them is that long-term interest rates, although they are very low, they are still above zero. If we can push them down further, it will do two things. It will encourage some people to borrow and spend. And investors who are no longer happy getting such low returns on Treasury bonds may take, you know, the chance and buy something riskier like stocks or perhaps even invest in a new business.

JEFFREY BROWN: And you heard John Ryding refer to the language that they used. Does it sound like they are signaling, because that -- it is always hard to read their language, but, of course, the great fear is a double-dip recession at this point.

GREG IP: Now, this is what is interesting, Jeff, is that historically the Federal Reserve would often say they were worried about the economy. But that didn't cause the markets to fall, because investors always believed that no matter how bad the economy was, the Fed could do something to help it.

The thing that you have seen happening in the last month or two is that the Fed tells us the economy is in trouble, but people say, yes, but I don't think you're able to help us very much. The tools that you have left are somewhat kind of unconventional, a little bit desperate, and I think that's adding to the sense of gloom out there.

JEFFREY BROWN: Does that sound right to you, John Ryding, that plus of course all the political gridlock?

JOHN RYDING: Oh, I agree with that assessment.

I mean, it went to -- the Fed went to a 1961 policy that it tried called Operation Twist, this buying long Treasuries and selling short Treasuries. And the general wisdom from economists looking back at that period is it wasn't a very effective policy. So it does seem something of a Hail Mary play.

But I would say this. The economy doesn't have a monetary problem. Interest rates are very low. The banks have $1.7 trillion of excess reserves. So it's not the level of interest rates that's stopping people investing, stopping people from buying houses. It's other aspects of economic policy in the economy.

And yes, the gridlock in Washington in other areas means that fiscal policy can't address those issues. And so people are left saying, we have got to struggle through on our own. And I will add one more thing. These low long-term interest rates, perversely, may hurt the economy, rather than help the economy, because people have a lot of liquid assets and live off of fixed income, retirees. And it's really hurting retirees, pushing interest rates down.

And so if you are not encouraging people to borrow, but you are hurting retirees, those lower rates can curtail demand.

JEFFREY BROWN: Well, Greg, coming back to the political issue here, there was a political issue, of course, in the Fed acting. We heard John Boehner refer to it. There was a letter written...

GREG IP: Yes.

JEFFREY BROWN: ... asking that the Fed not act. Now, how does that play into what is going on?

GREG IP: So that is very unusual to have a letter from the leadership of a political party telling the Fed on the day that they are meeting, you know, we really think that it is a bad idea for you to act.

Now, it's not new for the Federal Reserve to be under attack by Congress. I mean, the Federal Reserve is independent precisely so that it can do the right thing.

JEFFREY BROWN: All right, that -- we have always heard that.

GREG IP: Yes. You know, in the '70s and the '80s, like, Paul Volcker was threatened with impeachment. The chairman of the House Banking Committee was always beating up on the Fed chairman.

What's different now is that it's not these lower-level people. It's not people on the fringe like Ron Paul. It's the leadership of the Republican Party. It's their leading presidential candidates. And they're essentially channeling the high degree of suspicion and skepticism of the Republican base of any form of government activism.

Now, I don't seriously think that people at the Fed are letting this stop them from doing right now what's necessary. And indeed we saw them move perhaps a bit more aggressively than we expected. But, over time, it does perhaps, you know, add a restraint on their willingness to act more aggressively.

More interesting I think is in 2014, when Ben Bernanke, the current chairman, when his term is up, who replaces him? It is entirely possible that if it were a Republican administration, he would be replaced by somebody with a much more hawkish and austere sort of view, vision about where monetary policy should go.

JEFFREY BROWN: All right, Greg Ip, John Ryding, thank you both very much.

GREG IP: Thank you.

Investors Worldwide Watch Shares Take a Beating

Thu, 22 Sep 2011 18:03:00 EST

PBS NewsHour

Watch This Segment

European markets finished at a 26-month low on Thursday, as markets plunged around the world amid mounting fears of a global economic recession. Judy Woodruff reports.

JUDY WOODRUFF: Investors worldwide had a rough ride today. Sell-offs hit all the major markets amid downbeat reports from Asia, Europe and the U.S. Federal Reserve. At one point, on Wall Street, the Dow Jones industrial average was down well over 500 points. It finished with a loss of just under 400.

Traders at stock exchanges around the world sat glued to their many screens, as they watched shares skid down, down, down. When the closing bell clanged at the New York Exchange, the Dow Jones industrial average had lost 391 points, or 3.5 percent, to finish under 10,734. The Nasdaq gave up 82 points to end at 2,455.

Overseas, after Asian stocks fell on weak manufacturing reports, European markets sank to 26-month lows. The German DAX fell almost 5 percent. And the main French index dropped even more, 5.25 percent.

A fund manager in France cited multiple causes.

JULIEN QUISTREBERT, KBL Richelieu (through translator): First of all, there was last night's expected decision from the U.S. Federal Reserve. So the lack of surprise created a lack of support on the market. There was also some other negative news, like the downgrading of some American banks' debt.

JUDY WOODRUFF: That Federal Reserve decision will shift $400 billion into long-term securities to lower interest rates and boost investment and spending.

Just as important to investors, the Fed underscored long-term risks that may delay a complete recovery for years.

In Washington today, Treasury Secretary Tim Geithner agreed, the U.S. faces a combination of economic problems.

TREASURY SECRETARY TIMOTHY GEITHNER: But the two other clouds still over us are the European crisis and the deep concern you can see across the world and around the country about whether the political system in the United States is up to the challenges we face, not just the near-term challenges of supporting an economy still healing from crisis, but the long-term challenges of growth and competitiveness and fiscal sustainability.

JUDY WOODRUFF: But Speaker of the House John Boehner complained the Fed's new stimulus efforts will make things worse. Republican leaders had warned against any such move.

REP. JOHN BOEHNER, R-Ohio speaker of the House: We continue to have concerns with the activities of the Fed, because it appears to us that they're taking actions because they don't believe the political system can do what needs to be done.

Frankly, I think that's enabling the political process, rather than forcing the political process to do what it should do, and that's to deal with our deficit and our debt, which is imperiling jobs and imperiling the future for our kids and grandkids.

JUDY WOODRUFF: Meantime, the president of the World Bank, Robert Zoellick, acknowledged that kind of fear for the future, even though he doubted that a new downturn is coming.

ROBERT ZOELLICK, World Bank: I still think that a double-dip recession for the world's major economies is unlikely, but my confidence in that belief is being eroded daily by the steady drip of difficult economic news.

JUDY WOODRUFF: Some of that difficult economic news continued in Greece, where protesters staged another 24-hour strike against new austerity measures. Greece needs international bailout payments, or it will run out of cash by mid-October and face default.

Do Social Safety Net Programs Shrink Gap in U.S. Economic Inequality?

Wed, 21 Sep 2011 18:36:00 EST

PBS NewsHour

Watch This Segment

As part of Paul Solman's reporting on Making Sen$e of financial news, The NewsHour has been airing a series on economic inequality. The widening wealth gap in America was examined in a past report, but economist Bob Lerman says those data are flawed because they do not include the value of Social Security and health insurance.

JEFFREY BROWN: And we return now to our continuing series on inequality.

NewsHour economics correspondent Paul Solman has been examining that subject, including studies showing an alarming rise in the so-called wealth gap. But tonight's interview takes issue with that view.

It's part of Paul's reporting on Making Sense of financial news.

ROBERT LERMAN, Professor of Economics, American University: It would be nice if there was more equality, but let's not overdo it.

PAUL SOLMAN: Bob Lerman is professor of economics at American University, a fellow at the Urban Institute, and an old college friend a year ahead of me at Brandeis University in the '60s.

ROBERT LERMAN: Oh, nice shot.

PAUL SOLMAN: Thank you. That's the one we're going to use on the video.

We sometimes play tennis when Lerman visits Boston. But this match at our alma mater was prompted by an email he wrote in response to our recent story about inequality, in which we asked people on the "David Letterman" ticket line in New York to pick the chart that best depicted America's distribution of wealth.

Which one do you think the United States is?

MAN: I would -- I might say this one.

PAUL SOLMAN: In the first chart, each one-fifth of the population has 20 percent of the wealth, in the middle pie chart, a middling amount of inequality -- the richest fifth owns 36 percent, the poorest fifth only 11 percent -- and, in the third chart, extreme inequality, where the richest fifth owns 84 percent of the nation's wealth, while the bottom two-fifths, 40 percent of the population, owns an almost invisible 0.3 percent of the nation's property.

MAN: I think the middle one is U.S.

PAUL SOLMAN: Middle one is U.S.? Middle one is U.S.? Middle one is U.S.?

Which one would you think the U.S. was?

MAN: Hopefully that.

PAUL SOLMAN: The punchline: Most people in surveys like this one, including ours, get it wrong. The third, and most unequal, chart is America, based on the distribution of housing and financial wealth.

But Bob e-mailed to say he thought the survey was misleading.

You think inequality really isn't a problem?

ROBERT LERMAN: No, I think it's somewhat of a problem, but you way overstated it. There were no nuances to the report. You ignored a big source of wealth, which is the wealth embodied in Social Security.

PAUL SOLMAN: Since we both embarked on adulthood here at Brandeis, Bob knows the Boston area well enough to make his case in and around town.

Just down the road, the EPOCH nursing home, a venue for his main nuance.

ROBERT LERMAN: A good part of wealth is embodied in the right to your Social Security flow of income and also to the guaranteed health insurance that you get. That's worth hundreds of thousands of dollars to a typical person. And you multiply that by the number of persons, and you have got a lot of wealth.

Take a lot of the people right here at this nursing home. Medicare is a source of wealth that finances their stay here.

PAUL SOLMAN: People like Clare Devane and Dorothy Arnold.

So you two were just sitting here while we were doing the interview. We didn't discuss this before.

Your point is?

ROBERT LERMAN: How are you being financed here?

WOMAN: Through Medicare and MassHealth.

WOMAN: Me, too, Medicare and MassHealth.

PAUL SOLMAN: So this isn't your own private savings that's paying for your room here?

WOMAN: Some of my money came here, but then the Medicare took over and MassHealth.

PAUL SOLMAN: How old are you?

WOMAN: Ninety-four.

PAUL SOLMAN: And, as Lerman would point out, the longer you live, the more wealth Medicare or Social Security represent. So Medicare is like a stash of wealth that you're now drawing on.

WOMAN: Right.

WOMAN: Yes.

WOMAN: That's right.

WOMAN: Wouldn't be able to come here otherwise.

WOMAN: That's right.

PAUL SOLMAN: And that's your whole point?

ROBERT LERMAN: That's my whole point.

PAUL SOLMAN: Downtown Boston, and a street busker we couldn't resist, maybe because of the snazzy hat. He was playing on the Boston Common, so named because, from 1634 on, everybody had equal access to it, up through today's regal swan boats ready and willing to offer commoners a ride.

After the American Revolution, General Washington came here to celebrate our right to the pursuit of life, liberty and happiness, made possible these days, says Bob Lerman, by the social safety net, which is not counted as part of the official wealth numbers.

So, Social Security represents hidden wealth for most of the distribution?

ROBERT LERMAN: Yes.

PAUL SOLMAN: And so does Medicare?

ROBERT LERMAN: So does Medicare. And another element of it -- and it's related -- is health expenditures overall for all ages.

PAUL SOLMAN: As it happens, this public patch of Boston features a monument to a monumental breakthrough in health care: ether for anesthesia to relieve pain. Like most of modern medicine, says Lerman, it's available to us all.

ROBERT LERMAN: The distribution of health spending is pure equality -- 20 percent of health spending is on the bottom 20 percent, 20 percent is on the next 20 percent, and 20 percent is on the top 20 percent.

PAUL SOLMAN: But you can't tell me that the top 20 percent of Americans in terms of wealth get the same health care as the bottom 20 percent? These guys have concierge doctors whom they can call on at any time. These guys are lucky to get into the emergency room.

ROBERT LERMAN: Well, I agree that the top 1 percent or the top half of 1 percent have fundamentally different health care, but not the overall top 20 percent.

PAUL SOLMAN: But the huge disparity is between the people at the very top and everyone else.

ROBERT LERMAN: Well, that might be fair if the people at the very, very top could actually get a better operation. It's not at all clear that's the case. The wealthiest person 25 years ago could not get access to the same care that the middle-income person gets today.

PAUL SOLMAN: The bottom line, to Lerman, is that, if you add in health care and Social Security wealth, the distribution wouldn't look like this -- the richest fifth of Americans with 84 percent of the wealth, the poorest two-fifths with an almost invisible sliver -- it would look something like this: richest fifth, 55 percent, poorest two-fifths, almost 17 percent -- more details on our website.

But then, if you look at the top 10 percent, the top 5 percent, the top 1 percent in America, you're going to have something that looks just as unequal, if not more so, than this picture does.we

ROBERT LERMAN: Paul, you know what's amazing, it's amazing we don't have more inequality than we do have, given the fact that 40 percent of kids are born to unmarried parents, we have had a lot of immigrants from very poor countries come into the country. And, yet, still, the distribution of consumption, the distribution of health expenditures is relatively equal.

PAUL SOLMAN: Just half-a-block away, it looked pretty unequal to us.

You can't tell me that the people who shop at Chanel here on Newbury Street in Boston or stay at the Taj Boston -- that used to be the Ritz-Carlton -- aren't living a significantly different life than the rest of the American public.

ROBERT LERMAN: The very top are, but, overall, you don't see that big a gap.

Today, you could have a Ferrari or you could have a Kia. You could stay at the Taj Boston or you could stay at the Holiday Inn. Is there that big a difference? So, let's be clear. The rich do have more opportunity to consume than everyone else, but I'm not sure that we need to be as concerned about it as implicit in your program.

PAUL SOLMAN: Now, all this may not reassure those worried about economic inequality. The rich don't just buy status duds, they might point out, but private limos, private schools, private everything. And their money also buys security and power, getting others to sing your song on Boston Common or, some would argue, Washington, D.C.

Skeptics might have one final concern as well: that America's famous economic upward mobility, where even the ugliest of ducklings can turn into a swan, is becoming a thing of the past.

But though Bob Lerman agrees that what he calls the super-duper rich have been pulling away from the rest of us, he thinks there's a more positive way to look at our picture of inequality.

ROBERT LERMAN: It's accurate for financial and housing wealth, but not for the comprehensive picture of wealth. The distribution of wealth is still wide, but it's not nearly so wide as you might expect.

PAUL SOLMAN: We will look further into this and other issues as we continue our series on economic inequality.

JEFFREY BROWN: And, in a coming report, Paul explores connections between economic status and personal health.

Ex-NCAA Official: Student Athletes Aren't Workers, Shouldn't Be Paid

Tue, 20 Sep 2011 18:44:00 EST

PBS NewsHour

Watch This Segment

In response to Monday's interview with historian Taylor Branch about the idea of college students who play sports being paid, the NCAA made available Joe Crowley, a historian, former member of NCAA committees and former president of the University of Nevada at Reno. He spoke with Hari Sreenivasan.

JUDY WOODRUFF: Finally tonight: the debate over big-time college sports and whether students should get paid.

Hari Sreenivasan picks up where he left off last night.

HARI SREENIVASAN: We heard tough criticism of both universities and of the NCAA in the wake of recent scandals involving players from several schools. It came from historian Taylor Branch, who wrote a 15,000-word essay in the latest issue of "The Atlantic" called "The Shame of College Sports."

Here's a bit of what he told us.

TAYLOR BRANCH, Author, "The Shame of College Sports": The essential problem is that we pretend that these adults are not entitled to a portion of the value that they earn. And we pretend that the problem with all of these scandals is that dirty athletes are getting money under the table.

The problem is that we're not honest about it. Nowhere else in America do we forbid adults from seeking a portion of the highly valued services that they provide. And nowhere else would we think of saying, don't pay these people until I'm satisfied that it won't mess something up.

HARI SREENIVASAN: We asked the NCAA for an on-air response. They made available to us Joe Crowley. He's a former president of the University of Nevada at Reno. He served on key NCAA committees for more than two decades. And he's the author of a history of college sports called "In the Arena: The NCAA's First Century."

Thanks for being with us.

JOE CROWLEY, Former President, University of Nevada at Reno: Well, a pleasure to be here.

HARI SREENIVASAN: First of all, you don't -- why you don't think students should be paid for playing big-time college sports?

JOE CROWLEY: Well, the NCAA is based fundamentally on the principle of amateurism, which Mr. Branch feels is a principle, sadly, out of date, and indeed no principle at all and perhaps a hoax, because it isn't what it was 100 years ago.

And that is true. The world has turned upside-down a couple of times since then and many other changes. And no concept, I think, in its pure state can last that long. Nevertheless, we believe, the NCAA believes, higher educational institutions believe, that paying a student a grant in aid, a scholarship, is not a violation of that amateurism principle.

So if we paid athletes to play for us, clearly, they wouldn't be, could not be, amateurs. And we will stay as long, at least as it is possible, by adhering to the principle of amateurism, no pay for players.

HARI SREENIVASAN: In his piece, Taylor Branch makes the point that these are the players on the field. They wear the logos. They help pack the stands. It's their likeness that's in the video games. Why shouldn't they be able to profit from some of that?

JOE CROWLEY: Well, again, if they profit, they're workers; they're not amateurs. And there is a further huge problem. It's just a practical problem.

There is no way, short of huge additional outlays, to hire athletes to pay them for what they do. That means not just the stars of division 1A, but the third-string halfback in football or the 13th bench player in basketball and athletes in Divisions II and III. Division III is a non-scholarship division, the biggest division in the NCAA.

And it would come as a surprise to that division and the institutions within it that we're now going to pay your players, whom -- to whom we wouldn't give and shouldn't give -- that's the principle of Division III -- scholarships.

In addition, there is Title IX. Surely, if we bestowed dollars on players who make a difference more than other players, we would have a tremendous tussle with the meaning of Title IX, which is equality for women. And to put this into institutions of higher education at a time when, across the country, budgets for higher educational institutions, public and private, are being reduced in double-digit numbers, it's just impractical.

HARI SREENIVASAN: Right. So, the notion of student athlete that you have referred to, the NCAA has referred to, the critics say this is just legal wrangling so you don't have to get -- you can get around the work that they actually do on the field. You give them the pads, the tools to do the job on the football field, but if they get injured there, they don't get workers compensation.

JOE CROWLEY: Well, that's wrong on two counts.

I mean, it is the case, as Mr. Branch points out, that, in its origins, that was the intention. That was more than 50 years ago. However, it has developed into a centerpiece of athletics in higher education. If we are going to have -- if we are going to have students playing sports, we're simply not able to pay them.

And that's the bottom line. That's the difference. The student athlete is a student athlete these days. The evidence is overwhelming on that score. If you look at academic reforms in the NCAA that have occurred over the last 20, 30, 40 years, if you look at the impact of those reforms, if you look at graduation rates of student athletes, including those in the top subdivision, you find them remarkable.

In the case of my own institution, the University of Nevada at Reno, our graduation rate is 78 percent. Here and in most, if not all, other institutions in the NCAA, those rates are higher than the rates of the general student population.

HARI SREENIVASAN: Which brings me to the topic of academics. The NCAA says that the academic performance is really first and foremost. It's secondary to athletic performance.

If that's the case, a lot of the athletes point to something -- a discrepancy. They say, listen, most of the contracts -- almost contracts -- the agreements or scholarships are one year at a time. If I get injured on the field, I am now unable to finish that great education that I got access to.

JOE CROWLEY: Well, I should point out as well that injuries are covered. They are insured. Students don't have to -- student athletes do not have to pay to get better, to have surgery.

The NCAA also has a multimillion-dollar catastrophic injury policy, which takes care of those really, really severe injuries. But the one year at a time really is no different from the way scholarships are generally given by institutions. Many scholarships are one year, freshman year, typically. There are others that are four-year scholarships, but you retain them only if you perform meritoriously. So you have to continue to be academically solid if you're going to continue to receive that non-athletic scholarship.

The same applies in sports. If you're not performing meritoriously, the institution would have a right not to renew your scholarship, although I believe that seldom happens.

HARI SREENIVASAN: All right, Joe Crowley, thanks so much for joining us.

JOE CROWLEY: My pleasure.

Taylor Branch: 'Only Custom and Fiat' Keep College Athletes From Sharing Profits

Mon, 19 Sep 2011 18:46:00 EST

PBS NewsHour

Watch This Segment

Historian Taylor Branch speaks with Hari Sreenivasan about his cover story in The Atlantic, "The Shame of College Sports," which calls for a complete overhaul of the way NCAA athletics works.

GWEN IFILL: Finally tonight: College athletics and the money involved in big-time sports comes under fire.

Hari Sreenivasan has the story, beginning with this background.

HARI SREENIVASAN: College football served up a slew of big games over the weekend. But there was unexpected excitement off the field. Syracuse University and the University of Pittsburgh announced they're leaving the Big East Conference to join the Atlantic Coast Conference, the ACC. And officials at Texas and Oklahoma held meetings today to discuss leaving their conference, the Big 12.

The moves are driven in part by efforts to cash in on television contracts worth billions of dollars controlled entirely by conferences. With that kind of money at stake, there is new talk about whether the college sports governing body, the NCAA, should allow college players to be paid.

Earlier this year, Mark Emmert, the president of the NCAA, defended the idea of amateur athletes on the PBS documentary series "Frontline."

MARK EMMERT, President, NCAA: We provide them with remarkable opportunities to get an education at the finest universities on Earth -- that's American universities and colleges -- to gain access to the best coaches and the best trainers to develop their skills and abilities, so if they have the potential, that small proportion, to go on and play in professional sports, we're helping them develop those skills and they can go do it.

If they choose to not go on, or if they don't have those skills or abilities, then they get to go on in life and be successful as a young man or a young woman.

HARI SREENIVASAN: Now Pulitzer Prize-winning historian Taylor Branch has again raised pay-for-play in an explosive new article in "The Atlantic" magazine called "The Shame of College Sports," all of this at a time when new scandals have raised questions about the oversight of the big-money sports: football and basketball.

One high-profile case involves allegations that University of Miami football players received gifts, cash, and even prostitutes. And Cam Newton, last year's Heisman Trophy winner at Auburn, was the subject of an investigation after his father received funds from a booster.

In all, at least 10 major football programs have faced investigations or punishment in recent months.

Taylor Branch is the author of "The Atlantic" story, which is on newsstands now and will be released as an e-book later this week, and he joins me now to talk about all this.

Thanks for being with us.

TAYLOR BRANCH, Author, "The Shame of College Sports": Thank you, Hari.

HARI SREENIVASAN: So, first, help us understand what you think the essential problem with big-time college sports is today.

TAYLOR BRANCH: The essential problem is that we pretend that these adults are not entitled to a portion of the value that they earn. And we pretend that the problem with all of these scandals is that dirty athletes are getting money under the table.

HARI SREENIVASAN: Now, as the NCAA president said, they're getting an education, some to schools that they may never have had access to. Isn't that payment enough?

TAYLOR BRANCH: They're generating billions of dollars on top of those scholarships. And we are saying that they should be amateurs. We don't tell anybody else -- amateurism isn't -- it's like religion or idealism. It's something that one professes. It's not something you impose on someone else.

HARI SREENIVASAN: You don't buy the idea of amateurs or this phrase called the student athlete that the NCAA uses. You call them in your article "cynical hoaxes and legalistic confections."

Explain that.

TAYLOR BRANCH: I discovered that from the founder and architect of the NCAA himself, Walter Byers, who said that they invented the term student athlete to help colleges and the NCAA defend against workers compensation suits from athletes who broke their necks in college.

The colleges say, you were only doing that -- you weren't working for the university. Therefore, you're not entitled to medical care compensation. You were just like throwing -- it was just like you were throwing a Frisbee on the college lawn. And they have beaten down all of these lawsuits this way. So there's an underside to all of this behind all of the money that started in the 1950s.

HARI SREENIVASAN: Now, you have said in the beginning of the article when you approached this story that you would have also been somebody that said, no, the college athletes shouldn't be paid. Right now, after having done this research, do you think they should be paid?

TAYLOR BRANCH: Yes, I do. I think that, one day, we will be amazed at our presumption that we have pretended that the problem is dirty money to these people who are working hard at two careers at once.

HARI SREENIVASAN: And you use some very strong language in the piece. You said that you didn't want to use slavery. You don't consider them slaves. But you do say that it resembles colonialism and has an unmistakable whiff of the plantation.

How so?

TAYLOR BRANCH: Because we're pretending it's for their own good that we're denying them the right to earn a living from stuff that they have worked -- from professions that they worked on and sweat and kill themselves on all the time.

So, it looks pretty bad to me. I'm not saying that any college should pay these players. I'm just saying that it is artificial and wrong to prohibit them from paying them by a cartel. There's no law that does it. It's only custom and fiat. And among many other things it does is, it prevents us from having an honest conversation about whether professionalized sports and quality education are compatible.

We're the only country in the world that houses big-money sports in institutions of higher learning. And we don't have a debate about whether that injures education or sports, because we're pretending -- the NCAA has the big sports media pretending that the problem is dirty athletes.

HARI SREENIVASAN: So how would a system like that even work? If I'm on a college football team and if I think that this guy or -- next to me is making more money or less money, does that destroy some of the camaraderie; does that destroy some of the integrity of the game?

TAYLOR BRANCH: How about, does it destroy the camaraderie here at the NewsHour? It's the same thing. It's like the real world. It's also like the Olympics.

The Olympics were amateur for a century, and people thought even, more than college sports, that it would ruin them if they went professional. They went professional, and no one even noticed. They scarcely noticed. And the same thing could happen in college sports. I'm not saying that it would. I'm just saying that we are postponing all the questions behind a facade that exploits these athletes.

HARI SREENIVASAN: OK. Now, what -- we did try to reach out to the NCAA. Mark Emmert, the president of the NCAA, wouldn't appear with you tonight. But we're hoping to hear from a representative on this matter.

Now, in a recent op-ed in the USA Today, the NCAA does say -- or he says that academic standards, they're trying to increase those. They're also trying to increase the opportunity for multiyear scholarships.

Do you think that the NCAA is making a good-faith effort?

TAYLOR BRANCH: I think they're doing -- actually, I'm glad you asked that. I do think that they're making some effort on academic standards. And the people I talked to about -- at the NCAA about the academic side seemed to be doing a pretty good job.

But on the amateurism side, which is where the big money is, I think that it's all smoke and mirrors and it's like the Wizard of Oz.

HARI SREENIVASAN: You also mentioned a couple of lawsuits that are coming against the NCAA that could have significant ramifications. If people haven't been following this or the "Frontline" story, kind of briefly summarize them. Why could they be so game-changing?

TAYLOR BRANCH: Because the NCAA is threatened on many fronts with practical threats beyond the ones I mentioned in principle.

Ex-students are suing the NCAA for making money off their old video games and college sports archives that they're selling, and they're not -- and they don't give a portion of it to the athletes long after they have left college. Congress is looking into the NCAA for not -- for denying athletes due process and for antitrust. Why don't they have a national college playoff?

That's what a lot of this musical chairs in the conferences is about. The NCAA used to control all the TV revenue for football, too. The football schools broke away. And if these giant conferences can put on a national football playoff without the NCAA, which it would be without the NCAA, the NCAA's terrified that they could put on the basketball tournament, too, and take that from the NCAA, which is 95 percent of its income.

They get $771 million a year straight to the NCAA just for running this March Madness basketball tournament. And if the football schools took that, the NCAA would collapse into an impotent rule-making body.

HARI SREENIVASAN: All right, Taylor Branch, thanks so much for your time today.

TAYLOR BRANCH: Thank you.

GWEN IFILL: And as Hari mentioned, an NCAA representative wasn't available to speak with Mr. Branch, to appear with Mr. Branch tonight. But we expect to hear the organization's viewpoint tomorrow when we interview Joseph Crowley, a former university president and NCAA historian.

Zoellick: Eurozone's Fate Immediately at Stake; U.S. Needs to Address Spending

Mon, 19 Sep 2011 18:17:00 EST

PBS NewsHour

Watch This Segment

Markets on Monday continued to show anxiety over the European debt crisis as Greece held an emergency conference with creditors, trying to calm fears of default. Speaking with Judy Woodruff, World Bank President Robert Zoellick urged eurozone nations to make some hard decisions and the U.S. to slow the growth of entitlements.

JUDY WOODRUFF: Anxiety over the European debt crisis sent new tremors around the globe today, as you just heard, shaking up financial markets again, the most immediate worry: Greece.

Its creditors are threatening to withhold the latest installment of a $150 billion rescue package. Lenders are worried the government will not follow through on politically unpopular cuts. That prompted new fears today that the country may default on its debt in a matter of weeks, triggering big problems across the continent and elsewhere.

Well, those developments served as a backdrop to our interview with Robert Zoellick, the president of the World Bank. The bank provides loans and assistance to developing countries. Along with the IMF, it is a critical player in global economics and politics.

We met at the World Bank's headquarters here in Washington.

Robert Zoellick, president of the World Bank, thank you for talking with us.

ROBERT ZOELLICK, President, World Bank: Pleased to be with you.

JUDY WOODRUFF: As we sit here today, a lot of worry out there about Greece. You have said yourself in the last few days you think the world economy is entering a danger zone. Do you worry more about the European debt crisis or about slow growth here in the United States?

ROBERT ZOELLICK: Well, I don't think it's an either/or. We're in a world economy, and both of them matter.

But I think the Eurozone right now presents a more imminent issue. And that's what we're seeing in the markets.

JUDY WOODRUFF: Given what's happened with the Eurozone, is it better if this has to be the choice for the Greeks to default, if that is the only choice, rather than to continue to muddle along, which is what has been happening?

ROBERT ZOELLICK: Yes, well, so far what the Europeans have done, whether it's Greece or some of the other countries, is to provide various types of liquidity support, meaning they're making sure that money is available for banks or for the country's bonds.

And that's important, but it buys time. And it only buys time. And there are some more fundamental decisions, whether it's Greece or any others. And so the point that I have been making is, is that Europe really is approaching a key decision point here, just like it did in 1989 or '90.

And it needs to think of three issues in an interconnected fashion. One is the sovereign debt and for some countries, like Greece, in a very, very heavy load; B., the banks, because if the debt doesn't have its full value, that undermines the bank's capital. And then that shows with problems with people pulling money or illiquidity out of banks.

But third for some countries, the competitive position. So it really comes down to a question of whether that monetary union that was created some 20 years ago will have a complementary fiscal union, which could be done in different ways, or whether Europeans manage the consequences for highly indebted, uncompetitive countries.

But it's also affecting all of us, just as we saw in the summer, where the combination of events in Europe and the United States started to have a contagion effect in markets globally.

JUDY WOODRUFF: Well, given -- you speak about the Eurozone, the monetary union. There are those who argue that it would be better to have each country standing on its own dealing with the consequences on its own, rather than trying to hang together and have the sort of difficulties we're seeing right now in Europe.

ROBERT ZOELLICK: And these are decisions that only Europeans can make. So, if you're sitting in Germany or some of the other countries, you're saying, look, I'm tired of bailing out other partners. But then those countries have to decide do they want to preserve a Eurozone?

Do they want, in the case of the absence of a euro, you would see the Deutsche mark have appreciated in value. But it's more than just that aspect of trade. It's a question of what sort of future of Europe do they want and how should it be structured?

So, if one does move towards a fiscal union -- I'm not by any means suggesting it just needs to be a bailout -- you would have to change -- and there's different ways to approach this -- the types of fiscal discipline, whether used through markets or whether used through institutions.

JUDY WOODRUFF: What do you think?

ROBERT ZOELLICK: I really believe it's a European question, because it's so fundamentally political. It's not -- this is not a technical expert question.

Experts can offer various alternatives. But to make this work, just as the United States had to make its decision in 1787 -- that was a political decision about the future. And so these are the questions that they have to face because they're going to pay for it one way or the other. And it's going to affect their future as a union.

JUDY WOODRUFF: You have also mentioned you're worried about the weak growth here in the United States. Solutions -- is the solution the kind of austerity that some are saying must happen, cut government spending massively or should it be some combination of cutting government spending and strategic investment in things like infrastructure?

ROBERT ZOELLICK: Well, the U.S. also has to pay attention to fundamentals. It's not quite as imminent as the European situation.

But over the course of the next year or two, and maybe after the 2012 elections, given American politics, people are going to have to face up not just to the question of what we call the discretionary spending, the annual budget spending, but really the growth of entitlements.

And here it doesn't really have to be cuts. It's slowing the rate of growth. And that's a decision that neither the Congress nor the executive have really joined yet.

But, also, there are -- there's a need for pro-growth strategies.

And you have seen -- I was at the Treasury in the '80s when there was the last major tax reform. There's starting to be a movement for the idea of trying to broaden the base, lower the tax rates. That would be a strategy that would boost growth. And, frankly, open trade is something that we haven't been pursuing. That's another important structural reform.

So, my message, whether it be to Europeans or the U.S., or frankly with the developing countries we work with, is don't forget the structural aspects of growth, the fundamentals of growth going forward. And I'm not by any means a believer that the U.S. or others are caught in some stagnation. There's certainly all the possibilities of moving ahead. But people are going to face some tougher decisions.

JUDY WOODRUFF: So do you think people are acting like things are worse than they really are here in the U.S.? Is that what you're saying?

ROBERT ZOELLICK: No, I think they're serious. But I think -- the difference is I think, in terms of market response, Europe is right now on the firing line. I think, in the United States, if the United States doesn't act on these issues, I see it already globally, how it's sort of weakened the United States' position. But in terms of financial markets, the United States can muddle through for a while longer.

JUDY WOODRUFF: Why does all this matter for the developing world, which is your principal focus here, the World Bank?

ROBERT ZOELLICK: Well, you know, in this downturn, the developing world has actually been the one source of light. About a half of global growth now comes from emerging markets.

And that really relates to your prior question, too. What we have seen over the past 10 years much faster than one would have expected is the rise of emerging markets as players in the system. But starting in August, we started to see some of the ripple, the contagion effects.

The bond spreads for emerging markets debts on average rose about 70 basis points. That's about three-quarters-of a percent.

JUDY WOODRUFF: Costs more money to...

ROBERT ZOELLICK: Costs more money for their sovereign debt. Their equity markets also took serious hits, just like they did in some of the developed countries.

Their exports to developed countries have already been down because of the crisis. And the issue which we're watching closely, because this could be the game-changer is that, if the confidence effects also undermine their investment or their consumer confidence, then the one source of global growth that's kept us going would start to slow.

JUDY WOODRUFF: And that, you're saying, would have a -- in turn, a big effect on the developed world, on Europe...

ROBERT ZOELLICK: Yes. I mean, one of the -- if you look at the source of U.S. growth, it's primarily been some of the exports. So we're all in this together. That's part of the point, whether you're developing or developed or Europe or the United States.

And the need is not only for actions, but some cooperative actions that reinforce one another.

JUDY WOODRUFF: You are putting at this meeting of the World Bank a lot of emphasis on providing more equality for women, gender equity.

I think you're using the theme "Think equal." There's been efforts over the years in the international community by non-governmental organizations and others to increase opportunity for women. Why is this one different?

ROBERT ZOELLICK: Well, this is being driven by an annual report that we do. It's a world development report. It's certainly a major contribution to a field where we don't just try to advocate or talk about a subject, but provide some solid analysis.

And while, you know, I believe that gender equality is not only the right thing to do. What this report makes very clear is that it's smart economics. So what we can show with studies from African countries, developed countries, is what a difference it makes to give women the same property rights, a chance to move into business lines, credit, inputs for agriculture and how it improves productivity.

So at the exact moment that we're looking for sources of global growth, how can any country really succeed with growth if it doesn't draw on the full capacities of 50 percent of its population?

JUDY WOODRUFF: Well, it's certainly a full plate that you have.

And, Robert Zoellick, president of the World Bank, we thank you for talking with us about it.

ROBERT ZOELLICK: Glad to be with you.

Egypt's Economy Sinks on Heels of Uprising

Fri, 16 Sep 2011 18:13:00 EST

PBS NewsHour

Watch This Segment

Margaret Warner continues her reporting from Cairo with a look at the economic fallout from the country's revolution.

JUDY WOODRUFF: And we turn again to Egypt.

Margaret Warner continues her reporting from Cairo with a look at the economic fallout from the revolution.

MARGARET WARNER: After 30 years driving a taxi from upscale hotels through the streets of Cairo, Sayed Swidan's fares come few and far between these days.

SAYED SWIDAN, driver: My work very bad now.

MARGARET WARNER: The revolution that toppled Hosni Mubarak has kicked off a political transformation. But for men like Swidan, this upheaval has brought a stifling economic slowdown, especially to the country's lifeblood: tourism.

SAYED SWIDAN: Not a lot of tourists come this year, because after demonstration, no good job for me. All Egyptian people, very good for them, not me.

MARGARET WARNER: And not for millions of other Egyptians who've seen their bottom line falling as prices rise. Tourism generates one in seven jobs here and 11 percent of the gross domestic product. But this year, international arrivals and the revenue they produce are down by nearly half.

Other gloomy indicators abound: stock market down 35 percent this year; inflation projected to rise by double digits; growth, anemic. The streets of Giza should be teeming with tourists early on a Friday morning. But, today, the camel drivers and horsemen sat idle.

SAYED SWIDAN (through translator): Normally, this place is so filled that it's uncomfortable to stand because the huge crowd of people here, foreigners, Egyptians. But ever since the revolution, the livelihoods of the people who work here have been brought to a halt.

MARGARET WARNER: Khaled Sayed Ahmed runs sporting stables nearby. He used to pull in about 1,500 Egyptian pounds per day, about 300 U.S. dollars. Now his ships of the desert lie deserted, and many of the men who once drove them are gone.

KHALED SAYED AHMED, Egypt (through translator): These men aren't only responsible for themselves. Behind them are workers, then camels and horses, and of course their families to feed and provide for. And no one's helping us.

MARGARET WARNER: Just up the street, Mahmoud Said opens an empty gallery. Papyrus artwork here sells from $20 to $2,000.

MAHMOUD SAID, gallery employee: We have just two, three customers, not more. Before, we have like 20 customers, 15 every day. You can work, not sleep. But right now we can sleep any times.

MARGARET WARNER: It is a commanding view from the roof of his gallery, but Mahmoud says, as bad as times are now, things may get still worse.

MAHMOUD SAID: We hope the tourists come back because we have horses' leavings, horses dying and camels. Also, is no food.

MARGARET WARNER: For Sayed Swidan, the tumult is hitting not only him, but his children. He worked seven days a week for decades to send them to private school and university. Sayed's 26-year-old son, Tamer (ph), who graduated with an accounting degree does have a job, taxi driver. Neither father nor son blame the revolution for their lot. They do blame a system that hasn't changed enough yet.

JEFFREY BROWN: Ray Suarez talked with Margaret earlier today after she filed that report.

RAY SUAREZ: Hi, Margaret.

MARGARET WARNER: Hey, Ray.

RAY SUAREZ: Egypt is a place with a fast-growing population and often a slow-growing economy. Wasn't there economic dissatisfaction long before the fall of Mubarak?

MARGARET WARNER: There certainly was, Ray.

Two-thirds of Egyptians are under the age of 30. And it's estimated that a third of them don't have jobs. And a lot of them are university graduates. This is not new. In fact, the driver Sayed who is in our piece told me that when his son graduated from Cairo University with an accounting degree, he said, "If he have friends in Mubarak office, he get job tomorrow. No friends, no job."

And so there is a deep sense, really, of injustice here that is very longstanding. And, in fact, it was part of what helped fuel the revolution. A recent poll by the International Republican Institute, when people who participated were asked, what drove you, about 80 percent said it was really unhappiness with their economic prospects, rather than unhappiness with the pace of democratic reform.

So what is bothering people here now, though, is that absolutely nothing appears to have changed, and, in fact, it seems to have gotten worse.

RAY SUAREZ: Well, after the struggle against the Mubarak government, are more Egyptians having second thoughts about whether it was all worth it, kind of revolutionary buyer's remorse? And if people are unhappy, who do they blame for how things are going?

MARGARET WARNER: Ray, we haven't had anyone say to us, we wish Mubarak were back. But they are very unhappy with what has come after Mubarak.

As earlier pieces of mine have shown, people thought -- many people thought there would be faster change. Instead, what they have got is a complete stalemate, uncertainty about where the country is going, and less security. I mean, one thing a police state can guarantee is security when you walk in the streets. People don't feel quite that same sense of security anymore.

Now, in terms of blaming about the economic situation, you put your finger on a really hot political issue. In the state media, the military government, the cabinet are blaming the revolution for the bad state of the economy. And when we were at the Tahrir Square, a protest rally, last Friday, that infuriated the young activists there.

We talked to one young couple, highly educated, both underemployed, and they said, that's ridiculous. The reason foreign investment in Egypt is drying up right now is because, who wants to invest in a country in which you don't know who is going to be running the government, what kind of government it will be in six months?

Finally, Ray, there is another factor that just developed the past week, and that is, of course, the attack on the Israel Embassy. In the last five days, the stock market has been down absolutely every day. And according to the Egyptian media, this is non-Arab investors pulling their money out, because what it conveyed was a general sense of lawlessness here, which may be a slight exaggeration, but not reassuring to anyone who is thinking of investing in this country.

RAY SUAREZ: I'm glad you brought that up, because in that same stretch of days, the president of Turkey, Recep Tayyip Erdogan, was in Egypt. Is the political map of the Eastern Mediterranean now being redrawn? Is Egypt moving toward Turkey and away from Israel?

MARGARET WARNER: I am not sure I would equate Israel and Turkey in terms of Egypt's relationship with them, because, as we all know, I mean, the relationship with Israel, the peace accord, it was really an accord of necessity, a very cold piece, as the cliché goes.

Basically, it kept both countries from feeling they risk going to war. Egypt's relationship with Turkey is quite different. I mean, Turkey is seen as a very successful country here, the most successful Muslim-majority state certainly in the region.

And when Erdogan came this week, he was treated like a rock star. Literally, people were waving for him in the streets. He got huge crowds at all of his events. And I think you are definitely going to see greater, if not coordination -- cooperation, then coordination between the two on many issues involving the Eastern Mediterranean, but also the world, for example, next week's vote in the U.N., or at least the introduction of the issue, on Palestinian statehood.

Finally, Ray, yesterday, in a real stunner, the transitional prime minister of Egypt -- now, he is just of the transitional government -- but came out and said that the Camp David accord was -- quote -- "not a sacred thing" and could be, should be discussed, and might have to be, I don't know if he used the word renegotiated, but looked at in terms of what was best for the peace and security of the region.

Now, up until now, the transitional government, all the political players have been saying, the Camp David accord stands. And the fact that so soon after the Israel Embassy attack, he came forward and said that said to observers here, they have to listen to the Egyptian street.

And when we have talked to various political parties here, all of them have said, well, we want to retain the Camp David agreement; some of the side agreements will have to be renegotiated. For example, Egypt sells Israel 40 percent of its natural gas.

So, all of this combines, Ray, I think, to make Israel's at least sense of political security in this region less secure than it was just two months ago.

RAY SUAREZ: Margaret, thanks a lot. Good to talk to you.

MARGARET WARNER: Thank you, Ray.

JEFFREY BROWN: When Margaret returns next week, we will have her interview with novelist and activist Alaa al-Aswany for his perspective on the uprising and the post-Mubarak era.

Europe's Banks Face Escalating Credit Crunch

Fri, 16 Sep 2011 18:03:00 EST

PBS NewsHour

Watch This Segment

European Union economic leaders gathered in Poland Friday to discuss the fiscal crisis facing Europe and whether Greece should receive another round of bailout money. Jeffrey Brown reports.

JEFFREY BROWN: Europe's economic leaders struggled anew to find a way toward a rescue plan for troubled nations and aid for vulnerable banks. They also heard a strong and pointed challenge from a key voice on this side of the Atlantic.

With their banks facing a growing credit crunch, and with a looming default deadline for Greece, and other nations also already receiving bailout funds, European finance ministers met in Poland today to try to resolve longstanding differences over how to deal with the financial crisis.

This time, in an unprecedented move, they were joined by a high-level visitor from the U.S., Treasury Secretary Timothy Geithner, who urged the 17-member nations of the eurozone to act quickly and take much stronger measures. But, once again, there was no resolution. The head of the group of finance ministers spoke after the meeting with Geithner.

JEAN-CLAUDE JUNCKER, Eurogroup: Different points were mentioned. This wasn't a decision-taking meeting we had with Tim. It was a dialogue amongst friends, continuing the one we had in Marseilles, and preparing the one we will have the other day on a different continent. We are not discussing the increase or the expansion of the EFSF with a non-member of the euro area.

JEFFREY BROWN: That was followed by a question from a reporter.

QUESTION: Are you optimistic that maybe Europe or the eurozone can speak a bit more with one voice?

JEAN-CLAUDE JUNCKER: No.

(LAUGHTER)

JEAN-CLAUDE JUNCKER: But we have to come back to verbal discipline.

JEFFREY BROWN: Geithner responded to pushback from several European ministers, saying: "Of course your financial challenges in Europe are within your capacity to manage financially. You just have to choose to do it." And, he warned, "One of the starkest ways to emphasize the importance of Europe getting on top of this is that you don't want the future of Europe to rest in the hands of those who provide financing to the IMF."

Today's meeting came a day after the world's major central banks, including the U.S. Federal Reserve, took coordinated action to make funds available to European banks. That move lifted world markets yesterday, and modest gains continued today.

Europe's finance ministers will meet through tomorrow.

Dem Senator Suggests Obama Jobs Plan Won't Pass in Full

Thu, 15 Sep 2011 18:03:00 EST

PBS NewsHour

Watch This Segment

House Speaker John Boehner offered his first major response to President Obama's new American Jobs Act in a speech Thursday. Jeffrey Brown discusses the politics of job creation with Sen. John Barrasso, R-Wyo., and Sen. Ben Cardin, D-Md.

JEFFREY BROWN: The president took a break today from the debate on jobs policy, but the Republican leader in the House presented an alternative set of ideas on taxes, regulation and entitlements.

It's been one week since President Obama laid out his jobs package, a $447 billion mix of tax breaks, public works spending and jobless benefits. Today, House Speaker John Boehner offered a Republican response. He said, while some of the president's plan offers -- quote -- "opportunities for common ground," overall, it's not enough.

REP. JOHN BOEHNER, R-Ohio speaker of the House: The president's proposals are a poor substitute for the pro-growth policies that are needed to remove barriers to job creation in America, the policies that are needed to put America back to work.

JEFFREY BROWN: The speaker said what private sector job creators really want is an end to uncertainty created by the burdens of taxes and new regulations.

REP. JOHN BOEHNER: They have been hurt by government ideas that offer short-term gimmicks, rather than fundamental reforms that will encourage long-term economic growth. They have been hampered by a government that offers confusion to entrepreneurs and job-creators, when there needs to be clarity.

JEFFREY BROWN: Boehner spoke on a day when new economic data underscored the country's troubles. First-time claims for jobless benefits reached the highest level in three months; and the number of home foreclosure notices spiked 33 percent in August, the most in nine months.

In the face of such numbers, Boehner ruled out higher taxes on better-off Americans, as the president wants, to pay for his jobs plan. Instead, the speaker called for the bipartisan congressional deficit super committee to consider tax reform, closing loopholes, but not raising taxes. And he said the super committee plan should include changes to entitlement programs, as it searches for savings of up to $1.5 trillion over 10 years.

REP. JOHN BOEHNER: The joint committee can achieve real deficit reduction by reforming entitlements and taking real action to preserve and strengthen Social Security, Medicare and Medicaid.

Most of the entitlement reforms that are in the House Republican budget were phased in over time. And that's just the way the joint committee should do them as well. Modest changes in spending programs today can have large effects tomorrow.

JEFFREY BROWN: By contrast, the president today walked back from considering changes in Social Security, something he'd reportedly been open to in last summer's debt ceiling talks.

White House spokesman Jay Carney said today that such ideas can wait.

JAY CARNEY, White House press secretary: On Social Security, the president from the beginning has stated that we need to take measures to strengthen Social Security for the long term, but it is not a driver of our near-term deficit problems, and it can be pursued on a parallel track.

JEFFREY BROWN: In the meantime, a bipartisan group of three dozen senators gathered to show their support for the super committee. Connecticut Sen. Joe Lieberman said they want the panel to -- quote -- "go big" and find up to $4 trillion in savings.

SEN. JOSEPH LIEBERMAN, I-Conn.: The gang of us six grows to the group of 36. You asked a question about what the leadership reaction to this will be. If 36 of us in the Senate across party lines stick together, the leadership has to react. Maybe they will look back and say that today was the beginning of the Washington spring, as opposed to other springs.

(LAUGHTER)

JEFFREY BROWN: But that moment of mirth aside, there was little sign of how Democrats and Republicans will find agreement on specific measures to spur job growth while also cutting the deficit.

And I'm joined now from Capitol Hill by two senators to discuss the politics and policy of job creation, Republican Sen. John Barrasso of Wyoming and Democratic Sen. Ben Cardin from Maryland.

Sen. Barrasso, before we get to the differences, I want to start on this question of the potential common ground. Now, Speaker Boehner said again today there are some parts of the president's plan that Republicans might be able to work with.

Do you agree? And, if so, which parts exactly?

SEN. JOHN BARRASSO, R-Wyo.: Well, I am looking for common ground. I do want to work with the president.

I want to make it easier and cheaper for the private sector to create jobs in is this country. And I think by ratifying the three free trade agreements that the president talks about, that would be a great start. And I would love for him to send those now to Capitol Hill, so we could actually ratify those and get people back to work.

JEFFREY BROWN: What about the other key things he brought up the other day, extending the payroll tax, infrastructure spending?

SEN. JOHN BARRASSO: Well, I think it all come downs to how you're going to pay for a number of these things. I think we need to look for ways to take the red tape away from American jobs creators.

And, unfortunately, today -- today, this administration rolled out another $10 billion in red tape on our job producers, and that makes it harder and more expensive for the private sector to create jobs.

JEFFREY BROWN: Now, Sen. Cardin, on your side, one of the key questions, of course, is what can and will happen on entitlement reform. It looks as though today the president wanted to set that question aside. Is he right to do that? And, to you, some specifics on where you think there might be some room for agreement here.

SEN. BEN CARDIN, D-Md.: Well, the president's absolutely right. Social Security has nothing to do with our current deficit problems. Social Security actually has been a cash-plus in our bookkeeping.

But the key thing in -- and the president's absolutely right -- is that the only way we are going to be able to get our deficit under control is to create more jobs. With 9 percent of Americans unemployed, you're not going to have the revenues in government, those who pay taxes, and you're going to have a greater demand on public services.

So job creation has to be critically important to getting our deficit under control. And, quite frankly, his proposals of rebuilding our nation, of helping small businesses, of targeting the relief to those who have been unemployed for a long period of time will help all of us bring our budget into balance.

As far as the entitlement programs, of mandatory spending, yes, we think we can get savings in that area. We want to see a balanced approach to dealing with our nation's deficits.

JEFFREY BROWN: And the savings meaning things like raising the retirement benefit age, for example?

SEN. BEN CARDIN: I personally believe we can do it without affecting the beneficiaries, particularly in the health care areas. I think that when you look at the way we deliver health care services, that we could do it in a more cost-effective way and we can get savings that will help us deal with the cost of Medicare and Medicaid.

JEFFREY BROWN: Now, Sen. Barrasso, Speaker Boehner also pushed another mantra today that he has talked about a lot: tax reform. We hear a lot about closing loopholes, but, again, we often don't get to specifics. What exactly might that mean, for example, the -- ending the home mortgage deduction, things like that? Can you give us some specifics?

SEN. JOHN BARRASSO: Well, we're looking at total tax reform, so that taxes are simpler for American families and American businesses, and you could actually lower the overall tax rate and generate more overall tax income.

I agree with my colleague Sen. Cardin that we need to get more people back to work. If you have more people working, you have more people who are then actually paying in taxes. So that is the reason that my focus -- and I actually came out with a whole jobs program, a number of us from the Rocky Mountain West, a "Jobs Frontier" plan, 20 pages of ways to make energy more affordable, more energy security, getting more people back to work and getting rid of these onerous regulations that are making it -- that are really turning into a heavy wet blanket on our economy.

JEFFREY BROWN: But on this question, Sen. Barrasso, of tax reform, again, would the revenues from such reforms, would they be used for deficit reduction?

SEN. JOHN BARRASSO: Well, our real problem is we have a huge debt in this country, over $14 trillion. We're borrowing $4 billion a day, $2 million every minute.

We're borrowing a lot of this from China. And how do you stay a strong and an independent and forceful nation in the world if you owe this kind of debt to people who are not necessarily your friends or don't necessarily have your best interests at heart? So I am hoping that this deficit reduction committee of 12 that are working together, I hope they do go big and get to that larger number of $4 trillion.

JEFFREY BROWN: Well, Sen. Cardin, we keep circling around these areas where there might be some agreement.

Even as Rep. Boehner was speaking today, a number of Democrats were suggesting that they can't support the president's plan in full. So, as you look at what's going to happen in the coming weeks here, is it now clear that the full plan doesn't go forward, that this is done piecemeal? What do you see happening?

SEN. BEN CARDIN: Oh, I think the president has laid out the right plan. I think Democrats and Republicans need to come together.

It's not going to be what the president wants. We're anything to have to be able to develop a plan between the Democrats and Republicans. I hope, though, it will meet the objectives the president has laid out to create the jobs that we need. You mentioned with Sen. Barrasso tax reform. I think tax reform is one area where Democrats and Republicans can come together.

And if we do tax reform right, we will bring in additional revenues that we can use to help bring our deficit in control in a way that will allow us to be more efficient and have job growth. So I think there are ways that we can do this where Democrats and Republicans can come together. I think the president has laid out the right plan for job growth, and I would think that the Democrats and Republicans both want to see more jobs. We should be able to come together.

JEFFREY BROWN: And, Sen. Cardin, I am guessing that there is a fair amount of confusion out there in the country now. A few months ago, all we talked was about the debt ceiling and debt, deficit reduction. And now most of the focus, of course, is on the need for job creation, which a lot of economists talk about a need for stimulus.

What -- how do you balance these priorities and what is -- which is the right priority right now?

SEN. BEN CARDIN: They're one and the same. You cannot get our deficit under control unless we create more jobs. There is no way that we're going to have a manageable budget with a 9 percent unemployment.

We have got to get that rate down. So I urge this joint committee, this super committee that's been created, they need to make sure that part of their recommendations -- they don't have to deal with the jobs issues directly -- but part of their recommendations must be to leave us the ability to create jobs, give us the resources so that we can rebuild our nation, help small businesses, target relief to those who have been unemployed for a long period of time.

Do that, so that we can create the jobs. If we do that, we can balance our budget. Otherwise, it's going to be impossible.

JEFFREY BROWN: Sen. Barrasso, just in our last time left here, are we still looking at two fundamentally different approaches to dealing with these priorities, or is there something coming together here?

SEN. JOHN BARRASSO: Well, I want to come together on the trade agreements. I want to come together on energy security for our country. I want to come together on getting rid of the red tape which is a heavy wet blanket on our economy.

But 90 percent of the president's plan is paid for by increasing taxes on individuals' tax returns. And I think, at times like this, there's bipartisan agreement that you shouldn't be raising taxes on anyone in these economic times.

JEFFREY BROWN: Well, Sen. Cardin, that doesn't sound like agreement. That sounds like taking taxes off the table on their side. What about your side?

SEN. BEN CARDIN: I think we have different views and different visions on how America needs to grow. I think that is clear.

However, we all have a responsibility to listen to each other and to come together with a proposal that will move this nation forward. Objectives are the same: job creation and bringing our deficit under control. We're going to have to yield on each other's views, so that we can come together with a true compromise in the best spirit of our nation.

JEFFREY BROWN: All right.

Sen. Ben Cardin of Maryland, Sen. John Barrasso of Wyoming, thank you both very much.

SEN. JOHN BARRASSO: Thanks for having us.

Can Obama, Democrats Overcome Economic Issue in 2012?

Wed, 14 Sep 2011 18:03:00 EST

PBS NewsHour

Watch This Segment

Democrats lost two House races Tuesday when Republicans won special elections in New York City and Nevada. Gwen Ifill discusses what the results -- and some new polling -- mean with New York One's Errol Louis and NewsHour Political Editor David Chalian.

GWEN IFILL: President Obama and his party faced the fallout today from losing a U.S. House seat they had long held. At the same time, new poll numbers showed growing unhappiness with the way things are going.

BOB TURNER, (R) New York congressman-elect: We have been asked by the people of this district to send a message to Washington. And I hope they hear it loud and clear.

(CHEERING AND APPLAUSE)

GWEN IFILL: Republican businessman Bob Turner claimed victory last night in the race to fill disgraced Congressman Anthony Weiner's vacant seat.

BOB TURNER: I am telling you, I am the messenger. Heed us. This message will resound for a full year and will resound into 2012. We only hope that our voices are heard and that we can start putting things right again.

GWEN IFILL: Turner defeated Democrat David Weprin by eight points in a Brooklyn-Queens-area district where no Republican had won since the 1920s. Weiner resigned in June after admitting he'd sent lewd photos of himself online.

Democrats got equally bad news in another special election in Nevada, where Republican Mark Amodei beat the Democrat by 22 points.

The chair of the National Republican Congressional Committee, Pete Sessions, laid the election results at the White House door, saying in a statement: "An unpopular President Obama is now a liability for Democrats nationwide in a 2012 election that is a referendum on his economic policies."

White House Press Secretary Jay Carney, traveling with the president to North Carolina today, warned against reading too much into the Republican victories. "Special elections are often unique," he said, "and their outcomes do not tell you very much about future regularly scheduled elections."

But the loss of the heavily Democratic New York district came at a time when the president's own numbers are sinking.

A Bloomberg News poll released today found that only 9 percent of Americans feel confident the economy won't slide back into recession. And nearly three-quarters of the respondents said the country is on the wrong course.

The president has been hoping his new jobs plan will help turn around the economy, and put a brake on that growing pessimism. He pitched his job proposal for the fourth time in a week today. Congress, he insisted, must put aside politics to help come up with a solution.

PRESIDENT BARACK OBAMA: We're in a national emergency. We've had -- we've been grappling with a crisis for three years, and instead of getting folks to rise up above partisanship in a spirit that says we're all in this together, you got folks who are purposely dividing, purposely thinking just in terms of, how does this play out in terms of this election?

GWEN IFILL: But House Speaker John Boehner read the results of the New York special election differently. Turner's victory, he said, delivered a strong warning to the Democrats that the president's party is on the wrong track.

For more on the meaning of last night's results, we are joined by Errol Louis, host of "Inside City Hall," a program about New York City and state politics that airs on New York 1, and NewsHour political editor David Chalian.

Errol Louis, what is it about this district that made it flip last night from Democrat to Republican?

ERROL LOUIS, New York 1: Well, it's an unusual district, Gwen, where President Obama won with 55 percent of the vote, which sounds like a pretty broad margin, but for New York City, it's actually pretty close.

It's also a district that has a very large immigrant population from the former Soviet Union. They tend to vote conservatively. There's also a very large conservative Jewish population, and they vote very conservatively.

So it was always a district that would split its vote. It went for Rudy Giuliani, the Republican, over the decades. It also voted for Gore, and it voted for Obama. So you can never really pin it down. And that tension really sort of came to a head in the special election. The Republicans carried the day.

GWEN IFILL: You know, normally, the -- we go back and forth about whether these special elections really have any larger national impact. Were the issues that brought about this outcome local or national?

ERROL LOUIS: It's very interesting. They really very much ignored local issues. And the Republican and the Democrat both said it was a national race.

So the Democrat said we have got a Tea Party candidate running and if you want to send a message to push back the Tea Party, vote for me. The Republican candidate who prevailed said we have got a problem with President Obama's policies towards Israel and problems with economic policy and if you want to send a message to Washington, vote for me.

So they both really nationalized the race as best they could. And in retrospect, it wasn't such a smart strategy for the Democrat.

GWEN IFILL: Well, we have been talking a lot about the economy here in Washington, obviously around the country as well. Was that a drag for the would-be incumbent, for the Democrat?

ERROL LOUIS: Well, I think it was a problem. The Republican candidate, Bob Turner, said he got into all of this purely because, as a retired businessman -- I mean, he's 70 years old, a successful, retired executive who had never held public office -- he said he was tired of watching what was going on with the economy, he was tired of seeing policies that he thought would fail, and he wanted to be heard, and he wanted somebody to go out there and, as he put it, light a candle.

And that's just what he did. So, yes, the economy was very much front and center. And there's no corner of this country, Gwen, you can go to where people are not concerned about the lack of jobs, the sagging income, the inability to get credit. It's a longstanding problem, and it's the problem for the Democratic administration.

GWEN IFILL: And for David Weprin, how much were the problems of the Democratic administration a problem for him?

ERROL LOUIS: Well, they had to be. He ran as a Democrat and said he wanted to support the president and he supports the president's plan for jobs and he supports the president's approach to health care.

And all of these are controversial within this district. There are a lot of people who have some grave doubts about it. This was a chance for them to express those doubts. And I don't think the Democrats really understood exactly how uneasy people are with what's going on with the president's policies. That -- to that extent, I think this really was a bit of a wakeup call for them.

GWEN IFILL: So, David Chalian, special election, one congressional district or not, are the Democrats freaked out about this on a national basis?

DAVID CHALIAN: They're expressing concern, and real concern.

We can't over-interpret. It is one special election -- or two, actually. There was a race in Nevada we can get to in a moment as well. But what special elections do, they don't predict the future. They don't tell us, oh, this means exactly this will happen a year from now. But they do give us a snapshot of the current political environment.

And right now, when the Democrats went 0-2 last night, the current political environment is really bad for them. And so the psychological impact on the party is actually what Democrats fear the most, right, Democrats in charge of the Democratic National Committee, the campaign committees on the Hill, the Obama re-election campaign.

What they're hearing from Democrats now is real concern and worry. And that has a way of feeding on itself. And that's what the Obama team is trying to tamp down.

GWEN IFILL: You mentioned Nevada. Now, that was supposed to be -- that was a Republican seat, was expected to be -- continue as a Republican seat. Why is that a harbinger for the Democrats?

DAVID CHALIAN: Well, yes, it was a Republican seat, and although it was pretty close in the last presidential election, because Nevada swung so heavily towards Barack Obama's direction.

It is a battleground state, though, where the Obama campaign is going to invest a lot of time and resources in trying to keep in its column next year. And specifically in that congressional district, Gwen, Washoe County is a battleground county. Barack Obama won that county by some 12 or 13 points against John McCain in 2008, just this one county that is about where half the vote in that congressional district comes from. The Republican trounced the Democrat there yesterday.

So there are signs there that it's not just easily written off. And, trust me, the Obama campaign is not writing it off as just a Republican district. There are lessons to be learned there, too.

GWEN IFILL: Now, it's not just the president's approval ratings or lack thereof. It's not just the right track/wrong track polling numbers we all keep track off.

They're all -- there seems to be just a growing sense, a pretty deep-seated sense of pessimism among American voters.

DAVID CHALIAN: Which is why David Weprin's problem in New York is not so much that his problem is Barack Obama. It's that his problem is the same problem Barack Obama has, which is exactly this: When you are the Democrat and you're in charge of the White House, this kind of pessimism is going to weigh on you and your political prospects.

Take -- there was a Bloomberg poll out today, Gwen, and we saw that only -- that famous Ronald Reagan question, are you better off now than you were four years ago, right? Only 27 percent of the country says they're better off than when Barack Obama took office. That fundamental question gets at how people are feeling, how the economy is permeating everybody's political outlook. And that doesn't bode well for the president at this moment in time.

GWEN IFILL: And certainly not for the future.

So, when the Democrats are looking at this and they say, well, we just get better candidates or we just get a better set of issues, or do they look at this and say there is something fundamentally wrong that we have to tackle here?

DAVID CHALIAN: They look at this understanding how great their challenge is. Yes, they want to recruit the best candidates possible, but what they see here is -- and, again, specifically, the Obama re-election campaign, they look at this and they say, listen, we are going to have to bring yet new voters again into the process in 2012 if we are going to be successful, they say.

So they are in a process, a yearlong process, a year-and-a-half-long process, identifying young African-American, Hispanic voters that have not voted before, that have not participated to bring try to them into the fold. That's one mission, to bring them...

GWEN IFILL: To try to expand their base?

DAVID CHALIAN: That's right, and to literally alter the electorate.

One of the things Democrats keep saying about New York Nine today is that, well, this electorate doesn't look like the way the country is going to look. All these Republicans showed up.

Well, the Republicans showed up because that's where the enthusiasm is right now. And so the enthusiasm gap that we saw exist in the 2010 midterms last year is still here. We see it in the fund-raising right now. The DNC just had a really bad fund-raising month in August. And the RNC had one of their best off-year August fund-raising months.

So all in these different factors, we continue to see the energy and enthusiasm on the Republican side right now. So the president needs to enliven and awaken his base. He needs to reach out to new voters and actually alter shape of the electorate so he has a better chance than right now polls would suggest. And he needs to of course keep that conversation going with the independent voters that have totally defected from him since 2008.

GWEN IFILL: But is his base abandoning him at this point?

DAVID CHALIAN: No. The polls suggest that they are really not. But they are going to need to be energized, right, which is why a lot of Democrats say, hey, if someone like Rick Perry is the nominee, that can go a long way in energizing the Democratic base.

GWEN IFILL: Errol Louis, up in New York, are Democrats, elected officials, people who are absorbing the impact of this election, are they beginning to say, you know, there is something -- something smells bad here, something we have to fix in the end, and that involves stiff-arming the president?

ERROL LOUIS: I don't think so. Actually, Gwen, I think there's an interpretation here that's going around that they blew it locally.

And it was really the whole Democratic establishment. I mean, it was stunning how all of the big guns -- I mean, our very popular governor was doing robo-calls for David Weprin. Former President Bill Clinton was doing robo-calls for them.

The scene at his headquarters last night looked as if it was a candidates forum for the 2013 mayoral race. Everybody's who's even thought about running for mayor was there. All of the major unions were committed. Everybody was involved. And it just didn't make a difference in a district where there's a 3-1 registration advantage for Democrats.

So they have got to rethink both their tactics and the underlying philosophy that led to this. But, no, the general thinking is that they didn't have such a great candidate, that he made some mistakes, and that if it weren't a special election, their normal machinery would have produced the outcome that they expected, even though they seriously outspent the Republicans.

Now, I think that might be a little shortsighted, but that's my sense of how they see it here locally.

GWEN IFILL: Errol Louis of New York 1, David Chalian of the NewsHour, thank you both very much.

DAVID CHALIAN: Thank you.

ERROL LOUIS: Thank you.

How Do Tax Cuts, Hikes Fit Into Obama's American Jobs Act?

Tue, 13 Sep 2011 18:14:00 EST

PBS NewsHour

Watch This Segment

President Obama continued to make a case for his American Jobs Act on Tuesday, but GOP leaders remain skeptical. Judy Woodruff discusses the tax aspect of the president's plan to spur job creation with two former top economic advisers, Austan Goolsbee and Martin Feldstein.

JUDY WOODRUFF: Next, the president's jobs plan and questions about its potential impact.

Tonight, we look at the centerpiece of the bill, tax cuts and tax credits.

The president continued to make the case for it today, but leading Republicans on Capitol Hill remained skeptical.

President Obama returned to the road today, this time Columbus, Ohio, selling his jobs plan and pushing Republicans to buy it.

PRESIDENT BARACK OBAMA: Yesterday, there were some Republicans quoted in Washington saying that even if they agree with the proposals in the American Jobs Act, they shouldn't pass it because it would give me a win.

(BOOING)

BARACK OBAMA: This isn't about giving me a win. This isn't about giving Democrats or Republicans a win. It's about giving the American people a win.

(CHEERING AND APPLAUSE)

JUDY WOODRUFF: The president formally sent his $447 billion plan to Congress on Monday. More than half of the total would pay for extending or expanding Social Security payroll tax breaks for employees and employers. The actual payroll tax rate would drop from 6.2 percent to 3.1 percent.

The bill would also give employers a $4,000 tax credit for hiring the long-term unemployed.

BARACK OBAMA: If we get Congress to pass this bill, the typical working family will get $1,500 in tax cuts next year.

(CHEERING AND APPLAUSE)

BARACK OBAMA: Fifteen hundred dollars that would have been taken out of your paycheck will go right back into your pocket. But if Congress doesn't act, if Congress refuses to pass this bill, then middle-class families will get hit with a tax increase at the worst possible time.

JUDY WOODRUFF: To give the middle class that break, the president wants wealthier Americans to pay more. That would include a limit on an assortment of tax deductions to save $405 billion. Another $40 billion would come from closing loopholes for oil and gas companies, plus $18 billion from new taxes on hedge fund and private equity managers.

Top Democrats like Senate Majority Whip Dick Durbin defended the tax proposals today.

SEN. RICHARD DURBIN, D-Ill. majority whip: I think that it's fair to limit the tax cuts for the wealthiest, so that we can provide tax cuts for working families. That, to me, is sensible. It's not only morally right; it's economically right.

JUDY WOODRUFF: But Republicans and some Democrats rejected those same ideas two years ago. And today, House Speaker John Boehner said they're still not popular.

REP. JOHN BOEHNER, R-Ohio speaker of the House: When you look at what we saw in the president's pay-fors yesterday, we see permanent tax increases put into effect in order to pay for temporary spending. I just don't think that's really going to help our economy the way -- the way it could.

JUDY WOODRUFF: The leader of Senate Republicans, Mitch McConnell, insisted the plan is really just a political ruse.

SEN. MITCH MCCONNELL, R-Ky. minority leader: All he's doing is just proposing a hodgepodge of retread ideas aimed at convincing people that a temporary fix is really permanent and that it will create permanent jobs, and then daring Republicans to vote against it.

JUDY WOODRUFF: As the war of words heats up, President Obama will take his jobs campaign to the Raleigh-Durham area in North Carolina tomorrow.

We get two takes on the tax aspects of the president's plan from notable economists. Austan Goolsbee is a longtime adviser to President Obama and served until last month as the chair of his Council of Economic Advisers. He's now returned to the University of Chicago. And Martin Feldstein is a professor at Harvard university. A longtime conservative thinker, he was the chair of Council of Economic Advisers in the Reagan administration.

And, gentlemen, we thank you both for being with us.

MARTIN FELDSTEIN, Harvard University: Good to be with you.

AUSTAN GOOLSBEE, former chairman of the Council of Economic Advisers: Thank you.

JUDY WOODRUFF: Professor Feldstein, I'm going to talk with you.

Let's talk about the tax cuts in the president's plan first. This notion that he would cut the Social Security payroll tax in half for employees, expanding it, and then extending it to employers, what effect would that have on jobs, do you think?

MARTIN FELDSTEIN: It would have a very small positive effect, the part that households get, that employees get. The part that employers get I think would basically be just saved, added to retained earnings. So that would have almost no impact at all.

JUDY WOODRUFF: Why don't you think it would have a greater impact on employers?

MARTIN FELDSTEIN: Oh, because you're talking about a 3 percent of payroll reduction. So if you're going to hire somebody and pay them $30,000, it's $900 a year. That's tax-deductible against their corporate rate. So it's $600. So, for $600, they're not going to make the decision to make a permanent hire.

JUDY WOODRUFF: Austan Goolsbee, you were in this White House until not so long ago. You're hearing what Mr. Feldstein is saying. What do you say?

AUSTAN GOOLSBEE: Well, look, I think there's pretty wide agreement that the payroll tax cut for the workers is -- at a moment like this could be an important demand effect.

I think there's differing views. I would like to think that if you address the cost of labor and you sort of reduce the after-tax cost of hiring people, I think the amount of billions that it adds up to will make a difference to some companies.

I think it tends to perhaps be a bigger impact on smaller businesses than on big ones. And then another part in the jobs bill is continuing and expanding tax incentives for companies to do investment. I think those three things are what you want to do. You don't want to just pick one because what -- your view of the world might not be correct.

You want to try cutting taxes for hiring people, cutting taxes to put in people's pockets, cutting taxes for investment, and try to do that as a package. I think it could be pretty positive.

JUDY WOODRUFF: So, Martin Feldstein, so what if you put them all together, you look at it all as a package? Does that make it any more helpful?

MARTIN FELDSTEIN: So, I have looked at what the various forecasters say this might do. And the most optimistic ones say that it will add between one and two million jobs over the next two years. And that sounds like a lot, until you realize that that's about $200,000 per job, $200,000 per job.

So it's just not a good use of money that -- of course, it has to be paid for. And we haven't talked about that yet, but it's not a good use of money to spend $200,000 to create a single job.

JUDY WOODRUFF: And we're going to talk about that in just a moment.

But, Austan Goolsbee, what about that? That's a pretty high price tag.

AUSTAN GOOLSBEE: Well, I don't think I totally agree with that exact number.

But I would say that at a moment when you have got an unemployment rate as high as it is and we have lost eight million jobs, whatever you could do to get two million jobs strikes me as a perfectly good thing that we ought to be considering doing.

You know, the Professor Feldstein and I have at a lot of times agreed on the need for different kinds of direct injection or tax cuts that can be used to help facilitate the growth of the economy. I think, if you look at this package, it's pretty broad-based. It's a bunch of things that if this were three years ago, a lot of people would be saying -- would be asking, was that a Republican plan, because a lot of this stuff was -- were Republican ideas or were bipartisan ideas three years ago.

JUDY WOODRUFF: I think the point I want to ask you, picking up on what he said, is, is the situation not desperate enough in terms of needing jobs that, even if it just adds up to some jobs and they cost a lot, it's worth it?

MARTIN FELDSTEIN: It's just -- I don't think it is worth it.

And, moreover, if you're going to finance this, then the financing is going to have negative effects on employment. So when we talk about the forecasts that say this could add a couple of million jobs at a cost of $200,000 per job, that's on the assumption that you're not offsetting it by higher taxes on businesses and on high-income individuals.

JUDY WOODRUFF: Well, in fact, the president is proposing -- we now see this week he put out the details.

He wants to limit itemized deductions for people who are on the wealthy side, people earning over $250,000 a year as a family, $200,000 as an individual, in other words, limiting deductions for home mortgage interest, state and local property taxes and charitable deductions.

MARTIN FELDSTEIN: So, my feeling is that we are going to need more revenue and that eventually Congress will find a compromise on that issue. And there are two ways to get more revenue.

One is to raise tax rates, marginal tax rates, on individuals. That would be a mistake, because that would hurt incentives. That would hurt growth. That would hurt employment. On the other hand, taking away some of the spending that's built into the tax code, like the subsidies for mortgage borrowing or the subsidies for other things, to me, that makes sense.

But I think the way the president has approached it -- we're only going to do it for high-income individuals and we're going to use that money for more spending, rather than deficit reduction or rate reduction -- I think that's a mistake.

JUDY WOODRUFF: How do you see it, Austan Goolsbee?

AUSTAN GOOLSBEE: Well, look, I see it that the economy is in a tough spot. We're facing these borderline-catastrophic events coming from Europe. And we have got to start growing in this country.

And one important way to do that is -- it's not spending to be cutting the payroll tax to be encouraging investment. And if we're doing that by eliminating some of the tax expenditures and loopholes that we have argued for years would be good to get rid of, I don't see -- I view that as a win, not a loss.

MARTIN FELDSTEIN: We need that money eventually to reduce the deficit. And we could use it also...

JUDY WOODRUFF: The money that would come from taking away those taxes?

MARTIN FELDSTEIN: From broadening the tax break -- or limiting them. I wouldn't take them away. I would put a cap on them. I would limit the size of them.

But that's money that could be used to reduce budget deficits over time to get our debt ratio down. And so to use it for a very inefficient new spending program, a new set of job stimulus of the sort that the president has proposed, I think, is a mistake in use of that money.

JUDY WOODRUFF: Austan Goolsbee, he's saying that it's just a cockeyed use of the money.

AUSTAN GOOLSBEE: Look, he is. But just to put in perspective, when the economy is bad enough, even Professor Feldstein, you know, in late 2008 was saying, let's have $300 billion of direct stimulus.

I think there is a question of, do you view this moment as one in which it warrants action, that the government would be doing things to try to get the private sector to help stand up? And I think that it is such a moment.

And if you decide that it is such a moment, then the question is, do you want to do that in a way that's paid for over the 10-year budget window, or do you want to not do it in a way that is paid for? If you think you should do something and you think it should be paid for, then the way it should be paid for is using things that we should have gotten rid of a long time ago, like direct subsidies for oil and gas companies, and getting rid of loopholes that shouldn't have been in the tax code to begin with.

JUDY WOODRUFF: Which is another -- which is another part of what's being proposed.

MARTIN FELDSTEIN: But focusing on -- just on high-income individuals means that it would be very hard ever to expand this to the rest of the population.

JUDY WOODRUFF: Why is that?

MARTIN FELDSTEIN: Because then it would be a tax increase for non-high-income individuals, for middle-income individuals, exclusively for middle-income individuals. And the politics of that would be impossible.

So we really need to have everybody share in raising additional revenue through broadening the tax base.

JUDY WOODRUFF: So, the concept behind this, or at least part of the concept of making the well-off pay a little bit more in order that the middle class get a break, more money in their pocket, small businesses create jobs, you're saying that's not a trade-off.

MARTIN FELDSTEIN: You know, this is not a one-for-one thing. This is not, we're going to temporarily raise the tax on high-income people in order to temporarily lower it for the rest of the population. Nor is it, we're going to permanently increase for it high-income individuals in order to permanently reduce it for the others.

It's, we're going to permanently raise taxes on high-income individuals by broadening their tax base in order to finance a one-year set of programs to try to stimulate the economy in a very inefficient way.

JUDY WOODRUFF: Quick final word, Austan Goolsbee.

AUSTAN GOOLSBEE: Look, I think the economy -- we're facing tough headwinds from the international sphere. We ought to be doing some things to try to help get the private sector stood up.

I think there has been and should be continued bipartisan consensus that it be tax cuts of the form to people, to businesses to invest and to hire, and that's what this seems like it is, and that, if you can get rid of loopholes that should have been gotten rid of before to pay for something like that, you ought to do it.

JUDY WOODRUFF: All right, gentlemen, we're going to leave it there. And we thank you very much, Austan Goolsbee, Martin Feldstein. Thank you.

MARTIN FELDSTEIN: It's good to be with you.