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The Unemployment Rate and How It's Changing; When Does the Real Recovery Get Underway?; The New White House Plan for Health Care
Aired March 6, 2010 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN HOST: Welcome to YOUR MONEY. I'm Ali Velshi. The unemployment rate in the United States held steady at 9.7 percent in February. But 8.4 million jobs have still vanished since the start of this recession.
CHRISTINE ROMANS, CNN HOST: I'm Christine Romans. Thirty six thousand jobs lost last month. But here is something deep inside this report, Ali that really caught our attention. The average length of unemployment has shortened just a little bit by about four days. It doesn't feel like much, but if you are out of work now you can expect to be out of work for 29.7 weeks. That's about 208 days. The real problem here, the long-term unemployed. This is a huge sea of people causing economic and political unhappiness in this country.
Take a look at this. 6.1 million people long-term unemployed. People who considered themselves involuntary part-time workers, even folks who would like to work full-time, Ali, but are not, 8.8 million people. These are figures that still show a labor market and an economy not living up to its potential. Ali.
VELSHI: Yes, this was a bit of a confusing report. It wasn't, there's clearly still a big rain cloud over us but there is a big silver ling around it. There are a couple things that stood out to me. One of them was that shortening of the time that people are on unemployment benefits. The other thing, two things also stood out to me.
One is that there is a change in the number of people who are getting temporary employment. That is always an indicator that things are getting better. We've seen an increase in temporary employment over the last several months. That caught my attention.
The third thing that caught my attention Christine, is how many years have you and I month after month even when there were jobs being created in the United States talked about the fact that manufacturing workers were losing their jobs? Manufacturing workers didn't lose their jobs in this job report. I don't know what that tells us. We'll have to have people smarter than me on that but it tells me something is changing.
ROMANS: We do have a couple people smarter than both of us Ali here right now. Rutgers University professor William Rodgers, and former chief economist to U.S. Department of Labor, Lakshman Ackuthan is managing director of the Economic Cycle of Research Institute. OK, let's talk about that little manufacturing, I think manufacturing gained a 1,000 jobs. Is that a sign that the hemorrhaging is done for manufacturing? What does it say?
LAKSHMAN ACHUTHAN, MANAGING DIR. ECONOMIC CYCLE RESEARCH INST: Yes, it is basically. In a word, it is, yes, because when you have a recession you shed manufacturing jobs. When you have a recovery, you just stop losing them. You go flat. You never get them back, and it's part of the reason why the long-term unemployed is such a big problem.
You have 40 percent of the unemployed in the unemployment numbers are long-term unemployed. They are unemployed over six months. They're being joined by people who lost jobs that were associated with the bubbles, construction and credit, these two big bubbles. They've also -- those jobs aren't coming back.
The manufacturing jobs don't really leave us in big leaps forward and then you have the construction and the credit related jobs that are never coming back. That's your long-term unemployed. The other 60 percent, people who are not in those areas, are actually seeing unemployment rate fall very quickly. That's why unemployment already peaked back in October.
ROMANS: Ali just said there is two different kinds of labor markets here. The long-term unemployed and things are getting better for the 60 percent of the unemployed that haven't been long-term unemployed.
WILLIAM RODGERS, FMR. CHIEF ECONOMIST, U.S. DEPT. OF LABOR: I want to jump in.
VELSHI: Go ahead.
RODGERS: On this one month improvement in manufacturing. We have to be very, very cautious here that manufacturing has been on a secular decline during this recession and even during the recovery. So it's very encouraging news, but also you have to -- the gains were within some various niche markets. But for the most part, it's a sector that we can continue to have to work on providing incentives to bring in -- bring investment back here in the United States, and growing those sectors.
ACHUTHAN: But you're still just -- you're never going to get big jobs growth out of manufacturing. That just won't happen. Ten years ago, we had 18 million people in manufacturing. Now we are lucky if we have 10 million. We're not going back to 18. There is just no way.
RODGERS: I wasn't suggesting that we'd get back to that. We are a service based economy; we are an information based economy.
VELSHI: Let me ask you this. Bill, let me ask you this.
VELSHI: This business, this other thing that caught my attention, this business about temporary jobs, temporary hiring. Should I be reading anything into that? We have had a few months of gains in temporary hiring and traditional back of the envelope economics will tell you that's a good sign as we come out of a recession. Do you agree with that?
ROMANS: But it is not translating it right? Am I right? It is not translating into full-time jobs yet and that's the real --
RODGERS: You have to remind ourselves, we didn't get to where we are overnight and we're not going to get back to a point where you are re-creating 200,000 jobs per month very quickly. That this is a slow and steady process, and, yes, so that positive encouraging piece here was we added, this is our fifth month in a row of temporary employment growing.
We are up to about 300,000, and again we don't want to be there. Not where we want to be at. One thing that was a little discouraging, we didn't see the work average work week continue to trend up. So these are the baby steps that have to occur.
ACHUTHAN: Ali, I just want to throw out one other, a lot of statistics here.
ROMANS: We love every one of them.
ACHUTHAN: There is one other one that is really important, the payroll job numbers are often criticized. Because it is usually like big companies, they are not the small businesses which are the job engines of the country.
And if you look at the household survey which is thought to be more related to small businesses, over the last two months, we've added 850,000 new jobs. That's a lot of new jobs coming out of what we think is the small business area, and also here's a little business cycle factoid. The household survey leads the payroll survey by about a month or two.
VELSHI: The difference between them? Tell me the difference between them.
ACHUTHAN: OK. The payroll survey, that is the number the minus 36, that's big companies, your Fortune 500 companies.
RODGERS: It's all companies.
ACHUTHAN: It is all companies but the household tends to be smaller businesses thought to be capturing more small business hiring, right?
RODGERS: You are talking to people in the households.
ACHUTHAN: Right. But the idea is that you are getting a sense more of what's going on with small businesses, and there's a big divergence there. You have 850,000 positives, that's a big number.
RODGERS: And, if I can ...
RODGERS: At this stage, in this inflection upon where the economy is starting to improve there is a shift out of the payroll numbers and look at what's happening in the household numbers, because, again, the headline number that comes out in this report, what's unemployment rate at?
ROMANS: Tell me what you guys are thinking about what parts of the country we're going to see the hiring in first? Are we going to see hiring first in the south? Are we going to see hiring first in the Midwest? Where manufacturing at least isn't hemorrhaging anymore? Where regionally are we better off? Laks.
ACHUTHAN: Well look Russ Felts is going to take it on the chin again and always does and it will continue to be hurting. It's the service sectors, I.T., health care, accountants and finance. These people are coming back rather quickly and general services, temporary services which we described earlier. You're not getting that necessarily inside of a factory floor. Right? And so I would stay away from the Russ Felt in terms of job searches and go elsewhere.
ROMANS: All right. Lakshman Achuthan, Bill Rodgers you are both staying. Ali Velshi stick around for a minute guys. If the economy is growing, then why aren't jobs growing more strongly? What is the key to unlock them? The key, you're going to get the answer and a simple question for our panel. When does the real recovery get under way?
ROMANS: The Federal Reserve this week said the economy is slowly improving, but will it be a jobless recovery and when will people actually be able to feel a recovery and put the fear of a double dip recession behind them? Rutgers University professor William Rodgers is a former chief economist at the Department of Labor and Lakshman Achuthan is managing director of the Economic Cycle Research Institute.
VELSHI: That's what he does for a living.
ROMANS: That is what he does he makes the call.
VELSHI: That is what Lakshman does. When is it ending?
ACHUTHAN: Well, look, the recession ended already. It ended somewhere in the summer. We still have to wait for dust to settle to pick an exact month. What is interesting to note, this is not a forecast. It is a fact. That this recovery in terms of jobs and GDP is already stronger than the last two recoveries and so I'm calling it the Rodney Dangerfield recovery. You don't get no respect.
You have the unemployment rate peaking in October. That's a few months, say three or four months after the recession ended. That's very different than the last two recoveries where it took 15 or 19 months, about year and a half, for the unemployment rate to start coming down.
So what's happening is, you've got long-term unemployed, 40 percent of the unemployed, they are being left behind during this recovery. They're not getting their jobs back anytime soon. Sixty percent of the people are getting their jobs back quicker than we've seen in the last two recoveries, and that's driving down the unemployment rate.
RODGERS: I've got jump in. When I look at my tea leaves I think the fourth quarter of last year will be when the National Economic Research, the arbiters of recessions and business cycles, I think they will come back and say that's when the recession ended. One second. You got your time. Let me ...
ACHUTHAN: All right.
ROMANS: Ding, ding, ding, ding, ding!
RODGERS: And the fourth quarter will be that period where GDP began to grow. First quarter GDP growing elsewhere. Two consecutive quarters, but it will be a jobless recovery and that we are going to continue to see ...
ACHUTHAN: Jobless ...
RODGERS: Excuse me, excuse me. We have jobs but on that we're not adding jobs and so ...
ACHUTHAN: We are.
RODGERS: And, no, we just lost 30-some thousand.
ACHUTHAN: Look, we had revisions in the last two months where we overestimated job losses in the last two months by 35,000. So by that count ...
ROMANS: You're going to get hate mail. I'm telling you right now. The last two weeks -- wait, wait. The last two weeks you've said that, look, we have this statistical recovery under way. It doesn't get any respect. We get bombarded with people who are saying, are you kidding me?
ACHUTHAN: Don't label me as a ...
ROMANS: Really painful.
ACHUTHAN: Look, it's a depression if you are out of a job; it is not even a recession. So if you have lost your job, and 40 percent of the unemployed aren't getting their jobs back any time soon and they absolutely should be pissed off. It is not my fault, but there is still a recovery here.
RODGERS: But the other issue that we have to put on the table here that makes this recovery look so different from other recoveries is, you've got, I call it a part-timer recession. You've got about 8 million to 9 million Americans who are working part-time for economic reasons, and that's a historical high. Since they had been calculating or estimating those numbers.
VELSHI: I have a question for the economist smack down. I don't think you guys are arguing on the point. There are a whole lot of people who are not going to get re-employed anytime soon. So the reality is what does that make our society look like? Does that mean that I am ultimately going to pay more taxes because more people are not able to pay taxes and the deficit continues to increases? Does that mean safety is -- my safety is in danger because we are going to have more crime, we are going to have more homelessness? What does that mean?
ACHUTHAN: It is not that society breaks down but it is about $100 billion a year to have long-term unemployment at the levels that we're having it, and the fact that this recovery isn't going to really lower long-term unemployment means that we have to deal with in various ways, a bill of about $100 billion a year annually, to deal with this, and the only way you get rid of long-term unemployment is a really long business cycle expansion. And unfortunately you know for a host reasons that's unlikely.
ROMANS: So what do you think Bill? Do we need to -- what do we need to do as society to support those people of longtime unemployed? Is there a debate to be had here? An economical debate, not political and not ideological, an economic debate to be had about how do you support people who are going to be out of work for two years, three years and longer?
RODGERS: You run out of - your best case for unemployment insurance is a year and then you're out.
VELSHI: So what happens?
RODGERS: You have to then look at what's -- our longest term hedge against joblessness that is education and training. Then you have to also, we also are going to have to look at how we come up with other types of safety nets to help families and communities address these challenges. The other piece of this is that we have to remind ourselves. You know, yes, it's costly; it is $100 billion long-term, yes, annually. Yes it is costly to be providing unemployment insurance benefits.
So New Jersey governor has been pulling back. However, though, there are tremendous costs associated with doing that. Psychological costs, social costs. One thing that has been interesting with this recession, we haven't seen a typical rise in crime that you do see associated with the business cycle. Some people argue that's related to the get tough three strikes and you're out legislation that is kind of overpowering the cyclical, the recession aspect.
ACHUTHAN: We are not talking about not dealing or not helping or not trying to find some way out.
RODGERS: Maybe you're not, but there are some people saying let the market sort itself out.
ACHUTHAN: Look I am just trying to give some practical advice to the people who are totally long-term unemployed. Get out of construction, manufacturing and bubble related industries and into services.
VELSHI: This is a conversation we need to keep on having and we'll keep on having it with both of you. Thank you very much. Bill Rodgers and Lakshman Achuthan.
When we come back, we are going to talk about the new White House plan for health care. Is the president going to do what he said? Is he going to force it through with or without the support of Republicans, when we come back.
ROMANS: President Obama wants an up or down vote on health care reform but nothing in Washington is ever that easy. There is fierce debate on what a final proposal should look like. David Gergen is CNN senior political analyst. David you know the American people are sick and tired of health care process. I think that every poll pretty much reflects that.
I want to you listen to something the president said earlier in the week. Because it sounds like the president is a little sick and tired of health care process, too. Listen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Every idea has been put on the table. Every argument has been made. Everything there is to say about health care has been said, and just about everybody has said it. So now's the time to make a decision.
(END VIDEO CLIP)
ROMANS: David, will he get his decision and been it look like what he wants?
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: We don't know yet. He doesn't know. The betting in Washington is that he will certainly get an affirmative vote out of the Senate. He's probably, but it's a much closer call, going to get a vote in the House.
Nancy Pelosi does not have the votes now and she is not going to have them until everybody understands what's in the new bill. She's been working through a set of amendments that are going have to be costed out by the Congressional Budget office; they are going to be double checked with Senate leaders and with the White House. That's all going to take some time.
Until she does that, these coalitions won't quite come together. Where she is now, by all, most accounts, is, she starts out about even, maybe even a vote down, based on what happened in November in the House. That she is, she probably had some votes in her pocket in November that she could have called upon. So we don't know how many are out there. Maybe eight, nine, ten Democrats who could go from no to yes.
On the other hand, there are also some Democrats who voted yes who may go to no. And they start with the abortion opponents led by Bart Stupak, a Congressman from Michigan. And he says he has about a dozen Democrats who go no. So you can see how close that leaves the counting.
VELSHI: Let me ask you, David.
GERGEN: There are wild cards out there. Sure.
VELSHI: Let me ask you about this. One coalition that seems to be coming together quite clearly is the Tea Party. They have been on conference calls, they have been discussing-- doing something akin to what happened when the initial bailout bill was passed. You remember that in the fall of 2008. Getting people to force their Congressmen to vote no against this. Is there some danger in the next two or three weeks that we see a ground swell conservative movement that pushes some Congressmen from the yes column into the no column and actually derails this?
GERGEN: I think there is Ali and I think that's one of the reasons that the White House wants to move swiftly. The press secretary of the president has been arguing he'd like to see a House vote by March 18th. The president's going off to Indonesia then. I think that's unrealistic to get a House vote that quickly given all the permutations they have to go through.
But the longer it's out there the more the againers, the Tea Party folks and others can mobilize. What we are seeing in the polls Ali is there has been some slight shift of wins in the more favorable wins for the bill, but we also know that the people who are opposed are much more intensely opposed than the people who are for it. And the people opposed are about twice the size of those who are for it.
So it is quite possible that you could see some real push back and clearly what the White House wants to do is to get this done before the Easter recess comes. So they don't want members of Congress going home and just getting inundated by Tea Partiers and others over Easter recess and then balking.
VELSHI: And they got a cross country thing starting on March 27th. So I guess the president wants to get it out of the way before that. David, good to talk to you, as always thank you so much.
GERGEN: Can I just say?
GERGEN: Can I just say one other thing, that I do think that ...
GERGEN: From all of our points of view on this show, the longer the Congress in Washington is thinking about and trying to legislate on the future of various industries, the more uncertainty I think that also introduces into our economy, and our economic performance.
Right now we have a health care industry, the financial industry and the energy industry, huge parts of the American economy, that are all facing the potential of new laws, new regulations, uncertain about how to invest and I think that's causing some dampening of the capitalistic spirits, if you will.
VELSHI: May not be regulation, it's just that it is uncertain as to what those regulations will be.
GERGEN: Exactly. So uncertainty, as you know, breeds caution. On the part of industry and I think it's in everybody's interest that this get wrapped up by health care.
ROMANS: I think we can all agree on that. Yes.
VELSHI: I think that's very true. David good to see you. Thanks very much, one of those industries that David was talking about, the energy industry. When we come back we're actually going to talk about that, about the nuclear opposite. Why some people say it's the only clean energy solution for the country and why there may be a little less regulation to allow the entrepreneurs into the nuclear game.
VELSHI: President Obama recently backed $8 billion in loan guarantees to build new nuclear reactors here in Georgia. A nuclear plant has not been built in the United States in 30 years. Now, at the same time, a license for a nuclear power plant in the northeast is being revoked. Is nuclear power the answer to our country's clean energy needs? Is it even part of the answer?
I spoke with Christine Todd-Whitman, she is the co-chair of the Clean and Safe Energy Coalition, and she is the former Environmental Protection Agency administrator and the former governor of New Jersey. I asked her why we aren't seeing more private money going towards the generation of nuclear power.
CHRISTINE TODD-WHITMAN, PRESIDENT, WHITMAN STRATEGY GROUP: One of the big reasons is that the federal government got out of the business in the 1970s and said we weren't going to encourage any more nuclear, we weren't going to give them licenses. They're big investments. No question about it.
They are not as big as wind farms producing the same amount of power but they're big investments and people want to know if they're going to put that kind of money up front that this is actually an industry that is going to get support and is going to be recognized as part of our future, and I think that's what is important here to say.
Nuclear is only going to be part of our energy portfolio. It is not a silver bullet, it is not the only answer but it is 20 percent of our power today in this country and better than 70 percent of our clean power. And that's what makes it attractive.
VELSHI: Let's talk about how much it should be. You said about 20 percent of the power that we generate in the United States right now.
VELSHI: Germany, Japan sort of have a greater portion of their power generated by nuclear energy. France has 76 percent. What's the right number? Where should we be with nuclear power?
TODD-WHITMAN: You know that's going to be up to the economics and the country to decide. There's no magic number for it. I happen to believe that we ought to at least keep it at 20 and probably we would be better off if we could get up to 25 that would help us both with reducing our need to import foreign oil, it would give us clean power, affordable power. Because once it is up and running nuclear on a per kilowatt basis is the most least expensive.
It the least expensive actually of the base power that is the 24/7 power that we need. So there is no magic number, but as you look at how we are going to meet a projected 23 percent increase in electricity demand by 2030, which is only 20 years away, how do we meet that in a way that is clean, safe and affordable?
VELSHI: Let's talk about this. When you look at pros and cons of nuclear power generation, the environment falls into both categories. It falls into the probe, because it's carbon-free emissions. It falls into the cons because people are concerned about how you safely and effectively dispose of the spent uranium. Explain that a bit to us.
TODD-WHITMAN: Sure. Well that is a very real concern that is brought up again and again and rightly so. Right now the spent fuel rods and if you took all of the spent fuel rods we have in the 104 nuclear reactors around the country they'd fill up one football field to the height of the goal post. That's the magnitude of what we are talking about. Not something that is the size of the state of South Carolina.
But if you took --in those spent rods you have about 96 to 97 percent energy still there. We don't reprocess in this country because we got out of the business of nuclear back in the '70s. France reprocesses, Japan reprocesses and that means you can reduce the amount of energy that's left in there or fishable material to down to 2 to 3 percent which means you have a far smaller amount to dispose of.
VELSHI: Well obviously there are a lot more jobs created in the building of a nuclear facility or the expansion of an existing one than ongoing jobs in the operation of a nuclear facility?
TODD-WHITMAN: Well you have some 2,400 jobs at height of peak of construction but you have between 4 and 700 jobs permanent full-time jobs of a reactor once it is up and running. Those are jobs that are not going to go anywhere and they pay traditionally one-third more than a similar job in that same area, neighborhood. They throw off a lot of economic benefit, $430 million a year in overall economic benefit to the area, and $40 million a year some odd in labor income. And for every job you create out of sight they're the support jobs that come along with it. So basically if you're looking at it from an economic development point of view, it's a very strong industry in which to invest.
VELSHI: Christine when we were talking to David Gergen one of the points he was making is that if we need private companies, if we need private investment into major infrastructure or health care in this country we do need some certainty as to what the regulations are going to be around those industries. I think that's an interesting point here.
VELSHI: Why haven't we seen more private money going into nuclear energy? Because we don't know what the rules are, we don't know what the rules are going to be.
ROMANS: It is all about visibility and clarity. And as long as those two things are lacking you are going to have a difficult time raising private money. That is what those loan guarantees are all about or at least trying to jump-start. I guess we will say Ali.
VELSHI: In terms of clarity, we have a guest coming up who was in the business of actually establishing clarity. She was a witness to history, Christine.
ROMANS: Right. A fly on the wall so to speak during the biggest financial crisis of our generation. Her "inside story," that's next.
ROMANS: September 19th, 2008, the country on the verge of financial collapse. Treasury secretary Henry Paulson calls for the controversial T.A.R.P. or the Troubled Asset Relief Program.
(BEGIN VIDEO CLIP)
HENRY PAULSON, TREASURY SECRETARY: I am convinced that this bold approach will cost American families far less than the alternative. A continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.
(END VIDEO CLIP)
ROMANS: In this unprecedented time our next guest was on the front line. Her job was to explain the economic meltdown in language that you and I could understand. She was Henry Paulson's speechwriter. Stacy Carlson is author of "You, Me and the U.S. Economy" available now as an e-book.
Stacy welcome to the program. You know I sat down with treasury secretary just a couple of weeks ago and it is interesting because he talked about that event as a mistake and not T.A.R.P. being a mistake or the bailout but that he delivered a three-page summary to Congress for what he wanted to do, and then Congress turned around and said you're being imperial. How can you just give a blueprint? Take us behind the scenes a little about what happened there.
STACY CARLSON, FMR. SPEECHWRITER, TREASURY SECR. PAULSON: Thanks for having me today. What happened was that when they decided we need a comprehensive approach because the markets were in such dire meltdown, that Hank went up to Congress and said, this is what we need to have, this comprehensive approach. Congress said to him, great. Give us the outline and what you need, don't give us the details. We'll do the details. So what treasury sent up to Congress was a three-page outline as they asked for and then Hank got vilified for sending the outline that they asked for?
ROMANS: So this is a perfect example of no matter what, you were in a no-win situation.
ROMANS: Tell us about how difficult was it at the time and even now to explain to people simply and clearly what happened. Because I know Ali and I really struggled with this. On the air during the crisis. And you must have struggled with this, too, because here you've got pretty high -- high-flying engineering that you're trying to explain to the American people and why it's so important to help Wall Street for the sake of Main Street. Right, Stacy?
CARLSON: Right. We actually are trying to talk to all kinds of people at the same time. Hank had to talk to Wall Street, to world leaders, politicians, to government and to Main Street, and it was very difficult to explain very complicated economics and the financial system in one or two minutes, and we did our best, but I think that one reason why I wrote this book was that I thought someone needed to explain it in very plain, Main Street terms with a little bit of humor, like a conversation. So that Americans could really understand the causes of the crisis, and what we did to try to fix it.
VELSHI: In fact, you put this book out as an e-book, because you wanted to get it out at the same time people were reading about Henry Paulson's information, he's put out a book himself. Anything you look back at and you think, oh, I wish we hadn't done that or I wish we hadn't said it that way or something you thought was really clear that ended up being more confusing than you intended for it to be?
Because I know Christine and I go through that a lot with our own reporting during that period. If I only knew today what I knew then what would you have done differently?
CARLSON: I think we would have stepped back and really, when we heard of the fury of the American people, about the $700 billion proposal, that at that moment maybe pivoted more to really try to talk directly to the American people and in one specific speech that really sort of did do the economic primer, the financial system primer, that maybe they might not have been much happier than they were. But at least would have understood what was happening and why we doing it.
ROMANS: I guess a year and a half later, it will be impossible for us to ever know, you know, and trying to explain to people what could have happened? It's an unknown. We dodged a very terrible bullet and now the second guessing is I think inevitable. That's what the Treasury secretary said, too, former treasury secretary. He basically said I can sleep at night because I know what we averted and that's good enough for me.
All right. Stacy Carlson, thank you so much. The book is called "You, Me and the U.S. Economy" very plain language, companion guide, really, with a forward by the former treasury secretary.
ROMANS: Thanks, Stacy. Thanks a lot.
VELSHI: Thank you Stacy.
CARLSON: Thank you.
ROMANS: All right. Suze Orman is here. We love Suze Orman. Did you know when you apply for a job your potential employer can run a credit check? See all your financial secrets? Suze and Ali and I are going to talk whether it's fair and what you can do to protect yourself.
VELSHI: All right. Every week we, we take a look beyond the headlines and we usually do it with people who are interesting and smart. But this week we have something a little different for you, Christine. Everybody knows Christine is my TV wife, but if I had a TV girlfriend it would be this woman in the middle. Suze Orman, she is the host of CNBC's "Suze Orman Show" she is celebrating her eighth anniversary on the program. She is a great friend to me and to us. Suze welcome, great to see you.
SUZE ORMAN, CNBC HOST, "SUZE ORMAN SHOW:" Oh, boyfriend!
ROMANS: All right. Well, you know ...
ORMAN: He just wants us to fight over him.
ROMANS: I know he does, and he's probably going to succeed. We'll do it in the break. But I want to talk to you about something that is very serious here for so many of you out there who are looking for a job. It's tough enough to find work, but many people are facing another hurdle. This is potential employers holding their credit histories against them. And that brings us to this week's "Roman's Numeral."
Thirteen percent of employers do what? They run credit checks on every single job applicant. They can see your whole financial life there. Another 47 percent run checks and at least some applicants, now 18 states have introduced legislation to ban or to limit this practice. Mostly, mostly so that it's just for financially, you know financially oriented kinds of jobs. So what are your rights?
Your employer must notify you before obtaining this report, get your consent and if they are not going to hire you because of something they see in there they have to tell you in writing, that look, we see that you have a very high debt to income ratio. We are not going to hire you. Suze is this fair and are there things people can do to protect themselves from an employer, potential employer who can see an awful lot of information about them.
ORMAN: This is why your years I have been telling all of you, you have got to the know your fico scores, you have got to make sure that your fico scores are great, because other people are checking them, and it's not just your employer. It's your landlord, it is your cell phone company, and it is your utilities. They all look at this, everybody. We've come into a world of the fico craze.
Therefore, is it legitimate? Well, they tell it to you. Should they be doing it? I have to tell you, given the fact that banks have decreased your credit limits on credit cards, many things have happened that have forced you into foreclosure and, yes, I know these companies will say, but we looked back seven years, we were able to tell when it hasn't been good, when it's not good. I don't believe it. I think they just look at your fico score and they make a determination. I do not think though should be allowed to do so.
VELSHI: Suze, one of the things you tell people to do as much as possible, is at least familiar, not just with your score but your report to the see if something's inaccurate. Because wouldn't you hate to not get a job knowing somebody's checking your credit report and it is inaccurate. I mean it's not easy to fix these things. So you might as well at least know what's in them.
ORMAN: You know a long time ago Ali when I did some stats, I'm not sure they're still accurate but they are probably close, about 25 percent of all people who look at their credit reports will find a mistake on it, 60 percent will find a mistake that actually keeps them from getting credit. So it's essential. But do not get suckered into all of these commercials that you see on television today, free credit report, free this, free that. The only place you should go to get a credit report for free is annualcreditreport.com. Period.
Your fico scores are not free. You have to pay for your fico scores so be very careful, people. Experian and Equifax and Trans Union give to you are worthless, because 80 percent of lenders only check fico scores.
VELSHI: Very interesting. All right. Suze listen, we have been talking about jobs, people needing extra money. Here is a way you might make some extra money, if you knew someone, a co-worker, maybe your ex, who's cheating on their taxes. Would you turn them in? Under the IRS's informant program, if you turn someone in for fraud you could receive up to 15 percent of the amount that they under paid up to a maximum of $10 million. Getting paid to turn in potential tax cheats, is that being a rat, Suze or is that a good idea?
ORMAN: I like the idea. I have to tell you I like the idea. I actually like it for women who are in relationships with their husbands who have been cheating on their taxes, who have been stashing all of this money away. They're not powerful enough to do anything about it, and then they get a divorce. The women end up getting absolutely no money whatsoever while the husbands go on to do many things. I have had so many cases like this I can't even tell you.
Here's the bottom line. Every single one of us, whether we like it or not, we have to pay taxes. And if xy and z cheat on their taxes then that somehow affects all the taxpayers that are really doing what they are supposed to be doing. In fact, if there is somebody who is cheating on their taxes I think the government should know about it and I think if that's the way for you to make money, I have to tell you, I don't have a problem with that.
However, you better not just report people to make their lives miserable. You better know for sure that they are cheating on their taxes. I think there should be a penalty that if you report somebody that is not cheating, and you're doing it just to be vindictive, there's a $10,000 penalty to you.
ROMANS: I wonder if there might be laws against false reporting to the government on something like that. Let's stay on top of this topic of taxes. If you live in California and you did a short sale of your primary residence last year, you're going to get a 1099, and you are going have to pay income tax this tax season. The federal income tax may have been repealed but not the California state income tax, and it's one of the highest in the country. Suze, you talked to one woman who was saddled with a $30,000 tax pill.
ORMAN: Yes. Here's the problem. Everybody, you have got to stay up on this. Federal regulations said that if you sell a primary residency, and let's say you have to sell it for a less than what you owe, you currently do not owe income tax on the difference between what you owe and what it was sold for. That goes through the year 2012.
However, most states adopted the federal regulation. California adopted it but only for two years, for 2007 and 2008. All of a sudden 2009, 2010, it is not there anymore. So now what happens, if you sold a home and you did a short sale, in 2009, it is possible that you're going get a 1099 form right now and you are going to owe taxes and it could be $8,000, I have a woman as Christine was just saying, she did a short sale for $300,000. Her tax bill now is like $30,000 just on that money alone.
She doesn't have any money. Nobody wanted to lose their home. Governor Schwarzenegger, get it in line here. You keep vetoing these or you keep saying you are going to veto the bills. What is the matter with you, sir? These people need money. You need to pass this so they're not subject to these taxes.
VELSHI: That's a fascinating thing, having to pay taxes on your short sale. Suze is going to stick around. Find out which of America's superhero got a pink slip this week. When she comes back.
ROMANS: But first, brand recognition is a problem many small businesses face but product recognition is an even bigger hurdle. We met with one entrepreneur who is up for the challenge in this week's "Turn Around."
ROMANS (voice over): If you don't know what a pizzelle is, you're not alone. These waffle-shaped Italian cookies are hardly a household name, but Stan Kourakos is trying to change that. His business Little Pepi's makes pizzelles and only pizzelles. In this modest factory in Hatfield, Pennsylvania.
STAN KOURAKOS, PRESIDENT, LITTLE PEPI'S: My biggest challenge is just getting people to know what a pizzelle is. Even though the product has been around since 700 BC.
ROMANS: Kourakos bought the business in 2003, from the original owner, who started out baking the cookies in his own kitchen four decades ago. Little Pepi's had a small but loyal following, but sales began to slow.
KOURAKOS: When I bought the business, there were two big problems. Two glaring problems that I saw. Number one was the building was being taken for eminent domain. The second problem was the equipment was 25 years old. It was all electric; it was very labor intensive process.
ROMANS: The solution, Kourakos moved the company to a larger suburban facility and made a big purchase, a giant waffle stick oven retrofitted specifically to make pizzelles. Production tripled, but his energy bill also jumped. So Kourankos went from baking four days a week for eight hours to baking three days a week for ten hours. He was able to keep almost all of his employees. About one-quarter of them had special mental or physical needs.
KOURAKOS: That's a corporate responsibility we are taking on. That's the one unique thing about our business. It is it is family run business but we like to keep family here.
ROMANS: Little Pepi's are sold mainly in supermarkets, bakeries in the northeast. But has distribution centers in Florida, Chicago, Los Angeles, and San Francisco. Although sales have been growing steadily since Kourakos bought the company, they were off 12 percent last year. But an appearance on the "Rachael Ray" show gave the company a boost at the end of 2009.
RACHAEL RAY, HOST, "RACHAEL RAY:" I love these.
KOURAKOS: I get e-mails all the time. Your product is just like my grand mother's. We embrace this. That's why our history, our past, will help us go forward.
ROMANS: Christine Romans, CNN, New York.
ROMANS: Back with us, Suze Orman. Here's a fantastic story. I can't wait to hear what you guys think about this. You know Spider- man, may be more of an average Joe after all. In the latest issue of the comic, the super hero's alter ego Peter Parker gets a pink slip. He is fired from his job as a photographer for the New York City mayor's office. So Peter Parker you are fired, will Marvel's decision give Spidy a pink slip help readers relate? Even if, Suze, even if Spiderman gets a pink slip. He is like the rest of us, I guess, right?
ORMAN: I have to tell you, I think that is great. And let me tell you why I think it is great. Especially for the youngins out there that are reading the comic books and that are idolizing these super heroes thinking nothing can happen.
A lot of these kids if you talk to them though, I want to be a super hero, well you be a super hero in life when you can deal with all kinds of devastation and it is a reality that you may just lose your job so what has he done to prepare for losing his job? He might be able to crawl all over those buildings and put on that little, you know, suit that he does but the truth of the matter is, this is a web that every one of us needs to learn to deal with and I think that if children can see that this is a reality and what is Peter going to go do?
I think it can teach them to actually be responsible with money. Do it any way you can.
VELSHI: The other thing that I think is important here is that it goes further to just eliminating the stigma. One of the things that is so tough when you lose your job is the pride and the self esteem that goes along with that. And where you see it everywhere, even with our super heroes, it gives a sense that a lot of people are in this soup together. Suze, there's a lot of that to be said for credit and some of the difficulties people have had. At least you understand that it is a popular culture and it is all around you.
ORMAN: Yes. Again, I think whoever did that storyline, kudos to them.
ROMANS: All right. Suze Orman, thank you.
VELSHI: Kudos to you, Suze, for eight years on your show.
VELSHI: And it's -- you're so kind and you're so busy.
ORMAN: Tune in everybody tonight for my eighth anniversary show. It's going to be fun.
ROMANS: Yeah. All right. We thank you for dropping by to celebrate that anniversary and as always, another fantastic hour of YOUR MONEY. You can follow us on facebook and twitter. Suze just got her millionth twitter follower. Am I right? A million.
VELSHI: What is your address? What is it? Tell us what it is.
ORMAN: Suze Orman show.
ROMANS: Suze Orman show. And at AliVelshi and at ChristineRomans, and we're both on facebook. We had a great discussion this week about the credit checks for job applicants. So keep weighing in folks we want to hear what you say.
VELSHI: Make sure you join us every week for YOUR MONEY, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00. Log on 24/7 to CNNMONEY.com. Have a great weekend.