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Income For Middle Class Down 7 Percent in Last 10 Years; Working to Solve Poverty; Closing the Gap Between the Haves and the Have-Nots; Predicting and Preventing Academic Failure; Dating in the Great Recession

Aired September 24, 2011 - 09:30   ET


CHRISTINE ROMANS, HOST: A good GPA is critical. How about a CPA? That's character point average.

Good morning. I'm Christine Romans.

Plus, what if I told you a student's academic achievement is determined by fifth grade? If that's true, then why aren't we doing everything possible to build that foundation solid as a rock?

And she may be Bravo's "Millionaire Matchmaker," but Patti Stanger has advice for all of you trying to date. The rules have changed.

First, it's a milestone for America's middle class, back to where we were in 1996. New data shows a decrease the last 10 years of the earnings of middle class Americans. Income fell to $49,500 last year, a level not seen in 15 years. And over the last 10-year period, income for middle-class Americans down 7 percent .

Don Peebles is the chairman of the Peebles Corporation, a member of President Obama's National Finance Committee.

Don, is it officially a lost decade for the middle in this country?

DON PEEBLES, CHAIRMAN, PEEBLES CORP.: Well, I think it is certainly a lost opportunity. This has been a lack of progress. We've lost ground. And middle class Americans are really suffering.

ROMANS: The top end has done well, though. That's where you get this whole political narrative that the middle is suffering at the expense of the top.

PEEBLES: What's happening right now is we're seeing a transformation or a dramatic change in our economy. We've gone from a manufacturing-oriented economy in terms of middle class job opportunities, those jobs are now lost. Many of them are lost overseas. And so now, our economy is paying for intellectual property and intellectual ideas. So we're going to be a much more educated economy and the jobs that are going to be created are going to require a greater level of education.

ROMANS: That's happening faster than American families can transition. And that is the problem.

PEEBLES: That is the problem.

ROMANS: Let's bring in Don Peck; he's the features editor with "The Atlantic". He wrote the September cover story, "Can The Middle Class Be Saved?" We certainly hope the answer to that question is yes.

But, Don, America's middle class, it's earning less at the same time the cost of raising a chide has gone up. New data this week from USDA. It now costs an average $227,000 to raise a kid to age 18. That's an increase of 40 percent, or about $60,000 compared to 10 years ago. That's just for the basics like food, clothing, health care, transportation. It does not include college.

What is the breaking point for the middle class here?

DON PECK, FEATURES EDITOR, "THE ATLANTIC": Well, I mean, think we're at it. If you look at birth rates since the crash, they've plummeted. So many people feel like they can't afford children right now. Their lives are too insecure. You know, even marriage rates have declined, you know, rapidly since the crash. So in almost every respect, the middle class or millions of middle class people, at least, are deferring family decisions, families are shrinking as a result. And that's a tragedy for millions of people. It's going to have demographic consequences, as well.

ROMANS: For those of you thinking about not having another junior, I will give you the highlight from that report, as well. It is that the more children you have, there's economies of scale actually. The per child cost goes down, because I guess you share you know shelter and the like.

But I want to talk about education. Because, frankly, that survey doesn't take into account education. You've got to save money. If you don't save enough money, maybe you can borrow it, right? Maybe not. According to a new survey by "Inside Higher Education" college admissions officers say that they are actually looking for students who can pay full price. They say 22 percent of those admissions officers say that the economy is driving their choice. And in some cases, money trumps smarts, grades, and a student record.

Don Peebles, let me get this straight. The middle class is earning less. At the same time it costs more to raise a child. And according to this survey, you need to have all the money in your pocket if you want your kid to have a sure shot at getting into college.

PEEBLES: It's a tough time, right now. Colleges are businesses. In fact, if you look, Stanford University is trying to have a school here in New York City right at Roosevelt Island. The idea now is schools are being competitive. They are trying to go and attract students who can actually pay to go to school. And that is a shrinking environment. So, yes, the middle class is being hit on many ends right now, loss of jobs, household income going down dramatically. The poverty rate has increased to the highest it's ever been in 52 years. Education is more expensive.

But there are opportunities out here, on the brighter side here. There are student loans available.

ROMANS: Right.

PEEBLES: There are other types of grants available. And education is certainly a priority of the president's administration right now. And so there's a big effort to make education affordable. Because I think we all have to recognize that the future jobs in America are going to require a much higher level of education and skills. We're not going to be able to provide cheaper labor and larger pools of labor than say China, Asia, Latin American countries. We're going to have to bring something different to the equation. That's going to be our intellect, our freedom, the ideas, creativeness of America. That starts at education. So one of the things that we need to do-all of us do-is we need to emphasize education and help pay for it.

ROMANS: Yes, well, Don Peck, that's the problem, paying for it. Because middle class families, they think, I've have saved all this money. Now I'm going to pay full price for this tuition. It doesn't feel fair when tuition keeps going up, up, up, when you know, income isn't going up. You don't have a house you can tap into to pay for tuition. Is that a bubble that is just bound to burst?

PECK: I think to some extent it is. That's really unfortunate. You mentioned housing. And housing has been critical to college attendance, especially for working-class families, lower middle-class families. They've historically used home equity to fund college. That's a hard decision for them. And now it's a decision that's out of their hands because of the housing bust. They don't have the bank accounts that they used to. A lot of lower-middle class, working- class families are beginning to doubt the value of a college education, which is unfortunate and a mistake.

I mean, I agree with Don that we really need to make education a priority. We need to make sure that it is affordable to and available to all of America's citizens. Unfortunately, it seems to be going in the wrong direction right now.

ROMANS: Next, can success be determined by the fifth grade? And how crucial is building character in school? Should kids get graded on their character? That's all coming up next.


ROMANS: Some 46 million Americans live in poverty today. Some are locked in the grip of generational poverty, they are unable to escape the circumstances of their parents. Millions are children brought up poor through no fault of their own, and many are new to these ranks, squeezed out of the middle class by a great recession that scarred virtually everyone except the very rich.

Too many people live in poverty, a salute now to the people who are working to fix it. (BEGIN VIDEOTAPE)

CARRIE THORNTON, CIRCLES MEMBER: I signed my papers today for my bankruptcy.

ROMANS (voice over): Carrie Thornton is an unemployed mother of four with $175,000 in debt.

THORNTON: I couldn't afford daycare. So I have lost my house, and my car, and my job. And I've been on the system, and it's just a struggling circle. I can't get out of it.

ROMANS: Carrie turned to Circles, a non-profit community group with a simple goal, to end poverty.

DIANNA MORRISON, DIR., SUSSEX CIRCLES: We take people from all walks of life and sit them down to the table together. And they solve situations which allow people to remain in poverty.

UNIDENTIFIED FEMALE: I have a job interview on Thursday.

ROMANS: The group pairs those who are struggling with a volunteer mentor, or an ally as they call it, to help make an action plan.

KARIN VANZANT, CEO, NATIONAL CIRCLES CAMPAIGN: An ally's primary role is to ask one question in any circumstance. What do you need from me? Not how can I fix it? Not do you need money? But what do you need from me?

ROMANS: Circles is in 23 states and 63 communities. CEO Corinne Vanzant says the faces of poverty are changing.

VANZANT: We have a lot of families that were right on the cusp of middle income that have fallen into poverty, through foreclosures, divorce, being laid off from their job.

ROMANS: Carrie is still looking for work but knows she's not alone.

THORNTON: You are with a bunch of people that are in your same situation. So you can know that you're not the only one out there.

UNIDENTIFIED FEMALE, CIRCLES MEMBER: Yes, I still feel like I'm poverty.

ROMANS: Cashmia Cook isn't afraid to admit her reality, but the 19-year-old single mom does want to change it.

COOK: I have a lot of expectations for myself and I'm not there.

ROMANS: Cashmia says she was kicked out of her home when pregnant and looking for somewhere to turn. With no income, Cashmia turned to a shelter and the shelter suggested Circles.

TERI CORSO, CASHMIA'S CIRCLES ALLY: Our goal together is so that her life will be better.

ROMANS: And there's Kathy Dieterle, a loan processor until the subprime crisis hit.

KATHY DIETERLE, CIRCLES ALLY: We had leased vehicles, credit cards, the whole nine yards. And when I lost my job, that really hurt us.

ROMANS: She came to Circles for support; she never considered herself in poverty because she says she wouldn't allow it.

DIETERLE: I would make sure we won't have gone out on the street. One way or the other, come hell or high water.

She's gone from $15,000 in debt to just $600 in debt. She was able to re-modify her mortgage, find a job. And she is now an Ally.

DIETERLE: Then I had this group on top of it. And I was never poor, never.

ROMANS: As for Cashmia, she has a job and she'll be moving into an apartment. Her number one goal?

UNIDENTIFIED FEMALE: To be a great role model for my child and be successful.


ROMANS: As you can see, there are clearly two economies, right now, the haves and have-nots. Let's bring back our guests.

Don Peebles, how do we close the gap between these two?

PEEBLES: Oh, I think we have to do it through education, educational opportunities. And also we have to rethink how we approach jobs. First of all, right now, all of us have alignment of interest. Those in the top end of income spectrum, and those in poverty. We all are an alignment of interests, we all have the same goals.

And so what we have to do is start looking for with a wide angle lens as opposed to a myopic lens. So that means organized labor has to figure out a way to make their American workers more competitive with global markets. We as businesses have to become more efficient and look to create better opportunities for our employees, and continuing education supporting them, through additional educational opportunities. We do that at our company. I think we also have to look at tax policies now that incentivizes job creation.

ROMANS: What we hear about taxes now is that the rich aren't paying their fair share and it's just not fair. You should raise taxes on rich people. That will help solve it.

PEEBLES: What needs to happen is we need to eliminate, or get away from this debate of class warfare, this anger and frustration. But how can we work together to create jobs and better opportunities for many people? And for all-Americans?

ROMANS: Don Peck, let me have you weigh in on this. The haves and have-nots, the haves are certainly getting a beating these days from Washington and the media.

PECK: Well, they are. And you know, some of that is unfair. We should continue to celebrate people who have made great achievements in their work.

But I do have to disagree with Don in one respect. We've kind of reoriented the economy over the past 20 or 30 years. We've oriented it in a way that promotes rapid technological advance, globalization. This has advantaged people at the very top of the economy. At the same time, we've expected less and less of those people. Marginal tax rates have fallen and fallen since the mid-20th century.

So the solution to our national problems is not soaking the rich. But I do think that we should expect the rich to pay a little bit more to help the millions of Americans, who have fallen out of the middle class, rebuild their lives.

ROMANS: Don Peck, Don Peebles, as always, great to spend a Saturday morning with you. Thank you, gentlemen.

All right. Imagine being able to spot a potential high school dropout as early as fifth grade. My next guest says there's no reason to spot a failing student, intervene, and fix it, next.


ROMANS: What if I told you that a student's academic achievement can be determined by say fifth grade? If that's true, why aren't we doing everything possible to build that foundation solid as a rock?

Bob Weiss is the former governor of West Virginia, and now the president of the Alliance for Excellent Education. And Nancy Carlsson-Paige, professor of education at Lesley University and also the author of the book "Taking Back Childhood."

Let me start with you Governor Wise. It was you who first told me that statistic, fifth grade; that you can see a child going off the rails academically by fifth grade. What are the warning signs?

BOB WISE, PRESIDENT, ALLIANCE FOR EXCELLENT EDUCATION: The warning signs, they're pretty intuitive. The important thing is to capture them, do something about them.

Warning signs are very simple. First of all, declining academic performance. Second, increased absences, tardiness starts to go up, truancy starts to go up. And number three, disciplinary.

I would add a fourth one -- that's what researchers established, if you get a good data system, you capture it, you intervene, but I would add a fourth one and that is literacy, the ability to read and write at your grade level. Because by eighth grade, we see on the only federal or national test, we see 25 percent of our kids reading several grades below grade level. I can go to any state, look at that score and tell you within a point or two what their dropout rate will be within the next three or four years.

ROMANS: Why don't we use that data and intervene fiercely when we see districts or subsets of kids or states that are failing?

WISE: Good news is more and more we are, but we're not doing it on a widespread basis. Only recently have we really adopted data in education, and then what he can do with it. I would look at the early warning indicator as the check engine light on your car. You car doesn't necessarily have to grind to a halt, but there are certain steps you need to intervene right away.

Good teaches see this every day but the ability for one good teacher in one classroom to communicate to another good teacher in another classroom, to make sure the whole system is responding, that's what we need to be doing.

ROMANS: I want to ask both of you, I'll start with you Nancy, about the importance of building character in our children. So, I want to kind of switch a little bit here and talk about this. You call it EQ, that it is more than IQ. What do you mean by that?

NANCY CARLSSON-PAIGE, LESLEY UNIVERSITY: I love this idea. I started an institute at Leslie University where we trained teachers in this very area. Sadly we see fewer and fewer programs like this right now, social and emotional learning programs, anti-bullying, conflict resolution, peer mediation programs that all foster what you would call character development, or EQ, emotional quotient versus IQ, intelligence quotient. I think Dan Golman (ph) might have coined that term.

But the important thing is that in the best of education, we would understand that cognitive social and emotional development are deeply intertwined in the human brain and systemically. We talk about them separately. But if you look at research, children who are in programs that foster social and emotional awareness and skills do better academically in school. That's a flat-out fact and something very important to understand.

Because the way that we're influencing with ed policy today, most of our classrooms is to be narrowing the curriculum, taking the social and emotional aspects, the community building aspects away, focusing in a sort of didactic way on reading and math because of high stakes tests and losing the opportunity to really be nurturing the whole person, and ultimately the whole citizen.

ROMANS: Wow, you know, Governor Wise, it's interesting because I was at an event this week, around the U.N. General Assembly. And there was someone who was involved in admissions for a big ivy league school. Who said that they routinely turn down straight A students because they are too traditional. They're looking for that EQ that she's talking about, they're looking for that something else, that character grade point average.

WISE: Well, they are looking for something that strikes, that stands out above all the others. I happen to believe character and character building is an incredible part and an important part of education. It is a socialization process.

When I was governor of West Virginia, I am happy to say we were able to get involved into every country system a character program, because it is just important. And not just on the surface, this is something that can be worked into almost ever aspects of curriculum. When you have an English class, what is the character issue of the book that you are reading.

ROMANS: Right.

WISE: When you are working with science, what are the ethics that are involved here? When you're working with math, what are the implications? Character needs to be built into every aspect of the education system.

ROMANS: And it doesn't necessarily take money to do that. We think that money is going to solve the problems in education, but it doesn't necessarily --

WISE: Is not the-money helps, money makes strategic investments, but this is also about a culture of education and building a culture is critically important.

ROMANS: All right. Governor Bob Wise, Alliance for Excellent Education. Thank you so much. Nancy Carlsson-Paige, the book is called, "Taking Back Childhood". Very nice to see both of you today. Have a great weekend.

Love and money, have the rules of dating changed in this tough economy? Bravo TV's millionaire matchmaker, yes, Patti Stanger. She says yes and she shares some advice with Ali and I next.


ROMANS: Love and money in the great recession. Have the rules changed when it comes to dating? I recently sat down with my work husband, Ali Velshi, and supposed these questions to the authority on the subject, Patti Stanger. She's a third generation matchmaker, star of the show based on her business, the "Millionaire Matchmaker" on Bravo.


ROMANS: Who pays, though? So, should you pay?


ROMANS: He who asks.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Or she who asks. But that doesn't happen that much.

STANGER: But there's the four to one rule. Every time a man takes you out four times, we have to give back, so we usually make dinner. Something that we do not touch the credit card or the cash, because when we do that, he goes like this.

ROMANS: We got millions unemployed, struggling to pay down debts. If you are out of a job, do you let your date know that? Do you let them know you have $35,000 in debt?

VELSHI: They're going to find out at some point.

ROMANS: Do they need to know the 580 credit score?

STANGER: The problem is going to be that the women, OK, if you're downtrodden, the man wants to rescue you. So that is attractive sometimes to the millionaire man. He likes the woman that doesn't challenge his opinion, doesn't have a better job than him, and --

ROMANS: How boring.

STANGER: I know. But that is biology. If you're a man and you said that to a woman, what would we do? We would run for the nearest exit.

VELSHI: Has that changed in this economy, with more people unemployed, with more people with debt?


VELSHI: How do you discuss that? I mean, we talk about it all the time.

STANGER: You shouldn't be dating anyway, because you can't take a girl out for dinner or cocktails, or even Olive Garden, you shouldn't be dating.

VELSHI: OK, let's talk about online dating. I saw a statistic somewhere that one in five relationships begin online now. What do you think?

STANGER: I think that is fabulous.

ROMANS: People can lie about themselves, too. They can lie about how much money they have. They can lie about how successful they are. So you need to be a sleuth.

STANGER: It's just like the bar. When you go to the bar, you have to screen the person you met, right? It is not different. You have to screen people, be in public places when you go to dating. And yes, one in five is true. And that is a good thing. Because we're meeting people that we would never, ever meet, never associate with.

VELSHI: Once you're in this relationship, once you've gotten past the first few dates, what do you suggest? Do you suggest that people handle money issues a certain way?

STANGER: Yes. When you're exclusive and now you've pooled your resources together, especially if you're living together or you're married, you have to make a decision. If the woman makes more money than the man, which was my case in the last relationship, we have to feel like, OK, I'm going to pay more for the mortgage. But you are going to have to pay for the electric bill, you are going to have to bring the groceries home. When we went on vacation I always upgraded us to first class. So you have to give and take. And that is something that you want to live a nice life. And you don't want to always be fighting about money.

ROMANS: Fighting about money I think is really dangerous in a relationship.

STANGER: You do that, the sex goes out the window.

ROMANS: And sometimes, you know, savers are attracted to spenders and vice versa, so, when you are courting and you see someone's generosity, then when you're in a serious relationship or a married you're saying, wow, you're spending money we don't have. Or you are being too liberal without money.

STANGER: Right, you're excessive.

ROMANS: And it's gone from what you admired about the generosity because you are kind of stingy, now you're upset about it.

STANGER: Well, Kim Kardashian is going through with Chris Humphries. As you see on their upcoming wedding special, he is very cautious. He makes X amount of dollars a year, he is young to the team. And she's making zillions of dollars and she's like, wait, what do you mean? We can't buy this, we can't do this? And he is like, no, we don't know what tomorrow is going to bring. And that is good. That there is balance, but then you should have a money mediator.

ROMANS: Look at census numbers, and quite frankly, fewer young people are getting married now.

VELSHI: They're just living together.

ROMANS: They're living together. Is that OK?

STANGER: Well, it is because of financial security and they don't want to pay out at the end of the day. That's why Hollywood, 90 percent of them are not married.

VELSHI: Patti, great conversation.

STANGER: Thank you so much for having me. I really enjoyed being with you guys.

ROMANS: You are so fun.

VELSHI: Great pleasure.

STANGER: You married for love, right?

VELSHI: Absolutely, I did.

STANGER: So did you, right? ROMANS: I married for love.

VELSHI: We're both married people who were good with money.

ROMANS: I'll tell you something. You can always earn money, you can't always fall in love with somebody.

STANGER: Oh, can I steal that?

VELSHI: That is good.

ROMANS: You can. But I really think you can always lose money, but if you work at it, you won't always lose love.

STANGER: That's right. Love will always be there.


ROMANS: See, we can start doing relationship advice on this show. You can catch Patti on Bravo every Thursday night at 9:00, 8:00 Central.

That is going to wrap things up for us this morning. But the conversation continues online. Find me on Facebook or Twitter. Our handle is CNNBottomLine. You can also find me @ChristineRomans.

Back now to CNN SATURDAY for the latest stories making news. Have a great weekend everyone.