two straight years, job creation seems to be slowing down. earnings for middle income americans fell some 7% in the past decade. and then there are investments. your i.r.a., your 401(k), your pensions. they're a second road to prosperity. that is complicated in this volatile market. for those of you looking for a safe harbor by investing in fixed income or parking money in the shelter of a bank, you're getting nothing. even our virtually nonexistent inflation is higher than what you're earning. you are being penalized for not taking risks. ironically, owning your home may be the one vehicle to personal wealth that shows signs of some brightness. home prices may have hit bottom and are finally bouncing back. if that's the case, then now is the best time to buy a home or refinance a loan. interest rates are at historic lows. but that's little consolation to scores of homeowners who have seen the value of their homes on average shrink by a quarter since the beginning of the recession. i'm not a profit of doom. but as long as your politicians don't tell you the truth about the economy, i will. america could be headed to another recession and there may not be much that you can do to protect yourself. there is one thing you can do, understand how congress is dangling you over a fiscal cliff. i'm talking about a series of tax increases and spending cuts that are mandated by congress to take effect starting january 1st. if congress doesn't act, if democrats and republicans can't get out of their own way, millions of middle class taxpayers will revert to higher income tax rates in the midst of an economic slowdown when those bush era tax cuts expire. many of you in the middle class, the people we immediate to hole our economy up, many people could face even higher tax bills because more of you will have your income assessed at the alternative minimum tax rate. and there's continued bad news for retirees and those of who you rely on dividend paying stocks. you could see your tax bills double. that's not all. because congress couldn't agree on how to cut the budget as much as a trillion dollars in across the board mandatory spending cuts could kick in starting january 1st and that could fuel a wave of job cuts. all of this is avoidable. congress could rid us of this uncertainty right now. but why eliminate uncertainty when you can use that uncertainty to scare people into voting for you or voting against the other guy? washington won't act before the elections because members of congress would prefer to play russian roulette with the american people in order to get votes. your vote should go to a congressional candidate who is willing to put the economic good over election year politics. harvard economist is a former imf chief economist and the world's leading authority on financial crisis. krista freeland and will cain is a cnn contributor and is so wrong about the truth of this congress that i insist he comes on until i can convince him otherwise. welcome to all of you. >> bravo you for having background music to your sermon this week. i feel like we're about to land on an asteroid. save the world from doom. >> i would like to know where the asteroid is coming from. ken, we have, in my opinion, i'm calling it storms. maybe they're not asteroids, but we have two storms. the one over europe that's getting big and hitting us. the waves are higher. the winds are stronger. and then we have this one coming out of washington which teams entirely avoidable and fixable. what's your thought? >> the one in washington is contrived. on the other hand, it reflects our politics and our voters which are incredibly divided. so i don't think we're going to go off the fiscal cliff. but i'm not sure. maybe we'll get to next year and they'll say well we're not -- we're going to do it retro actively. a lot of stuff will start unwinding. europe, that's a deeper problem. there's years in the mud there. >> i'm not sure is the problem. it's likely that they will fix it. it's likely it will be at the 11th or 12th or 14th hour that they'll deal with all of these things. decisions have to be made ahead of that. >> what if it's another patch that fixes it for six months or a year and leaves it hanging over the longer term? >> will cane, this is my attempt to get you to come to my side. we're dealing with the fiscal cliff now. it comes with a cost. >> it does come with a cost. first, i can't match your outrage on the fiscal cliff for two reasons. number one, i think it will be resolved. i think ken suggested because there's not any political benefit to not solving it. across the aisle, republicans and democrats, there will be an impetus to solve the fiscal cliff. but more importantly, i think we have to analyze the potential cost. if you extend the cost or avoid going over, you inevitably continue to ramp up this deficit spending, which doesn't have a problem right now. but ken's written about this -- potentially. as you continue to rack up debt, it will have a depressing effect on your economy. you have to balance that against the immediate potential recession of going over the fiscal cliff. >> generally speaking, we've all agreed that this balancing thing you're doing with your hands is exactly what we have to do. we can't have serious cuts right now. we do need to deal with our budget in the long term and our deficits and debt in the long term. and in the middle, we need to give people some ability to plan. >> yeah. i totally agree with you. but we don't do that. we continue to, as and i talked about, handle the short term problem. i imagine we'll avoid going over the fiscal cliff and never address our long-term problems. >> i would like to jump in for a minute and say i think we really have to get the budget deficit issue in perspective and understand how it fits into where the u.s. and the world economy are right now. the reality is all of the warnings about how the bond vigilantes were coming after the u.s., those have not materialized and the truth is the people are practically paying the u.s. government money. >> they are. >> right. >> the ten year bond returns you less. >> people are paying the u.s. government money. hang on, will, to hold on to their money. the clear and present danger is not at this moment the budget. sure, medium term you have to worry about it. but right now any sensible person needs to be much more worried about two things. one, overall, the world economy. is it going to go into a recession or depression? and number two, this is not trivial -- the lost generation of people who are not getting jobs right now, of children who are not getting educated. it's really easy to talk in abstract terms and to be like the brave courageous deficit cutter. but that is not the challenge for 2013. >> how do we balance that out? ken, what is your view of this -- it's not the first time in history we face the got cut later, not cut now. the strug. we seem to all have is where the inflection point is, how we make the tough decision, how we transit from lots of government money into no government money and higher taxes. >> we especially don't want to do it all at once. the fiscal cff is crazy. on the other hand, it's not a free lunch just expanding, digging ditches. you need to have, you know, things that you're spending on that make sense. there's a lot of things congress could do but doesn't do. and that is simplifying the tax system would help a lot and making it fair at the same time. we could improve the infrastructure. we have this incredible bonanza from energy, from the gas revolution, that might make us an oil exporter for a little while. we could bring manufacturing back. but everything sort of frozen at the moment because the government is so paralyzed. >> but everything is frozen. all of the measures that ken talk about, broad agreement needs to be done. with all due respect, they're not abstract. these are problems that must be dealt with and the reason they're not is because we're always dealing with emergency situations. we're always dealing with the next fiscal cliff, the next need for quantitative easing. these are things that i have not opposed, but we always put these things on the front burner. >> these are not all emergency situations. consider the '90s. there have been times. the big problem at the end of the '90s and the early turn of this century was a budget surplus. we must not assume that the conditions that prevail today are the conditions that are going to prevail forever. >> there are long term problems. >> actually, there was a budget surplus. i'm afraid it was george bush who squandered that money and who embarked on two wars without a tax increase, which is not the american way. i think that ken has made a central point which to me is the counter to ali's storm warnings. for me, actually i am pretty bullish about the u.s. economy. and i'm bullish because of this energy revolution which is coming. i don't think that that is sort of fully taken into account in our economic discourse. but the shale gas is really going to transform the economics of the u.s. in the world economy. >> because nobody knows where krista comes from. she comes from the oil sands in canada. she knows what an energy revolution looks like. my point is i agree with you on that. i think energy is a great story. i think congress can mess things up and it will hurt if we don't fix it. congress's failings take action to protect americans from an on coming storm. i'll show what you jobs are at risk and whether your state could be the hardest hit. plus, that hammering you're hearing down the cul-de-sac from where you live could be the sound of a real heartbeat in the housing market. stick around. 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[ male announcer ] ...forbusiness.com. ♪ ha ha! i've been harping on about this fiscal cliff. let's talk about what it means to you, the threat of the so-called fiscal cliff, just the threat of it could cost you your job. christine romans joins us now. she's the host "your bottom line." what happens if we go over the fiscal cliff? >> it would be terrible, first of all. let's focus on the sequester. that is mandatory spending cuts that automatically kick in if congress doesn't act. they're estimated to be $1 trillion in cuts over several years splitting between defense and non-defense programs. the cuts will lead to immediate reductions in procurement spending in the private sector which could result in two million direct job losses in fiscal year 2012 and 2013 including professional and business services, maybe half a million jobs lost there. manufacturing jobs, an estimated 350,000 lost there. it would, of course, hit federal workers very hard, about 300,000 jobs lost there. suppliers and vendors that do business with federal agencies and contractors could see their own indirect losses as a result. wherwould these job losses be? california, virginia, texas, maryland, the district of columbia. they would each lose more than 100,000 jobs. and if congress eventually addresses sequester saying if the lame duck session after november's election or early next year, it may be too late to avoid a round of job losses because the federal warren act requires businesses with more than 100 employees must notify workers 60 days in advance. that means since sequester takes effect on january 2, layoff notices would start coming out in the first week of november -- just in time for voters going to the polls. >> come over here and join us. one thing that ken says is probably deal with these things. but you're not sure they'll deal with them. and that's where the problem comes in. this warren act means some companies may have to lay people off. >> that's a frightening story that they actually have to start acting in november. there's an awfully good chance they won't figure out what to do until really the beginning of the year because we're going to need to see the election before they have any kind of big deal. and then they're going to want to have the lame duck congress pass it. they're not going to want to do that probably. then we'll get into the year. there will be wrangling for a while. and a lot of stuff unfolds. >> it's more likely it will do something to change the warren act than change the actual problem. so that nobody has to go out and have layoff notice on their hands right before an election. >> that worries you more. if you're one of the people who works in one of the industries, people like to say government cuts. these are not government cuts. when you cut government spending, these are private sector workers. >> our government is addicted to contract workers. >> you're a contract worker for the government, will. you're sitting here with that same uncertainty saying am i going to lose my job at some point? she took a piece out of you talking about these are not abstractions. they're real jobs and real people's livelihoods that will be affected because of some idea we have to get the debt under control right now. >> i was pausing. there is a cost benefit analysis. this debt we're racking up, that we'll continue to rack up at a greater pace should we extend the fiscal cliff, not go over it, has an effect on economists. ken wrote about this. it's not just the bond markets as she brought up. it is not just the bond markets that's your day of reckoning. that has a depressing effect on your economy. i recognize that you have moments in the economies when you can't take a hit. we had that in '08 and several time in our past. christian made the argument, we're there again. you can't let the fiscal cliff push us over. my question is simple. i don't have the answer. i'm sure ken does. which is the bigger hickey to take, the long term one where we continue to rack up debt or the possible 3.5% contraction in gdp, the recession for the fiscal cliff? >> why can't there be something in the middle? >> let's ask the expert. ken, what's the compromise? >> you have to do something much more gradual here. not only are we barely growing 1.5% the most recent number. but the rest of the world is slowing down. this isn't a time to sort of contract artificially. this is a poison. it's completely contrived. congress couldn't agree. they said to make sure we agree we'll put in this. >> we'll put in the poison pill. generally the point of a poison pill is you're not supposed to have to take it. it is supposed to force you into hard decisions. >> do you believe that? >> back to will's point which is compelling though i think not fully thought out where you say we can't always act like we're in an emergency. christine, you have said this many times with respect to unemployment insurance benefits. but what do you do in the case that it is kind of emergency-ish. the patients, it's like saying i can't keep trading this patient who isn't stabilizing. >> here's what makes me crazy. they only see two things, deficit reduction and debt control or the fiscal cliff. and we have people who represent us in congress who are supposed to be able to figure something out somewhere between that. and we have an emergency in the economy right now with europe and a lot of other things happening in our own domestic economy. i mean it's like malpractice. it's like congressional malpractice. >> that would be ideal. >> that's a good word. >> that's a good word. that's what it is. >> i would love to handle both of the problems at the same time. i buy it. we're in an emergency. can you not go over the fiscal cliff. i think our other problems are not abstract. i think when you purchase this avoidance, you have to understand the price you pay. >> i think you're right about that. you know what? when we gave the bush tax cuts, we purchased avoidance. the bush tax cuts and the wars are a big part of our projected debt. so we have to always decide in good times and in bad that if there are unintended consequences, the things we do. i don't know, ken. i'm sure the government employees very smart economists and you can't all have different opinions on this thing. i mean at some point doesn't the economist come into the room yelling? guys, you can't do this even if it gets you some votes. it's wrong. as christine says, malpractice. >> who is going to pay the taxes? that's what the real fight is over and how are we going to pay taxes? everybody is trying to protect their special interest. congress doesn't want to give up all the exemptions. that lets them give favors to people who give them money under the table so people don't understand it. we have to fix the tax system. and they have avoided that. the bowles-simpson came out. they made a proposal and it didn't go anywhere. >> they don't feel the emergency right now. bond yields are so low. we can borrow money super cheap. they see an emergency in europe. they see an emergency in greece and spain. we don't feel it yet here. >> which goes to your point, will. you're trying to make the point that this is important. this is urgent that we deal with this debt and deficit issue. it doesn't feel as urgent as getting people jobs. >> it's about economic growth as well. this is a patch. that's the point. the fiscal cliff thing, it's a patch. it doesn't aggress the real problems that he's mentioned several times with tax reform or entitlement reform. they lay the groundwork for real economic growth. >> congressional malpractice. you heard it here first. you're going to see that a lot on my show. >> as long as you give me credit. >> don't go anywhere. ken, great to see new person. real treat for us. >> glad you got to see me. >> always. glad i got to see you, too. coming up, as home prices improve and mortgage rates hit a new record low, you may finally be able to sell your house. but should you be buying a new one? report after report says the housing market is coming back but the smartest guy in the world on housing says not just yet. i'll hear from him on the other side.io l lawyer? well, legalzoom came up with a better way. we took the best of the old and combined it with modern technology. together you get quality services on your terms, with total customer support. legalzoom documents have been accepted in all 50 states, and they're backed by a 100% satisfaction guarantee. so go to legalzoom.com today and see for yourself. it's law that just makes sense. so go to legalzoom.com today and see for yourself. according to ford, the works fuel saver package could terally pay for itself. jim twitchel is this true? yes it's true. how is this possible? proper tire inflation, by using proper grades of oil, your car runs more efficiently, saves gas. you could be doing this right now? yes i could, mike. i'm slowing you down? yes you are. my bad. the works fuel saver package. just $29.95 or less after rebate. only at your ford dealer. so, to sum up, you take care of that, you take care of these, you save a bunch of this. that works. every communications provider is different but centurylink is committed to being a different kind of communications company. ♪ we link people and fortune 500 companies nationwide and around the world. and we will continue to free you to do more and focus on what matters. ...we inspected his brakes for free. free is good. free is very good. my money. my choice. my meineke. everybody is complaining that i'm being doom and gloom about the economy. i've been telling you that housing is the one ray of economic hope in our enronment. buying a house may not make you rich again for a long time. but most indicators suggest that housing is coming back. some of them suggest housing is on a tear. shares of home building stocks have surged an average of 49% this year as investors continue to bet on a rebound. we're seeing it in the auto industry. home construction is driving truck sales higher. the big three saw sales of full sized pickup trucks jump 13% in the first half of the year after a very strong december. we're seeing it in retail. luck ber li lucky lumber liquidators smashed quarterly profit estimates as same store sales surged 12%. home depot shares up 27% this year. let's bring in christine romans. christine, housing looks like it's back. am i wrong? >> helping you prove your case, zillow making the call that the bottom is in. why? one piece of evidence, home values are up for the first time in five years. a little uptick in home values here. that's one of the reasons why they're saying a bottom is reached. here's what the country looks like. green, ali. these are the markets that they say hit bottom. look at parts of california, arizona, phoenix. phoenix prices up 10%. parts of colorado, even over here in florida, you know, kind of ground zero to the real estate speculative boom and then bust. you're seeing some recovery there. red on this map, anywhere you see red, ali, this means there is no bottom. not even in the next 12 months. homes now are more affordable than they've ever been in 20 years measured against median income. if you have a job and savings, it's a good time to buy. and that housing affordability number is pretty good for you overall. one last thing here. mortgage rates. mortgage rates have never been cheaper. 30-year money, 3.49% on a 30-year fixed rate loan. a new record. ali, all the ingredients are there. now we just have to bake in a recovery. >> and that is the trick. you can have almost all the ingredients or not the right temperature in the oven and your cake doesn't get baked. christine, stick around. i want to talk housing more. i want to bring in bob schiller. professor of economics at yale and the co--founder of the famous s & p case schiller home price index which saw the first uptick in seven months in april. bob, sales hit a blip in june. declining after a string of gains. but it seems to me that the vast majority of evidence suggests that housing is back. >> well, i agree there is a lot of positive indicators. and that housing prices will probably go up through the summer at least. but i don't know what you mean by "housing is back." this suggests -- i hear it from a lot of people that we're off to the races again. i think a much more likely prospect is disappointing, at best. the cme futures market has it going up, you know, 1% or 2% a year. just keeping pace with inflation. that's not exciting. why are you so excited? it's not a major break-through we've had. >> because we think -- the reason we're so excited, you're actually the expert on this. the reason we're so excited is because housing creates -- housing prices going up are one of the legs of the prosperity tool. it's the thing that makes us feel betr. it's either going up or it's going down. you're saying maybe goes up for a long time at such a slow rate it will make no difference to anybody. >> this is a problem being a forecaster. you usually have to give bland forecasts. so yeah, it might go up a couple percent a year. i'm not excited by that. but after your basic question, should you buy a house now? i would say if you are interested in buying a house, christine is exactly right. it's affordable. we don't know which way it's going to go. you may as well just do it. >> you gave a lot of evidence as to why prices are coming back and sales are increasing. but in the end you can have most of the ingredients in the cake. there is one ingredient bigger than all others when it comes to a housing recovery, and that is? >> your job and jobs recovery. you're not going to have a full real recovery in the housing market until you have a jobs recovery. you need a job to pay the mortgage. right? >> to get a mortgage. >> unless you're independently wealthy. then you're not even getting a mortgage or paying cash, and that's where a lot of the tion in the housing market has been. cash buyers and foreign buyers. it's not been joe and jane and their two little kids and their jobs in the suburbs. it's been someone else. so jobs in savings i think are the most important thing here. and, you know, bob and i talked about this before. i feel like there are two housing markets here. the distressed housing market where the foreclosures are happening, then there's this other housing market where people are having an opportunity, but those people have savings and a job. and it's almost a two-speed recovery in housing. there is some opportunity for some but a lot of the same devastation for everyone elimination. >> robert schiller is the economics professor at yale university. he is author of a great book. "finance and the good society" and about 8 other books he's also written. always good to see you. christine, thank you as well. all right. t.a.r.p., the troubled asset recession program. washington abandoned you in order to save the banks. the cop in charge of it says that washington abandoned you in order to save the banks. he'll make his case next. i'm serious, we compare our direct rates side by side to find you a great deal, even if it's not with us. [ ding ] oh, that's helpful! well, our company does that, too. actually, we invented that. it's like a sauna in here. helping you save, even if it's not with us -- now, that's progressive! call or click today. no mas pantalones! every communications provider is different but centurylink is committed to being a different kind of communications company. ♪ we link people and fortune 500 companies nationwide and around the world. and we will continue to free you to do more and focus on what matters. so if you're still watching me and there is some chance that you believe we could get hit by another massive economic storm. a lot of people think the last recession wasn't worse than it was because the government stepped in with t.a.r.p., the troubled asset relief program. in a new book the man who served as the official watchdog for the treasury department's economic crisis response says that $700 billion t.a.r.p. program may have caused more problems than it solved. i'm going to talk to him in a minute. t.a.r.p. gave the banks money, encouraged them to lend it out to keep americans in their homes running their businesses, going to college and buying cars. here's the scene from too big to fail, movie that portrayed an exchange between ben bernanke and then treasury secretary hank paulson. >> why don't they use the money the way we're asking them to? >> they will. lend it out, won't they? >> of course they will. >> four years after the crash, credit is still tight. americans who want to become homeowners still have trouble getting mortgages. taxpayers, that's you, still own part of the companies that got bailed out. you own one-third of general motors. 61% of aig and nearly three quarters of ally financial and you continue to pay for the bailout. the congressional budget office estimates that t.a.r.p. will end up costing $32 billion. the treasury's estimate is higher, $70 billion. the special investigator general assigned to monitor t.a.r.p. is now joined the ranks of the critics with a new book called "bailout: inside account of how washington abandoned main street while rescuing wall street." welcome to the show. the problem back then very clearly like the name of the movie that i just showed that clip from was too big to fail. four years ago the assets of the five largest u.s. banks were $6 trillion. now they're $8.5 trillion. the banks are bigger than they were then. if they were too big to fail then, they're much bigger now. >> exactly. this was the policy response of our government. a government which is detailed in the book is really puts the interest and defers the trf the largest financial institutions over that of the taxpayer. and they have grown the banks bigger with the government support. and as we know, t.a.r.p. is supposed to do a lot more than just shovel money into the capital holes of the banks. it is supposed to protect the system and help the economy. as we know, the only real policy ties to that goal was what you saw in that clip. >> right. >> a hope. but they didn't do the -- >> could it have been done -- we may get into the situation again, i hope not. could it have been done in some fashion that had more of -- more than a hope attached to it that we're going to give you access to all this capital in the midst of a credit freeze where no one could borrow mvrn from anyone. but you have to do something in terms of lending it out to people. >> absolutely. this money was given with no strings attached. when i went down and started making recommendations about this these things and anti-fraud provisions, i met with such steely resistance. an incentive to lend the money or requirement to lend the money out to the economy. for example. the answers i would get no matter what the subject was was always the same. it really crossed administrations. i was told, oh, no, we don't need to do that, we don't need to have conditions, we don't need to have transparency. >> why were the administrations def deferential to the banks? we like to see in political commercials that we're not, that they're the 1%. they're the problem. but why -- you were inside. you say that treasury is highly defferential to the banks. >> exactly. the response is we don't have to worry, the bank was never embarrass themselves. they would never risk the reputations. part of the problem is the big revolving door between washington and wall street. it's not a democrat problem or republican problem. but so many of these individuals come from the very same banks -- >> will breaking them up make any difference? you go from 20 big banks to 50 or 80 smaller but still influential banks, all of whom have the same interest. they lobby the same way. they take the same position on things. they don't tend to differ. >> the difference is if you have what -- what we have are the bank that's are too big to fail. if anything happens to one of them, they lose so much money or get in trouble with the law, they go down and bring the whole system down. >> the economy suffers. >> distorts all the incentives. as a result, they can take more risks than they normally would because of that guarantee. actually important, we see the parade of financial scandals every day. they can't be charged. they can't be held criminally accountable. united states government wants to indict one of the banks, boom, economy over. >> sandy wile, let me play -- you heard it already. he is a former ceo of citigroup. a poster child for too big to fail. he agrees. he says he wants to break the banks up. listen to what he has to say. >> so i think what we should probably do is go and split up investment banking from banking and have banks do something that's not going to risk the taxpayer dollars. that's not going to be too big to fail. >> he's talking about the volker rule. very weird. we've been trying to get more comment from him. strangely, he said he is making no further comment than that interview he did. what do you make of that sea change? >> i think there is just this growing recognition that we have to break up the banks in order to have a better economy. better off for shareholders and investors. >> does anybody suffer? do bankers still not make lots of money? do stockholders still not make lots of money? >> under this current model, the too big to bank and the executives make more money because they get what's essentially a subsidy from the assumption that they'll be guaranteed. they get this immunity from prosecution to a certain extent because of the fears. you take that away, they individually will suffer. but it's very interesting. if you've seen this happen, more and more economists, regulators, specials inspectors general come on the site, who is left? to defend the status quo? the big banks and the enablers in washington. the united states treasury department which fought against bipartisan effort to break up the banks, they're among the very few people still on the sides of keeping what is a very, very broken status club. >> you write i realize the american people should lose faith in their government. neil, former inspector general of t.a.r.p., senior fellow at nyu law school, and author of "bailout," good to have you here. >> the store may be hitting regardless. which is a bigger threat to the u.s. economy right now europe or the fiscal cliff? only one may be in your power to control. plus, could facebook's flop be your gain? we go past the earnings breakdown and get the answer to the one question you want to know -- is it time it buy facebook stock? down here, folks measure commitment by what's getting done. the twenty billion dollars bp committed has helped fund economic and environmental recovery. long-term, bp's made a five hundred million dollar commitment to support scientists studying the environment. and the gulf is open for business - the beaches are beautiful, the seafood is delicious. last year, many areas even reported record tourism seasons. the progress continues... but that doesn't mean our job is done. we're still committed to seeing this through. you heard me say this before. right now there are two urgent storm clouds threatening your prosperity, one of them is europe's debt crisis. the other one is the fiscal cliff that we are headed over if congress doesn't act. now the international monetary fund has made its voice clear. if congress fails to avoid the fiscal cliff, u.s. growth will hit the skids coming in well below 1%, and quite possibly taking down the rest of the fragile world economy with it. treasury secretary tim geithner is emphasizing the other view. he thinks europe is the bigger threat telling congress this week that europe is hurting growth and tightening financial conditions and that is exacerbating the global economic slowdown. so how about a little cross atlantic debate? richard quest joins me. richard, the question is this. which is the bigger threat to the u.s. economy and hence the global economy? what you guys are doing in europe or the fiscal cliff in the united states and given it is my show, i'll go first. control room? give me 60 seconds on the clock. richard, i know you europeans are self important. the fiscal cliff is, in fact, the bigger threat. we're talking about a half a trillion dollar hit to the u.s. economy alone. if our congress does not act by january 1st, a mix of huge tax hikes, massive budget cuts will take effect and that's going to push the u.s. economy back into a recession. those job cuts will be fast and furious, at least a million private sector jobs lost by 2014. some people say two million jobs. and every single day brings us closer to impending disaster even as the american consumer is already, as you know richard, pulling back. retail sales declined now for three months in a row. now i'm not saying -- i know you're upset about this. i'm not saying that europe is not a major concern. we've had some pretty ugly sell-office because of your business over there. but the fact is, major indices are still up for the year. we don't know what's going to happen if greece exits the ear euro, or spain needs a bigger bailout. but the point, richard, is we can't do much about either. the u.s. can fix its problems right now. >> all right. you are once again delusional and devoid of reason. if you give me 60 seconds on the clock, i will put you right. the truth of the matter is it's a silly question. it's like saying which is better, the devil or the deep blue sea? being caught between the rock and the proverbial hard place. the reality, of course, is that the particular moment when you and i are talking, it's another euro zone crisis that is the most serious, by far and awab way, for one simple reason. 17 countries, 27 in the european union and inability to disagree, central bank not doing what is necessary. to date euro zone is more serious. but the fiscal cliff becomes more serious later in the year. and you missed one very important point. >> what's that? >> they're both serious because they are structural, not cyclical. solving both the fiscal cliff and the eurozone crisis will involve major political upheavals in decisions and the sort of leadership that's been singularly lacking on both sides of the atlantic so far today. >> you had three seconds to spare. you make a good point. we will agree that there's -- >> i proved a point. i've proven a point. those three seconds, you can take to the bank! >> you are right. these are both very serious issues. so where we probably differ here is not that one is more serious than the other but at the time and place that we're at right now, europe is the bigger threat as we get closer to where this fiscal cliff happens at the end of the year starting december 31st, january 1st, it may become more important. you disagree? >> i do disagree. solving that fiscal cliff problem really comes down to five elements. the president, the congress, within congress the republicans and the democrats. so solving the fiscal cliff is actually quite a small tight narrow body. seems a lot. you take the eurozone with its 17 countries, the ecb, all the different other bodies, the imf, everybody. then you realize why in -- i come back to what i said before. the way the u.s. solved the great recession with t.a.r.p., stimulus, dodd-frank, is a model compared to the europeans' inactivity. >> well said, my friend. always a pleasure to see you. we'll make this a habit. richard quest, host of "quest means business" joining me from london. up next, facebook's stock has flopped since it opened in may. now we have real earnings information, is this the time to get in? is the stock a bargain? i'll tell you on the other side. hmm, it says here that cheerios helps lower cholesterol as part of a heart healthy diet. that's true. ...but you still have to go to the gym. ♪ the one and only, cheerios ...but you still have to go to the gym. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. see life in the best light. [music] transitions® lenses automatically filter just the right amount of light. so you see everything the way it's meant to be seen. experience life well lit, ask for transitions adaptive lenses. male spirit present.trong it's the priceline negotiator. >>what? >>sorry. he wants you to know about priceline's new express deals. it's a faster way to get a great hotel deal without bidding. pick one with a pool, a gym, a great guest rating. >>and save big. >>thanks negotiator. wherever you are. ya, no. he's over here. >>in the refrigerator? you know what i'm tired of hearing about? facebook? it's probably the most hyped up company. you know the story by now. the ipo sizzled in may. shares of the social network have been on a slippery slope since we saw mark zuckerberg and his friends partying in menlo park. the results were underwhelming. yes, they made over a billion dollar of revenue in the quarter but they've got over 75 mill users. when they use facebook on their smartphones where facebook makes little to no money, you've got a bigger problem. i think they'll figure it out eventually, but for now the company has a lot to do. listen. i like facebook. i use facebook a lot. i ask you to come to facebook every show but i ask you if facebook is a good stock to buy or not. but my producer says you're not tired of talking about it so i'm going to talk about it one more time until the company makes real money. matt mccall and ned riley, chairman of reilly asset machlkt guys, good to see you. my viewers only care about one thing, it seems, and is this the time to buy facebook stocks. i'm going to start with you. matt, if you own facebook stock. if you got in at 35 bucks, 40 bucks, wherever you got in, would you buy, sold, where would you -- >> i'm not buying more. i'm not doubling down. it's not a good strategy. i meet hold here. we might get a bounce next week. hold right here. >> i'll put a circle around for you. ned, what do you think -- i'm assuming you don't own the stock. >> no, i don't. two months ago i told you i wouldn't touch it in a month, three months or a year. my rationale is the same. they don't have the platform to generate revenue from the mobile phone area. they have a lot of competition in terms of others offering social networks. they have sellers in the background. there are those just eager to get auto of this stock. they thought it would probably be $75 to $100 today and they'd like to dump it. now they're stuck at $22 when it was $45. i didn't like it then. i don't like it now. the only thing that could bail it out now is a takeover and nobody has pockets deep enough. >> if you were one of the people who bought it for $35, $40, what would you do? buy it? sell it? >> i'd hold it but trade it once we got up into the 30s. that's not a buy in my estimation. i'm a long-term holder and i'm not going to gamble on someone else's holding. >> let me ask you, ned, while you're there. is there a price at which you would buy the stock? is there a price at which you'd say there's value in it? >> i suppose at one point, ali. at some point it's 65 earnings. the model real stinks at the moment, but the user base is huge. you can't deny the in fact this company has done a very good job at generating interest with a lot of people, but at a price and it depends on the fundamentals of that particular point, you're about got to anticipate because the market is going to beat you to the draw on this as well as any other stock. i might buy the stock maybe, but at what price? i could pay more if the company convinces me they have all the wherewithal? >> if i could get it to you for a certain price, what would you pay for it today? >> probably $12 to $15 maybe. >> all right. matt, what would you say? >> i'll go higher. i'd be willing to pay $15 to $17. the concern for me is the same as ned. the concern is they're slowing down. we saw adding. down 2%. that's huge. why are they dropping? you mentioned they're moving to mobile and they're not making money off it yet. they'll figure it out but it probably drops to the teens before they do figure it out. >> what do you think happens to the stock over time? it's really largely the same question because we have people who bought the stock. do you think this thing is higher or lower in a year? >> i think it's higher in a year. people coming in, vultures in low 20s. high teens, high to mid teens. at that time, probably a flyer. put some money in it. >> ned, higher or lower? >> i think lower. i said it two months ago and the offering price is going to be lower. i'm going to stick to my guns. it's learning,000 capitalize on the growth that's out there. the demographics definitely favor, you know, a company like facebook. you've got to figure it out. >> how to make money and how much it's worth. you're saying if you're stuck with it, but it's going to hold. you think it's going to be -- you buy it at a lower price and you're both guessing that it's going lower right now. but that's a choice people are going to have to make if they own it. thanks, guys. good to see you, matt. good to see you, ned. these are two guys not convinced to buy facebook. . going up, i say they're playing russian roulette. if you're ready to debate me on that point, i'm goin to show you how to do it next on "your money." ♪ we link people and fortune 500 companies nationwide and around the world. and we will continue to free you to do more and focus on what matters. she's not just natalie coughlin. she's every 5-year-old who ever jumped in a pool and didn't want to get out. ♪ every coach, every rival who ever pushed her. she's the tip of a spear that goes all the way back to the beginning. it's amazing how far you can go with a little help along the way. td ameritrade. proud sponsor of the 2012 u.s. olympic team. your congress refuses to act on a future economic act headed our way. they refuse do anything about tax increases, spending cuts and potential job losses is sending you to the brink of a fwis call cliff that it's created. if congress worried more about saving your job than saving their own they would take the steps to protect you today from the coming economic storm. i know you have a strong opinion whether or