columnist david from, the host of the fromme forum and former speechwriter for george w. bush. thank you for being here. the one thing we're going to be hearing about in the next 12 months, david i put it to you, a gop set of primaries, looking for a candidate, talking about the middle class, who represents the middle class in this country? the the democrats are trying to make some speeches that the democrats are the party of the middle class, republicans the party of the rich. the republicans struggling with that themselves. david, what's your sense of how republicans are positioning themselves and who this country represents the vast majority of people, the middle class. >> i don't think anybody is doing a very good job of it. the president gave a speech in kansas in which he tried to stake out this ground and gave an assessment of the major problems facing middle-class americans. his prescriptions were really weak. the president's main idea seems to be to have higher taxes on those who earn a lot and to use that money to expand public employment and hope more public employment will create a broader government sector middle class. that's what tony blair tried, and gordon brown tried in britain, they drove up in some parts of the country government employment of 50% of the labor mark. they set the stage for the even greater crisis britain is facing now. >> david, the flip side, one of the things, diane swonk, we talk about in our politics, we cater to short answers, easy answers, simplistic answers. sometimes i would love to know what would happen if with you put economists in a room and said how would we fix this. >> take about 20 minutes and 10 minutes would be saying hello to each other. david's exactly right. i gave a speech and quoted bob dillon. the answer is blowing in the wind. the answer is right in front of us and we know what the answers are. a lot have consensus on it. dave talking about you can't lower taxes, create middle class with government spending. we have a framework of a plan in the simpson bowles. deficit reductions. what most don't realize $4 trillion over ten years with over 10 years. the longer we kick this can down the road the more problems we're creating for ourselves. >> we don't kick the can down the road, someone has to pay. this has to cost people. terry, you write about this. you're trying to make the connection between economic concepts and viewers wondering how it affects them. they will cast ballots based on discussions about taxation in many cases. when we don't kick the can down the road, what does that mean to us? >> means we face reality. the irony, as they come together in washington over the payroll tax cut what you have on both sides is a general acknowledgement people do better when they have more money in their pockets, the government doesn't do well spending our money. they define poverty at about $45,000 and above. that's a very -- many more people are closer to poverty than we acknowledge if that's the definition. >> one in five children. >> if those people get their own money to spend, it works better than the government spending it. we have the last four years and $3 trillion of government spending to prove that doesn't really jump-start an economy. if it works for middle income people it ought to work for upper income people to keep more of their money whether they save it or invest it. that's what we're facing now. >> it's a far reaching than that. the reality is, you can back load a lot of the pain. if we know a road map there has to be tax reform. it means spreading the revenues across higher income households and higher upper income households and middle income households. we have to get rid of the behavior reductions. our corporate tax code is a mess. these can be dealt with. we have lobbyists that stop it from happening. you have to look at it, it has to be revenues and it's got to be spending. it can't be right away. if we deal now we can back load it. american public and corporations if we know where the potholes on the road are, we can brace ourselves or avoid them. >> this remarkable uncertainty, david, has been the problem for the next couple of years. we don't know what the next thin is. if we tell people what the next thing is, it might help individuals and companies plan. part of the problem we continue to get back into taking positions as political parties that seem to cater to particular constituencies. as a conservative, david, what is the solution out there that doesn't necessarily pander to a specific constituency that will get somebody the nomination for the republican presidency but at the same time will actually may solve some problems for the next five and ten years. >> you can't solve the problem if you keep asking the wrong question. >> right. >> the political problem in washington, fiscal policy, the government's finances. the issue is economic policies not fiscal policy. we've got a patient, the american economy, suffering high blood pressure, the equivalent of the deficit problem and has been hit by a bus, which is the current downturn. everyone says no sense treating the trauma of the bus hit until we deal with the high blood pressure. i think that's exactly backwards. there's time to worry about the deficit. the world is happy to lend united states money for 10 years at less than 2%. i say keep borrowing that money as much as you can. use that money to address the immediate trauma of a country in crisis, incomes collapse. yeah, the deficit problem is not that difficult to solve, but do it later. solving it now to use one more analogy, how do you get down off an elephant. you don't you get down from a duck. we have to come up with useful answers. >> i agree with a lot of that, but back loading, putting america's house in order over 10 years not taking the pain up front is exactly what we need and what ben bernanke -- i'm sorry. let me stop you. >> is there any evidence for that proposition? all the evidence i see is exactly the contrary. the uncertainty holding back the american economy that doesn't make sense to me. >> how many corporations have you talked to? i talk to companies with trillions on balance sheets and they are holding back, hesitation, that's a big issue. >> as a matter of fact, there are surveys out on this question where they ask business owners why are you not investing? uncertainty is not the reason they give. weak sales is the reason they give. >> in large corporate america -- i disagree. if you're talking small business -- >> i'm also -- >> systematic way that's not the answer you get. >> it is a systematic way. there are a lot of surveys out there that say uncertainty is the biggest issue, we have a crisis in confidence. growth i agree with you at the end of the day you cannot do anything without more robust growth. that is the crux of the issue and we agree 100%. i do think we saw in august with the keystone cops playing politics that really caused, along with the downgrade of our debt, and european debt situation all come together, that caused a hesitation. >> that type of uncertainty than regularer to uncertainty is -- >> i'm not talking regulatory. >> i think we all agree, david, you made this point. we all know we've got remarkably low interest rates. the u.s. government can borrow money at a low rate, which is why deficit spending or borrowing against that could be a good solution for the short term for the united states. where that changes is with europe. we're tinkering around the edges, very concerned about what politicians are going to do in washington when in fact what's going on across the pond may be a greater concern. i want to take a break and come back with this great panel and discuss what role america should play, there are criticisms america is not doing enough to help europe and keep the world out of a global recession. a special edition of "your money" from the cme in chicago. 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[ male announcer ] and there you go, business pro. there you go. go national. go like a pro. welcome back to a special edition of "your money" from the cme in chicago. the chicago mercantile exchange group, the floor of what used to be called the chicago board of trade, where things are traded. we'll tell you more about what goes on on this floor. it's a very exciting place to be, one of the few places you can see instant reaction to things around the world. economic announcement, what's going on in the stock market. there are real men and women down here trading things. we'll talk to you about that. my great friend christine romans is here. she started her career here as a reporter. she's going to be telling us about what's happening in the world of commodities, which are important to you. let's get back to the economy right now. we've been talking about politics in the united states and worried about what our candidates for office are going to be doing to fix this economy. there's a good argument so much of what's going on in the economy right now is not about what's happening in america but dependent on the rest of the world, particularly europe, which as a group is as large as the united states and our biggest trading partner. europe's concerns continue to develop. christine lagarde, the former finance minister is now head of the international monetary fund. she says this is not europe's problem alone to solve. she said the whole world needs to be involved. listen. >> it's not a crisis that will be resolved by one group of countries taking action. it's going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action. >> all right. we are joined by david frum in washington, cnn contributor and conservative columnist. with me in chicago diane swonk who is the chief economist at me zer ro financial and terry savage at the "chicago sun times." terry, let me start with you, it is trying enough for the average american, middle class american, trying to deal with their lives in this economy, to deal with whether republicans or democrats with what they're doing with the economy and christine lagarde is saying solving europe's problem is the whole world's problem. i don't know how that will go over with your readers. >> it won't go over well. we are the largest contributor of the imf and the imf was created to help poor countries, germany and france don't qualify. american citizens are wondering what all this economic talk is about. first of all if you're a senior citizen, saved your money, government helping by keeping interest rates low, funding its own deficit. seniors are wondering where is the interest i was planning to live on. >> absolutely. >> younger people wonder, i'm paying 6.8% on my student loans, where the jobs that will help me repay those. people in 40s and 50s and thinking about retirement, scared to invest and worried about jobs. everyone knows someone out of work. the idea that the united states should be funding a bailout for european countries that can't get their own act together really turns people off. >> diane, americans are not happy they were funding bailouts of american banks. although at the time and i think history will increasingly show, it was crucial and necessary. is it crucial and necessary we have a role in europe? and maybe it's not funding. >> we can't bail them out. that is not our purview, not our legal purview, not a political stomach for it nor should there be. we can't bailout europe. if europe goes down, the euro implodes it is an event larger than lehman for us and why it matters to us. we learned in 2008 there's no where to hide. unless you all have your oars in the water at the same time. you don't get out of it. there is this idea that christine is right about, lagarde, about we have to be part of the solution. being part of the solution isn't necessarily bailing out europe. there's no reason for us to bail out the european banks. however, our banks are exposed, underwritten cds. there's in the money market account in the u.s., very exposed to european banks. this is what went down on the might of the crisis of september 21st, 2008, and froze everything in the united states. >> by the way when american companies couldn't get credit because there was a global freeze they fired people. when people ask what does this mean to my credit card -- >> i said you are going to live in a cave if europe fails. >> we're not an island. that said, we cannot bail out europe. >> bernanke has said that he would stand behind the central banks of europe so -- >> he has. >> that's the important role. >> the dollar -- >> david brought up a few minutes ago, for our own problems in america, we have -- it costs us nothing to borrow money. david says like some say, at least to shore up our own finances and situation we should use some of the cheap money. david fromme, ron paul running for the presidency of the united states, feels opposite from the way you do. listen to what he said. >> we've bailed out about just about everybody when it comes to the banks and corporations. now it's europe. we're getting ready to bail out greece and italy and spain and all of europe. it can't be done. it's unsustainable. we've already been downgraded once and we're on the verge of having our credit rating downgraded again. >> so david, before we get too carried away with this, the fact is there isn't an explicit conversation about america taking money and sending it to europe. but what role should america -- what should we be considering to make sure europe doesn't fail and we don't lose more jobs here in the united states. >> hit the mute button when ron paul talks. second, if you were unwise enough to leave the sound on the idea it is more sustainable to have a global depression, which is what is otherwise coming, than to help europe that's crackers. grandpa ron paul may welcome a depression and people sell apples for a silver nickel but not from anybody else's point of view. i would be in favor of european bailouts if they were necessary. what is happening there, when christine lagarde says the world must help, that is only true if the european institutions refuse to do the job there. there's no necessity for american support of fiscal bailout if the europeans will be a monetary authority. the idea that the european central bank can't create enough euros they can create an infinite number of euros. they have all of them. how many do you want? it is the european central bank -- >> germany won't let them do it. >> sorry. who elected the germans to tell the european central bank what to do. >> believe me -- >> their refusal to do their job is the core of this crisis. >> thanks for the great conversation. teri, great to see you. >> always good to be here. >> personal finance editor of the chicago sun times, diane, the chief economist at me ser ro financial and david fromme, joining us from washington. thanks for your great insights. we'll be back in a minute and talk about the middle class. who exactly is the middle class? who's the 1%, who's the 99%. you've heard a lot about it over the last several months. we'll get down to the bottom of it when we come back. you're watching a special edition of "your money" from chicago. ♪ now i'm a geologist at evron, and i get to help science teachers. it has four servo motors and a wiress microcontroller. over the last three years we've put nearly 100 million dollars into american education. that's thousands of kids learning to love science. ♪ isn't that cool? 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[ male announcer ] learn more from your state farm agent today. welcome back to special edition of "your money." i'm ali velshi at cme in chicago, chicago mercantile exchange. this is the old floor of the chicago board of trade. you can see the traders down here, trading all sorts of things, commodities, treasuries, all sorts of things that matter to your life and affect your money actually get traded on this floor. christine romans with me just in the room next door in the agriculture pit probably trading hogs. this is where she got her start. a little while we'll talk about what goes on here and why it's important to you. right now we want to talk about something that's a concern to everybody watching us. who is watching the middle class? this battle to be the champion of the middle class is under way. president obama made a number of comments recently, this latest one in kansas where he really claims the mantle of the champion of the middle class in this election cycle. here it is in his words. >> after all that's happened, after the worst economic crisis the worst financial crisis since the great depression, they want to return to the same practices that got us into this mess. in fact, they want to go back to the same policies that stacked the deck against middle class americans for way too many years. >> okay. if you're in the middle class in this country you listen to that, you think president obama is your money. the democrats are your people and republicans are going to go back to the same practices that got us all into the mess we are in today. guess what, if you listen to republicans, similar message. let's talk to will cain and pete dominick, the host of sirius xm standup. will cain a cnn contributor. will, how do you answer that charge? this is what we're bog to be hearing month after month. republicans saying it's the democrats who kept us in this mess. democrats saying republicans got us into this mess. and are going to take us back there. what do you say? >> i reject the battle trying to find who is the champion of the middle class. i reject this concept of dividing according to class and say how are you doing compared to someone else. you're pan dering in that respect to a group as large as the middle class. what i would do is i would position the debate like this, position republicans as the defenders of a system, a system that has been one -- beneficiary for every single one of americans, every one of class, i would say stop asking yourself how are you doing compared to someone else but how are you doing? you would defend a system that moved more people out of poverty in the history of man than any system we've invented. >> wow, that's an interesting way to think about it, because we do set up ourselves up in society n work, in sports and everything we do where we compare ourselves to someone else or someone in a different class. one of the things we've seen with the protests is the creation of a battle between us and them, 99% versus 1%. pete dominick, let me bring you into this battle. middle class is a strange creature in america. other countries you have rich, working poor and middle class aspirational. they have moved out of the working poor over the generations and try to get into the rich. you say that in america, particularly with the moniker of the 99%, it's a different beast? >> absolutely. i think ali it depends how you define middle class, $60,000 to $20