polls. economic conditions vary greatly from state to state. let's take a look at a few. vermont's unemployment rate is at 5.1%. that is much lower than the 8.3% national average. in january, only one in about 21,000 homes in vermont were in the foreclosure process. a very different picture in ohio. unemployment much higher there, 8.1%, though lower than the national average. 1 in 616 homes is in foreclosure in ohio. in georgia, it's seen some of the worst numbers. unemployment there, 9.7%. higher than the national average. 1 in 328 homes are in the foreclosure process in georgia. cnn's chief national correspondent john king joins us now. as if john king needs an introduction to anybody who watches tv. john, as we just pointed out, we just pointed out three states. every state has a different economy. so what economic issues are going to be the most important both in super tuesday and in the election? >> ali, you make a very critical point going state by state because we often look at national polling and look at national numbers like the unemployment rate, like gdp and say the economy is doing better or doing worse or pick the national number. presidential elections are decided not just the nominating process, the general elections state by state. you just pointed ohio, a state still struggling. unemployment in the 8% range, the industrial base. move over, go to pennsylvania, go to michigan, some of the big electoral battle grounds are having the hardest time coming back. it's better now than it was a year ago but it's still a struggle. go to nevada, a small state in the electoral college but swing state in presidential politics. enormous in foreclosures and housing crisis. what can we do to get jobs back? if you're in arizona, nevada or florida, what about housing kicks in as well. you have to go state by state. can you vote your way to a better economy? i don't mean this disrespect fully. a lot of voters thought that voting for president obama four years ago and it's been tough. he will make the case things are better and that will be the defining debate of the election. >> but that is the key question in this discussion right now. by the way, you don't need the promo john, but on super tuesday, you want to be looking at watching cnn for the results, only because john, i think it's weird how you know the details not only of states but within states and down to the county level in terms of the economy. i learn a lot from you. stay right there, john. harvard university professor ken rogoff is the former chief economist with the international monetary fund. ken, i spoke with lochman. we have spoken about whether we're in a recession, out of it. he's one of the best predictors of the business cycle. now, he says despite all of the positive indicators that we've seen recently, remember, four years ago there weren't these state-by-state disparities generally, it was all bad. some were worse than others. this economy, the one that we think is headed into a recovery or in a recovery, he says it's headed for another recession. listen to what he told me. >> even with the firming in jobs growth which we fully acknowledge and include in our activity, we still have on balance the definitive hard data, not a forecast, showing us that the economy is actually still slowing, which is the direction that you go in when you're heading towards a recession. >> so he says definitive data, not a forecast. he makes these calls by studying the business cycle, which he said operates largely outside of the realm of politics. he admits that politics can influence it by things like stimulus, but largely he says a business cycle is a business cycle. ken, is there a contradiction in what he says for those americans who want to vote on the economy? is he basically saying it can't have much to do with it? >> well, i think the president and the congress definitely set the tone for where the country is headed over the long run. in the short run, there's much less they can do. we're in the aftermath of a deep financial crisis. in some ways we never left the recession. i don't agree with him that actually we're about to head for negative growth or about to start falling. i think we're probably steady at a low level now. but huge unemployment, a lot of problems to fix. >> ben bernanke said earlier this week that the job market remains, quote, far from normal. that's his words. and that stronger growth, stronger economic growth, usually what we refer to through gdp will be required to turn this around. now, we did have some positive gdp growth news this last week. take a look at it. in the fourth quarter of 2011, gdp is measured by quarter, every three months. that's the bar all the way to the right. gdp grew from the third quarter to the fourth quarter at a rate of 3%. that is higher than initially estimated. it was supposed to be 2.8%. you can see that over the four quarters of 2011, makes up the entire year, growth steadily picked up. how do we keep gdp momentum going despite all of the threats out there from europe, from gas prices, from iran, what do we do? >> well, that's the big question. i think what we have to hope so is we don't have any new external shocks. i think there is a risk of that. the new risk is oil prices. there's also a risk we might mess thing up with policy domestically. but the hope is if we don't mess things up, that you gradually get some kind of momentum. as the labor market improves, people start to spend more and you get a circle. consumer confidence is up, the stock market is doing much better, but i think it's a very, very fragile situation and i think ken is absolutely right that this is -- we're not going anywhere to a roaring recovery. as ben bernanke said, we need a lot more growth to get the unemployment rate down. but i think in contrast perhaps to last year where we started off with high expectations and they were dashed, it does seem that there's some reason to hope that this time maybe we may be able to continue. >> robert schiller is a professor of economics at yale university. bob, you're not one known to be, can i use the words, irrationally exuberant about the economy, but let's talk about the things that are not working yet. if there's an area of the economy that you or politicians or candidates could fix, whether it be jobs, housing, oil prices, that would help create or continue the momentum that this recovery has, what would it be? can we even isolate one? >> well, i don't know. everything is interconnected in the economy. but of the things you mentioned, i think jobs are the most important issue because they underlie confidence and the kind of thing that would bring back entrepreneurship hiring, lending. we've seen increases in the consumer confidence indexes, but i don't think that we're there yet. i'm not sure that these indexes measure what we want. we want to see people thinking we're safe now. our job is secure, we can spend money. if i'm an employer, i can hire people now. that's where i would put jobs first on your list. >> wf your areas of specialty, however, is housing. we've seen new data from you that indicated that in 2011 we had remarkably low home prices. we hit another low. where do you think house prices are going, because obviously that's where so many people's savings are wrapped up and that will have an influence on how they feel about the economy and whether they're ready to spend more? >> well, you know, there's a lot of positive indicators. permits are up, starts are up, though more in multi-family. we have, as i said, confidence up. survey data of other sorts are suggesting the housing market should go up. but with our numbers, it keeps going down. and we have it down 4% in the last year. it's a puzzle. you know, when i learned about forecasting home prices is that momentum matters more than anything else. >> interesting. >> and we still have downward momentum. >> and this is where the rub is, right, because we're all feeling relatively good about a lot of the economic indicators we have but you've got some things to say about the housing market that say don't everybody get crazy just yet. let's talk about this in a second. the housing market, despite what rick santorum said, did start off the financial crisis. it did trigger it. next we're going to have the best solution that say my guests have heard for fixing that market going forward. stay with us. 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[ female announcer ] discover what's next in your life. get this free travel bag when you join at aarp.org/jointoday. in what passes for common sense. used to be we socked money away and expected it to grow. then the world changed... and the common sense of retirement planning became anything but common. fortunately, td ameritrade's investment consultants can help you build a plan that fits your life. take control by opening a new account or rolling over an old 401(k) today, and we'll throw in up to $600. how's that for common sense? we teased you with this before the break. take a look at home prices over the last decade. if you have small children in the room, tell them to look away from the tv. national home prices fell 4% last quarter to levels not seen since 2002. that's according to the s&p case schiller national home price index. the shillor there is robert shiller who we have on this pam. prices are down 33% from their peak in 2006. john king, looking at those housing numbers, we know that the jobs numbers have been looking better for the president in recent months. we know there has been 16 months of job growth. we've got an oil price, gas price thing which some say could derail our recovery. and we have this stubborn, strangely stubborn housing situation. tell me how that plays out for president obama, who was kind of hoping that he's going to get some momentum and go into the campaign saying, hey, things aren't that bad under me. >> ali, when you travel, the psychology of the housing market is fascinating. this was a big part of consumer confidence. this is a consumer-spending driven economy. people thought their home values were going up. they looked around the neighborhood and everybody's home voss were going up. that doesn't exist anymore. most states i visited the prices aren't better so people aren't feeling better about their personal nest egg. maybe it was a mistake to think of your house as a big investment. it's a generational question. but when you see them now, they are still very uncertain about where this housing market is going. you've seen the administration, three, four, maybe five times rejigger their programs trying to help people under water. there's a big debate in the republican campaign versus democrats with mitt romney saying the market has to fix this with not that much government intervention. there's great uncertainty. if you're the consumer who used to look at your house value going up every year as part of your confidence, guess what, you don't have that and that psychology affects politician, trust me. >> so you're talking about the psychology of housing, bob shiller is talking about the momentum. you think, john, it may have been a mistake to use your home as a nest egg. that probably would have been only one of several mistakes in the housing sector. the other was getting involved in loans and being sold loans that you weren't able to afford. the other one was the housing valuations that didn't make sense. and then the big mistake i would say is the fact that lenders and banks have not done the right thing in the last few years to try to keep the situation from getting worse unless forced to by government regulators. when it comes to the housing market, we understand the multitude of problems. on this show we want to talk about solutions. robert shiller has written about an idea that we describe as kind of like a prenuptial agreement for mortgages. now, the idea is that if a home's value drops below a set level, the mortgage would automatically reset to a predetermined payment. bob, can this help stabilize the housing market going forward? does it fix problems we already have? or is it something we should implement for mortgages from here on in? >> well, it doesn't immediately fix the fact that we have these foreclosures in the pipeline. this is a new kind of mortgage. but it is something. you know, dodd-frank called for a study on what they said were shared appreciation mortgages which is something similar. i think this is a time to reconsider our home mortgage institutions. we got into this crisis because we had most homeowners putting themselves in a leveraged, undiversified portfolio. they put their entire life savings in a house in one city and leveraged it. boy, is that asking for trouble. it's elementary finance. don't do that. we have to change our institutions that make it easier for people to do something more sensible. >> ken, what do you think of this idea? >> i couldn't agree with what bob said more. you don't want to put all your eggs in one basket. people put more than 100% of their eggs in one basket in their house. we need to give them mortgages, shared appreciation mortgages where they give up some of the upside, but some of the downside. the prenup specifically, one of the problems and why it hasn't happened is they aren't always enforceable in court, as people know, so the government really has to provide a firm way that this can work. >> zanny, what's the best solution that you've heard to the housing crisis? >> well, i think the idea the professor put forward is very good going forward, it makes a lot of sense. the thing to realize now is that there isn't actually a single magic bullet. one of the reasons so little has happened is because there's drawbacks and downsides to all the attempts to deal with the housing market. so all the efforts of loan maude run into trouble, whether it's regulatory trouble, whether it's too expensive. but one of the things that hasn't been focused on enough that's worth looking at is the encouraging single family homes to move into the rental market, to make it easier for investors to buy up a lot of them and rent them out. we're actually seeing a recovery in the rental market and people want to rent. there's a lot of people who before the crash were able to qualify for mortgage who say now really can't, so we have a huge increase in the demand for rentals. so something there i think would be useful. the other thing which i think is less popular ii think there's a tendency to think that it's great to keep people in their houses for as long as possible and to make foreclosure as hard as possible. and paradoxically i think that means it does take longer for the market to clear and putting a lot of barriers into that process is happening. >> let me understand this letting the market clear. we'd all like to know what a house is actually worth in america and no one really knows. bob shiller, john king knows that ron paul continues to do particularly well in this primary season, and one of his arguments are -- is to let it clear. foreclose on everybody who needs to be foreclosed on. get the government out of subsidizing mortgages. get rid of the mortgage interest credit and let house prices go where they may. in fairness to ron paul, he's been saying this forever. your thoughts. >> well, i think that there's a legitimate argument that homeownership promotes good citizenship, a feeling of connectedness. it's an american tradition too. it's part of our capitalist values. but i think that government role in subsidizing housing for the long run perhaps should be limited to marginal home buyers. you know, people who are struggling to be part of the middle class. and i think it is a good thing to give them a subsidy. it creates positive externalities for all of us. fannie and freddie should lower their conforming loan limits so they're not subsidizing big mcmansions. >> there's a remarkable piece of the republican primary electorate out there supporting not just ron paul but these independent ideas, these libertarian ideas to get the government out of all of this. do you think there's a real understanding when it comes to getting government out of subsidies and regulations that voters have that this may be economically prudent over the long term and help us clear out the system, but home prices could collapse as a result? >> i don't think there's a deep enough understanding of the potential consequences, because we're not having that conversation. but we are having a pretty sharp conversation and this is one of the problems. in divided government, especially when the republicans won the last election, attacking big institutions, attacking the bailout, attacking government itself and the role of government, you have a campaign now that is defined on big questions. what should the government do, what shouldn't the government do. what has the government done in the past that is a big mistake, not what are we going to do tomorrow. not how are we going to clean up this mess. people don't trust the banks, people don't trust the government, people sometimes don't trust our business in the media. in that environment it's very hard to have a serious conversation as you have three people much smarter than me on this panel saying there's an upside to this, a downside to this. that's a conversation the country has to have and then make its choices. but we're not getting that conversation in the election because it's a much more pointed government is good, government is bad, it's not specific. >> that's why we like to have this sort of a conversation. sometimes the things we say on this show don't fit well onto a bumper sticker for somebody's campaign but they are important. john, thanks for breaking that down for us. we'll watch you very closely over the next few days and into super tuesday. bob shiller, always a pleasure to have you here and thanks for your interesting idea about what we can do for the housing market. let's see if we can get some traction on ideas like that. gas already above $4 in some states. we could see $5 a gallon gas by summer. those prices won't just hurt consumers, they could derail the entire economic recovery. we'll talk about that next on "your money." americans are always ready to work hard for a better future. since ameriprise financial was founded back in 1894, they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪ but one is so clever that your skin looks better even after you take it off. neutrogena® healthy skin liquid makeup. 98% saw improved skin. does your makeup do that? neutrogena® cosmetics. all your important legal matters in just minutes. now it's quicker and easier for you to start your business... protect your family... and launch your dreams. at legalzoom.com, we put the law on your side. have more fiber than other leading brands. they're the better way to enjoy your fiber. welcome back to "your money." the u.s. economy is starting to actually feel like we're in a recovery and