believe this is a place where only their willingness to work hard and to act with honor and integrity and ingenuity determines their success in life. then we'll have a bunch of people sitting on a couch waiting for the next government check. >> that's new jersey's governor chris christie. he's endorsed governor mitt romney for president. who knows, the two could be running against president obama in the fall if romney taps christie to be his vice presidential candidate. threats to hard work is hardly a new issue for president obama either. it was a central team in the kansas speech he used to lay out his economic agenda at the end of last year. listen. >> for most americans the basic bargain that made this country great has eroded. long before the recession hit, hard work topped paying off for too many people. fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success. >> now, the president is referring to the wealthy when he talks about those precious few who are seeing the benefits of this economy. stephen moore an editorial writer for the "wall street journal." good to see you. i know you're not going to side with the president here. give me a sense of what specifically the government does that punishes success and discourages hard work from a conservative perspective. >> ali, let me start by sounding a note of optimism. i think chris christie and barack obama are wrong here. i think the great american dream is alive in america. we saw a great story this week, one of my favorite stories in a long time, instagram. these two kids start a company out of their garage two years later and sell it for a billion dollars. it can happen here in america and it's a great story. look, this has been a tough recession obviously. we're seeing declines in real incomes, people pinched by high gas and food prices. i do believe, we've lived through this before. we've lived through this in the 190s, in the 1970s people said the middle class is dead. i want to make that point of optimism, i think it's important. >> fair enough. what's the thing we say punishes success and doesn't reward hard work? what would conservatives like to see changed? >> here is the problem i have with the president's message. i think this idea of the buffett rule, tax the rich, the idea all we have to do is get the middle class ahead is soak the rich, sock it to the rich, that's the wrong message of success. we need a tax system that tries to make poor people rich and not rich people poor. the president misses that when we have vibrant employers, when this is a country if you get successful the government doesn't take half your money away from you. i don't think the american people share this envy of the rich that the president and a lot of democrats do. >> hold on. chrystia freelander, from reuters. do you agree the economic system we have in the united states fails to reward hard work and punishes success? >> no, i don't. i agree with stephen about one thing. i think america is a tremendous center for innovation. america is good at fostering that and rewarding it. instagram is a great example of that. i think what is missing, ali. i don't think this is a fault of politicians, this is but structure of the global economy, about the technology revolution, globalization. the hard reality is those middle class jobs, the jobs for people who are not going to become billionaires in 12 months off an ipo, those jobs are vanishing. >> people with basic education, the kind of education that 25 years ago would have guaranteed you a good job for life. that's becoming harder. >> we can all see that in our daily lives. think about it, travel agents, we don't need them anymore because we have the internet. people don't have so many secretarial positions. we saw it recently in the retail sales employment numbers. sales are up but jobs are down. why is it? we're buying online. i think that is a great trend. i believe in technology, all of us love it. >> what do you do with the people. >> we have to be realistic and honest about the fact that we all encounter in our daily lives those good, solid jobs for someone -- yes, chris christie does want to work really hard. they are not there. either you're a generous ipo person and doing fantastically well or struggling to get by at the bottom. i think that makes america and actually all of the western world right now in a really difficult place. our democracies are built on a robust middle class. >> an area that's important, an area where the president is wrong factually, he says over the last 20 or 30 years the middle class has not made gains. it's factually wrong. i was looking at the data. if you look at the middle class, 40th and 60th percentile, between 40 and 70,000 a year, in the 80s and 90s, reagan, there were a lot of jobs. we became a job creation factory around the world with 30 to 40 million jobs. so the formula does work. i do think we've gotten off track in the last five years. i think this economy is prepared for a big expansion that will benefit the middle class but i don't think raising taxes on the wealthy is the way to do it. >> chrystia. >> i disagree. anybody in the middle class will tell you their lives are rough. what particularly worries me are the job numbers. what we have seen in the recovery from the past three recessions is the employment number resets at a lower level. we are seeing higher levels of instructial joblessness in the economy. i don't think this is forever. i think it's lying to people to say it's easy and something hasn't changed. it has changed. as a society people need to respond to that. >> stephen, what would be the counter to the things you're criticizing the obama administration for either doing or suggesting? i think i know where you'd go with this. what would be the thing that does incentivize hard work, reward success and create jobs for this very set of people we are disagreeing about right now, the middle class. >> i think what we need is a lot more saving and investing. a lot more orientation toward spend, spend, spend and not building building blocks of long-term prosperous economy which is investing and saving. i do think it's a mistake to double and triple capital gains, the money injected into the economy that creates new businesses. chrystia, look, i'm not saying the middle class isn't struggling, you're right. this has been a very difficult recession for middle class families. what i'm saying with the right amount of skills and new companies developing, we're seeing a huge renaissance in manufacturing of it's true they don't ploy as many as they used to. call me an optimist. i think we're prepared for a big expansion that's going to benefit all income groups. it can't be this kind of distribution. we have to grow the economy. the key here is competitiveness. i wish everything washington did was oriented with how do we make number one. >> we're going to talk about those things, manufacturing, a key point you brought up. chrystia, stay where you are. the guru behind the republican or economic tax agenda. is he ready to sit down in a room with president obama and work out a deal? >> work with president mitt romney and work with a senate -- >> can you choose northbound in office now. >> he's rumored to be at the top of the vice presidential list. i asked him if he's ready to take up the job next. 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paul ryan the republican chairman of the house committee seems like the architect of the gop's economic agenda. if governor mitt romney has a shortage of potential running mates ryan would likely be at the top. in an election decided by the economy one could understand why romney would choose someone like ryan but would ryan accept if he were asked. >> you have to give that serious consideration and thought. i haven't done that. i'm pretty busy doing my day job. >> people have been talking about it. >> it's not my decision to make, it's somebody's decision to offer it. it's a good deal of time for now. if somebody says consider it, i would. >> you're open to it. >> i don't know. my wife and i would have to set down and think it through and i haven't done any of that. >> could you and the president sit in a room like this or starbucks or a room we provide and hammer out a budget, notwithstanding all the outside concerns. >> i would love to try. the government has given us four budgets and never once attempted to do that. usually you have to get an invitation from the white house to do that. i've always wanted to do that, try. when i first put budgets out, maybe i was naive. i thought when i put this out others will put their plans on the table, then debating plans, then an emerging consensus. we put it out there, nobody followed suit. the president decided not to put out a plan to solve the problem, they waited for us to offer solutions then attacked it for election purposes. i don't see that kind of leadership from this president. if we were going to get this kind of leadership from this president, we would have gotten it by now. >> ultimately you have to deal with this before that. >> i don't think that's right. if the president wanted to have a budget agreement he would have given us a budget that attempted to soflve the problem. harry reid would pass the budget. >> who on the other side would you like to meet with, i'll try to get it done. >> mitt romney and a senate by mitch mcconnell. >> i'm asking you who on the democratic side do you think has the wherewithal. >> it's not about the people, the pear, the ideas, what are the best ideas to save and strengthen this country and problems, medicare and things like that. >> when a smart guy like paul ryan won't name a single democrat he would get in a room with and #out a budget deal it gives a sense of how toxic the tone is now. i have to say, i have a lot of respect for paul ryan, disappointed. on this show we love to go beyond politics. no matter what i asked i could not get beyond it. i could not get him to reach across the aisle and show me room for compromise because that is what we need. forget right or left, it's a shame the u.s. cannot accomplish anything big because we're so divided. >> i agree with that. i think have you to be fair here. i think the press is not enough on the story paul ryan talked about. the fact is the president did present a budget, as you know in february, ali. it was brought to vote in the house and senate. it got zero votes in the house, zero votes in the senate. even nancy pelosi wouldn't vote for that budget. in the meantime the senate still run by democrats, harry reid, it's true, for three years there's been no senate budget. i talk to paul ryan a lot. i really admire the guy. i think he has a fair point to say, look, we put our cards on the table. we've told the american people what we can't to do with medicare, medicare, social security, tax code. when you ask paul ryan, are you willing to negotiate, negotiate with what? >> everybody points to the debt showdown last summer. we were all involved in covering it. we wonder how close president obama and house speaker john boehner came to achieving a grand bargain. to stephen's point, what blame does president obama hold for doing this, presenting budgets and ideas he knows are nonstarters and paul ryan presenting deals we know are nonstarters. everybody has good points, as stephen says, and they are all nonstarters. what do we do about this? >> first americans need to have an election. i don't think this is a technocratic issue at the moment. i don't think you had a group of economists in a room they could come up with an idea that would suit everybody. i think it's a profound question. big governments with welfare states. let's talk about german or sweden or canada that have generous welfare states and a balanced fiscally disciplined rating. smaller countries balancing budget. it's not a left, right thing. they have different approaches. americans are going to decide, it's simple. pay higher taxes and can you have more government support for the elderly, children, education for infrastructure. if you don't want to pay taxes, you're not going to be able to have that. >> stephen, can we present that stark an argument to the voters and have them actually make that decision so come december or january we can actually start getting deals done? >> yeah, i think so. chrystia is right. she and i are agreeing way too much today. >> very weird, let me tell you. >> i think this election, ali, is going to be a voter referendum on these very issues. i might not have put it quite the way chrystia did. i think the big government more taxes model is the greece model that hasn't worked very well. i think the model of more for enterprise is the hong kong model. we can debate about this. chrystia is exactly right. this is for the voters to decide. whoever wins this election will have an upper hand in terms of what direction do we go in with this budget come january. >> the problem, of course, the options are never as clear as what chrystia described. it's not all the way to the right or all the way to the left. the problem we may have is in november we may end up with a government that is as split as it is today. >> that's true. >> one thing i think is an important point ali, stephen and i agree on, there's a centrist mentality there's a clear solution. there isn't. it's not just about toxic environment and people not being nice to each other. america is genuinely idea logically divided about the kind of country they want to be. i welcome the election. the country needs that dbtd. >> you two have gone weird on me. chrystia, always good to see you. stephen, always good to see you as well. a solution for the housing market that could make underwater mortgages a thing of the past. we'll talk to the most brilliant economist who successfully predicted our rough past and what he says is in store for the future. stay with us. but not how we get there. because in this business, there are no straight lines. only the twists and turns of an unpredictable industry. so the eighty-thousand employees at delta... must anticipate the unexpected. and never let the rules overrule common sense. this is how we tame the unwieldiness of air travel, until it's not just lines you see... it's the world. home protector plus, from liberty mutual insurance, where the costs to both repair your home and replace your possessions are covered. and we don't just cut a check for the depreciated value -- we can actually replace your stuff with an exact or near match. plus, if your home is unfit to live in after an incident, we pay for you to stay somewhere else while it's being repaired. home protector plus, from liberty mutual insurance. because you never know what lies around the corner. to get a free quote, call... visit a local office, or go to libertymutual.com today. liberty mutual insurance. responsibility. what's your policy? take a look at this. in 1987, this housing index was created, case-schiller index, created to track home prices in the top 20 metropolitan areas in the united states. it is still one of the leading economic indicators by economists. in 2000 this book, "irrational exuberance" predicted a bubble in the housing market during the height of the do the-com boom. it turned out to be a prophecy. in 2005 an updated version released predicting another bubble, this time in the housing market. it, too, turned out to be a prophecy. skip ahead to 2012, this book is released arguing the economy will not advance without the creation of new financial products. sounds laughable, sounds like a tough celticly to a public that blames financial sector and innovation for the crisis of 2008. is this book going to turn out to be a prophecy as well. turn to the man behind it, the man behind the case-schiller index, behind pe ratios, this is your new book. i can't believe it. you're telling us we should innovate more in terms of finance. >> i think that should be our response to occupy wall street. they want to fix something, right? >> right. >> okay. if a car is broken you bring in a mechanic. you've got to bring in people who study finance. they are looking kind of bad. people think it's evil. it's not evil. it's something that can be fixed. >> one of the things you recommend, the great thing about the book you have very, very specific ideas, some seem attainable and some seem like pie in the sky. one of them my producer refers to as a prenup for mortgages. tell me what you're talking about. >> right now we have over 11 million americans who are under water on their mortgage. the home price fell. their mortgage balance didn't fall. they are ruined, right? that's a major part of our crisis. they don't spend when they are in that state. that didn't have to happen. we want to give them workouts now but we don't have an arrangement for that. >> a workout is generally seeing if the bank will make some kind of deal to cut the amount of money they are owed. >> ideally, that's what it would be, but it's not happening very much. i think if we want that to happen, the thing to think about now, let's plan for it now for the next time. >> which is why we think about it as a prenup. let's give an example, if a husband and wife go into a bank, they want to buy a house, they go to apply for a mortgage. there's basically an insurance product they would buy that says in the event that -- you finish the sentence. how does it work? >> it might be tied both to home prices and the economy, unemployment rate. if home prices fall we will reduce your mortgage balance automatically to keep you in positive territory. >> in fact, the whole concept of a mortgage was the idea you're taking money from people who have lots of it and don't have enough places to put it and things to do wit and giving it to people who can use it to find a house. we'd all have to be 80 years old to buy a house or most of us if we didn't have the concept of mortgages. >> mortgages are really important. we don't reflect on that. young people when they have kids reflect on that, that's when they want the house but they don't have money saved up yet. finance has improved our life. it used to be before we had mortgages you had to live with your parents. that wasn'