spending and that's because trat decisional path to prosperity is still strewn with debris from the last storm. the big one, the recession. your job and the wage you bring home is the single most important way to build wealth. but despite net job growth for 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 rinare investmen. 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 we will thaj shows some signs of brightness. home price maze have hit bottom and 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 can you 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 spedding 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 bueschs bush era tax cuts expire. 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. >> i would like to know where the asteroid is coming from. we have a, in my opinion, we're calling it storms. we have two storms. we have the one over europe that is getting big. it is 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 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. i think we have to analyze the potential cost. if you extend the cost or avoid going over, you ramp up this deficit spending which doesn't have a problem right now. ken has 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 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 awful the u.s., those have not materialized. the truth is 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 worries about two things, one, overall the world economy. is it going to go into a recession or depression? and number two, this is nontrivial, 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. how do we make the tough decision? where do 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 cliff 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 inf infrastructure. we have this incredible bonanza from energy 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. 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 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 xwasquandered that money an that is the not american way. i think ken 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 that i that is sort of fully taken into account in our economic discourse. but the shale gas is really goingo 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 could be the sound of a real heartbeat in the housing market. stick around. ♪ ♪ [ male announcer ] its lightweight construction makes it nimble... ♪ its road gripping performance makes it a cadillac. introducing the all-new cadillac xts. available with advanced haldex all-wheel drive. [ engine revving ] it's bringing the future forward. ♪ ♪ [ male announcer ] you've been years in the making. and there are many years ahead. join the millions of members who've chosen an aarp medicare supplement insurance plan insured by unitedhealthcare insurance company. go long. insured by unitedhealthcare insurance company. 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. i think we should see other people. in fact, i'm already seeing your best friend, justin. ♪ i would've appreciated a proactive update on the status of our relationship. who do you think i am, tim? quicken loans? at quicken loans, we provide you with proactive updates on the status of your home loan. and our innovative online tools ensure that you're always in the loop. one more way quicken loans is engineered to amaze. wouldn't it be nice if there was an easier, less-expensive option than using a traditional 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. . 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. what happens if we go over the fiscal cliff? >> it would beter inl, 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 nondefense 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. where would these job losses be? california, virginia, texas, maryland, the district of columbia. they would each lose 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 sin sequester takes infect on january 2, layoff notices would start coming out 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 actual sli 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? christian 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 krista brought up. >> he is trying to ligitamize i had argument. >> it has a depressing effect on your economy. i recognize that you have moments in the economies when you can't take a hickey, 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? >> let's ask the expert. what is the compromise? >> you have to do something much more garage you'll 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 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. you sthed many times with respect to unemployment insurance benefits. what do you do in the case that it is kind of emergencyish? 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 malpracti malpractice. >> that would be ideal. >> that's a good word. >> that's a good word. >> 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. doinlt 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 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? everyone 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 bowls simpson came out. they made a proposal and it didn't go anywhere. >> they don'teel 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. >> you heard it here first. you're going to see that a lot on my show. >> g 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 report is going up but they say don't buy just yet. we'll hear from him just on the other side. [ male announcer ] research suggests the health of our cells plays a key role throughout our entire lives. ♪ one a day men's 50+ is a complete multi-vitamin designed for men's health concerns as we age. ♪ it has more of seven antioxidants to support cell health. that's one a day men's 50+ healthy advantage. 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 ybored withave to go then lead a double life! with blast flipstick from covergirl. creamy color on one end, shimmery color on the other. so you can flip your look from demure, to daring. blast flipstick from covergirl. i tell mike what i ca