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We do not want an urban underclass developing again. our cities have fought this back for years. what can states even do now? look at california with jerry brown as governor coming in with stuff that would make arnold schwarzenegger blush in terms of cuts. new york state doing the same thing. mayor nutter is talking about pennsylvania. what can states in these positions do? >> well, there's no avoiding these are tough choices that are going to have to be made. but you make a very good point, which is you don't want to be so folkouseden the short term that you lose the bigger picture and cause ...

>> it's regional. >> throughout asia particularly, want to lure the same businesses. i think our big cities under leadership of great mayors like nutter, bloomberg and others have done fine. those second and third tier cities, the harrisburgs, the allentowns, the daytons, are getting hit. if we're going to keep america competitive, when we look at the real advantage america has, it's the fabulous state universities. i'm a product of rutgers university on a garden state scholarship from a working class family. >> right. >> our states now are slashing the budgets, whether it's the california sys...

Falling housing prices are one of the big things affecting state budgets. >> absolutely falling housing prices are killing city budgets, because cities and counties are so dependent upon that property tax as a source of revenue. but then as individuals lose their wealth, their housing values, they go into foreclosure, that trickles down to the state and you get this kind of terrible cycle that the mayor was talking about. and then if the state comes, state budget cutts coms come, t hurt the city. so get housing prices stabilized. the unemployment report this week looks better, so hopefully ove...

Painful, yes some people were upset, but they -- the public i think understands it. now we've stabilized our finances, and we're starting to see the turnaround. next tuesday and wednesday we'll make a series of announcements, groundbreakings, that will produce over 1,000 new jobs in philadelphia over the course of the next two to three years. and other companies are investing and expanding in the city because they see, even though we have fewer police officers, not through layoffs, but through attrition, crime continues to go down. they see the gains we're making in education. they see we're c...

Sort of hit with a couple different things. so they're just coming out of the effects of the economic recession that they've felt very hard, and revenues are starting to tick up a little. but two more things loom out there for them. one, the stimulus that came in was helping the states, is going to get pulled back next year and that's going to be a big hit for them. they're not going to have the money that the federal government was funding through stimulus. and second, the federal government has to come up with a plan to balance its own books, which means the money it generally gives to state...