Rallying Supporters Raising Money; Fed Chair Gives Grave Assessment, Saying Still Big Threats to Economy
MALVEAUX: Familiar face on Capitol Hill today. Top Republican aides tell us former Vice President Dick Cheney will attend a House leadership meeting. That's happening this afternoon. He's also going to meet with a team that helps round up votes in the House. They're talking about strategy for dealing with automatic cuts for defense programs. Those cuts would go into effect next year. Also on Capitol Hill today, a warning from the Federal Reserve Chairman Ben Bernanke. He told a Senate Banking Committee there, there are still big threats to the U.S. economic recovery. He made no mention of stimulus plans. I want to bring in Alison Kosik at the New York Stock Exchange. He said essentially Europe's debt crisis was the biggest threat. He also talked about a fiscal cliff in the hearing. Specifically, what was he referring to?</s>ALISON KOSIK, CNN CORRESPONDENT: OK, the good old fiscal cliff. Yes, get ready, Suzanne, to hear that phrase a lot over the next six months. What that is is essentially a handful of different policies schedule to automatically expire early next year that would literally take billions of dollars out of the economy when the economy barely has a pulse unless Congress does something. Now, some of what would happen here is, number one, the Bush tax cuts would expire. President Obama says he wants to extend these cuts for Americans who make less than $250,000 a year, but let them expire for families with net incomes above that level. What would also happen is the payroll tax cut. That would go away. That would mean less money in your paycheck. The alternative minimum tax would expand to upper middle income earners. Some people would be paying more in taxes. Also a bunch of spending cuts kick in. All together, most of those cuts are targeted at military defense. It would cut about $10 billion from the budget next year. And for millions of Americans, their extended unemployment benefits would run out. Bernanke says the consequences are serious if Congress just sits on their hands and does nothing.</s>BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: The Congressional Budget Office has estimated that if the full range of tax increases and spending cuts were allowed to take effect, a scenario widely referred to as the fiscal cliff, a shallow recession would occur early next year and one and a quarter million fewer jobs would be created in 2013.</s>KOSIK: And, you know what, Suzanne, many economists say, you know what, Chairman Bernanke, we agree with you -- Suzanne?</s>MALVEAUX: Keeping in mind, all these warnings over the economic picture here, what does he look -- when he sees the big picture, is it moderate growth?</s>KOSIK: You know what, he does still see moderate growth. He's really sticking to his guns about still seeing moderate growth. You know, but many would say that's being pretty generous. Many would call this growth anemic, especially when you're looking at the Fed's expectation for economic growth to be up to 2.4 percent for the entire year. So, yes, the economy is slowly but surely recovering. We're seeing slowdowns in certain areas, especially in important areas like manufacturing and jobs. One real takeaway you can certainly walk away with after watching Bernanke on the Hill is his tone, Suzanne, was definitely more downbeat today than he was in June -- Suzanne?</s>MALVEAUX: All right. Thank you, Alison. Appreciate it. Checking your 401K these days could also lead to disappointment. It's not just growing as fast as you like. Our Poppy Harlow, along with financial experts, have tips to grow your retirement fund in this tough economy.</s>POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: Hey, there, everyone. Here on the "Help Desk" today we're helping you prepare for retirement. Always important. With me, Greg Olsen and Donna Rosato, our two money experts. Greg, this question comes for you. Take a listen.</s>UNIDENTIFIED FEMALE: My question is about 401K. I have quite a bit of money invested there. It doesn't seem to be growing. So my question would be, what's the best way to move that and where to move it to build on it?</s>HARLOW: You know, Greg, she also told me, the market is so volatile now, you don't really know where to put it.</s>GREG OLSEN, PARTNER, LENOX ADVISORS: Understood. Unless her 401K -- if she's still at her employer, there's not much she can do in terms of moving her 401</s>K. MALVEAUX: Right.</s>OLSEN: The good news is that most likely it's not specific to her 401K program. A year ago, the S&P; was sitting at over 1,300. Today, the S&P; is sitting a little over 1,300. So it's not specific to her 401K. A lot of people are feeling the same thing. The one thing that I would recommend is look for a target asset allocation fund that's closest to her age, within her 401K. Allocate the money toward that and then contribute as much as possible.</s>MALVEAUX: I wonder, Donna, if she should maybe put a little less than maybe she is in her 401K and put it elsewhere in the market, an IRA, for example, she might have more options?</s>DONNA ROSATO, SENIOR WRITER, MONEY: A lot of our readers do get a little frustrated. But I think people underestimate of the power of the 401K. You can put a lot more into your 401K than you can into an IRA, up to $17,500 a year. Plus, it's automatic and you get an employer match. That said, people are not often happy with their choices. So I think a good rule of thumb is, put in enough money to your 401K to get the employer match, then if you want more choices, go to an IRA and fund that. You're going to feel like you have more control about where the money's going.</s>HARLOW: Absolutely. Thank you both. We appreciate it. 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