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Conclave Will Begin Electing New Pope Starting Monday; Kurdish Leader Jalal Talabani Sworn In As New Iraqi President; Republicans, Democrats Join Forces, Hope to Reduce Oil Consumption

Aired April 10, 2005 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(BEGIN VIDEOTAPE)
ANNOUNCER: From New York City, America's financial capital. This is IN THE MONEY.

(END VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT: Welcome to IN THE MONEY. I'm Susan Lisovicz sitting in for Jack Cafferty. Coming up on today's program:

Vatican Inc.: When the cardinals sit down to choose the next pope it'll play like a company board meeting. Find out what's at stake.

Plus, decisions, decisions: It took weeks of wrangling, but Iraq finally has its interim president. See if Jalal Talabani has what it takes to pull the country together.

And how to get a hawk to think like a tree hugger: We'll look at why Republicans and Democrats are teaming up behind a new energy initiative.

Joining me tonight a couple of IN THE MONEY veterans, "Lou Dobbs" correspondent, Christine Romans, and "Fortune" magazine Editor-at- Large, Andy Serwer.

I think it could be safely said that the media often goes overboard on certain stories.

ANDY SERWER, "FORTUNE" MAGAZINE: No.

LISOVICZ: Like say, celebrity trials, for instance.

CHRISTINE ROMANS, CNN CORRESPONDENT: Car chases.

LISOVICZ: Right, especially when they are taken live.

ROMANS: Right.

LISOVICZ: This past week we have seen unprecedented coverage of one man's funeral. And I ask of you...

SERWER: An outpouring of coverage.

LISOVICZ: An outpouring of coverage. Not only on our network. And I'm just curious; do you think that we got it right?

ROMANS: I think that we did get it -- I don't think it was herd mentality this time around. I mean, this is one man's funeral, but let's keep in mind this is 1.1 billion Catholics in the world -- you know, 23 percent of the American population consider themselves Catholic. There are a lot of people who are watching this. And I think this is not a case of just running after the herd. I also think that people are asking a lot of good questions, talking about the child sex abuse scandal, talking about women and the future of the church and where it's going to go from here. So I think it's not just covering a funeral. I do think there are a lot of questions happening about the Catholic Church, and Christianity in general.

SERWER: Well, and I like to look at this also in terms of a political situation because here we have a leader of state, essentially, for 26 years. Very hard to think of someone who's been around that long -- maybe Fidel Castro -- but here is someone who was instrumental in the downfall of communism, knew every president, king, queen across the word. So, his body of knowledge is really something to think about and discuss.

LISOVICZ: You know, Christine and I both were at St. Peter's Square. You were lucky enough to meet the pontiff, I was there six years after he was elected and I saw tens of thousands of people in the square, as usual. But I saw history in the making and think this is one of the reasons why we saw this outpouring this past week. Thousands of Poles -- this was before Poland become independent, serenading the pope in Polish. A song that I knew actually, learned as a girl, "May You Live a Thousand Years" and the Solidarity banners waving proudly.

SERWER: I remember those.

LISOVICZ: I do remember those, and they were there and he was a catalyst for that.

SERWER: Now, the question is, are you going to sing the song now?

LISOVICZ: I am not, but I know it and I will spare everyone.

SERWER: Thank you for that.

LISOVICZ: We will move on, though. They've got hats and robes instead of suits and ties and what's on the line isn't dollars and cents, but souls and salvation. Still the cardinals picking a new pope face some of the same big issues that come up in choosing a new CEO. In fact, you may think of those cardinals as, well, the Vatican's board of directors. Paul Baard is going to rip on that idea. He is the professor of communication and media at Fordham University here in New York City.

Thanks so much for joining us, Professor.

PAUL P. BAARD FORDHAM UNIVERSITY: Glad to be with you. LISOVICZ: You know, as popular as Pope John Paul II was, a lot of his ideology wasn't with Catholics in Europe, in the United States, so this is really a pivotal time. Can his successor continue on that very conservative -- with that very conservative doctrine?

BAARD: Yes, of course there's been a mass by the large number of Catholics worldwide which has been infused somewhat by conversions and from Africa and South America. It has hidden a real basic problem. The church in the United States and Europe is in very serious trouble. Fewer than -- way fewer than a third of identified Catholics attend church regularly and that's symptomatic of something that's very wrong in their spiritual relationship, their relationship with God. And that's what needs to be attended to, right now.

So, they need to find a leader that can change that. And the excuses have ranged from materialism of the West and yet we find so many churches, there are so many churches that are thriving in the United States. Some say it's the doctrines of the church, they're too conservative, the role of women, and so on, and yet again, we find these churches despite these things are thriving, so there's something going on that's in the minority of Catholic churches, but that could well be replicated. And that's what the new leader needs to find and do.

SERWER: Paul, how important is that issue to the cardinals when they are going to be picking a new pope? Do they care about the status of the Catholic Church in America? I mean, obviously they do to an extent, but will they be thinking about that when they pick the next pope?

BAARD: Well, I think if there is someone that comes up from their ranks and really speaks forcefully and calls it is like it is -- and this often happens. I've served on boards of charities and corporations and when you have someone that has a real conviction about there's a problem here, we need to address it. It's not just the United States, it is Europe, it's where the church has been established for a while. There's no reason to think it's not going to occur in the new churches of Africa and so on. Someone has to be forceful, someone has to be really spiritually led, to say this is -- we've got a problem. I stand ready to serve, to bring about change.

ROMANS: We talk about cardinals as a board of directors. There are a couple things, if you are going to use that analogy: market share, globalization, big global structure that this church is. If you're on that board of directors, if you're hiring the next person to lead the Vatican Inc., what kind of strategy do you want? Do you want somebody who's going to come in and do a quick turnaround or do you want somebody who's going to continue the policies of someone who's clearly much loved, if we watch the footage this weekend? How do you hire somebody for that job?

BAARD: Well, you don't go and appease the bureaucracy that's in place. You don't go in their face, these are the people who are great workers and so on, but you need to pick a person who's independent and strong, and has one vision, and a conviction about that vision and wants to bring all the bureaucrats, wants to bring all this college along with him and delivers a very impactful convincing message to that extent. It would be good to have someone who has had a track record of doing that, who has lived that, who has turned around a -- oh, anywhere from a diocese to a -- to whatever might be under his domain, a hospital or a seminar, and so on. So, it would be good to see it.

But, what I'd be listening for is that conviction in the voice, that person whose -- it's not personal ambition and it's not someone who's a popular person who's built up the IOU's and votes, it's someone who really sees that this is a crisis.

Leading into this show you were saying that this has eternal consequences. When people aren't going to church, there's no reason to think that their eternal salvation is assured.

LISOVICZ: On that note, Professor, you know, one of the reasons why I think the Holy Father registered -- resonated with so many people who weren't even Catholic is that he walked the walk, as well as talked the talk. He was someone who defied the Nazis and Communists. Would it be attractive for the cardinals to choose someone from a country or a place or continent where there might be similar examples, for instance, Africa or maybe there's even talk about Russia, that kind of situation?

BAARD: Yeah, see that's a political decision and they need to make something better than that. It's not about the president of a club who has the most friends or constituencies. This is, this is life and death stuff. They need to pick the best person. It could be someone who has really honed his skills by being in those countries up against difficult odds and managed to organize things and inspire things. It could well be.

SERWER: Can the Catholic Church change to the extent that it allow priests to marry? That it would allow women priests? Do you ever see that happening? Change policies on divorce?

BAARD: Well...

SERWER: I mean, that's what would really change views here in the United States, wouldn't it?

BAARD: But it's not -- that's not necessary. They need to get the preaching done right. They've a Billy Graham right in the church, right now. Sam Jacobs down in Louisiana, a bishop. They've wonderful talent and turnaround artists; you have very talented executives that are part of the Catholic Church laity. This has been done before (INAUDIBLE) has been done before, one person having this big impact. He was a fisherman named Peter and he went before a large group and he said there's a need for change in your life. And 3,000 people committed that day to change. It can be done. With God, all things are possible.

ROMANS: Paul Baard, Fordham University, thank you so much for joining us today.

BAARD: Thank you. ROMANS: And when we come back, dance fever: Iraq's Kurds are celebrating with one of their leaders chosen to serve as the new interim president. See if the rest of Iraq has a reason to kick up its heels.

Also ahead, feel the fear: Tax day is coming up. Find out whether the IRS is getting a teeth and claws back.

And taking stock of your name: We'll show you a Web site that'll track your handle's popularity like a DOW heavy weight.

(COMMERCIAL BREAK)

SERWER: Kurdish leader Jalal Talabani was elected and sworn in as Iraq's new president this week. Talabani's two vice presidents, a Shiite and a Sunni, also too the oath of office. The threesome then nominated Ibrahim al-Jafari, a Shiite leader for prime minister. Does this mean Iraq is getting closer to a peaceful democracy? Let's find out.

Fawaz Gerges is a Middle East analyst and a professor at Sarah Lawrence University.

Fawaz, welcome back to the program.

FAWAZ GERGES, SARAH LAWRENCE COLLEGE: Thank you.

SERWER: First of all, can you explain to us how this government is organized? There's a prime minister and a president, right?

GERGES: Absolutely. The most executive position, in Iraqi government, is the prime minister. That is Ibrahim al-Jafari, who was named yesterday, who will be, you might say, the manager of the Iraqi government. The president, who is a Kurd, Jalal Talabani, is basically, it's a ceremonial position. And of course, you have the head of the National Assembly who is a Sunni Arab.

The truth is, here, is that, I think, the three communities -- the Kurds, the Sunni Kurds represent about three percent of the population and Sunni Arabs who represent 20 percent of the population, and Shiites who represent about 60 percent of the population -- distributed the three major positions among themselves -- a Shiite for prime minister, a Sunni Arab for the head of the National Assembly, and a Kurd for position of the president.

ROMANS: Professor, how is the sharing -- power sharing going so far? Each of the tentative steps that we have seen, it's all a move toward democracy. This is democracy at work, the horse trading and building coalitions and building consensus. How is it going?

GERGES: I think, first of all, it seems to me there is a new government or almost a new government in place in Iraq today. And even though Iraqi is -- as you suggested, it took them quite a few weeks to, at least, arrive at the consensus -- I think what the government tells us that Iraqis could transcend their differences and could work together to build a new Iraq. But, I would argue here, and this is really -- your question is very critical because I think the hard work begins now. Even though there's a government, first of all, the new government has to write a permanent constitution, a permanent constitution whereby Iraqis are deeply divided over the future direction of their country. And there are some major, major problems here.

First of all, Iraqis differ on the role of Islam -- whether Islam should serve as a source of the legislation or the major source of the legislation. Iraqis are also -- they differ over their all -- or the autonomy for the Kurds. As you know, even though the Kurds have now a president, which is really -- it's wonderful to see the new face of Iraq, the Kurds' Jalal Talabani being the president, let's remember for the last 60 years or so, Iraqis were persecuted and the Iraqi government -- but of course...

LISOVICZ: But, Professor, but you know -- sorry to interrupt, but what you're saying is actually very encouraging and very optimistic because what you imply is that these people are talking. They are talking.

GERGES: Yes.

LISOVICZ: And we're not seeing mosques getting blown up and our servicemen and women being killed. Not to say that there isn't still violence in Iraq.

GERGES: Absolutely.

LISOVICZ: You're actually encouraged more than I've heard you in a long, long time and is it because of something you've seen with Sunnis in particular?

GERGES: I think I am becoming more positive for a variety of reasons. I think Iraqis are talking to each other. I think the elections served as a watershed because the majority of Iraqis defy the insurgents and also, I think the last point about Sunni. The Sunni Arabs who represent about six million people out of the 26 million Iraqis, I feel to be deeply divided, now. I mean, the Sunnis are becoming divided and I think the Sunni Arabs realize they made major mistakes by not voting, by allowing the insurgents -- who are mainly Sunnis -- to dictate the agenda and, I think, as a result the Sunnis became weaker and weaker. And now what we are seeing in Iraq is that the Sunnis -- more and more Sunnis are saying, enough is enough. Let's participate in the political process. Let's participate in writing the constitution.

In fact, as you know, more than 60 Sunni clerics issued a fatwa a few days ago calling on Sunni Arabs to enlist in the security forces and the military. And this is really -- testifies to the dramatic change that has taken place among Sunni Arabs. This is a highly positive development.

SERWER: Let me jump in there, Fawaz, because I want to talk about the insurgency and you're really speaking to that. I mean it does seem to be declining, it may be premature to call it dead or over. And -- so I want you to talk about that very quickly. And then also, to what extent was the insurgency driven by outsiders? Maybe not at all?

GERGES: Yes, I mean, I think that you are raising here, again, very critical questions and the reason why the question of the Sunni Arabs, who represent 20 percent of the population, is crucial is because the Iraqi insurgency is being led and supported by Sunni Iraqis -- homegrown Sunni Iraqis -- as opposed to the foreign elements. Let's remember here, that according to all of the estimates including the CIA and American military there are no more than 1,000 foreign insurgents in the country, out of, let's say, between 20 and 40,000 insurgents. And this is why, the question Sunni Arabs and the fact that they are being integrated into the political process, I mean, carries hope for Iraq, because the sooner and more you integrate Sunni Arabs into the political process, the sooner you hammer a deadly nail into the coffin of the insurgency.

And you're right, Andy, it seems to me, we are beginning to witness the beginning of the end -- the beginning of the end of the insurgency.

SERWER: Thank you as always for your insight. Fawaz Gerges professor at Sarah Lawrence College and Middle East analyst.

Coming up after the break, Wall Street's family squabble: We'll look at the fight for control of Morgan Stanley and see what it's doing to the stock.

Plus, kicking the habit: Find out why Republicans and Democrats are teaming up to get America weaned off the oil pump.

And sayonara, Detroit: Money.com's Allen Wastler is going to tell us what he discovered when he went out car shopping a few days ago. That sounds good.

(COMMERCIAL BREAK)

ROMANS: Time now to check some of the week's top money stories. The summer months may bring relief from the cold weather, but not from high gas prices. The government's latest forecast pegs the average price at $2.29 a gallon this summer. That's at 38 cents higher than last year. This comes as a new CNN/"USA Today"/Gallop poll shows 58 percent of Americans surveyed says the high price of gasoline is causing them a severe or moderate hardship.

Another prescription arthritis drug is off the market. Pfizer pulled Bextra from the shelves after the FDA sited the drug for possible heart disease risks and serious skin conditions. This comes six months after Merck pulled arthritis pain pill Vioxx off the market. Bextra brought in $1.3 billion in sales for Pfizer last year.

And if you are going to Duke University next fall, just to get a free iPod, well you better press pause. Unlike last year, Duke is cutting costs and won't be giving iPods to all its incoming freshman this coming semester. But, the college says that its experiment was a success because the students found educational ways to use technology. SERWER: Another big story this week is the continuing civil war saga at Morgan Stanley. A group of eight former top executives continues to attack the CEO, Philip Purcell, and are calling for his ouster. They say Purcell is guilty of the greatest sin you can commit at a Wall Street firm; he's not making everyone enough money.

Morgan Stanley shares are actually closer to their 52-week high than their low, but critics say the stock's performance is weak compared to its competitors and now market analysts are saying that whoever wins the power struggle at Morgan Stanley will end up presiding over a weakened group and that makes Morgan Stanley our "Stock of the Week."

You know, this one of these great Wall Street epics: Huge money, huge egos. Here's the situation were the CEO is being criticized. He hasn't done a terrible job. He hasn't done anything criminal. And yet it raises the question, the broader question, what is the threshold for a CEO? You look at a Hewlett-Packard or a Disney, at what point does performance become such that shareholders and employees are unhappy and force change?

ROMANS: How powerful is this dissent, this group of eight, as they are being known? And if they were to oust of him and take over, who's to say they could do any better than he could?

SERWER: Well, you know, this is a result of a merger between Morgan Stanley and Dean Witter that goes back to 1997. The group of eight actually doesn't own that many shares. They're trying to convince shareholders -- again, like Disney...

(CROSSTALK)

ROMANS: But they are big shareholders.

LISOVICZ: But they're pretty big shareholders, right?

SERWER: Just a couple percentage points, though. They need to convince shareholders, like what happened at Disney, to force change and withhold votes. It's going to be a tough grinding battle. Critical, I think, is how do employees at Morgan Stanley react. Are they going to stay? Are they going to be happy?

LISOVICZ: Well, you know, that's really interesting because this is why the whole thing went over the top. What happened was that Philip Purcell, the CEO, wasn't popular at Morgan Stanley among the traders because he manipulated John Mack -- who came from that side -- out of the equation, out of his leadership position. When he let go of two top and very popular executives, in the past week, that's when you saw all hell break loose. And in fact, I thought, one scene I would have loved to have been a fly on the wall, is when one of them walks out after being fired by Mr. Purcell. There was a standing ovation, the "Wall Street Journal" wrote, in one of its vast trading floors. You know, these are -- these are block-long trading floors. So, you know that a lot of the rank and file is certainly with some of these people who are no longer there. ROMANS: There have been a lot of complaints, too -- the stock back in 2000 was 110 and now it's half than that. But I guess you could argue...

LISOVICZ: A lot of stocks were higher.

ROMANS: I'm playing devil's advocate, here. I mean, was it worth it at 110? I mean, maybe it wasn't worth it, maybe when you talk about the stocks being cut in half...

SERWER: Well, the dissents will show you. What they'll complain about is yes, the stock's down, but relative to other companies like a Goldman Sachs, like a Lehman Brothers, like a Bear Stearns, Morgan Stanley Dean Witter -- of course the Morgan Stanley people, the Philip Purcell people have their own set of statistics.

I think one problem that is unassailable here, these two companies, Morgan Stanley and Dean Witter, were never fully merged and when you talk to people at the firm today you're either a Morgan Stanley person or a Dean Witter person, still eight years after the merger.

LISOVICZ: And Phil Purcell still lives in Chicago. He commutes back and forth.

SERWER: Right, that's correct. So this is going be a saga, I think, that goes on for a while. So, stay tuned. The Wall Street battles are always the best ones, I think.

ROMANS: Yeah, they are.

SERWER: Coming up on IN THE MONEY:

Canning oil: See why some Democrats and Republicans are taking the same side about America's love affair with the gas pump.

Also ahead, kinder and gentler, or leaner and meaner: We'll look at whether the IRS is getting tough again.

And see if your stock is up: We'll check out a site that shows you how your name rates in popularity these days.

(COMMERCIAL BREAK)

GERRI WILLIS, CNN ANCHOR: Hello, I'm Gerri Willis at the CNN Center in Atlanta, IN THE MONEY continues in a moment.

But first "Now in the News."

Iraq's newly-elected president says he expects American troops to be gone from his country within two years. Jalal Talabani tells CNN it should be enough time for Iraqi forces to rebuild and secure control of the country. He also says he expects to be able to draft Iraq's new constitution by mid-August as scheduled.

President Bush is scheduled to sit down tomorrow in his Texas ranch for talks with Ariel Sharon. Mr. Bush and the Israeli prime minister expected to focus on a key part of the Middle East road map for peace --Israeli withdrawal from Gaza and the West Bank.

A spring blizzard is blowing across parts of Colorado. The wet, heavy snow has shut down Denver's airport, knocked out power to thousands of customers and closed several roads across the region. Denver is expecting up to ten inches of snow. Other areas could see more than two feet.

A complete wrap of the day's news at the top of the hour on "CNN LIVE SUNDAY." Now back to IN THE MONEY.

ROMANS: America's dependence on oil is a major economic and environmental issue and it is also a serious national security issue. Our next guest says two-thirds of the oil we rely on for transportation comes from countries that are unstable or hostile or both. That's why he and 25 other former national security officials sent a letter to the president last week calling for a new initiative on curbing oil use. Frank Gaffney is founder and president of The Center for Security Policy. He joins us now. Frank, welcome to the program.

FRANK GAFFNEY, CTR FOR SECURITY POLICY: Thank you, nice to be with you.

ROMANS: Strange bedfellows security hawks and environmentalists. But together you are trying to figure out a way to curb this high oil use in the United States because it is best for our national security among other things.

GAFFNEY: Well it is actually not just best for our national security. Our view is that it is imperative. I think it's either on the cusp of or in the midst of -- depending on how you look at it -- a national security emergency in the making.

We are reliant, as you said, in the opening on imported oil to power most of our transportation sector -- a vital sector of our economy. It comes in large part from places that are unstable at best, and downright unfriendly at worst. And it is increasingly the case that people who are determined to do us harm understand they can inflict that harm by attacking the infrastructure -- whether it is pipelines or tankers, or offload facilities or refineries. Not only overseas but in this country. Add on top of that growing demand from places like China and you have the makings of a perfect storm and one that really compels us to act on this problem immediately.

LISCOVICZ: You know Alan Greenspan gave a speech to the petroleum industry just a few days ago and said that 200 million light vehicles in this country -- light vehicles, he is not even talking about the 16-wheelers -- consume 11 percent of the total world production of oil. That's a mind-boggling figure. So it is also even bad for our economy because you see other countries like Japan for instance who are far ahead of the U.S. in terms of hybrids.

GAFFNEY: Right, well in fact the Japanese carmakers -- Toyota and Honda in particular -- have stolen a march on Detroit again by producing vehicles that are now capable of getting on average something on the order of 50 miles per gallon. That's quite impressive when the average in the States is something on the order of 17 to 23 or 24 miles per gallon.

Here's the real important thing. The very good news is applying what's called flexible fuel vehicle technology -- that is to say fuels that can be derived from plants or garbage or coal together with electricity, the plug-in hybrid technology that's available now -- we could get as much as 500 miles per gallon of gasoline consumed in cars that are not different from what we drive right now.

This is a very promising and I think further reason why we have got to get off of the current habit of importing so much oil and using so much oil. We can rely instead on indigenously-produced fuels for the transportation sector of the future. And frankly we have no choice but to do so.

SERWER: Frank, Christine talked about strange bed fellows -- meaning you being in bed with environmentalists I think is what she was discussing. But when you start talking about drilling in Alaska, I think one of you is going to start falling out of bed, right?

GAFFNEY: Well that's one of the reasons why we're not talking about that. If people want to get into oil, I happen to be a supporter of exploiting the oil that's in Alaska and oil shale that we can exploit in Canada and in the States. Others may not agree. I happen to be a supporter of nuclear power for the electrical power grids upgrade. Others may not agree.

What we can agree on though is we have technologies at hand right now that are available, that are cost-effective that simply need to be scaled up and made available to the consumers across this country that can do something about again what we all agree is an immediate problem namely excessive consumption of oil in the transportation sector. And by doing that we can buy ourselves some time to worry about things we may not agree about and getting those sorted out one way or the other.

ROMANS: Frank we're in an era of really big deficits. To really get people to conserve energy and to get people to make some of these new hybrid vehicles and to sell them, you are talking about subsidences maybe for conservation and for oil alternatives. Subsidies in time of big deficits can be a tough sell. Can you do it without subsidies or can you convince Washington that it is a necessity?

GAFFNEY: Well this is a very good question that has multiple answers. We have a blueprint -- we call it "Set America Free," it is available at Setamericafree.org -- that estimates it will cost $12 billion over four years to make investments of various kinds. Some of them may take the form of subsidies, some of them maybe tax incentives and some may be mandates. That really needs to be worked.

But what is certain is we will wind up spending probably vastly more than that if we don't do something about this oil dependency and god forbid some terrible cataclysm takes place -- an oil pipeline or infrastructure is taken down, countries stop being willing to sell us oil, Detroit fails to make the switch to plug-in hybrid technologies in time and winds up having the same kind of obsolescence that it faced back in the 70's and has to be bailed out. All of these could be vastly more expensive than doing something sensible now in a cost effective way.

The other answer is the electrical industry, which understands that it could get into this game of providing fuel for the transportation sector and some utilities are actually say now we'll give you $1,000 to buy a plug in hybrid car. There may be ways that this can be done without the taxpayer and market forces could be brought to work. What is certain is we're going to have to take steps like these. We can do it more cheaply now than later under much more difficult circumstances.

LISCOVICZ: Well let's hope it is not too little too late, that's for sure. Because it's an old argument and there have been plenty of people talking about it since the last energy crisis decades ago. Frank Gaffney founder and president of the Center for Security Policy, thank you so much for joining us.

GAFFNEY: My pleasure. Thank you very much.

LISCOVICZ: And there's much more to come here on IN THE MONEY. Up next how to spell fear with just three letters. You see them right there with tax day coming up. See if the IRS is really as scary as they say.

And wheels of fortune, MONEY.com's Allen Wastler went car shopping last weekend. He'll tell us how Detroit is making out against the other guys.

(COMMERCIAL BREAK)

SERWER: More than one million taxpayers were audited last year. But don't wag your finger just yet: our next guest says Congress is putting pressure on the IRS to be even more vigilant this year. So what are your chances of getting the dreaded audit? Let's find out from Donna Levalley a tax attorney and contributing editor to J.K. Lasser's "Your Income Tax 2005." She joins us now. Welcome Donna.

DONNA LEVALLEY, TAX ATTORNEY: Thanks for having me.

SERWER: So what about it? Are your chances greater now are of getting audited?

LEVALLEY: They have been on the rise for the past three or four years. That will continue with the IRS actually going to be getting some more money to do the enforcement that Congress has been wanting them to do. That's a dangerous combination of Congress wanting enforcement and the IRS willing to do it.

ROMANS: Is it true, Donna, that the more money you make the more likely you are to get audited, because I guess if the IRS can get you if you make more than $100,000 a year then the IRS gets more money for its coffers than if they go after the little guy.

LEVALLEY: Absolutely. Cash businesses and people who have a lot of control over their income they are in there with high-income folks. That's exactly the issue. If a disallowed deduction comes in with some of the higher income, the disallowed deduction will bring in bigger tax revenue to the IRS. They focus resources where they think they can get bigger bucks.

LISCOVICZ: Donna, Christine has got her act together -- her taxes are done, but Andy and I are still in the process of doing ours. So can you...

SERWER: Get the extension form.

LISCOVICZ: What are some red flags to avoid the dreaded audit?

LEVALLEY: Deductions that the IRS can look at more closely. You should be prepared to hand over those receipts. Things like a home office. Things like cell phones for instance. A cell phone is listed property. They can ask to look at those detailed bills. I suggest getting that service from your provider. Pay the extra charge every month, because you can write that off as a business expense.

If you have a sideline business and if you are trying to get into something different and you have a different occupation that pays your bills, keep your records in a very business-like manner. It will take a long time to turn a profit and they may try to disallow the losses because it is considered a hobby.

SERWER: Donna I'm hearing a lot of growling, barking and voices complaining about the alternative minimum tax. Talk about dreaded. That's worse than the audit -- I mean because it seems to be more certain than ever for large number of taxpayers. What can we do about this? Is there any hope that they will get rid of this thing?

LEVALLEY: I don't know if they'll get rid of it but they're obviously going to have to address it, the lowering of tax rates and bigger deductions has made people more vulnerable to the alternative minimum tax. What is difficult about it is unlike other things where if you'll lose your itemized deductions, your personal exemptions there is nothing on a line that says well if your income is more than this go out to this form. Fill out this extra set computations. The AMT is a ghost or a shadow tax system. Unfortunately the way that you can lower regular taxes can actually make you vulnerable to the AMT and because it really...

SERWER: It's a curse.

LEVALLEY: It is a curse. And because it functions like a flat tax, there really isn't too much you can do to avoid it

ROMANS: I can't even overstate how that alternative minimum tax has ruined my spring. Just a little pool around the newsroom here a lot of people have been hit by that. Some people are calling it the new middle class squeeze, people that didn't realize it. It was meant for rich people but a lot of people in the middle class are getting slammed by this thing.

LEVALLEY: They are because it wasn't appropriately indexed for inflation like other rates and brackets and deductions that move along with inflation. This has been kept really low. They sort of patch- worked over it by increasing the exemption periodically you know for two years, four years that sort of thing. And what is going to happen is as more people fall into this, and all you need is certain preference items. If you live in a high tax state, state and local income taxes, mortgage interest and lots of kids, one of the more famous cases a man makes $90,000, had nine kids, paid an additional $3,400 in the AMT because of those 11 personal exceptions he and his wife and the nine children. That is not who it was meant for

SERWER: That is not fair.

LISCOVICZ: And that is the problem I think that a lot of people calculate that they get money returned to them and then when they have this alternative minimum tax that they are dealing with for the first time they see that they owe the government money. So is this something now that is part of our permanent horizon -- I guess my question really is how often do tax codes change?

LEVALLEY: The tax code is changing and especially in the past four years we have seen it change mid year, retroactively and multiple times during the year. I think for the AMT what we need to do is maybe put some pressure on people in Washington to address it -- you know, whom do they want to tax and how much do they want?

But this sort of parallel tax system that is catching people because it is not indexed for inflation -- they indexed the regular brackets to provide for or buffer against what is called bracket creep. That's never happened with the AMT. And it is snagging a lot of people.

ROMANS: You know Donna I think we can agree that the AMT is more dreaded this year than the audit. Which is always dreaded, it is the AMT I think that is the kitchen table tax story of the year, don't you think?

LEVALLEY: Absolutely. And it is going to be more of a story because what is going to happen is most people find it the first time if they don't use a professional. The first time they find out they usually get a letter in the mail saying you know what you actually owe on AMT and here is your penalties and interest because there is nothing on that 1040 that tells you do this separate in additional calculation to find out if you are subject to it you need to feel it out. Do I have a lot of preference items, or do I have a high enough income that I may want to look into doing that second computation?

SERWER: It's a nightmare.

LISCOVICZ: That extension is starting to look really good.

ROMANS: And it is automatic.

LISCOVICZ: Donna Levalley contributing editor J.K. Lasser, "Your Income Tax 2005." Not a pretty picture for a lot of folks. Thank you for joining us.

LEVALLEY: Thank you for having me.

LISCOVICZ: There is more to come so stick around.

Up ahead, how to make a car that will roll out of a showroom. Allen Wastler of Money.com will tell us if he saw Detroit doing just that when he went car shopping the other day.

And whether you want to brag about your ride or just tell us what's on your mind, drop us a line. The address is INTHEMONEY@cnn.com.

But first this week's "Money & Family."

Another day, another bill. If you are having trouble keeping up with your mail, you might want to make the leap to online banking. Here is a quick checklist before you get started. First, find out what it costs to make transactions online. Most banks don't charge a fee but if they do it is usually less than what you would pay on postage. Look into what security features your bank has in place. Most financial institutions have strict systems to protect you. Nail down what exactly you need to do should you notice any questionable activity in your account. Protect your PC: firewalls and anti-virus software can keep hackers from accessing any personal information such as account balances and your Social Security number.

And finally, monitor your account activity. Review your statements as soon as you get them and report anything suspicious to your bank. Early action could limit your liability and help clear up any errors. For more information log on to FDIC.gov.

I'm Susan Liscovicz for "Money & Family."

(COMMERCIAL BREAK)

LISCOVICZ: GM recently came out with some disappointing results but folks like our Web master Allen Wastler didn't need Wall Street to tell him American automakers are in deep trouble. Allen has more on that and a new fun site of the week. So first the bad news.

ALLEN WASTLER, MONEY.COM: Well we had to get a new car because the old car went kaput. So we had to get shopping for a new car. But talk about living the headlines. First we went to a Toyota place, right, because we're thinking maybe we should get a van, maybe we should get a truck -- I like trucks. We get there, it is hopping. It is like a disco, they got the high tech stuff, the plasma screens. And people are there, some people are sitting and talking turkey with the salesmen and others like us are just cruising around looking at stuff. I mean it is a bustling joint.

ROMANS: So that's Toyota.

WASTLER: Went across the street over to Honda. Honda they are a little bit snooty. Our cars sell themselves. It, too -- people there making deals. My kids came crawling out of a Pilot. The salesman was right behind them taking out the sticker -- they just sold that car. Went to a Volvo place, it is hopping too. We couldn't even look at the car we wanted to look at -- a Cross Country -- because the people just bought it and they locked it up. They didn't want strangers...

LISCOVICZ: Times are good for automakers.

WASTLER: It is all happening. So you know I like the Avalanche, I like the Suburban; Honey, please can we just look at the big trucks? Let's go check it out.

We go to the Chevy place. First, I thought it was closed -- no cars in the customer parking lot, it is dark. Go up and the door is open. I walk in there. It is empty. The salesman looks up from the back and comes running across the floor.

LISCOVICZ: An actual body.

SERWER: Do you know how I can get to the Toyota dealer?

WASTLER: We looked at some of the things and everything. You could smell the air of desperation there. You know what -- the incentives aren't really there anymore. GM is kind of backing off of that, and it is interesting. I talked to a University of California professor who is doing some research into the affect of discounting on car-maker profits and she said what I was probably seeing was an aftereffect of that. She said her research shows when you beef up on the discounts and the incentives -- when those are gone there's no reason for the people to come unless you have product buzz.

LISCOVICZ: Well let's do something fun after all of that bad news.

WASTLER: The producing staff found the fun little site where you can sort of look at the popularity of your name...

LISCOVICZ: Of your own name?

WASTLER: Of your own name and they do it with some fancy graphics. There are the graphics. As you search different names it goes up and down. We went and had a look at that. Now for me I'm a declining stock. You see Brittany, there -- she's got popular --

LISCOVICZ: She is the blue chip.

WASTLER: In the bottom -- you can't see it there -- but it is for the past 100 years how popular that is. So Brittany sort of came up. Gee I guess why it had the last-minute soar. So we looked up Allen, I'm declining stock. Look at that.

ROMANS: That means you're a value stock. Someone will buy you for the value.

WASTLER: Maybe so, but if you check out Susan. She should cling on to that idea really --

ROMANS: Oh my gosh.

SERWER: What happened? Wow. She was a '50s girl. Cruisin' with Susan.

WASTLER: You need to start introducing some new products.

SERWER: Bring back the poodle skirt there, Susan.

WASTLER: Christine, I wouldn't gloat too much.

SERWER: Bring back the poodle skirt, Christine.

ROMANS: Every, like, third person named their daughter Christine in the 1970s.

WASTLER: It just tapered right off. But you know what -- Andy is a good news story. He is right up there with Brittany.

SERWER: Me and Brittany Spears. You are red hot.

LISCOVICZ: Your bull market might be over, Mr. Smug.

WASTLER: Cute little site. You can check out; it is lots of fun.

LISCOVICZ: It truly lived up to its name, the fun site.

SERWER: Good, cute.

ROMANS: All right, thank you everyone. Coming up next on IN THE MONEY, it is time to hear from you as we read some of your emails from the past week. And you can send us an email right now. We are at INTHEMONEY@cnn.com.

(COMMERCIAL BREAK)

LISCOVICZ: Now it is time to read your answers to our question of about whether religion or the government is damaged more when the lines separating church and state are crossed.

David wrote, "Our government and society are damaged more, because when religious people debate you, they are trying to convert you. They cannot be convinced to change their minds or even allow you to keep your opinion. They're not interested in a democratic society."

Eric wrote, "Obviously, religion is damaged more. Take a look at Europe where every country has an official state religion and prayer in schools. Religion in Europe is mostly dead because of it."

And Douglas wrote, "The best argument I've heard for separating church and state came from a theologian who said that mixing religion and politics is like mixing ice cream with horse manure. It won't hurt the manure, but it sure ruins the ice cream."

SERWER: Wow.

LISCOVICZ: We'll leave it at that.

SERWER: Food for thought.

LISCOVICZ: Now for next week's email question of the week. Who or what is the biggest obstacle keeping us from reducing our dependency on oil. Send your answers to INTHEMONEY@cnn.com. And you should also visit our show page at MONEY.com/inthemoney that is where you will find the address for our fun site of the week see how your name measures up on the fun site. Thanks for joining us for this edition of IN THE MONEY.

Thanks to Lou Dobbs Tonight correspondent Christine Romans, "Fortune" magazine Editor-at-Large Andy Serwer and MONEY.com Managing Editor Allen Wastler. Join us next week on Saturday at 1:00 p.m. Eastern and Sunday at 3:00 p.m. or catch Jack and Andy all week on "American Morning" starting at 7:00 a.m. Eastern. Thanks for joining us.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


Aired April 10, 2005 - 15:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
ANNOUNCER: From New York City, America's financial capital. This is IN THE MONEY.

(END VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT: Welcome to IN THE MONEY. I'm Susan Lisovicz sitting in for Jack Cafferty. Coming up on today's program:

Vatican Inc.: When the cardinals sit down to choose the next pope it'll play like a company board meeting. Find out what's at stake.

Plus, decisions, decisions: It took weeks of wrangling, but Iraq finally has its interim president. See if Jalal Talabani has what it takes to pull the country together.

And how to get a hawk to think like a tree hugger: We'll look at why Republicans and Democrats are teaming up behind a new energy initiative.

Joining me tonight a couple of IN THE MONEY veterans, "Lou Dobbs" correspondent, Christine Romans, and "Fortune" magazine Editor-at- Large, Andy Serwer.

I think it could be safely said that the media often goes overboard on certain stories.

ANDY SERWER, "FORTUNE" MAGAZINE: No.

LISOVICZ: Like say, celebrity trials, for instance.

CHRISTINE ROMANS, CNN CORRESPONDENT: Car chases.

LISOVICZ: Right, especially when they are taken live.

ROMANS: Right.

LISOVICZ: This past week we have seen unprecedented coverage of one man's funeral. And I ask of you...

SERWER: An outpouring of coverage.

LISOVICZ: An outpouring of coverage. Not only on our network. And I'm just curious; do you think that we got it right?

ROMANS: I think that we did get it -- I don't think it was herd mentality this time around. I mean, this is one man's funeral, but let's keep in mind this is 1.1 billion Catholics in the world -- you know, 23 percent of the American population consider themselves Catholic. There are a lot of people who are watching this. And I think this is not a case of just running after the herd. I also think that people are asking a lot of good questions, talking about the child sex abuse scandal, talking about women and the future of the church and where it's going to go from here. So I think it's not just covering a funeral. I do think there are a lot of questions happening about the Catholic Church, and Christianity in general.

SERWER: Well, and I like to look at this also in terms of a political situation because here we have a leader of state, essentially, for 26 years. Very hard to think of someone who's been around that long -- maybe Fidel Castro -- but here is someone who was instrumental in the downfall of communism, knew every president, king, queen across the word. So, his body of knowledge is really something to think about and discuss.

LISOVICZ: You know, Christine and I both were at St. Peter's Square. You were lucky enough to meet the pontiff, I was there six years after he was elected and I saw tens of thousands of people in the square, as usual. But I saw history in the making and think this is one of the reasons why we saw this outpouring this past week. Thousands of Poles -- this was before Poland become independent, serenading the pope in Polish. A song that I knew actually, learned as a girl, "May You Live a Thousand Years" and the Solidarity banners waving proudly.

SERWER: I remember those.

LISOVICZ: I do remember those, and they were there and he was a catalyst for that.

SERWER: Now, the question is, are you going to sing the song now?

LISOVICZ: I am not, but I know it and I will spare everyone.

SERWER: Thank you for that.

LISOVICZ: We will move on, though. They've got hats and robes instead of suits and ties and what's on the line isn't dollars and cents, but souls and salvation. Still the cardinals picking a new pope face some of the same big issues that come up in choosing a new CEO. In fact, you may think of those cardinals as, well, the Vatican's board of directors. Paul Baard is going to rip on that idea. He is the professor of communication and media at Fordham University here in New York City.

Thanks so much for joining us, Professor.

PAUL P. BAARD FORDHAM UNIVERSITY: Glad to be with you. LISOVICZ: You know, as popular as Pope John Paul II was, a lot of his ideology wasn't with Catholics in Europe, in the United States, so this is really a pivotal time. Can his successor continue on that very conservative -- with that very conservative doctrine?

BAARD: Yes, of course there's been a mass by the large number of Catholics worldwide which has been infused somewhat by conversions and from Africa and South America. It has hidden a real basic problem. The church in the United States and Europe is in very serious trouble. Fewer than -- way fewer than a third of identified Catholics attend church regularly and that's symptomatic of something that's very wrong in their spiritual relationship, their relationship with God. And that's what needs to be attended to, right now.

So, they need to find a leader that can change that. And the excuses have ranged from materialism of the West and yet we find so many churches, there are so many churches that are thriving in the United States. Some say it's the doctrines of the church, they're too conservative, the role of women, and so on, and yet again, we find these churches despite these things are thriving, so there's something going on that's in the minority of Catholic churches, but that could well be replicated. And that's what the new leader needs to find and do.

SERWER: Paul, how important is that issue to the cardinals when they are going to be picking a new pope? Do they care about the status of the Catholic Church in America? I mean, obviously they do to an extent, but will they be thinking about that when they pick the next pope?

BAARD: Well, I think if there is someone that comes up from their ranks and really speaks forcefully and calls it is like it is -- and this often happens. I've served on boards of charities and corporations and when you have someone that has a real conviction about there's a problem here, we need to address it. It's not just the United States, it is Europe, it's where the church has been established for a while. There's no reason to think it's not going to occur in the new churches of Africa and so on. Someone has to be forceful, someone has to be really spiritually led, to say this is -- we've got a problem. I stand ready to serve, to bring about change.

ROMANS: We talk about cardinals as a board of directors. There are a couple things, if you are going to use that analogy: market share, globalization, big global structure that this church is. If you're on that board of directors, if you're hiring the next person to lead the Vatican Inc., what kind of strategy do you want? Do you want somebody who's going to come in and do a quick turnaround or do you want somebody who's going to continue the policies of someone who's clearly much loved, if we watch the footage this weekend? How do you hire somebody for that job?

BAARD: Well, you don't go and appease the bureaucracy that's in place. You don't go in their face, these are the people who are great workers and so on, but you need to pick a person who's independent and strong, and has one vision, and a conviction about that vision and wants to bring all the bureaucrats, wants to bring all this college along with him and delivers a very impactful convincing message to that extent. It would be good to have someone who has had a track record of doing that, who has lived that, who has turned around a -- oh, anywhere from a diocese to a -- to whatever might be under his domain, a hospital or a seminar, and so on. So, it would be good to see it.

But, what I'd be listening for is that conviction in the voice, that person whose -- it's not personal ambition and it's not someone who's a popular person who's built up the IOU's and votes, it's someone who really sees that this is a crisis.

Leading into this show you were saying that this has eternal consequences. When people aren't going to church, there's no reason to think that their eternal salvation is assured.

LISOVICZ: On that note, Professor, you know, one of the reasons why I think the Holy Father registered -- resonated with so many people who weren't even Catholic is that he walked the walk, as well as talked the talk. He was someone who defied the Nazis and Communists. Would it be attractive for the cardinals to choose someone from a country or a place or continent where there might be similar examples, for instance, Africa or maybe there's even talk about Russia, that kind of situation?

BAARD: Yeah, see that's a political decision and they need to make something better than that. It's not about the president of a club who has the most friends or constituencies. This is, this is life and death stuff. They need to pick the best person. It could be someone who has really honed his skills by being in those countries up against difficult odds and managed to organize things and inspire things. It could well be.

SERWER: Can the Catholic Church change to the extent that it allow priests to marry? That it would allow women priests? Do you ever see that happening? Change policies on divorce?

BAARD: Well...

SERWER: I mean, that's what would really change views here in the United States, wouldn't it?

BAARD: But it's not -- that's not necessary. They need to get the preaching done right. They've a Billy Graham right in the church, right now. Sam Jacobs down in Louisiana, a bishop. They've wonderful talent and turnaround artists; you have very talented executives that are part of the Catholic Church laity. This has been done before (INAUDIBLE) has been done before, one person having this big impact. He was a fisherman named Peter and he went before a large group and he said there's a need for change in your life. And 3,000 people committed that day to change. It can be done. With God, all things are possible.

ROMANS: Paul Baard, Fordham University, thank you so much for joining us today.

BAARD: Thank you. ROMANS: And when we come back, dance fever: Iraq's Kurds are celebrating with one of their leaders chosen to serve as the new interim president. See if the rest of Iraq has a reason to kick up its heels.

Also ahead, feel the fear: Tax day is coming up. Find out whether the IRS is getting a teeth and claws back.

And taking stock of your name: We'll show you a Web site that'll track your handle's popularity like a DOW heavy weight.

(COMMERCIAL BREAK)

SERWER: Kurdish leader Jalal Talabani was elected and sworn in as Iraq's new president this week. Talabani's two vice presidents, a Shiite and a Sunni, also too the oath of office. The threesome then nominated Ibrahim al-Jafari, a Shiite leader for prime minister. Does this mean Iraq is getting closer to a peaceful democracy? Let's find out.

Fawaz Gerges is a Middle East analyst and a professor at Sarah Lawrence University.

Fawaz, welcome back to the program.

FAWAZ GERGES, SARAH LAWRENCE COLLEGE: Thank you.

SERWER: First of all, can you explain to us how this government is organized? There's a prime minister and a president, right?

GERGES: Absolutely. The most executive position, in Iraqi government, is the prime minister. That is Ibrahim al-Jafari, who was named yesterday, who will be, you might say, the manager of the Iraqi government. The president, who is a Kurd, Jalal Talabani, is basically, it's a ceremonial position. And of course, you have the head of the National Assembly who is a Sunni Arab.

The truth is, here, is that, I think, the three communities -- the Kurds, the Sunni Kurds represent about three percent of the population and Sunni Arabs who represent 20 percent of the population, and Shiites who represent about 60 percent of the population -- distributed the three major positions among themselves -- a Shiite for prime minister, a Sunni Arab for the head of the National Assembly, and a Kurd for position of the president.

ROMANS: Professor, how is the sharing -- power sharing going so far? Each of the tentative steps that we have seen, it's all a move toward democracy. This is democracy at work, the horse trading and building coalitions and building consensus. How is it going?

GERGES: I think, first of all, it seems to me there is a new government or almost a new government in place in Iraq today. And even though Iraqi is -- as you suggested, it took them quite a few weeks to, at least, arrive at the consensus -- I think what the government tells us that Iraqis could transcend their differences and could work together to build a new Iraq. But, I would argue here, and this is really -- your question is very critical because I think the hard work begins now. Even though there's a government, first of all, the new government has to write a permanent constitution, a permanent constitution whereby Iraqis are deeply divided over the future direction of their country. And there are some major, major problems here.

First of all, Iraqis differ on the role of Islam -- whether Islam should serve as a source of the legislation or the major source of the legislation. Iraqis are also -- they differ over their all -- or the autonomy for the Kurds. As you know, even though the Kurds have now a president, which is really -- it's wonderful to see the new face of Iraq, the Kurds' Jalal Talabani being the president, let's remember for the last 60 years or so, Iraqis were persecuted and the Iraqi government -- but of course...

LISOVICZ: But, Professor, but you know -- sorry to interrupt, but what you're saying is actually very encouraging and very optimistic because what you imply is that these people are talking. They are talking.

GERGES: Yes.

LISOVICZ: And we're not seeing mosques getting blown up and our servicemen and women being killed. Not to say that there isn't still violence in Iraq.

GERGES: Absolutely.

LISOVICZ: You're actually encouraged more than I've heard you in a long, long time and is it because of something you've seen with Sunnis in particular?

GERGES: I think I am becoming more positive for a variety of reasons. I think Iraqis are talking to each other. I think the elections served as a watershed because the majority of Iraqis defy the insurgents and also, I think the last point about Sunni. The Sunni Arabs who represent about six million people out of the 26 million Iraqis, I feel to be deeply divided, now. I mean, the Sunnis are becoming divided and I think the Sunni Arabs realize they made major mistakes by not voting, by allowing the insurgents -- who are mainly Sunnis -- to dictate the agenda and, I think, as a result the Sunnis became weaker and weaker. And now what we are seeing in Iraq is that the Sunnis -- more and more Sunnis are saying, enough is enough. Let's participate in the political process. Let's participate in writing the constitution.

In fact, as you know, more than 60 Sunni clerics issued a fatwa a few days ago calling on Sunni Arabs to enlist in the security forces and the military. And this is really -- testifies to the dramatic change that has taken place among Sunni Arabs. This is a highly positive development.

SERWER: Let me jump in there, Fawaz, because I want to talk about the insurgency and you're really speaking to that. I mean it does seem to be declining, it may be premature to call it dead or over. And -- so I want you to talk about that very quickly. And then also, to what extent was the insurgency driven by outsiders? Maybe not at all?

GERGES: Yes, I mean, I think that you are raising here, again, very critical questions and the reason why the question of the Sunni Arabs, who represent 20 percent of the population, is crucial is because the Iraqi insurgency is being led and supported by Sunni Iraqis -- homegrown Sunni Iraqis -- as opposed to the foreign elements. Let's remember here, that according to all of the estimates including the CIA and American military there are no more than 1,000 foreign insurgents in the country, out of, let's say, between 20 and 40,000 insurgents. And this is why, the question Sunni Arabs and the fact that they are being integrated into the political process, I mean, carries hope for Iraq, because the sooner and more you integrate Sunni Arabs into the political process, the sooner you hammer a deadly nail into the coffin of the insurgency.

And you're right, Andy, it seems to me, we are beginning to witness the beginning of the end -- the beginning of the end of the insurgency.

SERWER: Thank you as always for your insight. Fawaz Gerges professor at Sarah Lawrence College and Middle East analyst.

Coming up after the break, Wall Street's family squabble: We'll look at the fight for control of Morgan Stanley and see what it's doing to the stock.

Plus, kicking the habit: Find out why Republicans and Democrats are teaming up to get America weaned off the oil pump.

And sayonara, Detroit: Money.com's Allen Wastler is going to tell us what he discovered when he went out car shopping a few days ago. That sounds good.

(COMMERCIAL BREAK)

ROMANS: Time now to check some of the week's top money stories. The summer months may bring relief from the cold weather, but not from high gas prices. The government's latest forecast pegs the average price at $2.29 a gallon this summer. That's at 38 cents higher than last year. This comes as a new CNN/"USA Today"/Gallop poll shows 58 percent of Americans surveyed says the high price of gasoline is causing them a severe or moderate hardship.

Another prescription arthritis drug is off the market. Pfizer pulled Bextra from the shelves after the FDA sited the drug for possible heart disease risks and serious skin conditions. This comes six months after Merck pulled arthritis pain pill Vioxx off the market. Bextra brought in $1.3 billion in sales for Pfizer last year.

And if you are going to Duke University next fall, just to get a free iPod, well you better press pause. Unlike last year, Duke is cutting costs and won't be giving iPods to all its incoming freshman this coming semester. But, the college says that its experiment was a success because the students found educational ways to use technology. SERWER: Another big story this week is the continuing civil war saga at Morgan Stanley. A group of eight former top executives continues to attack the CEO, Philip Purcell, and are calling for his ouster. They say Purcell is guilty of the greatest sin you can commit at a Wall Street firm; he's not making everyone enough money.

Morgan Stanley shares are actually closer to their 52-week high than their low, but critics say the stock's performance is weak compared to its competitors and now market analysts are saying that whoever wins the power struggle at Morgan Stanley will end up presiding over a weakened group and that makes Morgan Stanley our "Stock of the Week."

You know, this one of these great Wall Street epics: Huge money, huge egos. Here's the situation were the CEO is being criticized. He hasn't done a terrible job. He hasn't done anything criminal. And yet it raises the question, the broader question, what is the threshold for a CEO? You look at a Hewlett-Packard or a Disney, at what point does performance become such that shareholders and employees are unhappy and force change?

ROMANS: How powerful is this dissent, this group of eight, as they are being known? And if they were to oust of him and take over, who's to say they could do any better than he could?

SERWER: Well, you know, this is a result of a merger between Morgan Stanley and Dean Witter that goes back to 1997. The group of eight actually doesn't own that many shares. They're trying to convince shareholders -- again, like Disney...

(CROSSTALK)

ROMANS: But they are big shareholders.

LISOVICZ: But they're pretty big shareholders, right?

SERWER: Just a couple percentage points, though. They need to convince shareholders, like what happened at Disney, to force change and withhold votes. It's going to be a tough grinding battle. Critical, I think, is how do employees at Morgan Stanley react. Are they going to stay? Are they going to be happy?

LISOVICZ: Well, you know, that's really interesting because this is why the whole thing went over the top. What happened was that Philip Purcell, the CEO, wasn't popular at Morgan Stanley among the traders because he manipulated John Mack -- who came from that side -- out of the equation, out of his leadership position. When he let go of two top and very popular executives, in the past week, that's when you saw all hell break loose. And in fact, I thought, one scene I would have loved to have been a fly on the wall, is when one of them walks out after being fired by Mr. Purcell. There was a standing ovation, the "Wall Street Journal" wrote, in one of its vast trading floors. You know, these are -- these are block-long trading floors. So, you know that a lot of the rank and file is certainly with some of these people who are no longer there. ROMANS: There have been a lot of complaints, too -- the stock back in 2000 was 110 and now it's half than that. But I guess you could argue...

LISOVICZ: A lot of stocks were higher.

ROMANS: I'm playing devil's advocate, here. I mean, was it worth it at 110? I mean, maybe it wasn't worth it, maybe when you talk about the stocks being cut in half...

SERWER: Well, the dissents will show you. What they'll complain about is yes, the stock's down, but relative to other companies like a Goldman Sachs, like a Lehman Brothers, like a Bear Stearns, Morgan Stanley Dean Witter -- of course the Morgan Stanley people, the Philip Purcell people have their own set of statistics.

I think one problem that is unassailable here, these two companies, Morgan Stanley and Dean Witter, were never fully merged and when you talk to people at the firm today you're either a Morgan Stanley person or a Dean Witter person, still eight years after the merger.

LISOVICZ: And Phil Purcell still lives in Chicago. He commutes back and forth.

SERWER: Right, that's correct. So this is going be a saga, I think, that goes on for a while. So, stay tuned. The Wall Street battles are always the best ones, I think.

ROMANS: Yeah, they are.

SERWER: Coming up on IN THE MONEY:

Canning oil: See why some Democrats and Republicans are taking the same side about America's love affair with the gas pump.

Also ahead, kinder and gentler, or leaner and meaner: We'll look at whether the IRS is getting tough again.

And see if your stock is up: We'll check out a site that shows you how your name rates in popularity these days.

(COMMERCIAL BREAK)

GERRI WILLIS, CNN ANCHOR: Hello, I'm Gerri Willis at the CNN Center in Atlanta, IN THE MONEY continues in a moment.

But first "Now in the News."

Iraq's newly-elected president says he expects American troops to be gone from his country within two years. Jalal Talabani tells CNN it should be enough time for Iraqi forces to rebuild and secure control of the country. He also says he expects to be able to draft Iraq's new constitution by mid-August as scheduled.

President Bush is scheduled to sit down tomorrow in his Texas ranch for talks with Ariel Sharon. Mr. Bush and the Israeli prime minister expected to focus on a key part of the Middle East road map for peace --Israeli withdrawal from Gaza and the West Bank.

A spring blizzard is blowing across parts of Colorado. The wet, heavy snow has shut down Denver's airport, knocked out power to thousands of customers and closed several roads across the region. Denver is expecting up to ten inches of snow. Other areas could see more than two feet.

A complete wrap of the day's news at the top of the hour on "CNN LIVE SUNDAY." Now back to IN THE MONEY.

ROMANS: America's dependence on oil is a major economic and environmental issue and it is also a serious national security issue. Our next guest says two-thirds of the oil we rely on for transportation comes from countries that are unstable or hostile or both. That's why he and 25 other former national security officials sent a letter to the president last week calling for a new initiative on curbing oil use. Frank Gaffney is founder and president of The Center for Security Policy. He joins us now. Frank, welcome to the program.

FRANK GAFFNEY, CTR FOR SECURITY POLICY: Thank you, nice to be with you.

ROMANS: Strange bedfellows security hawks and environmentalists. But together you are trying to figure out a way to curb this high oil use in the United States because it is best for our national security among other things.

GAFFNEY: Well it is actually not just best for our national security. Our view is that it is imperative. I think it's either on the cusp of or in the midst of -- depending on how you look at it -- a national security emergency in the making.

We are reliant, as you said, in the opening on imported oil to power most of our transportation sector -- a vital sector of our economy. It comes in large part from places that are unstable at best, and downright unfriendly at worst. And it is increasingly the case that people who are determined to do us harm understand they can inflict that harm by attacking the infrastructure -- whether it is pipelines or tankers, or offload facilities or refineries. Not only overseas but in this country. Add on top of that growing demand from places like China and you have the makings of a perfect storm and one that really compels us to act on this problem immediately.

LISCOVICZ: You know Alan Greenspan gave a speech to the petroleum industry just a few days ago and said that 200 million light vehicles in this country -- light vehicles, he is not even talking about the 16-wheelers -- consume 11 percent of the total world production of oil. That's a mind-boggling figure. So it is also even bad for our economy because you see other countries like Japan for instance who are far ahead of the U.S. in terms of hybrids.

GAFFNEY: Right, well in fact the Japanese carmakers -- Toyota and Honda in particular -- have stolen a march on Detroit again by producing vehicles that are now capable of getting on average something on the order of 50 miles per gallon. That's quite impressive when the average in the States is something on the order of 17 to 23 or 24 miles per gallon.

Here's the real important thing. The very good news is applying what's called flexible fuel vehicle technology -- that is to say fuels that can be derived from plants or garbage or coal together with electricity, the plug-in hybrid technology that's available now -- we could get as much as 500 miles per gallon of gasoline consumed in cars that are not different from what we drive right now.

This is a very promising and I think further reason why we have got to get off of the current habit of importing so much oil and using so much oil. We can rely instead on indigenously-produced fuels for the transportation sector of the future. And frankly we have no choice but to do so.

SERWER: Frank, Christine talked about strange bed fellows -- meaning you being in bed with environmentalists I think is what she was discussing. But when you start talking about drilling in Alaska, I think one of you is going to start falling out of bed, right?

GAFFNEY: Well that's one of the reasons why we're not talking about that. If people want to get into oil, I happen to be a supporter of exploiting the oil that's in Alaska and oil shale that we can exploit in Canada and in the States. Others may not agree. I happen to be a supporter of nuclear power for the electrical power grids upgrade. Others may not agree.

What we can agree on though is we have technologies at hand right now that are available, that are cost-effective that simply need to be scaled up and made available to the consumers across this country that can do something about again what we all agree is an immediate problem namely excessive consumption of oil in the transportation sector. And by doing that we can buy ourselves some time to worry about things we may not agree about and getting those sorted out one way or the other.

ROMANS: Frank we're in an era of really big deficits. To really get people to conserve energy and to get people to make some of these new hybrid vehicles and to sell them, you are talking about subsidences maybe for conservation and for oil alternatives. Subsidies in time of big deficits can be a tough sell. Can you do it without subsidies or can you convince Washington that it is a necessity?

GAFFNEY: Well this is a very good question that has multiple answers. We have a blueprint -- we call it "Set America Free," it is available at Setamericafree.org -- that estimates it will cost $12 billion over four years to make investments of various kinds. Some of them may take the form of subsidies, some of them maybe tax incentives and some may be mandates. That really needs to be worked.

But what is certain is we will wind up spending probably vastly more than that if we don't do something about this oil dependency and god forbid some terrible cataclysm takes place -- an oil pipeline or infrastructure is taken down, countries stop being willing to sell us oil, Detroit fails to make the switch to plug-in hybrid technologies in time and winds up having the same kind of obsolescence that it faced back in the 70's and has to be bailed out. All of these could be vastly more expensive than doing something sensible now in a cost effective way.

The other answer is the electrical industry, which understands that it could get into this game of providing fuel for the transportation sector and some utilities are actually say now we'll give you $1,000 to buy a plug in hybrid car. There may be ways that this can be done without the taxpayer and market forces could be brought to work. What is certain is we're going to have to take steps like these. We can do it more cheaply now than later under much more difficult circumstances.

LISCOVICZ: Well let's hope it is not too little too late, that's for sure. Because it's an old argument and there have been plenty of people talking about it since the last energy crisis decades ago. Frank Gaffney founder and president of the Center for Security Policy, thank you so much for joining us.

GAFFNEY: My pleasure. Thank you very much.

LISCOVICZ: And there's much more to come here on IN THE MONEY. Up next how to spell fear with just three letters. You see them right there with tax day coming up. See if the IRS is really as scary as they say.

And wheels of fortune, MONEY.com's Allen Wastler went car shopping last weekend. He'll tell us how Detroit is making out against the other guys.

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SERWER: More than one million taxpayers were audited last year. But don't wag your finger just yet: our next guest says Congress is putting pressure on the IRS to be even more vigilant this year. So what are your chances of getting the dreaded audit? Let's find out from Donna Levalley a tax attorney and contributing editor to J.K. Lasser's "Your Income Tax 2005." She joins us now. Welcome Donna.

DONNA LEVALLEY, TAX ATTORNEY: Thanks for having me.

SERWER: So what about it? Are your chances greater now are of getting audited?

LEVALLEY: They have been on the rise for the past three or four years. That will continue with the IRS actually going to be getting some more money to do the enforcement that Congress has been wanting them to do. That's a dangerous combination of Congress wanting enforcement and the IRS willing to do it.

ROMANS: Is it true, Donna, that the more money you make the more likely you are to get audited, because I guess if the IRS can get you if you make more than $100,000 a year then the IRS gets more money for its coffers than if they go after the little guy.

LEVALLEY: Absolutely. Cash businesses and people who have a lot of control over their income they are in there with high-income folks. That's exactly the issue. If a disallowed deduction comes in with some of the higher income, the disallowed deduction will bring in bigger tax revenue to the IRS. They focus resources where they think they can get bigger bucks.

LISCOVICZ: Donna, Christine has got her act together -- her taxes are done, but Andy and I are still in the process of doing ours. So can you...

SERWER: Get the extension form.

LISCOVICZ: What are some red flags to avoid the dreaded audit?

LEVALLEY: Deductions that the IRS can look at more closely. You should be prepared to hand over those receipts. Things like a home office. Things like cell phones for instance. A cell phone is listed property. They can ask to look at those detailed bills. I suggest getting that service from your provider. Pay the extra charge every month, because you can write that off as a business expense.

If you have a sideline business and if you are trying to get into something different and you have a different occupation that pays your bills, keep your records in a very business-like manner. It will take a long time to turn a profit and they may try to disallow the losses because it is considered a hobby.

SERWER: Donna I'm hearing a lot of growling, barking and voices complaining about the alternative minimum tax. Talk about dreaded. That's worse than the audit -- I mean because it seems to be more certain than ever for large number of taxpayers. What can we do about this? Is there any hope that they will get rid of this thing?

LEVALLEY: I don't know if they'll get rid of it but they're obviously going to have to address it, the lowering of tax rates and bigger deductions has made people more vulnerable to the alternative minimum tax. What is difficult about it is unlike other things where if you'll lose your itemized deductions, your personal exemptions there is nothing on a line that says well if your income is more than this go out to this form. Fill out this extra set computations. The AMT is a ghost or a shadow tax system. Unfortunately the way that you can lower regular taxes can actually make you vulnerable to the AMT and because it really...

SERWER: It's a curse.

LEVALLEY: It is a curse. And because it functions like a flat tax, there really isn't too much you can do to avoid it

ROMANS: I can't even overstate how that alternative minimum tax has ruined my spring. Just a little pool around the newsroom here a lot of people have been hit by that. Some people are calling it the new middle class squeeze, people that didn't realize it. It was meant for rich people but a lot of people in the middle class are getting slammed by this thing.

LEVALLEY: They are because it wasn't appropriately indexed for inflation like other rates and brackets and deductions that move along with inflation. This has been kept really low. They sort of patch- worked over it by increasing the exemption periodically you know for two years, four years that sort of thing. And what is going to happen is as more people fall into this, and all you need is certain preference items. If you live in a high tax state, state and local income taxes, mortgage interest and lots of kids, one of the more famous cases a man makes $90,000, had nine kids, paid an additional $3,400 in the AMT because of those 11 personal exceptions he and his wife and the nine children. That is not who it was meant for

SERWER: That is not fair.

LISCOVICZ: And that is the problem I think that a lot of people calculate that they get money returned to them and then when they have this alternative minimum tax that they are dealing with for the first time they see that they owe the government money. So is this something now that is part of our permanent horizon -- I guess my question really is how often do tax codes change?

LEVALLEY: The tax code is changing and especially in the past four years we have seen it change mid year, retroactively and multiple times during the year. I think for the AMT what we need to do is maybe put some pressure on people in Washington to address it -- you know, whom do they want to tax and how much do they want?

But this sort of parallel tax system that is catching people because it is not indexed for inflation -- they indexed the regular brackets to provide for or buffer against what is called bracket creep. That's never happened with the AMT. And it is snagging a lot of people.

ROMANS: You know Donna I think we can agree that the AMT is more dreaded this year than the audit. Which is always dreaded, it is the AMT I think that is the kitchen table tax story of the year, don't you think?

LEVALLEY: Absolutely. And it is going to be more of a story because what is going to happen is most people find it the first time if they don't use a professional. The first time they find out they usually get a letter in the mail saying you know what you actually owe on AMT and here is your penalties and interest because there is nothing on that 1040 that tells you do this separate in additional calculation to find out if you are subject to it you need to feel it out. Do I have a lot of preference items, or do I have a high enough income that I may want to look into doing that second computation?

SERWER: It's a nightmare.

LISCOVICZ: That extension is starting to look really good.

ROMANS: And it is automatic.

LISCOVICZ: Donna Levalley contributing editor J.K. Lasser, "Your Income Tax 2005." Not a pretty picture for a lot of folks. Thank you for joining us.

LEVALLEY: Thank you for having me.

LISCOVICZ: There is more to come so stick around.

Up ahead, how to make a car that will roll out of a showroom. Allen Wastler of Money.com will tell us if he saw Detroit doing just that when he went car shopping the other day.

And whether you want to brag about your ride or just tell us what's on your mind, drop us a line. The address is INTHEMONEY@cnn.com.

But first this week's "Money & Family."

Another day, another bill. If you are having trouble keeping up with your mail, you might want to make the leap to online banking. Here is a quick checklist before you get started. First, find out what it costs to make transactions online. Most banks don't charge a fee but if they do it is usually less than what you would pay on postage. Look into what security features your bank has in place. Most financial institutions have strict systems to protect you. Nail down what exactly you need to do should you notice any questionable activity in your account. Protect your PC: firewalls and anti-virus software can keep hackers from accessing any personal information such as account balances and your Social Security number.

And finally, monitor your account activity. Review your statements as soon as you get them and report anything suspicious to your bank. Early action could limit your liability and help clear up any errors. For more information log on to FDIC.gov.

I'm Susan Liscovicz for "Money & Family."

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LISCOVICZ: GM recently came out with some disappointing results but folks like our Web master Allen Wastler didn't need Wall Street to tell him American automakers are in deep trouble. Allen has more on that and a new fun site of the week. So first the bad news.

ALLEN WASTLER, MONEY.COM: Well we had to get a new car because the old car went kaput. So we had to get shopping for a new car. But talk about living the headlines. First we went to a Toyota place, right, because we're thinking maybe we should get a van, maybe we should get a truck -- I like trucks. We get there, it is hopping. It is like a disco, they got the high tech stuff, the plasma screens. And people are there, some people are sitting and talking turkey with the salesmen and others like us are just cruising around looking at stuff. I mean it is a bustling joint.

ROMANS: So that's Toyota.

WASTLER: Went across the street over to Honda. Honda they are a little bit snooty. Our cars sell themselves. It, too -- people there making deals. My kids came crawling out of a Pilot. The salesman was right behind them taking out the sticker -- they just sold that car. Went to a Volvo place, it is hopping too. We couldn't even look at the car we wanted to look at -- a Cross Country -- because the people just bought it and they locked it up. They didn't want strangers...

LISCOVICZ: Times are good for automakers.

WASTLER: It is all happening. So you know I like the Avalanche, I like the Suburban; Honey, please can we just look at the big trucks? Let's go check it out.

We go to the Chevy place. First, I thought it was closed -- no cars in the customer parking lot, it is dark. Go up and the door is open. I walk in there. It is empty. The salesman looks up from the back and comes running across the floor.

LISCOVICZ: An actual body.

SERWER: Do you know how I can get to the Toyota dealer?

WASTLER: We looked at some of the things and everything. You could smell the air of desperation there. You know what -- the incentives aren't really there anymore. GM is kind of backing off of that, and it is interesting. I talked to a University of California professor who is doing some research into the affect of discounting on car-maker profits and she said what I was probably seeing was an aftereffect of that. She said her research shows when you beef up on the discounts and the incentives -- when those are gone there's no reason for the people to come unless you have product buzz.

LISCOVICZ: Well let's do something fun after all of that bad news.

WASTLER: The producing staff found the fun little site where you can sort of look at the popularity of your name...

LISCOVICZ: Of your own name?

WASTLER: Of your own name and they do it with some fancy graphics. There are the graphics. As you search different names it goes up and down. We went and had a look at that. Now for me I'm a declining stock. You see Brittany, there -- she's got popular --

LISCOVICZ: She is the blue chip.

WASTLER: In the bottom -- you can't see it there -- but it is for the past 100 years how popular that is. So Brittany sort of came up. Gee I guess why it had the last-minute soar. So we looked up Allen, I'm declining stock. Look at that.

ROMANS: That means you're a value stock. Someone will buy you for the value.

WASTLER: Maybe so, but if you check out Susan. She should cling on to that idea really --

ROMANS: Oh my gosh.

SERWER: What happened? Wow. She was a '50s girl. Cruisin' with Susan.

WASTLER: You need to start introducing some new products.

SERWER: Bring back the poodle skirt there, Susan.

WASTLER: Christine, I wouldn't gloat too much.

SERWER: Bring back the poodle skirt, Christine.

ROMANS: Every, like, third person named their daughter Christine in the 1970s.

WASTLER: It just tapered right off. But you know what -- Andy is a good news story. He is right up there with Brittany.

SERWER: Me and Brittany Spears. You are red hot.

LISCOVICZ: Your bull market might be over, Mr. Smug.

WASTLER: Cute little site. You can check out; it is lots of fun.

LISCOVICZ: It truly lived up to its name, the fun site.

SERWER: Good, cute.

ROMANS: All right, thank you everyone. Coming up next on IN THE MONEY, it is time to hear from you as we read some of your emails from the past week. And you can send us an email right now. We are at INTHEMONEY@cnn.com.

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LISCOVICZ: Now it is time to read your answers to our question of about whether religion or the government is damaged more when the lines separating church and state are crossed.

David wrote, "Our government and society are damaged more, because when religious people debate you, they are trying to convert you. They cannot be convinced to change their minds or even allow you to keep your opinion. They're not interested in a democratic society."

Eric wrote, "Obviously, religion is damaged more. Take a look at Europe where every country has an official state religion and prayer in schools. Religion in Europe is mostly dead because of it."

And Douglas wrote, "The best argument I've heard for separating church and state came from a theologian who said that mixing religion and politics is like mixing ice cream with horse manure. It won't hurt the manure, but it sure ruins the ice cream."

SERWER: Wow.

LISCOVICZ: We'll leave it at that.

SERWER: Food for thought.

LISCOVICZ: Now for next week's email question of the week. Who or what is the biggest obstacle keeping us from reducing our dependency on oil. Send your answers to INTHEMONEY@cnn.com. And you should also visit our show page at MONEY.com/inthemoney that is where you will find the address for our fun site of the week see how your name measures up on the fun site. Thanks for joining us for this edition of IN THE MONEY.

Thanks to Lou Dobbs Tonight correspondent Christine Romans, "Fortune" magazine Editor-at-Large Andy Serwer and MONEY.com Managing Editor Allen Wastler. Join us next week on Saturday at 1:00 p.m. Eastern and Sunday at 3:00 p.m. or catch Jack and Andy all week on "American Morning" starting at 7:00 a.m. Eastern. Thanks for joining us.

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