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CNN IN THE MONEY

Cost of Hurricane Katrina Cleanup; Effect of Hurricane on Economy and Stock Market; Rising Gas Prices; Charities Contributing to Disaster Relief; Insights on War on Poverty; Airline Bankruptcies

Aired September 17, 2005 - 13:00   ET

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


FREDRICKA WHITFIELD, CNN ANCHOR: A look at our top stories right now. A passenger train from Joliet, Illinois, derailed this morning on Chicago's South Side. The Cook County coroner's office confirms at least one death and dozens of injuries. As many as 76 in the Metro train accident. The exact cause of the derailment is not known.
Iran's new president tells CNN's chief international correspondent Christiane Amanpour his country is determined to pursue a nuclear energy program. The U.S. accuses Iran of trying to build a covert nuclear weapons program. You can see more of this exclusive interview on "CNN Today" at 2:00 Eastern.

I'm Fredricka Whitfield at the CNN Center in Atlanta. More news at the bottom of the hour. IN THE MONEY begins right now.

JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Welcome to a special edition of IN THE MONEY. I'm Jack Cafferty. Coming up on today's program, trading pain for gain in the wake of Hurricane Katrina. Gasoline climbed to $3.00 a gallon and more. Some economists think it ought to stay right there. Find out how a little hardship now could make sense down the road.

Also ahead, building a better charity. The Red Cross took a lot of heat after 9/11 and following Katrina. It's now the biggest cash game in town when it comes to relief agencies. See how a disaster aid organization might look in your dreams.

And the relocation nobody asked for. Katrina scattered much of the Gulf Coast workforce to places around the country. We'll look at what that's doing to the job market and eventually to the nation's economy.

Joining me today a couple of IN THE MONEY veterans, CNN correspondent Susan Lisovicz and "Fortune" Magazine's editor at-large Andy Serwer.

President Bush's approval ratings are at record lows hovering around 40 percent. The perceived failure of the federal government in the hours and first couple days following Katrina no doubt contributing to this precipitous decline in his numbers. He's got three years left on the job here.

ANDY SERWER, CNN ANCHOR, IN THE MONEY: Well first of all, record lows, Jack, I'm afraid you're really overstating the case. No doubt, Franklin Pierce and Andrew Johnson enjoyed similar numbers. CAFFERTY: They did?

SERWER: Yes. War is hell on a president and his approval ratings. No question about that. But that pales in comparison to domestic bumbling. Nothing is worse than that at that is what he is feeling the effects of.

SUSAN LISOVICZ, CNN ANCHOR, IN THE MONEY: The irony of course is that whether you voted enthusiastically for President Bush or you had your reservation, one of the things that he had in his favor was the perception that he would keep you safe and that he was going to create this government that was going to stay on high alert for our safety. So you had the one reason already hobbling him with the war, unpopularity of the war. People saying well, this is really making me feel safer. And two, the clear-cut failure of the government at all levels to respond to one the worst natural disasters ever.

CAFFERTY: The question now is whether or not Karl Rove and the spin machine that surrounds the White House can dig out of this thing. Can he recover from this?

SERWER: They're going to try. But you know what also hurts, high gas prices. That's another one.

CAFFERTY: All right. To be continued. When post-Katrina gasoline prices ran up more than $3 a gallon. Some economists had a radical suggestion. Keep the pain coming. They are pushing for a gas tax that would force all of us to start conserving and get serious about alternative energy sources. In other words the (INAUDIBLE) maybe it's time for a bigger stick. Joining us to talk about that now is economist Mark Zandi who is with Economy.com.

Mark nice to have you with us.

MARK ZANDI, ECONOMY.COM: It is good to be with you.

CAFFERTY: This is counterintuitive to this old county boy from Reno, Nevada. There is two things I don't need in my life, it is higher gasoline prices and more taxes. Why is this a good idea?

ZANDI: Well I think it's important for the nation economically and politically for our national security that we reduce our dependence on fossil fuel. That means we need to consume less of it. And we know from our experience past and current, the only way that happens is we have to pay a higher price for it.

LISOVICZ: But you know Mark, that's not the mentality of the United States of America, which feels entitled to cheap oil. I heard Richard Branson of Virgin the other day saying that he is thinking about building a refinery. We have two more airlines in bankruptcy protection as a way to sort of escape the soaring jet fuel pries. There's a real resistance, even in times of crises, to doing things like what you're proposing.

ZANDI: Of course, it doesn't mean that we're going to have to pay more, but I think in the long run, we'll have to pay less and we'll have a stronger economy for it. I'm not suggesting we don't do other things. We do need to build more refineries. We need to expand the supply of energy. But we also need to work very hard at reducing the demand for energy. You know, we weren't responding at all until prices spiked at $3 a gallon, prior to Katrina when bucks was $2.35 a gallon there was no change at all.

We were all driving as much as we were before. In fact more, gasoline consumption was raising a couple percent every year. We need to stop that. We need to change. The only way that's going to happen is if we face a higher price.

SERWER: Well I want argue with you a little bit there Mark. But first all I applaud your bravery. Because you know advocating a gas tax is political suicide. I hope you're not running for president or anything.

ZANDI: Not anytime soon.

SERWER: You wouldn't get elected.

ZANDI: But I bet my approval ratings are higher than 38 percent.

SERWER: They probably are. I take issue with the notion that we're cutting -- we're not cutting back on driving. I think some of the latest numbers show that when the prices spiked over $3 Labor Day weekend, that actual consumption did drop a bit. So can't the markets just take care of everything Mark?

ZANDI: Well that's the point. It took $3 gasoline plus before we actually began to respond. My point to you is if things moderate and prices go back down to $2.50 to $2, which they probably will, then we'll go right back to where we were and we're going to be consuming as much energy and oil. Our oil import bill will be $150 billion a year and our dependence on foreign producer is going to rise with each succeeding year and that's an economic problem today and it's going to be a mammoth economic problem down the road.

CAFFERTY: Let me ask you a political question. It was like waiting for Cadough (ph) but we finally got an energy bill. It took years. They finally passed something they're calling an energy bill and the president signed it. It pays absolutely no attention to mileage requirements for automobiles in this country. Forty percent of our oil goes into our gas tanks.

We have an energy bill that fails to address the SUVs and the behemoths that are out there on the road, getting five or six miles to the gallon, and yet we are paying lip service to all these other things. What is it about a government mentality that ignores where 40 percent of the oil goes when they pass a piece of legislation that's designed to reduce our dependence on foreign oil? I don't get it.

ZANDI: Well it's very easy politically to provide incentives, tax incentives and other incentives to energy, industries and companies, to go out and explore for more energy and to develop more energy. That's fine. It's very difficult politically to ask consumers, or the voters to pay more energy. I don't think cafe standards are the right answer. That, to me, won't work. I think a cleaner, more elegant solution that will cause us to change and to generate revenue for the government is to have a gasoline tax and keep prices up for consumers.

LISOVICZ: Do you have -- Mark, I'm curious do you have a model that's based on? Because obviously it hasn't been done here. Has it been done in another -- in other economies where it's actually been roaring success?

ZANDI: Well, you know we have a gasoline tax. The federal government has one, state governments have one. What I'm calling for is a variable gasoline tax set at a higher level. They've done this in Europe over the years. So it has been done. The process is in place. We don't have to do anything except --

LISOVICZ: Jack it up.

ZANDI: Jack it up. I think -- no, here's the other benefit of this, which I alluded to, which is very important. This could generate significant amount of revenue for the federal government, which is desperately needs. It needs to pay for Katrina, it needs to pay for our battles overseas, it needs to pay for Social Security; it needs to pay for Medicare and Medicaid. We need to generate revenue. This is a good way to generate revenue and at the same time, accomplish another objectives, reduce our dependence on fossil fuel.

CAFFERTY: Sounds like a winner. Mark Zandi, ECONOMY.com. Thank you very much for joining us. I appreciate having you on the program.

ZANDI: It was a pleasure.

CAFFERTY: When we come back on IN THE MONEY, first aid when it comes to help for Katrina's victims, the American Red Cross is the biggest game in town. See if it as good though as it could be.

And tough times, bankruptcies is a popular word in the airline industry. We will show you what the future holds for the beleaguered business. It is not pretty.

And turning a disaster into a war. The hurricane turned the spotlight on some of America's poorest people. Find out how it could kick-start the war on poverty.

(COMMERCIAL BREAK)

CAFFERTY: People all over the world have been donating to help those hit by Hurricane Katrina. No one's bringing in more cash than the American Red Cross. One estimate I read as we were taping this the end of last week over $600 million and rising.

After taking flack for the way it handled some of the contributions following 9/11, the Red Cross is trying to do better this time around. Around here, we began thinking about what the Red Cross does well, what it could do better and how the ideal relief organization might work. For that, we're going to hear now from Daniel Borochoff, who is the president of the American Institute of Philanthropy, which is a charity watchdog group based in Chicago. Mr. Borochoff welcome to the program. Nice to have you with us.

DANIEL BOROCHOFF, AMERICAN INSTITUTE OF PHILANTHROPY: Yes nice to be here.

CAFFERTY: Anybody tell you, you look like Chris Berman over there on ESPN, because you do?

BOROCHOFF: I've heard that before.

CAFFERTY: All right. A Pavlovian response in the United States, there's a disaster, the American people pick up the phone or whatever, and they respond to the Red Cross. In some ways I guess that's a wonderful thing. They have branding in the charities like Coke does in the soft drink industry. But there's more to the Katrina story than just a single charity. Talk a little bit about some of the other charities that maybe aren't getting the kind of response they should and why it's important that they do.

BOROCHOFF: Well, the Red Cross is getting 80 percent of the response here. They got about half of the money during 9/11. So it's -- they're the front line emergency relief group. They can turn on a dime to help in crises. It's good that they get the money early on. But as this crises goes forward, we need to get beyond the Red Cross. The American public needs to think about all these great nonprofit groups that can help. Because we need all of our charitable resources here, this too big of a crises to not get the other groups involved in.

The Web site of the American Institute of Philanthropy at Charitywatch.org has identified over 20 groups in all kinds of areas that can help out here. I can get into that with you if you'd like.

LISOVICZ: And Daniel and one other things about this disaster is it's ongoing. It will certainly take months if not years, to restore that area to something resembling normalcy. But, you know, I interviewed the chairman of the American Red Cross in the last week and one of the interesting things they were calling out for, I'd be curious to hear what you have to say about, is not only money and blood and supplies, but also time.

Asking Corporate America to donate people to work as volunteers on the company dime. The New York Stock Exchange says it's going to be one of the organizations that does just that. What do you think about that? Is that something that's a good idea and the right time?

BOROCHOFF: If it's needed. If you want to do disaster work, you need train and experience in disaster work. If you're a doctor, and EMS worker, you're certainly valuable. A lot of the volunteer jobs, though, sorting mail and answering telephones, not quite as glamorous.

CAFFERTY: Did the Red Cross get their situation cleaned up there after 9/11? What was the problem? What have they done to fix it? BOROCHOFF: The problem in 9/11 and years before that, they would raise more money than they would need for a particular disaster and look to use it for other things. Not necessarily bad things, but other things. And so what they've agreed to do -- and they proved this during some other recent disasters, is -- such as the tsunami, when they raised enough, they would announce it and then shut it off so money could go to other causes.

We really have to think about the intermediate and longer-term needs here. Because what happens too often after a crisis is the Red Cross goes in, they do their job, they help out the people. But then the people don't have much money or aid afterwards. They heard about all of these hundreds of millions of dollars being raised and then they don't have anything so --

CAFFERTY: Why does the Red Cross --

BOROCHOFF: We need to look at all these other needs, need to be addressed.

CAFFERTY: They tell us when they have raised enough. But they don't tell us how much that is, do they?

BOROCHOFF: They can -- they don't know yet. I mean, the situation is shaky now. They're saying now they want somewhere around $1.6 billion that they need for this crisis. But they're not giving us costs. They're not giving us much in the way of breakouts as of yet. They've said about -- they spent about $140 million of the money they've raised so far. But, you know, it does take time for them to come up with the number and we'll ask for accountability here.

SERWER: Daniel, let me break in; ask you a very quick, very naive question. That is exactly where does the Red Cross money go?

BOROCHOFF: Well, the money goes -- it goes to direct aid to people. But it also goes to services. They've set up hundreds of shelters across the country. They also want to help 750,000 people in various ways. Their psychological counseling is one thing to give people vouchers so they can buy things that they need. They have lots of chapters that they're sending money to in the hard-hit areas. They're training volunteers. There's a number of different ways they're using the money.

SERWER: Great, all right well thank you for explaining that to me. Daniel Borochoff is the president of the American Institute of Philanthropy.

CAFFERTY: He looks like Chris Berman.

SERWER: I know. Thank you for coming on the program and dealing with us.

Coming up after the break, four is a crowd. Delta and Northwest join United and U.S. Airways in bankruptcy protection. We will look at what is next in the airline business. Plus talent on the move. Hurricane Katrina forced the Gulf Coast work force to pack up and get out. See how that is changing job markets across the U.S.A.

And leading the charge. America reflects on it's poor after Katrina. We'll talk to Tennessee Congressman Harold Ford Jr. about fighting the new war on poverty.

(COMMERCIAL BREAK)

LISOVICZ: Now lets take a look at the week's top stories in your "Money Minute." Billions of dollars in federal relief money is already flowing to devastated Gulf Coast region. As companies race to win lucrative government rebuilding contracts there the Bush administration says it plans to keep a close eye on the money. A team of 30 Homeland Security investigators and auditors will be based in the effected areas to monitor spending.

Economic reports out this week raising concerns about inflation. Surging energy costs and producer prices, or wholesale prices higher last month. However, consumer prices remain tame. Some economists say the Federal Reserve may pause in its campaign to raise interest rates due to Hurricane Katrina's effect on the economy. The Fed meets Tuesday.

Americans across the country expected to personally feel the effects of Hurricane Katrina. According to a CNN/USA Gallup Today poll, 43 percent say the disaster will affect their finances a lot over the next year while more than a third predicted Katrina would affect their budget a little. Just 19 percent said the hurricane would not have an impact on their wallets at all.

SERWER: Some very big news in the airline industry. Two of the nations largest carriers Delta and Northwest filed for bankruptcy protection within minutes of each other Wednesday afternoon. The moves were long anticipated. Both airlines had warned they were struggling to deal with soaring fuel costs before Hurricane Katrina sent prices even higher. Delta and Northwest joined United and U.S. Airways in Chapter 11.

So this week instead of focusing on one stock, we're going to talk about the airline sector as a whole. I know about high fuel cost. I know about 9/11. But I've got a bigger bone to pick. I want to go further back to 1978 when this business was deregulated. Since then, 100, 100 airlines, have declared bankruptcy or been liquidated, including 12 majors. We have six in bankruptcies.

LISOVICZ: Eastern, Pan Am.

SERWER: Yes those are the old ones. Eastern, Pan Am, TWA, Midway. Now you've got United, U.S. Air, Delta, Northwest, Hawaiian, and also who am I forgetting here, ATA. What's wrong with this picture? I think deregulation was a big mistake. We got cheaper tickets. But the industry is dying. And employees of this business are getting killed. This is a huge mess. LISOVICZ: But then you see Southwest Airlines come in and it's not only popular, not only getting people there on time, the company is really profitability. I mean, it's really ...

SERWER: It can be done, is what you're saying.

LISOVICZ: Exactly.

(CROSSTALK)

CAFFERTY: You raised the question about can't the market take care of these things. And in the case of the airlines, some of the discount airlines that are around on the scene now don't have the kind of costs that the Delta's and the Americans have. There is a small airline right across the tarmac in Atlanta whose labor costs represent about 20 percent of their overall revenue, as opposed to the 40 percent it represents for the big carrier like Delta. Smaller, light, more efficient, cheaper. Why not let the big guys go belly up? Brandif's (ph) gone nobody missed them. Some of these other guys are gone; nobody's miss them, people still getting around.

SERWER: Well I think that would be a good thing. You know part of the problem, Jack is these enablers, and I call them. Wall Street enablers who keep bailing these airlines out. The government helped out after 9/11. I think we would all agree that's probably a real positive and necessary thing. Now it's not really the government who is bailing these people out. There's always someone around with a couple hundred million dollars in their pockets because running an airline's sexy, it's cool. We saw a lot of people, Carlyle (ph), Warren Buffett got involved once, Julian Robertson. A lot of heavy hitters like this business. But it's a bad business.

LISOVICZ: And U.S. Airways is in its second bankruptcy. And you know yet maybe we as consumers won't miss it without some of these airlines, but think about if you worked 30 years for this company and your 40(K) is gone and your pension is gone. There are tens of thousands --

SERWER: Hundreds of thousands of people who have gotten killed by this business. And --

LISOVICZ: And it's sad.

SERWER: I think the government does have a role. Because you look overseas Jack and there have been some bankruptcies there with government-run airlines. But overall, I think they've got to have a bit a hand in. But you're right; I mean the unions have to be responsible too.

CAFFERTY: And they created in all fairness they created some of their own troubles.

SERWER: A lot of their troubles that is what I mean. No I agree with you.

All right. Coming up on IN THE MONEY, help wanted. Some American cities are working to connect Gulf Coast evacuees with jobs. See what that means for the rebuilding efforts in the towns they left behind.

Plus the hidden America gets its prime time slot. Hurricane Katrina put the spot light on poverty. See if that will shake up the country enough to bring permanent change.

And rising demand-sinking supply. A new report says Hurricane Katrina will have a long-term effect on the U.S. housing market. Find out what it means for perspective buyers and sellers.

(COMMERCIAL BREAK)

WHITFIELD: Hello. I'm Fredricka Whitfield at the CNN Center in Atlanta. At least one person is dead from a passenger plane derailment this morning on Chicago's Southside. Dozens of people were injured, 17 of which required immediate emergency medical care. Officials with the National Transportation Safety Board are en route to the scene and will take charge of that investigation.

In Iraq, police say a car bomb killed at least 30 people today in a town on the eastern outskirts of Baghdad. The attack occurred in a mainly Shiite area. Emergency officials tell CNN about 38 people were wounded.

The new president of Iran addresses the United Nations this afternoon. Earlier in an exclusive interview with Christiane Amanpour, the Iranian leader said his country remains committed to pursuing nuclear energy. We'll air a portion of that interview in our 2:00 hour.

I'll have all the day's news at the top of the hour. Now back to IN THE MONEY.

LISOVICZ: Many corporations opened their wallets to the victims of Hurricane Katrina in the days following the storm. Now many are opening their doors, too, offering job opportunities to those displaced by Katrina. And that's an economic boost for cities like Houston or Baton Rouge.

But what does that mean for New Orleans and other Gulf towns an they try to rebuild? Robert Reich served as labor secretary in the Clinton administration; he is now professor of Economic and Social Policy at Brandeis University. Welcome. It is good to see you again Mr. Secretary.

ROBERT REICH, FMR. LABOR SECRETARY: Hi Susan, how are you? Good to see you, too.

LISOVICZ: Enormous devastation but enormous opportunities, too. This economy has proved itself to be nothing if not resilient.

REICH: There are enormous opportunities, Susan, indeed. The federal government's is talking about $200 billion now of redevelopment, reconstruction activity, so they'll be a lot of jobs down there. The question is whether those jobs are going to go to the people who were displaced by the hurricane, many of whom don't have job skills.

SERWER: Mr. Reich let me ask you a question. We're hearing reports from a lot of people in Houston, San Antonio and other places that they're happy there, they might not want to go back. Couldn't that be a very serious problem?

REICH: Well, it could be a very serious problem, if New Orleans wants to get them back. Many of these people, though if they get good jobs out of New Orleans if they really did not have very good housing or other conditions in New Orleans, well, why not celebrate the fact that America's a place where people can reinvent themselves and even after disaster they can go and get a better life.

CAFFERTY: I'd heard an estimate by the secretary of the treasury in the days right after the hurricane that likely short term, the storm would probably knock a half a point off the gross domestic product and the then the rebuilding process once it gets under way would add that half a percentage point back to GDP. Dire predictions are the storm and its implication and effects afterwards might be strong enough to tip this economy over into a recession. Where do you come down on that debate?

REICH: Well, look there are two separate debates here. We shouldn't get them confused. One debate is about the simulative effect of all that new reconstruction around the New Orleans and the Gulf Coast. Undoubtedly that is going to stimulate the economy; it is going to improve the national product. Every disaster after we get rebuilding does actually improve the economy.

But there's something else going on, consumers are worried about the cost of gasoline, home heating oil, come up in future month. If we don't get more gas, more home heating oil, more natural gas in the pipeline, then consumers may worry because their bills are going up, they may not go to the malls, as much. They may not buy other things. And that could certainly slow the economy way down.

LISOVICZ: But you know what's interesting is in the two weeks immediately following Hurricane Katrina, the stock market rallied. Each of the three main averages were up 2.5 percent. I say that only because there were such fears of such massive body count, oil was hitting all-time highs. It's come down considerably since then. When you look at the last disaster to hit the U.S., the economy after 9/11 was in much worst shape. Don't you think, then, that that's a sign that the economy actually can weather this pun intended much better?

REICH: Yes, the economy will, I think, overall do fairly well. Remember, the economy is not functioning on all four cylinders right now. We've got oil price shocks potentially. We've got also worries about huge deficits, trade deficits and budget deficits. And we have consumers out there who have not had a raise. Minimum raises are not going up. So a lot of people are concerned, they may not buy very much. The economy probably will not take a huge hit from Katrina. The economy is not all that gangbuster anyway.

SERWER: Let me ask you about the labor markets again. Was it legitimate for President Bush to suspend the prevailing wage laws on federal contracts, down in the Gulf region so that more workers can be hired? Wasn't that a good thing?

REICH: No, it was a bad thing. Because the prevailing wage laws essentially mean that the 3,000-pound gorilla called the federal government can't go into a place and underbid prevailing wages. It doesn't mean more jobs. There will be a lot of jobs down there anyway.

Kind of an odd thing for the federal government to do because, remember, at the same time that Bush suspended those prevailing wages down there, he also authorized no bid contracts with Halliburton and Bechtel and some big companies for reconstruction in the Gulf Coast. That means the government is not willing to use its bargaining leverage when it comes to big companies doing construction. It is willing to use its bargaining leverage to get wages down as fair as possible. It doesn't seem fair to me.

CAFFERTY: What about the dollars involved here Mr. Secretary? Estimates running as high as $300 billion, going to be needed to restore the Gulf to its pre-storm luster. We're spending something in the neighborhood of a billion plus dollars a day in Iraq. We're running trade deficits and federal budget deficits, are numbers that I can't even write on a piece of paper. Is it time to look at the revenue stream here; is it time to talk about tax increases, to make some effort at reducing the deficit spending?

REICH: Well, it's certainly not time to eliminate the estate tax or to infinitely extend Bush's other tax cut. We have enough problems as it is. It maybe time to -- maybe not increase tax, but at least ask Congress to reconsider that transportation bill. All that pork $260 billion of pork last summer -- you know, bridges to nowhere in Alaska. I mean you've got mobile skating systems set up around parks. I mean this is crazy. When we want to rebuild Louisiana, want to rebuild Mississippi, you got to get rid of that pork.

So I would say the president should declare kind of a no -- bring the pork back to Washington day. And have this entire Congressman come back and put the pork on the table no questions asked. And then use that for Louisiana and Mississippi. Look, I'm being only half facetious here. We don't have a capital budget in this country. We need a capital budget, setting forth priorities as to what we ought to build and when we ought to build it. Now is the time to do it. We can't afford not to.

LISOVICZ: Professor Reich you might be encouraged by a "Wall Street Journal" editorial this week, how the good citizens of Bozeman, Montana are willing to give up their piece of the pork in the Transportation Bill and send it to the Gulf Coast and the "Journal" was encouraging others to do the same. So maybe there's hope. Robert Reich is professor at the Brandeis University and former labor secretary. Good to see you and thanks for joining us.

REICH: Thanks, bye-bye.

LISOVICZ: Coming up on IN THE MONEY, fighting the war on poverty. Hurricane Katrina is forcing the government and the nation to take a hard look at the state of America's poorest citizens. And a bit later in the program, believe it or not, Katrina's destruction could be a shot in the arm for an already hot housing market. We'll tell you what that means for you. Right after this break.

(COMMERCIAL BREAK)

SERWER: The latest census figure show 37 million Americans living below the poverty line. In the aftermath of Hurricane Katrina, that number is likely to get even bigger. Although the images we have seen out of the Gulf region have helped put the spotlight on the nation's poor citizens, the question remains, will this disaster kick start America's war on poverty?

Joining us from Washington is Congressman Harold Ford, Jr., Democrat from Tennessee. Welcome Congressman. January 8th, 1964, Lyndon Baines Johnson, his State of the Union Address, declared, the administration, here, now, declares unconditional war on poverty in America. Is it time to revive that fight, or have we simply not -- do we need to start it again?

CONGRESSMAN HAROLD FORD, JR., (D) TENNESSEE: We certainly need some new ideas strategies and a new charge. LBJ, and even before that, FDR, Franklin Delano Roosevelt were able to use the force of government, partnering with business, to try to make a difference in people's live. I think Katrina has exposed an ugly reality that over the last several years, we've seen more than 1 million people added to the poverty ranks. Even after welfare reform.

We've seen, since 1999, the bottom one-fifth of Americans earning less than -- I should say income decreasing by some 10 percent, or almost 10 percent. And even as you look at world numbers you find the 500 wealthiest people in the world, their income last year was larger last year than the 416 million poorest people in the world.

I'm not an advocate for government just pouring money and spending money and giving money to people. But I am an advocate for us to figure out ways to make public institutions like schools work better, to provide better saving instruments and vehicles and investment vehicles for middle class and poor families in this country.

We do a lot for people who earn $300,000 a year or more in terms of investment and savings incentives. But we do very little to offer those who earn $30,000 or $40,000 a year, to help encourage them to save and to invest for the future. Hopefully this will provoke a new wave of thinking and a breakout, kind of innovation, as it relates to how government can help battle poverty. More importantly, lift people to a new level and to a higher level economically.

CAFFERTY: In terms of the kind of thinking that goes on in the country, on the subject of poverty, let me get your reaction to something that Barbara Bush said in the wake of the Katrina hurricane. I quote here, "So many of these people here were underprivileged anyway. So this is working very well for them." Referring to people who lost their homes, their cars, their clothing, all their possession, maybe members of their family, and were eventually, after a weekend hell in New Orleans, transported to the Astrodome in Houston, Texas where they were stuffed on to cots that were, you know touching each other all across the floor of the Astrodome.

Some of them wonders whether their pets lived, where their kids were, whether their spouse or other members of their family survived. And we get the comment out of the former first lady of United States, "This is working well for them." What does that say about the state of mind in this country, when you talk about the poor?

FORD: You know, I'm not in the business of criticizing grandmothers, but I do think that her comments are indicative and representative of a lot of people in that class in our country. These people are Americans. And they were uprooted, through no fault of their own. By the grace of god, my city, Memphis, was not hit and affected by it, as New Orleans and other folks who live along that coast.

I think the question now is, how do we react, how do we respond? I don't know what was in Mrs. Bush's head, but her comments were way off base and completely out of line. That being said, poor people in this country, in working people in this country, deserve the same breaks as anyone else in this country does. They deserve to have good schools for their kid and hospitals that work and frankly a government that will respond when a disaster hits their area.

LISOVICZ: Congressman, but what -- certainly, everyone agrees that job creation is one of the most important keys to escaping poverty. There is an opportunity right now in the Gulf with some of the poorest states in the nation. Do you like what you're seeing so far? We're not talking about the immediate aftermath of the hurricane but now, with the relief projects that -- the people that have come into the area, are you encouraged by what you see? Give us the status report there.

FORD: Sure, thanks for the question. One of your segments I think talked about where's the Red Cross money going and other money. It's a good question. I think the same question should be posed to the government. The $62 billion we've spent, we have to ensure that it's going to reach families that is going to help people find new lives, whether it's through job training or being able to buy a new home and start a new life. We need some kind of czar to ensure that money's being spent right.

Number two, there's no doubt job training and skill development is the key to America's future. As we find ourselves being surpassed on the global level by India and China on so many fronts. And as we find them graduating smarter entrepreneurs and workers, we have to focus on public institutes in our own nation.

I can only hope that the schools in New Orleans and in cities and in rural areas across the country, that the hospitals in these areas, that the job training for current workers and settings all across this country that we will reevaluate these efforts. And again it's going to take some new and creative and in some instances fundamentally radical thinking on some of these parts.

LISOVICZ: And we will certainly be following it. And I know that you will be speaking out it frequently. Congressman Harold Ford, Democrat of Tennessee. Thanks so much for joining us.

FORD: Thanks for having me.

LISOVICZ: Coming up, the housing market once again kicks into high gear. Find out why Katrina maybe driving up home prices from Baton Rouge to Boston and everywhere in between.

And put our producers to the test with your e-mail insights, drop us a line. The address INTHEMONEY@CNN.com.

But first this weeks "Money & Family."

Fixing up a hope damaged by floodwaters, fire or other natural disasters can be an overwhelming task. And that is why hiring the right people to help you do the job is so important. Here are some tips on finding a contractor. Ask around. Try getting recommendations from neighbors and co-workers.

A good referral is a good first step. Know who you're dealing with. Make sure any contractor you hire is licensed and insured. You can check with the Better Business Bureau or The Home Builders Association to see if any complaints have been filed against him or her.

Don't rush into signing a contract. Read it thoroughly. And don't just go with the lowest bidder. Remember, you should always get a copy of the signed contract before any work on your home begins. Finally don't hire a contractor who wants to be paid up front. One- third of the total cost is a common down payment. Don't make the last payment until the work is complete. That way, you can be sure the project is done to your liking.

For "Money & Family," I'm Susan Lisovicz.

(COMMERCIAL BREAK)

CAFFERTY: Over the last few months more and more of the so- called experts have been saying the housing market is starting to deflate in places around the country. But a new report out this week says Hurricane Katrina may put the air back in the bubble with prices actually expected to rise. Money.com managing editor Allen Wastler is here with more. This is unconventional wisdom to me. What are you talking about?

ALLEN WASTLER, CNN ANCHOR, IN THE MONEY: Well, it's basic economics actually. It is working on the demand side and supply side. First, the demand side. If a storm comes through and erases a number of items of a product like a lot of houses, well, there's less supply, still people there that want it, so it's going to drive prices up. And in fact you're already seeing that down there right in Baton Rouge. Baton Rouge prices in the last two weeks have gone up almost 30 percent.

CAFFERTY: Wow.

WASTLER: With people just going around saying, I need a place to live, can I buy your place? You're already seeing that there. Once housing moves back into Mississippi, Louisiana, the affected areas, remember, the land's still there, it is still a nice place to live in a lot respects, those prices are going to go up. Now, demand side, the inputs going into building houses are going up. For two reasons, one is, everybody's saying, quick; I need plywood to put it up. You have a lot of demand going for the inputs.

Also, go to a construction site sometime and check out all the machines. They're fired by diesel, gas, and things like that. Look at the PVC pipe, the plastic sheeting, the shingles for the roofs, all made with petroleum products too. Those prices are going up. So those inputs are going up. Also, New Orleans was one of the biggest cement ports around.

It closed down. They can't bring in the cement material; they can't bring in a lot of gypsum. So those prices are going up and if they do redirect to Houston or other ports on the Florida, Gulf Coast, they got to go in by truck. All those prices going up. So put that all together and it means you are seeing a basic price inflation on that side.

CAFFERTY: What does that have to do with Boston?

WASTLER: Ah. If the plywood -- I'm Mr. Plywood maker, OK? I can send it to Boston, where I'll get $20 a sheet. Or I can send it to Mississippi, Louisiana where I'll get $40 a sheet. Hey baby guesses where I am sending the plywood.

CAFFERTY: So now there is a shortage in Boston.

WASTLER: So now all of sudden in Boston, you know, I'm building houses here. And so we're going to see that ripple effect.

SERWER: And a lot of the prices on commodities have been going up before on lumber, and steel, copper so it continues.

WASTLER: You know how the hot money goes. Big storm, there is going to demand, do quick, let's put it in there and that's how they play the market.

CAFFERTY: Interesting. All right.

We have been off the air for the last couple of weeks here on IN THE MONEY due to breaking news and Katrina and things. Nevertheless, you've kept your comments flowing in our direction. Here's what some of you had to say about Hurricane Katrina and the efforts to rebuild the Gulf towns and cities destroyed by the storm.

We began with the first and last letter I will ever read on this program from anybody named Spud. "Employ and pay all the able-bodied evacuees. It would solve many problems, including giving people a purpose, helping those who cannot work." If your name is Spud, don't write to us. If your name is not Spud, don't sign your letter Spud, because I'm never reading another one.

Another viewer Mel wrote this, "Why not mobilize the able-bodied citizens of New Orleans to clean up their city? Why not pay them instead of contractors? They have a vested interest as a rural resident; we take care of our own folks. Folks work together where I come from."

And Sheila writes, "Right now, what America needs is to be reassured that when catastrophe strikes it won't be every man for himself and the poor left behind. That's not what America stands for."

Now for next week's e-mail question of the week. And Spud, don't even think about it. Do you think a tax on gasoline, keeping the price above $3 will eventually force Americans to change their driving habits? You can send your answers to INTHEMONEY@CNN.com. We actually have one poor guy on the staff whose job it is to read and select the e-mail. His pay will be cut for putting Spud's letter in this week's batch.

On that note thank you for joining us for this edition of IN THE MONEY. My thanks to CNN correspondent Susan Lisovicz. "Fortune" Magazine editor-at-large Andy Serwer and Money.com managing editor Allen Wastler.

We'll see you back here next week for another edition of IN THE MONEY. Hope you can join us then. Meantime, enjoy the rest of your weekend.

(COMMERCIAL BREAK)

UNIDENTIFIED MALE: I just want to let everybody know, this is a beautiful town. You better come back.

WHITFIELD: New Orleans business owners get a firsthand look at Katrina's devastation for the first time. We'll have a live report.

Plus, a deadly accident on Chicago's Southside. What caused this passenger train to derail? We will bring you the latest developments.

And President Bush calls his nation a member of the axis of evil. Now Iran's new president has a message for America. Hear what he has to say in our exclusive interview.

Good afternoon, I'm Fredricka Whitfield.

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

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