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CNN IN THE MONEY

Military to Shift To a Smaller, Leaner Force; Job Figures for December Lower Thank Expected; Jack Abramoff Scandal Rocks Capitol Hill;

Aired January 7, 2006 - 13:00   ET

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


ANNOUNCER: From New York City, America's financial capital, this is IN THE MONEY.
JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, bad apple or just a part of the core? Lobbying king Jack Abramoff is talking and a lot of members of Congress aren't sleeping so well because of it. Is Abramoff an example of business as usual in Washington, D.C.?

Plus, leaner, meaner, and green, smaller, faster strike forces may be the way to go when it comes to defending America and fighting the war on terror. That's if Washington's big spenders will get out the way and let it happen.

And can you say ouch? Minimum payments on credit card balances are doubling for many Americans starting with the New Year. We'll take a look at the pros and cons of that idea.

Joining me today on the program, "Headline News" correspondent Jennifer Westhoven. "Fortune" Magazine editor at large Andy Serwer.

So last Friday the jobs number came out, last one for the year. Lower than expected for the month of December, 108,000 new jobs. But for the year, 2 million new jobs created. This economy appears to be in good shape.

ANDY SEWER, EDITOR AT LARGE, "FORTUNE" MAGAZINE: I think it was a not too hot/not too hot scenario, which is just the way Wall Street likes it. We weren't as good as we thought in December, but they revised November's upward. For the year, it was pretty good too.

JENNIFER WESTHOVEN, CORRESPONDENT, "HEADLINE NEWS:" I think you have to start thinking about this year and they have promises about what they think new jobs will be created. With only a 100 thousand you are going to have to bounce back a little bit better than that.

SERWER: But the past two months, if you lump them together, I'm looking for the glass to be half full here a little bit, Jennifer. I mean you got to try here.

CAFFERTY: Andy's an optimist.

SERWER: I think it was a pretty good year. It was actually the second best year of the decade, 2004 a little bit better, 2.1 million jobs, 2005 2 million jobs. But you go back to the late 1990s; we were creating 3 million jobs a year. I think you're right, Jennifer, I don't think we'll hit that.

WESTHOVEN: Not even close.

CAFFERTY: All right. We shall see. It's too early to --

SERWER: Give up.

CAFFERTY: A lot of powerful people in Washington, D.C. are not sleeping so well. Hey, it's about time they lost a little sleep down there. Earlier this week, super lobbyist Jack Abramoff copped a plea deal and admitted to committing three felonies. As part of this deal, Abramoff is cooperating with prosecutors. Are you listening senators and congressmen? That's making some big power brokers in Washington, D.C. very nervous.

The question now is whether Abramoff is a byproduct of a corrupt system or simply a bad apple giving other lobbyists a bad name? Here to talk about that is Ken Gross who is an expert on lobbying at the law firm of Scadden Arps. Mr. Gross nice to have you with us.

KENNETH GROSS, LOBBYING EXPERT: Nice to be here Jack.

CAFFERTY: The perception on Main Street is that the Abramoff story is simply the tip of a very ugly iceberg, that the system is corrupt that our government's for sale, and if you got enough money and have the right phone numbers in your rolodex, you can buy whatever you want from our lawmakers in Washington, D.C. Is that perception accurate or is Abramoff simply the rogue elephant in the herd of otherwise honorable influence peddlers down there?

GROSS: I think that probably is an overstatement of what is business as usual in Washington. I think, considering the breadth and magnitude of what went on here, I would have to characterize Mr. Abramoff, his conduct as aberrational. Do we have entertainment? A lot of political officials going there all the time? Are the political contributions going on all the time? Yes. But the magnitude here makes it stand out.

WESTHOVEN: This is Jennifer Westhoven. Hi Mr. Gross. I'm going to actually going to turn this into sort of an Enron era question. When we got there Enron was sort of seen as the pinnacle of bad accounting, got into all this trouble but you know there were a lot of companies pushing the rules. When we start to see this touching like the House Republican leadership, is this kind of the thing where when you start to see the leadership stretch the rules, maybe other people do it as well? So I'm not trying to blanket all of Washington, but I mean, how far does this go? It can't just this be little bit of an area, right?

GROSS: No, I think you're right. I think that as you go down the totem pole both in terms of the members and the conduct, you see, certainly, I think, a laxity in complying with all these rules. The ethics committees, both the Senate and House ethic committees has essentially have been dormant. There's been no enforcement. Does anybody need to follow the $50 gift rule? Well, you should. But if there are no ramifications for going over it or a golf trip or something like that people are going to get loose with the rules. So I think there is something going on below this level that is problematic, no question about it.

SERWER: Ken I'm reading our notes here. In it, you say that lobbyists are a critical cog in our process. And that lobbying is an honorable profession. Can you explain to us how lobbying is an honorable profession? In other words, how is it supposed to work legitimately?

GROSS: Yes. Well, the truth of the matter is that legislation in Washington is extraordinarily complex. If there's an energy bill, if there is a tax bill and the staff available to members, both house and senate is very limited. And the only way that they can really get to the bottom of a lot of complex issues is to rely on lobbyists. And of course lobbyists have conflicting views. They're the industry lobbyists and those who are opposing the industry. And they can gather this information.

And if you want to be a credible lobbyist in Washington, D.C., you have to provide credible, valuable information. You just don't go in there with a couple cigars and a glass of bourbon and schmooze. That's not the way you get your reputation in this town. And they do, in that sense, provide an important cog in the process. There are the bad apples. But your ordinary, run of the mill lobbyists, doing their job, working for a corporation, working for a public interest group, working for a labor organization, is an important part of the process here in Washington.

CAFFERTY: You mentioned the House and Senate ethics committee, which are arguably of two the great oxy morons in the English language. This is a off year election year coming up. And the one thing that all politicians understand is that not being able to get re-elected. What are the implications of this Abramoff thing and all the various and sundry other little tawdry deals that have come into the news lately? We got Delay under investigation in Texas, we got Bill Frist being looked at for stock dealings by the SEC. You've got the Karl Rove/Libby stuff in the White House is still being looked at by Fitzgerald. How much trouble are the incumbents in? And I hope the answer is "a lot."

GROSS: I think the -- I think you're going to be happy with this answer. I think the incumbents have a lot to be worried about. The legal implications of this may not spread as far as people expect it to, but the political implications are extraordinary. I mean, so many people have been slimed by this, people are returning contributions, they're giving these contributions away to charities left and right, even though they're perfectly legal, and you know, there are not actually illegal contributions. They are doing back flips to distance themselves from Abramoff and anybody involved in these scandals. But they will be the subject of 30-second ads as we move towards the election later this year.

And something seems to -- a corrosive effect seems to set in after one party has been in power a number of years. It certainly happened to the Democrats about a decade ago and it seems to be happening to the Republicans now. WESTHOVEN: So is that the way we change things so not everybody gets slimed again, is it these bad ads and that people are just going to be fearful, or do you hope that something else happens that there's a little bit more of -- that Congress does something more to stop this happening?

GROSS: Well I think two things need to happen. Certainly, they need to tighten up some of these laws. Legislation of course being proposed left and right in the last several days. Also, I think you've got to get these ethics committees working. If they're going to sit there dormantly -- I'm not saying go after everybody who goes $5 over the limit, but some specter of some enforcement is important. And I think the scandal itself is actually getting a lot of people's attention. So when I go out speaking, people are listening rather than rolling their eyes at some of the rules.

CAFFERTY: All right. Ken we're going to have to leave it there. It's interesting stuff and just a great story unfolding over the next year. I can't wait for the hearings and all of the good things that lie ahead. Ken Gross is with Skadden Arps. Thank you for being with us.

GROSS: Thank you.

CAFFERTY: All right. Coming up next on IN THE MONEY, bye-bye big army. We'll talk to a man who says the Pentagon has a new military model in mind for the war on terror and guess what, it's working pretty well. Find out if leaner and meaner will get the job done.

Plus, big box bust. Wal-Mart's latest numbers disappoint the street. Find out if the mega retailer can bounce back.

And your guide to a better life and why it's not on the newsstands. We'll talk to an author who says that self-help books are doing more harm than good. Stick around.

(COMMERCIAL BREAK)

CAFFERTY: It says here, size matters in the military. Who wrote that? Big tanks, big ships, big aircraft and a huge ground presence. But that motto is starting to change now. President Bush said this week that he expects the level of U.S. forces in Iraq to actually come down some this year. Our next guest says that doesn't mean the fight over there is winding down by no means. Robert Kaplan is the author of "Imperil Grunt." And he says the bigger is better theory isn't flying in the military anymore. Robert is also a distinguished writer with the "Atlantic Monthly" Magazine, which is a distinguished publication. Robert nice to have you with us.

ROBERT KAPLAN, AUTHOR, "IMPERIL GRUNT:" It is my pleasure to be here.

CAFFERTY: Tell me about the sea change that I guess, to a degree, is being dictated by the war against terrorism that's going on in the U.S. military. We're seeing some plans and some approaches to fighting this war that we haven't seen in a very long time and it appears that it's working. KAPLAN: Yes, it is. And we're going to see a lot more of it across the earth. It's not just in Iraq but it's throughout the world where we are fighting a global counterinsurgency and that is irregular war fare, it is unconventional and what that means is that the smaller the unit, the more far-forward it is, the more power has been pushed out to the edge of command. Meaning less power in the hand of generals and cornels, more power in the hands of second lieutenant and staff sergeants, the more that tends to get done.

It's a matter about -- it's a matter of empowering the small unit in this future kind of warfare. Another point -- the future is going to see a bigger and better battle space, but with less and less people inside of it. So instead of mass infantry warfare where you have tens of thousands of men in a confined space, the future and present is about hunting down 300 or 400 within a space of several hundred square miles. It's killing the enemy that's easy. Finding them is difficult.

SERWER: Robert speaking of the size situation here, it's not a coincidence that the army is moving to a decentralized model, much like its primary foe, Al Qaeda, is it? I mean, and that's a good thing because you have guerrillas fighting against guerrillas essentially. If the British soldiers had adopted the colonialists' tactics, maybe we wouldn't be an independent country, right?

KAPLAN: That is exactly right. George Washington never fought a straight battle with the British. He always ran away from them and attacked them from the back in smaller numbers. Al Qaeda has the perfect model for a post -- for a 21st century global corporation. That is, the Al Qaeda model, the corporate model, is the one the military is moving towards. That model is the following. A weak center but very strong at the edges.

You push power out to the edge of command, in corporate terms that would mean the point of contact with the customer. The customer in this case could be an insurgent who needs to be killed. It could be civilians who need to have a water well dug in order to gain their corporation, to turn up actionable intelligence, and it's about empowering the sergeants, the junior officers who are at that point of contact with the customer, and give them more and more training and let them make the decisions. So it's about the center, whether it's -- whether it's a CEO, whether it's a four star general, being comfortable with divesting power from his staff.

WESTHOVEN: Mr. Kaplan, I want to turn to a larger picture. When I was reading some of your work, I have to admit, I was a little shocked to see that you -- from my readings -- embrace the idea that America must embrace its imperial destiny.

KAPLAN: Yes that is right.

WESTHOVEN: Can you talk a little bit about that? Because I have to tell you for me that's frightening. So convince me.

KAPLAN: Right. The word imperial is one in which the U.S. public and the military is uncomfortable. But the fact remains we are in an imperial like situation around the world. The challenges, the frustration, the goals we deal with are comparable to those faced by the British, the French, the Portuguese, the Dutch, the Turks, the Austrians, all and going right back to the Romans during their high point of empire. And what does imperialism mean in this sense?

It means training host country troops to push them forward, let them take the credit. It is about small numbers; two-thirds of all the engagements the British and French fought were with native indigenous troops, not with their own. Most of what the roman military did in North Africa was train the local indigenous forces.

So imperialism is a word none of us like. But when it's done smartly, we all like the result. One example, this past summer, I was in Algeria, in sub-Saharan Africa. The United States military is training indigenous troops across the Sahara to create a pan African intervention force to deal with future humanitarian emergencies like Darfur. That's the kind of imperialism people like.

CAFFERTY: Based on your up close and personal experience with some these young men and women who are fighting for and protecting our interests around the world, give me a sense of the caliber of the people that we've got out there representing this country. My gut instinct is to think that anything that happens outside Washington is probably an improvement, but give us some guidance here.

KAPLAN: All right. First of all, I've only met two kinds of marines and army special forces. Those who have been deployed to Iraq and those who are pulling every bureaucratic string to get deployed there. Morale has never been better. Let me repeat that. Morale has never been better than it is now.

CAFFERTY: Good stuff.

GRUNT: They see progress being made daily on the ground, even though it's not covered in the newspapers. I've been going back and forth to Iraq over last 20 years, actually, especially the last three and combat is virtually over. It's more of a governmental, developmental challenge. And over the last 20 years, I can tell you the caliber of the young lieutenant have gone up and up. They're more linguisticically adroit. They operate more like corporate level lower managers. And they just know how to take charge and to fill vacuums.

SERWER: All right. Robert Kaplan, author of "Imperial Grunts" and a correspondent for the "Atlantic Monthly." Thank you for that very singular interesting perspective. Thanks for coming on the program.

KAPLAN: My pleasure.

SERWER: Coming up after the break, did Wal-Mart have a Merry Christmas? And will this be a good year for investors? We'll take a look.

Plus, if you gave your credit card a workout last month, be warned. We'll explain why your bills may be harder to pay.

Just because you bought a book to tell you what to do, doesn't mean you've solved your problem. We will look at the self-help and motivational movements and see what they're worth.

(COMMERCIAL BREAK)

WESTHOVEN: All right. Let's take a look at the week's top stories in our "Money Minute." The green arrows came out for the first few days of stock market trading this year. Notes out of the December Fed meeting hinted this long run of interest rate hikes may be coming to an end. That sent U.S. stocks soaring and the dollar fell.

As a sign of the time, IBM is freezing its pension plan and switching to 401(k) plan. The company says the move will save it $3 billion over the next five years. Good news for IBM retirees. They will not see any change in their checks.

Enron founder Ken Lay and former CEO Jeffrey Skilling are asking, again, to move their trial out of Houston. Their defense lawyers say all the jury members there would be too biased. Skilling's attorney pointed to some questionnaires where potential juror called his client a high-class crook and someone who would lie to his mother. Ouch.

SERWER: It's a new year and what better way to start it off than with a little chat about the world's biggest retailer. Wal-Mart sent worry through the markets this week with report that its Christmas season sales were not so spectacular. Wal-Mart also announced that it's profits for the entire fourth quarter will come in at the low end of expectation. Wal-Mart shares are now trading about 15 percent lower than they were a year ago. That makes Wal-Mart our stock of the week.

You know, the real problem here is it's the biggest company in the world. It's got $300 billion of annual sales, $11 billion of profits, 1 million employees, very hard to move the needle. How do you grow, right?

WESTHOVEN: Also, how do they grow? They're move to poorer countries where we outsource half our jobs. They rely on Americans who live paycheck to paycheck and then people who live paycheck to paycheck. They're trying to get fancy, right, and 400 count sheets at Wal-Mart?

CAFFERTY: The Wall Street reaction wasn't real severe though and I think it goes to what you said a minute ago. They were up 2 percent year over year in the fourth quarter. Well a $300 billion corporation down 2 percent, we're not talking chump change. They still made a few dollars.

SERWER: It is true. I mean people are a little ticked off; they are getting a little irritated. The stock's gone nowhere for five years. People are getting a little impatient. They put the song on the Website for institutional investors kind of making fun of themselves, they were going nowhere. It was to the sun of "Up on the Rooftop." It's like a c-rated Christmas carol or something. I never even heard it before.

WESTHOVEN: We know that.

CAFFERTY: I do. SERWER: Oh, you know it? It ticked off investors even more. They're moving into food more and more. They're chewing up America's supermarkets, which is good for them on the one hand. On the other hand, that is a real low margin business. I mean, it's very, very difficult to make money. And --

WESTHOVEN: Unless you're whole foods.

SERWER: Whole foods is an amazing story, we talked about them. The only good point I can think of is the stock has been down for so long now -- it's starting to get cheaper. It's just when people start to give up like this, at some point it's got to move.

WESTHOVEN: How do they do something to get momentum so the people want to buy? They have to do something. They have to have some turnaround plan or they have to really start showing big gains in their numbers.

SERWER: How about more stupid Christmas songs?

WESTHOVEN: Lower gas prices.

SERWER: All right. Let's leave it at that. Coming up on IN THE MONEY, your credit card bill may look a little different this month. We'll tell you why and show you how to take some teeth out of the bite.

Plus, we'll show you latest gizmos from the big consumer electronics show in Las Vegas that could bring big money to investors.

And the bare bone Website that is chilling the big newspapers to the core. AllenWastler looks at the impact of Craig's List.

(COMMERCIAL BREAK)

WILLIS: Now in the news, Congressman Tom Delay is permanently giving up his post as House Majority Leader. Delay is fighting campaign finance charges in his home state of Texas. He says he's done nothing wrong. But house Republicans are anxious to get new leadership in place and remove any hint of scandal in this congressional election year.

Strong winds and warm weather in Texas today could increase the danger of wildfires. Now that's the warning from forecasters. Authorities are urging residents to contact police immediately, if they spot anyone trying to start a fire. Nearly 250,000 acres have been burned by wildfires across Texas since the day after Christmas.

And a U.S. congressional delegation is in Iraq to get a firsthand look at the situation there. Members of the bipartisan group are meeting today with American troops and military commanders. The visit comes after a stop in Israel. Tomorrow the Senators leave for Qatar and then it's on to Afghanistan and Pakistan.

There's new information about the condition of Israeli Prime Minister Ariel Sharon. At a news conference this morning, doctors said tests showed Sharon's vital signs are stable and the swelling on his brain has eased somewhat. They caution his condition remains critical. Sharon is in a medically induced coma after suffering a massive stroke on Wednesday.

The sole survivor of the disaster at West Virginia's Sago Mine is making some progress. Overnight, doctors were able to fully expand Randal McCloy's inflamed lung. Now they say he's now requiring less oxygen but they add he's still in critical condition. The Associated Press is reporting that one of the families left -- says a miner left a detailed note with a time line showing the trapped men were alive at least ten hours after the mine explosion.

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

WESTHOVEN: Nervous about getting that first credit card bill of the year? The one that shows every little thing you bought for the holidays? I am. And here's something to make it even worse, some banks are doubling their minimum monthly payments. Yep, doubling them. That is to comply with a 3-year-old federal rule that our next guest says don't panic yet, you might have already absorbed the shock.

Ed Mierzwinski is consumer program director with the U.S. Public Interest Research Group. Ed I'm a little worried, tell me are you worried about people who might be -- maybe people who are already stretched, they might get pushed into bankruptcy because of this? And those laws aren't so nice these days.

ED MIERZWINSKI, US PUBLIC INTEREST RES. GROUP: In the short run, there may be a few people hurt by the new rule. In the long run it should benefit people to pay more on their credit card because then they won't accumulate a lot of high-priced credit card debt. The credit card company's years ago lowered the minimum payments so low that some consumers make the payment, but have their principal, the amount they owe go up. So it is a good thing in the long run. I'm concern for some consumers who have sticker shock.

SERWER: All right Ed. You're talking about this minimum payment thing, which I think is probably a good idea because Americans get to the table and can't stop eating. Why not regulate the interest rates that the banks charge on these cards? It's usury, you know, it's 16 percent APRs, I mean, come on. Why don't they attack that?

MIERZWINSKI: Congress has to do that. The courts 20, 30 years ago said that a bank can move to South Dakota where there are no usury ceilings and treat everybody around the country as if they lived in South Dakota with those bad laws. We absolutely support interest rate caps, but Congress is reluctant to do so.

CAFFERTY: Why is that pray tell?

MIERZWINSKI: Yes.

CAFFERTY: I'm serious.

SERWER: Go ahead.

MIERZWINSKI: The credit card companies have a lot of money.

CAFFERTY: And they spend it lobbying Congress so they can protect the usury fees that they're allowed to collect, correct?

MIERZWINSKI: Absolutely. The credit card companies take advantage of the cash register Congress, a lot of campaign contributions. The credit card industry got the bankruptcy bill passed, which forces consumers to pay more of their credit card bills if they file for bankruptcy. And they've prevented any reasonable reforms of their industry for years.

CAFFERTY: So the small person who owes a credit card balance because of the recently concluded Christmas holidays is threatened with bankruptcy because he can't pay the payments, but the Congress of the United States sits there, continues to allow 16 percent interest rates to be charged by the credit card companies against these very people who can't afford to pay off the principal part of their credit cards. If any incumbents are re-elected in the year 2006, I'm going to go throw myself in front of a cross-town bus. What a disgrace.

MIERZWINSKI: Well, just to be clear, 16 percent is the average rate. Most of the consumers in trouble are probably paying 24 to 30 percent.

SERWER: Oh, well --

MIERZWINSKI: That's how bad it is.

SERWER: Well then.

WESTHOVEN: Ed, you even thought, I noticed that there was something tricky about the timing of this as well. That banks weren't exactly nice --

MIERZWINSKI: The regulators said do this three years ago and gave the banks three years. They all tried to take an incomplete just like college kids, something like that. They waited until the last minute. It's sticker shock right after the holiday. The regulator told me, if a consumer has trouble, call their bank, ask for a workout. The regulator also suggested to the banks, by the way, raise minimum payments and lower interest rates. I'm waiting for banks to lower interest rates.

SERWER: Right. All right Ed, we're blaming the lobbyist, we are blaming the regulators, we are blaming the banks, and if there is a blame enough to go around here. There's another problem here, and this deals with an age-old question, which is personal responsibility. There's a problem here with that right? People are just spending too much. They don't have any sort of accountability for how much they're spending, right?

MIERZWINSKI: I think it's partly consumer's fault that they don't have the right information, they're not told enough. And when the banks continue to lower minimum payments it became like candy, as long as you made your tiny payment every month, you could continue to use your credit card. They'd lower your payment and they'd increase the amount you could borrow and you'd never realize that you, in many cases, were running on a debt treadmill. So the banks deceived us in a lot of ways.

Look at the example of rewards cards. The banks give you 1 percent back if you buy an airline ticket, but they'll give you 5 percent back if you use your card at the grocery store. They're encouraging us to use our cards to finance our daily lives and I think that's deceitful and dishonest of the banks, myself.

SERWER: All right, Ed, we're going to have to leave it there. I guess maybe the lesson is just don't spend any money on your credit card or something like that or be careful about how much you spend, right?

MIERZWINSKI: We have a Website, Truthaboutcredit.org that will give you some tips. Be careful, try to pay as much as you can pay, if you only pay the minimum, the bank wins.

SERWER: Right. OK. Ed Mierzwinski he is the consumer program director of the U.S. Public Interest Resource Group. Thank you for coming on the program.

MIERZWINSKI: Thank you.

SERWER: Lots more to come here on IN THE MONEY. Up next, reading your way to a better life. Only halfway through that 12 step program? We'll tell you why you might want to take a breather.

And later, a picture's worth a 1,000 words. But sometimes the captions are better than the photo. Our "Fun Site of the Week" is coming up next.

(COMMERCIAL BREAK)

SERWER: Searching for a new you in 2006? Well, you're probably not going to run into him or her in the self-help aisle of your favorite bookstore. Our next guest says the self-help movement isn't bettering Americans; it's actually hurting them. It's hurting me. Steve Salerno is author of "Sham." Wow, can't get any stronger than that. How the self-help movement made America helpless. You know Steve I got to disagree with you right off the bat. I mean what's wrong with paying Dan Quayle or Michael Dukakis $75,000 to come talk to your people, to inspire them?

STEVE SALERNO, AUTHOR, "SHAM:" The big picture is to paraphrase the old Seinfeld line, you've got a $10 billion industry here about nothing. This stuff, it is so rife with fraud, abuse, and corruption from top to bottom. People who don't have the credentials to be talking about what they're talking about in the first place. They're selling regiments that have never been validated in any kind of meaningful way. They convince you that you have problems you didn't think you had to start with. And it does all kinds of collateral damage to society in the mean time. Other than that it's just great.

SERWER: Talk about the fact that the United States of America is the only place in the globe that is all hung up on this stuff. I didn't realize that, but that is a very interesting phenomenon.

SALERNO: Well it is probably because the book was brought out in England. A couple months ago. And my editor over there -- we had some interesting discussions. They don't get this whole mentality that we have where you can wake up Tuesday morning and be somebody different than you were when you went to bed Monday night. There's this American notion that you can just keep reinventing yourself and that you can buy a new self just by going to the bookstore. Or for example if you're in the school system now, simply by chanting every day, "I am special, I am wonderful" that somehow --

CAFFERTY: I love it.

SALERNO: It doesn't matter that you add 2 and 2 and get 19. You know this is something that has become pervasive in society.

CAFFERTY: Which has happened. Tell me about the S.A.T. scores; since we changed our approach to teaching these little darlings that they're really all 24-karat princes.

SALERNO: Yes it use be, I don't have the exact numbers in front of me, but I think it was 28 percent of students used to go on from high school to college with "a" and "b" averages. Now it's 83 percent of students. S.A.T. scores have gone down 35 points on average. During one particular period between the 1970s and 1995, at the same time that kids were getting better grades. What we've really succeeded in doing with the self-esteem movement is we've completely -- we haven't made kids any better; we've just made them think they're better about worst performance. We've completely detached measurable objective performance from their own notions of how good they are at something.

WESTHOVEN: I completely agree with that but I'm going to have to play a little bit of devil's advocate here. These two are just --

SERWER: Snickering.

WESTHOVEN: At this self-help stuff. Some of it I think, I can see why you would think it would be harmful, when people are bonding about being victimized about something, and you're just participating in why you feel weak. Don't you think there are some of those out there, maybe it's not a book, maybe it is a course, I don't know, some of those people I find a little bit inspiring. I find Buddha inspiring. You can call that self-help.

SERWER: He was the original self-help guy, right?

SALERNO: Well, if I could address that seriously. First of all, I'm not arguing in the book that this doesn't help anybody. And this is really one of the problems, is the use of anecdotal information. You can find people who will insist that they were helped by remote healing, which is simply having a bunch of people in New Mexico pray for you and that's going to be your practical program for getting better. You can find anecdotal evidence to support almost anything.

I went into this book with the notion of what can we prove, how much is it costing, and what's the cost effectiveness? I think this gets particularly dangerous is when it affects regiments like health care, which it has very much. And you have this notion that simply by eliminating the internal energy flows that are counterproductive and by sitting around a room and chanting, you can somehow put yourself in touch with the healing energies and therefore you don't need a doctor and there's increasing evidence that people are gravitating away from traditional health care towards this kind of mind/body stuff which I think is a dangerous development.

SERWER: Now Steve I mean this is a big business, right? Like this whole "Chicken Soup for the Soul" guy and his entire ilk. That's big bucks. Do you have any idea how big it is?

SALERNO: Well as I said when I wrote the book the figure that I had which was tracked by Market Data Enterprises, was $8.5 billion. I tried to get the figure as close to deadline as possible. It's already outdated. The latest figure is $10 billion. The projections are $12 billion by 2007. But, that's just the tip of the iceberg. I mean, that's just tracking the people who are on the grid. You have so many guys like the poor man's Tony Robins, who are doing relationship seminars down at the local Ramada Inn, which somehow --

SERWER: That sounds cool.

SALERNO: Well, I interviewed people where it actually turned into kind of an escort service because they say for $50 an hour I'll meet with you and give you special one on one customized attention, you know.

CAFFERTY: You can find that in any port in the world.

SALERNO: Yes, that's right, exactly. Except now it's legitimate. Now you get million dollar book deals force writing this stuff.

CAFFERTY: What about the title of your book "Sham," and address it just briefly because we're almost out of time. From the idea that they really don't want you to succeed. These are self-help movements, peoples; companies that really hope you fail.

SALERNO: Right. If you track the demographics, you'll see that the same people buy the same books at predictable intervals, which means that they're not really being helped, which means that there's a very strong incentive for these people not to help you but to keep you locked into a brand-new addiction, which is the self-help movement itself.

The title "Sham" comes right out of their own title for themselves, which is self-help and actualization movement. It's very rare that an author gets a ready-made title like that.

WESTHOVEN: All right. Well thank you very much Mr. Salerno, I still say one of my favorite pieces of advice was from Tony Robins. Don't marry anyone you don't love to talk to.

SERWER: All right.

WESTHOVEN: Still to come on IN THE MONEY, high time for high tech. The annual consumer electronics show blew through Sin City this week. Find out which products created buzz this year.

And speaking of buzz, tell our producers what is on your mind. Drop us a line. The address is INTHEMINEY@CNN.com.

(COMMERCIAL BREAK)

WESTHOVEN: In our "Brainstorm Segment" this week, high tech is center stage in Las Vegas. The annual international consumer electronics show kicked off Wednesday and our Renay San Miguel spent the long weekend out there and he got a sneak peek at the latest and greatest.

(BEGIN VIDEOTAPE)

RENAY SAN MIGUEL, CNN CORRESPONDENT (voice over): You can't have a big technology show without Bill Gates. You can't have a Bill Gates keynote speech without an announcement that targets a competitor. With the new digital music service Urge in partnership with MTV, the target is Steve Jobs and Apple iTunes. When you combine that announcement and the deals with Comcast and Directv for video on windows devices and throw in Intel's new strategy at putting chips in things besides PCs, you get a new twist on the old wintell alliance.

BRIAN COOLEY, CNET: The bottom line is, both Microsoft and Intel are salivating over the living room because they much have saturated the den and home office and the corporate office. We've got our computers there. We're happy with them. They work fine. Where's the upside? It's the living room.

SAN MIGUEL: There's another battle shaping up. This one over the next generation of DVD discs and players. CES is showing off products and manufacturing agreements highlighting the competing Blue Ray and HD DVD standards. Both promise a better picture and more information crammed on to a DVD disc. They're backed by different heavyweights in the tech arena. Can you say VHS versus beta max all over again?

Traditional radio is using CES to fight back against satellite radio companies Sirius and XM, which had more than their share of publicity in 2005 thanks mostly to Sirius's hiring of Howard Stern. High definition radio technology provided by a company called Ubiquity will expand the sound quality of AM and FM radio and allow each station to multicast. Think five or six streams of your favorite radio station, all-commercial free. In fact all free period. No subscription fees.

A lot of big news here has been about consumer control over their media, watching your TV shows and your movie, listening to your music wherever you want to whenever you want to. The company that really got that ball rolling, Apple. Its not even here. Its CEO Steve Hobs has his say next week at the Mac World Conference in San Francisco.

Reporting from the consumer electronics show in Las Vegas, Renay San Miguel, CNN.

(END VIDEOTAPE)

WESTHOVEN: Coming up next on IN THE MONEY, we'll look at one Website that has newspapers all over the world shaking in their boots.

And it's time to hear from you as we read some of your e-mails from the last week. You can send us an e-mail right now, too. We're at INTHEMONEY@CNN.com.

(COMMERCIAL BREAK)

CAFFERTY: Some people say that the nation's big newspapers are losing profits because of their politics or because they don't have enough younger readers. But the real reason may be because of the classified ads. That's the focus of Allen Wastler's "Inside Out" segment for this week.

ALLEN WASTLER, MONEY.COM: Have you ever heard of Craigslist, Jack?

CAFFERTY: Yes.

WASTLER: It is a little tiny ad that started ten years ago, bare bones thing, started in San Francisco where people could go -- people could post postings for events, looking for jobs --

SERWER: Concert tickets.

WASTLER: It has grown and grown and grown. It's in 45 cities now. It gets nearly 7 million of these little ads a month on it. They do them mostly for free. If you're a company looking for a job, they'll charge you a little bit for it. But mostly you can use the service for free. Now it's got newspapers a little bit -- hey, wait a minute that used to be our classified ad. What are you doing there? Newspapers get over 36 percent of their revenue from classified ads. It's becoming more of a concern for them. They'll tell you, we're not that really worried about it because this is consumer to consumer and we deal in business to consumer. But there was a recent study done in San Francisco saying that $50 million that normally would have gone over to the classified ads actually got siphoned away --

CAFFERTY: Can cow do that again?

WASTLER: Now, here's the inside out of this. Craigslist, you think it would be one of these big high-falooting, yeah, we're going to be the next Google -- no, they start out as community thing and they are going to stay a community thing.

WESTHOVEN: Didn't they sell a big chunk to eBay?

WASTLER: They did, 25 percent to eBay. The way that happened, is the owner Craig Newmart apparently gave out some shares in the company to employees and one of the employees just --

SERWER: I think that's where the name Craig name came from.

WASTLER: Ebay has a minority interest. Craig Newmart remains in charge of the whole thing.

CAFFERTY: How do they make their money if they give their ads away for nothing?

WASTLER: They make enough off the corporate postings for jobs and things, they estimate -- it's a private company, they won't tell you up front, but the estimate is about $20 million a year. They figure the cost for running this little thing, 18 employee, $5 million a year.

WESTHOVEN: It is fantastic to use, so easy.

WASTLER: They do publish stuff that you won't see in a newspaper, I've noticed.

SERWER: Really.

WESTHOVEN: It is not always a family site.

WASTLER: The "Fun Site of the Week." It has some cute little pictures. You can write your own caption, Jack. So the producing staff went and started its hand at writing. There you have it, Jack Cafferty for president.

Got to love that one. All right, granny, way to go.

CAFFERTY: That will get a lot of votes.

WASTLER: Next one, OK, here's one for you. Andy Serwer, call me tonight.

WILLIS: We're going live to a press conference at the Allegheny General Hospital in Pittsburgh, Pennsylvania, where the lone survivor of the West Virginia mine disaster is being treated. You're listening to Dr. Richard Shannan the hospital's chairman.

DR. RICHARD SHANNAN: (INAUDIBLE) really focusing in on several new strategies to try and improve his lung function. As I reported to you yesterday, there were persistent problems with inflammation, primarily in his left lung that appeared to be due to coal dust and toxic gasses that he inhaled while still in the mine. Overnight, we aggressively dialyzed him, as I believe I reported yesterday, and initiated a course of steroids, Decodron, in an attempt to decrease the swelling and inflammation in the airways and to reduce any constriction of the airways that would occur as a result the particularly inflammation.

I'm thrilled to report that we have had success overnight. Mr. McCloy's oxygen requirements and support by the ventilator have been produced dramatically. He's breathing 40 percent oxygen today on much reduced pressure support and his chest x-ray looks dramatically better. So I think that for the moment this very important and potentially limiting issues with his lungs appear to have resolved. And we are hopeful that with continued treatment along these lines, careful attention to his volume status and the use of anti- inflammatory agents that we can maintain the stability.

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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