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Issue Number One
Fifth Anniversary of Iraq War; Interview With General David Petraeus; War & The Economy; Supermarket Spending
Aired March 19, 2008 - 12:01 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CO-HOST: Iraq, five years later. The majority of Americans blame the war abroad for problems with the economy at home.
Higher gas prices could mean higher bills at the checkout counter. And pizza is the new economic indicator.
Issue #1 is the economy. ISSUE #1 starts right now.
Hello, everyone. I'm Ali Velshi, and welcome to ISSUE #1.
Gerri Willis will join us in a minute, as well as our panel of Carmen Wong Ulrich, Greg McBride and Allan Chernoff. The rest of the CNN money team will be here as well. We're talking gas prices, costs of goods, and we're going to be answering your e-mails.
Well, today marks five years since the start of the war in Iraq. There are many costs associated with the war -- the cost of human life and the actual cost of running the war. And that cost is rising quickly.
Now seven in 10 Americans say the war in Iraq is the reason that the economy is issue #1.
CNN's Ed Henry is live with that at the White House -- Ed.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Ali, the president said today that the war has been longer and more costly than anticipated. The biggest cost, of course, as you noted, is the loss of life for nearly 4,000 Americans. But there has also been a major impact on the economy.
(BEGIN VIDEOTAPE)
HENRY (voice over): Reflecting on his time as administrator for the reconstruction of Iraq, Paul Bremer says he and President Bush misjudged how much it would cost to rebuild that country.
J. PAUL BREMER, FMR. COALITION PROVISIONAL AUTHORITY ADMINISTRATOR: It's absolutely clear that we did not understand how devastated Iraq's economy was. I found that was my biggest surprise when I arrived actually.
HENRY: Chalk it up as one of many mistakes made five years ago in Baghdad, resulting now in a soaring price tag back in the United States. REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: The war in Iraq has come at significant cost to the American economy. It has led to a spike in oil prices, resulted in massive deficit spending.
HENRY (on camera): How much is the war costing? About $608 billion -- money for veterans, billions for reconstruction, and the largest chunk of all, military costs.
Now, the president's own aide, Larry Lindsey, was pushed out in 2002 when he predicted the war could cost up to $200 billion, just a third of the current total.
(voice over): The White House points out war planning is imprecise and says funding equipment like MRAP vehicles is expensive but worth it.
DANA PERINO, WHITE HOUSE PRESS SECRETARY: They've helped save lives and prevent injuries. And that's just one example of the many things that we are spending money on. We have to ask ourselves what the cost of -- what the cost would be of doing nothing.
HENRY (on camera): Looking ahead, the president says there will be a long-term presence in Iraq, leaving two Democratic economists to estimate the total tab at $3 trillion when you factor in more fighting, increase veterans' benefits as wounded troops come home, and hundreds of billions of dollars just to pay the interest on the debt from the war.
(voice over): Dana Perino would not dispute the estimate.
PERINO: It's very hard to anticipate, depending on conditions on the ground and circumstances, how much the war is going to cost.
HENRY: A question the next president will be grappling with.
(END VIDEOTAPE)
HENRY: Now the president today fired back at those Democratic economists, saying that their predictions of a $3 trillion cost, that they're exaggerated. But the fact is that, heading in and starting year six of this war, the White House has still not given a clear estimate of how much it's going to cost -- Ali
VELSHI: All right. And Ed, this story is not going to go away over the course of the next few months. You can be sure that everyone involved in the campaign for the presidency will be talking about it.
Ed Henry is part of the best political team on television.
Thanks for joining us, Ed.
HENRY: Thank you.
WILLIS: All right. When you really break down these numbers, it gets interesting, especially looking ahead. CNN's Barbara Starr is live right now at the Pentagon. Hi there, Barbara.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Hi, Gerri.
When you look at these numbers, you know, people are talking about $3 trillion. What the Pentagon says is the actual cost of just running the military operation in Iraq has been something over $400 billion. And in terms of the economy, that is basically money flushed down the drain in terms of any economic benefit.
It doesn't go to investment, it doesn't go to production, it doesn't go to advanced research and development for industry. That is just the money it costs to run the war.
So let's break some of those numbers down.
For the war in Iraq, it is about $9.5 billion each month. That breaks down to about $12 million every hour just to run the war in Iraq.
And of course the cost of fuel with the rise oil prices has still been one of the biggest costs. We asked the Air Force, for example, with the rise in oil prices now to about $100 a barrel and over, what does it cost to run one of those F-15 fighters?
Well, they tell us back in 2003, when the war began, an F-15 cost about $1,500 an hour to run. That's still plenty of money, but now with the rising oil prices, that $1,500 an hour has jumped to $4,300 an hour. And everybody is predicting for the future, costs, of course, Gerri, are only going to go up.
WILLIS: Well, Barbara, you and I were talking about this, and I guess the Pentagon sent Congress a report on this in just the last month. What do you know?
STARR: Well, they did. You know, the Pentagon has this requirement under the law that's not very well noticed but very significant. And that is, when they determine the risk of being able to fight a third war, if you will, is significant, the risk of not being able to win outright, they have to send Congress a report on what they're doing to fix the problem. And once again, that's all about money and investment in making the military better.
So what we have found in looking at that report is the Pentagon is engaging in yet even more spending to try and improve the military capability.
Let's look at some of the things they are doing that are going to cost billions of more dollars -- expanding the size of the Army, the Marine Corps, Special Forces, adding thousands of new troops to the force, so if there is a third war they can go fight it.
Increasing the U.S. intelligence capability. Billions of dollars on expensive new reconnaissance satellites. Billions of dollars on new armored vehicles. Billions of dollars on missile defense. It is going to be a very expensive high-tech new force. The question is, what do our enemies have planned out there? Are they looking at low-tech insurgency, guerrilla movements, the kinds of things that the U.S. military has struggled against for years already, Gerri?
Are we making the right investments, the right money, for what the threat may be? That's the key question for the future.
WILLIS: Well, the number that will stick in my mind is $12 million an hour. That's amazing.
Barbara Starr, thank you for that.
STARR: Sure.
VELSHI: All right. Let's go to Baghdad now.
Five years into this war, Kyra Phillips is standing by to tell us what the situation is now on the ground -- Kyra
KYRA PHILLIPS, CNN CORRESPONDENT: OK. Just want to make sure that we are live. I have a couple of people talking to me in my ear.
Are we indeed live?
VELSHI: Go ahead, Kyra. You are live.
PHILLIPS: OK. I appreciate it. Thank you so much.
We are here at the Cross Swords. You'll probably know this area here in the international zone. It's one that Saddam Hussein built in honor, as he said, of the Iran-Iraq war. Obviously a lot of controversy about that, whether Iran takes credit for it, Saddam Hussein took credit for it, or if indeed it was a stalemate.
But we are here in the international zone at the site of that monument and have been joined now by General David Petraeus.
We are five years into this war now. It was a bit of a surprise that he was able to join me.
So thank you very much for the last minute, sir.
Obviously, as our viewers know -- and we welcome our domestic and international viewers -- you are the man in charge here, five years into this war. You are overseeing the military strategy.
Let's get right down to the president's speech today. I know you don't want to talk a lot about the anniversary. That is not something that you wish to discuss, but want to talk about the future obviously of this war.
The president in no way, shape or form talking about a timeline. That is a big political discussion, it's a big discussion among Iraqi people, even U.S. troops. Can you even, five years into this war, say it is good for U.S. troops to stay or go at this moment?
GEN. DAVID PETRAEUS, COMMANDING GENERAL, MULTINATIONAL FORCES, IRAQ: Well, first of all, I think let's just focus on where we are right now and recognize that we're in a good, but better, place in terms of security, and even in terms of political progress by the Iraqis than they were, say, a year ago. Iraq was on the brink of a civil war. The additional coalition forces, and then also the Iraqi surge that was some three or four times our surge, and then joined by the concerned local citizens, now sons of Iraq, all of that has helped drive down the level of violence by well over 60 percent, reduce the level of civilian deaths, and all the rest of that, although we are always quick to note that the progress is tenuous and that it is reversible, and that there are innumerable challenges out there.
We're in the midst right now, as you know, of drawing down the surge forces. In fact, we will take out by the end of July -- we'll reduce by over one-quarter our ground combat power -- five of 20 brigade combat teams, two Marine battalions, and a Marine expeditionary unit.
We've recommended that, we believe that we can carry that out without unduly jeopardizing the gains that we and our Iraqi partners have fought so hard to achieve. And then we'll carry on from there. We're keenly aware of the strain that this has put on the force, the sacrifices of the families back home, on our troopers, and we want to continue obviously to draw down our forces in the months after that, but we do want to do it in a way that again does not place in jeopardy all that we've fought so hard for, particularly over the course of this past year.
PHILLIPS: All right. You've brought up a couple of things. One thing I want to bring up, the CLCs, the concerned local citizens.
You have talked about this for a number of years now. Al Anbar province, you rave about that area and the success that you've had there. The president even mentioned it in his speech today.
But we want to hear about more regions that are becoming an Al Anbar province, and we haven't heard that yet. These sons of Iraq, they used to work for the insurgency, they used to work for al Qaeda. They have now turned around and said, OK, General Petraeus, OK, U.S. troops, we're going to join you, we're going to help protect our area. And you've talked about that that's key, that local tribesmen have to work with you in order for security to work in this country.
Why are we not seeing it in more areas five years into this war?
PETRAEUS: Oh, we actually are. In fact, the entire southern belt, the so-called throat of Baghdad, all the communities that are just south of here, in fact, they -- tens of thousands of sons of Iraq there in Baghdad neighborhoods right around us, in fact, in some of the areas in which al Qaeda held sway until, in some cases, six, eight months ago, across the river, Adhamiya here, Amiriya, Gazalia (ph), to the southeast of here, Dora, and so forth. So there are numerous other areas. And then when you go up into Diyala, you actually have Shia, as well as Sunni sons of Iraq. You work your way up the Tigris River Valley to Nanua (ph) province, and again, you see also up there very important places.
The city of Hawija, is to the southwest of Kirkuk, was a true al Qaeda stronghold for quite a long time. And the people there had the same awakening, if you will, that the citizens of Anbar province had.
They realized that this extremist ideology is not something they could subscribe to, they realize they made a mistake by not volunteering in the past to serve in the Iraqi security forces. And they made a colossal error in not voting in the elections in 2005.
They realize you can't win if you don't play, you can't get your share of the incredible bounty of this country, the oil revenues, the -- all the rest, if you do not participate. And they now are intent on participating.
PHILLIPS: Since Monday, 130 deaths. That's just in the past couple of days. A hundred and thirty people have died, almost 200 injured.
You talk about deaths being down, attacks on U.S. troops being down. Even the president mentioned that in his speech. But still, the streets are so dangerous.
Iraqis tell me every day, yes, I'm trying to go to work, I'm trying to go to the grocery score, I'm trying to get to school, but I'm afraid of the explosions, I'm afraid that I'm going to be killed when I'm leaving my house and going to my destination.
PETRAEUS: Well, interestingly, the week through last Friday actually saw a reduction in the overall level of attacks throughout Iraq. But clearly there have been also in recent weeks some of these headline-grabbing attacks, sensational attacks, if you will, and a tragic one in particular, the suicide vest attack in Karbala.
Again, al Qaeda is intent on re-igniting sectarian violence. They have tried to do this all along. We're not sure exactly why.
It may be that they're trying to relieve the pressure on Mosul, where there is quite an intense effort to deal with one of the remaining areas in which al Qaeda still does have quite -- quite a grip in certain neighborhoods of that city of 1.7 million people. Some people, even Prime Minister Maliki, even thinks that maybe the testimony in April that's coming up, that again they're trying to show that they can still carry out attacks.
They have paid a price for that in Baghdad in the last two weeks. There have been significant kills or captures of the remaining car bomb and suicide vest networks.
PHILLIPS: But the fact that al Qaeda's still active -- and I had a chance talk to the Iraqi foreign minister today. And you and I have talked a lot about this as well -- Iran. Iran is a tremendous problem in this country. Yet, leaders here say, look, Iran's our neighbor, we have to try to negotiate, we have to try and talk to them.
The Iranian president came here. I know you told me you weren't invited. This is not someone you would want to shake hands with and look in the eyes. The Bush administration has referred to Iran as the "axis of evil," but it stands firm that Iran is funneling weapons and supporting al Qaeda and supporting the insurgency.
Was it a slap in the face to Americans, the fact that the Iranian president came here to Iraqi soil when you and other U.S. troops are trying to rebuild this country and trying to end terrorism in this country?
PETRAEUS: No. Again, I think it's very natural that Iraq should try to deal with its neighbors. It also then hosted the following week in Iraqi Kurdistan, in fact, the Arab Parliamentary Conference. In fact, the Iraqi speaker of the council of representatives was elected to be the head of that organization.
They want their Arab neighbors involved. They have to deal with their Persian neighbors to the east. Iran is always going to be to the east of this country. They have a bloody past.
But also, many of the leaders have associations there. They spent years there during exile from Saddam and so forth.
But the foreign minister actually captured I think the sentiment brilliantly when he said during that visit, we welcome the religious pilgrims, we welcome Iranian money, we welcome Iranian goods and services, but we don't welcome Iranian bombs nor those trained in Iraq. They are a very serious concern.
The so-called special groups in particular, the supported elements that have -- without question, this is not supposition. It is not intelligence. It is a fact that they have been trained, equipped, funded, and are even directed by the Iranian Qods Force.
We have detained a number of them. And, in fact, in recent weeks we have picked up a number of weapons caches that included the explosively-formed projectiles, rockets and mortars that clearly have come from Iran. In fact, today we did communicate with some of our Iraqi partners and asked them to contact their counterparts and share that information with them, that in fact the promise by President Ahmadinejad and the other senior leaders of Iran have obviously not been kept by certain elements of the Iranian structure.
PHILLIPS: Iran obviously a big sticking point within the White House as well. We know the head of CENTCOM, Central Command, he was your boss, Admiral William Fallon, resigned. A lot had to do with this "Esquire" magazine talking about him butting heads with the president.
How is your relationship with Admiral Fallon, and is this going to impact relations with Iran? PETRAEUS: Well, I don't know what the effect with Iran would be, actually. He certainly didn't have a relationship with Iran. Actually, over the last six months or so our relationship was really very, very good.
PHILLIPS: You and the admiral.
PETRAEUS: In fact, I had just made the latest recommendations to the Joint Chiefs, and as one of the participants in there told me later, he said he could not have been more supportive. And that has characterized the relationship.
There was friction in the beginning. He has a different job than I have. There can be understandable differences of your take, if you will, on a situation. As they say in politics and government 101, where you stand on an issue sometimes depends on where you sit in the organization. And we sit in different chairs.
So, some of that is, again, understandable. But I think if you ask him, he would agree that over the last six months in particular, the relationship has been very good, and that he was -- again, could not have been more supportive in the last set of recommendations that we've already made, that we will continue to make, in fact, tomorrow with the secretary of defense, and then the following week with the president.
PHILLIPS: He has said, Admiral Fallon, that it's perception of capability. Iran needs to know that if indeed the U.S. were to go to war with Iran, that the U.S. would win. But Admiral Fallon said it's about negotiating, we have to figure out what they want and we have to figure out how to find a peaceful solution here.
Would you support a war in Iran?
PETRAEUS: Well, first of all, that's not a question that I would deal with at all. And I'm worried about Iraq. That's what our focus is on. We certainly are...
PHILLIPS: But clearly the influence of Iran is huge here.
PETRAEUS: We are concerned very much about the lethal accelerants, as they are called, that do come from Iran. And we appropriately raised that to those who have a broader perspective, then who have a regional and a global look. And the same way we do about what comes through Syria.
As you know, the flow of foreign fighters and of suicide bombers that help al Qaeda typically is through Syria. We've worked very hard with interagency partners, other combatant commands out there -- CENTCOM and other combatant commands -- to work with source countries to try to make it much tougher for a military-age male to take a one- way plane ride to Damascus, Syria, and so forth.
So, again, you have to have a very comprehensive approach to all of these issues. And again, you certainly need the help of -- obviously of the regional combatant commander, of other combatant commanders, and of the entire government. In fact, they call it the whole of government has to be engaged in this if you're to whittle the problem down and to take away all of the different needs of an organization like al Qaeda, Ansar al-Sunna, or the other extremist elements in Iraq.
PHILLIPS: General, you and I have talked a lot about the corruption in this country. A number of people here from leaders in the educational community, to the political community, to even civilians, say, well, it's a part of our culture, this is something that we have to deal with. But in a democracy, corruption is something that is going to really hinder that process. This is what the Iraqis are saying to me, we're fighting this cultural struggle with corruption.
You and I have talked about Bakshish (ph). You even taught me that word.
PETRAEUS: Well, and Bakshish (ph) was invented here, I think, that word. And certainly -- and it's not just a concern in a democracy, it's a concern in any system.
It's obviously an enormous drag on the economy. It fosters a culture really of illegality, if you will. And so corruption is a serious concern, and Iraq has very much had its -- had issues in that arena.
Prime Minister Maliki recently hosted a conference on corruption. A variety of different organizations here have taken -- pursued efforts to take that on, but it remains a very serious concern.
And the amount of wealth that is generated by this country makes it, in many respects, very prone to that. It is still a very much a maturing government, it is still a work in progress. It is largely led by individuals who have not led at the strategic level, if you will, in large organizations before. And so it is a very big concern for Iraqi leaders, and it should be.
PHILLIPS: Well, it's your troopers that are having to train Iraqis, in particular the Iraqi police force. And the Iraqi foreign minister was saying to me, "That is my biggest struggle, is dealing with corruption in the police force."
Let's just take that as an example. What are you doing? How are you working with your troopers with regard to the training...
PETRAEUS: Sure.
PHILLIPS: ... to get police officers in this country that are legitimate, that believe in the true cause of securing this country? Because until that happens, that puts you in a quagmire with regard to your presence.
PETRAEUS: It does. It's about building a culture, and it's the same in our organization as well.
If you want to build a culture of -- that embraces the right ethical values, if you will, you want -- it doesn't mean the national police. That actually is a very good example of what is required.
A year or so ago, a lot of people -- and I was close to it -- had written off the national police. They had become sectarian actors. They were not only corrupt, they were also carrying out sectarian activities, particularly Shia activities.
Over time, Iraqis, they put in a very good national commander, they put in -- they replaced both division commanders. They replaced all of the brigade commanders, and they replaced 70 percent of the battalion commanders. One of the brigades twice.
Put them all through specialized training. And now they're going through even more training with the Italian Caribinari having come out through the NATO training mission in Iraq to help further.
But it is that kind of effort -- and in some cases this will take generational change. It also though is a heck of a lot easier when they are not fearing for their lives quite the same way they did, say, 12, 15 months ago, when there were 55 dead bodies a night turning up on the streets of Baghdad just from sectarian violence, when your number one concern is literally to survive that day.
I don't want to make light at all of the innumerable security challenges that are still out there and face Iraqis in their everyday life, because they are substantial. Having said that, they are much, much reduced from the periods, say, in December, 2006, the height of the sectarian violence, when Iraq was literally on the verge of a civil war and during which the fabric of this society was torn.
PHILLIPS: Oil revenues, $5 billion a month. That's what the oil revenue is in this country.
You look at the conditions and you think, where is that money going? Smuggling, a huge issue. These mafias with these armored boats and guns -- even the Iraqi coast guard has said to me, commanders within the coast guard, saying, we can't take on these militias, they're too powerful for us. So they're stealing this oil, they're making money off this oil. And that is killing this country from an economic standpoint.
PETRAEUS: Actually, I take issue with that.
PHILLIPS: OK. Tell me.
PETRAEUS: Iraq is exporting some two million barrels a day. So there certainly is -- I'm sure there is leakage, there is corruption, there are a variety of other ills that beset Iraq's oil industry, but it's producing about 2.5 million barrels a day and it's exporting about 2 million a day. Of that, the rest goes to domestic -- domestic production.
PHILLIPS: But considering all the oil here, that could be even better.
PETRAEUS: Well, it should be even better if they improve their extraction methods, if they -- again, as the level of violence has been reduced, can bring the large corporations in that can take on the big oil field projects, can again figure out how to get so much more literally out of the ground than is being gotten out of the ground right now. But they are at or near record production and export levels right now. And coupled with the price of oil, obviously that has helped them enormously. They are some $3 billion ahead of their oil revenue goals through their oil revenue goals through the first two months of this year already.
PHILLIPS: The president of the United States said in a speech today the U.S. is going to win this war. Is it the U.S. that needs to win this war, or is it the Iraqis that need to win here?
PETRAEUS: Well, we often talk about people say, gee, how are you doing at winning the hearts and minds of the Iraqis? And we'll say, certainly, we'd love to win hearts and minds. But the truth is what we really want to do is help the Iraqis win hearts and minds of their own citizenry, help them achieve legitimacy in the eyes of the (INAUDIBLE) -- or the people of Iraq. That's what it is about obviously.
We can help, we can enable, we can assist, but at the end of the day, increasingly, obviously, it is Iraqis who must carry it forward. So it will be a team effort, very much, but increasingly the bigger part of that team will be Iraqi and the smaller part will be the coalition and the U.S.
PHILLIPS: Ambassador Crocker has made it clear that come January, he's no longer in that post. What about you as the general? You have taken a lot of heart and soul into this war.
Is your time up when the next president steps in to position in the U.S.?
PETRAEUS: Well, I think there's the common phrase that you're familiar with, that folks at this level serve at the pleasure of the president, of the chain of command above them. And that's certainly true in my case.
PHILLIPS: So that means your time will be up?
PETRAEUS: Well, I don't know what it means.
PHILLIPS: Do you want to -- do you want to see this out?
PETRAEUS: I have served here three and a half years already. By the time I go back to Congress in April we'll have served that long. At some point in time, probably a fresh set of eyes, new energy, and all the rest of that would be a good idea. So when that is, again, that's a conversation to have with...
PHILLIPS: Sir, you never lose energy. I know that for sure.
Final question, if you don't mind.
PETRAEUS: Yes.
PHILLIPS: A bit of a personal question.
PETRAEUS: Sure.
PHILLIPS: You -- this has been a very different type of mission for you when you look at your entire career. Culturally, personally, emotionally, how has this affected you? I guess from a personal and professional standpoint. I mean, this is a war like no other.
PETRAEUS: Well, it is. And I think, you know, that oftentimes people will observe that they are much older than the five years that perhaps -- you know, we all feel much older than we did in 2003. And not just five years older, but vastly older. It seems like light years ago, frankly.
It has been a very tough endeavor. There are certain aspects of this that you obviously never get over.
You do not get hardened to casualties. You take every one of them deeply personally. The tragedy -- again, you -- it never becomes easier, and everything here has been hard.
You've heard Ambassador Crocker, and you've heard me answer that we're not optimists, nor are we pessimists, we are realists at this point. And reality in Iraq is that everything is hard and it's hard all the time.
KYRA PHILLIPS, CNN CORRESPONDENT: You've also told me you're not in the end zone doing a victory dance yet either.
PETRAEUS: We're not. And we pushed the champagne bottles to the back of the refrigerator. And we're not proclaiming to see lights at the end of the tunnel or to have turned any corners. We'll let other people make those observations when it is completely obvious to everyone that that may have taken place.
PHILLIPS: General David Petraeus, head of all forces here, appreciate your time very much so.
PETRAEUS: Thanks. Good to be with you. Thank you.
PHILLIPS: There you have it, the head of all military operations here in Iraq, five years into "Operation Iraqi Freedom."
ALI VELSHI, CNN ANCHOR: Kyra Phillips with a very, very insightful interview with Commander General David Petraeus, commander of multi-national forces in Iraq.
Our polling here at CNN with Opinion Research Corporation shows that while the economy is issue number one, including the cost of the war in Iraq, Iraq itself is the second most important issue in this election to Americans. We've got some very interesting brand new polls about the war and rising gas prices.
Plus, what rising gas prices mean to the price of your groceries.
Plus, we want to answer your questions. So send us an e-mail to issue1@cnn.com.
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GERRI WILLIS, CNN ANCHOR: Behind this program is that you get to weigh in. Every day this week, we have new polls showing what worries you most about your money.
VELSHI: Well, for that, let's go to CNN's senior political analyst Bill Schneider. He's live in Washington, D.C.
Bill, what have you got for us today?
WILLIAM SCHNEIDER, CNN CORRESPONDENT: Well, you're talking about issue one, which is the economy. Iraq is still on the agenda, but they are connected very clearly in the voters' minds. Seventy-one percent, more than seven in 10 Americans, say that U.S. spending on the war in Iraq is a reason for the nation's economic problems. The two issues are connected. This is a point that Democrats in particular have been trying to make because they understand that the economy is issue number one to Americans and they've been arguing one of the reasons for the economic problems in this country are that we're spending $12 billion a month. That's about $400 million a day in Iraq. And that money has to come from somewhere. And a lot of Americans think it's coming from them and their own pockets.
WILLIS: Well, that's a whole lot of dough.
Bill, we also got some interesting polls out about gas prices. Are people feeling the pinch?
SCHNEIDER: They are indeed. Again, here's this familiar figure, more than seven in 10, in this case 72 percent, say rising gas prices have caused financial hardships for themselves and their families.
Now has it affected their daily lives? Only about 20 percent of Americans say it's had a major effect on the way they live their daily lives. Thirty-six percent say it's had some effect on their daily lives. So that's a majority of Americans. But financial hardship, that appears to be the way most Americans are trying to cope with this rise in gas prices.
VELSHI: Every time I report, Bill, you see my oil barrel, every time I report on oil prices and gas prices. The question I get is, well, when are they going to come down or are they going to come down. So I'll going to put that question right back to you.
SCHNEIDER: Do Americans expect to see oil hit -- gasoline, rather, hit $4 a gallon this year? Well, here's a familiar figure. Seven in 10 percent say they think it's very likely that the price of gasoline will hit $4 a gallon. You may remember that President Bush was asked that question and he seemed surprised at the prospects of $4 a gallon gasoline. Most Americans would not be surprised. Seventy- two percent of Americans say they would definitely expect it this year.
Now what would it take to have a major effect on the way Americans live their daily lives? There's that figure again, 72 percent very likely.
How high would gas have to go to have a major effect on people's daily lives? They say it would have to cost about $4.50 a gallon. And the way things are going, with people expecting $4 a gallon this year, that doesn't look so far away.
VELSHI: No kidding.
Bill, thanks very much for that. It sort of reinforces what we've been thinking about how people feel about these prices.
Well, we're going to be doing more on these. Coming up next on ISSUE NUMBER ONE, we'll talk more about high gas prices and high food prices.
WILLIS: Maybe there's a connection there. Rick Sanchez and Greg Hunter, they're all over it. We're getting to the bottom of things coming up next.
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WILLIS: So with high gas prices comes higher shipping costs. Higher shipping costs are then passed back to you and you pay more for everything from television to furniture to food. You can hold off on buying that new TV or couch, but food, hey, is a cost you absolutely have to deal with. CNN's Greg Hunter is live in New York City with more on these high prices.
Hi there, Greg.
GREG HUNTER, CNN CORRESPONDENT: Hey, Gerri.
I'm at Garden of Eden Grocery Store here in Manhattan. And according to a new poll, about 65 percent of Americans are worried about inflation. And, you know what, come in here and take a look at my cart. I just picked a few things out here. I got some apples. I got bread. I got milk. I got eggs. You know, staples. Things you have to do. You can cut back on other things, like you say, but you have to eat.
Let's take a look at inflation. Just February '07 the February '08. Apples up 10 percent. Move down to bread. Bread's up almost 11 percent. That will likely go up because we hit record wheat prices this year.
Now move down to eggs and that's where you start seeing some big increases. Eggs, $2.17 a dozen. That's a 24 percent increase. Milk, $3.87 a gallon. If you've got a passel of kids, that's a 25 percent or more increase. And, you know, kids have to drink milk.
And fuel. We talked about that. February '07 to '08, $3.03 a gallon. But just last week it broke the record of $3.25 a gallon. And the reason why fuel is so important is because it's in trucking, it's in cosmetics, oil is, and the reason why it's happening, you've seen these bailouts, you've seen the Federal Reserve injecting liquidity and cutting interest rates. Well, that's having a terrible effect on the value of the dollar. The dollar's going down, so the people overseas in Saudi Arabia or Venezuela say, hey, listen, you're devaluing your currency. Your currency is going down. We have to have more money to make up that difference. And that's why you're seeing sustained high prices in the cost of a barrel of oil.
Now I talked to a few people here to talk to us about what they think about inflation.
What's your name?
BOB ARKINS (ph), CONSUMER: Bob Arkins.
HUNTER: And what do you think about inflation?
ARKINS: Well, it's definitely -- food prices are going up.
HUNTER: OK.
And what's your name?
MEGAN TALLY (ph), CONSUMER: Megan Tally.
HUNTER: And what do you think about inflation?
TALLY: It's unfortunate. It's hitting the people that don't need to be hit the hardest.
HUNTER: All right. Thank you very much. There you heard, word on the street.
Back to you guys.
WILLIS: Well, there are all sorts of indicators to how the economy is doing. The price of gas, milk, a gallon of wheat among others. But I'll bet you never factored in this.
Ali, tell us all about it.
VELSHI: Cost of a pizza! Check this thing out. You got a -- I've been waiting to eat this all afternoon. You wouldn't think that that's what it is. But, in fact, Allen Chernoff, our senior correspondent, is here to tell us exactly how this has anything to do with inflation. And, do me a favor, take a couple of minutes to do this so that I can . . .
ALLAN CHERNOFF, CNN CORRESPONDENT: Well, Ali, I'm glad to see you know how to hold the slice. This is the way we do it in New York.
VELSHI: That's right.
CHERNOFF: And you'd think it would really cost virtually nothing to make a pizza. But the fact is, of course, the crust is made from wheat and the price of wheat, oh my goodness, it is getting very expensive. The fact is, you are going to need much more dough to buy anything made from flour.
(BEGIN VIDEOTAPE)
JOE VICARI, OWNER, MARIELLA PIZZA: $37.00. I can't believe it.
CHERNOFF, (voice over): Gold Medal brand flour seems more golden than ever to pizzeria owner Joe Vicari.
VICARI: Yes, it is like gold, yes.
CHERNOFF: The pizza dough that Joe and his temporary apprentice need is suddenly more precious than ever because the flour from which it's made now costs $37 for a 50-pound bag, a price that has more than doubled in the past month.
VICARI: I can't even believe how much they (ph) want for the flour. When I see the bill, I can't believe it. That's so much money.
CHERNOFF: Vicari raised the price of a slice up to $2.50 earlier this year after the cost of cheese jumped. If flour keeps climbing, Joe says, he'll have to hike it again.
VICARI: Over here people come to buy pizza I mean are working people. How much are going to (INAUDIBLE) pizza now? The flour will go up to over $40 and then I have to raise.
CHERNOFF: Prices for all kinds of baked goods are going to be heading up and that's all because of the rapid rise in the cost of a bag of flour, which is the result of wheat trading near an all-time high.
The price of wheat is now two and a half times what it was just a year ago. Why? Huge demand for ethanol has farmers planting more corn to produce the fuel when they could be growing wheat. And the dollar is sinking to a record low is making U.S. wheat relatively cheap for foreigners. As a result, nearly 60 percent of the wheat harvested last year is being exported, leaving wheat supplies here at the lowest level since the end of World War II. Another factor pushing prices skyward.
FRANK KARALIS, EUROPAN BAKERY CAFE: It's killing us. It's killing us.
CHERNOFF: So bakery owner Frank Karalis plans to raise the price of every item on his menu next week.
KARALIS: Someone's going to come in here and buy something for $2 and tomorrow they're going to be paying $2.50 for it. They're not going to like that.
(END VIDEOTAPE)
CHERNOFF: So if you've been thinking about going on a low-carb diet, this might be a very good time to try that out.
Ali, I see you're not doing that.
VELSHI: That was the perfect amount of time for that report.
Allan, thank you very much.
Gerri, over to you.
WILLIS: Well, will you save me some pizza.
VELSHI: We got a few more slices here.
WILLIS: All right. Still to come on ISSUE NUMBER ONE, back out to talk to the folks who feel the pain of rising gas prices every single day. The truckers. Rick Sanchez is on the case.
Plus, answers to your questions. Don't be shy. E-mail the CNN Money team at issue1@cnn.com.
(COMMERCIAL BREAK)
WILLIS: Gas prices, they're flirting with record highs. Now imagine the cost of filling up trucks. CNN's Rick Sanchez is live in Forest Park.
Hi there, Rick.
RICK SANCHEZ, CNN CORRESPONDENT: Since you asked the question, I'll tell you. For many of these gentlemen right here, it's $1,000 to fill up that tank. Now, keep in mind, these are the guys who have to take that carton of milk to the grocery store or those eggs or that pizza or the ingredients for the pizza that you were all talking about. They're telling me it's so bad, Gerri, that some of them are just parking their trucks and leaving them, getting out of the business. There's foreclosures on them.
As a matter of fact, you know what else is going on? They're actually talking about a potential work stoppage if things don't get any better.
Gentlemen, make Americans watching us right now understand just how bad it is. Because you seem to be pretty pessimistic from our conversation so far.
UNIDENTIFIED MALE, TRUCKER: Oh, we're going broke. We can't even put money in the savings accounts no more. We can't even -- our wives can't go to Wal-Mart and to Targets and the Publics (ph) and go shopping two and three times a week like we used to anymore. The diet is changing in the house. I can't put away for the college fund any more.
SANCHEZ: Well, make us understand -- Red, how long have you been in this business?
RED, TRUCK DRIVER: I've been in it since 1945.
SANCHEZ: 1945. Has it ever been this bad for you? RED: Not this bad in my lifetime.
SANCHEZ: Well, let me ask you a question. Since everyone's talking about the Iraqi War today, being it's the anniversary, did you think that when we went into the Iraq War that it would bring down the price of gas for fellows like you that depend on them?
UNIDENTIFIED MALE: Absolutely.
SANCHEZ: You did?
UNIDENTIFIED MALE: Absolutely. I mean, I thought, you know, we'd be helping out that country over there and we would get a return on that. But it's anything but that.
SANCHEZ: Have you been sadly disappointed?
UNIDENTIFIED MALE: Not in our troops. I'm very patriotic towards our troops, but I'm sadly disappointed in the results that we're getting because of the war.
SANCHEZ: I understand that there have been three different trucks that have been taken from your lot, Ali (ph). You run this truck stop. Is that true?
ALI: That's true. We had three trucks actually being repo'd last week because these drivers just cannot make enough money to make the payment.
SANCHEZ: And is it true that you guys are considering a work stoppage? Is that conversation going on between you guys?
UNIDENTIFIED MALE: Everywhere.
UNIDENTIFIED MALE: Yes, sir.
UNIDENTIFIED MALE: Everywhere.
UNIDENTIFIED MALE: Every day.
SANCHEZ: So you would just park your cars one day and just not drive anything anywhere.
UNIDENTIFIED MALE: Park our trucks.
SANCHEZ: If you had to do it tomorrow, if there was a vote, raise your hand if you would. You would?
UNIDENTIFIED MALE: There's not a truck driver in this nation that wouldn't do that right now.
UNIDENTIFIED MALE: Not (INAUDIBLE). A week or two weeks if it comes to that.
SANCHEZ: Wow. Gentlemen, thanks so much for your time. We'll continue having these discussion with average Americans, like yourselves, so we can better understand what's going on with our number one issue in this country.
Gerri, back to you.
VELSHI: Rick, we have to move on with the show, but you should keep on talking to these guys because the stuff that we just learned from that conversation was incredible. Thank you.
Rick Sanchez in Georgia talking to some truckers. What a story.
WILLIS: Fascinating stuff.
Up next, a major security breach involving millions of credit cards. Details ahead.
And we're turning the show over to you. Answers to your questions about your money. That and a whole lot more at cnn.com/rightonyourmoney.
(COMMERCIAL BREAK)
WILLIS: All right. We want to get right to your e-mails with our all-star panel here. Here to help, Greg McBride, bankrate.com, and senior correspondent Allan Chernoff. And Carmen Wong-Ulrich is also with us today.
I want to get right to the first question. It's from Rebecca in Georgia. She asks, "in 2006, I entered into an interest-only loan with a fixed rate of 7 percent for 10 years. No prepayment penalty. With today's rate cuts, would it be beneficial for me to refinance to a principal and interest loan at this time?" And, of course, as we know from the Mortgage Bankers Association just this morning, rates are at 5.98 percent.
What do you say, Greg?
GREG MCBRIDE, SENIOR ANALYST, BANKRATE.COM: Mortgage rates march to the beat of their own drummer. So they're directly connected to the Fed. If rates drop into your range, go ahead and lock it because they've been extremely volatile lately.
WILLIS: And she can get out of that interest-only mortgage, which I think is a great idea. Time to re-fi.
E-mail number two from Bill. "Can you let me know the name of the municipal bond in California that Allan Chernoff mentioned?"
Allan.
CHERNOFF: Gerri, California State University. They issued the bonds yesterday. Unfortunately, the pricing ended at the end of the day yesterday.
WILLIS: Oh, no!
CHERNOFF: However, they'll still be viable in the secondary market. But considering the triple tax-free status of these bonds for Californians, they're yielding more than 7 percent. That's pretty good.
WILLIS: That's a good deal.
All right. OK. Let's go to the e-mail from Jane. She asks, "I have money in a credit union. Is the NCUA as safe as FDIC, or should I move the money to a bank?"
I like it. I mean, what do you think, Carmen?
CARMEN WONG-ULRICH, AUTHOR, "GENERATION DEBT": It's great. Credit unions have some of the best rates around there. As long as it's up to $100,000. If you have more than $100,000, good for you, spread it around in different banks and you'll be safe.
WILLIS: You're safe because they're insured.
Let's go to the Odetta e-mail. "If I cannot afford to continue making payments on a property, would it be better to surrender the property to the bank or to allow them to foreclosure?"
Greg.
MCBRIDE: Well, we're really talking about the lesser of two evils here. Regardless of which way you go, whether it's a deed lue (ph) of foreclosure or a short sale or an outright foreclosure, it is going to have ramifications on your credit for many years to come.
WILLIS: I kind of like the short sale idea myself.
Guys, thank so much for helping us out. Great answers. We really appreciate your time.
VELSHI: All right, Gerri. We are going to take a quick break. Greg and Carmen and Allan, thanks very much.
A major breach of credit card security involving millions of cards. We'll have the details for you next on ISSUE NUMBER ONE.
(COMMERCIAL BREAK)
WILLIS: Credit alert. Grocery store chains, Hannaford Brothers and Sweetbay supermarkets have announced a credit card data breach. Not good news. The stores say 4.2 million credit card numbers have been exposed and could be vulnerable to fraud. Hannaford stores in New England and New York and Sweetbay stores in Florida were most affected by the intrusion. So far Hannaford Brothers says fewer than 2,000 cases of fraud have been reported.
And, don't forget, for more ideas, strategies and tips to save you money and protect your house, watch "Open House," 9:30 a.m. Eastern right here on CNN.
VELSHI: And not to be competitive, but for more on how the news of the week affects your wallet, tune in to "Your Money" Saturdays at 1:00 p.m. Eastern and Sundays at 3:00 right here on CNN. WILLIS: I like that show. Across America, the economy is issue number one. We'll be back same time, same place tomorrow, noon Eastern right here on CNN.
VELSHI: Time now for your latest headlines. And for that we turn things over to Don Lemon and Brianna Keilar in the CNN NEWSROOM.
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