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YOUR MONEY

Tax Deadline Looms; Social Security and Medicare in Jeopardy; Candidates Speak Economics

Aired March 30, 2008 - 15:00   ET

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


(BEGIN VIDEO CLIP)
HIDEYUKI TAKAHASHI, JOICFP: They are poor. They need assistance from the house to the clinic.

KYUNG LAH, CNN CORRESPONDENT (voice over): In a sense, mobility?

TAKAHASHI: Yes.

LAH: There have been some hiccups. Malacia accused wealthy Japan of dumping its trash in a less developed nation. But overall, these villagers tell activists the likes of transporting medicine in saving numerous lives. Takahashi (INAUDIBLE).

(UNIDENTIFED FEMALE): It's really amazing. I was really touched, saving lives of a lot of mothers and babies also.

LAH: In this case, proving one nation's junk can sometimes be another's treasure. Kyung Lah, CNN.

(END VIDEO CLIP)

WHITFIELD: Well who doesn't need help figuring out what to do with your money? That's coming up next after a look at today's stories.

Now, in the news, several U.S. sources tell CNN that the Iraqi military push in Bosra is not going as well as hoped. The U.S. war planes today dropped two bombs on a suspected militia strong hold north of Bosra.

In Baghdad, U.S. helicopters conducted air strikes last night on insurgent targets in the Sadr City area in of Baghdad.

Well dramatic pictures out of Miami right here, where a drugstore manager was taken hostage at gunpoint during a robbery attempt. He escaped with only minor injuries. Police say the gunman is now in custody.

We will update the top stories at the bottom of the hour. Now time for YOUR MONEY.

ALI VELSHI, CNN HOST, YOUR MONEY: Welcome to YOUR MONEY, where we look at the news of the week affects your wallet. I'm Ali Velshi.

CHRISTINE ROMANS, CNN HOST, YOUR MONEY: I'm Christine Romans. Coming up on today's program, issue number one, and is still the economy. The candidates are ramping up their talk on the economy, defining their positions, why they might not be saying what voters want to hear.

VELSHI: Plus, look, mom, no safety net. Our Social Security and Medicare systems are in a dangerous downward spiral. Find out if anyone has a plan to set those thing straight.

ROMANS: And oh, the April 15th tax deadline looms. It is a little more than two weeks away. We will tell you how to avoid an audit. Audits were up last year.

VELSHI: I really have got to get my taxes done on time.

ROMANS: Yes you do.

VELSHI: Well the candidates focus their energy on issue number one this week, the economy.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, (D) PRESIDENTIAL CANDIDATE: The Bush economy is like a trapped door. Too many people are one pink slip away, one missed mortgage payment away, one medical diagnosis away from falling through and losing everything.

JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: I have always been committed to the principal that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.

BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: If we can extend a hand to banks on Wall Street when they get into trouble, we can tend a hand to Americans who are struggling often through no fault of their own.

(END VIDEO CLIP)

VELSHI: Sub prime crisis took center stage, but that isn't the only crisis we are facing right now.

ROMANS: Treasury Secretary Henry Paulson this week said the Social Security program in this country is financially unsustainable, news flash. Medicare program not much better off. The overall economy is shaky. We know economic growth sputtered to a near halt in the last three months of last year.

VELSHI: Of 2007. Consumer spending was flat last month; new home sales are at a 13 year low. Consumer spending, well it is not doing so well.

ROMANS: Any surprise there I guess with record gas prices. OK. Joining us now, Mark Halperin, senior political analyst at "Time." Welcome to the program.

MARK HALPERIN, "TIME:" Great to be here.

ROMANS: You say that there is not any passion among these candidates on the economy. When you think of the economy you don't think passion, you think money you can start thinking a little bit about passion. Where is the passion?

HALPERIN: Well it is difficult to find. These are three pretty good presidential candidates. This is the number one issue, as you all like to say. The reality is, they are all struggling. All of them know, they have been told by their advisers, I think they are smart enough to realize none of them have captured this issue the way Bill Clinton did in 1992. The way George Bush did to some extent in 2000. This is the worst time I think to be making policy, in the midst of a campaign, in the midst of crises, you are not going to get the best policy proposals in all likely hood, but they are trying.

VELSHI: Christina and I would like to be telling everybody it was issue number one for a long time; it would have helped our ratings. But the bottom line it is not us, it is the voters who have been saying it is issue number one. I am sure the candidates and John McCain, in particular this week, really would like it not to be issue number one. He would like foreign policy perhaps or Iraq to be issue number one. Because he feels he can best sort of communicate some direction object that.

ROMANS: Ideologically hands off which means people who are out there saying, we have to do something that puts him at a disadvantage.

HALPERIN: It is always hard as a conservative Republican who believes in less government, less regulations to feel the pain as much as voters. It is a more complicated argument to make. But we have had Republicans who have done it successfully. McCain's problem is he has not been that successful. And some people are kind of raising their eyebrows and saying; he is not even coming out and dealing with the crisis, not in laying out a long-term economic philosophy.

But in terms of dealing with the housing crises, the financial crises, he is not being even being an activist in his proposals as the Bush administration, which has had a reputation well deserved for not being very activist. So he is puzzling some people with that and he is having a hard time trumping these long lists of proposals from Obama and Clinton. With by saying basically markets work, let's figure out a way to get the markets to work better.

ROMANS: Well let's talk about those long lists of proposals by Clinton and Obama. Clinton has been coming out for months with her all of her plans. Obama also having a speech this week where he is defining his. There is not a lot of light, as they say, between the two of them. They are pretty close. You have to look at the nuances between them if you are trying to decide which candidate to go for on the Democratic side.

HALPERIN: They are so close in terms of the short-term crises and the long-term philosophical and bigger programs. But mostly what they argue about is not their differences, but who stole which idea from the other one, who said what first.

ROMANS: I said it a year ago. No, I said it today.

VELSHI: The interesting turning point, I think in the last couple of weeks though is what you mentioned. They have gone from talking about what they might do when elected president or when they take office, to all sort of recommending what at least Barack Obama and Hillary Clinton recommending what the administration should do right now, which probably is going to appeal more to voters then what you are going to do in January.

HALPERIN: It's what's on people's minds and what is in the news. The problem is again, it is not the best time to be starting a bidding war about how much to spend, how big the program should be. It does offer a window into their philosophy. They want to spend a lot and they want to create new programs for training. They want to create new programs to help people deal with different government agencies, like Freddie Mac and Fannie Mae getting more involved in dealing with the short- term crises. So clearly, therefore, a more activist role for the federal government then John McCain has. But the specifics the tens of billions of dollars we are talking about again, as you said, these are things they are saying should be done now. Who knows what they will find when they get into office.

ROMANS: Well that is true. And we also have the story about Social Security and Medicare. Let's be honest. Somewhere down the road, we are going to have to be tightening our belts. Our some of these proposals and ideas, you know academic at this point?

HALPERIN: Well, look, the report came out and it said what we always hear, down the road a little bit, there will be a big problem that will require benefit cuts and tax increases.

ROMANS: They have been saying that for years.

HALPERIN: But as the economy fluctuates, the date can move, and all three of them, if you sat them in a room privately. Let's say the six of us went across the street for fried chicken and had dinner. They would agree on what the options are, you have to cut benefits, you have to raise taxes, and you have to shift the programs in some way. I think all three of them have in the back of their mind that they will deal with it.

The problem is Clinton and Obama want to do a big health care proposal, a healthcare overall. McCain is going to be focused I think on foreign policy and the war in Iraq and Afghanistan. Doing something about entitlements is always for every president a nice dream, a big legacy possibility, but they all kick it down the road. The actuary tables allow you often to do that, until it is upon us, very hard.

ROMANS: We are probably not going to see anything happen very soon. All right.

VELSHI: Mark good to see you. We are going to talk more about Social Security with Allan Chernoff later in the show.

ROMANS: OK. Up next on YOUR MONEY, make no mistake about it; your Social Security is going to run out someday. What's the government going to do about it?

VELSHI: Plus, making sense of all those housing numbers, it has been another roller coaster week in real estate and what that means for the value of your home. Stay with us we will tell you more about this on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Well the presidential candidates all gave speeches centering on the economy this past week. But there wasn't too much talk about one of the most important fiscal issues confronting the nation.

ROMANS: You know candidates have focused on the immediate crises right now of housing but there is a longer term financial challenge that some say is a looming disaster for this country, Social Security and Medicare. Allan Chernoff reports.

(BEGIN VIDEO CLIP)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice over): By the time one of the presidential candidates becomes the 44th president of the United States, the worst of the housing crises may have past but the funding problems confronting Social Security and Medicare will still be around and growing in urgency, particularly for Medicare.

HILLARY CLINTON (D) PRESIDENTIAL CANDIDATE: Our real challenge is Medicare, which is much more in crises and deserves closer attention.

CHERNOFF: The Medicare trustees reported this week that in 2010, less than two years from now, spending on Medicare hospital insurance will exceed the program's income. By 2019, 11 years away, the trust fund will be depleted. The Social Security Trust Fund will be exhausted in 2041 according to the programs board of trustees. Senators McCain, Obama, and Clinton say they would avoid politically unpopular benefit cuts. The answer, they say, is controlling health care spending. The Democratic candidates claim they can save billions by improving efficiency and relying more on high technology.

EUGENE STUERLE, URBAN INSTITUTE: None of the candidates have really proposed solutions for these problems. They have recognized the problem to some extent but none of them have come close to proposing inadequate or meaningful solutions.

CHERNOFF: John McCain supports partial privatization of Social Security. The plan President Bush proposed but failed to gain congressional approval.

JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: We don't have time to waste. We don't have eight years; we don't even have eight years to fix Social Security or Medicare.

CHERNOFF: Senators Clinton and Obama are against partial privatization. Clinton proposes new retirement accounts to supplement Social Security. While Senator Obama says the answer is to increase Social Security taxes on the wealthy and the super rich like Warren Buffet.

SENATOR BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: He is paying payroll taxes on a fraction of 1 percent of his income. Now, that is not fair. CHERNOFF: The money has to come from somewhere, either raising taxes for millions of Americans, not just the Warren Buffets of the nation or cutting benefits but trying to make Americans swallow that pill is no way to get elected.

Allan Chernoff, CNN, New York.

(END VIDEO CLIP)

ROMANS: That's why it is politics over economics and we are going to hear politicians talking in two and four year time horizons when this is something that needs to be really thought of and handled.

VELSHI: Jennifer Westhoven joins us now. She is going to talk about the issue that really does continue to be the number one issue within issue number one. That is housing. We have a lot of information on housing this past week. Bring us up to speed on where we are.

JENNOFER WESTHOVEN, CNN CORRESPONDENT: All this information, it boils down to we are still in trouble, is a turnaround coming? Are we turning a corner? Because when we look at the reports this week, the really big report, existing home sales. They rose in February, only by a whisker from January. But that little whisker started a lot of talk. Are we finding the bottom here? For context though, if you look at February to February, we are still sharply down from last year, sales are down almost 25 percent.

VELSHI: But that little whisker that was up was the first whisker since last July.

WESTHOVEN: And it is not the first little whisker and it is a big report. Which really got some people started talking about this. One of the big bones that showed up in this report that everybody was then fighting over, you know bulls and the bears was this record drop in home prices. We saw it in a few places. We also saw it in the S&P Case Shiller Index (ph); prices plunged nearly 11 percent in the latest 12 months.

California hit particularly hard. Prices are month more than 16 percent in San Diego, Los Angeles. That is a lot of reality check for people who bought at a certain level; their homes are not worth that now. The market for new homes is having an even worse time. A lot of people are in new homes than existing homes, because of the overbuilding that went on there by the builders. Still, this idea, maybe we are getting the first sign of a turn. It is going to take a lot more to convince economists.

But we know it is not just housing, it is not just buyers and sellers we are talking about here, this affects the whole economy, construction jobs for those new homes, the vacant homes and what kind of influence they have on the neighborhood.

ROMANS: I have been looking through the real estates; I am obsessed with looking at what kind of homes you can get for your money. So many of the houses are being shown vacant, which tells you somebody is gone. They have already left that house. So many of these houses, you have to talk to the real estate broker and then the bank represent.

VELSHI: Jennifer had a story this week about Syracuse, a place in Syracuse where you can start the bidding on a vacant house for a dollar.

WESTHOVEN: It's people like you, Christine, that are the key right now. Are you looking? Are you going to buy? Are you going to wait six months for prices to go down further? That is the big key.

ROMANS: My husband wants to buy and I want to wait six months. We are having strife in our household. Because we are looking at what happened, the economy slowed, we know it almost slowed to a halt in the last three months of last year. Some people think it will slow even more in the first quarter, maybe again. I am not sure.

VELSHI: But if you are moving into a house to live in it. If it is a good buy, and that is what some people are thinking. The mortgage rates still under 6 percent for a 30 year fixed mortgage. The price of a median single family home, down about $40,000.

ROMANS: It is still scary because if you think of how much more housing prices according to some could go.

WESTHOVEN: You have got to have a lot of cash, about 20 percent.

ROMANS: And 720 credit score and all of that. What about the economy? We know it is low.

WESTHOVEN: We got a reading on this, it is what it was expected but it is officially flat lining. This is fourth quarter GDP, Gross Domestic Product; it showed the economy grew but only by .6 percent. So by just a smidge, of course Gross Domestic Product, it is the biggest snap shot we get of the economy, and it is the slowest growth I think in about six years.

VELSHI: Smidge is a technical term for between zero and 1 percent.

ROMANS: All right. Jennifer Westhoven, thanks Jennifer.

VELSHI: All right. Coming up next, the final countdown to tax day. What you need to know to avoid the dreaded IRS audit. Stay with us. You are watching YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: All right. It's that time of year again. And no I'm not chirpy about spring, it is tax time. If you haven't filed your 2007 tax returns, you should be working on them. The deadline is less than three weeks away, at least the first deadline.

ROMANS: You only have a couple weekends to sit down with the pencil and paper.

VELSHI: Because that is really what I want to do with my weekends.

ROMANS: Yes, exactly. That is why you have gone this far with even the new software programs. More people are doing their own taxes. You need to be careful. The number of returns audited by the IRS last year jumped some 7 percent. Tax attorney Donna Cocovinis gives us the low down on how to avoid an audit. We love it when you come by because you give us all this important information about a subject that is not.

VELSHI: Donna seems to like it.

ROMANS: Donna likes taxes.

DONNA COCOVINIS, TAX ATTORNEY: It gives me something to do and a way to make money. I enjoy them. I think people should learn how to take control of them and pay as less as possible.

VELSHI: This business about audits increasing, is that related to people doing their own taxes?

COCOVINIS: Not necessarily. The frequent reasons why people are audited have nothing to do with simple or common errors. Sometimes audits are a way of looking at things and finding statistical norms or other types of things. But generally speaking no, doing your own taxes is a good thing not a bad thing.

ROMANS: Let's talk about some of the common red flags. I was surprised to read that if you make more than $100,000, you have a higher chance of being audited. If you have a high level of unreported income you have a higher chance of being audited. What are some of the red flags for the Internal Revenue Service?

COCOVINIS: If you are self-employed, have cash income, those are the things where you can control what you report. They looked at you more closely. They are worried you could not be reporting everything that you are receiving. Whether or not you fit into your zip code. What are your income deductions relative to your profession and your zip code. Are you making, I think $30,000 when you live in Beverly Hills, 90210. Just doesn't square. So they want to make sure that you are reporting all of your income.

VELSHI: The things that you can do that you recommend being careful about, these are some high risk areas that we have got on the screen. We talked about the income over $100,000. Tell me about mileage logs. That's something a lot of people were interested in. I think there was a time where people would let some of those mileage logs go. Now, with prices the way they are, they are keeping track of it.

COCOVINIS: Keeping track of your travel and entertainment expenses in general is good. Mileage logs are very important. Driving, there are PDAs will help you. Use a pen and pencil. Keep really good contemporaneous records. The IRS will accept them. Those are the things that people do tend to foul up on. The IRS targets them. Because they can knock them out and get more money.

ROMANS: Donna has some really good advice to about what to do if you get audited by the IRS, something that I found that was real interesting. Don't offer any more advice or any more word than what they ask you. Answer yes and no questions, I mean don't try to hide anything, but don't ramble on about your situation so there might be something else that they investigate down the road.

COCOVINIS: Organize your records. Replace the missing records. You can get copies from charities if you don't have copies of your donations. Only offer what you need to. In terms of your words and your records. Also, don't be a jerk. These people work for the IRS. They probably have a tough time as it is. They are also professionals, accountants and lawyers. You have to be nice regardless of whether they are. Don't ignore the notice. Make sure you don't give them original copies of what you have. They don't have a responsibility to keep track of them. If they lose them, you can be in trouble. Give them copies and hold on to the originals for yourself.

VELSHI: I would have a hard time not being a jerk at this point if someone wanted to audit me. But I suppose that's a good point. That's what they do for a living.

COCOVINIS: Take your time. Be courteous. Don't let them come to your house. They are looking around for more items. Stay in a businesslike manner and approach it like you are having a business meeting.

VELSHI: They have become a slightly warmer, fuzzier IRS in previous years. They have wanted to soften their image about audits and not look like they are just randomly going for money and wasting their times.

COCOVINIS: They are asking you for copies of documents that you are supposed to keep, records of charitable donations is a good example. Sometimes it is about record keeping for the IRS. Other times it is about your are just coming out of the norm, excessively high income in relation to other years. Sometimes people want to show earned income. It is really about you keeping within, you know, good record keeping, claiming the donations that you are entitled to. If you are entitled to them and they seem abnormal, that's OK. Expect some questions. Keep good records.

ROMANS: Donna real quick, we have hundreds of thousands of people facing foreclosure. Or in the foreclosure process. How does that affect your taxes? If you have been foreclosed on or you are in foreclosure, this is something that is going to be in your taxes right?

COCOVINIS: It is. Unfortunately they changed the rules, so if your debt was discharged or your mortgage was reworked by your lender in 2007, 2008 and even 2009, you are not going to be attributed income from whatever debt they canceled, if you are reworking the mortgage or when you sell it and they cancel the rest of the debt, for the short fall. This is really good news. Normally, you have to be in solvent, not necessarily bankrupt but insolvent.

ROMANS: Big break for homeowners.

COCOVINIS: That is a huge break. It will help people get on their feet and you know get back on the road to economic goodness hopefully.

ROMANS: Donna Cocovinis thank you so much. We will talk to you again soon. COCOVINIS: Thank you for having me.

VELSHI: If you want some free, expert advice this tax season, send your tax questions to YOURMONEY@CNN.com. Watch for your questionnaire as we head toward the dreaded 15th of April.

ROMANS: It is not so dreaded if you get it done. You might get a refund.

VELSHI: Let's just say it. For anybody who doesn't know out there, honestly, I hate this time of year.

ROMANS: OK. Tulips in Texas. What could have been done to prevent the mortgage crisis and whether it could ever happen again.

(COMMERCIAL BREAK)

WHITFIELD: Hello. I'm Fredricka Whitfield in Atlanta. Miami police say they have a suspected robber turned hostage taker in custody. Intense drama unfolded at a Walgreen's drugstore, cameras were rolling. Police say the gunman tried to hold up the store and then took the manager hostage at gun point in order to escape. Police say they found the suspect hours later at another location.

Democratic presidential hopeful Barack Obama, is making a stop in Johnstown, Pennsylvania right now as you look at live pictures. Yesterday, he told a crowd in Greensburgh, Pennsylvania, that he would return the country to what he called more traditional foreign policy effort of past president like JFK, Ronald Reagan and the first George Bush.

Democratic rival Hillary Clinton reassured supporters in Indianapolis today that she is staying in the race. This comes a day after she was dealt two setbacks. Pennsylvania Senator Bob Casey's endorsement of Obama and Vermont Senator Patrick Lahey calling for her to quit.

Coming up at the top of the hour, a new edition of the CNN "Ballot Bowl." Now time to go back to YOUR MONEY.

VELSHI: When a former banker in this pro business Bush administration suggests that we might need more regulation, some people say that's a sign of just how deep this mortgage crisis actually is.

ROMANS: Treasury Secretary Henry Paulson this week said investment banks may need more scrutiny. And he warned the cheap tax payer money the Fed has supplied to them will not last forever.

(BEGIN VIDEO CLIP)

ROMANS (voice over): The Treasury secretary before the largest American business lobby called for more oversight of Wall Street.

HENRY PAULSON, U.S. TREASURY SECRETARY: This latest episode has highlighted that the world has changed as has the world of other non bank financial institutions and inter connective ness among all financial institutions. ROMANS: He is talking about the investment houses the Fed has desperately tried to stabilize with your money. Paulson says the government needs more access to the financials of some of these firms to see just what sort of risks they are taking. Risks, as a sub prime mortgage crises has shown that could slam the overall economy. Risks that prompted the tax payer rescue of Bear Stearns and billions in low interest tax payer loans to others.

KENNETH ROGOFF, HARVARD UINIVERSITY: You can't go in and bail them out and then just let them go gamble it up again and come bail them out after that. I think the investment banks were crying out for help. This is a price that they have to pay for it.

ROMANS: But Rogoff warns against overreaching. At the same time, housing advocates scoff at the administration's focus on the big players.

JOSH NASSAR, CENTER FOR RESPONSIBLE LENDING: What's been missing in the administration are bold plans to help the homeowners. That is fundamentally what is viewed.

ROMANS: The Center for Responsible Lending estimates 20,000 homeowners with sub prime loans are losing their homes each week.

(END VIDEO CLIP)

ROMANS: You know the housing advocates say that if the banking regulators had done their jobs in the first place to protect consumers, I mean they have consumer protection oversight some of these banking regulators, then this crisis would have been averted in the first place. But that of course is hindsight.

VELSHI: Andy Serwer joins us now from "Fortune" Magazine to talk about how we got into this mortgage mess to begin with, because you have got an entire show on this that people can see on CNN this weekend.

ANDY SERWER, "FORTUNE" MAGAZINE: Gee thanks Ali.

How we got there is sort of well-known. We had a perfect storm; a perfect calm, the conditions were right, cheap money, easy credit, lenders that were predatory, people that didn't know what they were doing. Wall Street that had demand for product that created these exotic products and sold them to hedge fund and on, on, on, on.

ROMANS: Don't forget the ownership society, we have a record home ownership, everyone will be a part of the American dream and be able to step up the ladder and then --

SERWER: And then it blew up. Maybe Greenspan is partly responsible, because he tried to help the economy along and one bubble ended and we had to jack things up another way. So there is a little bit of this and a little bit of that.

When you talk about regulation, though, I think that's very interesting, because lending requirements weren't there. The lending companies, themselves, actually need more oversight.

ROMANS: I mean it was really a wild west. If you sold somebody a stock -- this is something that Senator Chuck Schumer said, if you sold somebody a stock that was so absolutely inappropriate for them, you go to jail. You could sell them a mortgage product that was so inappropriate.

SERWER: You know what is so interesting to me Ali too is the same people who are crowing for deregulation on Wall Street, you don't hear them anymore do you, that is number one.

Number two, people signing those statements had nothing to do with it. Capital flows to unregulated places. It goes to hedge funds, it goes to private equity. The money is going to keep going there. Regulators are behind. They need to be more proactive and maybe John McCain needs to hear that.

VELSHI: What's going to happen? We don't where we are in this whole process, we might be toward the end of it, we might be smack in the middle of it, we might even be in early stages? Given all the research you have done into this, is there an over arching lesson that we learn right now? What can be done right now to stop it from being worse?

SERWER: Well I think it is just to further what I was saying before; government needs to get ahead of the game instead of responding to the problems.

ROMANS: Paulson says that innovation always leads regulation. That's the way it should be. That's what keeps our economy growing. You try to tell that to all these people losing their houses.

SERWER: Well Christine, maybe that's the American way. Maybe we need to have huge blow-ups, great depression, leads to people losing their homes and everyone losing their 401(k)'s. I think there is a middle ground. Let's take a look at hedge funds and let's take a look at the housing market. Let's take a look at the mortgage companies. Let's take a look at where the money is going. Is there a need for regulation?

There are a lot of people on Wall Street actually who say we do need more regulation right now. I think those are voices that need to be heard. Obviously, everyone on Wall Street is going to say, we don't need any regulation. I need to make $75 million this year. You know what? Maybe you only need to make $30 million. Maybe a little regulation would spare us all this crap of people getting broke and busted all over the place.

ROMANS: Do you think there will have to be a bailout of the homeowner? Do you think that philosophically or morally you could have, call it intervention or call it a bailout of the banks and the big money and not address the foreclosures happening on the ground?

SERWER: Well, I think you can't. This is tricky business too. When you get into this notion of personal responsibility, Ali, you know when people are signing on the dotted line; I didn't know what an a.r.m. was. On the other hand, there were people who said, I had no idea. The man put the paper in front of me.

ROMANS: And told me to say I made $50,000 a year and, in fact, fudged.

SERWER: Erase this on your w-2. That's fraud. That's illegal. This Christine is an interesting point. You almost have to go through this on a case by case basis. That means we are going to spend a whole lot of time and money doing it. There is all these issues, what's the cost benefit? Do we have $50 million to examine the million or so people near foreclosure to really see if this person deserves and this person isn't.

VELSHI: And several months to do that.

SERWER: That takes time. That's why a tax rebates; look it is not a lot of money. It is quick and you get it out. That, you can see the allure of that.

ROMANS: Do you prop up home prices then. The average home price in this country is still too high for a fire fighter, a teacher or a lot of really good solid jobs to be able to afford.

SERWER: It is very controversial stuff too, when you talk about bearing out the Wall Street, you are talking about the Bear Stearns deal. They were trying to prevent systemic failure.

ROMANS: That helps everyone.

SERWER: That helps everyone. On the other hand, do these people deserve $2 or $10 a share. I am down to my last $50 million. Right now, I am telling you who is working on the economy, who is basically running the show, which is Paulson, Bernanke, Tim Gitner (ph) and Jamie Diamond.

ROMANS: Andy can't wait; I'm going to watch it. Thanks Andy.

For more with Andy and the mortgage mess, continue the "CNN Special Investigation, Busted, Mortgage Meltdown," that is later this evening right here on CNN.

VELSHI: All right. Coming up next on YOUR MONEY. Get the inside scoop on how to score your next job.

(COMMERCIAL BREAK)

ROMANS: You know newborn babies, they might be bundles of joy but they are also going to cost you bundles of money. The U.S. government reported this week that middle income families can expect to spend $204,000 to raise a baby born in 2007 until it turns 18 years old. It is worth twice as much. That includes feeding, housing and schooling cost. Sounds like a lot, if you factor in some other things, like inflation, transportation, health care, the study says the grand total to be $270,000 and that does not include college.

VELSHI: But so sweet, honestly. All right. AT&T CEO Randall Stephenson announced on Wednesday that the company is struggling to find enough skilled workers in the United States to fill 5,000 customer service jobs that it pledged to return to the United States from India. It says it has only moved about 1,400 of these positions since it set the target back in 2006. So if you are looking for a customer service job.

ROMANS: Interesting they can't find anybody to fill those jobs. Last month the U.S. economy lost tens of thousands of jobs for a second consecutive month, meaning there are people out there looking for work. Fact is, unemployment is a reality for a growing number of people.

VELSHI: The way to land a job has changed dramatically over the last several years, it is becoming pretty daunting. You have to know what to put in your resume and cover letter and who to send those to and how to make them different, let alone figuring out how to ace the interview.

ROMANS: What does somebody have to do to get a job around here? Cynthia Shapiro joins us now. She is the author of a book with that very title. Cynthia, you say, you know what, to get a job around here, you have about three seconds for someone to look at your resume. Three seconds is all they are going to look at it. You have to hit it out of the park right away.

CYNTHIA SHAPIRO, AUTHOR, "44 INSIDER SECRETS:" That's right. A lot of people don't realize that those three seconds are critical. You have got a hiring manager who puts out an ad for a job. They get 5,000 resumes for one job. If you can't grab their attention in those three seconds, you are going to go to the maybe or no pile and you are not coming back.

VELSHI: Now the world has changed. If you haven't looked for a job for 10 or 15 years now they recruiting services, there are online submissions, you get more applications for each job. As a result, are you looking to tailor your resume and your application for every job or you want a resume that shows how versatile and broad you are? Tell me what you do? Normally, you are not looking for one job; you are looking for one of several?

SHAPIRO: Right. That's absolutely true. It use to be that you could do several different resumes and tailor them to each and every job. You don't have to do that anymore which is the good news. What you really want to do is tailor your cover letter and occasionally you will have certain things where you need to have separate resumes, but what you want to do now is get rid of your objective. That will narrow you down. Its wasted space.

What you want to do is put at the top of your resume an executive summary. You don't have to call it that. It's a wonderful opportunity to sum up all your experience, everything you have to offer, your qualities. You can't put qualities in the rest of the resume but you can put it in this summary. That will provide an incredible foundation for all the other things that are on your resume. It should be compelling enough that if that's all the hiring manager reads in that three-second scan, they will pick up the phone and call you. It can broaden your whole scope and keep you from having to do multiple resumes.

ROMANS: If you get that job interview, you say it is really important to stay positive? If they start asking you questions where they are trying to get you down a negative route about what you don't like about your other job, don't go there. Be positive.

SHAPIRO: Yes. Absolutely. This is such a great secret for people. Trick question. Behavioral interview questions. They are designed to make you sweat and they are designed to do one thing. Here is the secret. They are designed to make you go negative. They want you to say something bad about a previous boss or a previous company you worked for. Don't bite. Even if the interviewer goes negative. Even if the question has a negative premise. Always stick to the positive, silver ling everything. Make sure you showcase as a star.

VELSHI: The one unfortunate negative is as Christine said earlier we have lost almost 100,000 jobs this year alone. Who knows what will happen next week when we get the jobs report for March. It is kind of negative if you have lost your job. How do you deal with that in a resume and an interview if you have been a victim of a layoff or a downsizing of some sort?

SHAPIRO: The good news is it is happening to a lot of people. It is not going to be the stigma it could be in a different economy. What you have to do is you have to pick yourself up and get your confidence going. Step up your game and get the insiders secrets that are going to make you feel confident and feel like you can go in there and really nail it. What happens if people lose their jobs and they feel badly, and they are starting to feel desperate because they are looking and they are not finding anything and that desperation can come across in a cover letter? It can come across in your interview. Getting it together on the inside, your inner game is really important.

VELSHI: Good advice Cynthia and that really is important. It's not all an academic conversation until it happens to you. Keeping that game face on and making it look good. Cynthia Shapiro is the author of "What Does Somebody Have to Do to Get a Job around Here."

ROMANS: And she says use the objective at the top of the resume. Three seconds, you can look at that and be positive. Be very positive.

Still to come. What you should do with your rebate checks.

Plus, saving for retirement or saving for your kids' college. Which is more important? What do you do first? We are going to break it down next.

(COMMERCIAL BREAK)

VELSHI: There is nothing for nothing. No free lunches. Just a couple weeks, the rebate checks are going to be in the mail, some of them. By the way, you have to do your tax return in order to get them. What are you going to do when you get it, are you going to spend it, invest it, save it for your kids college education? You have a lot of options.

ROMANS: Susan Liscovitz of MONEY.com, senior writer Jeanne Sahadi joins us now with a look at all this. I want to start with the tax stimulus check. You say, Jeanne, that you have to file a return or you are not going to get this thing. This is incentive to get your taxes done, Ali.

It depends on when you get your stimulus check by your Social Security Number.

JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: They are going to be mailing out on the basis of when you file, so for people whose returns have been processed by April 15th, which means you probably filed by April 1st. They have a schedule which we have on line that they will be mailing out checks every week. The people in the first batch, it will be dependant on the last two digits of their Social Security number and then as those numbers go up you get it the week after.

VELSHI: That's assuming you are direct deposit. If you are one of these people that likes to paper check for deposit. It will be later.

SAHADI: Scheduled a little bit later. Let's say you are getting a refund this year, on your tax return you are going to say deer IRS, please direct deposit my refund or send me a paper check. That will determine how you are going to get your stimulus check.

VELSHI: Susan, you spend your time with the smart money on Wall Street. Are they saying this rebate is going to be the be all and end all? Because President Bush the other day said, because of these rebates, the economy is going to come roaring back stronger than ever.

ROMANS: We are going to create a bunch of jobs.

SUSAN LISCOVITZ, CNN CORRESPONDENT: There is wishful thinking, I think. And then there is reality. I think that one of the facts that's happening in our economy right now is people are in way over their heads. Smart people, like the both of you, have been encouraging people to put that money in pay down debt.

Will some people put it back into the economy immediately by buying things? Yeah, we will. After 9/11, Wal-Mart, for instance, I remember saying that it saw a pick up in some sales. I think that one of the reasons why we have a credit crunch right now is that so many companies got burned.

ROMANS: I can't say this enough. If you were going to get one of these checks and you have a bunch of credit cards at 20 or 30 percent interest, you have to pay down what you have already bought. You can't buy something new.

VELSHI: We have the gas prices the way they are. It's being eaten up by other things.

ROMANS: You have college investments and your retirement. The other things that people are not investing enough for. There are a lot of important things. Kind of a time to get yourself back into reality. The bill is due for all of that spending that we have had over the past, I don't know, 20 years, I guess.

LISCOVITZ: You have to look at your own finances first and then figure out the nation as a whole. Once we as a people get our own house holds in order, the economy, as a whole, will also be better as a result. It's as simple as that.

VELSHI: Jeanne, what are you seeing about -- we have been tracking real estate numbers for so long. We have been noticing as Jennifer Westhoven describes it, a smidge of an up tick from January to February in the sales of existing homes because the prices have come down so much. Is this the time to get back into real estate?

SAHADI: If you are getting into real estate for investments, we can't answer that question. If you are out to buy a home, it is a perfectly fine time to buy a home. And people say shouldn't I wait another year? Economists are predicting home prices will bottom out maybe in '09. I think the decision to buy a house is so much bigger than the prices. If you are going to be moving in for 5, 10 years, this is an immaterial moment.

ROMANS: If you save the money and you have good credit, you are kind of in the cat-bird seat where there aren't any bidders at all on these homes.

SAHADI: That is right. It is definitely a buyer's market. Think about your own financial situation. You can't wait for, you know, the national economy to come out and say --

VELSHI: What's going on on Wall Street with those opinions in terms of whether we --

LISCOVITZ: The house prices are going to come down more. It's as simple as that. There is an inventory of at least 10 months. There is more product coming on the market, because all these big construction projects that were started at the height of the boom are being finished. Sadly, there are still more foreclosures. There is a lot of product out there.

VELSHI: Back to your point. It's your economy, it's your affordability. If the home prices are where you think you are comfortable with and if you can get a mortgage.

LISCOVITZ: If you can get a mortgage.

ROMANS: Right and that is a whole other story.

All right. Jeanne Sahadi, Susan Liscovitz thank you so much.

LISCOVITZ: You're welcome.

VELSHI: Well, still to come, we are going to reach into our mailbag and find out how you are dealing with the economic slowdown. Because that is why we do this show in the first place. Your e-mails are next. First, this week, "Right on Your Money."

(BEGIN VIDEO CLIP) VELSHI (voice over): Falling home prices means more opportunities for buyers. With lending standards tightening, improving your credit score is more important than ever.

JOHN ULZHEIMER, CREDIT.COM: If you want to guarantee yourself the best rates and the best terms that any lender has to offer, you need to be boosting a 750 across the board. Now, of course, you can still get approved with a score lower than 750. You could even get credit in the mid 600s. But you should not expect the best rates and the best terms in the mid 600s.

VELSHI: The easiest way to give your credit score a boost is to pay off high credit card balances. And avoid opening new lines of credit.

ULZHEIMER: If you are in credit score improvement mode you really need to kind of take a step back. No knee-jerk reactions and tackle the things that are costing you the most. Pay off the collections or settle them. Pay down the credit card debt as much as possible. Do not access the credit environment as a means to improve your credit score. And be aware closing credit cards because you rarely use them will not help your credit score. Hold on to older credit cards. The longer you have managed credit, the better your score will be.

VELSHI: That's this week's "Right on Your Money."

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ROMANS: You know we have been talking to people about how they are handling the economic down turn, what it means for their own family budget. We have been getting a lot of e-mails.

Beverly writes from Kentucky, "My husband is a plant manager. We are doing OK but the young folks in this rural community are not. All but a few have said that any extra money in their wallets will go for savings, to pay down a bill or two or to buy a much-needed item."

All three of those are a good idea. "When will Congress and the administration wake up to are a reality check?"

VELSHI: Yes, that reality checks that says that everybody is not going to take that check that they get in May or June.

ROMANS: Buy a flat screen TV.

VELSHI: Exactly right. Al has this opinion. He is writing from Minnesota. "How is this recession affecting me? We are retired. Our home is paid for, we don't drive much or buy much, but our retirement invests are losing value every month by thousands. Thou we don't feel it directly, it really is hurting us over the long run."

That's a tough position to be in when you are near retirement. Because you don't have that window to make up for that extra.

ROMANS: That is true. Richard writes and this is very important, "Why does TV never speak up about senior citizens who are depending upon the interest from their CDs and Social Security to make ends meet. We did the right thing and saved but why? Every time the Fed lowers the interest rate everyone seems to benefit except for us."

Richard you are absolutely right. We have pointed that out on this program a couple of times. Lower interest rates are good if you are going out to borrow some money for something else. If you are living on a fixed income, it is tough. It is also tough for charities; it is tough for churches, and those kinds of groups that have endowments that can only be invested in treasuries.

VELSHI: We should talk more on this show about ways to invest that are relatively conservative and safer. But will get you a better return.

ROMANS: Richard we are going to do it.

VELSHI: Send e-mails to us, because it gives us good ideas about things to do. Thanks to everyone that wrote in. if you want to share a question or a thought or an idea with us check in at YOURMONEY@CNN.com. It will tell you there how to send us an e-mail.

ROMANS: All right. So CNN is making a big commitment to covering the economy, issue number one is on the minds of Americans.

VELSHI: New Eastern on Monday, make sure you join us for "Issue Number One" we are going to be talking about your jobs, your house, your savings, and your debt. We hope to see you Monday at 12:00 pm Eastern.

ROMANS: OK. Thanks for joining us for this edition of YOUR MONEY. We will be back next week.

VELSHI: Saturday at 1:00 and Sunday at 3:00. See you then.

(COMMERCIAL BREAK)

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