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Your Money
Testing the Candidates' Financial Plans; Traveling on a Weak Dollar; Some States Are Actually Booming Economically
Aired April 13, 2008 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN HOST, YOUR MONEY: Coming up on YOUR MONEY we are losing jobs in the United States, but do the candidates have solutions for that? We will put the candidate's plans to the test.
CHRISTINE ROMANS, CNN HOST, YOUR MONEY: Despite all the negative economical reports you are hearing, we will tell you which states are actually booming and economies are growing in this country.
VELSHI: And traveling on a weak dollar, we have the inside scoop on vacation destination and where you can get the most of your money.
ROMANS: All that and more after a quick look at the headlines.
(NEWSBREAK)
VELSHI: Welcome to YOUR MONEY where we look at how the news of the week affects your wallet, I'm Ali Velshi.
ROMANS: And I'm Christine Romans. Coming up on today's program if you can believe this, some state's economies are actually growing and we will tell you why and whether it will last.
VELSHI: Plus, gas prices hit a, re you sitting down for this? A new record. Find out which cars will get you further on less cash.
ROMANS: And picks for Tuesday, and we will answer your last minute questions ahead of the April 15th tax dead.
VELSHI: But first, gasoline prices reaching new highs this week, oil hovering around a milestone of its own. Consumers are feeling pinched by these high prices and they are beyond the pump. We will get the government numbers on the inflation, that is the consumer price index next week and a little later in the show we will tell you how it is calculated.
ROMANS: Surveys out this week show that the middle-class continues to fall behind rising prices and big business and we saw how they are affecting retail sales in the month of March, chain store sales were dismal the worse March since 1995.
Ali had hair back then. Three straight months of job losses, and a deteriorating housing market that continues and credit crunch not exactly encouraging consumers out there to go spend.
VELSHI: Now there were gains at discounters like Wal-Mart and Costco and B.J. But others like Nordstrom and the Gap they all fell behind and because of inflation, retailers are having a hard time to lower the prices to get you back into their stores, but unless they do, consumers are not going to want to spend. In fact, the new reading shows that consumer confidence has fallen to a 26-year low in the United States.
ROMANS: Is it any wonder that all these concerns about the economy make it issue number one on the campaign trail and the battle for the White House and the Pennsylvania primary is coming up and voters in parts of that state hit hardest by the economic downturn are turning to the candidates for some sort of help.
VELSHI: So we will get some of that right now. Mark Halperin is a senior political analyst "Time," Lakshman Achuthan is the managing director on The Economic Cycle Research Institute. They are both friends of ours, and they are very clear with us about things. So let's put this to you very clearly. These candidates are out there talking to people about jobs in many cases which are the biggest issue for people, and can they do anything or say anything that will actually result in us losing fewer jobs over the course of the next few months and maybe gaining jobs? Let's start with you Lakshman?
LAKSHMAN ACHUTHAN, ECONMIC CYCLE RESEARCH INST: Well, as we have been discussing before, the main thing is they should of have done something earlier and everybody on the campaign trail now is in office, and they are policy makers and they should, and they were definitely, you know, steering the ship to a degree and moving policy faster could have helped us to avoid a recession, and losing a job is very, very painful. I mean getting and creating a new job, you have to have the economy on the upswing.
VELSHI: You mean pain for the individual, but it is also much harder for the economy to create a job than lose a job.
ACHUTHAN: Absolutely. It is much more difficult. Job number one is keeping your job. And then we have a stable economy and you can businesses that you want to -- you want to -- policy makers should stay out of the way of making it difficult to start business and they should allow for competition and these are general healthy things for a longer term that they can debate, but on this near term driving of the economy the main thing is to avoid a recession so you don't lose the job in the first place.
ROMANS: But really these three candidates are all three senators and basically what they can do is vote on the economic stimulus package which they have done but by the time one of them is president, you will have another 20,000 subprime foreclosures and how many more millions of foreclosures and, Mark, this week we heard John McCain get more specific than he has ever been on the housing issue. You know, they get it that they have to get out there and talk about it, but what can they do about it?
MARK HALPERIN, SENIOR POLITICAL ANALYST, "TIME:" Well, he has more extensive and expensive and he moved from saying the market will take care of this to saying that the government needs to intervene in a more limited way that the presidents called for and then the Democrats and the phrase they all use is that they want to be a good steward of the economy and I never really understand exactly what that means but part of it is that the president cannot actually create jobs, the president is not a CEO or an investor.
ROMANS: But he can get knocked out of office when a lot of jobs are lost.
HALPERIN: Yes, I think what they need to do is they need to think about how to talk less like senators and more like leaders to create the kind of climate that people will want to invest. When the new president comes in the two big issues we talk about all of the time are Iraq and the economy, I think the markets and the real economy and the world economy will say, what is this new person going to do to inspire confidence to try to set some of the fundamentals in a better direction, and between now and then I think they are basically auditioning for that role.
ROMANS: Did John McCain this week erase some of the space between him and the Democrats on economic populous issues? He is moving a little closer to what the polls are saying people want to hear.
HALPERIN: Well, he is a bit of a populous and rallying against CEO pay and the housing plan, and he has the longest way to go though in explaining how he would be different than President Bush on the economy and also what he would propose as someone who at heart is a Barry Goldwater small government laissez faire policy.
VELSHI: Now, the people are calling for something different today. And should they be, Lakshman, you are the economist. Should people be saying that the government should be involved or in the long term is John McCain right that these things will right themselves if the leadership is there?
ACHUTHAN: Well, if the leadership is quick with the policy when need be and that is a big if. We have seen a huge failure recently.
VELSHI: Well, you made a great point the other way if a recession is eight months and you spent six months talking about what to do about it.
ROMANS: Well, yes in the press conference.
ACHUTHAN: But now we are here and we shouldn't be here, and we are talking about it, building a safety net and the recession is the housing downturn and now that you are having a recession, things that are bad went worse and you are going through a litany of things getting worse including foreclosures which will drive down home prices so to the degree that things can be done quickly on a national scale to do something with some policies with these home prices, recognizing this issue and dealing with this issue, that may on the margin help, but it is a lot more expensive than it was just a couple of months ago.
ROMANS: Mark, let me ask you about the Democrats, because something you keeping hearing a lot about is how these two Democrats are trying to define themselves and really feeling the pain of Pennsylvania voters, and I don't know what the exact ratio is, but every job lost equals I don't know how many votes, because people know somebody who lost their job and they vote because they are concerned about that, and how are the Democrats positioning themselves in Pennsylvania is it alike or is it different from one another?
HALPERIN: Well, trade is something they are both competing on, I think at heart, all three of these people are internationalists and free traders, but both Democrats are talking about protectionists and they can't name enough trade deals, they want to overturn or stop, that is a big issue in parts of Pennsylvania. But of course in the eastern part of the state trade is good and the economy in some places that is high-tech and in some places post industrial, I think their biggest challenge and Pennsylvania is a great laboratory for this, how do you talk to the whole American economy and not just the parts that are concerned about jobs going overseas, not just the parts want tax incentives and create high tech jobs, Pennsylvania is the place to do it. I would say right now they are both having good days and bad days and neither of them has really broken out and I have said all along which ever one of these three people breaks out on this will be probably be the next president.
VELSHI: Mark good to see you, Mark Halperin, senior political analyst at "Time." Lakshman Achuthan from The Economic Cycle Research Inst. You know I think back to Pennsylvania, historically the western part of Pennsylvania the rural part, industrial, it is that sort of thing, and Philadelphia is a port city and the most trade oriented kind of place around, so it is a good laboratory.
ROMANS: A lot of fun. Up next, believe this. There are areas in the country that doing very well, thank you very much. We will tell you where they are and why next.
(COMMERCIAL BREAK)
VELSHI: All right. The consumers for months now were saying it feels like there is a recession out there, but a report by Moodieseconomy.com says there are some states showing signs of economic expansion, 22 states are growing and some parts of the country are enjoying healthy economic growth and they are holding on to those jobs.
VELSHI: On the other hand the list of states with growing economies was longer at the beginning of the year than it is now. Mark Zandi chief economist at Moody's Economy.com is here to tell us more about this. Mark, good to see you again and in some ways a bit of a good news story, but it is really? Fewer states are growing now more in April than they were in January?
MARK ZANDI, MOODY'S ECONOMY.COM: Well, there are some states that are growing, Texas, and Farm Belt and parts of the Pacific Northwest, but you are right, there are increasingly fewer areas growing and more areas that are contracting.
ROMANS: What sets these states apart that are growing, they are holding on to the jobs and there is actual positive economic growth? Are they singular stories in the mid west, is it ethanol and the crux of Canada where you are seeing the people coming in from the northern states where they are spending money because of the weak dollar or what are the reasons?
ZANDI: Well, it is a higher commodity prices for energy, oil, coal and these are the things that are producing in these regions and it is exports. We send a lot of agricultural goods overseas which is good in places like Kansas and Nebraska. And also the aerospace, so if you produce a commodity or you produce something that you send overseas, you are doing OK.
VELSHI: Lets take a look at that map that we had in January we showed 28 states that were growing and since then six have moved into the column that they are not growing. Mark, is that a trend? I mean, basically this explains to people that a recession, the green states are the states that have economic growth and the brown states are the states that don't. Mark, is that a national story? What does that mean? There is more recession creeping around or more slowdown creeping around?
ZANDI: Well, it does show how the economy is weakening and weakening quite a bit since the beginning of the year and in my view, we are in a recession and you can see why by the map and big economies like California and Michigan and Florida that in recession and you have a whole slew of big economies on the way so that the map does a good job to encapsulate why we have such big economic problems.
ROMANS: Let me ask you about the big economic problems, because this week we heard that Americans feel more down beat giving a more down beat assessment about their prospects than any other time in some 50 years and also --
VELSHI: And we know they are spending less and we know that the Michigan surveys sentiment is lower.
ROMANS: Yes. In fact --
VELSHI: And lowest since it has been in 1982.
ROMANS: Yes, so we know that the consumers are telling us that there is something happening out there and are the consumers more down beat than the rest of the economy or are they telling us something that some economists and frankly Washington has been too diplomatic to admit?
ZANDI: Well, times are bad. And the consumer knows it, because everything is wrong for the consumer, right? Jobs are down and the stock prices are down and the house prices are falling rapidly and gas prices are headed higher. I can't think of a single good thing that is happening for the consumer, but it is important to realize that they are the weak spot, I mean this recession is being led by the consumer unlike other recessions that were led by businesses, and this is a consumer-led recession.
ROMANS: Well, the consumer drives 75 percent of the economy, so that is why we care that the consumer is down beat.
ZANDI: Yes, and we care if we are in recession, but I don't want to pervade all of this pessimism, but the good news is that businesses outside of financials and housing are in very good financial shape and the balance sheets are strong and they don't want to lay off workers and they are but not to the degree that they have in past recessions, so hopefully they hold on and this will be a mild recession and not a long severe one.
VELSHI: We are on the eve of a pretty important primary in Pennsylvania and the election continues to be a big issue, and we are looking at an all of the candidates to come out and say what they can do to help the economy keep out of a recession. Your best advice right now to candidates about what do they do to keep this country from sinking further?
ZANDI: Well, I think that it is very important that we do no harm and we can't raise taxes at this point in time and we can't do anything that is going to take away from the consumers ability to spend and those tax rebate checks will be very helpful and we do need to have targeted responses as to what is going on in the housing and mortgage market, because that is the ground zero for our problems, and we need policy makers to focus on that and address that.
VELSHI: Mark, good to talk to you and as always, thank you so much for being with us. Mark Zandi, chief economist with Moody's Economy.com.
Well rising prices are pinching American pocketbooks as we are talking about everything really does seem to be costing more and inflation has been rising about 4 percent compared to last year and it is climbing.
ROMANS: It is climbing and climbing faster than wages, so that really starts to hit the family budget. You have probably heard about the CPI Index, the Consumer Price Index which measures inflation and the monthly report comes out this week. CNN's senior correspondent Allan Chernoff is here to explain it and show what it means for your wallet.
Allan.
ALLAN CHERNOFF, CNN CORRESPONDENT: Christine, Ali. It all begins with shopping; indeed, there is some people who have what you might think of as a dream job. The federal government employs hundreds of people who do just that, they spend the day pricing items to help the government figure out how much prices have changed month to month. It is all tallied up in the Consumer Price Index known as the CPI.
(BEGIN VIDEO CLIP)
CHERNOFF (voice over): Janet Edwards is a professional shopper for the U.S. government. She travels from store to store checking prices.
JANET EDWARDS, PROFESSIONAL SHOPPER: Exact $249.99.
(UNIDENTIFIED MALE): Yes.
EDWARDS: I have to have it down to the minute. And that is the regular selling price?
(UNIDENTIFIED MALE): Yes. CHERNOFF: All kinds of consumer goods are on her shopping list. From fruit to women's undergarments.
EDWARDS: Excuse me, do you know where they moved the strapless --
CHERNOFF: To men's suits.
EDWARDS: It is 100 percent wool.
CHERNOFF: But she doesn't buy. Edward's sends the information she collects to Washington where it is used to price a market basket of goods and services that becomes the Consumer Price Index.
EDWARDS: I add the data into this computer where Washington keeps a record of the prices and that is how the Consumer Price Index is actually devised.
CHERNOFF: There are more than 400 shoppers like Edwards around the nation.
EDWARDS: We capture whatever is going on in regard to that item that the consumer would come and purchase.
CHERNOFF: What they do is not casual window shopping.
EDWARDS: The weight is 397 grams, and that is the same.
CHERNOFF: The shoppers have to be precise and tracking the exact weight and size of each item so it can be compared to the exact same item from the prior month and as precise as the methodology is, economists say that sometimes the Consumer Price Index doesn't seem to reflect reality, and the latest CPI for example in February was unchanged.
ALLEN SINAI, ECONOMIST: As an economist, I have to look at an it as a professional and technically and I will give it very good grades, but I am like anybody else, I don't believe that the numbers that the CPI is telling me on inflation these days. I am squeezed like everybody else. I think we are paying a lot for a lot of things and the CPI won't tell us that.
CHERNOFF: Why not? Well, take the example of gasoline and we all know that the price has been soaring recently, but the CPI won't fully reflect that increase, because it is seasonally adjusted because it takes into account that gas usually rises in the springtime, so the CPI will show some increase for gas, but not as much pain as we are feeling at the pump. Ali and Christine.
VELSHI: Well, we have been following the inflation thing and it is not an easy topic to get your head around, but it is the most serious one and it is the one that people feel on a nightly basis when they buy milk or cheese or chicken or melons or whatever they are buying.
CHERNOFF: That is the reason that people feel that inflation is far worse than what the CPI is saying. We are spending the money everyday on those grocery items, at the gasoline station, but if you think about big ticket items, maybe a washing machine or car, the prices there are not rising as quickly.
VELSHI: But you don't buy those daily.
CHERNOFF: Exactly. So in our mind, it seems well, that doesn't figure into what we are thinking about.
ROMANS: And one thing they are watching, too, which is import prices which rose more than expected this week because of inflation in the developing countries that are making a lot of the cheap consumer goods.
CHERNOFF: And our dollar is worth nada.
ROMANS: I think there is a feeling among many in the middle class that things are starting to happen, like they are paying more at the grocery store and all of that cheap stuff is more expensive as well and they are getting hit from one end to the other.
VELSHI: And you got health care and education. And I think it is an interesting conversation, because when we talk about retail sales or we talk about consumer sentiment, the bottom line is the American consumer responds to how they are feeling and we have seen them respond by shopping less by buying less at the stores. Whoever is right the bottom line is if you feel like you're getting squeezed, the money is staying there.
CHERNOFF: Worried about rising prices and they are worried about jobs and they are worried about the entire economy and they are pulling back.
ROMANS: All right. Allan Chernoff thank you so much Allan.
VELSHI: OK, coming up next. Cyber criminals are targeting your kids. We have the scoop on the latest online scheme. The inside story is next up on YOUR MONEY.
(COMMERCIAL BREAK)
ROMANS: All right. Jennifer Westhoven is here and our friend and colleague and news reporter, and she is going to tell us about an important information for people about the social networking sites and fishing for information about your kids.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Yeah, you think that spam is where you will get the attacks and you are careful about clicking there, but it turns out that cyber criminals forget it, they have completely moved most of their efforts in the United States to Facebook and Myspace and that is where they are going after you and your kids and this new report found that 91 percent of the criminal phishing attacks in the back half of last year were all focused on these two sites.
These are attacks where they are trying to trick you into getting your confidential information and you are around your friends and your guard is down. Cyber criminals can do all kinds of things from the simple, they can see enough of your details that you already laid out there to apply for a credit card in your name or complicated such as they can hijack address books and then send messages to every one of those friends and you are more likely to click on a link that comes from a friend and the next thing it is spewing all of the stuff into your computer and stealing your passwords and financial information and we talked to Myspace and Facebook and they said they are trying to work hard to protect the users and trying to catch any would-be criminals, but never the less 91 percent of the activity is a lot of people focusing their mischievous activity.
VELSHI: Do you remember Frank Abbot, catch me if you can, I remember talking to him a few months ago and he was saying that he can take three pieces of information off of somebody and recreate your life. So it is not that they are getting your credit card number or your Social Security number, but --
WESTHOVEN: Your birthday.
VELSHI: And that stuff they ask you about you and that stuff is on Facebook and people put dog's names and dog's birthday and stuff like that.
ROMANS: And it is easy to figure out the passwords and stuff like that. And I wanted to ask you about the survey from Gallup and Pugh and what people are thinking about the middle-class and how hard it is to stay there and kind of their assessment of the economy. It is more pessimistic than what we are hearing from Washington and Wall Street.
WESTHOVEN: This is far beyond the normal, oh, everything costs too much. I mean the normal humdrum everyday complaining. The question was, are you better off now than you were five years ago which of course Ronald Reagan said "Are you better off now than you were four years ago," and he famously said that and saved the president say in 1980. But in this new survey by Pugh Research, a lot of people said no, they are not. Thirty one percent said things are worse and 25 percent said that things are about the same as they were five years ago, and they haven't made any headway and more than half of the people in the survey said they had to cut their spending and found that money was really tight and they were making choices of less these days instead of more and this is the worst that this survey has seen it in nearly 50 years.
VELSHI: The middle-class is not the place where you just live. People are slipping out of it and going out of the middle-class and I know it is a point that you have made for a long time, but I don't know that it is out there as clearly that this is a real danger that you have aspired to or that your parents aspired to this place that you are at and you got your education and you can actually fall back the wrong way.
ROMANS: Well, there are a lot of important questions for policy makers who think on two-year or four-year cycles and that is not controversial to say that because it is near-term things, but you are talking about what kind of American dream and economic mobility are we giving people longer term and if it is so hard to stay sort of running in place, what are your choices going toward? We know that household income is up over a generation and up over a generation because we went from one income to two incomes. Well, what is going to be the next thing that is going to push the household income up? Someone said, well, are we going to send our kids to work? That seems to be the only thing to continue to drive household wealth gains and not the housing market right now for sure.
VELSHI: Good discussion, thank you, Jennifer.
ROMANS: Jennifer Westhoven. Thanks Jennifer. Well, coming up, why gas prices climb every spring and why the drivers are getting hit particularly hard this season and how to beat the high prices at the pump with cars that won't guzzle gas.
(COMMERCIAL BREAK)
(NEWSBREAK)
ROMANS: 3.36 is a new record high according to AAA for gasoline. The pain at the pump continues, and there is all of this -- you know, spring supply crunch and we know it is going to happen and it still feels bad, but you know it will happen, and it is bad.
VELSHI: They change the gas from the spring to the summer, so it goes up. But this year it is a little bit different, because there is a thing that they put into the gas called alkaline which is an additive for summer grade gasoline and that is in short supply.
ROMANS: I want to play "Jeopardy!" with you, because you know all of the factoids.
VELSHI: Well, didn't know that much about alkaline, but what we do know, you don't need any help on this one, the pump prices are going up and up and up.
ROMANS: Well, it is time too consider your options, because someone on staff recently asked me, should I downgrade my big SUV, because it is killing me to fill this up to take the kids to ballet class and the whole bit. And Michael Quincy is an automotive content specialist at "Consumer Reports" and we love to have him drop by, because he drives all kinds of trucks and cars and SUVs and the fuel efficient vehicles.
VELSHI: Every time he comes here he drives a couple of hours to get here, so he tries out different cars, but Michael, you don't think that people are at the point where people are widely making that decision that Christine just talked about, not everybody is saying trading in the truck for something more fuel efficient.
MICHAEL QUINCY, "CONSUMER REPORTS:" Well, I think you are right. I think we are getting to that point, but when price of gas gets to $4 or above $4 maybe that is the tipping point where people say enough is enough and I can't take the amount of money it takes to fill up my big SUV or pickup truck.
ROMANS: So are there some options out there for people who are looking for something that maybe could carry the whole family and get you around town with the groceries and all that but is still going to be a little more fuel efficient?
VELSHI: Well, the problem is that it is called a minivan.
QUINCY: Well, it is not a problem.
ROMANS: You would look great in a minivan, Ali.
VELSHI: I would not look great in a minivan, but nonetheless people would admire me for the effectiveness of space and fuel efficiency.
QUINCY: Minivans are the best family vehicle ever. I know they have this image, this stigma and what not --
ROMANS: No.
QUINCY: But I am telling you when you go on vacation with small children and the minivan and the sliding seat and the parents can go from the front seat into the back seat and changing diapers on the freeway and minivans make the most sense and they get better fuel economy than most SUVs.
VELSHI: And you like the Honda Odyssey in terms of good cars.
QUINCY: Yes, the Toyota Sienna is "Consumer Reports" top pick for the last few years and the Sienna has good fuel economy and 19 gallons overall and very nice interior and the top of line front wheel drive model, it is almost like your are driving a luxury car.
ROMANS: 19 miles a gallon is good.
QUINCY: Very good for it's class.
VELSHI: But you could do better then that in a mid-sized SUV and if you are like me and can't get a minivan, you have good mid-sized SUV choices.
QUINCY: Exactly. Well, the Toyota Highlander hybrid. We are big on the hybrid, because it is good power and good fuel economy and about 23 miles per gallon overall and pricey on the top of the line, but $44,000, but you have three-row seating and you have all-wheel drive and a lot of space and you have a lot of flexibility, and you have that traditional Toyota, you know, can we make it better? Yes, we can.
ROMANS: And it is cooler for Ali who is cool apparently is worth five miles per gallon for Ali. And the Toyota Rav 4, that is sort of the next category down.
QUINCY: Well, it is a four cylinder model and did well in the "Consumer Reports" tests and absolutely aces when it comes to reliability and 23 miles per gallon and only give up one mile per gallon with the v-6 version and we love how agile it is and fun to drive and you can get three-row seating in a smaller SUV and good for putting the kid in the back for a pinch. And Toyota did a nice job of the Rav-4. We like it.
VELSHI: And that is 23 miles per gallon. Let's kick this up a notch and I love this car Honda Fit. It is 34 miles per gallon.
QUINCY: Yes. And manual transmission and we love this car and it is a lot of fun to drive. It has -- you can get manual or automatic transmission and get 34 miles per gallon overall and great visibility and great responsiveness and the interior flexibility is one of the high points for the car. You told gown to back seat and you almost have a station wagon and you have the versatility of a four or five- passenger car --
ROMANS: And you won't get a lot of power out of this car?
QUINCY: No, it is 109 horsepower, but what you are giving up in power, you are making up for in fuel economy.
ROMANS: Well, the family sedan, the Toyota Camry hybrid, but the Prias, want to go to that one, 44 miles per gallon.
QUINCY: Yes, the Toyota Pries has the best fuel economy for any five passenger car that "Consumer Reports" has done. Forty four miles per gallon overall and it is a real four to five passenger car. And you can put real adults in the back seat. You can fold down the back seat and turn it into a mini station wagon almost and great reliability and aces for reliability, and total five-star reliability.
ROMANS: What does your motorcycle get?
VELSHI: It is not particularly fuel effective, and I don't know what the actual calculations, but less so for two wheels and no shelter.
QUINCY: But easy to park.
ROMANS: And you can't strap your kids on to back of that and go to ballet lessons.
VELSHI: I am told 45 miles per gallon is what it gets, but in a Toyota Pries, you get windows and protection from the rain.
QUINCY: And go for a ride in the snowstorm and you bring the motorcycle and I will bring the Pries and we will see who wins.
VELSHI: Thank you so much. Michael always a pleasure. Michael Quincy is the automotive specialist for "Consume Reports."
Well coming up on YOUR MONEY lets talk about the best places to travel outside the United States when the dollar is weak. And you can't afford the road trip anyway. Where can you go on vacation this year?
ROMANS: You can still go.
VELSHI: Well we will tell you about that, stay with us. We have some good tips for you.
(COMMERCIAL BREAK)
ROMANS: More bad news for the airlines and their passengers. American Airlines canceled more than 3,000 flights this week. The largest airline grounded its MD-80 planes under order of the Federal Aviation Administration. American CEO Gerard Arpey issued an apology to travelers who were stranded, rising fuel cost have also taken a beating on the struggling industry forcing ATA Airlines and Aloha Airlines and Sky Bus and most recently Frontier Airlines to file for bankruptcy in the last two weeks. Four airlines in two weeks.
VELSHI: And in fact, Frontier is the only one still operating and the other ones just kind of shutdown. To deal with rising costs, United Airlines has chosen to raise rates. Domestic one way fairs will increase by up to 15 dollars, this price increase will vary on the length of the flight and the competition from both carriers in the given markets. Shorter one way flights will increase $2 to $5 and mid range flights by $4-$10 and longer flights up to $15, but the other airlines try to match these increases so in a few days we will see whether it sticks or not.
ROMANS: So thousands of flights canceled and you can pay more. OK.
VELSHI: Yes.
ROMANS: The U.S. dollar continues to fall, unlikely to rebound any time soon. Meaning traveling outside of the U.S. can be pricey very quickly and think about a $15 grilled cheese sandwich in Paris or a $10 cup of coffee in London.
VELSHI: It is a couple of days before the tax deadline and you know what I have not done my taxes.
ROMANS: Done your taxes.
VELSHI: But I have been looking very carefully into a summer vacation because this dollar thing is killing me and I have my summer vacation months ahead. Sheila Buckmaster is senior editor for "National Geographic Traveler" magazine, so why this may appear to be a good service to our viewers, really this is about helping me find my vacation, getting me somewhere where the dollar might still get some good mileage and one of the places that you suggested that I have been thinking about is Mexico.
SHEILA BUCKMASTER, SENIOR EDITOR, "NATIONAL GEOGRAPHIC TRAVELER:" Yes, that is true. The dollar is still holding up pretty well there. And you can get a beach front and call it a room, but it is a thatched room bungalow right in the Yucatan right on the Gulf of Mexico for $110 a night.
ROMANS: So maybe in Tulum, Mexico is going to have culture events and ruins to go to. What about food and lodging. You mentioned lodging, but $110 is a fair price for me.
BUCKMASTER: If you go away from the resort, I want to get back to the ruins, because Chich Niche Cha is great, but you are not going to see ruins right on the turquoise waters, and if you go away from your resort or from your hotel, you will have lunch for $10 no problem.
ROMANS: Nice.
What about Canada? Quebec in particular?
VELSHI: It is the 400th anniversary this year.
ROMANS: Do you get a flavor of la France, but it is definitely an --
VELSHI: It is close.
ROMANS: It is close for us.
VELSHI: Well, not for them.
BUCKMASTER: Well, it is closer to Texas, but it is a two-hour drive from Burlington, Vermont. Up to the countryside outside of Quebec City where you can stay in for $130 a night. That is half or less than what you would pay in the states or in Europe, and they are celebrating their 400th anniversary in Quebec City, so spend a day there and head out to the countryside or go to Ill Darlene the 21-mile-long island which feels really feels French.
VELSHI: And I enjoy going there, but it is a lovely place and the dollar is weak, but you get a lot of value. One of the places I have been thinking about, Sheila, long, long flight from anywhere in the United States, but in the same time zone as we are, Argentina.
BUCKMASTER: That is the answer to the big question right now. Where will you feel that the dollar is pink in the cheek and will get you a lot? It is Argentina. Your almost feel like the kid in the candy store the way you felt 20 or 25 years ago in France.
VELSHI: Really?
BUCKMASTER: How about a glass of Malback which is a great red grape for $2. And how about their version of cafe latte for under $1. And a steak dinner --
VELSHI: And with good Argentinean steak.
ROMANS: Yes, and you will need them all after a 14-hour flight crammed in with all of your friends.
VELSHI: One place that I have always wanted to go to and I will get to but it is on the list, Malta.
BUCKMASTER: Malta, why have you always wanted to go there?
VELSHI: I went through a period in my life where I told people I was from Malta just for kicks and no one was able to prove that I was wrong.
BUCKMASTER: Well, I went to school in Malta for my semester aboard and I remain faithful to it. It is a 120-square mile island and 60 miles south of Sicily and 120 miles north of Tunisia and they speak English so you can dive into your holiday and be understood and great beaches, but do not go this summer. Wait until September or October, because the summer is too hot and too many people and September and October, you can still swim in the Mediterranean. ROMANS: Sheila Buckmaster, senior editor of "National Geographic Traveler" thank you so much. Malta, that sounds like a pickup. I smell a pickup line.
VELSHI: Well, I went to church at 11:00 and that is the good news and we have good news about what you can do for the dollar, but if you are sticking around in the United States, you are going to be hurt by these rising prices and if you go to any supermarket these days and you don't need us to tell you about inflation.
ROMANS: But we can tell you what to do about it, what can you do about it? For that we turn to our very own Greg Hunter. Hi Greg.
VELSHI: Don't tell us to stop eating.
GREG HUNTER, CNN CORRESPONDENT: You can't stop eating. Well listen, this whole financial thing is being called the mother of all crises and that according to former Fed Chief Paul Voccer, big bailouts and billions being doled out to the banks and brokerages is the problem. And nowhere is a warning signal flashing brighter than the price of gold. It is down to the mid $920 range. Jim Sinclair, a man who used to work for Paul Voccer told us what those warning signals should mean to you.
(BEGIN VIDEO CLIP)
JIM SINCLAIR, PRESIOUS METALS SPECIALIST: When the dollar was strong where was gold? Weak. And as the dollar became extradinarily weak where is gold, making new high's. As the dollar makes new lows in this period of time, they are absolutely linked together and gold functions as a warning.
(END VIDEO CLIP)
HUNTER: So you are sitting there thinking what should to common man do? Well, this is what Bill Sinclair says, listen up.
(BEGIN VIDEO CLIP)
SINCLAIR: If possible, with their debts that can be paid down and he has the ability to do it, it should be. If that is not possible, then certainly don't put anymore debts on the credit card. Understand that even employment could be in question. Have some sort of a basic plan of what to do with the family and how. It is a time for consolidation. It is not a time for risk. It is not a time to take a new job. It is not a time to go out the go into some sort of business. It is a time to sit back and let gold speak to you.
(END VIDEO CLIP)
HUNTER: Notice Sinclair who made millions in the '70s trading gold is an expert of precious metals trader did not tell people to buy gold or silver, asking why even though he is predicting gold to reach $1,650 an ounce in the next couple of years.
And he told me, listen, most people really are not in a financial position to do it. They need to put the financial house in order and pay down debt and do research and a small portfolio and incidentally, Sinclair does not sell anything. He has a free Website and he doesn't need investors and he doesn't sell gold, he is just saying what he thinks.
VELSHI: That is a good piece of advice, rather than worrying about the next quick buck, don't get more in debt.
ROMANS: And talking about these stimulus checks in the mail next week, listen, and folks the best thing you can do for the economy is to take care of yourself at this point and get your financial house in order. We have seen it at the shopping mall and the grocery store and people are pulling back where they can and there is a reason, because they have an awful lot of debt and taken a lot of money out of their houses, and he is saying, if you got to take care of your own family budget first.
HUNTER: That is right. Don't worry about a quick buck many where and if you have the money do the research and you can't tell people to buy gold, because it is like buying stock. What stock? Do the research and you should be the port of your portfolio and know what you are buying.
ROMANS: Doom and gloom out there, I feel like it is a real wakeup call for people and this is a great opportunity for people to get it altogether, and you know, stop the insanity and get it altogether and move along.
VELSHI: There are things to do when you do the research and there are investments you can make but the priority has to be to protecting yourselves from getting in worse situations. Thank you, Greg.
VELSHI: Thank you very much Greg.
All right. Coming up, help for all of you procrastinators out there, tax attorney Donna Cocovinis will be here to answer your e-mail questions about taxes. And how many days left? Just a few.
VELSHI: Just a few days.
(COMMERCIAL BREAK)
ROMANS: All right. It is Tuesday. That is when you have to do your taxes. If you haven't done it yet, Tuesday is the deadline for filing your 2007 taxes.
VELSHI: Everybody is telling me that they have filed the tax returns and guess what, they haven't and that is why you haven't changed the channel yet. Tax attorney Donna Cocovinis is here to answer your e- mails. Donna is with us to answer the e-mails.
Mike has written and said "I am unemployed for 2007 and no other income other than interest on savings and can I still report my income in order to get a rebate from the government?"
DONNA COCOVINIS, TAX ATTORNEY: Yeah, Mike had unemployment income as well and that was the bulk of his income and unfortunately even though it is taxable because it replaces income, it is not eligibility income for the purposes of the rebate, so he won't get one. Sorry, Mike.
ROMANS: OK. Jill wrote. Jill wrote, "I have been told that you can use retirement fund money for a down payment on a mortgage without paying taxes whether it is penalty for early withdrawal or ordinary income tax. Is this true?"
COCOVINIS: Well, it is half right. If you take up to $10,000 and if you have a spouse with an IRA $20,000 from the IRA for a down payment and you will take it as if it were distribution and you don't pay the penalty so it is a 10 percent penalty so it is a stiff penalty that people would incur, but you still have to pay it and you have to use it within 120 days of redistribution to buy the home and pay it back.
Once you get the check you have to use it within 120 days to buy refurbished or build this first home and being a first time homeowner actually really means not owning a home in the past two years.
ROMANS: So depending upon your own personal situation it may be good or not.
COCOVINIS: Yes, what is happening in the retirement account is a last resort, because you want it to stay there and grow.
ROMANS: Now this one I think is really important. Daniel wrote, "If you file for an extension, will you still get your rebate?"
VELSHI: Well, you are not getting any rebate tax if you don't file something.
ROMANS: That is right. You have to file your taxes if you are going to get the rebate, the free money from the government.
COCOVINIS: Which means you have to file sometime this year, because as of December 31st, no more checks.
ROMANS: But if you file for extension, you are putting it in jeopardy.
COCOVINIS: That is right, but you won't be eligible until you send in the return. But if you wait for October, they need time to process it and send out the check.
ROMANS: So November --
VELSHI: Well these ones that are going out the first week of May and if you did not file a tax return, you are not going to get one for you until you have done it.
COCOVINIS: Right, check it off and got the 1040 and then checks. And they made a good incentive to file on time this year.
VELSHI: Evelyn is writing "I was 71 this year in January and I was told to withdraw from my IRA account starting this year a certain percentage every month or in lump sum in 12 months and how do I put that money away for future use without being penalized and I can get by on my Social Security and I see no reason to take it out." COCOVINIS: Well, it is kind of like the deal with the devil. You got a deduction to put it in. They have been waiting for people to turn 70. So when baby boomers retire, that is the deal. You get a deduction but you have to start pulling it out. No tax advantage way to save without earned income, so she can put it in regular investment account, but it is taxable.
The one thing she could do is to take out the money to pay a conversion and convert this to a Roth IRA and a Roth and she wouldn't have to take anything until she needed and that would be tax free and that would be a good thing for her and she has the money in account. That is the only thing when you convert an IRA to Roth IRA; you have to pay ordinary income taxes on the account balance.
ROMANS: I guess that is a good problem to have, she doesn't need the money and right things and money saved. Donna Cocovinis, tax attorney, thank you so much Donna.
COCOVINIS: Thank you for having me.
ROMANS: All right. Coming up a sneak peek of a very special edition of YOUR MONEY. But first this week's edition of "Right on Your Money."
(BEGIN VIDEO CLIP)
ROMANS (voice over): Paying for college tuition is tough enough and one cost that many families fail to factor into their budget is the cost to apply for college. Application fees can range from about $25 to $60. Many students apply to more than one college up to a dozen in some cases, and then there is the cost of visiting all of those schools to check them out.
KATHERINE COHEN, CEO, APPLYWISE.COM: We found that students spend on average $3,500 just applying to college.
ROMANS: But there are a few ways to cut costs once you have been accepted.
COHEN: You could try to graduate in three years which cuts the cost of college tremendously and if you have taken AP courses in high school, see if the credits transfer or go to a lesser expensive institution over the summer and make sure that those credits will transfer over and try to graduate sooner.
ROMANS: Or if three years sounds too short, there are other options.
COHEN: Maybe you would look at room and board versus renting an apartment with your friends off campus and sometimes that is less expensive and thinks about buying used books instead of new books.
ROMANS: Check out Half.com, Ecampus.com and Bookswap.com, to compare prices on used textbooks. That is this weeks "Right on Your Money."
(COMMERCIAL BREAK)
ROMANS: Coming up next we got a special YOUR MONEY, debt free forever, if you or a loved one are now in debt you can't afford to miss it. Saturday at 1:00 p.m. Eastern, Sunday at 3:00 p.m. Eastern.
VELSHI: Email us your questions about credit and debt and we will try to answer them. YOURMONEY@CNN.com. Well thanks for joining us for this edition of YOUR MONEY. We will see you back here next week.
ROMANS: Saturday at 1:00 and Sunday at 3:00, see you then.
(COMMERCIAL BREAK)
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