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Issue Number One
Major Merger Could Change Landscape of Airline Industry; Tax Procrastinators; Fuel Economy Standards; Supermarket Spending
Aired April 15, 2008 - 12:02 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CO-HOST: A major merger could change the landscape of the airline industry. But what does it mean to you and the price of your tickets?
A presidential candidate lays out his ideas to fix the economy.
Gas prices hit an all-time high, and the clock is ticking.
Get those taxes done. The deadline is today.
ISSUE #1 is the economy. A very busy ISSUE #1 starts right now.
Good afternoon and welcome to ISSUE #1.
I'm Ali Velshi. Gerri Willis will be along in just a minute.
We've got a packed show for you today from Delta, to gas prices, to foreclosures.
But we begin with Senator John McCain. He delivered his most wide-ranging speech to date on the economy this morning.
Dana Bash, part of the best political team on television, live right now from Pittsburgh, Pennsylvania -- Dana.
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: That's right. You know, John McCain, this has been the moment that he -- that certainly a lot of people have been waiting for, that his campaign has been promising, that he is going to release this kind of comprehensive economic plan. And certainly, it was a very lengthy speech. But when it comes to the issue, issue #1, that Americans care most about right now, what will affect them the most, what the McCain campaign put in here was something that would help them, at least immediately, and that is a gas tax holiday.
This is something that is proposed very, very often on Capitol Hill, and what it would do, basically, is from Memorial Day until Labor Day, it would suspend the gas tax, which is about 18.4 cents for gasoline, 24.4 cents for diesel fuel. So, what Senator McCain is trying to make the point about is that he does understand the pain that people are feeling, especially the pain at the pump.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: The effect will be an immediate economic stimulus, taking a few dollars off the price of a tank of gas every time a family, a farmer or trucker stops to fill up.
(END VIDEO CLIP)
VELSHI: Dana, this was like a stew with a few pieces of meat, but the meat pieces were good. It's Tax Day today. I think he told you a couple of weeks ago he would come out with his comprehensive proposal on Tax Day. He said something that was definitely designed to appeal to people who just finished doing their taxes, a simplification of the tax system.
BASH: That's right. This is one of the things that gets probably the most applause line for any candidate, particularly for John McCain lately on the stump.
He talks about the fact that he understands that most people don't have a clue how to do their own taxes. And he wants to try to simplify it. Well, today he said that what he wants to propose is giving people an alternative. They don't have to have sort of a fairer tax code, or a more simple tax code, but they can choose to do so.
Listen to what he said.
(BEGIN VIDEO CLIP)
MCCAIN: All who wish to be under the current system could still do so. And everyone else could choose a vastly less complicated system with two tax rates and a generous standard deduction, period. Period. Americans don't resent paying their rightful share of taxes. What they do resent is being subjected to thousands of pages of needless and often irrational rules.
(END VIDEO CLIP)
BASH: Now, what his campaign says, Ali, is that this idea would be revenue-neutral. It's not very well defined just how they would do it, but the idea here is, on Tax Day, to try to appeal to people's frustration that they don't really have the sense of the best way to do their taxes. And it is incredibly, incredibly complicated.
One more thing I just want to point out back on this idea of a gas tax holiday that is really important to note here, is that John McCain is proposing it for this year. John McCain obviously is not president right now. So it would be something that he is saying he would propose as president, but obviously he doesn't have an effect right now. He is not in the White House.
So, what his campaign is saying is he is going to put this in the form of legislation to try to push through the Senate, where he is at least serving right now, although he is not there very much. But the other thing to point out is this idea of a gas tax holiday, you know this, Ali. This is proposed so often.
VELSHI: Right.
BASH: So often on Capitol Hill. And at this point we have been looking back and we have not found any evidence on a federal level it's actually gotten passed.
VELSHI: Because it's not revenue neutral. The government will lose a lot of money on that.
BASH: Exactly.
VELSHI: Dana, I've got to say, don't tell anybody, but I never get my taxes filed on time. I always have to file for an extension. I don't know how you people on the best political team in television ever get your taxes done.
BASH: The same way you did.
VELSHI: I can't imagine you were ever -- yes. Somebody else.
Dana, good to see you. Thank you so much.
BASH: Exactly. Thank you.
GERRI WILLIS, CO-HOST: All right. We want to break down this McCain plan for you, what it means, what it would do for you, and most important, hey, could it work?
Jeanne Sahadi is a senior writer for cnnmoney.com.
Hi, Jeanne. Great to see you.
JEANNE SAHADI, SR. WRITER, CNNMONEY.COM: Hi, Gerri.
WILLIS: All right. Dana was just talking about this gas tax holiday. She seems to think that this gets proposed a lot, isn't very likely.
What would it mean though if it did become a reality?
SAHADI: Well, the federal gas tax is about 18 cents a gallon. So, if you figure a 13 gallon tank, you are saving about $2.35 every time you feel up.
WILLIS: Not a bad thing.
SAHADI: Not a bad thing. It depends how many times you fill up a week. It's not an enormous amount of money, but in terms of the cost to the federal coffers, our back of the envelope calculations are it would cost about $10 billion.
WILLIS: Wow.
SAHADI: We don't how the McCain campaign would pay for it. We've got calls in. But, you know, all of these proposals that give you a break will cost the federal coffers something. And Congress has to decide how to make up for it.
WILLIS: And nobody ever tells you how they're going to pay for it.
Let's go on to the home plan. That is what McCain is calling his plan to help people in foreclosure. Not a ton of details.
What do you make of this and what do you know about it?
SAHADI: It's a composite of a lot of other housing proposals that are out there from Barney Frank, who's the House Financial Services chairman, and also the White House has put out its own plan. All of them involve the same structure, which is the Federal Housing Administration guaranteeing loans that lenders agree to write down below the a appraised value of a house.
WILLIS: OK.
SAHADI: Under McCain's plan though, it's all about the particulars. The lenders and the government would get a piece of the equity when the borrower sells the home if they manage to sell it above the amount of the written-down loan. So, if I owe $150,000, they write my loan down to $100,000, and then I sell for $150,000, the extra $50,000 in equity will be split three ways between the seller, the government and the lender.
WILLIS: You know, the last time the government got involved in a program like this, it made a ton of dough. It will be interesting to see how they resolve this.
Let's go on to one of the most hated taxes in the country, I think, the Alternative Minimum Tax, AMT. McCain is all over this. What does he say?
SAHADI: Right. In this sense, though, he doesn't distinguish himself from other people. Everybody wants to get rid of it. So does he.
His campaign proposes to pay for it by eliminating earmarks. Earmarks are about $60 billion a year. But that is kind of a hard thing to eliminate entirely. And the cost of eliminating the AMT over 10 years can be about $7 trillion, according to tax policy estimates. So it's a big chunk of change.
WILLIS: And it's not clear to me -- it sounds like it would be phased in over a number of years. I mean, getting rid of this, it would take some time. It wouldn't happen right away.
SAHADI: It wouldn't happen right away. And I think he wants to phase it out, so it would be over some period of time. I'm not sure how long.
WILLIS: Now, there is a good thing in there for families, right?
SAHADI: Right. Dependent exemption is $3,500 per child. Now, he is proposing increasing it to $7,000. Again, I'm not sure what the total cost it, but it will be a reduced -- reduction in federal revenue.
WILLIS: Great.
Jeanne, great information. Go on to cnnmoney.com for more details -- Ali.
VELSHI: I love how Jeanne breaks these things down.
We mentioned the Delta-Midwest merger at the top of the show. We'll have more on that in just a few minutes. But it is the subject of today's "Quick Vote."
CNNMoney.com's Poppy Harlow is here with more, and that contest to get people to respond than when I ask for Quick Votes.
POPPY HARLOW, CNNMONEY.COM: Last week I asked for 80,000 of you to respond. So let's see if we can do it today.
Delta and Northwest inking a long-awaited more than $300 billion merger. Some experts say this might be good for the carriers, but is it good for you? Is it going to mean higher ticket prices?
Here's our question today: Do you think the merger of Delta and Northwest will result in higher airfares, lower airfares, or no change in airfares?
Log on to cnnmoney.com to vote. We'll bring you the results later in the show.
Keep in mind, federal regulators, of course, still have to approve this merger, Ali. And will this kick off consolidation across the airline industry? Continental, United, some people talking about that.
VELSHI: And your respondents are more open-minded than you might think. Yesterday they thought they weren't going to have delays. You know, they did -- so let's see. I'm anxious to see what they come up with.
Thank you, Poppy.
HARLOW: Sure.
VELSHI: All right. Up next on this packed ISSUE #1, more on that Delta/Northwest merger, creating the world's largest air carrier. What are the effects of it? Is it going to cut jobs? Will ticket prices go up?
We'll have answers to those questions and more.
Plus, a scary foreclosure report in the mortgage meltdown, but we're going to show you how to make this rough real estate market work for you when ISSUE #1 comes right back.
(COMMERCIAL BREAK)
WILLIS: So the landscape of the airline industry may be changed forever. Delta and Northwest will be announcing their creation of the largest air carrier in the world, on the entire globe.
CNN's Rusty Dornin, she is live now at Atlanta's Hartsfield- International Airport.
Rusty, good to see you.
RUSTY DORNIN, CNN CORRESPONDENT: Gerri, I think for everyone who is a passenger on flights anywhere, is always nervous when you hear about the jumbo airline. In fact, locally., you can see in the paper 00 this is the take the hometown newspaper has on it. And I think people are uncertain what's going to happen? How is it going to affect me?
For the Northwest passengers that we spoke to, they are a little nervous about "my frequent flier miles." "Am I going to be able to push them over?"
Also, when you lose the identity of your favorite airline, it's always a little bit unnerving. And for the folks we talked to at the counter, the same thing. The agent said, "Well, you know, I sort of feel like I'm losing my identity."
For the Delta passengers, on the other hand, they've been hearing about this for a long time. And a lot of folks are recognizing there is a shakeout in the airline industry now anyway, and across the economy. And they are seeing this may be as a positive sign.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I think there's so many companies going out of business. I think maybe if they can consolidate some of the workers in the back office, that they can probably save some money and maybe keep prices where they are.
DORNIN: How about your pocketbook? They are talking about the fact that since there is less competition, there's the possibility that, you know, airfares are going to be going up again.
UNIDENTIFIED FEMALE: I think that's always a risk. I think they are going up a lot just because of the fuel costs. So I think that's probably going to affect it more than just the merger of the airline.
(END VIDEO CLIP)
DORNIN: And, of course, this consolidation, you know, happens -- of course, Northwest and Delta may have flights from here to Memphis, which is a hub for Northwest. They say all the hubs are going to remain open.
But there isn't as much consolidation that might happen with maybe two different airlines, because their roots don't overlap that much. So, it remains to be seen how much consolidation there will be, how much competition will be eliminated, and therefore, how much the fares will be going up outside of the fuel price issue.
So, right now for people just not quite sure how this whole thing is going to shake out -- and as we know, it's going to take six, seven or eight month for it all to be approved anyway. There could be a very different merger deal by then -- Ali. VELSHI: And Rusty, that's just the approval process. And then we'll see how long it actually takes, if they get that approval to integrate.
Thanks very much.
Rusty Dornin on this story.
Well, this is huge news in the airline industry. If you plan to get on a plane anytime soon, let's check out what it means for you. Let's answer some of the questions that those people were talking to Rusty about.
Rick Seaney is back with us today. He's the CEO of FareCompare in Dallas. They track fares on airlines on a minute-by-minute basis.
Rick, good to see you again. Thank you for being with us.
RICK SEANEY, CEO, FARECOMPARE.COM: You know, I want to refine the conversation we had yesterday, because the question most people are asking is what does this mean for fares? And that woman who Rusty was just speaking with said fares are going up because of fuel prices, they were going to go up anyway.
What does this actually mean, this merger, if it happens?
SEANEY: It's pretty amazing how the public pretty much gets it right. I mean, from this merger perspective, what we are going to see is little or no issues when it comes to pricing, because, really, it's the fuel prices that are increasing the cost of airfare right now.
In the long run, once the merger gets approved and they integrate maybe two, maybe even three years -- it took almost three years for US Airways and America West to integrate. Then what we'll see is a lot of these huge cutbacks in capacity. And those huge cutbacks in capacity will drive prices up.
Hopefully, we'll get fuel down to some decent level. So, in the long run it's bad. In the short term, it really doesn't have much effect.
VELSHI: Let's think back to that US Airways/America West merger. Once they got approval to do that, boy, that didn't work out as well in the initial stages when they were integrating their reservation systems and their check-in systems, and we had massive delays at the airports that served them. A lesson that these guys will learn? They'll make it a little smoother hopefully?
SEANEY: You would hope that the airlines would learn from past history, but I've got a feeling that we're going to see similar issues. The interesting thing is, is these two companies actually share sort of a common route reservation system from the Worldspan days. And so I think it might be a little easier than the America West/US Airways merger.
But, overall, it's going to be a pain. It's going to be a pain for a lot of people.
I want people to understand that if they are holding a ticket today on Northwest or Delta, your tickets are fine. Your frequent flier miles are fine. So, right now, just don't worry too much. The real issue is going to be about a year, year and a half from now.
VELSHI: If I am -- I think a lot of people haven't planned their trips because of the dollar and the effect of what that will have on their spending. If I am planning a trip, do I need to be conscious of this if it's in the next four or five months?
SEANEY: Honestly, if you are going to be traveling this summer, you need to be buying your tickets right now. We have had basically 11 increases this year. We have had about 12 since Labor Day last year. You need to lock in your prices.
I expect at least two or three more increases in the next month and a half or so. So, lock in those prices.
There's also going to be fewer seats this summer. Last summer we had 90 percent planes full, which means basically the planes are packed. So we might even have a shortage of seats this summer. So, go ahead and get those prices locked in.
You are going to pay a little bit of a premium, but go ahead and get that done now.
VELSHI: And Rick, we covered last summer all those delays and people sitting around at airports on overbooked flights. So, keep us up to speed, and we'll keep our viewers up to speed on it.
Rick Seaney is the CEO of FareCompare.com -- Gerri.
WILLIS: We need some good travel news.
Coming up, oil hits a new record. Gas hits a new record. What it means for what you will be paying at the pump.
And how to turn around a negative time in the real estate market into a positive for you.
Make sure you send us your e-mail questions. That address: issue1@cnn.com.
We'd love to hear from you.
(COMMERCIAL BREAK)
VELSHI: A new report from RealtyTrac says foreclosures spiked 57 percent in March, compared to the year before. They were up 5.6 percent in just one month from February to March.
So RealtyTrac tells CNN that bank repossession also spiked in March, up 129 percent from the year before. Now, they estimate the banks will hold one million properties by the end of the year. We'll have another spike in foreclosures in the third quarter of this year after a wave of loan resets in May and June.
WILLIS: All right. So, it sounds like all bad news, right? We might be in a housing slump, but you can capitalize on this down market.
Danielle Babb is the author of "How to Find Foreclosures."
Danielle, the thing I love about the information you are bringing to us today, the first list of places to shop for a foreclosure, these are all places that you would like to live.
DANIELLE BABB, AUTHOR, "FINANCING FORECLOSURES": They are places that you would like to live. They're also places that boomers will be moving as they retire in the next couple of years, which makes for a great investment, absolutely.
WILLIS: Yes. Let's go through this list.
BABB: OK.
WILLIS: We've got Palm Beach, Florida. We've got Vegas.
BABB: Yes.
WILLIS: Now, here is my question about Vegas, though. Will that city continue to grow like it has?
BABB: Well, we've seen 10 percent-plus job increases year over year for the last four years, while the rest of the country has seen some slowdowns in certain areas.
WILLIS: Right.
BABB: So, I don't have any reason to believe it's not going to continue to grow.
WILLIS: All right. I love that list. That's a great list.
All right. Let's talk about what you need to know when you are trying to figure out which market to go into. And where you get this information anyway?
BABB: Well, I get it from RealtyTrac myself. They have a great comprehensive database.
WILLIS: We're familiar with it.
BABB: Yes, but some of the other things that you need to know, you want to find out what the job market is like in the area that you are moving. You also want to find out what the long-term projection is for that community -- for the particular community.
You can do that by finding out if a Lowe's is moving in there, is a Wal-Mart moving in there? See what giant retailers are moving in. And also, what big companies are moving into that area?
WILLIS: That can be tough though. I guess you have to subscribe maybe to the local newspaper and see what's being reported there?
BABB: That's an excellent way to do it. Also, you can go online. A lot of these individuals, especially realtors, they have blogs about the community and things that are happening there. Subscribe to those blogs (INAUDIBLE). Get them to subscribe to your e-mail, and find out what is going on there.
WILLIS: Now, you say don't, don't, don't invest on a street where there are a tons of foreclosures.
BABB: Yes. I'm not a big fan of that, because what happens is, the price -- as these people make offers on these foreclosures and the banks begin to accept the lower offers, we start to see the bottom continue to drop. So that is a really big problem.
WILLIS: Now, it's not just high foreclosure areas that offer opportunities right now. You also have a list of great places to invest outside the foreclosure areas.
BABB: Yes, I do. You k now, I love the areas outside of Boise. They have this incredible growth, they have lots of new construction. But they're still growing and people are still buying.
I love Oregon and Washington, because boomers -- if you look at the top five states where boomers currently live, where they are moving as they retire, nothing changes with the exception of Washington and Oregon.
WILLIS: You know, the West is on fire. It's really interesting to see the bigger trends. Folks retiring out there, moving out there.
Now, I have to ask about this new trend, house swapping. I don't know about this. I would trust my deal online to find somebody out there that wants to swap houses? Does it work?
BABB: It does work. We've had about 20,000 people successfully do it so far. And what -- there's several ways to do it.
You can use, say, like, Craigslist, which I would not recommend. It's kind of insecure and unsafe. Or there is -- the biggest one I know of is onlinehousetrading.com.
And what they'll let you do is they use a legitimate escrow company, you do a full appraisal, a walkthrough. You get an inspection, all the things you would do to safeguard your property if you were buying it. It happens online, and you can trade houses with someone, whether you are trading a mortgagor or just the potential to buy in the future.
WILLIS: Is it mostly investors doing this, or regular people who are just under water with their mortgage doing it, too?
BABB: It's mostly people who just need to move very quickly either for military requirements or work -- job relocation. Need to get out of their home really fast but can't sell.
WILLIS: Danielle Babb, great information.
BABB: Thank you.
WILLIS: You'll be back later for our help desk. We'll see you in a few.
BABB: Sounds good. Thanks.
VELSHI: Gerri, did she just recommend buying houses in Boise, Idaho?
WILLIS: The West is on fire, Ali.
VELSHI: I think we might have just been punk'd.
So that's why you've got to stay with ISSUE #1.
All right. Stay with us.
If you missed the big news on Senator John McCain's plan to fix the economy or the Delta/Northwest merger creating the largest airline in the world, or anything else, not to worry because we're going to bring you up to speed.
Oil hitting a new record high. Gas hitting a new record high. What it means for what you are going to pay at the pump.
ISSUE #1 rolls on this very busy Tuesday. Stay with us.
(COMMERCIAL BREAK)
(NEWSBREAK)
ALI VELSHI, CNN ANCHOR: Welcome back to ISSUE NUMBER ONE.
In case you missed the two huge stories of the day, time to bring you into the loop. John McCain is calling for a gas tax holiday this summer. It's part of what he calls his economic vision for the country, which he says is mired in recession. In an economic speech this morning in Pittsburgh, the likely Republican presidential nominee also says the Education Department should do more to make it possible for college students to get loans this fall.
And, as expected, Delta and Northwest have agreed to merge, creating the world's biggest airline. But before that new outfit can fly, the deal must be approved by federal regulators.
GERRI WILLIS, CNN ANCHOR: All right, midnight tonight, you know what that is. It's your tax deadline. The last minute you can get those forms filled out and submitted online or postmarked at a post office. You know, it's no big surprise, it's the same day each and every year. But there are still so many folks out there that temperature fate and wait until the very last minute. CNN senior correspondent Allan Chernoff, hey, he's helping us out today. He's live in New York at one of the world's biggest post offices, I think.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT, (voice over): The only thing as certain as death and taxes for some is procrastination.
UNIDENTIFIED MALE: I will wait until the last minute. Maybe I'll hear a tax tip on television or something that might help me.
CHERNOFF: Millions of us, the IRS says it doesn't know exactly how many, rush to accountants as the deadline approaches and wait until the final day to file.
UNIDENTIFIED MALE: Good cash management.
UNIDENTIFIED MALE: Because I don't have time. I'm busy always.
CHERNOFF: There are as many excuses as there are taxpayers.
UNIDENTIFIED MALE: Delay the pain.
UNIDENTIFIED FEMALE: It's not fun to do. There's always something else to do.
CHERNOFF: Psychologist Barry Lubetkin says filing taxes can be traumatic, a reason for taxpayers to put it off as long as possible.
BARRY LUBETKIN, PSYCHOLOGIST: Taxes cause them to feel phobic, fearful, anxious, worried about their financial security. And while they may be very effective in other areas of their lives, when it comes to paying taxes, they're paralyzed.
UNIDENTIFIED FEMALE: Because my accountant didn't finish them until now.
CHERNOFF: The blame the accountant excuse is among the best because they're often guilty as well.
CHARLES LEWIS, ACCOUNTANT: I do my own taxes anyway.
CHERNOFF: You do your own?
LEWIS: Yes.
CHERNOFF: Are you an accountant?
LEWIS: Yes, I am.
CHERNOFF: You're an accountant and you haven't filed yet?
LEWIS: Yes, I know, it's an oxymoron. But, yes, I haven't. Not yet.
CHERNOFF: Joseph Anabe claims his accountant told him he doesn't have to file by April 15th.
JOSEPH ANABE, TAX PROCRASTINATOR: He's been filing for me for three years now. So he told me that. Yes. CHERNOFF: He told you that you can wait until after the 15th?
ANABE: Sure.
CHERNOFF: Your accountant?
Of course, certified procrastinating accountants would rather not be accountable for their delay.
UNIDENTIFIED MALE: I'm a CPA. So, you know.
CHERNOFF: You're a CPA and you haven't filed yet? What's your name, sir?
UNIDENTIFIED MALE: No, forget it.
CHERNOFF: Please.
UNIDENTIFIED MALE: Good-bye.
(END VIDEOTAPE)
WILLIS: All right, great story, Allan. Tell me more about these procrastinators.
CHERNOFF: Gerri, there are so many of them. In fact, last year 10 million Americans had to ask for an extension. They simply couldn't even make the delay. So really, you know, you've got just so many people giving all kinds of excuses. And it's very common. You know, as our psychologist said, this is really almost a phobia, creates incredible fear among many people. In fact, I call these -- the steps of procrastination here at the main post office in Manhattan because there are so many procrastinators who come together today. It's I almost a convention for them.
WILLIS: Allan, thank you for that. Great story.
Gas prices at a record high. What it mean for you at the pump and whether new fuel standards will hit their mark.
Plus, we're answering your questions on our help desk. The e- mail, issue1@cnn.com.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE NUMBER ONE.
New, record high today for gas and oil. AAA reports the average price of regular unleaded rose more than a penny to $3.38 a gallon. Ouch. Gas prices now are up 18.5 percent from where they were last year. And crude oil prices soared today to an all-time high of $113.66.
VELSHI: Well, one of the reasons you're paying so much for gas is you're actually paying to replace the gas you're buying. It's one of the few industries that actually works that way. So if oil prices go up, you'll almost immediately see the rise in gas prices. Now one way to cut down on how much you lay out for gas is to have cars with more efficient fuel standards. Carl Cannon is the Washington bureau chief for "Reader's Digest." He's the author of an article researching the feasibility of the fuel standards that have been proposed.
Carl, good to see you. Thank you for being with us.
You're a pretty straight-talker in this article. You know, President Bush wanted to reduce fuel standards to 35 miles per gallon for a fleet by 2020 or something. Most of us who look at this and say, huh? That don't sound like much of an achievement.
CARL CANNON, WASHINGTON BUREAU CHIEF, "READER'S DIGEST": Well, President Bush signed that bill December 19th. And he and the Democrats said it was a great achievement. They both -- look, at "Reader's Digest" we like bipartisanship as much as the next -- we love it -- but this thing would have been a good law 20 years ago.
VELSHI: What really should happen? I mean you look at Europe, 40 miles per gallon. You look at Japan, 47 miles per gallon. I mean it's not like we're inventing some new technology here. If there's a will to get this done, we can get it done, can't we?
CANNON: Well, that's right. President Roosevelt used to talk about American know-how, American ingenuity and I have great faith in that. But sometimes the Congress doesn't and the presidents don't. You know, in 1975, President Ford signed this law, the CAFE standards, what we call them, to raise -- they were to double their fuel efficiency of their fleets to 27.5 mile-a-gallon in 10 years. Well, they met that standard and then we never had another major increase.
VELSHI: What's the downside of this, Carl? I mean we obviously know from covering the very, very sad demise of Detroit that Detroit says if you increase fuel economy standards it hurts them. What is the downside of increasing fuel economy, getting more mileage per gallon out of a car that we make in America?
CANNON: Well, there's no downside. And I think what Detroit does and what all the automakers do is they squawk when they get regulation. You don't blame them. The point is, Congress and the presidents are supposed to force them to do it. When they've been forced to do it, they always do it. They meet their target. They surpass them. That Gerald Ford standard was met. Ten years we're going to double the fuel -- and they did it. And then we didn't do anything, you know, till now. So now we're going to, by 2020, increase the average fuel economies to 35 miles to the gallon. Well, the Japanese will be at 50 by then.
VELSHI: And one of the things that is interesting is that a lot of people say, even though American drivers, truck drivers and car drivers, consume so much of the world's oils, by some estimates 10 percent of all the oil that's produced in a day is consumed in America for driving. There are a lot of people who say, even if Americans start to conserve now, that's not why oil is at $113 or almost $114 a barrel and gas prices are high. It's the world demand. How does that argument play into what you're talking about?
CANNON: Well, it may not be the reason. In fact, it's the other way around. Gas going above 3 miles a gallon was finally the catalyst that made Washington act. But there's no -- any kind of social good you can think of, any kind of economic good helps you by reducing -- by making cars more efficient. This is, you know, global warming's lesson. Less money is leaving this economy for unstable governments where, if you have smaller cars, the cars are safer. There's no real downside to efficiency. It's all upside.
VELSHI: Carl, good to talk to you. Thank you for joining us.
CANNON: Thank you.
VELSHI: Carl Cannon is the Washington bureau chief at "Reader's Digest."
Gerri.
WILLIS: Coming up, the CNN Money team is standing by at the help desk to answer your questions. And it's not to late. Send us an e- mail. The address, issue1@cnn.com.
(COMMERCIAL BREAK)
WILLIS: Hey, get ready, get set, the help desk is open for business. Let's get right to you e-mail questions. To help us today, Dani Babb is the author of "Finding Foreclosures," Doug Flynn is from Flynn Zito Capital Management, and we're joined by the very lovely CNN business correspondent Stephanie Elam.
Welcome to you all.
Let's get right to the first e-mail. This is from Virginia. "We currently have our house on the market for what we owe on our first and second mortgage. We realize with the cost of living skyrocketing, we won't be able to continue to afford our mortgage. However, we can't compete with the foreclosure for sale in our neighborhood. We don't know what to do next."
Dani, a lot of people are in this situation. What do you recommend?
DANIELLE BABB, AUTHOR, "FINDING FORECLOSURES": They are. Don't do anything. If you can possibly hold this home, ride out the market. If you can't afford the payment, try to refinance if you can.
WILLIS: Great idea. OK, how long should I be willing to wait though? I mean you said ride it out. Some folks, they need to get moving. What do they do?
BABB: It could be years in some areas. I would consider refinancing to an adjustable rate mortgage that will drop their rate considerably.
WILLIS: Oh, that's a great idea. OK, let's go to the next e-mail. Miguel asks, "do you know of any good, green mutual funds?"
Stephanie, that sounds like it's right up your ally.
STEPHANIE ELAM, BUSINESS CORRESPONDENT: Well, Miguel, there are some and there's a lot of information out there. You can do a little bit of researching. It's called socially responsible investing. And there's one company or organization, I should say, it's Social Investment Forum. Socialinvest.org. They can go through. They have mutual funds on there that are all about being green. And you can take a look at how they perform and see which one works best for you.
WILLIS: You know, Doug, I'm wondering, though, if you were investing in green funds over the last couple of years, you would have missed the whole move in oil companies.
DOUG FLYNN, CERTIFIED FINANCIAL PLANNER, FLYNN ZITO CAPITAL MGMT.: That's true.
WILLIS: How do you -- you know, what do you do about that?
FLYNN: Well, it has to be one part of your portfolio for most people, unless you have a mandate where that's the most important thing to you and you're willing to sacrifice some performance for the goals of being socially responsible.
WILLIS: OK. Well, you've got to balance those things out, I guess.
Rich in Arizona asks, "so much attention has been placed on helping homeowners on the brink of foreclosure. What relief is being offered to families who refinanced to use the equity in their home to satisfy outstanding debt? Their decision to be accountable and not rely on a bailout still leaves them with a double-digit interest rate and poor credit score."
A lot of people are in this situation where, you know, they wanted to use the home equity line of credit to, you know, fix the kitchen, all the things that they were told would be good for their home's value. What do they do, Dani?
BABB: Or even pay off debts. Like high interest is like credit cards. Rich, you are absolutely right. A lot of people are in this position. And the best thing that you can do right now is not count on any sort of bailout. It doesn't look like that's going to happen. But try to get that HELOC rate down. You know, you should be able to get that to 7 percent or 8 percent, even with a FICO of 660. So I would hang in there.
WILLIS: And get a new HELOC? Get a new loan?
BABB: Get a new HELOC, absolutely.
WILLIS: OK. Great idea. Bob asks, "when the U.S. was on the gold standard, to put more dollars in the economy, the government needed to produce more gold." Or buy more gold or get more gold. "Now that we are not on the gold standard, how does the government put more dollars into the economy? Does it just print money?"
Stephanie.
ELAM: I like this question. But it is funny because we do what all Americans do when we need money, we borrow it. And so we do it in the form of Treasury bonds, you have notes, Treasury bills. All of that is a way that the government goes about getting more money when they need it.
WILLIS: Yes, OK. So more debt for Americans, obviously.
ELAM: Exactly. Our children will be paying for it.
WILLIS: Yes they will.
ELAM: Yes.
WILLIS: Absolutely.
OK. Terry in Virginia asks, "in the long run, I can see where a president's policies (or lack of fiscal restraint) can affect the economy. But regarding the mess the next president is going to inherit, just how much control does a president have toward a quick, short-term recovery?"
This is sort of a political question. Sort of an economics 101. Doug, what do you think?
FLYNN: I don't think they can really do a lot for a short-term fix. I think that, long term, their policies are what give you the movement in terms of whether you have low tax policies or low interest rates. You can keep them low if inflation isn't a problem. But that's the issue is, longer term, I think they can do some things. A short-term fix, I don't know how much control they actually have.
WILLIS: Yes, the economy's bigger than the president, you know.
FLYNN: Exactly.
WILLIS: All right. So Patricia asks, "I have a 15-year fixed mortgage and was unable to pay for April. I called the lender and said that the payment will be sent by the end of April. The lender said it was unacceptable and I'd have to pay by the 15th -- or else."
Dani, what can this person do?
BABB: You know, I'm actually surprised because more lenders are being aggressive up front when you first call them. You must have a lender (INAUDIBLE) that's not so friendly. I would definitely, the day that you are late, if you really are going to be late on that payment, the day that you are late you need to call them. They'll know that you're very serious then. And also, even though the rates are about 3/4 point higher, if you really can't afford this loan, you might want to consider a 30-year fixed and pay payments twice per month, which will actually pay it off in about 19 years.
WILLIS: That's a great idea. Those 30-year fixed rates are so attractive right now and I think a lot of people forget that. But you have to push these lenders to the brink before they really start working with you.
BABB: You do, a lot of them. Yes.
WILLIS: OK. I think it's Tia in Indiana has a question. "When you pay off an installment loan, car payments, how long does it take to show up as "closed" on your credit history?"
Who wants to take this one?
FLYNN: I'll take it.
WILLIS: Doug, go.
FLYNN: It's supposed to take just a couple of months but I've seen closed debts that are still open on your credit report for years and years. So one of the things you should do is run your credit report annually and take a look and see that if you have paid anything off, get that officially closed. Right to the lender, call them, because that will show up and affect your credit score if it looks like that loan is still outstanding or still open for credit.
WILLIS: You know, and so many wrong pieces of information on these credit reports out there. I know it's really concerning to folks. I'm going to do a 101 on that.
Bianca asks, "my husband and I will be purchasing a home in the next two months. We will be able to pay cash for our home purchase. Is this a good move?"
Steph.
ELAM: Well, you know, I think it depends because, really, it's about your rate of return. You've got to look at your house as an investment. So if you're going to put your money into your house, let's say your rate of return is 5 percent, but you could actually make it 7 percent if you were to invest it in another investment vehicle, that would be a better way to go. You'll have more money in the long run. Take a little piece of it.
WILLIS: I love that idea.
FLYNN: And don't discount the tax advantages for having a home equity loan or a mortgage and the fact that you can keep that money invested. If you have the money invested, you have equal the amount of the mortgage. You actually have the house paid off. It's just a matter of actually paying it off with the money. So keeping the money invested, as she said, if you're doing a better return there, then that's probably the wiser thing long term. That's what the rich people do.
WILLIS: That's what the rich people do. That's what we're looking for.
All right. OK. Thanks so much you guys. Great answers. Dani, Doug, Stephanie, thanks for being with us today. Great stuff.
VELSHI: Tell me where the rich people shop. How they deal with food prices. Coming up, food prices we know are going up. We're going to show you how to slash those grocery bills.
And the results of today's Quick Vote poll. The question, do you think the merger of Delta and Northwest will result in higher airfares, lower airfares or no change in airfares? You still have a few minutes to vote. Log in to money.com and weigh in. You are watching ISSUE NUMBER ONE on CNN.
(COMMERCIAL BREAK)
WILLIS: We asked you to weigh in on today's Quick Vote and you did. For the results I'm joined, once again, by cnnmoney.com's Poppy Harlow.
Hey there, Poppy. What were the answers?
POPPY HARLOW, CNNMONEY.COM: Hey, Gerri.
Well, an overwhelming majority of people thought that due to this merger between Delta and Northwest, if it's approved, 67 percent of you say that will result in higher airfares. Only 7 percent said they think they're going to get lower airfares out of the deal. So pretty staggering. We could see a wave of consolidation in the airline industry. We'll see what happens next.
Gerri.
WILLIS: Everybody thinks it's going to be higher prices.
Poppy, thank you for that.
HARLOW: Sure.
VELSHI: I'm always curious as to who that 7 percent is. Are those Delta and Northwest executives who have been telling us it's going to be who thinks the prices are going down because of this? Do write and tell us.
All right, the cost of everything is getting higher and higher. A government report out today shows that inflation at the wholesale level rose more than double what was expected. And that's got a lot of folks worrying quickly about the rising cost of food. Tod Marks is with "Consumer Reports" with some very basic tips, Todd, that many of us should know about, but we forget about, in terms of making choices. Because inflation, people don't talk about inflation at the dinner table. They talk about how much something costs and the fact that it costs more. So you've got some very basic tips. And the first one is, compare unit prices. We have the ability to do that in a store now.
TOD MARKS, "CONSUMER REPORTS": Oh, sure. Absolutely. Most states have done away with unit pricing. That is the price sticker on the product you're buying. But they have shelf tags, called unit price tags. It's the cost per ounce, per pint, per quart, per pound. And you can make a direct comparison of products of different sizes. There is a natural assumption that people make that the larger the package, the cheaper the product will be.
VELSHI: And that's not necessarily the case?
MARKS: Absolutely. There's been studies done that have shown that in around a quarter of all instances, the smaller package tends to be the cheaper product.
VELSHI: And this is because we're conditioned. We've learned all these years to think that the bigger one is the cheaper one. What's a good example of that?
MARKS: Well, you know, it's man bites dog. I mean, you look at the mayonnaise and you look at the coffee. It's not just the fact that the pound of coffee doesn't weigh a pound anymore, it's the fact that you have an economy of scale if you buy a larger can. They're moving more volume, hence a lower price. However, studies have shown that products like coffee, ketchup, canned tuna are often cheaper in the smaller size.
VELSHI: Now that doesn't necessarily go over to that little Frosted Flakes you've got over there. Pass me that.
MARKS: Oh, sure.
VELSHI: This kind of convenience, you pay a premium for, am I right about that?
MARKS: Well that's called value-added packaging. And people are willing to pay a premium for that -- many people indeed -- because you get your bowl and your cereal in one. So you're paying more because you're getting less.
VELSHI: Right. That's the lazy man's way of doing it. That's my way of doing it.
All right. This is one I fall for all the time. I make the assumption when I see one of these circulars the stuff on here is on sale. And you're telling me that not only am I wrong, I'm quite wrong.
MARKS: Yes. Well, what you're holding in your hand is the holy grail for supermarketers because when you put an item and mention it in a flier, the mere mention of that item can raise sales by as much as 500 percent. In other words, you're moving tons more product simply by putting it in there. But the fact is, many consumers don't realize that most products that are in a flier have been put there through the payment of advertising dollars and nothing more. Grocery manufacturers pay for the privilege often.
VELSHI: So this is just the strong power of suggestion. If it's in a circular, it works. And you've mentioned, by the way, so do displays and where they put things on a shelf. So in a time when we're trying to cut costs, is it useful to be conscious of these things. It doesn't mean they're bad, just be conscious of them.
MARKS: You have to be aware of prices. There's no substitute for doing your homework before you hit the stores.
VELSHI: Tell me about end caps.
MARKS: End caps. Those are the displays on the front and end of every aisle. One side or the other.
VELSHI: The other thing that makes me buy stuff.
MARKS: Because products put on end caps, again, that's the single, most powerful selling spot in the supermarket floor. Can raise sales of products by as much as 33 percent. But what people don't realize about the end caps is that oftentimes it's a destination for merchandise nearing the end of its shelf life. In other words, stuff that's about to go bad or it's a destination for products that aren't on sale. Usually you can tell because there's no price there.
But again, it's the assumption, the same way with fliers, you assume. We've all been conditioned to buy those. We assume it's on that display, it's on sale. Not always the case.
VELSHI: Tod, in your opinion, when people do have to make choices about their spending, which they do have to do now and we know that that's coming down to the grocery bill level, with wise spending and knowing these things, can someone, you know, really measurably reduce their grocery bill?
MARKS: Oh, absolutely. And one of the most significant ways is through the sale or the purchase of private label or store brands. Store brands got a bad rap in the '70s when they were the no-frills generics. But many retailers are putting a lot of emphasis on them today. They sell anywhere from 20 percent, 30 percent, 40 percent cheaper than the national brands. And the great thing about them is that if you're not satisfied because the store puts its own name on it, you can bring it back in almost ever instance and get a refund.
VELSHI: In many cases they're made by similar manufacturers, sources, things like that.
MARKS: That's true too.
VELSHI: Tod, thank you for the advice. I'm sure it will come in very handy for many of our viewers.
Tod Marks is with "Consumer Reports."
For more ideas, strategies, tips to save your money and protect your house, watch "Open House" Saturday at 9:30 a.m. Eastern right here on CNN.
Gerri.
WILLIS: And for more on how the news of the week affects your wallet, tune in to "Your Money" Saturdays at 1:00 p.m. Eastern and Sundays at 3:00 right here on CNN.
And, you know, great topics here today. I'm going to avoid those end caps, Ali.
VELSHI: You know, I'm a major sucker for buying things like that, end caps and looking . . .
WILLIS: What a nightmare. What a nightmare. Small is good.
VELSHI: I'm -- the power of suggestion.
WILLIS: Small is good.
VELSHI: Well, there you go. Good tips for folks.
WILLIS: Yes, great stuff.
VELSHI: Well, the economy is issue number one. We here at CNN are committed to covering it for you. ISSUE NUMBER ONE will be back tomorrow same time, 12:00 Eastern, with a special segment. We're going to take a closer look at exactly where your tax dollars go.
WILLIS: I hope you can tell me t hat. I have no idea.
VELSHI: Yes, I'll be curious about that one.
It's time now for your latest headlines. Let's go over to CNN "NEWSROOM" right now.
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