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Issue Number One

All About Inflation; Mortgage Meltdown; Ghost Malls; What Recession?

Aired April 28, 2008 - 12:01   ET

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

ALI VELSHI, CO-HOST: Two Democratic candidates, two very different ideas of how to deal with rising gas prices.
And truckers, hundreds of them, descending on Washington, D.C., this hour, protesting gas prices.

The first stimulus money should be in your account. What are you going to do with extra cash?

ISSUE #1 is all about the economy. ISSUE #1 starts right now.

Welcome to ISSUE #1. I'm Ali Velshi. Gerri Willis will be along in just a moment.

Starting today, many folks in the country will be receiving some extra cash in their bank accounts. It's the first wave of the economic stimulus plan. Here are the details.

First off, you must have filed a 2007 tax return to be eligible. If you're a single tax filer and earn less than $75,000 a year, you'll get a check for $600. Couples filing together and earning less than $150,000 will receive rebates of up to $1,200, and parents will receive $300 for each child under 17.

Now to the when part of the plan. If you filled out direct deposit information on your tax return, you could see that rebate showing up in your bank account starting today. By the end of next week, 7.4 million people will have received their rebates.

If you're getting your check bay mail, the first checks go out next week and will continue through mid-July. The check schedule is based on the last two digits of your Social Security number.

For more details on when you're getting your check, check IRS.gov or head to cnnmoney.com.

Now, when you get your check, what are you going to do with the money? Well, what you do with it is going to determine whether or not the stimulus plan is successful in giving the economy the boost that it needs.

John Irons is the research and policy director at the Economic Policy Institute in Washington, D.C. He joins us now to talk about this.

John, there's a lot of talk. Our polling and our viewers have certainly said that many of them are going to pay off debt, because so much has been accumulated by those higher prices and the problems that we've been. A lot of people are not going to use this check to actually buy something.

Is that going to defeat the purpose?

JOHN IRONS, RESEARCH & POLICY DIRECTOR, ECONOMIC POLICY INST.: Well, people will spend part of it and they'll save part of it. When you look at the last round of stimulus checks that went out, people spent about half it over the next six months. So I think we can expect to see the same thing now, people will save some and spend some as well.

VELSHI: There's a lot of talk about how you spend it. If you were inclined to spend it in a way that was designed to help the economy -- and I'm not sure that that's what we need to be telling people to do, but if that's what people are inclined to do, how best does one spend the money so that it actually does help the economy? And how does it help the economy?

IRONS: Well, I think you're right. If people did want to use it purely to stimulate the economy -- and that might not be the best thing for their own personal situation -- but if you do, I think there's three rules.

You want to spend it now, don't wait for a year to spend it. Spend it on new things that stimulate new production, that employ new people into the market. And do it by American, do it locally. By doing it domestically, you add more to the domestic economy than if you buy things that were produced abroad.

VELSHI: The combination of a rebate check and a low U.S. dollar might mean that some people might put this toward a summer vacation. And if that vacation is in the United States, is that the kind of thing that for instance would maybe be good for people and help the economy?

IRONS: Yes, I think that's right. And I -- when you think about a vacation, don't fly abroad. The dollar's at very low levels, and you might not want to do that, and it doesn't add to the U.S. economy.

I wouldn't advise going on a road trip either, with the price of gasoline at $3.50 or $4.00 a gallon. So what I advise people to do is to be a tourist in your own town.

Go to your local tourist attractions, go to a local mini putt course. Go to the local sports events. But pretend like you're a tourist in your own city, and that's a good way to both help out the economy and have some fun at the same time.

VELSHI: You know, one of the things the last time we had a stimulus check, we had a lot of people buying -- either buying homes or in homes, or putting the money toward home improvement. With the market the way it is, might that be another place that people spend their money? IRONS: Well, I think home improvement is a great place to spend your money. If you have a faucet that needs to be fixed, go ahead and fix it now. What you do is two things.

One, is you'll put your money directly back into your low economy, and you'll also employ people if you employ repairmen who might be hurt by the economic downturn, particularly in the housing market. So what you can do is you can help to -- help a struggling sector, and at the same time add value to your own house, which will be of value in the future.

VELSHI: John, let's talk a little bit about what maybe people should be doing. The $600 is more than offset by the increase in the price of food that we've seen in the last year, the price of gasoline. And like I said, we've had people tell us that they are in many cases going to pay off debt. But you hear in speeches, particularly from the administration, about how this money is -- you know, they're hoping people will go out and spend this money.

What should people be thinking about? Is it the responsibility of the American taxpayer and the American consumer to feel that they have to do their part to hold up the economy? And we do pay taxes, we do all of the things we're supposed to. Should we be thinking that you should spend it because it's right thing to do?

IRONS: Well, I think you should do what you feel is right for your own financial situation. Now, what will happen is, as you do that, as millions of people go out and spend some of this money and save some of this money, that will help the economy in the short run, in the long run. But I think it's really important to mention, as you did, that a lot of this money is being eaten up by gas prices, by food prices. And the problem is that we're better to get this kind of money through pay raises, not through a government stimulus check.

And the problem is that the economy has been actually fair weak, not just for the last six months or year, but this entire recovery has not been as good as it probably could have been. And so I think the pay raise that people would normally expect to see just haven't been coming.

VELSHI: Tell me why that would be a difference. Tell me why, let's say, $600 more in your pay, that comes in your bank account and pays, is better than this?

IRONS: Well, this is a one-time check. It would be nice to have a pay raise that happened last year, this year, next year, and the problem is that this one-time check, people are going to rightfully feel like some of that ought to be saved for a rainy day, something that ought to be used to pay down debt. But we really need to sustain economic growth that propel incomes and wages in the future, and not rely on these short-term measures that we've seen lately.

VELSHI: John, thanks very much for this.

IRONS: Thank you.

VELSHI: John Irons is the research and policy director with the Economic Policy Institute.

Today, we will be talking, by the way, a lot more about inflation and how you can deal with that -- Gerri.

GERRI WILLIS, CO-HOST: You know, I know people love to get a little extra cash in their bank account, but you know, it's what you do with it that really matters -- spend it, save it, pay down credit cards.

Well, here to help you, Jack Otter, from "Best Life" magazine; Janice Revell from "Money"; and CNN Senior Business Correspondent Allan Chernoff is with us as well.

Welcome to you all.

Let's get right down to it here, because I think people really do have questions about this. Our last guest said travel at home, maybe go to the mini putt with this money, home improvements

Janice, what's your favorite solution here for people?

JANICE REVELL, SR. WRITER, "MONEY": Right. First of all, I think you should take 10 percent of your rebate and spend it. OK? You've done your patriotic duty, it's not going to be enough to throw your finances off the rails. Take 10 percent and spend it.

But what you need to look at before you spend the rest of it is, you have to ask yourself two questions. Do I have any credit card debt? And have I paid off my credit cards in full?

WILLIS: Right.

REVELL: Number two, do I have at least six months' worth of savings set aside in emergency funds?

WILLIS: In case the worst happens, because, you know, we are in a recession.

Jack, do you agree with this? Is this a great solution?

JACK OTTER, DEPUTY EDITOR, "BEST LIFE": Well, 100 percent. I mean, with the credit cards, say you're paying 17 percent interest. You pay off that credit card debt, you just got a 17 percent return on your money.

WILLIS: That's right.

OTTER: And unless Buffett is running your money for you, you can't beat that.

WILLIS: Now, Allan, I know a lot of people out there are going to be spending this. But at the end of the day, are they just going to be spending it at the gas station? I think a lot of folks will just be giving it to companies that don't even work in the U.S.

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Yes, with gas prices having soared so much of this for lower-income people, it is going to end up at the gas pumps. The problem here is that is a lot of the money goes to the oil producers out in the Middle East and elsewhere. Also, a lot of the money's going for taxes, federal taxes, state taxes, on gasoline.

WILLIS: Right.

CHERNOFF: Here's an idea that I would like to offer. I'd like to say, well, 10 percent, or as much as you can, I would say, donate it to a charity for the needy, because these are people, number one, who obviously -- it's the right thing to do. These are people...

WILLIS: It's a nice thought, Allan.

CHERNOFF: They'll spend it.

WILLIS: I love that.

CHERNOFF: Also, stimulate the economy. Plus, you get a tax deduction.

WILLIS: Now, what if your personal economy isn't so good?

Janice, I want to turn to you, because I know you're interested in housing here. A lot of people out there are really struggling to pay their mortgage. Maybe their mortgage is simply too much for them.

Should they take this money and just have a couple of more months that they actually make their payments on time, or should they do something else?

REVELL: Look, I think the number one priority has to be to attack your high interest rate non--deductible debt. And so here we're talking about, again, credit cards, you know, auto loans, that kind of thing.

You know, if you are so under water in your house, if your mortgage is so out of control, it's adjusting upwards, then, you know, with $600, $1,200, you're just staving off the inevitable for, you know, three or four weeks, maybe. So I don't think that that's the best strategy.

WILLIS: You know, we actually have to go. We're going to come back to you guys later in the show. Excited about having you on again.

Jack Otter, Janice Revell and Allan Chernoff, thank you so much.

Now, you can still, still, send us an e-mail. E-mail us at issue1@cnn.com. We're answering those questions right here -- Ali.

VELSHI: Thanks, Gerri.

It's time for you to get involved. As Gerri said, head over to cnnmoney.com to weigh in on today's "Quick Vote," and also send us a question that we can answer at the help desk. The question we've got for you today -- how do you plan to use your economic stimulus check? Never mind us all talking about it. Are you going to save it, spend it, pay down debt?

Let us know what you're going to do. We're going to have the results a little later in the show -- Gerri.

WILLIS: And up next, how the Democratic candidates differ when it comes to subject of gas prices.

Another major airline is the subject of merger rumors.

And you've probably heard of "Cosmopolitan," "Good Housekeeping," "Redbook." We'll talk to the woman behind them all, Cathie Black, live.

You're watching ISSUE #1.

(COMMERCIAL BREAK)

VELSHI: Like most of us, truckers are dealing with soaring gas prices, diesel prices in particular, and they are fed up with it. They're venting their anger in the nation's capital this hour.

More than 350 trucks, buses and cars are taking part in a protest that's being put on by the group Truckers and Citizens United. They're calling on Congress to stop subsidizing big oil companies, to release oil from the Strategic Petroleum Reserve, and end exports of oil from Alaska.

Now, oil prices have been soaring, hitting nearly $120 a barrel in trading early this morning, and that sparked in part by an incident in the Persian Gulf on Friday, when an American cargo ship opened fire on Iranian boats there. And a strike at a BP plant in the U.K. shut down a vital North Sea pipeline in Nigeria. Sabotage of a major pipeline hit production there. Nigeria's a big oil producing country.

And finally, OPEC's president warned that the prices of a barrel of oil -- the price of a barrel of oil could hit $200 a barrel. And that, of course, these high prices, are hitting gas prices here in the United States. The price of a gallon of self-serve unleaded gasoline now averages $3.60 a gallon. And yes, that is another record.

WILLIS: And the presidential candidates are taking notice, coming out with different plans to deal with record-high gas prices. Senator Hillary Clinton detailing her plan in the last 24 hours.

Jim Acosta joins us now live from Indianapolis.

Hi there, Jim.

JIM ACOSTA, CNN CORRESPONDENT: Hi, Gerri.

That's right, and the presumptive Republican nominee, John McCain, first proposed an idea to have a temporary holiday from the federal gas tax. It would last from Memorial Day through Labor Day, just in time for all of those holiday drivers.

Next year, I suppose, this would take effect, should John McCain be elected president. And what that means for drivers out there who are suffering from those high gas prices, it would mean a reduction or an elimination temporarily of the federal gas tax, which is about 18.4 cents for gas, 24.4 cents for diesel for those truck drivers out there that Ali just mentioned.

Hillary Clinton, who was campaigning in Graham, North Carolina, earlier this morning, she stopped at a fire station there to talk about economic issues. Those issues are definitely hitting people hard in North Carolina. She talked about this idea of a holiday from the federal gas tax. She likes the idea, she says, but we need to pay for it.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: My opponent, Senator Obama, opposes giving consumers a break from the tax -- the gas tax at the federal level. I support it.

I understand that the American people need some relief. But, you see, I think we want to show that the government can actually work for hard-working Americans again. So doing something like that sends a very clear message.

Meanwhile, Senator McCain says he's all for a gas tax holiday but he won't pay for it. Well, that's a mistake, because we can't give up on building and repairing our roads.

(END VIDEO CLIP)

ACOSTA: Now, as for Barack Obama, he is rejecting this idea for a gas tax holiday. He was speaking in Anderson, Indiana, over the weekend. He said that while drivers are being hit hard by high gas prices, he says that the savings would account for only about $25 for the average driver over the course of a summer. And that seems to be backed up by an organization called the American Association of State Highway and Transportation Officials.

That organization is claiming that it would save the average American $28, while at the same time devastating highway and transit programs. One thing we have to mention is that that federal gas tax helps pay for federal highway and bridge funds.

And Barack Obama, over the weekend in front of that crowd in Anderson, Indiana, talked about that bridge up in Minneapolis that came crashing down. He says that those kinds of funds need to be preserved to pay for our bridges and highways.

And we should also mention that this is not just something that John McCain would perhaps like to see put into place if he were elected president. But the candidates are also talking about whether or not this is something Congress should act on now for this summer to provide some immediate relief for drivers out there -- Gerri.

WILLIS: Well, Jim, 28 bucks doesn't sound like much.

Thanks for that report.

Up next, another major airline in merger rumor talks. We'll let you know if there's any truth to the story.

And we'll be talking to the woman behind some of your favorite magazines -- Cathie Black.

You're watching ISSUE #1.

(COMMERCIAL BREAK)

VELSHI: Some more headlines.

The word from Continental Airlines on merger talks with United is not going to fly. Continental chairman and chief executive Larry Kellner says the Houston-based airline will remain independent, at least for the time being. Continental reported a loss in the first quarter of this year, but it's widely viewed as the second strongest U.S. air carrier in financial terms, behind only Southwest.

WILLIS: All right. These are scary times to be in the workforce. When the economy is in a difficult time, folks, well, they start to worry about their job and how they're going to make sure that they keep it. Cathie Black is the president of Hearst Magazines and the author of "Basic Black," a book I have right here, which is best- selling and chock-a-block full of terrific advice for people who are in the workforce.

I also want to mention, Cathie, you were the first woman publisher in the country of a major consumer weekly New York magazine. So you're in a position to give us great advice.

Let's start with that young person coming into the workforce for the first time. You know, women hate asking for money, and yet you in your first job...

CATHIE BLACK, AUTHOR, "BASIC BLACK": I did. I did.

WILLIS: ... you not only asked for a raise, you asked for your boss' job.

BLACK: I went in to my boss and I thought he was going to have a heart attack when I said that I kind of knew what Phyllis (ph) made and I expected to get that as compensation. And after the blood drained from his face -- I was probably older than his youngest child -- I mean younger than his oldest child -- but I didn't get exactly what she made, but I got more than what he offered me. So that's the win/win.

WILLIS: Women are not good at that.

Now, in today's marketplace though, folks are just trying to hang on to that job. What kind of advice do you have for people? You've been in all kinds of economies, you know what it's like to be working in a tough environment. What's your advice?

BLACK: I think you have to tough it out. I mean, there will be better news at the end of the cycle, whenever that cycle is going to be. But you know, you have to be smart.

I mean, how can you really make yourself essential? Because if you're essential, someone might say, no, no, if we have to cut back, I'm get getting rid of that one, she's here early, she's here late, she asks for an extra work, she'll do a project, she's nice to be around. So, it's like, make yourself essential.

WILLIS: And that person who might say that might be your boss.

BLACK: Yes, it's true.

WILLIS: You've got a lot of information in the book about, you know, really managing your boss, which is no small thing. You know, sometimes you get the bad boss. And you've had some real lulus.

Let's talk about some of the bosses you've worked with -- Al Neuharth, et cetera. And how do you manage that?

BLACK: Well, Al was the founder of "USA Today," as you know, and he managed by fear. Not everybody responds well to being managed by fear. I don't. But here's what I think is the point. You have to figure out your solutions.

Don't take a boss problems, take a boss solutions. And if you do have a bad boss, I prefer the diplomatic approach.

I would go in to your human resources department, if you have one, and start laying out the case. And you might find out that people have worked for him that know he can never or she can never have anybody stay there very long. So then you kind of know there's a pattern.

But I put it down in writing. I would try to think about, all right, what are the things that I find this person is really -- are they too demanding, do they expect too much, are they impossible? So that you're sort of clarifying it in your own mind as to what is not workable here?

And then I think you have to say to yourself -- because at the end of day, that's all that matters. Your paycheck matters, but also how you feel about yourself. So, you look in the mirror and you say either, can I stand working for this person? You know, can I go in to them and say, look, these are the things that really are not working between us, but I want to work for you, I want to be here, I like this company, I like our products, I like what it stands for?

Here are some ideas about how I think I could be more productive, how we can work better together.

WILLIS: Right.

BLACK: So, if you help somebody kind of get there, or if they're truly impossible, then you have to say, you know what? This is not going to work out.

WILLIS: And you have to be smart enough to recognize that.

BLACK: Absolutely.

(CROSSTALK)

BLACK: You dust up your resume, you start networking, you start making contacts, and you find yourself a new job.

WILLIS: Now, I want to get you to one of the big successes in your career, which was "O Magazine." And this was all about seizing the moment, what you call taking the opportunity as it comes.

Tell me how you convinced Oprah that Hearst was the company to launch her magazine.

BLACK: Well, we knew we were only going to have one possible shot at this, and I think that is a universal lesson for people, which is assume this is the only chance you're going to have to make a good, first impression. So we had done a video of a woman in the shopping mall to sort of say what would you think about an Oprah Winfrey magazine? Of course, they went, "Oh, we love the idea!"

So we started the meeting, we captured her immediately as she sat there watching this little video that we probably didn't spend a thousand dollars on.

WILLIS: Well, it's a no-brainer. Like, people really love it when other people like them, right?

BLACK: Absolutely. And she knew we had done our homework. We had tried to think of everything.

We got there a day early. We were not going to get stuck on the tarmac. We had paper samples, we had cover samples, we had article ideas.

And you can see her get more and more involved. And when we left she said, "If I do a magazine, I will do it with Hearst." So my colleague and I, we walked out there and we were like very calm, cool and collective, and then we got into our waiting car to go back to O'Hare Airport, and we were like, "Yes!"

WILLIS: Yes, I can see that.

BLACK: And she made up her mind over the next couple of months, and then we went on to launch what's probably the most successful magazine launch ever. And it's been a thrill.

WILLIS: You know what's interesting about that story, though? Is you didn't know Oprah was going to be in the room until you got there.

BLACK: That's true. We were not guaranteed that she would be there. There were other people there, but we were not guaranteed that she would be there.

But when she walked into the room, I mean, the dynamics changed completely. You know, she's like a 50,000 watt light bulb, and you can tell that she loved the idea, because we kept talking about the idea that it was print, but that was a permanent record of her mission and of her vision, and of her words and her encouragement.

WILLIS: All right. I have to he get you to this next question. Not everybody is a born leader, and certainly not a born manager. You say you can learn the skill set, but you learned this the hard way. Tell us about that.

BLACK: I certainly learned it the hard way. I never managed anybody, and I was a very fledgling magazine editor of "Ms." magazine, a very controversial feminist magazine back in the mid-70s. And there were five people on the sales staff. They all thought they should have my job, and we had a big (INAUDIBLE) one day and they said I should quit.

WILLIS: Did you quit?

BLACK: And I said -- I looked at them and I said, "There is no way I am quitting." So I listened to them, and listening does -- that's an acquired skill for a lot of people.

I listened to what they really were complaining about. And there was some validity to it. And I think I was driving them crazy because we were very pressured, we were very discouraged, we weren't able to sell a lot of advertising. And so I really listened to what they said and I kind of backed off. And over time, you begin to sort of understand...

WILLIS: A little flexibility.

BLACK: It's flexibility, it's understanding that not everybody can be managed the same way that maybe you can be managed. It's trying to figure out, what's the key to their success?

WILLIS: All right. The key to their success makes you successful.

The book is called "Basic Black." Cathie Black is our guest.

Great book.

BLACK: Thank you, Gerri.

WILLIS: Just loved it.

BLACK: Thank you.

WILLIS: Ate it up with a spoon.

Thank you.

VELSHI: Up next, we're talking about inflation and the impact it's going to have on you in the near future.

Plus, you've probably gotten letters like these, very official- looking letters relating to your mortgage. But how do you tell the difference between real letters like the ones you might get and fake ones like these?

Gerri's going to lay it out for you.

And we'll tell you what a ghost mall is and why there could soon be one in your neighborhood.

ISSUE #1 rolls on after a quick stop in the "CNN NEWSROOM."

(COMMERCIAL BREAK)

DON LEMON, CNN CORRESPONDENT: Hello, everyone. I'm Don Lemon, live at the CNN world headquarters here in Atlanta. More ISSUE NUMBER ONE in about 90 seconds. But first, we want to check on what's happening right now in the news.

Southern California fire battle. A 490-acre wildfire is burning out of control near Sierra Madre. That's about 20 miles east of Los Angeles. Last night the fire was about 30 percent contained but the wind kicked up. Now fire crews say they have only about 20 percent of it surrounded. The fire is threatening hundreds of homes. More than 1,000 people have been ordered to get out of the way.

Well, some of the fiercest fighting in weeks in Iraq. The U.S. military says American and Iraqi troops killed 38 militants in Baghdad on Sunday. Most of them were killed when they attacked a security checkpoint. U.S. officials say suspected Shiite militants are firing rockets and mortar into the heavily fortified Green Zone. The Green Zone is where U.S. and Iraqi government offices are located.

On the stump in North Carolina, Barack Obama and Hillary Clinton are seeking votes there today. North Carolina and Indiana hold primaries next week. Republican John McCain has his sights on Florida. This morning he focused on his health care reform plans at a Miami hospital.

I'm Don Lemon. At the top of the hour in the CNN "Newsroom," more on Reverend Jeremiah Wright. He spoke last night to the NAACP. But how was his speech received at the National Press Club this morning and among his fellow ministers? I'll speak with a prominent minister who was there. And you might be surprised at his response.

Now back to ISSUE NUMBER ONE with Ali Velshi and Gerri Willis.

ALI VELSHI, CNN ANCHOR: Welcome back to ISSUE NUMBER ONE here on CNN.

You hear the word inflation all the time. Now here, by definition, is what inflation is. It's a persistent, substantial rise in the general level of price related to an increase in the volume of money and results in the loss of currency value. If you're still with me, that may be the book definition, but to you it really just means that times can be tough and your wallet is a bit tighter now than it was a year ago because things cost more. Our senior correspondent and inflation expert, Allan Chernoff, is here with more and he comes up with increasingly creative ways to explain to us how inflation affects us.

Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Well, Ali, certainly we're getting squeezed, but it's much worse than what the government is telling us. The government is saying that the Consumer Price Index has risen by 4 percent over the past 12 months. Well, let's have a look at some of the items that we buy very often in the grocery store.

First of all, flour. Over the past year, flour up by 14 percent. Rice and pasta, 13 percent. Milk up 13 percent as well. The fact is, when we go to the grocery store, we're paying increases that are much, much higher than the Consumer Price Index.

Ali.

VELSHI: Well, then why is it that the government number of 4 percent, and if I had hair, I'd pull it out every time I see this number because the bottom line is, we know that these things are costing us more. Why does the number not reflect this?

CHERNOFF: The problem here, the reason, is that the way the Consumer Price Index is calculated, these items that we buy almost every day -- flour, rice -- they don't count for very much in the CPI. Let's have a look at some of these numbers.

Flour accounts for less than 0.04 percent of the Consumer Price Index. Rice and pasta, 0.1 percent. Milk, 0.3 percent. It really doesn't add up to very much. In fact, food that we buy to bring into our own kitchens total accounts for less than 8 percent of the Consumer Price Index.

VELSHI: When in reality, we spend more on that than we do -- you've pointed this out -- computers haven't increased in price as much or apparels. But we don't -- when times are tight, you've got to buy the food. Is it disproportionate, depending on who you are and what your spending patterns are, there are other things that have gone up a lot more and that also doesn't help the calculation.

CHERNOFF: Totally. And this is very true for one area where we saw astronomical increases over the wintertime. Fuel oil. People who have to heat their homes with fuel oil, the price for that over the past year, up 48 percent. Natural gas, which is more prevalent, the increase was not quite as bad.

Let's see how these are counted in the Consumer Price Index. If you look at the percentage of the Consumer Price Index, you see fuel oil, where we had a huge increase, accounts for only 0.2 percent of the CPI. Virtually nothing. Natural gas, because so many more people use it, accounts for 1 percent of the CPI.

VELSHI: Five times that, yes. CHERNOFF: Yes. But the increase for natural gas, as we saw, was far lower than for fuel oil. That's why some people really feel the squeeze of inflation, others not quite as bad.

VELSHI: Here in the Northeast, for instance, we use fuel oil a lot for our heating. In parts of the Midwest, other parts of the country, the primary heating source for heating and air conditioning is natural gas. So it's a different affect it has on your budget.

All right. A really good topic. Thank you, Allan, for staying on top of that for us.

Gerri.

GERRI WILLIS, CNN ANCHOR: Well, when you start missing mortgage payments, you can be sure a foreclosure is on its way. But depending on where you live, that foreclosure could be just a month or two months or six months away. CNN's Kathleen Koch looks at one state that's giving homeowners a little extra leeway.

(BEGIN VIDEOTAPE)

SHERRI, LOSING HER HOME: There's my little brother. That was about '65. 1965.

KATHLEEN KOCH, CNN CORRESPONDENT, (voice over): A lifetime of memories. Cherished possessions ready to be boxed up. Sherri, who doesn't want her last name used, is losing the Silver Spring, Maryland, home she shared for much of last 50 years with her mother.

SHERRI: There's mom. This is where I lived, I grew up, I played around here. We left our doors and windows open. And it was wonderful.

KOCH: But just weeks after illness caused her to fall behind on the mortgage, Sherri learned the lender was foreclosing, despite efforts to work things out.

SHERRI: They had us fill out all this paperwork. And we filled it all out. We send it in. And they sent us a letter back saying, well, sorry.

KOCH: Maryland, for years, had one of the shortest foreclosure windows in the nation, just 15 days.

GOV. MARTIN O'MALLEY, (D) MARYLAND: There will no longer be, in our state, the draconian, fast track to foreclosure that has existed in the past.

KOCH: So earlier this month, the Maryland legislature passed and the governor signed a law giving homeowners 150 days after missing a mortgage payment before facing foreclosure proceedings.

THOMAS PEREZ, LABOR, LICENSING, REGULATION SECRETARY: The fast track to foreclosure really puts people at serious risk. And when you compound it with the fact that when you try to call your servicer and they don't answer the phone and you have difficulty getting a response and the clock is ticking and ticking and ticking, that is a very toxic recipe for homeowners. And so this is a basic consumer protection law.

KOCH: Attorney Phil Robinson's non-profit law firm helps families about to lose their homes.

PHIL ROBINSON, ATTORNEY: And there's some good case law that supports our position there.

KOCH: He says the new law means much-needed relief for struggling homeowners in Maryland, where more than 25,000 homes were foreclosed on last year.

ROBINSON: In the past, by the time someone got the notice, the sale was going to occur in a week's time. That's not a meaningful opportunity to defend their property.

KOCH: The law, though, is not retroactive, so it doesn't help homeowners like Sherri.

SHERRI: It's very frustrating. And we just -- we don't know where to turn. We don't know what to do now.

KOCH: A feeling fewer Marylanders will face now that time is on their side.

Kathleen Koch, CNN, Washington.

(END VIDEOTAPE)

WILLIS: States take the lead once again.

As a homeowner, though, you tend to get a lot of crazy mail. Mostly from people trying to sell you services like gutter cleaning or painting. Two letters, though, that I got recently really took the cake. Maybe you got these too.

The first was printed on letterhead from the Community Reinvestment Program and it had words on it like second notice. Was I late paying an important bill? I was concerned.

Reading on I got even more worried. The letter asked if I was the legal owner of my house. I was being targeted, according to the letter, by a fair lending program. It mentioned two, big, federal lending outfits, Freddie Mac and Fannie Mae.

The second letter, even more worrying. It looked like an IRS document. And I thought, holy cow, did I forget to file something in my tax return? Worse, the document noted my correct mortgage loan principal.

On closer reading, though, I realized these were mortgage lender promotions. Pitches. They were disguised enough to get my attention and they sure did. I called Freddie Mac, which was mentioned in the first letter, and asked them if they were involved. They said, no, these aren't our pitches.

What's more, the promises made in the letter, that they were waving traditional requirements for loans. Hey, it simply wasn't true.

There is good news in all of this, though. If you do have a jumbo mortgage, you may be eligible for a lower interest rate thanks to the stimulus package passed by Congress recently. But the best way to find out, forget these letters, call you current lender or a mortgage broker you trust to find out if your town or neighborhood is on the list.

VELSHI: Gerri, you showed me those. You and I have both seen a lot of things and we're not easily thrown off by fakes. Those are pretty impressive letters in that they looked very real. So people, please be sure. One of those looked like a tax document. It really looked like something that you should believe is real. So look closely at your documents.

Thanks for bringing us that, Gerri.

WILLIS: You're welcome.

VELSHI: Your local shopping mall might soon be coming through or going through some big changes. We're going to explain that to you. Jennifer Westhoven will be here with us for that.

Plus, one part of retail that's doing quite well. We'll get you some information on that. E-mail the CNN Help Desk. If you've got questions, we want to try and answer them. The address is issue1@cnn.com. Keep those questions coming to us. You're watching ISSUE NUMBER ONE right here on CNN.

(COMMERCIAL BREAK)

VELSHI: Retailers around the United States are struggling right now. In fact, in some cases, things are tough enough that the local mall could become a so-called ghost mall. Jennifer Westhoven has been following this story for a long time and she comes here with some details.

What have you learned?

JENNIFER WESTHOVEN, CNN CORRESPONDENT: Well, I mean, obviously, right, you get the picture immediately, right, and we're exaggerating that you get this empty haunted house looking (INAUDIBLE).

VELSHI: Yes, you're not going to see tumbleweeds going through.

WESTHOVEN: Exactly. But I think you really want to get the point here that where you shop may look different in coming months because more than a thousand stores have been closing around the country.

Now the first major retailer in trouble that we've heard of is Linens 'n Things. There have been several reports that it's been near bankruptcy. But aside from that, there are eight mid-sized chains that have already filed for bankruptcy protection. Sharper Image, Levitz, the furniture warehouse, Friedman's Jewelers. And I think Friedman's is really telling because they're nearly always built right next to a Wal-Mart and it's very similar target market here. These are shoppers that are fighting to make it from paycheck to paycheck right now. I mean how do you afford to pick up a pair of earrings right now when you're trying to afford gas?

Now even healthier retailers are also closing stores to shore up their finances. So Foot Locker, Ann Taylor, Zales, even Starbucks, for the first time, closing about 100 stores. So you can see how these numbers start to add up and how when you drive around you see stores that are closed down.

VELSHI: Now whether the stores going into bankruptcy or just closing stores, what we've heard of is a lot of people who got gift cards, and that is increasing every year, are holding on to them, particularly from the holiday season. Well, you don't want to do that and get stuck with a card to a store that isn't there anymore.

WESTHOVEN: Yes, and I think a lot of people right now are thinking, I'm going to save these cards for when I really need them. But I really suggest that if this company has shown any signs of financial trouble, you want to use that card because if it files for chapter 11, your card basically becomes worthless. You become one of those creditors that the company is speaking protection from.

You know, so go out and use them, especially restaurants. They're having a very difficult time there. There have been some bankruptcies because people are cutting back on eating out. And then, you know, when they do, there was just a report that they're cutting back on what they drink. They're not ordering alcoholic beverages. That just takes the margin right out. And restaurants, of course, are anchors for many malls and power centers.

Power centers. But you know them when you see them, right? It's the huge kind of outdoor mall. There's a lot of parking lot, a couple of big box stores and a lot of little stores in between. And it's those power centers and the strip malls that are most at risk for empty stores.

VELSHI: All right. I know you're staying on this story and you'll keep us posted with major retailers that do get into trouble.

Jennifer Westhoven, thanks so much for that.

There is one area of the retail market that is not struggling. In fact, far from it. CNN's Alina Cho explains that when the going gets tough, the smart spend money.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT, (voice over): Entrepreneur Paul Parmer says he doesn't feel any turbulence up here in his private jet or on the ground.

The same is true for money.

PAUL PARMER, ENTREPRENEUR: The same is true for money, you're right.

Hi. Welcome to my house.

CHO: Parmer belongs to a small, elite club. The ultra-rich. Unlike millions of Americans hit by skyrocketing fuel and food prices, the wealthy are snapping up high-priced cars, homes, and jewelry.

This seems counterintuitive. What's going on?

ANDY SERWER, "FORTUNE" MAGAZINE: These people are not hurt. And to the extent that they are hurt, they're down to their last $50 million.

CHO: A new study by the Harrison Group says the wealthiest 10 percent of Americans accounts for more than half of all U.S. consumer spending. The luxury market is not only booming, in some cases it's setting records.

Take real estate. Seventy-one Manhattan apartments worth at least $10 million sold so far this year. That's compared to 17 in all of last year. Foreign buyers are helping. Taking advantage of the weak dollar. But the richest Americans are also in the market for what they believe is a good deal.

PAM LIEBMAN, THE CORCORAN GROUP: And I wish we had more of them to sell. This part of the market is basically recession proof.

CHO: Fine jeweler's Faraone Mennella business has never been better. Everything is selling. Even with sticker shock prices like this $180,000 necklace and $65,000 matching earrings.

UNIDENTIFIED MALE: It really doesn't surprise, right?

ROBERTO FARAONE MENNELLA, FARAONE MENNELLA: Yes, it's true. I mean we travel around the country and we seen in our stores everything that is high ticket is selling out.

CHO: That includes smaller communities, like Fresno, California, where there is still an appetite for everything from designer handbags, to jaguars, to million dollar homes.

Back to Parmer. He owns five homes in three countries, a dozen cars, three jets, and says he'll keep spending without looking at the price.

What recession?

PARMER: Yes, what recession?

(END VIDEOTAPE)

CHO: Well, not so fast. To be clear, the super rich only make up a very small slice of the economic pie. The overall economy is hurting, as we've been reporting. And as one expert put it, you can't just have consumers spending at the high end. You need it at the little shop on the corner, too. Ali, and only then will we see some signs of a recovery.

VELSHI: Now the good thing is, all of these people with these fancy homes do pay property taxes. So where we see foreclosures, at least, hopefully that helps make up for it. But that gap between the super rich and the average or the not so rich has been increasing.

CHO: Yes, listen, as "The New York Times" put it this weekend, more pasta, less red meat. More movie rentals, fewer movie tickets. I mean I think that's sort of an accurate picture of what's go on here. Yes, as you mentioned, what's interesting about this current economic climate is the gap is widening, not just between the rich and the poor, but between the super rich and the merely rich.

VELSHI: And the merely rich.

CHO: Imagine that.

VELSHI: What a problem to have.

Alina, thanks so much.

CHO: You bet.

VELSHI: Alina Cho.

Gerri.

WILLIS: That little store on the corner is Wal-Mart. You know, no small thing there.

As we've been telling you, stimulus checks come out today. We're still dealing with the mortgage meltdown, the credit crunch, rising gas prices. You might need some help. Some advice from our CNN Money team. We'll open up the Help Desk next.

You're watching ISSUE NUMBER ONE.

(COMMERCIAL BREAK)

WILLIS: ISSUE NUMBER ONE is all about you. Time now to answer your questions. Here to help, Jack Otter is with "Best Life" magazine, Janice Revell is with "Money" and CNN's senior correspondent Allan Chernoff is with us too.

Thanks, guys, for all being here.

Let's get to that first e-mail question. Maribel from New York asks, "I am trying to consolidate my debts. I have two major credit cards. Currently the APR is a ridiculous 29 percent. I owe a combined amount of $2,000. I am having a hard time locating a bank that will give me a better rate. What can I do?"

Janice, let's start with you. This is a typical problem, high interest rates on credit cards.

JANICE REVELL, SENIOR WRITER, "MONEY": Oh, absolutely, and 29 percent is, you know, outrageous. But, you know, this is the poster child for take every dime of that tax rebate and plow it against that $2,000.

WILLIS: That's a great idea.

REVELL: You know, that's $600. That's a third of the bogey gone away.

And what she really needs to do is call up her credit card company, if she hasn't already, gather all the offers that she got in the mail and say, look, you know, I am taking my balance elsewhere if you don't do this.

WILLIS: I have done this more than once. And it absolutely works. It's easy to do.

REVELL: It works two-thirds of the time.

WILLIS: You know the flip side of this, though. Is she could have a very low credit score. That's what I'm worried about.

JACK OTTER, DEPUTY EDITOR, "BEST LIFE": And if she cannot get this down. This is $600 a year in interest. It's time for radical steps. If you have two cars, can you possibly sell one of them and start putting aside money for that car, which you can eventually buy, but you've got to get rid of the debt because that's a killer.

WILLIS: I like that idea. Radical solutions for radical times.

OTTER: You'll save on gas too.

WILLIS: Andy and Carol ask, "who will get their money direct deposit versus in the mail?"

This is tailor made for you, Allan.

CHERNOFF: The IRS wants to give money to those who filed online. Filed their taxes online.

WILLIS: That's a big deal for them. They love that online formula.

CHERNOFF: It makes it a lot easier for the IRS. Now who's going to get first among those people? They're doing it by the last two digits of your Social Security Number. So if your digits are between 00 and 20, you're first to get your check direct deposit.

WILLIS: All right. And today is the big day.

Belinda in Virginia asks, "we have a 6.75 percent fixed mortgage rate on a $465,000 loan. Are there any initiatives on the horizon for reduction of the jumbo loans?"

We talked about this a little bit today in the segment that I read. Jack, tell people a little bit about this program.

OTTER: Well, for starters, the government has actually redefined jumbo loans and you can now get Fannie Mae insurance on loans up to I believe $729,000 in certain communities.

WILLIS: It depends on where you live.

OTTER: Right. So they should be coming down a little bit. And 6.75 is not terrible. You might be able to do a little bit better. But, hey, shop around for a new loan. And as you always say, you know, don't refinance to get 6.6. If they can bring it down to 6, it's probably worth it.

WILLIS: It costs money to refinance and people forget about that. But this is a good deal. It's really time to call your mortgage lender to find out if you qualify.

Marcia asks, "I bought a house three years ago for $250,000. I have been paying negative amortization. I tried to refinance the house and the bank said it is worthy only $180,000. What should I do? I don't want to stop making the payments, but I don't want to be paying something that is not worth it."

Janice, what would you do?

REVELL: Yes, Gerri, this is a really sad situation that's happening a lot. She's 30 percent under water at this point in time. You know, actually, she needs to talk to her lender, first of all. Sit down and talk to her banker and say, look, you know, what can you do for me?

WILLIS: But you know how this works, Janice. A lot of these bankers won't do anything unless you stop paying.

REVELL: That's right. And, you know, here's the thing. If she's in this kind of situation, realistically speaking, it's going to take at least 10 years to get back to the price that she purchased. She may want to consider, at this point, a short sale. Negotiating a short sale with the bank. Which basically means that the house will get sold for less than the mortgage, the bank will forgive the rest of the debt.

WILLIS: Great answers from all of you. Appreciate your time today. Jack Otter, Janice Revell, Allen Chernoff, great Help Desk. Thank you.

Ali.

VELSHI: All right, Gerri.

You've still got time to vote. Go to cnnmoney.com and let us know what you are going to do with your stimulus check. And when you're out there, check on the latest news on Your Money. That's on cnnmoney.com.

Stay with us. We're coming back on ISSUE NUMBER ONE. Tell us, by the way, whether you're going to save it, spend it, or put it towards your mortgage, or pay down your credit card. We want to know what you're doing. We're coming back with more ISSUE NUMBER ONE in a minute.

(COMMERCIAL BREAK)

VELSHI: Time for results of today's Quick Vote. And 34,000 of you voted. Thirty-eight percent of you plan to pay off credit card debt with your stimulus money. Thirty-one percent of you plan to save it. Twenty-four percent of you plan to put it back into the economy and spend it. And just 6 percent of you will use it for your mortgage. I'm pleased to see, generally speaking, that breakdown. But why only 6 percent paying off their mortgage?

WILLIS: I think it's a smart move. I've got to tell you, if you're in over your head with your mortgage, the last thing you want to use is this money for that purpose. Maybe it's time to, you know, actually negotiate something with your lender.

VELSHI: Well, the economy is issue number one. We here at CNN are committed to covering it for you. ISSUE NUMBER ONE back here tomorrow, same time, 12:00.

Let's get you up to speed on other stories. "NEWSROOM" starts right now.