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Issue Number One
Investigating Oil; Sky-High Costs; Four-day Work Week; Turbulent Times
Aired April 29, 2008 - 12:01 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CO-HOST: President Bush takes on energy costs, food prices, the mortgage meltdown.
The future of your health care takes center stage on the campaign trail.
With rising food prices and record oil and gas prices, Glenn Beck is calling the United States a suicidal superpower.
ISSUE #1 is your economy. ISSUE #1 starts right now.
Welcome to ISSUE #1. I'm Gerri Willis. Ali Velshi will be along in a moment.
President Bush hits on all the issue #1 topics today -- housing, rising food and gas prices, students.
Let's get you right to the White House and CNN's Kathleen Koch. She is live with more.
Hi there, Kathleen.
KATHLEEN KOCH, CNN CORRESPONDENT: Hi.
You know, the president was very careful today not to use the "R" word, recession. He said he would let economists define it for what it is, but he did say we are in "very difficult economic times."
He said that he had repeatedly put forward proposals to address the problems that Americans are facing. But the president insisted that Congress has blocked them. Also, the president refused to really say a definitive yeah or nay when it comes to Republican presidential candidate John McCain's idea for sort of a vacation, a temporary lifting of the 18-cent federal gas tax.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I will tell you that, first of all, the American people have got to understand that here in the White House, we are concerned about high gasoline prices. We are concerned about high food prices. We are concerned about people staying in their homes, and we are concerned about student loans, just like I described.
And Congress can, you know, be helpful. Congress, they can show leadership by dealing with these issues. And we'll consider interesting ideas. But Jim, what I'm not going to do is jump right in the middle of a presidential campaign. We'll let the candidates argue out their ideas. I just told you I'll consider the ideas.
(END VIDEO CLIP)
KOCH: Now, the president said there was no magic wand to wave when it comes to both the economy and oil prices. He did argue that the U.S. needed to begin drilling more domestically, starting with the Alaskan National Wildlife Refuge. The president said that that could be done without hurting the environment.
The president also rebuffed the idea by a number of members of Congress to stop putting oil into the U.S. Strategic Petroleum Reserve. The president said that would not impact oil prices, would not help, because he said that that represents just one-tenth of one percent of global demand. And Gerri, he said if he did think it would help, he would seriously consider it.
WILLIS: Wow.
Kathleen Koch, too bad there's not a magic wand. Thank you for that.
KOCH: Wish there were.
ALI VELSHI, CO-HOST: Well, from the president to the three candidates vying to become his successor, all of them made health care and how to fix the system part of their presidential campaigns. Senator John McCain focused on health care today.
CNN's Dana Bash, part of the best political team on television, is live in Tampa, Florida, with more on that.
Hi, Dana.
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Hi, Ali.
Certainly everybody has made health care a top priority because they are listening to voters. But boy, was it clear listening to John McCain here just a short while ago in Tampa how different his approach would be from either of the two Democrats. And McCain wanted to make very clear that he believes what they want to do is mandate health coverage, Hillary Clinton's for everybody, and Barack Obama mostly for children. He thinks that would make things worse.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: They urge universal coverage with all the tax increases, new mandates and government regulations that come along with that idea. But in the end, this will accomplish one thing only. We will replace the inefficiency, irrationality and uncontrolled costs of the current system with the inefficiency, irrationality and uncontrolled costs of a government monopoly. (END VIDEO CLIP)
BASH: So what would McCain do? Well, Ali, McCain announced today that he wants to essentially do away with the tax credit that is currently given to businesses in order for them to give health care to their employees. He says that that should be now given to Americans themselves. He would give $2,500 to individuals, $5,000 to families. It would be a tax credit directly to them so they could go and try to seek their own insurance.
The other big issue, of course, is what people do who can't afford it primarily because of pre-existing conditions. Well, Senator McCain was a bit vague on this issue. But what he did do is announce a new concept which he calls GAP, Guaranteed Assistance Program. And that would be some form of federal assistance for what he called a kind of nonprofit board.
He said that he would try to get the idea of how to fashion this from governors who he thinks are doing well in some of the states, but the gist, he said, would be to give federal assistance to this board that would contract with insurers a way to get people with preexisting conditions and even those who may not be able to afford insurance, get them insurance. But as you can imagine, Ali, many Democrats are saying this does not go far enough, and it really will not do much for people who can't get insurance. Forty-seven million of them are out there without insurance.
VELSHI: And therein lies the problem, those 47 million people or more without insurance.
Dana, thanks so much.
Dana Bash is part of the best political team on television.
Now, these candidates and so many more issues out there, we want to make sure you really understand each issue and where the candidates stand. So to help us on health care, let's bring in Shawn Tully from "Fortune," who really has studied so much of this.
Shawn, the problem and the criticism, as Dana said, of John McCain health care problems -- health care solutions is that there are some close to 47 million uninsured Americans who may not necessarily benefit from John McCain's proposal. So while it may be, in your words, the most effective of the plans, the most workable of the plans out there, are we going to get everybody insured under health care in America under one of these candidates?
SHAWN TULLY, EDITOR-AT-LARGE, "FORTUNE": Well, remember, under the Democratic plans, you have national mandates, especially under the Hillary Clinton plan. And mandates don't necessarily insurance everybody either, because we're already seeing that there is a mandate in the state of Massachusetts which was put in under Governor Mitt Romney that is not working very well...
VELSHI: OK TULLY: ... where you have hundreds of thousands of people who have just not refused to buy insurance. You have the same thing with drivers -- with car insurance in the U.S. Virtually every state mandates car insurance, but we have hundreds of thousands of people in America who are not insured, drivers who are not insured. So a mandate does not necessarily mean...
(CROSSTALK)
VELSHI: And McCain absolutely opposes the universal mandate coverage.
TULLY: Yes, right. Now, what McCain is proposing though is very interesting. It's to bring down costs. And bringing down costs is a major way to get more people into the system.
One of the problems we have is what we call community rating, where young people who make up most of these people who are uninsured are paying three or four times their actual cost. He would allow people -- a revolutionary plan to buy insurance across state lines in the least expensive venue, allowing people to go around community rating, which mandates the same flat rate for everybody -- healthy, sick, old, young -- so people can actually pay their actual costs. That would cut the cost of insurance for someone who is 20 years old or 25 years old by at least 60, 70 percent in many states that have community ratings.
VELSHI: Shawn, you're a smart guy who works for a business operation. You study this a great deal. Why, if this were effective and/or profitable, would this not have been done already?
The bottom line is, markets have not solved the problem of health care. So why do we not say it has to happen? While states mandate car insurance, if you drive without car insurance you are breaking the law. Why wouldn't it work and why can't that be made to work?
TULLY: Well, there are two separate issues here. You are saying that the market has not worked. Well, the market hasn't been allowed to work.
There is no intrastate insurance market in America. Every state is a hermetically sealed market. And the price difference across states are enormous.
It's as if in the European Union you couldn't input or export products. You had enormous price differences, which is what you had before the (INAUDIBLE).
We have an extremely inefficient insurance and health care market that needs to be a national market to bring costs down. That's one element of it.
Secondly, community rating is not a pro-market force. In other words, why should you pay three times your actual costs?
Now, what the McCain plan leaves out is that this strips bear people who are 50 years old who are paying less than their actual costs. Their premiums are going to soar. And McCain has not yet given us a plan that will enable them to have the subsidies necessary to pay when their premiums go from $1,500 or $2,000 or $5,000, $6,000, $7,000.
VELSHI: Let's show our viewers -- let's -- Senator Obama's plan. As you have made clear many times, the distinctions between these plans, while they enjoy debating them -- or at least Senator Clinton enjoys debating it with Senator Obama -- are not huge. What fundamentally are the issues between these two?
TULLY: Well, there's only one issue between the two plans. I consider them to be virtually economical identical. And that is, the Clinton plan has a national mandate. Everyone is supposed to buy insurance.
As I say, a national mandate does not mean as much as it seems to mean because people refuse to buy it. People are paying penalties in Massachusetts and not buying health insurance. Clinton has been asked, what are the penalties going to be? She's declined to say.
Is there a criminal penalty? Is there a special tax or penalty assessed, which is the case in Massachusetts? But you still have hundreds of thousands of people who aren't insured.
Otherwise, they're identical. And they're identical in the following way. They have a pay-or-play feature which says that you can either -- companies can either choose to provide health care -- and by the way, the big difference here is that the McCain plan would tax your health care benefits and companies would have -- you would have no incentive to pay for your health care.
VELSHI: So they pass that money on to you.
TULLY: Right. You get the money in your pocket and you pay.
VELSHI: And you pay.
TULLY: Right. Under the Clinton plan, companies would also drop their health care, but for a totally different reason. By paying a tax into a Medicare-like fund, they would no longer be obligated to provide health care. You would have to provide it or pay for it.
VELSHI: A quick question to you. Under any of these plans, will we be better off than we are now?
TULLY: Well, I like to trust to the market. I think the market is the most efficient way to set prices and bring costs down.
We certainly have a terrible crisis in America. And the main reason people can't buy insurance is they can't afford it. And the market is not working. Prices are much, much too high. We need a national market and we need people to be spending their own money on health care.
VELSHI: Shawn Tully, good to see you, as always. Shawn Tully, editor-at-large at "Fortune" magazine.
WILLIS: ISSUE #1 is all about you. It's time for you to get involved and weigh in on today's "Quick Vote."
We want to know how you feel about your health care plan. Is it reliable, is it shaky, at best, or do you feel it's simply not worth your money? Let us know and we'll bring you the results a little later in the show.
Up next, Glenn Beck on why the United States is a suicidal superpower. Here is a hint. It has to do with oil.
Plus, find out how your city is faring through the housing mess.
And we'll show you how one store is making a killing selling outdated food.
You're watching ISSUE #1. Stay with us.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE #1.
Just out, another gloomy report on the economy. With people across country worried about soaring gas prices and weaker job prospects, a key measure of consumer confidence flips this month to its lowest level in five years. After edging up in December, the index has now declined four straight months. The survey is based on a sample of 5,000 households.
So, some bad news there, Ali.
VELSHI: Thank you.
Food prices are rising, oil is going to close -- is getting close to $120 a barrel. It hasn't quite gotten there yet. And gas prices though continue to set records, more than two weeks in a row every single day.
One man is calling the United States a suicidal superpower. And that man is the one and only Glenn Beck of the Headline News program "GLENN BECK."
Glenn, good to see you again.
GLENN BECK, HOST, "GLENN BECK": Good to see you.
VELSHI: What on earth are you talking about?
BECK: Oh, I think we -- I mean, I think we are going to be viewed at some point in history if we don't -- if we don't wake up as group of people that had everything going for them and they committed suicide. We have all of the resources. We have the ingenuity, and yet we won't do the things that we need to, to be able to survive economically. VELSHI: Well, what a fantastic time for you to give them your sense of what they should do given that we've got people running for president right now. What's number on your list that they need to do?
BECK: Don't elect any of the three, that's one of them.
Here's one. I just talked to the governor of Montana. Here we have synthetic oil, something that we tried to produce in the 1980s. It was going well until Saudi Arabia realized for the first time that we were actually serious about getting out of bed with them, and they collapsed the price of oil.
VELSHI: Right.
BECK: They went from $34 a barrel to $8 a barrel overnight. So we got out of the synthetic fuel business.
This can be done, coal to oil, at $55 a barrel. That's about half of what we are paying right now for oil. We can have cheap oil that is actually good for the nation because it is all homegrown. We are sitting -- just Montana is the Saudi Arabia of coal.
VELSHI: Well, you know, South Africa, most of the gasoline it uses is produced from coal. I did something on this the other day.
BECK: Sure.
VELSHI: And the number of e-mails and comments I got about how I am shilling for the coal industry -- I don't think it's clean. It's not cleaner, it just happens to not be oil.
BECK: No, wait. Hang on just a second.
We can sequester the CO2 now. We can make it cleaner than it has been. But anybody who says this argument, let me give you what was in the news today.
"As a top energy producer and consumer" -- this is from Russia. This is the guy who's in charge of the Kyoto obligations over in Russia. He says, "We don't plan on limiting the use of fuel for our industries. We don't think it would be right. In the foreseeable future, that won't be our model."
The rest of the world is not waiting for us. The rest of the world is licking their chops.
VELSHI: Yes. All right. Here is something else.
Glenn, you know a lot about a lot of things, but I've got to take issue with you on this. We are getting the second of a series of minimum wage increases this summer on July 24th.
BECK: Yes.
VELSHI: A minimum wage worker in this country, really it's almost impossible to make ends meet. BECK: Sure it is.
VELSHI: And while I'm a guy who's really in favor of business, and I think small businesses are the engine of growth in America, the bottom line is we cannot, you know, in a first world country pay people as little as we pay them.
BECK: Well, it depends on what state you are living in. If you are making minimum wage in New York City, you are in real trouble. If you are making minimum wage in Pocatello, Idaho, it's a totally different story.
First of all, you have to understand most people don't make minimum wage for more than -- for much less than a year. More than six months, most people are off of minimum wage. That's not everybody, but it is a very small amount.
It shouldn't be dictated by the federal government. It should not be something that the federal government says blanket countrywide, this is the wage. Let the states decide what that minimum wage is.
If you've run a business -- and I know. I grew up in a small town. My father was a baker.
When minimum wage was raised in our small town he had to let people go. It doesn't work the way, especially in a bad economy, it doesn't work the way the government works.
The government says, oh, well, we just need to spend more money. We'll just print more. The average small business doesn't do that. We don't have printing presses. We can't survive if you keep raising taxes and minimum wage.
VELSHI: Glenn, so many topics we want to talk to you about. And I hope you'll come back more often and discuss them with us.
BECK: Oh yes. Sure.
VELSHI: I know food is a big issue for you and for most Americans.
BECK: I think that's a fat joke. Food is a big issue. I mean, look...
VELSHI: It's a big issue for me, too, Glenn. Maybe you and I will sit over food and talk about the food industry.
BECK: All right. Any time. Thanks, Ali.
VELSHI: You can catch Glenn Beck every weeknight at 7:00 and 9:00 p.m. Eastern on Headline News -- Gerri.
WILLIS: One Minneapolis store as a solution to rising food prices -- sell outdated, damaged and markdown food. And you know what? It's working.
Jeff Olsen with our Minneapolis affiliate KARE has the story.
(BEGIN VIDEOTAPE)
JEFF OLSEN, REPORTER, KARE (voice over): Business at this north Minneapolis grocery outlet grew 30 percent last year. And 2008 is looking just as good.
SCOTT GODES, CO-OWNER, SO-LOW: We've always gotten people from all over the metro. We are just again going through another phase of starting to see new ones.
UNIDENTIFIED FEMALE: Every penny counts, you know.
OLSEN: Today those new customers are finding deals like a box of frozen angus beef patties for $3.99.
UNIDENTIFIED MALE: These are $6.99, $7.99 around town.
OLSEN: Cartons of Tropicana Lemonade, normally $2.00, are 99 cents. And the big one, entire cases of yogurt are 99 cents. Priced to sell because...
GODES: It's either close or outdated.
OLSEN: According to co-owner Scott Godes, outdated, but still edible. Like these cookies. Today, 99 cents gets you both packs.
GODES: As long as it looks good, smells good and tastes good, it's considered good. Everything, no matter what it is, is guaranteed 100 percent. We monitor that.
OLSEN: Godes says they monitor meat especially closely. And as a result, are able to offer great deals.
GODES: Last week we had fresh chickens, whole chickens for 49 cents a pound. That is a huge -- that is regularly 89, 99 cents a pound.
UNIDENTIFIED FEMALE: Greens and beets (ph) with this. And it's smoked. Right on for that.
OLSEN: And for folks who aren't so sure about experimenting with expiration dates...
UNIDENTIFIED FEMALE: Specials.
OLSEN: ... Godes offers himself as a walking, talking testament to that.
GODES: I've eaten outdated foods all my life. And here I am.
UNIDENTIFIED MALE: Thank you. Have a nice day. Thank you for shopping So-Lo.
(END VIDEOTAPE)
WILLIS: You know, whatever it takes. I sometimes buy that manager special, you know, that's marked to move.
VELSHI: Right.
WILLIS: You can save a lot of money doing that.
VELSHI: Yes. I'm a little concerned about dairy and meat products.
WILLIS: You wouldn't be buying that yogurt?
VELSHI: I don't know. I think that's a little dodgy. But the fact is, there are a lot of foods. And we know that thankfully, a lot of these safety rules are such that the expire date is earlier than you need to worry about it.
WILLIS: Exactly.
VELSHI: I don't know about that.
Well, coming up next, foreclosures and the value of your home. New indications on both of those things today.
We'll lay it all out for you.
And could a four-day workweek become a reality for you?
What do you think, Gerri?
WILLIS: I'd vote for that.
VELSHI: We'll check it out.
You're watching ISSUE #1 on CNN.
(COMMERCIAL BREAK)
VELSHI: Welcome back to ISSUE #1.
The mortgage meltdown doesn't show any signs of cooling down. RealtyTrac reports there were nearly 650,000 foreclosure filings in the first three months of this year. Now, that is up 112 percent since last year. It means one of every 194 households in the United States are in foreclosure, with 46 states seeing increases in foreclosure activity.
More than 156,000 homes were repossessed in the first quarter. That's the first three months of this year. The worst state for foreclosures continues to be Nevada. One in every 54 homes there is in foreclosure. California, Arizona and Florida are not far behind.
WILLIS: Another report out today. This one, the S&P/Case- Shiller home price index which tracks 20 housing markets across the country. Now, it is showing home prices in this country down nearly 13 percent from this time last year.
David Blitzer is the managing director and chairman of the S&P Index Committee.
David, welcome. Good to see you.
Let's just dig down into this report a little bit.
Where were the prices the worst? Where did they fall the most?
DAVID BLITZER, MANAGING DIRECTOR & CHAIRMAN, S&P INDEX: Consistently, the places they fall the most are where they've gone up the most. The Southwest -- Las Vegas, Nevada; Phoenix, Arizona; San Diego, California; Los Angeles, California. And not to cheat the other half of the country, the Southeast, particularly Miami.
Those cities have seen the sharpest increases. They are now seeing some of the sharpest declines.
WILLIS: Wow. And these are big -- 22.8 percent for Vegas. It's down that much.
You know, the flip side of this equation though, Charlotte is the best performer. Tell us a little bit about that.
BLITZER: Charlotte is the only city out of the 20 that is still up over the last 12 months, although very slightly. But Charlotte is probably coming late to the party as opposed to being a harbinger of the future.
It was the last city to peak of all 20 in September of 2007. Two other cities had peaked in the previous month. In August of '07, Portland, Oregon; Seattle, Washington. They have both fall into the negative year-over-year column at this point.
WILLIS: OK. You have said that there is no end in sight for these prices. And by that you mean prices going down.
Is there any hope in your crystal ball? And why are you so negative?
BLITZER: I think what I said is there is no sign of a bottom. Going through these numbers, we see city by city, and within cities looking at high, medium and low-priced homes, we see the trends continuing to point downward.
We don't see any spot where there is a clear turnaround. And we don't see any city out of the 20 that's up month to month. All 20 are down month to month. In fact, six months running now.
So, looking through these numbers, you like to see something that's at least showing stability. And unfortunately you haven't seen it given the foreclosure numbers that were mentioned a few minutes ago before this report. Unfortunately, the foreclosures are no surprise given those -- these numbers are no surprise.
WILLIS: But David, given what you are saying here, is now the right time to get in and buy a home in this country? BLITZER: Well, first of all, prices of homes are clearly not going to go to zero. There is some bottom. I don't know where it is. We don't forecast the indices because we are the people who construct the indices, and it would not be appropriate to do so.
I think for people who are in the home market, it's certainly a good time to start looking and paying attention and trying to understand what is out there. Is this the right time to buy it? If it's anything like timing the stock market, for every 100 people who tell to you you can do it, there are probably 125 who can't do it.
WILLIS: Who will say no. That's right.
David Blitzer, thank you for that great information, as always.
VELSHI: All right. Let's go to Winston-Salem, North Carolina, where Senator Barack Obama is talking about gas prices. Let's listen in.
(JOINED IN PROGRESS)
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: half a tank of gas, $25 to $30. That's what Senator Clinton and Senator McCain are proposing to deal with the gas prices, $25 to $30 half a tank of gas.
It's an idea that some economists think might actually raise gas prices because folks will start using more gas and demand will go up. And without a plan to pay for it right away, it means the money would come directly out of the fund that we use to pay for construction projects for the Highway Trust Fund, which could cost the state of North Carolina up to 7,000 jobs. And we don't know that the oil companies will actually pass on the savings.
So you are saving 5 percent in terms of the gas tax. It's not clear what would prevent the oil companies from just jacking up prices 5 percent. So you end up giving them more money and we've drained the highway trust fund.
This is the problem with Washington. We're facing a situation where oil prices could hit $200 a barrel. Oil companies, like Shell and BP, just reported record profits for the quarter and we're arguing over a gimmick to save you half a tank of gas, over the course of the entire summer, so that everyone in Washington can pat themselves on the back and say that they did something.
Well let me tell you something. This isn't an idea designed to get you through the summer. It's an idea designed to get them through an election.
The easiest thing for a politician to do is tell you what they think you want to hear. But if we're going to solve our challenges right now, then we've got to start telling the American people what we they need to hear. Tell them the truth.
When I called for higher fuel mileage standards, I didn't do it in front of some environmental group. I went to Detroit, in front of the automakers. I told them, you've got to change your ways. I voted for an energy bill. And I've got to say -- by the way, when I said that in Detroit, the room was really quiet. Nobody clapped. But that's OK because part of what we need is some truth telling.
(END VIDEO CLIP)
ALI VELSHI, CNN ANCHOR: That's Senator Barack Obama in Winston- Salem, North Carolina, talking about gas prices. Specifically his opposition to a federal gas tax holiday this summer. Something that Hillary Clinton and John McCain have both supported.
Well, coming up, we'll have more on these record gas prices. And there could be a call for an oil task force.
Plus, why two F-16 fighter jets are going to be flying over Manhattan this afternoon.
And we'll see if the four-day work week is for real.
ISSUE NUMBER ONE on CNN rolls on next.
(COMMERCIAL BREAK)
GERRI WILLIS, CNN ANCHOR: As always, we're tracking gas prices for you on this program. And, you know what? There is no relief in sight. Once again, gas prices hit another record today. The average price of a gallon of gas in this country, $3.61.
A lot of you out there, probably close to all of you, saying gas is too expensive. One member of the United States Senate wants to hold the oil industry accountable. Senator Maria Cantwell has asked President Bush and the Department of Justice to form an oil market fraud task force to investigate allegations of oil and gas market fraud and corruption. Senator Cantwell joins us now from Capitol Hill.
Welcome, senator.
SEN. MARIA CANTWELL, (D) WASHINGTON: Thank you.
WILLIS: Why do we need yet another task force?
CANTWELL: Well, we passed a bill in 2007, just at the very end of the year, that said the manipulation of oil prices is a federal crime. What we want to have happen now is all the federal agencies who can be involved in investigating that, like the Department of Justice did with the Enron task force, we think we'll get about the task more quickly of trying to drive down these prices.
WILLIS: All right. Well, you know, the president has a task force, a corporate task force, looking into fraud. Why can't that tasks force handle this problem?
CANTWELL: Well, that's our point. There already is a corporate fraud tax force within the Department of Justice. They did a great job coordinating with several federal agencies to get to the bottom of how Enron was manipulating electricity prices. So what we want to say is, that that same task force should get to work with this new law that Congress just passed in December and investigate what now oil company executives are coming to Capitol Hill and saying that oil prices should really only be about $60 a barrel.
So, obviously, if oil company executives are testifying under oath that oil prices should only be at $60 and yet we're seeing these outrageous, well over $100 a barrel prices, we need the federal government to be on its toes, looking into these new laws and statutes to make sure that we're protecting consumers.
WILLIS: Well, senator, of course we need the government to be on its toes. That goes almost without saying, I think. But what would this task force really do to cut the price of oil and, therefore, gas, and to make what is an incredibly important cost for Americans go down?
CANTWELL: Well, as I said, when you look at what the price is today, a lot of people are testifying that it doesn't have anything to do with the fundamentals of supply and demand in the market. That there is excessive speculation and what might be driving that speculation. We've seen in other energy markets people were withholding supply, diverting it, just to raise the price. That's what we want investigated.
WILLIS: All right, Senator Cantwell, thank you so much for being with us today. And we'll be back to you following up on this important story.
CANTWELL: Thank you.
VELSHI: Well, in the next hour, two F-16 fighter jets will fly up the Hudson River in New York City. There's nothing to be alarmed about. They are celebrating the 1 millionth sortie in the war on terror. But with rising fuel costs, it makes you wonder how much this little exercise is costing taxpayers. CNN Pentagon correspondent Jamie McIntyre is live at the Pentagon with more.
Jamie.
JAMIE MCINTYRE, CNN CORRESPONDENT: Well, Ali, we did some back of the envelope calculations. And here's the deal. An F-16 fighter jet can hold up to 600 gallons of jet propulsion fuel. JP-8 they call it. And it can go about 2,000 miles, assuming it's not loaded down with a lot of bombs. That means, with the current rate of fuel, which is about $3.00 to $3.50 for this JP-8, which, by the way, is mostly kerosene, so it's a little cheaper than gasoline, and also the Pentagon buys it in bulk ahead of time. So it's a little cheaper than that.
But using these figures, you can figure out that to take an F-16, fly it around on a tank of gas is going to cost you between $1,800 and $2,100. That, though, is just part of the cost because, as you know, when you drive your car, it's more than just the cost of gas. The Air Force figures it costs about $5,000 an hour to fly an F-16. So if you figure that minute or two that it's going to do that flyover, that's like $83 a minute. And, by the way, an F-16 gets about three gallons of gas per mile.
But here's an F-16 driving tip. If you're going to fly your F-16 and you want to keep your mileage up, don't turn on the afterburners because that will really cut your mileage. In fact, you'll be talking about gallons per mile instead of miles per gallon.
VELSHI: Gallons per mile. All right. So -- well the good news is, for those of us in Manhattan, when we hear that fly by, and they are loud, we'll know what it is. But as I suggested yesterday, maybe they should have just thrown a party and, you know, got a clown or something like that.
Jamie, thanks very much.
Jamie McIntyre at the Pentagon.
Gerri.
WILLIS: Great story.
Up next, major moves in the airline industry could mean a change in price of air travel. We mean higher prices. We'll tell you what to expect next month, in six months, a year from now.
Plus, the four-day work week. Jen Westhoven will be here with the details on the forever three day weekend.
You're watching ISSUE NUMBER ONE.
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WILLIS: It's Tuesday. And a lot of folks out there, they're saying, you know what, it's only Tuesday. What if, at the end of Tuesday, you were halfway through your workweek? I mean who doesn't want a four-day work week, huh? All in favor say aye?
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Aye.
CROWD: Aye.
WILLIS: All right. That's what I'm talking about. Jennifer Westhoven is here to help.
WESTHOVEN: When we first started talking about this story, the response just inside this building was crazy. People love it. But, you know, with gas prices rocketing to $4 a gallon, people are looking to save on their commute. So just imagine, you know, you're really working the same hours but you do it in four days. That would cut your commuting cost by 20 percent. You get the most precious reward of all, which is time.
And then collectively we cut back on the constant demand for oil, either shipping it here from overseas, drilling more, less cars on the road means less pollution. I mean you're just imagining, right? You can imagine a drop in traffic, a drop in accidents, road rage. And then there is the happiness factor. Americans say that commuting is the daily grind that they hate the most. The number one thing they don't like in their day.
WILLIS: Hey, the '70s, oil crisis. What did people say then?
WESTHOVEN: Well, back then this came up and some places actually tried it but it didn't really stick. But I do think, you know, if you think about it, there's a lot more arguments for why it might work now. Why Americans would want it a lot more.
Americans are working much longer hours now. Many of them could still work, right? We've got computers, we've got Blackberries. You could either do the work. You could be in touch.
And families are desperate for the time in many ways for appointments. A lot more moms are at work these days than they were back in the '70s. And, you know, we're aware of the environmental impact now in a way that we really weren't right then.
So some places are actually trying this. So Marion County in Florida tried it. They say they're saving $250,000. California and Louisiana use it for some government workers. And West Virginia is now considering it, too, for their government workers. So far in the government sector.
WILLIS: Well, I have some news for you, Jen Westhoven. Guess what? CNN management has called in. They're not so keen on the four- day workweek. You can forget about that. But I think it's a grand idea and maybe we can, you know, promote it.
WESTHOVEN: And I think, you know, for a lot of places where I think it really might work, why not ask? Why not ask your boss?
WILLIS: All right. Well, OK. Well, we'll campaign.
Thank you, Jen Westhoven.
VELSHI: I'm voting in favor, if you're still counting hands.
All right. Delta and Northwest, it's pretty much a done deal. United and U.S. Airways, well, that could happen. American and Continental. Well, we'll give that one a maybe. Any way you put it, the airline industry is going through some major changes and that could mean a big difference in the price of your next plane ticket. Rick Seaney is the CEO of farecompare.com, joins us from Dallas.
Hey, Rick, I work on "American Morning," you know. So I got in early this morning and I wanted to tell them about this new development about U.S. Airway and United. And my producer looks at me and says, it's an old story, we already did this one yesterday. And I can forgive my producers for thinking this way and I can forgive Americans for thinking they've heard this story before, but this one's actually new. United Airlines and U.S. Airways talking about a merger, or at least reports of that. That's entirely a new discussion.
RICK SEANEY, CEO, FARECOMPARE.COM: It's a new discussion of an old topic. Even before 9-11, they tried to merge back in the late 2000, early 2001. So, you know, basically with Continental and United basically being rumored to be eminent, everybody pretty much thought that was a done deal. And now it looks like United needs a new dance partner and U.S. Airways is one of the two left basically.
VELSHI: Yes, and if they wait long enough, United will have asked everybody, it seems.
Anyway, we don't know if that's true, but one of the things that always stands out in my mind is what you tell viewers, and that is, this is going to have whatever impact it's going to have on you down the road. It will be less competition. It may cause prices to go up. But the far more serious issue is the fact that prices are going up almost weekly now because of fuel.
SEANEY: Yes, it's really crazy now. I mean, we've seen this -- just yesterday we had the 14th attempted airfare increase this year. Twenty-three increases last year. And nine of those have been widely successful. And I expect this one to be successful too (ph).
American, just a few hours ago, matched the increase and so did United. So we got three more legacy airlines to go. It's really something they have to do in order to, you know, you get any modicum of profitability in the legacy airlines.
Recently only three airlines that I know of actually kind of eked out a profit. Southwest Airlines, Allegiant and West Jet up in Canada. So they're all pretty much hemorrhaging cash and it's all related to fuel.
VELSHI: And then, you know, most of them have gone through bankruptcy, so they've dealt with their staffing issues. Bottom line is, this is fuel that's doing this.
Rick, I just want to let our viewers know what you do at Fare Compare. Your track -- I don't know how you do it -- but your computers track all these prices. So you know -- these are not announced fare increase. What tends to happen is, you report to us that there's a fare increase, we then call the airline, which then sheepishly confirms to us, "that's correct, we implemented this fare increase." Tell me how you know that these increases are going on?
SEANEY: Well, basically the airfares are filed through a clearing house in Washington, D.C. called the Airline Tariff Publishing Company. We receive that raw data and we process it in about five minutes. We have one of the largest data bases in the world of air fare. And as soon as that airfare information comes in, we know exactly what all the airlines are doing. And we send that out to consumers to let them know what they're doing.
It used to -- we did this a lot for airfare sales. Lately we haven't seen many sales. It's all about increases. And I'm hoping that travelers understand that they need to be booking their tickets right now for summer. If you haven't done it already, do it. I expect at least two more increases before the end of May. And, really, honestly, for Thanksgiving peak days, Christmas peak days, you need to think about shopping right now.
VELSHI: All right. Rick Seaney, always good to talk to you.
Rick Seaney is the CEO of farecompare.com.
Thanks, Rick.
SEANEY: Sure.
WILLIS: All right. Up next, get ready for the Help Desk. E- mail us your question. We know you have them. The address, issue1@cnn.com.
And for more ISSUE NUMBER ONE news, any time, right now, if you want to, log on to cnnmoney.com.
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WILLIS: Welcome back to ISSUE NUMBER ONE.
You know, this show, it's all about you, all about the issues you deal with in your life, your job, your house, your savings, your debt. And we're going to open up that help desk right now.
Let's get right to it. Greg McBride is with bankrate.com. Mike Santoli is with "Barron's" online.
Welcome to you both.
Let's get right to those e-mails.
John asks, "we have our retirement money in CDs because we needed a secure place to keep it and still have a decent monthly income to supplement our other retirement income. With CDs maturing and renewing at very low interest rates, it is really causing problems. This is income we depend on and feel the Fed is totally ignoring us. Why should we suffer for other people's stupid financial mistakes?" Oh, that happens all the time. "Where is our help?"
You know, Greg, let's start with you. This has been a tough time for savers.
GREG MCBRIDE, SENIOR FINANCIAL ANALYST, BANKRATE.COM: Absolutely. They've been really taking it on the chin. Interest rates have been decimated by what the Fed's been doing. A lot of savers feel the way that John does, that they're being punished for the sins of others. And this is happening at a time when inflation's on the rise. So it's really a double whammy.
So two suggestions for John. First, shop around. Make sure you're getting the best deals on the CDs that you are investing in. That's the difference between 2.5 percent and 4.5 percent. And then also diversified portfolio. You want to be pulling income from investments such as dividend-paying stocks that are not purely interest rate sensitive.
WILLIS: Any other quick ideas here?
MIKE SANTOLI, ASSOCIATE EDITOR, "BARRON'S": I would point out that a little bit more risky than CDs, but not very risky, is municipal bonds right now. A municipal bond funds, actually they look pretty cheap.
WILLIS: Yes, that's a good deal right now.
The next e-mail is from Lenox who asks, "where is the money for the stimulus checks coming from?"
Mike.
SANTOLI: Well, it's coming from the general budget. And now since we run a deficit, it's essentially coming from government borrowings. I mean it's not as if -- they're calling them tax rebates, but it's not as if you and I have an individual account in Washington and they're giving us some of the money we paid last year. So essentially it's debt financed, as is most things in terms of discretionary spending.
WILLIS: Your money back to you. OK.
SANTOLI: That's right.
WILLIS: Dave and Becky asks, "we have several credit cards but the interest rate is only 5 percent. Should we pay them off or concentrate on paying our home off so it is free and clear?"
People ask me all the time, I want to get rid of this mortgage debt. I hate this mortgage debt. What's the best choice here?
MCBRIDE: Credit card debt is bad debt. Regardless of how low that interest rate is. If it's 5 percent today, it could be 15 percent or 25 percent if you slip up. So use that low rate as a tail wind. Pay off the credit card debt first, then you can focus on those other goals, whether it's paying down the mortgagor or making other investments. But that credit card debt needs to be paid off pronto.
WILLIS: I love that because, you know, you wouldn't even have to miss a payment for your credit card interest rate to rise.
Another e-mail. "How and when will the dollar regain its strength?"
Do you want to make -- hazard a guess there, Mike.
SANTOLI: Yes. I mean, if I knew for sure, I might be in another line of work. But it seems as if, if the Federal Reserve signals when it makes its interest rate decision this week, that maybe it's not going to continue cutting interest rate. One of the reason the dollar's been weak is because our rates here are so much lower than those in the rest of the world. It could actually cause a little bit of a bounce in the dollar. That could be one catalyst for why the dollar could regain its strength. And, really, beyond that, it's going to be a matter of America's economic growth.
WILLIS: OK. Randy in California asks, "this September I will be eligible to receive a pension from a previous employer at the age of 55. It will be $468 a month. If I wait until I'm 62, it will be $762 a month. I think I should take the early pension and invest all of it in my IRA (traditional). I have a secure job with no debt. I also contribute 5 percent to a 401(k). I have no intention of retiring until I'm 64."
Double-dipper here. What do you do?
MCBRIDE: I recommend delaying that pension. I mean, after all, you don't need the money now, but you're going to take a permanent hair cut on the money you receive every month for the rest of your life. You're not going to be able to invest that $468 a month well enough in the next seven years to make up for the difference that that $300 a month you're giving up. Delay the pension until you really need it. And if you truly have a secure job and no debt, then great. The next few years you should be able to plow that money into the 401(k) plan.
WILLIS: Love that answer.
OK. Chris in Florida asks, "I recently started my business and I'm in the process of purchasing a fast food franchise." Congratulations. "Eighty percent of this project will be financed and 20 percent I will invest. Today in the economy, food and gas prices have increased and technically we're in a recession." Basically, is this a good time to go onto business for myself, even if I have the backing of a food franchise?
SANTOLI: You know, it seems as if, if you're going to start a business, it's actually not a bad one. Fast food restaurants are actually kind of winning business market share from other types of casual restaurant chains. I would think if the financing is palatable in terms of the rates you're able to get, then I think it's an OK time. To me the big risk would be that financing would be very expensive because the credit markets are in such tough shape.
WILLIS: So what would be a good interest rate then?
SANTOLI: Gee, I don't know. I mean I don't know the terms of the deal. But, you know, if it's something that -- basically if you could get it comparable to what you could have gotten it a year ago, in terms of the interest, I think it should be OK.
WILLIS: It's all about the money.
Mike Santoli and Greg McBride, thanks so much for being with us today. Great answers, tough questions.
Ali.
VELSHI: Thanks, Gerri.
Exercise your right to vote. Maybe it's a primary. Maybe it's the election. But get some practice right here on cnnmoney.com. Cast your Quick Vote. It's all about health care today. Take a look at those questions and give us your results. We'll tell you how you all voted next on ISSUE NUMBER ONE. Stay with us.
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VELSHI: OK. Time to take the results of today's Quick Vote. Fifty-one percent of you say your current health care plan is extremely reliable. Twenty-five percent feel it's not worth your money. And 24 percent of you say it is shaky at best.
Interesting results.
WILLIS: Yes, it is. OK.
Well, the economy is issue number one and we here at CNN, we're committed to covering it for you. ISSUE NUMBER ONE will be back here tomorrow, same time, 12:00 p.m. Eastern, right here on CNN.
VELSHI: Time now for your latest headlines. CNN "Newsroom" with Don Lemon and Melissa Long starts right now.
