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Issue Number One
Looking at Worst-Case Scenario for Gas Prices; Rising Corn Prices; Saudi Nuclear Ambitions; Prom Gone Green
Aired June 11, 2008 - 12:02 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CO-HOST: Looking at the worst-case scenario for gas prices. How high will they go?
Why Midwest flooding could mean higher prices for your food.
And we break down Obama versus McCain on one of the biggest debates in any campaign.
ISSUE #1 is your economy. ISSUE #1 starts right now.
Welcome to ISSUE #1. I'm Ali Velshi. Gerri Willis will be along in just a minute.
But first, yes, it's another record at the pump. AAA says the national average for a gallon of regular unleaded gasoline is now $4.05. The most expensive gasoline in the country is in California. The average in that state is $4.49 a gallon. Missouri has the lowest average at $3.84.
Well, some relief from the pain at the pump might not be too far away, at least on one front. Toyota says it will come out with a plug-in hybrid car by 2010. You plug that in, it runs on an electrical charge and gasoline. The company says the gas-electric car can be recharged from a home socket outlet -- Gerri.
GERRI WILLIS, CO-HOST: Love that technology.
Well, heading out now to the campaign trail, Barack Obama is on a two-week tour focusing on issue #1, the economy. It is in this election, and both candidates are ramping up the economic rhetoric.
CNN's Jessica Yellin is covering Obama for us from Washington.
Hi, Jessica.
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Hi, Gerri.
Barack Obama is on a tour for the next two weeks to tell Americans that he is determined to improve the bottom line for your average working family. He is developing a clearly populist message that sounds very similar to the one we heard from Senator Clinton toward the end of her campaign and from John Edwards early on.
And today he is taking on the specific issue of credit card debt, predatory lending, banking practices that he says are friendly to companies, but not to the consumers. This puts Barack Obama clearly in line with many of his Democratic predecessors who have argued that the Republican Party stands for helping the well-to-do, while the Democratic Party is trying to help working folks.
On the other hand, John McCain is on the trail as well. He is talking about many of these same issues, but he is framing them very differently, promising tax breaks and making permanent Bush's tax breaks. Even looking at the way capital gains taxes proposed by Obama could hurt all the many Americans, wealthy and middle class, who are invested in the stock market.
The larger picture we're seeing here, Gerri, is that, as this campaign enters this general election phase, economic issues are the number one concern, not just for our viewers, but for the candidates on the trail, and they are both looking at ways they can communicate this to voters in a way that sounds fresh but really is actually very familiar from the old themes we always hear from Republicans and Democrats -- Gerri.
WILLIS: Well, the contrast cannot be sharper.
Jessica Yellin, thank you so much for that.
VELSHI: Well, as the campaign heats up, we want to help you break down the issues so you can know as much about the candidates as possible and how their policies will affect you. Now, this being issue #1, issue #1 being the economy, we want to take a closer look at how the candidates' positions will have an impact on your job, your House, your debt, your savings, all of those things that affect you personally.
Well, Justin Fox is editor-at-large for "TIME." He's also author of "The Curious Capitalist" column for TIME.com.
Justin, good to see you again.
JUSTIN FOX, EDITOR-AT-LARGE, "TIME": Good to see you, Ali.
VELSHI: We need to sort of keep hammering away at the fact that the one piece of great news here is that these candidates have very, very different positions on most of the matters in the economy.
FOX: Yes, they do.
VELSHI: How do you break it down?
FOX: Well, I mean, the way Barack Obama has been breaking it down is to say that John McCain is another term of George Bush. And obviously McCain doesn't like that, but on economy policy, they're an element of truth to it.
Basically, McCain wants to keep taxes low and wants to keep finding ways to push more responsibility and choice, I guess, to individuals. The one big difference with Bush being that he says he's going to be tough on government spending.
VELSHI: Now, with Barack Obama, he's got -- when it comes to taxes, when it comes to health care, he's got more traditionally Democratic positions on those issues.
FOX: Right. I mean, his rhetoric is not so traditionally Democratic on all of. He definitely -- he'll acknowledge that some of the changes brought on by the Reagan revolution made sense. But when you start going down the list, they are pretty moderate, Democratic, here is how we fix this problem, that problem or the other problem.
VELSHI: Right now neither of them have a comprehensive energy policy, although they do say very often that they would like to reduce America's dependence on foreign oil. We are so far away from eliminating our dependence on foreign oil.
FOX: Right.
VELSHI: Is there anything for a voter who wants to make a decision on energy policy to be able to do here?
FOX: I struggle with that. I sort of look at who is pandering the least. And I think Obama wins that by a hair, because I think McCain's whole gas tax holiday is really a joke, and Obama's windfall...
VELSHI: It's 18 cents on a gallon that costs $4.05 as the national average right now.
FOX: Right. And the whole issue is -- I mean, I guess it's no longer going to be a summer gas tax holiday, because we're almost in the summer. The whole issue during the summer is that it probably, because refinery capacity is so low during the summer, if you cut the tax prices, it will just go up to fill -- to replace the tax.
Obama talks about a windfall profit tax on oil companies. There are a lot of issues with that where, I mean...
VELSHI: It sounds very good though. The issue here, of course, is that we don't do that sort of thing generally in the economy. We don't punish companies for selling a product that we buy lots of.
What is the danger in saying we are going to tax gas companies, oil companies, when oil is above a certain price or when they make more than what is considered a reasonable amount of money?
FOX: Well, part of the issue is just in terms of the national resources business. You are there for the windfall profits. You invest for years and years and years and don't make much money. And then you get a few years of spectacular returns, and then things don't work so well again.
So there is that problem, that basically that is the basic cycle of the industry. If you want to jump in when times are good and punish them.
I mean, I think the point that Hillary Clinton made a lot -- because she was for this, too, during the campaign as well -- they've already -- the gas -- the stuff is already in the ground. They are getting it out. It's not like they are creating new jobs, creating new ideas like a Google or a Time Warner.
VELSHI: The parent company of this network.
FOX: Exactly.
VELSHI: But they do employ a lot of people.
FOX: But they do employ -- I don't think it's the most horrible -- it wouldn't be the end of the world. It wouldn't a whole lot either.
VELSHI: No. All right. We still have -- it doesn't address our major issue...
FOX: Right.
VELSHI: ... of the fact that we've got to do something other than just oil.
Justin, we have many other issues to discuss. I want to talk to you at some point also about the trade policy differences, because that has an effect on Americans, particularly as we continue to lose jobs in this country.
Justin Fox is editor-at-large at "TIME" magazine -- Gerri.
WILLIS: Well, Ali, the devil's in the details on those conversations, obviously. But now it's your turn. Your turn to weigh in on today's "Quick Vote" question. And that means it's time to check in with Poppy Harlow from money.com.
Hi there, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hey, Gerri. Have you noticed it's trendy to be green?
You can save money, folks, by being green, especially when it comes to gas. You can drive less, opt for a hybrid, something like that. But we really want to know how important it is to you.
So here is our question today. How important is being green to you? And be honest here. Very important, some what important, or not at all?
Weigh in on cnnmoney.com. We'll bring you the results later in the show -- Gerri.
WILLIS: It's a little like asking do you pay your taxes. Oh, yes, I do.
HARLOW: I know.
WILLIS: Poppy, thank you so much for that.
VELSHI: Wasn't anybody going to say it's not easy being green? All right. Well, the House tries to figure out the worst-case scenario of more high oil prices, how high they can go. We're going to take you to Capitol Hill next and find out why they've learned.
And we'll tell you why the U.S. government is trying to get $200 million in refunds to credit card users.
Stay with us. You're watching ISSUE #1, right here on CNN.
(COMMERCIAL BREAK)
VELSHI: And that's Barack Obama speaking in Chicago about the economy. Let's listen in to what he's saying.
(JOINED IN PROGRESS)
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: ... a gallon for gas, and the skyrocketing costs for groceries and health care and college tuition, at the same time that their wages and incomes have stagnated or, in fact, gone down.
As a result, more and more families are falling deeper and deeper into debt. And a lot of that debt is being put on to credit cards.
Over the past 15 years, average household credit card debt has tripled. The typical family is now nearly $10,000 in the red and bankruptcy rates have steadily climbed over the past year.
Now, let's be honest. Part of why our debt crisis is so bad is that some folks make reckless decisions, racking up big credit card bills by purchasing flat screen TVs or other luxury goods that they know they can't afford. And they should have to face the consequences of those decisions.
But many more Americans aren't falling into debt because of an irresponsible decision. They are falling into debt because credit card companies are pushing them over the edge.
For too long, credit card companies have been using unfair and deceptive practices to trick Americans into signing agreements they can't afford. The contracts you sign when you get a credit card have gone from being one page long a few decades ago, to more than 30 pages long today. They are often filled with traps and fine print that only a credit card executive could understand. And these companies have been crossing the line to boost their bottom line.
Rather than stop this outrage, Washington has let them get away with it. And it's no wonder, because the credit card companies have spent millions in recent years financing political campaigns and lobbying Congress to get laws written to their liking.
In the first quarter of this year alone, one such industry group spent nearly $800,000 on lobbying. And this has to stop.
We cannot let the rules of the game continue to be rigged against ordinary Americans. We need a president who will look out for the interest of hard-working families, not just big campaign donors and corporate allies. And that will be the real difference in this election, because when it comes to Washington letting credit card companies get away with this, John McCain has been part of the problem, not part of the solution.
When he had a chance to help families to avoid falling into debt, John McCain sided with the credit card companies. When he had the chance to protect teenagers and college students from deceptive credit card practices, he sided with the credit card companies.
And when I fought against the credit card industry's bankruptcy bill that made it harder for working families to climb out of debt, he supported it. And he even opposed exempting families who are only in bankruptcy because of medical expenses they couldn't pay.
Just look at the proposal he's been making on this campaign. He's calling for nearly $2 trillion, $2 trillion in corporate tax cuts over the next decade, but he has not proposed a single measure to protect hard-working Americans from credit card companies that are trying to take advantage of it.
That's not the kind of change that people I meet are looking for. They are looking for a president who will fight for them and restore fairness to our economy.
That's the kind of president I intend to be. I'll put a middle class tax cut in the pockets of hard-working families, a tax cut that will give 95 percent of all families $1,000 in relief. I will eliminate income taxes for seniors making less than $50,000 a year. And I'll protect the rights of ordinary Americans by cracking down on companies that are trying to deceive them.
VELSHI: All right. You are listening to Barack Obama speaking in Chicago.
This is a speech on the economy, on credit, in particular, that was scheduled to be in Iowa, but they moved it to Chicago because of the flooding this's being experienced in Iowa. They didn't want to divert state resources to dealing with this speech and the security involved. So it's a speech that's taking place in Chicago.
We will continue to monitor this and bring you any information that comes out of it that you'll find relevant to you and your financial situation -- Gerri.
WILLIS: Well, Ali, it's that time of the show when we get your "Energy Fix."
Back with us now, CNNMoney's Poppy Harlow.
Hi there, Poppy.
HARLOW: Hey there, Gerri.
Yes, folks, the price of oil soaring. Another record at the pump, $4.05 per gallon right now. And a government report shows oil supplies fell more than expected last week.
Meanwhile, gas prices at record high. The Energy Department also says there will be $4 gas here to say through 2009. That is a scary thought for folks.
That gives people plenty of reason to cut back on their driving. And many people in America, they're doing that, but they are not saving as much as they could because they are not letting their insurance company know about it.
The Consumer Federation of America says if you are no longer driving to work, you may qualify as a for-pleasure driver. That could mean an annual savings of 10 to 15 percent on your premium.
Now, if you switched to public transportation to get to work, you could save 5 to 10 percent. Another way to save, if you consolidate your trips, drive less, you could save another 5 to 10 percent. And a 15 percent discount on your premium, that could mean a savings of about $140 a year for the average driver. And in some states like New Jersey, that savings could top $200 a year.
That's about 50 gallons of gas right now, Gerri. That is a real energy fix. It's a real fix for people's wallets, too.
WILLIS: It's great information. And we should say, hey, they are not going to give this to you without you asking for it first. You've got to out there, pick up the telephone and talk to your agent.
Poppy, thank you for that.
VELSHI: Well, we all want to know what's driving the price of gas and oil higher. A new CNN/Opinion Research poll shows that most of you -- in fact, two-thirds of you almost, 62 percent -- believe that unethical behavior is to blame. Thirty-two percent think it's just supply and demand.
The other question we all want answered is, what's the worst-case scenario for oil and gas prices? How high will they go? The House Select Committee on Energy is dealing with that exact issue today, and our CNN Senior Correspondent Allan Chernoff joins me now with the latest on that.
Hi, Allan.
ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Ali, it all depends who you ask. And this is very interesting.
The Department of Energy's Energy Information Administration has a survey out, and it actually says the worst-case scenario is not nearly as bad as what we are experiencing right now. Let's have a look at their high-price anticipation for prices down the road. Have a look at this.
They are saying by 2010, the price for a barrel should actually be down to $86. 2030, $186. In today 's dollars, that's actually cheaper than what we are paying right now for a barrel of oil. Now, there are differing high-price scenarios. The chief energy economist of Deutsche Bank also is appearing on the panel. And he is saying there are two factors that are weighing here in the energy markets right now.
If we look at the marginal cost, the cost of extracting that oil right now, he says the price of oil should be about $85. But he says some people in the energy markets actually have a destroy-demand price that they are building in, the price that we need to reduce demand. And that is starting to happen. He says that price is above 150 a barrel -- Ali.
VELSHI: And by destroying demand, you mean that when prices continue to be this high, people will change their behavior, drive more fuel-efficient cars, maybe change the way they heat their homes, the way we consume oil? We consume less oil?
CHERNOFF: Absolutely.
VELSHI: Now what, in that case, is driving -- what are these experts saying is driving the price of oil to where we are now, $135 a barrel roughly?
CHERNOFF: Right. Well, you know we've talked a lot about speculation, investors rushing in to the marketplace. Some of the panelists are saying that's the case.
The chief energy economist though of Deutsche Bank says don't blame the speculators. He points to a lot of traditional factors. Let's have a look at what some of those are.
Of course, the emerging economies like China and India using more energy. Lagging investment in production and refining, meaning the big oil companies are not putting enough into their R&D. Rising geopolitical risk, of course. Lots of problems around the globe. And the falling dollar.
Keep in mind that a lot of investors use oil as a hedge against inflation. When the dollar falls, as it has been falling dramatically, that tends to push up inflation. And as a result, a lot of investors are jumping into oil.
Now, the fact is all of the panelists say we need to dramatically expand all of our energy resources. Let's have a look what that energy economist had to say about that.
(BEGIN VIDEO CLIP)
ADAM SIEMINSKI, ENERGY ECONOMIST, DEUTSCHE BANK: There is no silver bullet to solving the problems that we have in the energy area. We've got to do it all. And we needed to do it yesterday.
(END VIDEO CLIP)
CHERNOFF: He's talking here about nuclear alternative energy, coal, natural gas. Ali, you name it. VELSHI: Solar, wind. These are the kinds of things that Congress can really be doing. It can really be -- and that bill that was defeated had some of those components, but it also had this windfall tax. And that's why the Republicans couldn't stomach it.
So a lot of work to be done. There are possible answers.
CHERNOFF: Politics sometimes can get in the way of addressing these important issues.
VELSHI: Allan, thank you very much for that -- Gerri.
WILLIS: Ali, well, federal regulators are seeking more than $200 million in refunds for credit card users. They say hundreds of thousands of consumers may have been charged as much as $185 in fees that were not adequately disclosed.
Now, according to the Federal Deposit Insurance Corporation, and the Federal Trade Commission, two regulators, CompuCredit and two banks targeted individuals with weak credit histories. The two banks named are First Bank of Delaware and First Bank and Trust of South Dakota. CompuCredit says the charges are untrue and without merit, and that it plans to vigorously fight the allegations.
Still ahead, why the flooding in the Midwest could raise the cost of the food you buy.
Plus, we'll talk about one of the biggest issues of all presidential campaigns and let you know where each candidate stands.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
WILLIS: If you live in the Midwest you know the area is suffering with historic flooding. All the extra water is wreaking havoc on homes and on businesses. But for one Wisconsin community, it's now the lack of water that could put people out of business this summer.
CNN's Susan Roesgen reports.
(BEGIN VIDEOTAPE)
SUSAN ROESGEN, CNN CORRESPONDENT (voice over): For 55 years, water skiers have been wowing Wisconsin tourists at the Tommy Bartlett Show. But what happens when the water is gone?
(on camera): It took just a couple of hours for a 300-acre lake to drain out like water in a bathtub.
(voice over): The heavy rain this week washed out part of the lake's embankment, creating a huge hole that let the water run out and into a nearby river. Now businesses that surround the lake are watching their income dry up, too.
TOM DIEHL, OWNER, "THE TOMMY BARTLETT SHOW": If we don't play to people this summer, it's going to be catastrophic.
ROESGEN: Tom Diehl runs the water skiing show, and he says the show will go on without the skiers. He's got a magician and some other entertainment lined up that he hopes will fill the seats.
DIEHL: If we fail, it wasn't for lack of trying.
ROESGEN: This whole area is aimed at families. Tourism here is a billion-dollar-a-year industry. The manmade attractions are fine, but businesses that depend on the lake are in serious trouble.
(on camera): What are your customers saying?
UNIDENTIFIED MALE: I don't know. What are they saying?
ROESGEN: You didn't know about this?
UNIDENTIFIED MALE: No, we didn't know at all. Not at all.
ROESGEN (voice over): Many tourists book their trips here months in advance, and many are just now finding out that the amphibious duck boats won't be taking them into an empty lake.
Places like the Aloha Beach Resort are kind of empty, too. Eliza Shatua's (ph) family owns this resort. She says she cried when she saw there was no water under the dock.
UNIDENTIFIED FEMALE: Yesterday we had 10 cancellations. Today I would say probably another dozen.
ROESGEN: Can this area survive a summer without the lake? Right now there are no plans to refill the lake until after the season, hoping tourists will come back next year.
(END VIDEOTAPE)
ROESGEN: And maybe the ultimate irony here now in Lake Delton, standing in the middle of this basically empty lake, is that it was not a natural lake. This was a manmade lake that was created in the 1920s to try to bring tourists out here. And now if it's dried up, the tourists are going to go away -- Gerri.
WILLIS: Wow. Gas prices, the economy, it's really adding insult to injury.
Is the government, is the state government trying to do anything to help these folks?
ROESGEN: Oh, absolutely. The Department of Natural Resources, the state Department of Natural Resources, has been out here talking to the business owners. Governor Jim Doyle here in Wisconsin has been going around meeting people, getting a look at the situation.
They do plan to refill this lake. They want to do that as quickly as possible. They are going to do everything they can and ask for some federal help, too, Gerri, to try to get this area going again without the lake.
WILLIS: Susan, thank you for that.
Up next, what these floods mean for food prices.
Plus, would John McCain raise taxes? What about Barack Obama? And how would all of this impact you?
We are breaking down the candidates and the taxes.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
DON LEMON, CNN CORRESPONDENT: More ISSUE NUMBER ONE in just a moment, but first we want to check on some of the headlines right now.
Just minutes ago, NASA launched a new eye in the sky.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Four, three, engine start, one, zero and lift-off.
(END VIDEO CLIP)
LEMON: A spacecraft carrying a high-powered telescope blasted off from Florida's Cape Canaveral. It's designed to study cosmic gamma rays. The most powerful form of energy in the universe. Gamma rays are created by other great mysteries of space such as super massive black holes and colliding neutron stars.
A small town in Oklahoma on the edge today. That's after the killing of two young girls shot to death on a country road. Family members say the girls were best friends and planning a sleepover. Officials are offering a $14,000 reward for information in the case. Investigators say they're looking into the possibility that the suspect lives in the area and they're warning parents to be careful.
(BEGIN VIDEO CLIP)
SHERIFF JACK SHOATE, OKFUSKEE COUNTY, OKLAHOMA: Basically what we're saying is, you know, we don't know what the threat is. But if it were me, you know, I wouldn't let my kids out walking unless there was other people around, you know, that you knew.
(END VIDEO CLIP)
LEMON: Funeral services are being planned for 11-year-old Skyla Whitaker and 13-year-old Taylor Paschal-Placker. Police will talk to reporters about the investigation this afternoon and we'll have the latest for you right here in the CNN "Newsroom."
Meantime, I'm Don Lemon. Back to ISSUE NUMBER ONE with Ali Velshi in New York.
Ali.
ALI VELSHI, CNN ANCHOR: Hey, thanks, Don.
Well, you might think that all this Midwest flooding we've been reporting on won't affect you if you don't live around there, but you would be wrong because those fields that are under water right now should be producing corn. And because they're not, that could have a big impact on your grocery bill. Kevin Kerr is a commodities trader and a hedge fund manager. He's here to tell us a little bit about this.
Kevin, we have seen the price of corn increase in the last couple of years in large part because the demand for corn has increased. Partially because the demand for corn has increased, partially because we use it in ethanol. We're not really in a position to lose corn crops right now, but that might be what's happening.
KEVIN KERR, EDITOR & ANALYST, "RESOURCE TRADER ALERT": Yes, exactly. Kind of a worst-case scenario. You know, we -- already farmers have had a bad year. Got off to a late planting season because of the cold, wet weather in the Midwest. So they were behind anyway. And now this horrific flooding. Key states, Iowa, Illinois, Indiana, those crops are all under water. It could be devastating this year.
VELSHI: How widespread do you think this is? Because you follow this trading very quickly. You're involved in it. Do you see this as ongoing or do you think we'll be able to recover from this very quickly? How do you even recover from something like this?
KERR: Well, that's a very good question because I don't think we do. Unfortunately, a lot of the farmers in Indiana had got their crops in the ground. And the thing with corn is, it needs to have a mature root system so it can handle the heat coming in. We're already getting that heat out east, but we'll be getting that in June and July as we go on. And if the corn doesn't have the structure to handle that, and with this flooding, most of it's under water anyway. Even if farmers are going to replant, they'd need to get the seed, the fertilizer, and the diesel fuel. All of that costs a lot of money and is not very available right now.
VELSHI: Now let's remind people that it's not just the price of corn. You may think that if you don't eat that much corn, how does it affect you? Well, it affect was we use as sweetener. It effects feed for animals. So the increase in the price of corn, what affect has it had on everything else that we eat?
KERR: Yes, it really rolls downhill. You know, feed is a key component of corn. We feed our dairy cattle with it. Hogs. And we've seen hog prices already, to feed hogs, have just gone skyrocketed. So those meat prices, as we kind of wear through our on hand inventory, it's going to go much higher going into 2009. So you will see it in many places, not only the dairy aisle and the corn aisle, in the soybean aisle, you know, anything that we get -- any products we get from that, bread, milk, butter. VELSHI: We've certainly become more intimately connected with corn in the last few years understanding these price hikes and the effect that they have. You know, we've changed from cane sugar over the years to corn sugar. We really get a sense of it.
We're planting more corn in the United States because there's been more demand. But from what I've heard, we're not planting enough to make up for the increase demand in corn that we've got. So we're not ahead of the curve on corn.
KERR: No, unfortunately. And a large part of that, of course, as you mentioned, is the mandates in ethanol. You know, we never used corn for ethanol and now we're using at least half of our crop for that. So as long as those mandates stay in place, we're going to be seeing a large part of our corn crop going to ethanol. Of course the money is there, so farmers are going to focus on it. And it's hurting other crops. Things like cotton and other crops will probably be scarcer as we go on.
VELSHI: Because it's just more advantageous and it's more worthwhile to plant corn.
KERR: Exactly. More money immediately for those crops and cotton, for example, is a very expensive crop to plant and maintain. So corn is very attractive.
VELSHI: All right, Kevin, good discussion. Thank you for being with us.
KERR: Thank you.
VELSHI: Kevin Kerr is the president of Kerr Trading.
Well, food prices are a big issue right now. So are taxes. Most voters want to know whether the next president is going to raise taxes. Len Burman is with the Tax Policy Center in Washington. The Tax Policy Center is primarily funded by the Brookings Institution and the Urban Institute.
Len, good to talk to you. Thank you for being with us.
President Bush warned the other day that if his tax cuts of 2001 and 2003 are not continued when they expire in 2011, 43 million American families are going to be stuck with a much higher tax bill. What's the truth behind that?
LEN BURMAN, DIRECTOR, TAX POLICY CENTER: Well, it certainly would be true that if the Bush tax cuts expired and nothing was put in their place, that some people would pay higher taxes. Neither of the presidential candidates are proposing that. They both would extend at least part of the president's tax cuts.
VELSHI: That the difference is Barack Obama says that it won't go to the richest of Americans or those making perhaps over $250,000. So most Americans will probably see those tax cuts remain in place. Where else would we see differences between these two candidates with respect to what we pay in taxes?
BURMAN: Senator Obama has a number of tax cuts that are targeted to low and middle-income people to pay for things like higher education, to subsidize working, to encourage saving. There's a tax break for some senior citizens. Overall, his plan would cut taxes pretty significantly for low and middle-income people.
Even compared with President Bush's tax cuts, Senator McCain's tax plan is a bigger tax cut overall. He would extend all of the Bush tax cuts, but cut corporate taxes pretty significantly and would also raise the exemption you can take for your children. His tax cuts mostly go to higher income people. So the people for whom there's the biggest difference are very, very wealthy people. The richest 0.1 percent could see a million dollar swing depending on who's elected president.
VELSHI: But if you're in that category, it's very clear that you would at least know under one you'll pay more tax and under the other one you probably won't. What's the effect? I mean for many people watching this, they'll say, so what do I care if the top 0.1 percent pay more taxes. What is the effect of that?
BURMAN: Well, we do have this budget problem. We know that the demands on the government are going to be increasing pretty dramatically in coming years. We need to raise revenue from someone. Senator Obama made clearly made that decision that higher income people ought to be paying more in the way of taxes. For low and middle income people, it's a tax cut under the Obama plan compared with Senator McCain's.
VELSHI: Remember early on in the primary season, Mike Huckabee came out with the fair tax idea. And, boy, I mean at the debates, the applause he got for that. That's sort of, obviously, has fallen by the wayside but McCain has some idea about an alternate tax system that is much simpler and he's going to let Americans choose which tax system they'll file under. Does that make a lot of sense? Is that likely to fly?
BURMAN: I'm not even sure that it's a serious proposal from the campaign. When we asked him about it, they said what they had in mind was something that wouldn't have any effect on the deficit. Which means that you'd be expecting people to choose this, even if a lot of them would be paying more taxes.
There was a version of this proposed by Senator Thompson during the campaign. And that was actually a huge tax cut. Something like $7 trillion over the next decade. And, you know, my view is that a simpler, fair tax system makes a lot of sense, but you ought to figure out what the rules ought to be under one tax and not have people trying to figure out which one's best for them.
VELSHI: Good point.
Len Burman, good to talk to you.
Len Burman is with the Tax Policy Center in Washington. Good to talk to you.
BURMAN: Thanks.
VELSHI: Coming up next, Gerri, what are we doing next?
GERRI WILLIS, CNN ANCHOR: Well, coming up next, we'll talk to one congressman who says we're spending way too much time helping Saudi Arabia while American consumers, they're paying to much in high oil prices.
Stay with us. You're watching ISSUE NUMBER ONE.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE NUMBER ONE.
It's time now to get you some help. Some financial help, that is. The Help Desk is open for business. Answers to your e-mail questions. Ryan Mack is with Optimum Capital Management, Gary Schatsky is with objectiveadvice.com, Allan Chernoff is a CNN senior correspondent.
OK, guys, let's get right down to those questions. The first one is from Tim in Florida who says. "I am 25 and my wife is 22. We have been married for one year. Unfortunately, we do not have health insurance. Should we use our stimulus money to save for health care or pay off an old college loan with a 6 percent interest rate?"
What do you say, Ryan?
RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Well, I definitely think that this is one of the problems of the stimulus package. Sometimes there's no long-term solutions. Some individuals are paying as much as $1,000 a month on health care insurance for families. So I think that the budget is really the most important thing that they need to focus on right now. And definitely look for how soon . . .
WILLIS: So do they pay for the health care or do they do the . . .
MACK: I would go for the college loan initially, and then start saving for a long-term plan and say, let's go ahead and start making sure we can have a budget together for some health care insurance.
WILLIS: Everybody agree with that?
GARY SCHATSKY, PRESIDENT, OBJECTIVEADVICE.COM: I've got some issues. I think you should be taking care of your health care right up, especially when you're talking about a 6 percent loan. It isn't like an 18 percent credit card. And you've really got to start setting up the right future. And that is, making sure at least your health care is in place.
WILLIS: Well, you know, they are young, so they probably aren't going to have any problems. But if you do, you're going to have a big financial issue on your hands.
Juliet asks, "considering I am self-employed, what is the best way to raise my credit scores."
Gary, what do you think?
SCHATSKY: Well, I mean, clearly borrowing and paying it off is kind of the classic situation. And, you know, you don't want to . . .1
WILLIS: There's nothing like paying it off.
SCHATSKY: You know, I mean that is clearly the key, is to show that you can regularly take out the money and pay it back. And just don't go and spend it and then not -- and then carry the balances for a long period of time.
WILLIS: OK, that's great advice. Jennifer asks, "I have heard much talk about oil in terms of 'a barrel.' Could you tell me exactly how many gallons are in a 'barrel' of oil? Also, how many gallons of gasoline can be made out of a barrel of oil?"
Allan, illuminate us.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Well, it's 42 gallons in a barrel of oil. When a barrel of oil is refined, think of it as popping popcorn. You're heating it up, you're cracking it. That expands the oil. So you're actually getting 44 gallons of product out of that. That includes 19 1/2 gallons of gasoline, plus you've got diesel, jet fuel, petrochemicals for plastics, asphalt. A lot of stuff comes out of it.
WILLIS: Wow, that's a lot of products.
MACK: And a lot of money.
WILLIS: And a lot of money. Absolutely.
Tim asks, "I currently have what I consider a significant amount of money to invest. With such uncertain economic circumstances, would you buy CDs at the longest term and highest rate possible?" Or would you buy short term ones?
What do you think, Ryan.
MACK: Well, definitely, if you want to focus on CDs, buying a ladder could be a good way to go. Let's say you have $40,000 and you want to put $10,000 in six months, 18 months, 12 months and a 24 month. So if interest rates go down or go up, you have a component of your plan in some point of that buying ladder to make sure you can minimize the risk of interest rate fluctuations.
SCHATSKY: You just have to be concerned about rising interest rates, which is what we're thinking about in terms of inflation. So I think the sweet spot is really shorter-term CDs. But, of course, people should be diverse. So putting it all in CDs might not make sense.
CHERNOFF: The odds are that rates are going up.
WILLIS: Yes, you never know where things are going.
Allan.
CHERNOFF: Rates are likely going to be going up. We're probably near the bottom point here in terms of that. So I wouldn't put in long-term CDs. And also consider a five-year CD, 3.6 percent right now you're getting. That's not a lot. A 10-year Treasury note, 4.1 percent is the yield. You can do better in a Treasury.
WILLIS: All right, guys, you know what I like about this debate today? It's actually a conversation and a debate.
Guys, I want to thank you. Ryan, Gary, Allan, thanks for your help today.
Ali.
VELSHI: All right. Coming up next, one congressman who says we are doing too much for Saudi Arabia while American consumers pay record gas prices. We're going to tell you a little about that. You're watching ISSUE NUMBER ONE right here on CNN.
(COMMERCIAL BREAK)
WILLIS: Now even as oil prices rise, the Bush administration is helping the Saudis develop nuclear energy. Our next guest says that's not a smart move. Congressman Ed Markey is the chairman of the select committee on energy independence and global warming.
Congressman, welcome.
REP. EDWARD MARKEY, (D) MASSACHUSETTS: Thank you. Thank you for having me on.
WILLIS: All right. Well, let's talk about the Saudis for just a second. They're an ally. Why shouldn't we help them develop nuclear energy?
MARKEY: Very simply. There was a good reason why President Bush went over to visit them three weeks ago. It was to ask them to produce more oil. More natural gas that we could consume, because they've got it over there.
Plus, they have more solar capacity than just about any other country in the world, plus wind. So to generate electricity, the Saudi Arabians don't need nuclear power. They don't need all the uranium, the plutonium, the other nuclear equipment that would go with it.
So why would the Saudis want nuclear power? Perhaps it's because of Iran. Perhaps it's back of Iraq. Perhaps it's because of other middle eastern geopolitical concern. But it's not to generate electricity. It's very dangerous for President Bush to be selling nuclear power plants to Saudi Arabia.
WILLIS: Well, you said they have something else up their sleeve. But you also made the assumption that the Saudis have unlimited oil supplies and there's a real debate in oil circles about whether that's true or not. Some folks say the Saudi's fields are drying up.
MARKEY: Well, they may be drying up, but they're not going to be drying up in the 21st century. The point that I'm making is, is that if they're going to move to a new electrical generating source, they should be moving to solar. They have 300 days of blazing sun in Saudi Arabia and we can partner with them in a Saudi solar partnership so that out in the middle of the desert, on their sand, they can capture their solar. But sending them nuclear power materials, equipment, I think just is recklessly dangerous to the stability of the middle eastern region.
WILLIS: Well, you speak about the stability of the middle eastern region. According to "The Boston Globe," you've supported the U.S. helping Iran to develop nuclear energy as well. Isn't that in conflict with what you're saying the Bush administration should be doing with the Saudis? I mean if it's good for Iran, why isn't it good for the Saudis?
MARKEY: No, I do not support Iran developing nuclear power. I have always been an opponent, not only of Iran, but of Iraq and North Korea. I wrote a book on this subject back in 1981. Where we are right now is because of flawed Bush negotiation policy is that we've got to find a new way of dealing with the Iran nuclear situation. And one of the ways of dealing with it is to have an internationally- controlled way of dealing with the uranium and plutonium that's inside of their program. That's all I'm talking about. But I never was and never will be a supporter of Iran moving to the nuclear option.
WILLIS: All right, Congressman, unfortunately we're going to have to end it there. Fascinating conversation. Thanks so much for being with us today.
MARKEY: Thank you for having me on.
VELSHI: All right. Coming up, how important is being green to you? We want to know. Log on to cnnmoney.com and weigh in on today's Quick Vote. The results just minutes away.
And then, swapping limos for hybrids to save money and the environment. We're going to take you to a green prom. Stay with us. That's coming up next on ISSUE NUMBER ONE right here on CNN.
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VELSHI: Riddle me this. How important is it to you to be green? Well, that's today's Quick Vote question and here are the results. Forty-three percent of you say somewhat, 33 percent of you say very and 24 percent say it's not at all important to you to be green. Be nice, people, it's the earth. All right. High school seniors in Arlington, Virginia, feel very strongly about the environment. So strongly, in fact, that they are swapping their limos for hybrids and streamers for domestically grown flowers this prom season. Photojournalist Bethany Swane (ph) takes us to the green prom where even the tickets are eco-friendly.
(BEGIN VIDEOTAPE)
TIM MURPHY, ARLINGTON FLORIST: I actually chose green flowers to go with their green theme. I did find some stuff that were domestically produced rather than overseas, which most of the flowers nowadays come from, you know, South America. A lot of different places around the world. And costs are going up, so they're looking for different alternatives.
UNIDENTIFIED FEMALE: Thank you so much.
MURPHY: Oh, you're welcome.
UNIDENTIFIED FEMALE: She said we're thinking of doing a green prom and she thought that Whole Foods would go hand in and with that. I was impressed that it was her idea.
UNIDENTIFIED FEMALE: Oh, wow, this looks so good.
UNIDENTIFIED FEMALE: I've heard of green weddings, green showers, but usually not from, you know, a high school student.
UNIDENTIFIED FEMALE: Thank you.
UNIDENTIFIED FEMALE: I hope that it's a trend.
UNIDENTIFIED FEMALE: All of our food and all of our catering, they're clean. We don't use preservatives and additives.
UNIDENTIFIED FEMALE: I think that prom is probably the most wasteful event in a high school person's lifetime. I thought that instead of spending $10,000, we should donate to charity or something and have our prom in the gym. But people didn't really go for that idea.
We went for eco-friendly instead. And it's been working out really, really well. We're only using flowers for decorations. We're not using any crepe paper or Styrofoam.
We have very, very little waste. Because sometimes people don't even realize how much they're wasting on a day-to-day basis, let alone on an event like proms where you spend so much money and buy so many cheesy decorations.
The seniors have to give like a prom gift, and it's using something like cheap and plastic. And when we talked about it we were like, beach balls, sunglasses, but instead we got these water bottles. So we'll hand them out at the beginning and then people can use those to fill up and drink during the prom. And then they get to take them home with them. So it's a reminder of prom and the fact that it was a more sustainable prom.
MILES GRANT, THEGREENMILES.NET: This prom will not, in fact, save the world, but this generation might. A lot of it isn't making a big deal or making huge changes. They're having their event, but they're thinking about their impact. And that's a huge step.
When you buy products that haven't had to be transported very far, that haven't had to burn a lot of fuel, you're going to have a low environmental impact. And with gas at $4 a gallon, you know, you might be saving a little money a well.
CASEY ROBINSON, SENIOR CLASS ADVISER: They actually recycled their government notes and English notes from this year and cut them up into pieces of paper and just put stamps on them and that was their prom ticket. Every step is a step in the right direction. It doesn't have to be like 100 percent. Just because one set of kids shows up in a stretch Hummer doesn't negate the fact that a bunch of kids carpooled and, you know, drove hybrid cars here. It wasn't that much harder than anything else that we would have done for this.
UNIDENTIFIED FEMALE: It's more than just prom this year, it's a statement that students care about this.
(END VIDEOTAPE)
WILLIS: I hope that dinner wasn't organic, because I hate that. That's really . . .
VELSHI: Right. You've got to draw the line on that.
WILLIS: You know, it wasn't that long ago that you and I went to proms, though not together, obviously. We didn't do that.
VELSHI: No together, yes.
That's kind of neat. I mean the thing that stands out are these big cars that you see. That's kind of neat to get away from that.
WILLIS: It is. They did a great job. You've got to give them kudos. But I just want to show you some pictures that, you know, you might want to see. I would sure like Ali to see this. You know, Ali, can we get return here? Can you talk to some of your close friends?
VELSHI: Yes, let's take a look at what you're showing us.
WILLIS: All right. OK. So take a look at this, Mr. Velshi.
VELSHI: OK.
WILLIS: All right. You see that woman on the left?
VELSHI: That's you.
WILLIS: Love those glasses, don't you?
VELSHI: I like that. WILLIS: She sure has some big glasses. Who's that on the right? You have no picture. If you are out there, you have Ali Velshi's high school photo, send it to us right here.
VELSHI: All right. We're back tomorrow, 12:00 Eastern, with more ISSUE NUMBER ONE.
