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Issue Number One
President Bush Makes Major Change in Energy Policy; Record Flooding Sweeps Midwest; Southwest Airlines CEO Speaks Out on Airline Industry
Aired June 18, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CO-HOST: Record flooding in the Midwest. Levees are failing. More homes are under water. Farmland is threatened. We're all over that story.
Reacting to high gas prices, President Bush makes a big energy announcement.
And find out why high gas prices can lead to weigh loss.
Issue #1 is your economy. ISSUE #1 starts right now.
Hello, everyone. I'm Ali Velshi and this is ISSUE #1. It is a very, very busy day.
We've got historic floods in the Midwest, levees are on the brink, farmland is in jeopardy. And that may mean higher prices for you.
President Bush reacts to higher gas prices by making a major change in his energy policy.
And gas prices go down for the second straight day, barely, and they still remain at near-record levels.
From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we are all over the stories that matter most to you.
And Gerri, one of the biggest stories today is President Bush on energy.
GERRI WILLIS, CO-HOST: That's right.
We begin with a major change in White House energy policy, what's being called a very big difference. President Bush here calling for lifting the 26-year-old ban on offshore oil drilling.
CNN's Brianna Keilar joins us now live from the White House -- Brianna.
BRIANNA KEILAR, CNN CORRESPONDENT: Hi, there, Gerri.
President Bush is actually pushing Congress to do a number of things, but it's this lifting of this ban on offshore oil drilling that is definitely getting the most attention. So here's how it works. There are effectively two bans. There is the congressional ban, which was put into place in the 1980s, and then there is an executive ban, a ban that was put in place in 1990 by President Bush's father when he was president. And President Bush is saying that if Congress lifts their ban, he will basically cancel this executive order.
The White House says this comes down to a long-term solution to high gas prices. And the White House actually saying though you wouldn't see any of this oil for years. But President Bush really pointing a finger here at Democrats in Congress.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There is no excuse for delay. As a matter of fact, this is a reason to move swiftly.
I know the Democratic leaders have opposed some of these policies in the past. Now that their opposition has helped drive gas prices to record levels, I asked them to reconsider their positions.
(END VIDEO CLIP)
KEILAR: Now, Senate Majority Leader Harry Reid is calling this a flip-flop. He is tying President Bush to Senator John McCain on this one because McCain actually made this announcement himself yesterday. Reid calling this a cynical campaign ploy and another big giveaway to oil companies that are already making billions in profits.
Well, here is Democratic Congressman Ed Markey of Massachusetts hammering that point home just a short time ago.
(BEGIN VIDEO CLIP)
REP. ED MARKEY (D), MASSACHUSETTS: After eight years, President Bush and Dick Cheney have turned the GOP into the gas and oil party. That's the legacy that they are going to leave.
(END VIDEO CLIP)
KEILAR: Now, Harry Reid has said if President Bush is so serious about this, why doesn't he cancel his ban, his executive order, before Congress does? And I asked an economic adviser to President Bush that, and he said, look, we're trying to work in tandem with Congress. But it really appears, Gerri, that President Bush is not going to be going out on a limb before Congress does.
WILLIS: Well, Brianna, it's obviously controversial. The president enduring a lot of criticism here.
Thank you for that report.
VELSHI: Well, offshore oil drilling could become a big factor in the presidential race. Both candidates have taken stands on the issue.
CNN's Susan Candiotti has a look at them.
(BEGIN VIDEOTAPE)
SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT (voice-over): Do spiraling gas prices mean it's time to lift a 26-year-old federal ban on offshore oil drilling in Florida, California and other coastal states? Republican John McCain is all for it but says he'd leave it to individual states to decide.
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I believe it is time for the federal government to lift these restrictions and put our own reserves to use.
CANDIOTTI: Senator Barack Obama says McCain's flip-flopped on offshore drilling since his first presidential campaign in 2000.
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I think there's another example of where John McCain has taken the politically expedient way out. He had it right the first time.
CANDIOTTI: Obama supporters argue oil companies don't need unlimited access to drill offshore. They say the industry already has nearly 40 million acres under lease in the Gulf of Mexico but is only using about eight million acres. One oil industry analyst says both men are partially right, but lifting the offshore drilling ban wouldn't help consumers at the gas pump any time soon.
FIDEL GHEIT, OIL INDUSTRY ANALYST: If we were to drill today, realistically speaking, we should not expect a barrel of oil coming out from these new resources for at least three years, maybe even five years.
(END VIDEOTAPE)
CANDIOTTI: Now, here in Florida, Republican Governor Charlie Crist had been dead set against offshore drilling, but now in support of Senator McCain, and also, he says, because of skyrocketing gas prices that are hurting Florida consumers, he says he's changed his mind -- Ali.
VELSHI: Susan, do we have some sense of where the general public falls in terms of offshore drilling? I mean, there is opposition to it.
CANDIOTTI: That's true. Well, just last month there was a Gallup poll, and 57 percent of Americans who answered that poll said, yes, they favor offshore drilling in areas where it was previously not allowed if it would mean lower gas prices. But now, Democratic supporters of Senator Obama say, well, of course, you would answer that, but the devil's in the details. And they point out that only 1,600 leases that are being used by the oil industry of 7,000 leases that are out there are being used. So they say, why don't they use those leases that are already approved, in approved areas, before going into new areas?
VELSHI: All right. Susan, thanks very much for that. Susan Candiotti.
WILLIS: Well, all of this, the debates to drill, to not drill, is tied to near-record gas prices.
Let's check in with CNNMoney's Poppy Harlow for our "Energy Fix."
Hi there, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hi, Gerri.
Well, folks, gas prices fell for the second straight day today. We haven't been able to tell you that for more than six weeks. But the decline is very modest.
Gas prices are still above $4.07 per gallon on average. Oil prices, meanwhile, are down more sharply following a better than expected government inventory report.
Still, with prices near record levels, many out there are trying to figure out their own energy fix, including a small town in Georgia.
Holly Springs, Georgia, plans to add a $12 fuel surcharge to speeding tickets. The goal is to offset the gas prices that its police department is paying without having to hit the taxpayer directly.
So, if you're traveling through Holly Springs, slow down. Not only will it make your car more fuel-efficient, it could spare you from a speeding ticket that is getting just a little bit more expensive.
And folks, here's another way to save. Avoid $8 gas. Yes, you heard that right, $8 gas.
So, where does gas cost nearly $8? At a lot of rental car locations if you don't bring back a full tank.
Hertz is one company that has realized how outrageous that is. It's now charging a one time $6.99 fee, plus the market price for gas. But we called some other rental car locations around New York and found some prices that look more like what people in Europe are paying.
Avis and Budget are near $8 a gallon. Dollar is above $7 a gallon to top off your tank. Enterprise is a little more reasonable, but still above $5 a gallon.
So, folks, the "Energy Fix" for you, bring back your rental car full, bring a receipt back proving you filled it up. If you're prone to forgetting to fill it up, pick a car company with a more reasonable fee.
We're following the "Energy Fix" from every angle right on our Web site, CNNMoney.com.
I want to mention this, Gerri. Did you hear about FedEx this morning?
WILLIS: Yes. Well, before you get to FedEx, I've got to say, if you're going to save money renting a car, you know, you might want to think about not paying extra for that insurance. Your credit card probably covers it.
But tell me about FedEx.
HARLOW: A very, very good point.
FedEx lost hundreds of millions of dollars in the last quarter because they, too, they're suffering from these fuel charges. They fly their planes, drive their trucks across the country. So they're having a hard time too. Watch your shipping costs. They may be passing that down to the consumer.
WILLIS: Oh, no fun. Ouch again.
All right. And that leads us right into today's "Quick Vote," Poppy.
Tell us what question you've got.
HARLOW: We're talking about gas, of course. Some politicians calling for a gas tax holiday. We want to know if the high price of gas that you pay has led you to change your driving habits. Here's our question for you today.
"High gas prices have led me to change my commute, my shopping routine, or travel and leisure activities, or possibly all of the above?"
Please weigh in on CNNMoney.com. Gerri will bring you the results a little later.
WILLIS: I bet all of the above wins. Thank you for that, Poppy.
HARLOW: I bet you're right. Sure.
VELSHI: All right. Historic floods threaten towns and farms in the Midwest. How are you going to feel the impact of the flood in the weeks to come?
Plus, a very unusual connection. Why high gas prices and weight loss go hand in hand.
And meet the woman who spends billions of dollars a year just on fuel.
We are all over issue #1 right here on CNN.
(COMMERCIAL BREAK)
WILLIS: Just when you thought the flooding in the Midwest was as bad as it could be, well, it got worse. A levee along the Mississippi River gave way today. Water rushing into Illinois farmlands. CNN's Reynolds Wolf is right in the middle of it in Quincy, Illinois.
Tell me, Reynolds, what are you seeing?
REYNOLDS WOLF, CNN METEOROLOGIST: What we've been seeing is a great community effort, not just here in the community of Quincy, and not just in this particular region, but people from all over the country coming together, getting all this sand, putting it in bags, making things like this, things like this to stop the flow of the Mississippi River, which is just again overrunning its banks in many spots, including here in Quincy. It's a huge operation.
As you can see behind me, you've got some National Guard workers, you've got some people here that are just working with the state, local communities. Just a lot of people coming together hand in hand.
They plan on being here for as long as it takes. Everyone's got a great attitude, they're doing what they can to fill up these bags. Pretty nice systems they have here, just being one shovel after another.
They put it into this makeshift funnel, they tie it off, and then they put it in a pile. And then what they'll do is they'll send it away. They've had trucks that have been flowing in and out of here, and those trucks go to places, to communities that desperately need to fight off this river.
It's hard to believe this is something that happened just a week or so ago. Just a week or so ago, these folks were going about their lives, doing something entirely different, yet here they are doing what they can to help their fellow man. It's a beautiful thing.
This has gone from being a weather story to really a story of the human spirit, people battling a river. It's a battle that's going to last throughout the week and possibly into the weekend.
Back to you.
WILLIS: Well, Reynolds, you know, looking at that, surveying that scene there, it looks like there are people -- you know, volunteers, as well as government workers -- really working hard there. But it seems like it's -- is it going to make a difference? It seems like such small efforts against this huge, huge problem.
WOLF: Oh, it absolutely will make a difference. I mean, already in many places, they've certainly had -- they've done a great job.
Pardon me for the interruption. We've got a big machine right behind me.
But to answer your question, yes, it does make a little bit of a difference. But not just here, but in communities downstream that haven't had a chance to rise up yet with that water.
I mean, we're getting a brunt of it right now in Quincy, but farther downstream, just north of St. Louis, we've got a lot of that water that's yet to go. And that's where most of these sandbags are going. So, yes, it will make a difference. They're doing all they can to help battle that river.
WILLIS: Well, impressive efforts there. And we're enjoying your reports, really keeping us informed.
Reynolds, thank you for that.
VELSHI: And as Reynolds says, if you're living in one of those flooded areas, things are a bit tough for you right now. Even if you're not in the middle of it, you will feel the impact of the floods at some point down the road. Farms in the area produce most of the corn in this country, and those crops if they're soaked, they're destroyed.
CNN's Allan Chernoff has been looking into it. He joins us now live from Oakville, Iowa -- Allan.
ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Ali, certainly they're (AUDIO GAP) coming out of here. What you see behind me is an astounding lake. This is all corn and soybean fields.
We showed you yesterday a flooded area. That was a pond compared to this.
What we have here is at least 21 square miles of corn land and soybean land under water. The Iowa River, seven miles away from me. The Mississippi, three miles in that direction.
You can see over there irrigators. Obviously that's not necessary. We've got silos off in the distance. I mean, this is really astounding. There are more than 100 farms under water behind me here. For the farmers, it's devastating.
(BEGIN VIDEO CLIP)
KIRK SIEGLE, FARMER: It's basically like losing your job and not knowing when you're going to get back, and trying to think ahead of what it's going to take to clean up and recover from this also. It's just very disturbing to me.
(END VIDEO CLIP)
CHERNOFF: Also very disturbing for the homeowners. In fact, his dad, Richard Siegle, lives out there. He built his home 32 years ago, lived on this land for 47 years.
We traveled there by boat just a little while ago. The home is entirely under water. It's off way in the distance.
If these gentlemen can just move aside -- if you could just move aside a bit, please, and if we can (AUDIO GAP), there is a roof above the water. And that is pretty much all that extends out of the water. There's also a flag pole here.
Richard Siegle said he never imagined that his home could actually be under water.
(BEGIN VIDEO CLIP)
RICHARD SIEGLE, FARMER: You don't know where to start. You don't know where to start. It's just -- it just depends what Mother Nature does. When the water goes out, whether they get the levee repaired.
(END VIDEO CLIP)
CHERNOFF: Talk about being at the mercy of Mother Nature.
And of course, there's no way that any of this is drying out within the next few days. We are talking months and months and months.
Hopefully, it will be dry enough to plant next year. But the farmers here don't even know that for sure. And, of course, this is the reason that consumers like all of us are going to feel higher prices at the grocery store -- Ali.
VELSHI: All right, Allan. Thanks very much for that. And we'll come back to you to check in on that.
Allan Chernoff in Iowa.
Next, as Midwest farms are under water, we've got breaking news on the farm bill.
Plus, there is a connection between high gas prices and weight loss. We're going to tell you all about that when we come back.
And trading four wheels for two wheels. We'll tell you if scooter commuting could actually be a good idea for you.
You're watching ISSUE #1 right here on CNN. Stay with us.
(COMMERCIAL BREAK)
VELSHI: Well, if there's a silver lining to high gas prices, you might say it's fewer cars on the road. But I bet you don't think of weight loss as a byproduct. Well, as our Sanjay Gupta found out, some folks are shedding pounds by avoiding the pump.
(BEGIN VIDEOTAPE)
DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT (voice over): Skyrocketing gas prices and exorbitant parking fees weigh on the minds of countless commuters. That forced Lois Fletcher to find a solution to save money while providing an added benefit.
Take the train downtown, and walk to her office.
LOIS FLETCHER, LOST WEIGHT BY WALKING TO WORK: I hadn't been on a train for 30 years, and I thought, well, let's give it a try.
GUPTA: She soon started shedding pounds, lots of them.
FLETCHER: At first I started to see changes in the way my clothes fit. And then when I got on the scale I found that I had indeed lost weight.
GUPTA: Lois dropped 40 pounds and no longer needed to take blood pressure medicine. She also says she's less stressed out.
FLETCHER: I have Diabetes and I had hypertension. My doctor had been encouraging me to exercise for quite some time, and I never seemed to be able to fit it into my schedule. And I noticed that now I don't have to fit it in. It's a part of my daily commute.
GUPTA: A small change that paid huge dividends.
FLETCHER: I feel better. Now I can see how I can drop the rest of the weight. And I challenge you to come meet me in this park a year from now and you won't recognize me.
GUPTA: Dr. Sanjay Gupta, CNN, reporting.
(END VIDEOTAPE)
VELSHI: A great story.
You can catch Sanjay on "HOUSE CALL" every Saturday and Sunday at 8:30 a.m. Eastern, right here on CNN -- Gerri.
WILLIS: All right, so taking the train to work is one way to save on gas. But now some folks are trading in their cars altogether for smaller two-wheelers, and I'm not talking about bicycles here.
Richard Roth joins me now live. He's right outside our studios at Columbus Circle on a scooter.
Richard, what do you think of that scooter?
RICHARD ROTH, CNN CORRESPONDENT: Well, it's not what I think, it's what it seems many Americans are thinking, which is why pay $70 at the pump? Instead, pay $3 to fill up one of these. And it's created a bit of scooter craze because of high gas prices.
(BEGIN VIDEOTAPE)
ROTH (voice over): Nick Bilton was not born to be wild; however, skyrocketing gas prices forced a change. He dumped his car and purchased a scooter.
NICK BILTON, SCOOTER COMMUTER: It just makes so much sense from both a financial standpoint and an ease of use in getting around the city.
ROTH: It made sense to Mark Amerise, too. He has a Lincoln Continental, but was shopping for a scooter.
MARK AMERISE, SCOOTER SHOPPER: So I feel like right now, with the price of gas, you know, we're all just, you know, throwing the money away.
ROTH: He was in Vespa Brooklyn, a store that just opened and quickly sold 25 bikes.
CRYSTAL HADJIMINIAS, VESPA BROOKLYN: I have people calling up asking about how many miles to the gallon they're going to get.
ROTH: The scooter industry reports sales are up 25 percent nationally.
ANDREW HADJIMINIAS, VESPA DEALER: On a day like this, would you be rather be stuck in a subway, or would you rather be on a scooter getting fresh air?
ROTH: So I stopped by the New York Scooter Club's weekly hangout.
(on camera): Does this scooter make you feel like a different person when you're riding it?
MARCY FELTMAN, SCOOTER OWNER: Yes, a little bit more powerful, a lot more fun. Kind of cool.
ROTH (voice over): Could I too be cool?
(on camera): I've never ridden a scooter before.
UNIDENTIFIED MALE: Well, there's a first time for everything.
ROTH (voice over): Club cofounder Jonathan Furkel (ph) took me for a ride.
(on camera): All right. I'm holding on to you. Where do you like to be held though, really? Here or here?
UNIDENTIFIED MALE: The hips?
ROTH: Hips?
UNIDENTIFIED MALE: Right there.
ROTH: Very firm hands.
Easy. Oh, boy.
So far, as long as we don't get any highway, I feel safe.
(voice over): I couldn't help think of another famous scooter couple in the movie "Roman Holiday." Jonathan was no Audrey Hepburn.
(on camera): Whoa. You're kind of pushing up against me.
Are scooters sexy?
UNIDENTIFIED FEMALE: Absolutely.
ROTH: In what way?
UNIDENTIFIED FEMALE: I guess the wind.
ROTH: I lived in Rome for four years, but I never rode a Vespa.
UNIDENTIFIED FEMALE: Well, why not?
ROTH: I was too scared.
UNIDENTIFIED FEMALE: I came outside and I saw these wonderful, sexy men with all of these scooters. And I was shocked. Stay beautiful, sexy.
(END VIDEOTAPE)
ROTH: Of course, you will need a license in many states in the U.S. to drive one of these scooters. And earlier, Gerri, I think someone behind me, apparently not liking scooters, making a point whether he knew it was issue 1. Somehow he was making his views known. But we had no control over that.
WILLIS: Right. You never know with Ali.
(CROSSTALK)
WILLIS: Exactly.
But I've got to ask you, Richard, when you're driving around town, do those New York drivers just run you over? Do they make way? I thought it might be a little worrisome, particularly in a big city.
ROTH: Well, I just talked in the makeup room to an unidentified female CNN correspondent who reported no problems. She's on bridges, in congestion. I mean, you've got to have the gumption, of course. You can see the big vehicles moving behind me now. It's a battle out on the roads, but if you know what you're in for -- of course, the problem is weather and difficulty in parking.
WILLIS: And what about the cost? How much do they cost?
ROTH: You can start off at around $2,000. Of course, you can get more oomph and power, and you go up from there. But they're getting calls like crazy at scooter shops as people are turned off by the high gas prices.
WILLIS: All right. Richard Roth, thank you for that -- Ali.
VELSHI: All right.
WILLIS: You're not on a scooter, are you?
VELSHI: Yes. I've got a motorcycle, but it is -- you can weave around traffic quite effectively and you can stop places. It's an interesting story.
Richard does it particular justice. Well, listen, coming up, we've got news on the farm bill that we were telling you about. The president has vetoed it, and we're going to tell you exactly what that means to you.
Plus, you think your bills are high? Meet the woman who actually spends $15 billion a year on fuel and $3 billion on food.
You're watching the home of issue #1, the economy, right here on CNN.
(COMMERCIAL BREAK)
VELSHI: Breaking news right now from the White House.
Brianna Keilar, the president has vetoed the farm bill for the second time. Tell us what it means.
KEILAR: Well, you know, Ali, that's the thing. It may mean nothing, because the understanding is that the House and the Senate have veto-proof majorities in this case.
You may actually recall, this is not the first time the president has vetoed the farm bill. It's the second time. And the first time -- it was recently -- this bill was sent over here to the White House and it was missing a section. It was only a 14th/15th of the farm bill.
Well, the president went ahead. He vetoed the 14/15 of the farm bill. Sent it back to the Congress. The House and the Senate overwrote it with veto-proof majorities. And now what they've decided to do to get the whole farm bill through is they've passed it again in its entirety, sent the whole thing back here to the White House, and now President Bush has vetoed it in its entirety. That's what happened here today. But again, it's going to go back to The Hill and presumably the House and the Senate will be able to pass this with veto-proof majorities and it will become law.
But this was a farm bill that included subsidies to farmers, agricultural spending, international food aid. And the problem that President Bush had with it is he felt that the subsidies to wealthier farmers were really just too much and he wanted to see something that was more fiscally responsible -- Ali.
VELSHI: All right, Brianna, we'll stay on that and see if this thing's got legs a third time.
Brianna Keilar at the White House -- thanks.
WILLIS: Thanks, Ali.
If you think it's hard for you to pay for fuel and food, what if you were in charge of the fuel bill for the entire Pentagon? We'll meet the woman who is and see how she does it.
But first, let's get you up to speed on the rest of the day's headlines. Don Lemon is in the CNN "NEWSROOM." DON LEMON, CNN CORRESPONDENT: Hey, Gerri, thanks.
We've got a lot to talk about. Of course, we start with that flooding in the Midwest. Many are wakening today to a nightmare in west central Illinois. The Mississippi River has swamped at least one levee and is pouring across a 25-mile stretch of Hancock and Adams County. Just look at that. Beneath these flood waters, Gulfport, Illinois. About 400 people had to be evacuated after the levee there was overwhelmed.
The flooding that began in eastern Iowa now flows southward. In Illinois and Missouri, even more levees are in danger. And as flood waters rise, mere inches may make all the difference there. Some towns face an agonizing wait of several days, several more days, before the rivers expected to crest. Some areas are bracing for levels as much as 15 feet above flood stage.
Will the levees hold? What's being done to make sure the people who depend on them are safe? We will ask the man in charge of those levees, the chief of the Army Corps of Engineers, General Robert Van Antwerp. He will join us live in the 1:00 hour of the "CNN NEWSROOM." You don't want to miss that. We're going to ask him the tough questions.
Just days after his dramatic win in the U.S. Open, word is coming in right now that Tiger Woods won't be back on the golf course any time soon. That's according to his web site. Woods will miss the rest of the season because he needs more surgery on his left knee. Despite a stress fracture, Woods played 91 holes over five days to win The Open. We're going to talk to a medical expert to see if he may have done even more damage by playing there, coming up in the CNN "Newsroom" at the top of the hour.
I am back at the top of the hour. I'm Don Lemon. Now let's throw it back to Ali Velshi in New York.
Good to see you, Ali.
VELSHI: He can play. He's an athlete. It's always impressive to watch Tiger Woods.
LEMON: It certainly is. And, you know, to see the other guy who's older win, I mean, that's the real story out of this. I was thinking it's like "American Idol," you know, when Clay Aiken didn't win but got all the press. Same thing with this guy, you know.
VELSHI: It's always fun to watch. Don, good to see you, my friend. We'll see you at the top of the hour.
LEMON: Good to see you.
VELSHI: Well, you're going to love this story. You all probably have an idea of what you spend on gas and food every month. Hopefully it's a simple family budget. But what if you had a food and fuel budget for your entire company? And what if that company was nearly three times the size of Wal-Mart, IBM and ExxonMobil combined? CNN's Barbara Starr has the story.
(BEGIN VIDEOTAPE)
BARBARA STARR, CNN PENTAGON CORRESPONDENT, (voice over): If you think your gas and grocery bill is high, meet Tina Jonas. She spends $15 billion a year on fuel and $3 billion a year on food.
TINA JONAS, PENTAGON CHIEF FINANCIAL OFFICER: It's pretty hectic around here.
STARR: Jonas manages the Pentagon's $600 billion budget.
JONAS: If we were a country on earth, we'd be about the 17th largest economy in the world.
STARR: She likes to point out that the Pentagon's budget woes are just like everybody else's, running out of money in a world of rising prices. The U.S. military is the single largest consumer of fuel in the country, perhaps the world -- 122 million barrels a year.
JONAS: We need another $3.5 billion of fuel money just to get through the year. We're going to need another $1 billion to finance our food bill.
STARR: And why is that?
JONAS: Well, transportation's driving a lot of it. The cost of wheat and corn and other things have gone up.
STARR: From her desk, or what she calls her dash board, Jonas monitors everything.
JONAS: What I do for my fuel prices is, I have my -- the figures that I have here tell me how short I'm going to be in the accounts that buy fuel for the departments.
STARR: So the budget around here really isn't that different than your family budget really?
JONAS: Well, that's right. We're car pooling a lot at home now. Took the metro yesterday.
STARR: Seriously?
JONAS: Yes, I did. I've been taking it the last couple of days. My husband, he's a former retired Marine, so he's pretty tight with the bucks.
(END VIDEOTAPE)
STARR: And Jonas has another tip for saving money that might sound familiar, pay your bills on time. She's making sure the Pentagon does that and so far she calculates she has saved about $250,000 in late fees. VELSHI: All right. And that -- I mean, when you're at the Pentagon, that's a lot of money to be able to save, but they've got big budget needs. Where do they get the new money for those?
STARR: You know, I asked that question, Ali. I said, so is there a secret printing press for money in the basement? There's always been that rumor here in the Pentagon. But, of course, what they do is they go to Congress to get authorization to spend more money. So, of course, they're really getting it from you and me, the taxpayers.
VELSHI: Yes. And those gas prices have really, really hit them very hard. It's a great story. It's a good lesson to learn. You know, when the biggest of the big save money by doing those things, it could work for us.
Thank you so much, Barbara.
STARR: Sure.
WILLIS: Ali, a quarter of a billion in late fees? Why weren't they doing that before?
All right. Banks have found a way to jack up one of their fees to you and we're going to tell you all about it.
Plus, we'll talk to the head of one airline about the trouble in the skies for the airline industry.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
VELSHI: Well, it seems like airlines are always adding surcharges. So our friends at farecompare.com decided to check out surcharges on a non-stop flight from the U.S. to London. Listen to this. They ranged from $270 to $426. That's surcharges. That's before you pay for the ticket. And don't forget about taxes. That will add an additional $120 to the tab.
OK, well you knew this already. But it's been a rough go for the airline industry. One airline has avoided making the job cuts, the schedule reductions and adding a lot of the surcharges that the others have.
CNN Money's Poppy Harlow is here with more on that -- Poppy.
HARLOW: Thanks, Ali.
Yes, I'm here today with Gary Kelly. He's the chairman and the CEO of Southwest Airlines.
Gary, thank you so much for joining us.
GARY KELLY, CHAIRMAN & CEO, SOUTHWEST AIRLINES: Great to be here, Poppy. HARLOW: You know, Ali said it, you're not firing people, you're not tacking on the surcharges, you're not charging people $15 for the first checked bag. A lot of this has to do with the ability to turn a profit in a failing industry. You pay well under $100 for oil per barrel right now, lucky on that one. How long can this last? What happens when your hedge on oil runs out?
KELLY: Well, you know, there are just so many great things about Southwest Airlines. Our core strength is our people. We've got the best customer service record. We've got the best on-time performance record. We've got the greatest culture. And the fuel hedge is one element of the great things that our people have put into place. But we're going to have to continue to make adjustments to be able to be profitable in a higher cost environment. And I'm very confident that our people will make that happen.
HARLOW: Well, Gary, just for you folks out there who don't understand what a fuel hedge is. What it is, is sometime ago Southwest bet that the price of oil would stay around $51. They bet it would go up. So they hedged 70 percent of their oil at about $51. So right now they're flying for a lot less than the other carriers are paying right now.
And one interesting thing is, you're talking about expansion when the industry is really contracting. And the founder, Herb Keller, said to one of our producers about a year ago, you know, we're never going to fly to New York because planes don't make money on the ground. But how can you expand when you're not in the number one market in America?
KELLY: You know, this is just such a tough industry, high energy prices. We're very cyclical and subject to swings in the economy. You have to be prepared. And I think that that's one of our greatest strengths, in addition to our people. We've got a very strong balance sheet.
We've got $6 billion in cash in the bank. We've got our fuel hedge that takes us out through 2012. And so we are in an environment where we can plan. And part of our plans are taking advantage of opportunities. Other airlines are shrinking. That's leaving passengers on the curb, ready to be carried. And we'll be there to serve those communities.
HARLOW: And you're going to carry them and not charge them $2 for a soda on the plane, those kind of things. Do you think that's adding to your strength, is just what you're offering at this time?
KELLY: We have a brand promise that we make to our customers that you can trust us. That we're going to be there for you with a low fare and great service. And we don't like gimmicks. Customers hate those added fees. And so we've got a great campaign underway to extol the virtues of Southwest Airlines.
HARLOW: All right. So let's get to, why are others failing? What do you say to your competitors right now? KELLY: Well, I don't -- you know, we're busy, obviously, trying to make Southwest Airlines better. And certainly not focused on what our competitors are doing. We're improving the customer experience at Southwest. We've improved our boarding process, offered new products, and providing more choice for our customers. If you're not prepared in this industry, you're definitely going to find yourself losing money and that's where the rest of the industry is.
HARLOW: Now there are so many business travelers out there. A lot of them right now at airports around the country watching the CNN airport network. They're wondering, what's the future of airline travelers -- of the airline business for these travelers, these business travelers, that have to travel, people that are traveling for leisure. What's the future? What do you see it becoming?
KELLY: Well, I think there's a lot of opportunity as an airline to provide more service in the future. You have to be efficient. You have to have low cost. You have to have great service. All the things that we're so proud of at Southwest.
Now costs in our economy are rising. There are inflationary pressures because of higher energy costs. And it's not just air transportation. So fares will be higher, but you can certainly look to carriers like Southwest to keep them as low as possible.
HARLOW: Do you think any of the major airlines are going to go under? We've seen a number of the smaller carriers going out of business, filing for Chapter 11. Do you see this happening to an American, or a Delta, or a Northwest?
KELLY: I don't know. I think it's definitely that kind of an environment where that could happen. You've seen very dramatic cuts announced by almost every legacy carrier for the fourth quarter and by others. We've had the unprecedented event where we had three or four airline liquidations back in April. So, yes, that could certainly happen. But even if it doesn't, the industry is shrinking and that's why an airline, who is prepared like Southwest, can afford to grow.
HARLOW: All right. Well, thank you so much for joining us and helping explain it all to people out there.
KELLY: Thanks for having us.
HARLOW: Again, that was Gary Kelly, chairman and CEO of Southwest Airlines.
We're going to continue this discussion right on our CNNMoney.com set. So check out this site for more just a little later this afternoon.
Ali.
VELSHI: All right. Excellent discussion.
Thank you very much for that, Poppy. And thanks, Gary.
A lot of banks are raising their fees. Find out what you can do to avoid those fees.
Plus, we're opening up the Help Desk for business. Answers to your e-mail questions.
We are all over this on ISSUE #1 right here on CNN. Stay with us.
(COMMERCIAL BREAK)
VELSHI: The rising cost of food and gas are putting pressure on everybody's wallet. Now it looks like banks are coming down hard on customers who overdraw their checking accounts. Wachovia is urging its employees to cut back on refunds for overdraft fees. Shame on them. Bank of America and Washington Mutual have raised their overdraft fees and made it easier for customers to get charged with multiple penalties.
Well, why are they doing this? Well, with so many banks wrestling with so many bad home loans on their books, these overdraft fees have become an important source of revenue for them. It still doesn't make it fair -- Gerri.
WILLIS: Making it coming and going. Thank you for that, Ali.
OK. Let's get you some help with your money. It's Help Desk time. Answers to your e-mail questions. And let's get right down to it. Gary Schatsky is the president of objectiveadvice.com, Jack Otter, deputy editor at "Best Life" magazine, and Jennifer Westhoven is with "Morning Express" on Headline News.
Welcome all. Let's get right down to it.
The first question is Ray in New York. He says, "I'm a 23-year- old student who has owned a home for two years now. I'm currently renting it out. Should I take out a loan against my home to pay for the rising cost of school?"
Gary, what do you make of this?
GARY SCHATSKY, PRES., OBJECTIVEADVICE.COM: Well, I mean, there's a few different questions here. First of all, why do you have a home when you're a student? And some . . .
WILLIS: But that's not a bad thing, necessarily.
SCHATSKY: No, it's not necessarily a bad thing, but it's something you should kind of consider in terms of if you have all of your money in the home. One issue is, you might be able to get lower cost financing by taking out a home equity line of credit against the home, if that's possible. Of course, it's a variable rate and you've got to contrast that to student loans and if you qualify for the subsidized version, which will keep the costs relatively low.
As with any financial decision, you've got to look at all of your options. Sale of a home, home equity line of credit with no closing costs and potentially some subsidized student loans. WILLIS: Those HELOC are hard to get right now. Lenders are still pretty stingy.
SCHATSKY: Absolutely.
WILLIS: Jacob asks, "what are good stocks and bonds to purchase if you're just getting into the market?"
Jack, this is a question for you. I often think of you with these portfolio questions. What's your recommendation?
JACK OTTER, DEPUTY EDITOR, "BEST LIFE": Well, I would say stop right now, do not go out and buy stocks and bonds. If you're just getting . . .
WILLIS: No buying?
OTTER: I would not buy them. What I would do instead is, I would buy an index fund that covers the entire market for equities and then maybe an index fund for bonds.
WILLIS: You don't want people picking and choosing?
OTTER: I don't want that. I think it's just too dangerous. One misstep and you could loose a lot of money that would take a long time to recover.
SCHATSKY: You know, he's absolutely right about index funds. And probably for a new investor, they're not going to want to hear this, the best thing you should do is lose some money because it's a tremendous lesson for later.
WILLIS: You know, you advisers always say that.
Jen, I know this is a topic you're interested in.
JENNIFER WESTHOVEN, CNN BUSINESS CORRESPONDENT: Yes. I mean I also think, we were talking about index funds are great. And I also think that if you're really starting out, Morning Star is great because that's a place where you can look and they're going to do all that research for you. I mean you don't want to be chasing performance. They know how long the managers have been there, if they're good and how much they're charging. So I think it's a great way to learn about funds while letting them do the work for you.
WILLIS: Yes, independent analysis, always good.
Vanessa has a question. "What is the acceptable ratio to credit used to credit available on a consumer credit card?"
You know how this works, Jack. If you're out there, you're spending money on a credit card, if you spend too much and you get in trouble on your credit score. What's the right amount to spend?
OTTER: This is a closely guarded secret by FICO, which actually puts together your credit score. I've heard 30 percent. But there's also a bigger question.
WILLIS: Thirty? Only 30 percent?
OTTER: Well, the bigger question is, do you really want to be paying interest at all on a credit card bill? I would say take it down to zero. Keep that available credit because that's what they love to see is available credit.
WILLIS: All right. I think that's a great answer.
All right. Let's go to Elizabeth in Georgia: "I'm currently in a 5/1 ARM that expires in December. I am a single woman with a FICO score in the mid 700s." That's good. "I had my house up for sale for over a year with no success selling it, so I am pulling it off the market for now. Should I wait to refinance at the very last minute or start right now? Should I go directly to my mortgage company or should I pursue a broker?"
Gary, start with this one because, you know, a lot of people are in this situation where they're in these adjustable rate mortgages.
SCHATSKY: You know, you don't have to run to refinance. First of all, A, she has about six months remaining. B, with interest rates having come down over the last few years, she might not be faced with an increase when it does refinance. And, C, she's indicated that she's been interested in selling it. So why you would want to step out, refinance, pay all the closing costs and perhaps sell it in another year or two is another question she should think about. I'd probably stick tight for a moment.
WILLIS: We have seen these rates come up, though, recently.
Jack, do you have anything to add here?
OTTER: Well, I think, once again, I think people always think I have to own a home, I have to own a home and they never step back and say, well, why exactly do I have to own a home? I mean she wants to get out. I don't see prices skyrocketing next year. I'd say put it back on the market. Maybe take a hit. But why, as Gary's saying, pay the refinancing costs and then take the hit?
WILLIS: Yes, the problem is, if you take the hit, that's a hit to your bottom line right now. And I think that's what people are struggling with.
Vince in Florida asks, "I turned 18 in November and have since been trying to build good credit. So far, I've paid off the laptop using a six month no-interest payment plan and opened a credit card with a six month no-interest period and used it until the interest rates came into effect -- at which point I paid off the balance and stopped using it. Is this an effective way to build good credit?"
Anybody? I mean, come on, this is impressive, right?
WESTHOVEN: This is style. He's starting out strong. SCHATSKY: Absolutely. Let me just tell you, the best thing to do is to build credit with zero interest cost. I mean that is the ultimate win-win. And when you're showing that you can pay it off, you're not paying any interest, it's the first time . . .
WILLIS: You're liking Vince.
SCHATSKY: I love this guy.
WILLIS: OK. He's your kind of guy.
OTTER: He shouldn't cut up that credit card. He should use it occasionally and pay it off in full.
WESTHOVEN: Exactly.
WILLIS: All right. OK. And 30 percent. I'm remembering your 30 percent number.
OTTER: No, zero is my -- 30 at the maximum.
WILLIS: All right, your tough love, Jack.
OK. Sharon in Texas asks, "when is best to file for bankruptcy? What are the advantages?"
And I'm thinking not a lot of advantages.
SCHATSKY: Look, the best time is never. You know, clearly you want to avoid bankruptcy. And bankruptcy's a lot harder with the recent bankruptcy reform bill that's come through. The advantages are, you're wiping out, depending on whether you're filing a Chapter 7 or a Chapter 13, you're potentially wiping out all of your debt. Your credit rating is damaged for many years in the future. And the real key is, is there no other way out? That's the only time you should be looking at bankruptcy. And it's very possible bankruptcy will become a little more available if there's a change in administration in Washington.
WILLIS: All right. Well, we'll wait, we'll watch, we'll see. In the meantime, thanks to this panel for helping me out today. Jack, Gary, Jen, thank you so much.
VELSHI: All right. Get on it right now. Don't miss your chance to be heard. Log on to CNNMoney.com and click on today's Quick Vote. How have high gas prices changed your life? This is actually an important one. We really want to hear from you on this so we can report on it. We'll be back with the results in a moment.
And two, young kids robbed at their neighborhood lemonade stand.
(BEGIN VIDEO CLIP)
DOMINIQUE MOREFIELD, RAN LEMONADE STAND: The lemonade stand was right here and the guy comes up and he was just like, give me your money. (END VIDEO CLIP)
VELSHI: Some people have no shame. You heard her. We've got the full story.
You're watching ISSUE #1 right here on CNN. We're coming right back.
(COMMERCIAL BREAK)
WILLIS: OK. So how have high gas prices impacted your daily life? That's today's Quick Vote question. And here are the results. Twenty percent travel and leisure activities, 7 percent of folks say it's their shopping routine that's been impacted, 3 percent said the commute. But guess what? Most of you out there, 70 percent saying all of the above.
What do you think, Ali?
VELSHI: Yes, I mean, I think that's interesting. Obviously the commute is the most obvious one. The food is the one that people don't think about as much. But all of the above makes sense to me. Interesting. Thanks, Gerri.
All right. Well, this story popped up on our radar and we really have to share it with you before we go. Two kids innocently running a lemonade stand when things went sour.
Amanda Jarrett of our Terre Haute, Indiana, affiliate, WTHI, has the story.
(BEGIN VIDEOTAPE)
DOMINIQUE MOREFIELD, RAN LEMONADE STAND: The lemonade stand was right here and the guy comes up and he was just like, give me your money.
AMANDA JARRETT, CNN CORRESPONDENT, (voice over): Dominique Morefield and her friend set up their lemonade stand here at the corner of Deming and Center Streets when a man took their hard-earned cash.
MOREFIELD: I was just like shocked. It was just my immediate reaction to chase after him.
JARRETT: Dominique chased after the man, down the street. She even pulled out her cell phone and called police. The man ran into this house. Police then spent nearly 45 minutes trying to coax him out. Finally he came out and police arrested 18-year-old Steven Trion (ph). Now he's facing a felony robbery charge.
The kids say they recognized the teen who robbed them because he came here to the corner earlier in the day and tried to sell them a knife.
FRED ERSTINE, RAN LEMONADE STAND: It wasn't a pocket knife. It was like something you attached to your side and then you flip it open and you pull it out and it's just the knife right there. So it was just like a little knife.
JARRETT: The kids will get back their money. All $17.50. They say they're just glad Trion was caught.
ERSTINE: I didn't think anybody would come up to a lemonade stand and steal money. I mean that's like really low.
JARRETT: The kids have torn down their lemonade stand. But they say justice has been done. And they'll be back in business in just a couple of days.
(END VIDEOTAPE)
VELSHI: The -- I mean there's just so much about that story that's fascinating. First of all, kids, don't try this . . .
WILLIS: Dominique.
VELSHI: Dominique chased the guy. I'm not sure that's . . .
WILLIS: I love Dominique.
VELSHI: But, still, we shouldn't be chasing people.
WILLIS: Dominique for president.
VELSHI: But I think that business about how he came by earlier to sell them a knife, it's like that was a dead giveaway.
WILLIS: No kidding. No kidding.
VELSHI: Don't steel people's lemonade's stands, honestly.
WILLIS: Who does that? Somebody was telling me about their kids starting a lemonade stand. They weren't covering their costs. They were charging like 25 cents a glass. Their costs were $1.50.
VELSHI: Right, it was a loss leader.
All right. Well, we've got lots of stories like that, unfortunately. That's how the economy hits everyone.
The economy is issue #1. We here at CNN are committed to covering it for you. ISSUE #1 back here tomorrow, same time, 12:00 Eastern, right here on CNN.
WILLIS: Time now to get you up to speed on other stories making headlines. "CNN NEWSROOM" with Don Lemon and Kyra Phillips starts right now.
