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ISSUE NUMBER ONE
Farmers Struggle in Flooded Iowa; Skyrocketing Shipping Costs; Ways to Beat Inflation
Aired June 19, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CO-HOST: The flooding in the Midwest takes a toll on housing, farming, business. President Bush lands in the flood zone within the hour.
One candidate's plan to solve the energy crisis and another candidate's plan to finance his own campaign.
And as you're pretty much paying more for everything, we're going to show you how to beat inflation.
Issue #1 is your economy. ISSUE #1 starts right now.
Hello, and welcome to ISSUE #1. I'm Gerri Willis.
What a day. The floodwaters continue to cause all sorts of problems in the Midwest. President Bush is on Air Force One as we speak, headed to the region.
Two very interesting twists in the presidential campaign, one for Senator Obama and the other for Senator McCain.
And we've got a very cool story of one family making their own fuel, growing their own food, and saving a whole lot of money at the same time.
From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we are all over the stories that matter to you.
We begin with the terrible flooding in the Midwest. Farmers are in for a real struggle, their crops soaked. How will they weather the storm?
Our Allan Chernoff is in Oakville, Iowa, where 21 square acres of farmland are under water -- Allan.
ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Gerri, you can look at the strength of this current over here. And this is all coming out of the Iowa River. A levee broke on Saturday, Saturday evening. And still, the water flowing out.
I'm walking right now on a gravel road. Behind me, acres and acres of farmland. It looks like a giant lake.
Not only the farmland lost right now, but the infrastructure damage is just tremendous -- roads throughout the Midwest, rails, bridges. One estimate by an economist at Ball State University says his initial estimate, $160 million in losses. That's probably very conservative.
Here just another example of the damage. Just a mailbox knocked right down by the floodwaters.
And come with me over here. You can see the strength of the water just lifted the earth up, basically like a carpet, plopped just right over there. It's really astounding what the water has done over here.
Now, I've mentioned the infrastructure, but as you said, the real damage is to the farmland here. The Farm Bureau of Iowa is estimating that the losses, the crop losses, will total $3 billion, 3.3 million acres of lost corn and soybean. Keep in mind, Iowa is the nation's number one producer of those two essential commodities. So this is just a horrific flood. It's hitting farmers, it's hitting everyone -- Gerri.
WILLIS: Allan, it looks like you're at the beach the way the water is moving in waves. But about those farmers, can they replant these crops? Can they save these crops? Is there anything they can do to change these losses that they're going to incur?
CHERNOFF: Flooding like this, what you see behind me, is a total loss for this year. There's no question about that.
There are some areas, though, where the water is receding and we've had a series of bright sunny days. There is a forecast, though, for some rain tonight, tomorrow, and the next day, a little bit. But if it's not too much and if it's mainly sunny in some areas, the farmers are hoping to replant corn and soybeans, fast maturing seed, and hopefully be able to harvest before the frost in late October.
WILLIS: Wow. Lots of moving parts here. But you know, there's another group of folks who will get hit by this as well, and that's consumers at the grocery store. What exactly will it mean for us as we go shopping for food?
CHERNOFF: It's already impacting. We're going to have less of this stuff.
The price of corn now well over $7 a bushel. But it's much more than just the product itself. So many things, of course, made from corn.
I've got a few examples here. Corn chips, of course. But how about soda, energy drinks? They're filled with corn sweetener, corn syrup. So many products are sweetened that way.
In addition, of course, soybeans, as well, but it's not just soybeans, soy milk, soy yogurt. Soy is in just thousands and thousands of both products that we consume, such as a candy bar, but also in many industrial products. Even in ink.
Gerri, the impact here is so far reaching, far beyond the state of Iowa, far beyond the United States. This is a global catastrophe.
WILLIS: A global catastrophe. And we appreciate your covering it for us. Be safe out there, Allan.
ALI VELSHI, CO-HOST: Moving a little farther south now, Missouri is preparing for the worst of the flooding.
Reynolds Wolf is in Hannibal, Missouri.
Reynolds, what's it looking like where you are?
REYNOLDS WOLF, CNN METEOROLOGIST: Really, so far so good. We're expecting the water to rise around 31 feet by sometime tomorrow. But for the time being, this berm you see behind me, this levee, has been really strong.
Really no worries in downtown Hannibal. There's really calm sense of -- I guess you could say confidence. They're really not too worried here.
The water levels behind me have risen considerably and crossed over one berm, and also a set of railroad tracks that are just to my right. And although the city is fine, there are a few communities, few neighborhoods farther to the south of the city where the water continues to flow in.
Keep in mind, I mentioned tomorrow we're expecting the water to crest, which means there's more water coming down from the Mississippi, which means the water's going to rise even higher in those neighborhoods. So that is certainly an area of concern for us.
Back to you.
VELSHI: All right, Reynolds. Thanks very much. And thanks for the great coverage out there by our whole team, both about the story that's going on the ground and the greater implication of it.
President Bush is on Air Force One right now. He's headed to the flood zone. But how much federal help with president bring with him?
Ed Henry's covering that story from the White House right now.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Ali, you're absolutely right. The president wants to get a firsthand look. This is going to be his first opportunity to see the devastation himself. And he's going to be getting some briefings from local and state officials in Cedar Rapids, but then he's also going to be aboard Marine One and getting an aerial tour, both of Cedar Rapids, but also Iowa City, two of the areas particularly hard hit.
The president was in Europe, as you know, when the floods first hit. And I think it's pretty clear part of this is about the White House making sure this is not another Hurricane Katrina-type situation, where the president looks out of touch. While he was still in Europe just a few days ago, he was still getting briefings from there. As soon as he came back to the White House earlier this week, he was getting briefings from top aides. Now he gets this firsthand look. And some of the specifics he'll get into is what the federal government is trying to do.
FEMA, the Federal Emergency Management Agency, so far has been getting relatively positive reviews about its response on the ground. For example, they've brought in something in the neighborhood of two million liters of fresh drinking water for people there in Iowa and the surrounding states. That's obviously a critical need right now.
But also, the president looking at the housing situation. The federal government wanting to figure out how to deal with shelter for people in the short term, but long term, what do you do with people who have lost their homes, perhaps, or have them completely devastated and trying to rebuild them?
And then, of course, looking at what Allan Chernoff has been reporting about just how much of the farmland there has been devastated and what will that do to food prices that, as you know, have already been soaring, Ali? That's a key concern for this White House.
VELSHI: Yes. And that's the key concern that spreads out to everybody else.
Ed, thank you very much for that.
Ed Henry at the White House.
WILLIS: One of the presidential candidates says he knows how to solve our energy crisis, and it doesn't involve oil. And the other presidential candidate, well, he's saying he's not going to take public money for his campaign. The first time any candidate has done this.
Let's find out who said what coming up next.
VELSHI: Well, with oil and gas near record highs, what's the future of energy in this country going to look like? Well, presumptive presidential nominee Senator John McCain thinks at least part of it lies in nuclear energy. He's calling for a crash program to increase the amount of nuclear reactors by nearly 50 percent.
CNN's Dana Bash, part of the best political team in television, joins us now from Washington -- Dana.
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, Ali, you know, the idea of nuclear power as an alternative is actually something that John McCain talks nonstop about on the campaign trail. And until he threw his support behind lifting the moratorium on offshore drilling, McCain's support for nuclear power is really the main reason environmental groups don't like him all that much. They call him green, but not green enough.
But McCain insists nuclear energy and nuclear power is safe and efficient. And he's now giving some specific proposals on how he wants to promote it.
He wants to build 45 new nuclear reactors by the year 2030 and devote $2 billion federal dollars a year. And his ultimate goal, he says, is 100 new nuclear plants. Listen to his argument.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Right now we have 104 nuclear reactors in our country generating about 20 percent of our electricity. Every year these reactors alone spare the atmosphere from the equivalent of nearly all auto emissions in America.
Yet, for all these benefits, we have not broken ground on a single nuclear plant in over 30 years. And our manufacturing base to even construct these plants is almost gone.
(END VIDEO CLIP)
BASH: Now, clearly, McCain knows this country is still very concerned about the dangers of nuclear power because of the Three Mile Island accident nearly 30 years ago. But McCain notes that countries in Europe, like France and Belgium, they get about half of their power from nuclear energy.
Now, if you're wondering about Barack Obama, he opposes promoting nuclear power, even though as McCain pointed out, his home state of Illinois has more nuclear power plants than any other state -- Ali.
VELSHI: And at least at this point, Dana, there is just so much on the table. And I think we're going to get more from Barack Obama than his specific plan outlines at the moment. At least we've got all these things on the table so that by the time November rolls around, our viewers and Americans in general will have very specific things to talk about. So that much is good.
Dana, thanks very much.
BASH: Sure is.
WILLIS: Thanks, Ali.
You know, every single day on this show you can vote, and it's your turn to tell us what you think about the future of energy.
Time for today's "Quick Vote." CNNMoney's Poppy Harlow is here with today's question.
POPPY HARLOW, CNNMONEY.COM: Hey there, Gerri.
Well, you know, we just heard what McCain wants. But the truth is, folks, oil prices are flirting with record highs on a near daily basis. President Bush just yesterday calling for more drilling in the U.S. to meet our growing energy demands. But what do you think out there? Because your vote really matters.
Here's our question today. "I believe the future of energy is in oil and gas, nuclear, solar, or wind?"
Please let us know on CNNMoney.com. We'll bring you those results a little later in the show -- Gerri.
WILLIS: Can't wait to see that.
Thank you very much, Poppy.
VELSHI: Well, by the way, I think we can add something to that, Gerri. Can we have an all of the above, so that people think it's all of those options or maybe some combination?
Anyway, what if you could survive completely on your own without food or fuel from the outside world? Well, we're going to meet a family who is completely insulated from this economic mess -- the mess that we're in.
And how you pay at the pump could change. We'll tell you how and why.
Stay with us. You're watching ISSUE #1, right here on CNN.
VELSHI: Two former Bear Stearns fund managers are in a whole lot of trouble today, arrested today on conspiracy and fraud charges. The charges link Matthew Tannin and Ralph Cioffi to a hedge fund that bet heavily on subprime mortgages before that market went south. They are the first executives to be criminally charged in the aftermath of the mortgage meltdown.
Tannin's attorney maintains that his client is innocent. Cioffi's had no comment.
Well, we have a developing story in Washington right now. Hundreds of arrests in a nationwide mortgage fraud sweep.
CNN's Kelli Arena is following that story for us.
KELLI ARENA, CNN JUSTICE CORRESPONDENT: Hey, Ali.
You know, officials tell CNN that nearly 300 people have been arrested for alleged mortgage fraud as part of an FBI investigation that began about three months ago. And officials say that they plan to take about 100 or so more into custody, Ali.
Those officials say that consumers lost about $1 billion as a result of these illegal schemes. Many of the arrests were actually made yesterday in cities including Miami, Houston, San Antonio, Baltimore and Chicago.
The suspects were allegedly involved in mostly small-scale schemes, including things like reverse mortgages, which as you know, Ali, targets seniors. Some house-flipping schemes. These were primarily mom and pop shops, probably part of the local community where sometimes defrauding people actually is a lot easier because consumers assume that because they're dealing with neighborhood businesses that they'll be taken care of.
And Ali, this will probably not be the last that we hear of arrests in this area. The FBI says it's assigned more than 200 agents to work these cases, transferring them from other financial crimes areas. And the FBI said just last month that it's investigating more than 1,300 cases of mortgage fraud.
That includes 19 or so corporate investigations. Those will be the big guys, Ali, like Countrywide Mortgage.
And we do expect to get more details from officials. This time on the record at a press conference here in Washington in just about an hour from now.
VELSHI: OK, Kelli. So the word out there, I think, to people who are watching us is that there's a chance that you could be in danger at any point.
ARENA: That's right.
VELSHI: So just because you're dealing with somebody in your neighborhood or in your community, you have to be as diligent. When it comes to your mortgages and your financial affairs, you should do the same thing no matter who you're dealing with.
ARENA: Exactly right.
VELSHI: All right, Kelli. You're staying on that story for us and we'll check in with you again.
Kelli Arena on that story of the mortgage fraud -- Gerri.
WILLIS: Ali, that is the fastest growing white collar crime in the country, mortgage fraud. Appalling.
Well, more news on the housing front. The housing crisis marches on.
Nearly 250,000 foreclosure filings were reported in April. That, according to RealtyTrac.
So many people are desperate to avoid foreclosure, are eager just to get through it. A number of new businesses have started up telling people just how they can walk away from their mortgages.
Barbara Kiviat is a business writer for "TIME" magazine, and she wrote an article this week on these mortgage walk-away companies.
Barbara, help me understand here. What are these companies doing? And how can they help me when I can't help myself?
BARBARA KIVIAT, BUSINESS WRITER, "TIME": Well, as you know, you have to keep an eye out for people in this environment. There are a lot of different sorts of companies, a lot of them have walk-away in the name. Some of them don't do much more than basically give you advice on how to go through the foreclosure process. Some of them actually do try to help you keep your house.
So, unfortunately, it's yet another lesson of where you really have to dig down and find out what exactly they're offering, whether it's just to send you some literature about walking away or whether it's actually negotiating with your bank trying to maybe even save your house.
WILLIS: Now, according to your story, this isn't cheap. This is $900, $1,500. It's a lot of dough. Does it work?
KIVIAT: Well, that's an excellent question. And it depends what you're talking about.
If you're talking about paying someone upwards of $1,000 to explain to you what happens when you stop mailing in your mortgage check, that's information you're going to get that's true. Do you want to pay $1,000 for it? I don't know. If you call a nonprofit housing counselor, they might be able to give you the same information for free.
If it's a company trying to negotiate with a bank to save your house, talking to these different companies, maybe in 20 or 30 percent of the cases they're successful. A lot of people took out mortgages they could never afford in the first place. There's just not much to do.
WILLIS: Who could be helped and who should think about doing this?
KIVIAT: Sure. Well, the best advice for a person who thinks they might fall behind on their mortgage payment is to call their lender, call a nonprofit housing counselor early. Because if you catch this early, before you are unable to pay your mortgage, there's that much more chance that you're going to be able to be helped out.
If you have a temporary drop in income or a real extenuating circumstance that you might be able to explain to the bank, then you're more likely to be helped. If you were just out there spending money that you didn't have and you never would have, the banks are going to be a lot less likely to work with you.
WILLIS: Call your lender, call your lender, call your lender.
WILLIS: Barbara Kiviat, thank you so much for that story. KIVIAT: Thank you.
WILLIS: It's in this week's "TIME."
KIVIAT: This week's "TIME" magazine. Thanks so much.
VELSHI: All right. A big announcement, Gerri, this morning from Barack Obama. He's not going to use public money to finance his run for the White House.
Bill Schneider is part of the best political team on television.
Bill, why is this such a big deal? Because we've been talking about the implications and the implications for John McCain. What does this mean?
WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: I'm not sure it's a big deal to most voters because it's a surprise to a lot of people. There's not a lot of support out there for the public financing system.
We don't have any new polls on this, but about a year ago, the Gallup poll asked people if they thought -- if they supported the idea that candidates and campaigns should be financed by taxpayer money, by the federal government, and most Americans said no, they like the idea of financing campaigns through small contributions, from a lot of individual contributors, which is what Obama has done. It's a big deal to the McCain campaign because they're arguing that he has reversed himself, he's flip-flopped.
He made a commitment to support public financing and to accept public financing if his opponent did as well. And now they argue he's reneged on that deal and he's not a true reformer, as a result.
VELSHI: And Bill, the consequence here is, by not accepting public financing, Barack Obama has greater freedom or absolute freedom to spend as much money as he would like?
SCHNEIDER: Absolute. He can raise money as much as he wants. If you accept public financing, you cannot raise more money than the public treasury gives you. And you are limited in spending just that amount of money.
Here he can spend as much money as he can raise. He can spend it anywhere he wants. He can put John McCain on the defensive in state after state all over the country.
So it makes it really a whole new ball game. And he has out- raised John McCain by almost three to one in the campaign so far.
VELSHI: In your experience, Bill, you've seen a lot of elections. Is it something about Barack Obama that makes him this fantastic fundraiser or is it the Internet? SCHNEIDER: It's both. He's managed to use the Internet to raise fantastic amounts of money, because what he's leaving here is something more than a campaign, it really is a movement.
We've seen that occasionally but rarely in American politics. The last time was, of course, Ronald Reagan and the conservative movement, but they didn't have the Internet back in 1980. But it was the same kind of movement, a sense this was not just a coalition of interests trying to get someone elected, but a movement to change the way America works, to change American politics. And he's just got that kind of passion and enthusiasm that we rarely see in politics.
VELSHI: Never a dull day in this election campaign.
Bill Schneider, our senior political analyst.
Thank you for joining us.
A member of the best political team on television.
Well, listen, inflation's a hot topic for a lot of you out there, for everybody, really. It seems like everything costs more these days. But we've got some ideas for you to beat inflation in your own life.
Plus, imagine if you could survive completely on your on and not rely on the outside world at all. Who would I BlackBerry? No, I'm serious. I'm talking about growing your own corn, growing your own food, making your own fuel.
We are going to introduce you to one family which does just that. You're not going to want to miss this.
You're watching the home of ISSUE #1, the economy, CNN. Stay with us.
WILLIS: What if you could be completely, completely insulated from the economic mess? You grow your own food and make your own fuel? Well, guess what? It's happening.
Thelma Gutierrez spent the day with a family who is completely self-sufficient. Take a look.
THELMA GUTIERREZ, CNN CORRESPONDENT (voice-over): This is quite possibly one of the few households in America where rising food prices are not an issue.
UNIDENTIFIED MALE: You just stay at home and you grow your own food in your back yard.
GUTIERREZ: Where high energy costs are not a concern.
ANAIS DERVAES, URBAN HOMESTEADER: We try to cook outdoors using the sun and free energy.
GUTIERREZ: Where sky high gas prices haven't hurt one bit.
JUSTIN DERVAES, URBAN HOMESTEADER: It takes special oil (ph) heat and some chemicals and makes biodiesel.
GUTIERREZ: Meat the Dervaes, a family of four who live off their land, every horizontal and vertical inch they can find. In their back yard, their front yard...
JUSTIN DERVAES: In our driveway, we've got strawberries.
GUTIERREZ: ... even the driveway of their three bedroom in Pasadena, California.
UNIDENTIFIED MALE: One of our biggest crop is edible flowers.
GUTIERREZ: That's right, even their landscaping is edible. The Dervaes' urban home is a working farm on a tenth of an acre.
UNIDENTIFIED MALE: Getting a little rabbit's taste out of it.
GUTIERREZ: They sell to local chefs.
UNIDENTIFIED MALE: They may call for three pounds of salad. We pick the three pounds of salad. No waste, no mess. That cuts down on overhead.
GUTIERREZ: Anais Dervaes says her family has been living green way before green was in. Their home is paid for and they live on about $25,000 a year. What they don't sell, they eat.
(on camera): So what can you actually cook in here?
A. DERVAES: Anything that can be cooked in a normal oven can be cooked in a solar oven. And here we have some homegrown potatoes that we harvested and that we're cooking up for dinner tonight.
GUTIERREZ (voice over): The sun also powers their home and heats their water.
A. DERVAES: You're looking at our homemade, outdoor solar shower.
GUTIERREZ (on camera): This is the shower you use in the summertime?
A. DERVAES: Yes. And it's heated with a simple black garden hose, and then the water percolates down and water's our edible landscaping.
GUTIERREZ (voice-over): They Dervaes pick pets like chickens, ducks and goats that contribute.
UNIDENTIFIED MALE: Right now they're just -- they're pets, and they eat up our waste greens. So we call them composters. GUTIERREZ: Even their toilet gives back.
UNIDENTIFIED FEMALE: You'll wash your hands with the new water. That water will go in and fill your bowl.
GUTIERREZ: Just when you think you've seen it all.
UNIDENTIFIED FEMALE: This is our bicycle-powered blender.
GUTIERREZ: Isn't there a side of you that ever just wants to get out of bed, go in, turn on the blender, make whatever you need to make?
UNIDENTIFIED FEMALE: I don't really know another way. In a sense, I've grown up like this.
GUTIERREZ: Jordanna Dervaes says as a kid she was picked on for living green.
JORDANNA DERVAES, URBAN HOMESTEADER: Right when I began to accept being different and unusual, then I started becoming hip.
GUTIERREZ: In 10 years she says they went from the crazy family on the block, to the envy of their neighborhood.
Thelma Gutierrez, CNN, Pasadena, California.
VELSHI: I'm all about reducing my carbon footprint, but I think I'm going to take it a little slower than that.
But, listen, inflation. We've been talking about that a lot. It is a textbook economic word which has very real implications on your wallet. We're going to show you how you can help or how you can beat inflation in your life, at least.
But first, let's get you up to speed on the latest headlines. Don Lemon is in the CNN "NEWSROOM" right now.
DON LEMON, CNN ANCHOR: Hey, good to see you, Ali. Thank you very much.
We're going to talk about this story. I mean, it is really sad and depressing. Life along the Mississippi, the flood waters and the disaster, man, it can deepen. It's deepening, as if it can get any worse. A massive levee failure in Winfield, Missouri, has doubled in size to a staggering 300 feet wide. Fifty thousand acres are under water right now.
Flood waters threaten a secondary levee. Sandbaging efforts are underway. People to the east are being ordered out of low-lying areas. More than 20 levees have been swamped. The question is, though, is some or much of this flooding manmade? We'll uncover the truth in the "Newsroom" at the top of the hour.
Right now we want to get to our Rob Marciano. He joins us now in the Severe Weather Center.
Rob, talk about all this flooding. We see this new breach -- the whole widening. Any relief in sight for these folks?
ROB MARCIANO, CNN METEOROLOGIST: Well, I'll tell you, the relief comes downstream. Unfortunately for the people upstream, every time there is a breach, downstream folks get a little but of pressure relief. I mean these levees are like putting your thumb over a garden hose and they just extenuate the pressure. And if you release that thumb a little bit, then the pressure goes away.
Here's how it shakes down as far as the crest is concerned. It's going to happen tonight. It's happening now, actually. Quincy and Canton, these white spots, are where we've seen levee breaches. Hannibal, Clarksville, Saturday, St. Louis on Monday. And right now, St. Louis, expect to stay slightly below major flood forecasts. Hopefully that will remain true.
Don, back to you.
LEMON: Yes. OK. We hope so. Thank you very much for that, Rob.
We want to get you now to some live pictures. Rob was speaking about the Midwestern flooding. And there you see Air Force One on the tarmac now at Eastern Iowa Airport in Cedar Rapids, Iowa. Of course, the president is going there and he's going to tour the area, greet some of the folks, meet some of the people who are suffering from this Midwest flooding. Governor Chet Culver, his wife Mary Culver, and the former governor, Bob Ray, and his wife as well, will greet the president on the tarmac once he gets off the plane. We will follow that for you and have much, much more at the top of the hour right here in the CNN "NEWSROOM."
In the meantime, we have some new developments to tell you about. New developments expected next hour in two big financial stories. The Justice Department plans a news conference at the top of the hour on arrests in a mortgage fraud investigation. We'll bring that to you live. Plus, we're expecting another news conference on the Bear Stearns criminal investigation, all happening next hour.
I'm Don Lemon. I'll be back at the top of the hour. Now let's throw it back to Gerri Willis in New York -- Gerri.
WILLIS: Don, thank you for that. I know we'll be following those press conferences very closely.
Well, about 80 percent of everything that families eat in Hawaii has to be imported from the mainland. So our own Chris Lawrence followed the food from Los Angeles to Hawaii and found that when ships and planes pay a small fortune for fuel, the costs get passed right down the line.
CNN's Chris Lawrence explains.
CHRIS LAWRENCE, CNN CORRESPONDENT, (voice-over): The end result of expensive fuel can be found in Hawaii, where it's caused orange juice to sell for $10 a gallon.
UNIDENTIFIED FEMALE: It's a lot more than what we're used to.
LAWRENCE: But the change starts on California farms. When growers pay more for petroleum-based fertilizer, they pass it on to the shipper. And when the trucks that haul those crops to the warehouse pay more for fuel, the shipper gets hit again.
TIM KENNEDY, KENNEDY PRODUCE: There's a surcharge from just about everyone.
LAWRENCE: Tim Kennedy runs a shipping business his dad started in the 1950s. He knows that every time he raises prices in Los Angeles, it's passed on to an island family already paying a fortune.
KENNEDY: But that has to be how it works. I can't absorb it. I've taken some increases and absorbed those and not passed them on. But as they continue to come, they have to go to somewhere.
LAWRENCE: These California companies are a lifeline to Hawaii, which has less than a week's supply of food.
KENNEDY: Without me, it's difficult to feed the island.
LAWRENCE: Hawaii imports about 80 percent of its food from the mainland, either by planes or cargo ships that use a lot of expensive fuel. And those ocean and air freight charges are passed on. We followed Kennedy's containers to his wholesaler in Honolulu. Allan Woo turns around and sells that food to schools and restaurants in Hawaii.
ALLEN WOO, MANSON PRODUCTS: We're probably less profitable than we were three years ago.
LAWRENCE: Is that all because of this fuel surcharge that you're paying right now?
WOO: Yes, it is. The surcharge a few years ago was $432. Next month it'll be $1,600.
LAWRENCE: Woo says the only way to recoup that is to tack on a surcharge of his own.
WOO: Ultimately it is passed on to the consumer.
LAWRENCE: Isn't it always? Some shipping companies have been replacing those diesel trucks with hybrids. Others are buying newer, more fuel-efficient airplanes. But when it comes to moving food over 2,500 miles of open ocean, there's only so many ways to cut costs.
Chris Lawrence, CNN, Honolulu.
VELSHI: How did he get that gig? Honolulu.
All right. Everybody seems to be paying more for just about everything else. But there must be some way to beat inflation. Amanda Gengler from "Money" is with us now and she has a few answers to some questions that she's been writing about.
This particular edition of "Money" is about how to sort of tackle these things or this article that you've written. We just talked about shipping costs. Transportation is really a big deal for people. Some of the most obvious things -- or one of the most obvious things you can do to save money in your car?
AMANDA GENGLER, "MONEY": Under inflation in the tires can reduce your gas mileage by about 5 percent. But even bigger, just stop with the lead foot. Maintaining slower, steadier speeds, you can save up to 33 percent of your mileage.
VELSHI: I've done that. I've started using the cruise control now. And because otherwise I'd just be driving too fast.
GENGLER: Driving the 65 speed limit is a big help.
VELSHI: It's a big deal, isn't it? Yes. Well, the other thing that we're talking about a lot now as we got past the gas prices is into food prices. We know that oil and these commodity increases have affected food prices. What can you do to try and ease that pain?
GENGLER: The first thing you want to know is that everything in the grocery store is laid out for you to impulse buy. The more you see, then the more you buy. That's why milk is in the back of the store and the aisles are long with no breaks. So bring a list and stick with it. Don't go tired and hungry when it's harder to resist temptation. And also, search high and low on the shelves because companies pay a lot for the prime real estate in the middle of the shelves and the isle ends. So the cheapest products are often at the top or the bottom.
VELSHI: So look around a little bit. A lot of places make it very -- one of the reasons I love going to Target is because they compare everything with the unit price. Because some of these unit prices, they give you one measure on one and another -- a different one on another. So take advantage of that kind of thing.
Let's talk about medical costs. What can you do to reduce your medical costs? I mean it seems like one that you don't have that much control over except once a year. What can you do?
GENGLER: It is the hardest but a lot of people, especially employers, are touting these high deductible health plans because they come with lower premiums. You can generally save about $750 a year on premiums. But you have to understand, if you get sick, you will face great financial risk. You're going to have to pay that full deductible. You also typically have to pay the full cost of prescriptions until you meet that deductible. So if you're young and healthy, this may work. If you need that lot of care, it's best to stick with the traditional HMO or PPO.
VELSHI: The thing that you talked about, I was just looking at the numbers, they actually can really add up. I mean these are things that don't seem like big deals. One of the problems with inflation is, people feel out of control. They don't feel like they can do much. But when you add all these things up, you can really -- you can actually make a dent in it.
GENGLER: Well, and it's hard because it's the essentials that you need in daily life that are going up today. The food to put on the table. The gas to get to work. And, you know, home energy costs, medical costs, college costs. It's the luxuries, the woman's apparel, the flat screen televisions, the new cars that are dropping in price. So even psychologically you probably feel like prices are increasing, but even (INAUDIBLE) the Consumer Price Index shows (ph).
VELSHI: Well, I was going to say, that's why people -- they don't sort of see it when they say the Consumer Price Index is up 4 percent and they're saying, well, wait a second, I seem like I'm paying a whole lot more because you only buy so many flat screen TVs or computers or things like that.
VELSHI: Amanda, good to see you. Thank you.
GENGLER: Thank you.
VELSHI: Amanda Gengler from "Money."
WILLIS: Well, great information from that, Ali.
You know, your options for how to pay for gas might be dwindling. We'll tell you what not to bring to the gas station and why some say the solution to all our energy problems is just as simple as getting on track. We'll explain.
ISSUE #1 rolls on next.
WILLIS: Well, at first glance it doesn't seem to make much sense, but the rising gas prices is taking a major bite out of profits for a lot of gas station owners. The problem, credit cards. Consumers love them, pay at the pump and all that. But as the price climbs higher and higher, station operators have to cough up more and more of what they call interchange fees to the credit card company.
And the fees attached to $4 a gallon gas are enough to cause some stations to actually lose money on gas sales. Some stations are going cash only. Retailers also are looking for Congress to give them some relief. Credit card companies say the fees are justified because they bring in more customers -- Ali.
VELSHI: All right. It is 43 minutes after the hour. That means it is "Energy Fix" time. I just made that up. But the pain at the pump is pushing people off the road and on to the -- well, it says on to the tracks. I'm sure that wasn't intended to be how it was supposed to be read. But could the train be the next place to save money to help you answer your energy fix problems?
CNNMoney's Poppy Harlow is here with your "Energy Fix" -- Poppy.
HARLOW: Ali, pushed on to the tracks, like on to the train. Don't you get it?
VELSHI: No, I totally get where it was going, I just . . .
HARLOW: Now that Ali gets it, let's proceed.
There are some compelling reasons out there for people to want more rail travel in this country. In fact, a number of people are traveling on Amtrak. A record high is what we saw last month in terms of travelers as gas prices hit record highs and air travel becomes more expensive and even more of a hassle. Nearly 26 million people rode the rails in the U.S. last year. And earlier this morning I spoke to New Jersey Senator Frank Lautenberg. He's sponsoring the Senate version of a bill that is moving through Congress right now calling for more than $11 billion in funding for Amtrak over the next few years. He says rail travel is a good energy fix.
(BEGIN VIDEO CLIP)
SEN. FRANK LAUTENBERG, (D) NEW JERSEY: If we can make the system more efficient, make it better-used, I think that it's fair to say that prices should come down. And that's something we're going to watch very carefully. We can't push people into a system that's going to cost them a lot more money to travel. But on balance, I must say, tell you this, it typically costs less than a reserved air flight, it costs less than a single person or two traveling in a car.
(END VIDEO CLIP)
HARLOW: Now Lautenberg also says it's a greener option according to the Energy Department. Amtrak uses 17 percent less energy than domestic airline travel when we're talking about a passenger per mile basis. And, Ali, you know, Amtrak uses 21 percent less energy than just driving down the highway.
VELSHI: And it gets to places on time 21 percent less than you would if you drive.
The issue with Amtrak, of course, is the busiest part of it is this northeast corridor. So you would expect support from people in Pennsylvania, New Jersey, Connecticut, Massachusetts. But Amtrak gets a lot of money from the government and hasn't over the years been thought of as the most efficient user of that money.
HARLOW: No, you know, people in Minnesota, where I'm from, they don't really use Amtrak that often. Now like we do here in New York. But Lautenberg thinks he can turn that around by investing a lot more money in rails and becoming a bit more like Europe. A lot of Europeans take the train. Take a look.
(BEGIN VIDEO CLIP)
LAUTENBERG: People are begging to get alternative to being in the car, stuck in the car, or delayed flights. So I think that we ought to try to replicate what we see in Europe. I don't know that we can come that close. But they spent billions and billions more each and every year. We've been parsimonious in the way we treat rail, but we've spent plenty of money on aviation and highways.
(END VIDEO CLIP)
HARLOW: Now the House version of that bill passed with an overwhelming majority, but President Bush is threatening a veto. He's calling for more domestic oil drilling. He feels the funding for this bill is way too high. The House and Senate versions of the bill both had enough votes to override a veto but they call for different amounts of money. And, Ali, as you know, they're going to have to reach a compromise in Washington.
VELSHI: Yes. I mean, I enjoy the rails. I was making some fun of Amtrak, but I actually choose to take it where possible because it's . . .
HARLOW: Well, when you live in New York and you have the delays at the airport . . .
VELSHI: Yes, you don't have to worry about the airport transport. All right.
Thank you for that, Poppy.
Poppy Harlow with our "Energy Fix" -- Gerri.
WILLIS: Well, everyone needs some hints on how to handle your money. Make sure you send us all your e-mail questions. The Help Desk is next. It's right over my shoulder. We're all over issue #1, the economy.
Stay with us. It's ISSUE #1.
VELSHI: Millions of people who are eligible to receive government stimulus checks still haven't claimed their money. At a hearing on Capitol Hill this morning, the IRS commissioner said about 5 million people who don't normally file income tax returns haven't applied to receive their checks. Most of those people will have to fill out a return if they want the money. Well, why haven't people claimed the checks?
Well, the government blames age, disability and just plain fear of contacting the IRS -- Gerri. WILLIS: Free money. Why don't people get free money? It's crazy.
VELSHI: I know. Take it.
WILLIS: All right. Well, you might have a question related to your economy. And maybe you don't even know who to ask. Well, we are here to help. This is a Help Desk. Answers to your e-mail questions. Let's get right down to it.
Melissa Cohn is the CEO of Manhattan Mortgage, Farnoosh Torabi is the author of "You're So Money," and Amanda Gengler is with "Money" magazine.
Welcome, guys. Let's get right down to it.
First question is for Melissa who asks: "I am a 28-year-old mother returning to college. I am not eligible for financial aid, so I was wondering what my best option is to fund my education?"
Amanda, tell me, what do you make of this? It's an interesting story. She wants to go back to school. She has a child. Where does she find the dough?
GENGLER: The first thing I would say is, never assume that you are not eligible for financial aid. Someone who is earning six figures could qualify for financial aid. So everyone should fill out the FASFA. The application for Federal Student Aid. And it's unclear whether you're going to graduate or undergraduate here, but you always want to try to go for the federal loans first. They're going to charge fixed rates that are typically lower than any private lenders. So maybe a Stafford Loan or a Plus Loan for graduate school.
If you do have to go with a private lender, the least you can do is look for that low rate. Understand that it is variable because they will go up. But tie it to the Libor (ph) index, because that will likely climb slower than the prime rate, which is another index that student loans are often pegged to.
WILLIS: All right. So says private loans are very difficult to get. And Libor, of course, tell people what Libor is.
GENGLER: It's basically the index rate that the student loan is going to be pegged to. So it's going to change every year that you apply, you'll have a new student loan rate and your rate's going to go up and down. You can look it up in the newspaper if you're curious to see what it is.
WILLIS: All right. The next question from Arizona: "I am a first-time home buyer. What is the first step to buying a home?"
Now we have two housing experts on the panel. I want to tap both of them. Farnoosh, what would you say, first-time home buyer?
FARNOOSH TORABI, AUTHOR, "YOU'RE SO MONEY": Definitely get pre- approved because then you know how much you can borrow. And, second, once you get pre-approved, and you can chime in here as well, I think that does help speed up the mortgage process and the closing process, right?
MELISSA COHN, PRESIDENT, MANHATTAN MORTGAGE: Absolutely. Once you're pre-approved, it makes you a stronger buyer. So especially in today's real estate market, if you have a pre-approval, you know, how much you can get, what rate you can get, how much house you have, you're better to do a better job at negotiating a better price on the house you're looking for.
WILLIS: Melissa, though, I want to ask you, because it's hard to get money now. The lenders are not as free and easy with the money as they have been. Getting even pre-approved is that hard too, as hard as getting a loan?
COHN: Getting pre-approved is basically as difficult as getting a first mortgage today. But it's really a key step if you're a first- time home buyer because you don't want to go out and bid on a house and realize that you can't afford it, that you don't understand where interest rates are, what your monthly payment is going to be, how much of a down payment is required, what your credit history does to your mortgage rate. You really need to have all the facts up front.
WILLIS: Always need all of the facts.
All right, let's go to the next question. It is from Doyan in Maryland: "I have to take private student loans for summer classes, but most of these loans have accrued variable interest rates. Should I apply for these kinds of loans or try to get a fixed interest rate?"
I like the fixed interest rates. What do you think, Amanda?
GENGLER: If you find a private lender who is willing to give you fixed interest rates, then that would be amazing, but they're not common at all. In fact, it's generally the federal student loans that will have the fixed interest rate. So, again, if you're looking for a variable rate, go with that Libor index.
WILLIS: All right. OK. Darn it.
Let's answer Arline's question. She asks, "I am a stay-at-home mom but would like to open up an IRA for myself. Can my husband make contributions to my IRA for me and if so, what is the limit each year?"
TORABI: You can. Your husband can help. It would help if they both have accounts at the same bank. The limit is $5,000. If you're over 50, it's $5,000 plus a $1,000 catch-up allotment. So generally the answer is, yes, he can basically just pay her a check. She uses that money to fund her IRA.
WILLIS: All right. And that's great when you have somebody else pay for your IRA. I'm all in favor of that.
TORABI: Sure. Great deal.
WILLIS: All right, guys, thanks for your help today. Really appreciate your time. Amanda, Farnoosh, Melissa, thank you so much.
VELSHI: All right, everybody, here is your chance. Congress is debating it. The president has his view. The two candidates have theirs. Now it is your chance to be heard in the debate about energy.
What do you believe the future of energy is in this country?
Log on to CNNMoney.com and weigh in. Please tell us this because this is what we make our decisions on. What you tell us is important. Is it oil and gas, nuclear, solar, wind?
Check in right now at CNNMoney.com.
You're watching ISSUE #1 right here on CNN. Stay with us.
VELSHI: It's a little unorthodox, but I'm registering my protest with the question, the poll, the Quick Vote today. The question is, what do you think the future of energy is? And for how you voted, let's check back with PoppyHarlow.com. There was nothing wrong with the options on there, I just feel like there should have been an all of the above.
HARLOW: You know what, Ali, at least you're registering your complaints, making your voice heard. Folks, that's what you did. Here are the results. Nine percent of you think the future of energy is oil and gas. Not very many there. Twelve percent say it's wind. Thirty-eight percent, they look to the sun and it's solar. And 41 percent of you, a majority there, say it is nuclear. So they're siding with John McCain.
VELSHI: Forward-thinking people.
HARLOW: Yes, good for McCain.
VELSHI: I mean the fact that we're talking about even that many people thinking solar. Poppy, I think I'm very forward-thinking too. I think I just made you a .com. Did I call you poppyharlow.com.
HARLOW: Probably. You did that last time.
HARLOW: Get it straight.
VELSHI: Did you have that? Do you own that web site?
HARLOW: You know, I did one time. Don't go searching. It's not there anymore.
VELSHI: I probably shouldn't say that because somebody just bought it last second.
WILLIS: Poppyharlow.com. I love it. Why not, right?
VELSHI: Why not?
WILLIS: Americans plan to celebrate Independence Day a little closer to home this year. And not surprisingly, the main reason is gas prices. Almost 60 percent of people say higher gas prices at the pump will affect their holiday plans. That according to a new poll by the National Retail Federation.
Now that is a big jump from 2007 when 42 percent said gas prices would influence their plans. About 11 percent say they plan to travel, while almost two-thirds say they're going to host or attend a cookout. Forty percent say they're going to watch fireworks and 10 percent say they're going to watch a parade.
You know, I want to do all of the above. What do you think?
VELSHI: I'm going to be in a parade. I'm going to be at the California Stamped.
WILLIS: Alivelshi.com at the California Stamped, right?
VELSHI: We better all go get our .com right now before somebody else does.
WILLIS: All right. And for more ideas . . .
VELSHI: You know . . .
WILLIS: Strategies . . .
VELSHI: Tips to save you money and protect your house, watch "Open House," that's Gerri's, Saturday at 9:30 a.m. Eastern right here on CNN.
WILLIS: And for more on how the news of the week effects your wallet, tune in to "Your Money," Ali's show, Saturdays at 1:00 p.m. Eastern and Sunday's at 3:00, right here on CNN.
VELSHI: Listen, the economy is issue #1. You've told us that. We're committed to covering it for you. ISSUE #1 will be back here tomorrow, same time, 12:00 p.m. Eastern, right here on CNN.
WILLIS: Time now, though, to get you up to speed on the other stories making headlines. "CNN NEWSROOM" starts right now.