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Issue Number One
Presidential Candidates Lay Out Economic Plans; Political Gas Solutions; President Bush Comments on Oil Drilling
Aired July 02, 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: The countdown to Election Day, breaking down both candidates' plans to fix the economy.
A new way to buy gas in a day, a week, a month, even a year from now, at today's prices.
And we'll show you how to manage your money in a rough economy.
Issue #1 is the economy. ISSUE #1 starts right now.
Hello, and welcome to ISSUE #1. I'm Ali velshi.
There's so much information out there about Senator McCain and Senator Obama's policies that it can get confusing. So we're going to lay it all out there on the line. No opinion, no bias. We're going to let you decide which economic plan works better for you.
And as we wait for tomorrow's job report, what cities give you the best chance of building up your bank account and your savings and which ones aren't so good?
And one of the biggest banks in the country has some of their ATMs hacked. We'll tell you which one and if your money was at risk.
From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we're all over the stories that matter to you.
And topping off today's program, Gerri, President Bush is addressing the economy.
GERRI WILLIS, CO-HOST: That's right, Ali. The president was talking about oil drilling and the pressure of high gas prices.
Kathleen Koch joins us now from the White House.
KATHLEEN KOCH, CNN CORRESPONDENT: Hi, Gerri.
President Bush actually came to the Rose Garden this morning to preview what he hoped to accomplish at next week's Group of Eight Economic Summit in Japan. But not surprisingly, he was asked just what can the leaders there do about soaring oil prices?
The president said that he believed that change was already happening, saying that the U.S. is in what he describes as "... a transitional period moving away from its dependence on hydrocarbons." And the president pointed to the drop in the U.S. car sales as an example of how Americans' habits are changing as they look for more fuel-efficient vehicles. And, of course, yes, the president did renew his call for more drilling at home.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I want them to understand fully that we have got the opportunity to find more crude oil here at home in environmentally-friendly ways, and they ought to be writing their congresspeople about it. And they ought to say you ought to be opening up ANWR and Outer Continental Shelf, and increasing oil shale exploration for the sake of our consumers, as well as become less dependent on oil.
(END VIDEO CLIP)
KOCH: It does seem to be resonating. According to the latest poll numbers, the latest research from the Pew Research Center for the People and the Press, they found that now half of Americans do support drilling in Alaska's Arctic National Wildlife Refuge, and, Gerri, that's up from just 42 percent in February.
WILLIS: Kathleen Koch, thank you for that.
KOCH: You bet.
VELSHI: Who gets to become the next president may come down to who gets issue #1 right this election year. But the two presidential candidates have two very different economic agendas.
CNN's Candy Crowley takes a look.
(BEGIN VIDEOTAPE)
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): In the end, the presidency may come down to this: Which one will fix the things that ails the economy? Who hears the high anxiety?
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I have talked to families who are having to make different choices about the food they buy because they're out an extra $100 or $150 or even $200 a month that used to go groceries now goes to the gas tank.
CROWLEY: Which one feels the pressing nature of an economy gone sour?
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Who's suffering the most? Who is bearing the brunt of this? Well, the low-income worker on fixed income that drives the oldest cars.
Those are the largest gas consumption cars. We know that. The brunt of this incredible increase in the cost of a gallon of oil is being borne by the lowest-income Americans.
CROWLEY: The economy now dominates the campaign trail as it dominates American households. In the latest CNN/Opinion Research Corporation poll, 58 percent of registered voters said the economy was extremely important to their vote, eight points higher than Iraq, the largest gap since the war began.
The campaign trail, once separated by who was for and who was against the war, is now littered with 10-point plans and long-term proposals.
MCCAIN: American's dependence on foreign oil was a troubling situation 35 years ago. It was an alarming situation 20 years ago. It's a dangerous situation today.
CROWLEY: John McCain wants a huge step-up on the production side of the energy equation. That includes more nuclear power plants and offshore oil drilling. In the short term, he favors temporarily lifting the federal gas tax.
Barack Obama's plan leans more heavily on alternative energy, calling for a $150 billion infusion for research and development. He envisions an 80 percent reduction in carbon emissions by 2015, and he opposes the gas tax holiday and offshore drilling.
OBAMA: I want to provide tax breaks to working families, so a $1,000 tax break per family, so that 95 percent of voters will see their tax bill go down in an Obama administration.
CROWLEY: For a long-term boost to the economy, Barack Obama would extend the Bush tax cuts for those making $250,000 a year or less. He promises to restore fairness to the tax code and give an immediate stimulus to the economy with tax relief for middle-income families.
John McCain proposes making all the Bush tax cuts permanent, reducing the corporate tax rate, and doubling the exemption for dependents. Both favor a plan to help homeowners whose mortgage is larger than the value of their home. It is an awesome set of challenges.
But as detailed as 10-point plans may be, they're political documents designed to win votes. The question is which man will actually deliver when it comes to policy.
Candy Crowley, CNN, Washington.
(END VIDEOTAPE)
WILLIS: All right. Well, this show is all about you. And it's time for you to get involved and weigh in on our "Quick Vote." You can vote here every single day.
CNNMoney's Poppy Harlow is here with today's question.
Hi, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hi, Gerri.
This is my favorite question. And folks, you'll see why in just a minute.
With so much volatility in the stock market these days, it is critical who you trust with your hard-earned cash.
Here's our question today. "When it comes to investing my money, I most trust myself, a family member, a certified financial planner, or, drum roll, please, ISSUE #1 host Ali Velshi?"
Weigh in on CNNMoney.com. We'll bring you the results later in the show.
VELSHI: All of you people who considered yourselves my friends over the years, this is your chance to step up and call of your friends and tell them to step up. You just have to go to cnnmoney.com, scroll down to the bottom of the page, and there it is.
Don't let me down.
WILLIS: Aren't you the same man who said, "I don't pay my bills on time"?
VELSHI: I don't pay many of my bills on time. That is correct. But look at the banks that are making money off of those extra fees that they charge me. Someone's going to pay for it. I pay so you don't.
HARLOW: Oh. Thanks, Ali. We appreciate that one.
VELSHI: Yes.
WILLIS: That's a big favor.
VELSHI: But I know tat I'm doing something wrong by not paying it on time. So I can advise other people to not do what I do. Pay your bills on time. See, I'm very good for your bottom line.
HARLOW: I hope you don't lose for your self-confidence.
VELSHI: I hope I don't lose, too.
HARLOW: OK.
VELSHI: Actually, all I'm going to say is, I hope I don't lose really, really badly. Come on. Help a guy out.
HARLOW: Log on. We'll bring you the numbers a little later.
VELSHI: All right.
Coming up, why Barack Obama's plan to tax the wealthy is sparking quite a controversy. Gas prices are changing the way Americans live.
We'll show you how and how to manage your money in an economy like this one.
We are all over issue #1 right here on CNN. It's V-E-L-S-H-I is how you spell it.
(COMMERCIAL BREAK) VELSHI: There's a big difference between the tax policies of the presumptive presidential candidates. John McCain says he would like to keep tax rates low for those in upper-income brackets. Barack Obama argues wealthier Americans need to pay more in taxes.
Who's wealthy? Well, that's a controversy of its own, as Allan Chernoff reports.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN SR. CORRESPONDENT (voice over): Jeff and Kim Denick do almost all their own chores. And their kids wear hand-me- downs, even though in the next presidential term, they expect to earn close to $250,000 a year, what Barack Obama describes as wealthy.
OBAMA: We've got a shift in our tax values that disproportionately benefit the wealthiest Americans.
CHERNOFF: But the Denicks say they don't feel rich. Nowhere close to it.
Kim clips coupons and shops for the cheapest gas. Jeff does his own home repairs.
JEFF DENICK, SCHOOL GUIDANCE COUNSELOR: You really have to watch you spend, you know, each week and each month just to make sure that you have enough of what you need.
CHERNOFF: Kim is a pediatrician, Jeff a school guidance counselor who works as a swim coach in the summer. The Denicks and their three children live in a nice, but not extravagant four-bedroom home in Marlton, New Jersey, outside Philadelphia. A suburb where the cost of living is far higher than most other regions of the country.
KIM DENICK, PEDIATRICIAN: We pack our lunch every day for work, and there's -- it's not often that we go out to dinner.
CHERNOFF: Senator Obama says he would raise taxes on couples earning $250,000 or more and increase the amount of incomes subject to Social Security payroll taxes.
MCCAIN: I believe we should protect the American family against tax increases.
CHERNOFF: Senator McCain says he wants to extend the Bush tax cuts that lowered rates for the wealthiest Americans. But policy analyst Anne Mathias says McCain won't be able to deliver.
ANNE MATHIAS, DIR., POLICY RESEARCH, STANFORD GROUP: There's nothing he can do. He can't issue an executive order, he can't sign a piece of paper. He's pretty much at the mercy of Congress.
CHERNOFF: And unless the political balance of Congress changes, it'll be in the hands of Democrats, determined to let the tax cuts expire as scheduled in 2010. Jeff and Kim Denick, registered Republicans, say federal tax policy is important to them, especially since they pay nearly $11,000 a year in state property taxes. But they're undecided as to whom they'll vote for.
(on camera): You're Republicans. Would you vote for Obama?
K. DENICK: We talk about it.
J. DENICK: We do talk about it.
(END VIDEOTAPE)
CHERNOFF: And that talk is serious. The Denicks say they like Obama's passion and energy.
Now, in spite of the stark difference between Obama and McCain on tax policy, analyst Anne Mathias argues the issue may not matter much in determining who actually wins the election because there are relatively few Americans earning more than $250,000 in swing states. The wealthiest Americans are concentrated in California, New York, New Jersey, Connecticut, Massachusetts and Maryland, all solidly Democratic states -- Ali.
VELSHI: It was surprising that they said they might vote for Barack Obama, knowing full well that his commitment is to eliminate the tax on the wealthiest and that he will probably have -- or at least at this point, there's a Democratic Congress backing him.
CHERNOFF: Absolutely. And I think they may be indicative of a lot of people out there.
They realize, well, we may have to pay more of our income. They're Republicans, but they really like Obama. You know, and they're saying McCain, they're not excited by him, and they are Republicans. They also do point out though that they feel they still need to explore the issues some more.
VELSHI: We had a story on yesterday about a school bus driver in Georgia who was earning $15 an hour and has about five kids or something like that. Did you ask these folks how it is that they come to be clipping coupons and shopping around for the lowest prices when they earn that kind of money?
CHERNOFF: You know, when prices are rising the way they are, when gas prices are soaring, I think a fair number of people are in that situation. You know? We're not talking about people making half a million dollars a year, but that sort of income level, it's not easy. You know?
Not that it's hard, but...
VELSHI: Everybody's feeling the pinch across the country.
CHERNOFF: Yes, they are.
VELSHI: Allan, thanks very much for that.
All right. Well, gas hits a new record again, up for a third straight day in a row -- $4.09, Gerri.
WILLIS: And gas prices are definitely a hot topic on the presidential race. It's becoming clear that Americans are drastically changing the way they live because of record gas prices.
CNN Deputy Political Editor Paul Steinhauser is live in Washington with some new polls for us.
And what do those numbers show us?
PAUL STEINHAUSER, CNN DEPUTY POLITICAL EDITOR: You know, Gerri, they show just what you were talking about and what Ali and Allan were talking about -- gas prices are definitely -- you know, they're making -- they're causing a hardship among Americans in their wallets and pocketbooks.
Take a look at these brand new numbers right from CNN and the Opinion Research Corporation out right this hour. Seventy-two percent, 72 percent of Americans -- that's three in four Americans almost -- say gas prices are causing changes in their daily lives. That is a lot of people.
We also broke it down by where they live. And you know what? You'd expect gas prices to affect Americans, those out in the countryside and those in the suburbs. You can see right there, 78 percent in the rural and 73 percent in the suburbs.
Well, look at this. Even 61 percent of Americans who live in the city, people who normally don't drive nearly as much, they say gas prices, soaring gas prices, affecting how they live.
We also broke it down by income. And here's what our polling director, Keating Holland, had to say.
(BEGIN VIDEO CLIP)
KEATING HOLLAND, CNN POLLING DIRECTOR: The people who are getting hardest hit are the ones who can least afford it. Forty-one percent of people who make less than $50,000 a year say higher gas prices have affected their standard of living. Only half as many people who make more than that say that gas prices have affected them that way.
(END VIDEO CLIP)
STEINHAUSER: You know, Gerri, if gas prices continue to rise, I think you're going to see these poll numbers continue to rise, as well.
WILLIS: Well, you know, Paul, those people who can least afford it are the ones who are getting impacted the most, and they're the ones most likely to drive on this holiday weekend. Are they going to do less of it? STEINHAUSER: Yes. You know what? We asked that very question this weekend to Americans across the country, and here's what we found.
Around 30 percent, three in 10 Americans, say they are going to change their holiday plans because of soaring gas prices, which is -- that's a lot of people. Three in 10 Americans say, you know what? We are going to change our plans, maybe cancel our trip, or not go as far, 31 percent, because of soaring gas prices.
So, it's another sign that it's affecting Americans in every way possible.
WILLIS: Troubling indicator. Paul, thank you for that.
VELSHI: Well, what do you do in an economy like this one? Bail out of your 401(k), sell all your stocks and other investments? This is a very important question, and we are going to answer it next.
And we have the best cities in the world to make money and save up serious cash, and the cities where you might have a tougher time.
You're watching ISSUE #1, right here on CNN.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE #1.
Listen up, ATM users. You may want to double-check your banking accounts, the pin numbers. Three people in New York are charged with hacking into Citibank automated teller machines and swiping millions of dollars.
The case highlights an apparent vulnerability at the back end of the computer networks used by ATMs. Now, not much is known about the heists were pulled off, except that the thieves went through third- party processes to get the information.
Citibank isn't saying much other that they reissued new debit cards to affected customers and are not holding them financially responsible for the fraud. So I guess, thanks for small favors, right, Ali?
VELSHI: Yes, exactly.
Well, it is tough out there. One day you see the market go up a couple of hundred points, the next day, down a couple of hundred. And if you're wondering what to do with your 401(k) or your other investments, you'll want to listen up right now.
Earlier this week, I spoke with Stephen Gandel, a senior writer for "Money."
(BEGIN VIDEOTAPE)
VELSHI: For some people, your advice is don't hit the sell button just yet.
STEPHEN GANDEL, SR. WRITER, "MONEY": That's right. You want to stick to your goals.
Remember -- go back to remember why you're investing in the first place. They call these investment policy statements. And it's good to have one put away in the drawer. Remember, OK, I'm investing in my 401(k) not to -- so I can go in the middle of the day and feel good about myself that I'm up 10 percent or I can go to cocktail parties and brag about it.
VELSHI: Generally speaking, you're investing in it for your retirement.
GANDEL: You're investing for your retirement. And what you want is a good return over 30 years, not a good return over six months.
VELSHI: All right. So, again, it doesn't mean that you're not in a position where you should do something with it, but your second point is to get some perspective.
Give me perspective on this. It's been a lousy six months for the market. What more do I need to know?
GANDEL: You need to know that the economy is not as bad as what you think it is, right? So you think this is the worst economy since the Depression. Maybe it's worse. Well, it actually isn't.
Employment is about half of what it's been at the worst times over the last 60 years -- unemployment, that is. And inflation is at 4 percent, we've been as high as 12 percent over the last 50 years when we got the peaks.
So, it's nowhere near as bad as it has been. It's not great, but, you know, we're not talking about banks collapsing left and right. There are going to be problems here and there.
VELSHI: We often talk about -- people tell us, "I've lost this much this last year in my 401(k) or my IRA." Well, you haven't lost anything and you haven't sold anything, first of all. But how do you really calculate what your loss is? What point in time do you take to decide whether you're up or down?
GANDEL: The problem is you can't because you don't know what your portfolio's going to do over the next 15, 20, 25 years, however much time you have until retirement. We did a little calculation for the story and found out that even with the 20 percent correction that we have, the plunge into the bear market, the difference 25 years from now is going to be minimal, it's less than -- it's less than 10 percent for what you'll have. It's less than 5 percent for how much less you'll have 30 years from now.
So this -- it doesn't matter what your number is right now, it matters what your number is 30 years from now.
VELSHI: Unless, of course, you're very close to retirement. GANDEL: If you're very close to retirement, it's a totally different story.
VELSHI: Yes.
GANDEL: You really want to lower the volatility in your portfolio. Some recent studies have shown that if you have very bad few years at or around the time of retirement, your chances of running out of money in retirement go from about 12 percent to about 50 percent.
VELSHI: Right. And the interesting thing you said, lower the volatility. That's an interesting point.
That doesn't necessarily mean get out of things that move. You just want a smoother relationship to your stocks. You'd like a 10 or 15 percent increase more smoothly than a market that does this.
GANDEL: Right. What that means is -- it doesn't mean do nothing risky. It means put more bonds in your portfolio. And it also means if you're investing in stocks, stay broadly diversified. Don't go for the individual big stock picks. Go for a broad investment fund.
VELSHI: It's always tempting, particularly when there's a down market. Those that have the guts to get into the market at times like this want to sort of get into things specifically. This is not a time to not diversify, even when you're buying when things are low.
GANDEL: Yes, that's right. I mean, our tendency is that when we've lost a little money, it's to double or triple our bets. That's what we do in the casino to try to make ourselves whole. But what you don't want to do is you don't want to add to -- you don't want to run for the market. But you also don't want to add to bad bets, and a good way to do that is just to spread your money widely.
VELSHI: All right, Stephen. Good advice. Thank you very much.
For those of you worried about your portfolio, Stephen saying it's not as bad as it may look.
WILLIS: Well, some good news there.
Coming up, why the federal government may be standing in the way of developing solar power.
Then the best cities to boom your nest egg. We'll tell you where the dollars will stretch the furthest.
You're watching the home of ISSUE #1: THE ECONOMY, CNN.
(COMMERCIAL BREAK)
VELSHI: Well, with gas prices so high, the search is on for new energy sources. Massive solar farms have started to appear in some desert areas, but the federal government is calling a halt to new farms. CNN's Bill Tucker reports.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice over): This is one of only two commercial solar-generating plants in the United States. It's in Nellis, Nevada. The other is in California.
Solar's appeal is simple: it's clean, plentiful, widely available, but cost is a factor. Solar is still expensive.
Solar costs roughly 15 cents per kilowatt. Wind, 7 to 8 cents per kilowatt, compared with coal at 5 cents per kilowatt.
To help bring down those costs, to help develop solar energy, supporters of the technology argue the federal government ought to be aggressively and fully supporting its development.
PAUL SIDLO, SUNRGI: There's many things to look at to get our dependence off of fossil right now. And one of them is solar. And we certainly should be spending the billions of dollars that they're spending on oil and coal to do research on solar.
TUCKER: Instead, the Bureau of Land Management has ordered a freeze on all solar projects on federal land for a two-year environmental impact study. The bureau is under pressure from environmentalists.
One hundred and fifty applications already on file will be evaluated and cleared for development. No new ones will be accepted.
Despite appearances, a BLM spokeswoman insists, "We are going full speed ahead with solar development. The existing applications are for land with the greatest potential for development."
The new applications would cover one million acres. There are currently no solar projects on any federal land.
(END VIDEOTAPE)
TUCKER: Now, supporters of the technology hold out great hope for solar electricity generation, and there are tremendous technological advances being made with solar energy that are driving down the costs of solar generation.
Critics of the BLM's policy say, you know, this is the wrong message at the wrong time, Ali, when we're looking to decrease our dependency on energy.
VELSHI: Right. There's this great patch of land sort of from west Texas, or even Oklahoma, west to California...
TUCKER: Right.
VELSHI: ... which is really great for solar energy. And at the beginning of your story, as a good reporter who doesn't bury the lead, you came out by saying solar costs this much, wind costs about 7 to 8 cents, and coal, which is where we get most of our electricity from, 5 cents a kilowatt.
You're saying that these guys think they can bring the cost of solar down?
TUCKER: The cost is coming down, that's the exciting news. The guy in my piece from Sunrgi says he has the technology to bring it down to 5 cents per kilowatt, which is sort of the magic number...
VELSHI: Sure.
TUCKER: ... if you will, within this field. If he can do it -- and he has not proven it commercially yet, but if he can do it, this would be tremendous. This is a game changer, Ali.
VELSHI: All right. This is a big deal. And we'll keep closely on this.
Thanks, Bill. Good to see you again.
Well, next, the best cities in which to build your nest egg. We'll tell you where your dollars will stretch the farthest.
First, though, let's get you up to speed on the latest headlines. Don Lemon, who's a bright ray of sunshine for us all, is in the "CNN NEWSROOM."
Hi, Don.
DON LEMON, CNN ANCHOR: Ali, wait. Don't go anywhere because you know how we have the vest and the tie wars between you and I?
VELSHI: Yes. Yes.
LEMON: I thought my tie was too much like yours, so I changed it. I didn't want to look like your twin on TV today.
VELSHI: Don, you looking like me is only a complement to me.
LEMON: Well, if I shave my head, I may do that next. So look out.
VELSHI: Stay tuned.
LEMON: All right, Ali. All right. We have some very serious news to tell you about happening today in the "CNN NEWSROOM."
A man suspected of beating eight people to death in a two-state killing spree is due in court this afternoon. Authorities captured Nicholas Sheley last night in Granite City, Illinois, after an intense manhunt. He has been moved to Edwardsville, Illinois, for his initial court appearance. No word on a motive for the killings but a lead investigator tells CNN, Sheley was a methamphetamine addict with a history of violence. Texas authorities think they've caught the person responsible for a string of random shootings. Two people were wounded in at least six shootings in north Texas. Police aren't releasing the suspect's name but he is described as a 22-year-old man. In the latest incident, shots were fired into the wall of a busy restaurant in Garland, Texas.
In the meantime, the National Guard is being mobilized to help fight fires in California. It is the first time the guard will be used on the ground in more than 30 years. Air quality, a major problem right now in northern California. You can see just how thick the smoke is. People are being told to stay inside as much as possible, that's good advice, and some schools in some communities have canceled outdoor activities in that area.
Some news now in the entertainment industry. Angelina Jolie's doctor gave an update about the pregnant actresses condition within the past hour. Jolie is expecting twins and has been checked into a hospital in the French Rivera. Now reports are that her doctor believes it may be a few more weeks before the twins arrive, but, he says, the actress is doing fine. She'll be kept under doctors' supervision. Jolie has said that the babies are due in August, but twins often come early. She an actor, Brad Pitt, they have four children already.
I'm back in the "Newsroom" at the top of the hour. Now let's throw it back to Gerri Willis in New York.
Gerri, and no chance I was going to dress like you today. That would really make news, I'm sure.
WILLIS: Yes, that's a little -- yes, you know, red silk, pretty much not.
LEMON: We'll see.
WILLIS: See you later, Don.
LEMON: See you, Gerri.
WILLIS: All right. Well, ahead of tomorrow's jobs report, and it's a critical report, we decided to take a look at some of the best cities to make money and save up some serious cash and those where you might have a tougher time. Here to help us out is Bill Coleman. He's from salary.com.
Bill, great to see you.
BILL COLEMAN, CHIEF COMPENSATION OFFICER, SALARY.COM: Good seeing you.
WILLIS: All right. So let's start with how you did this study. What are you trying to measure? When you say personal wealth, what does that mean?
COLEMAN: So what we're looking at is the difference between the typical salary you would earn in a city versus the typical cost of living. And most people seem to think that they go hand in hand and they don't. They do move similarly, but there's a lot more volatility in cost of living. New York is very, very expensive.
WILLIS: Amen to that.
COLEMAN: You get a higher salary, but not even close to the additional cost.
WILLIS: Right.
All right. So it's a complex calculation. And a big surprise about the city at the top of the list, Plano, Texas, a suburb of Dallas. Now tell us about Plano.
COLEMAN: What's interesting about Plano is, what we were looking at is cities with more than 250,000 residents. Plano is the smallest city on the list with 255,000. It does very well on both salary and cost of living. They're fairly comparable. Just above national average, which is good compared to other large cities.
Plano also has a very highly educated workforce. They have access to a lot of city features. And so, overall, people who are living in Plano have a lot of career options. They get reasonable wages and a relatively low cost of living compared to other cities with a quarter of million people or more.
WILLIS: Interesting stuff.
OK. There are a lot of cities on your list that are in the Midwest. Aurora, Colorado. You go up and down the list. A lot of stuff in the Midwest. Why?
COLEMAN: The primary reason for the Midwest, in fact the top 10 cities, were all non-coastal cities. And the primary reason is that the cost of living in the Midwest is significantly cheaper than it is in the cities on the coasts -- East Coast, West Coast, as well as Hawaii.
WILLIS: All right. So you mentioned New York city being a very expensive place to live. And I can vouch for that. But you've also got two California cities at the bottom of your list doing really poorly in terms of building your personal wealth. Tell us about those.
COLEMAN: Well, California's notorious for high cost of living. It's not quite as high as New York. And the wages are comparably high, about 20 percent above the national average. The primary issue there is that people are getting paid 20 percent better than their peers in Louisville, Kentucky, but their cost of living is about 60 percent higher. So there's a huge spread there.
People generally will end up living in smaller houses. They'll end up spending more money commuting. And they'll try and find a way to make it work. Obviously people in California are doing fine, it's just a different metric for how their living works. How they spend that cost of living money. WILLIS: Well, Bill Coleman, a fascinating study. Thank you for bringing it to us. Interesting stuff.
COLEMAN: Thank you.
WILLIS: Ali, I guess that's some food for thought for the two of us, right?
VELSHI: Yes, I mean, maybe we can telecommute or something like that and live somewhere where we can save a little more of the money.
Well, there's one way to get a little more money. There's a way to buy gas now and pay today's price just in case it goes up tomorrow or in a week or in a year. "Energy Fix" is next. And is there anything Obama and McCain can do to lower your gas prices? We'll break that down for you on your home. For the latest news about your money, CNN. Stay with us.
(COMMERCIAL BREAK)
WILLIS: Welcome back to ISSUE #1.
What if you could look into the future and buy something tomorrow at the price it is today? Confused? Well, there's a company out there that will do that for you with gas. CNN's Poppy Harlow is back with today's "Energy Fix."
Hi, Poppy.
HARLOW: Hi, Gerri. Love this story. I think it's going to help people save a lot of money.
Folks, many airlines and other large companies do this all the tile. They buy gas at today's price, really, and they use it a year later, down the road. What that helps them do is it helps them guide against higher prices in the future, guard against that. It's called hedging and now you can do it, as well.
A new Web site is called mygallons.com. It lets you buy gas as you want at today's price in your neighborhood and then redeem it at a later price assuming that price is going to go up. Now the company gives you a debit card. It's accepted at about 95 percent of the gas stations across the country. Today the nationwide average for gas is another record high, above $4.09 a gallon.
And if you'd been able to do this a year ago when prices were averaging around $2.95 a gallon, Gerri, you would have saved $1.14 a gallon. So some big potential savings here for folks.
WILLIS: Well, is it to good to be true? Are there down sides?
HARLOW: Yes, of course, it sounds to good to be true. And, in a sense, it is a little bit to good to be true. There are some fees associated with this program, including a $30 to $40 annual membership fee. Also $1.95 processing fee each time you pre-purchase the gas. So in order for this to be a real energy fix for you folks, you need to consider how often you're going to use this service. For instance, if you only buy 10 gallons worth of gas, the processing fee will add nearly 20 cents to each gallon. So you'll need to buy more to make this worthwhile.
Also, the money will be tied up. So it can't make money on the stock market. It can't earn interest in your banking account. Therefore it really only makes sense if you drive a lot and if you believe prices are going to continue, Gerri, to rise sharply like they have been. There's no guarantee that that will keep happening.
WILLIS: Well, could this company get caught in the middle of this if prices were to spike?
HARLOW: Sure. Let's say gas prices go up to $7. That's what some people are saying, that this company could potentially face bankruptcy, right? That's what we asked the CEO of mygallons.com. He says he's placed his own bets in the oil futures markets, try to offset price increases. He also says your money is kept in an escrow account so that in case they go bankrupt, you'll get paid back. But still, of course, buyer beware. This could help really help people if they think we're still going to see surging prices a year down the road.
WILLIS: Interesting story. Poppy, thank you for that.
HARLOW: Sure, Gerri.
VELSHI: Gerri and Poppy, by the way, just -- I want to make sure you know -- you notice that I didn't miss out on brightly-colored day on ISSUE #1. I have my pink shirt. I'm glad you both came brightly colored.
HARLOW: Do you feel left out, Ali?
VELSHI: No, I'm not, because I have my pink shirt.
HARLOW: OK.
VELSHI: I'm totally in the color (INAUDIBLE).
WILLIS: It's very attractive.
VELSHI: Thank you very much.
WILLIS: We voted. It's . . .
HARLOW: Pretty in pink.
VELSHI: There is a vote going on right now on money.com where you can go and vote on who you think you trust most to handle your financial affairs. I am in the running. I would appreciate if you would go to money.com. You have about 20 minutes.
Well, Americans have their eyes pretty focused on the cost of gas these days, which means that the two presidential candidates are spending a good deal of time talking about it as well. So we wanted to break down, what can they actually do to make a difference? Charles Wheelan is from Yahoo! Finance and he's the author of "Naked Economics." He joins us now.
Charles, good to talk to you.
You have some very specific proposals on what could happen, whether it's Obama or McCain or Congress or somebody else. But one of the points you hit is, you know, we probably all thought that this was very innovative to subsidize the idea that we would have ethanol in the gas tanks. It ended up spiking the price of corn. It's also not really a portfolio of solutions. It was one idea. You're saying that we need a broader, almost national energy policy?
CHARLES WHEELAN, AUTHOR, "NAKED ECONOMICS": Yes, I think there's a really important distinction here between what somebody who steps into the Oval Office tomorrow can do about the price of gasoline, which is not much. That's supply and demand and we can come back to what's going on there. And things that they can do to react and better prepare us for high gasoline prices. And it's the second one, it's a rational transportation plan, it's more sane land use that actually will help us buffer the impact of high gas prices. But it's not going to make the price of gas go down.
VELSHI: Is the national transportation plan even a remote possibility? Who would undertake it? And what would they look at?
WHEELAN: Sure. It's been done before. If you go back to say the 1950s when Eisenhower put together the National Interstate Highway Program, that had a strategic vision that had federal money, it had an explicit purpose and we carried it out extremely well. In contrast to that, what federal transportation planning has kind of evolved into is a huge pot of money. We're talking about hundreds of billions of dollars that's just kind of passed out for projects. And the bridge to nowhere that everyone heard about a couple of years ago was probably just the most extreme version. But, really, this is -- we're going to give seven bridges to Missouri, we're going to give nine new roads to Illinois. It's not a, let's step back and think about what we want to do with several hundred billion dollars and make a strategic plan.
VELSHI: And we want high-speed rail links or we want to -- well, let's talk about some of the things that could happen. One of the consequences of sustained high gas prices, and I think this is important for people who are making their living or planning or business decisions, you say that the idea of these sort of far-flung office parks will probably start to decline.
WHEELAN: Yes, I think one thing people should start think about in general are these second order effects. So everything that we expected to happen immediately in response to high prices has happened. People have changed the kinds of vehicles they've bought. They've switched to mass transit when they have that option and so on. But in the long run, people have even more choices in terms of behavior they can change. So we've already started to see, for example, the real estate market change. There's now, you know, forget the carnage in general in the real estate market, we've now seen within the real estate market a premium for properties that are closer to job centers and particularly closer to transit, whether it's the L, or the metro or what have you.
To your office park point, I think for three or four decades, businesses have assumed, boy, if we can find cheap real estate 25 miles outside of the city and build a big parking lot, we'll save money and everyone will show up. I think that era is over. I think if you're 25 miles from where people can afford to live and you build a big parking lot, people are going to say, that's a really expensive thing to impose on me.
VELSHI: Charles, it's a good discussion. It's just the tip of the iceberg and we'll talk about it some more, about the effects of high gas prices and the way they're going to affect your life.
Charles Wheelan, thanks for joining us.
WHEELAN: Thank you for having me.
WILLIS: Look out, there could be some trouble at Starbucks. We'll explain.
And we are going to open up the Help Desk. Send us your questions. The address, issue1@cnn.com.
(COMMERCIAL BREAK)
VELSHI: Some trouble brewing at Starbucks. The coffee house giant is scaling back after growing at break-neck speed in the past years. Starbucks announced it's going to close 600 stores over the next year. Seventy percent of those stores were only opened after 2006. The closing is going to affect some 12,000 workers. Starbucks also plans to open fewer than 200 stores in the next year, and that is half of the previous goal.
WILLIS: It's Help Desk time. Answers to your e-mail questions. What are you thinking about? What are you trying to deal with when it comes to your money? Let's get right down to it.
Ryan Mack is with Optimum Capital Management, Jack Otter is with "Best Life" magazine, and Stephen Gandel is a senior writer for "Money."
Welcome all. Let's get right down to it.
Tim asks, "I have been investing about 15 percent of my salary in a 401(k) plan for 10 years and have been aggressive in my strategy. Should I put my 401(k) money into a money market account instead of investing it in stocks and bonds?"
Ryan, you want to take that one? RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Absolutely not. I think money market rates are a little bit too low. And the 401(k) has always been one of the greatest plans because of two reasons. You have diversification and you have the ability to employ dollar cost averaging. So those two things help you get a good, diversified portfolio that will give you a better return as time goes on.
WILLIS: Returns in money markets are lower than inflation right now.
MACK: Exactly.
WILLIS: OK. Let's go to Guwain in Pennsylvania who asks, "With the bursting bubble in real estate, would now be a good time to invest in a rental property that yields a better return than stocks?"
Jack, what do you think?
JACK OTTER, DEPUTY EDITOR, "BEST LIFE": Well, the problem with that question is that he seems to know what stocks are going to do in the future. So I'd love him to tell me. The fact is, we don't know, of course. So we don't know whether real estate will be better.
Also, we need to understand that stocks with reinvested dividends tend to be a capital gain play. Over the long time, the value of your stock holdings goes up. The reason you invest in real estate, despite the recent history, is actually for income. You want the rental income to exceed your cost of carrying that property. So it's really two very different types of investments. Does he want to deal with leaky roofs or does he want to have an index fund that he puts away and doesn't worry about for 20 years.
WILLIS: One's a lot less work than the other.
OTTER: Exactly.
GANDEL: And I agree. The one nice thing about real estate, that if you do want to put the work in, it's an investment that you can change the value of. There's very little you can do about a stock. Well, let's go with nothing. There's nothing you can do. But a house, you can go renovate, you can change the value there. You can't do it if you (INAUDIBLE).
WILLIS: It's all about picking the right stock. There's nothing you can do to change management.
GANDEL: Right.
WILLIS: All right, let's go to Sue. She says, "We are 38 years old and do not plan on retiring for about 15 more years. About 75 percent of our portfolio is in cash right now, the rest is split between a 401(k) and an IRA. Should we leave that alone or invest more?"
What do you think, Stephen? GANDEL: Invest more. Always invest more. The only thing that you want to have in cash is your emergency fund. You want three to six months, depending on how volatile the industry you're in, saved away in cash. The rest you want to invest. And I think this goes back to a question we had earlier about, you know, I'm nervous. Basically that's what the people ask. I'm nervous about the stock market. Should I be keeping more in cash? The thing you want to think about is, it doesn't matter how much is in your retirement fund now, it matters how much is in your retirement fund when you retire. And it's going to be more if you stay in stocks.
MACK: And, also, just look at retirements from 1980 to 2007. We had almost a 1,000 percent return in the S&P 500. So over time the stocks do well. Even though we're a little bit nervous right now. No reason to bail and jump ship. While you might want to have some sort of exposure to cash in your portfolio, you definitely want to make sure you have good exposure to stocks and bonds.
WILLIS: A strong vote for stocks and strong vote for diversification.
Brian asks, "To prevent foreclosure, should I consider doing a shore sale? Will it appear as a negative on my credit report" -- Jack?
OTTER: It can appear as a negative, but it beats the heck out of a foreclosure. Absolutely do a short sale. It's very common right now. I mean people are literally listed now in brochures. Jacuzzi, three bedrooms, short sale. So the buyers know they're going to get a good deal. It's a very good way to go, but it's a headache. There's a lot of paperwork and banks are reluctant to take that loss even though they know perfectly well they're going to lose more on the foreclosure.
MACK: Back in January, the Federal Reserve board did a survey of senior loan consultants and they found out that over 65 percent actually preferred and said that short sales and deed in lue of foreclosures were considerable ways to help them mitigate their losses. So they might be able to assist you in saying, let me help you to help to minimize the impact it will have on your credit report.
WILLIS: But they can only help you if you call them. You've got to call them. Mary in Colorado asks, "my Vantage score is higher than my FICO score. What is the difference between the two and which one is more important -- Jack?
OTTER: Vantage is a new scoring technique that's cooked up by the credit reporting agencies. And it's a money-making thing for them. Right now Fair Isaac, which runs FICO, makes a lot of money, about $800 million a year in revenue, on selling these scores. So they're trying to challenge FICO. Be careful because it's on a different scale. The Vantage score goes 500 to 990 and FICO is about 300 to 850. So if your Vantage number is higher, it doesn't mean you've got a better score. It's just on a different scale. So I would just do the same thing she's doing, pay your bills on time, try to have a lot of credit versus what credit you're actually using. Do all of the right credit things and both scores will rise.
WILLIS: I love that idea.
OK, guys, I think we're going to have to leave it here. Great answers to tough questions. Appreciate your help today.
Steve Gandel, Ryan Mack and Jack Otter, thank you so much.
VELSHI: OK. We helped you. No it's your chance to help me. Log on to CNNMoney.com right now and vote for me. I'm not actually supposed to say that, but I really don't want to finish last. Please, log on, vote for me. Poppy Harlow with the results. All you do is you go to CNNMoney.com, scroll down to the page and click on the Quick Vote.
You're watching ISSUE #1. We'll be right back.
(COMMERCIAL BREAK)
WILLIS: OK. When it comes to investing my money, who do I trust most? That's today's Quick Vote question. Let's check back in with CNN Money's -- you look a little upset, Ali.
HARLOW: Can you see me? Ali's head is in the way.
VELSHI: I feel this isn't going to go well for me.
WILLIS: So, Poppy, how did Ali do?
HARLOW: We threw Ali a bone and we put him on the list today, but I'm really sorry, Ali. Seventy-two percent of people said they'd trust themselves, 20 percent said they'd trust the certified families planner, 4 percent said they'd trust a family members and as many as trust a family member trust you, Ali, 4 percent.
VELSHI: I am like your family. You see. I knew that. I have a very tight connection to the viewer. I'm like the family.
WILLIS: That's like the bronze medal.
HARLOW: Maybe you need to have like Ali's top tips because Gerri gives people tips and she helps people.
VELSHI: That's right.
HARLOW: And you just tell them how expensive oil is.
VELSHI: I'm just doom and gloom.
All right. You know what, we're going to change that right now.
Not everybody out there is suffering from foreclosure and debt and high gas prices. No. In fact, there are some folks who are thriving this time. And not surprisingly, they're in Hollywood.
CNN's Brooke Anderson explains. (BEGIN VIDEOTAPE)
BROOKE ANDERSON, CNN CORRESPONDENT, (voice over): Rich, famous, and seemingly impervious to the economic crisis.
DAVID CAPLAN, STAFF EDITOR, "PEOPLE" MAGAZINE: A lot of these celebrities are filthy, dirty rich and rolling in it.
ANDERSON: They are over wealthy stars, living life on the plane high above mainstream America.
CAPLAN: There is a bit of a trickle down effect, but it's rarely the same way in which sort of an average American is affected by the economic downturn.
OPRAH WINFREY, TALK SHOW HOST: Hey, CNN.
UNIDENTIFIED FEMALE: Oprah banked $275 million in the last year.
ANDERSON: "Forbes" magazine named billionaire Oprah Winfrey the most powerful celebrity for the second year in a row, followed by Tiger Woods, Angelina Jolie, Beyonce Knowles and soccer star David Beckham.
CAPLAN: These two love a lavish lifestyle. Just look at Victoria Beckham. You can see she spends a lot of her money on high priced designer clothing. David, on the other hand, prefers his toys, or his big toys. He has multiple Porches, Lamborghinis, Ferraries.
ANDERSON: Recently married hip-hop heavyweights, Jay Z and Beyonce, according to "Forbes," earned more than $160 million between them over the past 12 months.
CAPLAN: Jay Z loves to lavish Beyonce because he spent $1 million on a car for Beyonce for her birthday. They travel a lot to Saint-Tropez, St. Barts. They rent out yachts. So, with them, you know, they love their luxury products.
ANDERSON: Some celebrities, though, are feeling the pinch.
DAX SHEPARD, ACTOR: We are still subject to the decline of the housing market. So -- and it has been interesting to go on zillo.com and just kind of track the downward spiral of my house value.
ANDERSON: "Iron Man" star Terrence Howard kept the purse strings tight on a recent trip to Europe.
TERRENCE HOWARD, ACTOR: I didn't buy anything in London. I definitely didn't buy anything in Italy.
ANDERSON: But for those who are spending money, that's a boost for the whole economy.
CAPLAN: It's no big deal to say, oh, I'm going to buy a private jet this week, another million dollar Rolls-Royce the following week.
ANDERSON: Brooke Anderson, CNN, Hollywood.
(END VIDEOTAPE)
WILLIS: Well, the economy is issue #1 and we here at CNN, 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.
The "CNN NEWSROOM" with Don Lemon and Veronica De la Cruz starts right now.
