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Issue Number One
Economic Divide; Hurricane Dolly; Back to School; Fast Food Money; Answering Your Questions; Quick Vote Results
Aired July 23, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CNN ANCHOR: Getting closer and getting stronger, Hurricane Dolly closes in on the Texas coast.
And the housing bill is about to become a reality, finally.
And some relief is in sight for those sky-high gas prices at the pump.
Plus, the trick retailers are playing to get your business.
Issue #1 is your economy. ISSUE #1 starts right now.
From the ISSUE #1 headquarters to the CNNMoney.com news room, we are all over the stories that matter to you.
Hello, everyone. I'm Gerri Willis. Ali Velshi is on the "Energy Hunt."
We are standing by for a vote on the housing bill today. We'll head to D.C. for that, and the hearing on how American families are coping with these tough times.
Gas prices are going in the right direction, at least as far as consumers are going. We'll check it out.
And Glenn Beck will be here to talk about oil.
And we'll talk about the staggering dropout rate among African- Americans and what's being done about it.
But we begin in the CNN hurricane headquarters -- T.J.
T.J. HOLMES, CNN ANCHOR: The hurricane headquarters. And we do have a hurricane on our hands right now, Hurricane Dolly now.
Things getting stronger, it's approaching the border between Texas and Mexico. It is now a Category 2 storm, has winds of about 100 miles an hour.
There you are right now taking a look from this satellite picture -- this radar picture, rather, I should say. But you can see it's bearing down and expected to make land fall at any time there. You can see Brownsville there appears to be right in the eye of the storm.
We are covering this from all angles for you. Our Ed Lavandera is actually on the mainland. He's live for us now in Brownsville, Texas.
Well, how have things been? Are things certainly picking up where you are there, Ed?
Ed Lavandera? Oh, there he is.
ED LAVANDERA, CNN CORRESPONDENT: T.J., sorry, we lost power there a second, so you kind of dropped out on me. Hopefully you can still hear me.
The wind and the rain picking up quite intensely here in Brownsville at this hour. Emergency officials say they're experiencing winds of about 50 to 60 miles an hour in various parts of the city. And they expect in the next couple of hours, they expect that to intensify.
However, a little bit of good news. The emergency operations commander here also tells us that the worry and the fear of intense flooding and severe flooding in many areas of south Texas appears to be improving a little bit based on the forecast that they're seeing.
They're confident or becoming much more confident in the way the levees are holding up at this point. So that had been a concern kind of going into this day.
As much as 10, 15, perhaps 20 inches of rain expected to fall in various places. But at least here in the Brownsville area, that concern seems to be subsiding. But still, people preparing for an intense amount of rain to continue throughout the day.
This is a slow-moving storm, and we're really seeing the effects on the streets here in Brownsville today, where downtown streets are virtually empty. People have boarded up windows, taped up windows. Pedestrian traffic and car traffic that go across the border between Mexico and the U.S. has been virtually quiet all day long. So traffic on the streets very light, as well, as the city here is preparing to see Hurricane Dolly kind of finish blowing through at some point later in the day.
But many people hunkering down at this point, T.J., and waiting for it to blow through. But so far, so good here in the city of Brownsville.
HOLMES: So far, so good. That's good news.
Have the people heeded all the warnings, Ed, as well? Have they taken off? Have they taken shelter? What is everybody kind of doing? You hit on it there for a minute.
LAVANDERA: Well, it sounded a little bit like a lot of the people that had taken advantage of some of the shelters that had been set up, especially -- you have to remember, this is kind of a widespread area. From South Padre Island to Brownsville is about 25 miles, then you need to go further up stream on the Rio Grande, into the McAllen area. You know, that's a long distance, as well. So, you have a lot of little towns scattered through these areas, a lot of them low-lying areas, and they have had shelters set up in a lot of these little towns along the south Texas area here. And we understand that people who have been in these low-lying areas have taken advantage of the shelter situation to kind of get out of harm's way.
HOLMES: All right. Ed Lavandera there for us in Brownsville, Texas. Again, not as bad as it could be there.
Ed, we appreciate you.
Also, we want to turn now to South Padre Island, as he was there just mentioning. Our Reynolds Wolf there, who has had a tough time hearing. It looks like we might have just lost his signal. It's going in and out, so we're going to try to -- bear with us here, but Reynolds had a tough time hearing us, and he's been getting battered and bruised by this storm.
So Reynolds, you just go ahead and take it away.
REYNOLDS WOLF, CNN METEOROLOGIST: I'll do the very best to help bring you the story.
Right now the winds have been kind of shifting a little bit. They were prevailing mainly from just the north. Right now it's kind of a mix, a little bit of both at this time.
The rain has been really intermittent. At times, you're going to have just a few drops, but other times the rain, T.J., just comes in, in just heavy, heavy sheets, as this storm edges ever closer to us.
You know, there's two components, the wind and the rain. They're two troubling aspects.
Now, in terms of that wind, that wind actually brings in a lot of those heavy waves you see behind me. I'm going to step out of the way for a moment and give Stuart (ph) a chance to zoom in for a moment.
Stuart Clark (ph) is -- again, through his eyes, photo journalist Stuart Clark (ph), you're seeing a lot of this throughout much of the day. You see the white caps coming in. The storm surge possibly in excess of six feet in many places on this barrier island.
Now, T.J., one thing about the land, the one thing about this island, remember, this is a barrier island. It's very flat. You don't have any mountain chains or here. You don't have any tall hills. So this wind really moves across the strip of sand impeded -- not impeded, rather, unless by a few buildings here and there.
Now, on some of the buildings, we've had a lot of tiles that have begun to fall off. So if you see me dodge left or right, I'm trying to avoid one of those things.
The wind is another key issue. Not the wind -- I'm sorry, the rain is going to be another key issue, because even though (INAUDIBLE) does make land fall, it'll begin to die out (INAUDIBLE).
HOLMES: All right. Yes, we are sort of having a tough time there with that signal. Our Reynolds Wolf, again, there on South Padre Island, where a lot of people have had to really hunker down because they've shut down that causeway. People can't get back to the mainland, so they're going to have to hunker down there and just ride that storm out.
But our Reynolds Wolf there, certainly having some issues with the weather and with that signal. But we'll continue to check in with all of the people keeping an eye on the hurricane.
Also want to let you know, our viewers, we're going to have this thing we're going to do with our screens and let you know and keep updated information on the screen, this push back that you'll be able to see all hour long, information about that storm -- Gerri.
WILLIS: Wow, T.J. Incredible pictures.
And on another front, a relief for struggling homeowners. President Bush today agreeing to drop his opposition to the housing bill we've been telling you about for some time now.
CNN's Elaine Quijano is live right now at the White House with the very latest -- Elaine.
ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, Gerri, President Bush has changed his mind, backed down from that veto threat, and now plans to sign that housing bill, a bill that is really aimed at restoring confidence in the jittery housing and financial markets. Now, this legislation would allow the government to help some homeowners get their hands on new and less expensive loans. It would also mean that the government could potentially extend credit to the mortgage finance giants Fannie Mae and Freddie Mac, if needed.
Now, in making this decision, President Bush is following the recommendation of his Treasury secretary, Henry Paulson. Paulson believes that this bill will help turn the corner on the housing crisis and help quell concerns that investors have around the world.
Now, the administration had been strongly opposed to a provision within this bill for $4 billion in grants because the administration felt that it was aimed at not helping actual homeowners, but instead banks and lenders. Now, though, in explaining the president's switch, aides here at the White House say that it was ultimately more important to go ahead and get these authorities for the federal government now, especially given that Congress is due to go on its August recess, Gerri, in just a couple of weeks -- Gerri.
WILLIS: Well, Elaine, I know timing is important here. We've been talking about this bill for almost two years. When will this get to the president's desk?
QUIJANO: Well, the House is expected to vote on it this afternoon. It then goes to the Senate. Unclear exactly how quickly it'll get through there. Majority Leader Harry Reid says he would like to get this to the president's desk today, but there has been some GOP opposition in Congress from lawmakers who think that this basically amounts to a bailout. So, if some of those lawmakers actually follow through with their filibuster threats, it could be perhaps as late as Saturday, but aides here are saying that President Bush very much wants to sign this bill as soon as possible -- Gerri.
WILLIS: Elaine, I'm sure you'll be keeping an eye on that. Thank you for that report.
Well, it's not just falling housing prices. High household costs, stagnant wages are the reason for a Joint Economic Committee hearing going on right now on Capitol Hill looking at the overall impact on American families.
CNN's Kate Bolduan is tracking the hearing for us, and she's live now in D.C. -- Kate.
KATE BOLDUAN, CNN CORRESPONDENT: Hi there, Gerri.
Well, the hearing just wrapped up a few minutes ago. And amid rising energy costs, food prices, and, of course, the struggling housing market, the Joint Economic Committee's trying to find some answers, simply, both short-term and long-term solutions on how to get the economy back on track, specifically as it affects the middle class.
Committee chair Democratic Senator Charles Schumer, he laid out the challenge this morning of what he calls one of America's kitchen table issues.
(BEGIN VIDEO CLIP)
SEN. CHARLES SCHUMER (D-NY), CHAIRMAN, JOINT ECONOMIC COMMITTEE: For the first time we've seen danger in the economy on both sides. Growth is too slow and inflation is too high. And who is squeezed in the middle? Once again, the middle class.
(END VIDEO CLIP)
BOLDUAN: Now, one startling example pointed out in today's hearing is median income. Right now, the median family income is not keeping pace with the expenses these families face.
For example, one witness calculates that the median family income dropped by about $1,200 between 2000 and 2007 after, of course, correcting for inflation, at the same time these families are spending almost $5,000 more on basic expenses. Listen here.
(BEGIN VIDEO CLIP)
PROF. ELIZABETH WARREN, HARVARD LAW SCHOOL: These costs are tearing a hole in the family that they simply can't make up. Families are not laying down the credit cards because it's fun. They're laying down the credit cards because it's the only way to put food on the table.
(END VIDEO CLIP)
BOLDUAN: Now, the witness panel offered a range of ideas on how to help cash-strapped families. Those include more domestic drilling to increase oil supply. We've heard that, of course, before. Education reform so people can qualify for higher-paying jobs. And also some way of reining in health care costs that so many middle income families face.
Also suggested, Gerri, a second stimulus package focusing more on assistance to states and infrastructure investments. So it's kind of quite a range right there.
WILLIS: Well, Kate, you know, these numbers are real. There's real pressures on the middle class. But what about the concern from Congress? Is this just grandstanding, or is anything going to happen?
BOLDUAN: You can't really say it's grandstanding, Gerri, but, you know, so many families, they really want answers. The committee said that what they're doing right now is they're looking for ideas of how to solve these problems.
I don't think anyone really expects to come out of the hearing with a set plan or proposal on how to fix the economy. Maybe it will lay groundwork for future legislation. At the same time, as we talk about all the time on this program, families want answers now rather than ideas.
WILLIS: Kate, thank you for that report.
BOLDUAN: Of course.
HOLMES: All right. Now time for you all to weigh in. It's time for our "Quick Vote" question.
And that means, hello, Ms. Poppy Harlow. What do you have for us today?
POPPY HARLOW, CNNMONEY.COM: Well, saving money, it's pretty hard. We all know that. It's a hard thing to do, especially right now with gas over $4 a gallon on average, trips to the grocery store costing more than ever.
So how good are you when it comes to watching your wallet? We want to know. Here's our "Quick Vote" question today.
"When it comes to personal finances I am a whiz, a novice, or totally clueless?"
Weigh in on CNNMoney.com. We'll bring you the results later on the show.
T.J. says he's a whiz. So...
HOLMES: Of course. HARLOW: ... we'll see.
HOLMES: Don't look -- why are you laughing over there, Gerri?
(LAUGHTER)
WILLIS: And you're so shy about it, too. That's what I like.
All right. We have good news. That's right, some good news on gas prices. We'll fill you in next.
And Glenn Beck will be here to talk on oil. Wait until you hear what's on his mind.
And we're talking "Black in America" and what's being done to reverse the sky-high dropout rate.
We're all over issue #1 right here on CNN.
(COMMERCIAL BREAK)
WILLIS: Well, we spend a lot of time here on ISSUE #1 talking about record gas prices and how tough it is for all of you out there. So we really enjoy it when we can deliver some good news.
CNNMoney.com's Poppy Harlow is here with today's "Energy Fix."
Hello, Poppy.
HARLOW: Hey, Gerri. A double dose of good news today.
WILLIS: Oh, excellent.
HARLOW: One possible energy fix, oil prices are falling. It looks like Hurricane Dolly will not interfere with oil production. And a government report (INAUDIBLE) of oil supplies in this country.
But let's talk about another fuel.
Had to clear my throat here. Sorry about that.
Natural gas is widely used to heat homes in the United States. But did you know it can power your car as well?
Around the world, more than eight million vehicles run on natural gas. But just about 120,000 of them are in this country, according to a group that promotes natural gas vehicles.
Now, Honda sells a version of its Civic that uses natural gas. It's called the Honda GX, and it's been on the market for 10 years.
A rep from Honda who brought over one for us to check out says he was able to fill up his tank for the gasoline equivalent of just about $2.70 a gallon. That is a big energy fix. But Honda only sells about 1,000 of these a year, mostly in states like California, even though it is one of the cleanest burning engines ever tested by the EPA. That's because there are some drawbacks. There are not many places in the country to fill it up, just about 1,100 nationwide. And only half of those are open for public use.
The natural gas Honda is about $8,000 more expensive than a typical Honda, as well. It costs about $25,000.
The good news, if you buy one, you qualify for a $4,000 federal tax rebate. Also, you can qualify for a tax credit if you get the natural gas pump. You can actually install it in your own garage, fill up your car there. It taps into the natural gas line in your house for people that use natural gas to heat their home.
(BEGIN VIDEO CLIP)
HARLOW: Here we go.
(END VIDEO CLIP)
HARLOW: As you can see, I tried one out for myself. It honestly rides just like a typical Civic. If only, though, Gerri, I could find somewhere to fill it up. That's the big problem.
WILLIS: Well, interesting story, Poppy. Thanks for bringing it to us.
HARLOW: You're welcome.
HOLMES: All right. Now it's time to turn to our very own Glenn Beck. He's been known to have a thing or two to say about what's going on in the oil industry, and just about anything else going on out there in the world.
Glenn, good to see you, sir. How you doing?
GLENN BECK, HEADLINE NEWS: How are you? Very good.
HOLMES: Oh, you look good. You look like you're ready to talk about this stuff.
BECK: Yes.
HOLMES: Let's talk about T. Boone for a second.
BECK: Yes.
HOLMES: T. Boone, should we not at least give this man some credit for coming up with something, no matter how long it might take, no matter how difficult or expensive? Can we give him credit?
BECK: Oh, I think -- I think -- absolutely. I think anybody that is ruling out anything in the energy sector is nuts. We should be pursuing solar, we should be pursuing wind, anything that we can do.
But let's also look at it realistically and see that the technology to store the energy made by wind power isn't here yet. We're nowhere even close of storing that wind power.
Should we develop it? Absolutely. Should we be moving forward in that direction? Absolutely. But we need absolutely everything, including oil, coal and natural gas.
HOLMES: You said shouldn't be ruling out anything. Should we also not be ruling out drilling in ANWR?
BECK: Of course we should be drilling in ANWR. We should be everywhere we can in an environmentally responsible way, in the most responsible way.
I mean, you know, all these other countries around the world -- Russia just tried to buy every bit of carbon, gas and oil from Libya. They are going to control the world in energy. But meanwhile, we don't have a problem with them drilling everywhere, we don't have a problem with China drilling in the oceans, but we somehow or another have a reason to believe that the United States would be less responsible.
The United States Congress is devaluing our dollar, they are bailing these banks out, they are not allowing us to drill. There's a reason why the president of the United States has an approval rating of like 23 or 28 percent and Congress has an approval rating of 13 percent. We like lawyers, hookers and crack dealers more than these people.
HOLMES: How did we get there, Glenn? We're talking about oil and ANWR. How did we get hookers in here?
BECK: Because hookers, lawyers and crack dealers would be able to figure ANWR out and the oil situation much more than Congress.
(LAUGHTER)
HOLMES: Oh.
BECK: Congress and the president of the United States, both the White House and Congress, they have become nothing but business. They are only their own special interests.
They are not serving the public interest anymore, I believe. We need to pursue aggressively solar wind, oil, coal, everything. We're going to need it.
HOLMES: OK. I'm going to try to move on here. Lord, help us all.
(LAUGHTER)
BECK: I've made you nervous, haven't I?
HOLMES: A little bit. They kind of gave me a heads up and said I should be on my toes.
BECK: Yes. HOLMES: But Fannie and Freddie, these two are vital to the system. I mean, why not -- why not just make the American people invest -- make everybody feel a little bit better, say at least the government is going to be there if they need help?
BECK: You're exactly...
HOLMES: There's no guarantee that they will need that help.
BECK: You know what? Starbucks is also closing their coffee shops. Aren't they too big to fail?
We have entered this realm of everything is too big to fail right now. This is akin to having a brain tumor. And Congress is saying, great, give them some aspirin. And then when the headache doesn't go away, great, give them some Percocet.
Well, at some point the patient is going to die. You must cut the tumor out.
You cannot in a capitalist system you can't expect people to change their behavior, you can't expect people to heal -- the capitalist system to heal if it's not allowed to fail. The pain would be great, really profoundly great, to let all of these institutions fail, but they must to be able to pick ourselves up and be stronger. You don't cure diseases with aspirin.
HOLMES: All right. Our Glenn Beck always has something to say.
And we want to remind our folks that our guy is on the "Energy Hunt," has been to ANWR. Ali Velshi has been to ANWR and he's been up there checking things out. He's on our "Energy Hunt." So we will hear back from him.
But Glenn and his harem of hookers are on the case for us.
BECK: I don't have a harem of hookers.
HOLMES: But we do appreciate -- oh, I'm sorry.
BECK: They're all in Washington. The people have a harem of hookers.
HOLMES: All right.
BECK: Their congressmen and people in the White House.
HOLMES: OK. I should say now that the views of Glenn Beck do not represent the -- OK.
Glenn, good to see you, man.
BECK: All right.
HOLMES: All right. Gerri, please take this away.
WILLIS: Can I just say that every time he's on the show the word "hookers" comes up? Seriously. It's interesting.
All right. Well, solving the ever-growing problem of dropouts, a serious topic among African-Americans. We'll be talking about that next: "Black in America."
And back to school shopping isn't what it used to be. What retailers are doing to get you into their stores.
You're watching ISSUE #1, right here on CNN.
(COMMERCIAL BREAK)
HOLMES: Fifty-four years after the U.S. Supreme Court's historic Brown versus Board of Education decision called for equal education for all children, the achievement gap in test scores and graduation rates between black and white students persists. In CNN Presents "Black in America," our Soledad O'Brien explores some of the ways that people are trying to close this gap, sometimes just one student at a time.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Ms. Jones, oh, you've (ph) got the keys. Doing OK? OK, we're looking for Laticia (ph). We want her. We want her back in school.
SOLEDAD O'BRIEN, CNN SPECIAL CORRESPONDENT (voice over): Victor Keys (ph) and other volunteers are confronting America's education crisis head-on. They're going door to door in inner city Houston trying to convince dropouts to come back to school.
UNIDENTIFIED MALE: I've got the keys, watching the house. I spoke with you on the phone a few days back.
O'BRIEN: This is where 18-year-old Brandon Gully (ph) lives.
UNIDENTIFIED MALE: So close. We're trying to get him back in school to finish.
O'BRIEN: Keys (ph) wants to convince Brandon (ph) that a high school education is his ticket to the future.
UNIDENTIFIED MALE: Brandon, Brandon, how are you doing, man? We've come here to get you back in school, man. You didn't register this year. And so, as a matter of fact, I'm going to -- as a matter of fact, if you don't have a shirt, I'm going to give you one of mine, I'm going to take you back to school and get you a dress shirt and find out what you need.
O'BRIEN: Without saying so much as a word, Brandon (ph) simply turns around and walks back inside.
While 70 percent of all high school students graduate in four years, that number drops to just 50 percent for black students. This crisis in education has inspired Harvard economist Roland Fryer to action. (on camera): If you could close that achievement gap between black kids and white kids, what do you think you could solve?
ROLAND FRYER, HARVARD ECONOMIST: Income disparities, wealth disparities. I'm not saying they will be totally gone, but I'm saying that I think some significant portion of that we would alleviate if we could close the achievement gap.
O'BRIEN (voice over): And so Professor Fryer thinks he's come up with a possible solution. He takes us to visit some of the students he is paying to learn.
UNIDENTIFIED MALE: Remember Dr. Fryer, everyone?
UNIDENTIFIED CHILDREN: Yes.
O'BRIEN: You heard right, he's paying kids to learn.
FRYER: The fact is that these kids understand money already at fourth grade, but they don't understand how education's going to help them get that. And so this program makes that connection very explicit.
Oh, she beat me.
O'BRIEN: These fourth graders can earn up to $250 depending on how well they score on a series of exams. It's a privately-funded program. And the kids say it's making a difference.
(on camera): Do you think it's like getting paid for your tests? You're ruining your love for learning?
UNIDENTIFIED CHILDREN: No.
O'BRIEN: Wow, that was a resounding "No." Oh my goodness.
UNIDENTIFIED MALE: It's just encouraging us to do more work. It's not ruining our chances of getting good grades. It's actually highering it.
O'BRIEN (voice over): It's children like Eric whom Professor Fryer is trying to reach.
FRYER: So they started off behind, and we've got to figure out a whey to help them catch up.
(END VIDEOTAPE)
HOLMES: OK. We have seen -- a lot of us have been privy to some of the behind-the-scenes stuff and some of the previews and premiers of it. Some of this stuff is shocking.
Were you shocked along the way to hear some of these numbers and the way things still are to this day?
O'BRIEN: Yes. You know, some of the statistics are very dire, and then there's a whole host of statistics that are actually very good, and they never really get out there. So, absolutely.
I mean, we thought that to really uncover the story of African- Americans in this country over the last 40 years, which was kind of our venue, we would cover all of that. No question.
I mean, little Eric (ph) who you just saw on that piece, as you'll see tonight, or tomorrow, I can't remember which hour he's in, he ends up losing his home because the home's being converted to a single-family home. And because of that, Eric, who's in this program now, can't live in the area where he needs to go to the school.
In three weeks from today, Eric could be living in a homeless shelter. That's just a fact. He's going to be evicted in three weeks.
And you saw that little boy. He's so bright, he's so smart. He's a metaphor for a lot of the problems that exist for kids who are in poverty in inner city schools. But by the same token, we also told you the story of a family that is sending off their sixth child to college.
HOLMES: Yes. Yes.
O'BRIEN: All of these kids are stellar students, great students, and successful across all fronts. And so we really wanted to tell both stories.
HOLMES: OK. This story is sparking a lot of interest. And people are fired up. I have people coming up to me on the street, friends, family...
O'BRIEN: I had a couple of cab drivers yesterday who said, "Ooh, D-Day on Wednesday."
HOLMES: Everybody has something to say.
O'BRIEN: Yes. Yes.
HOLMES: And it's not all positive. Some are just upset. "Why are you even doing this anyway? Why are you throwing this out there?" But if it's sparking the conversation, isn't that the point?
O'BRIEN: It is all about a conversation, no question. And one of the things that I went into it with was, it has to be true.
I don't want to do a story that only focuses on bad statistics. In fact, I don't want to focus on statistics, because that's not storytelling.
And I also don't want to do stories that only focus on highlights. It's a combination.
Black people are more than rappers and ballplayers, and more than people who are incredibly successful, like Condoleezza Rice. We are all things. We are a vast black middle class, we are teachers, we are drug dealers, we are doctors and lawyers. We're all those things. So to flesh out a portrait of African-Americans in this country takes well more than four hours. But we're just going to start the conversation tonight.
HOLMES: Well, that's good. The conversation has begun, no doubt about it.
Soledad O'Brien, tonight and tomorrow night.
O'BRIEN: Yes.
HOLMES: Tonight at 9:00, I believe it is.
O'BRIEN: Yes, 9:00 p.m. Eastern Time.
HOLMES: And that's women and family tonight.
O'BRIEN: Yes, black women and family.
HOLMES: All right. Stories again. The success, struggle, all of this, you're going to see it.
Tomorrow night's it's going to be the black man. But it starts -- yes, it starts tonight, four hours.
Soledad O'Brien, my goodness. I can't wait to see it myself.
O'BRIEN: T.J., thanks. Thank you.
HOLMES: But thanks.
O'BRIEN: Thanks for letting us come in and talk about it.
HOLMES: No, thank you for stopping by.
I'll hand it back over to you now, Gerri.
WILLIS: Well, we talk a lot on this show about your money, your debt, your savings, your job. But how is the black community faring in these tough economic times?
Lynnette Khalfani-Cox is the author of "Your First Home" and Ryan Mack is the president of Optimum Capital Management.
Usually we have you on our Help Desk, but this is a rare opportunity to get you to speak out on black issues in America.
Lynnette, you first. Tell us, what did you make of the package in the stories of Brandon and Eric?
LYNNETTE KHALFANI-COX, AUTHOR, "YOUR FIRST HOME": Well, interesting story because I know some people would question the legitimacy of paying students to learn. But if you think about it, in many families, that's done already. When a kid gets an A, the parents might give him $20. If they get a B, they might give them $10. That kind of thing. I think we have to start focusing on outcomes and saying, if it works, why not? Let's be creative here.
WILLIS: Be creative, of course. But let's talk a little bit about some of the issues facing the black community. You say issue number one is debt.
KHALFANI-COX: Absolutely. You know, one of the points that was highlighted in that piece is that he was saying the economists from Harvard was suggesting that if you could control the achievement gap and narrow that gap, you could impact the wealth gap.
Well, there's no question, if you get higher, you know, grades in school, if you actually matriculate through the process, according to the labor board, you have people who are earning with a college degree 62 percent more annually than our high school graduates. If you've got the income, then you can pay your debts, is the bottom line. But so many people are struggling. They're living paycheck to paycheck and they don't feel like they can manage the debt load that they're being crushed under.
WILLIS: Ryan, Lynnette just said wealth gap. You say that, in fact, there are many gaps when it comes to black families. Tell us about them.
RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Yes. Well, it seems as if, you know, as our income has risen over the years, since the 54 years from the fabulous decision, it seems like our prosperity has grown faster than our understanding of fiscal responsibility.
We still have -- there are fewer blacks worth $100 at age 68 than there are blacks worth $100 at age 18. There are 41 percent of us have a net worth of under $1,000. Thirty percent of us are still living beneath the poverty level. So as our income has gone up, our net worth still has not gone up. And I think our median household net worth is about $8,300 compared to the average white household of about $56,000.
So I think that what -- we're putting $650 billion a year into the economy, it makes no sense, no difference if 94 percent of that is being spent on consumption. So, you know, again, the positive side of it, we're still only 54 years away from the civil rights movement. This was -- before that we couldn't get loans to purchase homes, couldn't get loans to buy businesses.
But now we're just learning about the process of what we need to do with our money, what we need to do to -- how to manage our income more effectively. And I think that one child walking away, you know, and we work with a lot of students in temporary housing who are homeless effectively, and it seems like the hope is lost. So if we can just try to find the different, creative, tangible ways of reaching these children, reaching these adults who feel that they have no hope and have no desire to be able to move forward economically as a whole.
WILLIS: I want to get you guys to financial literacy. We don't have a lot of time left and I want to hear from both of you. You know, you mentioned red lining before. So many problems in the black community getting housed and they really got targeted with these sub prime loans. What is the key to raising financial literacy in the black community?
KHALFANI-COX: I think self-empowerment. There has to be an emphasis on it. And there is among many black families. We have to have policies in place from the top, from our government leaders, to do things like prevent predatory loans and that kind of thing. When you talk about the gaps, home ownership is one of the biggest gaps. Only about 49 percent of blacks own their own homes, versus about 75 percent of whites. So we do have to recognize the need for financial literacy and how that can help us to build net worth, as well.
MACK: I think the main key is also exposure. You know, when I was nine years old, both of my parents made sure to just show me what a college is. Let me see so I can have some foresight of where I will be going eventually.
Same thing with financial literacy. How do we improve our FICO scores? How do we purchase homes and avoid predatory lending. I mean we have a lot of -- as long as we're in a capitalistic society, there will be individuals who care more about revenue than about the individual. So we have to protect ourselves with higher education levels.
WILLIS: Well, Lynnette, Ryan, thank you for helping us out today. Great conversation.
That conversation continues tonight at 9:00 p.m. with "Black in America." Join us tonight. It's going to be a very exciting series.
T.J. HOLMES, CNN ANCHOR: All right. We'll turn now to some back to school shopping. It should be heating up right about now. But folks are spending a bit less this year. We'll tell you what retailers are trying to do to get your business.
And we're going to be checking in with the hurricane headquarters for the very latest on Hurricane Dolly, which is now a category two.
This is ISSUE NUMBER ONE. Stick around.
(COMMERCIAL BREAK)
HOLMES: We, of course, here at CNN are keeping an eye on Hurricane Dolly. Want to get the latest on this storm's movement, where it is, how strong it is. Chad Myers standing by for us at the hurricane headquarters.
Chad, what's going on with this thing?
CHAD MYERS, CNN METEOROLOGIST: It is still a very strong storm. Now 96 is a threshold between category one and category two. So this is a weak category two, but still a very strong hurricane. And now a big tornado watch box until 7:00 tonight here all the way past Corpus Christi. A tornado watch means that as this storm comes onshore, it could bring tornadoes in with it. Land spouts, water spouts coming on shore. The whole nine yards. This is a very intense storm. We talk a lot about South Padre Island really getting hammered right now. This storm is right on top of you. It is still traveling to the northwest and may get up toward Kennedy County, which may take a little bit of pressure off the big cities of Harlingen, McCal (ph) and also down into Port Isabel. That eventually that will pull you out.
But the wind's actually pulling offshore actually here. Here you go. There's South Padre. Winds offshore South Padre. Now they'd been onshore all night long, but now the storm has pulled up a little bit farther to the north.
Here's what it looks like with the eye. This is in three dimensional radar. The entire area here, there it is right there, right smack dab in the middle. That's the whole in the doughnut. That is the eye. And three dimensionally, we can kind of pull it down. Look at that. You can actually begin to see the eye. You can see the eye wall right there in the radar itself. Amazing 3-D dimension here of what's going on with the storm. Still coming onshore, still making damage and a 95 to 100-mile-per-hour storm is nothing to take lightly. If you are in the path, it's time to get in the shelter.
T.J.
HOLMES: All right, Chad, we appreciate that and we appreciate that interesting look.
MYERS: Isn't that cool?
HOLMES: It is a cool look. Interesting way to see the storm.
MYERS: Look at that in there.
HOLMES: But, Chad, we appreciate you keeping an eye on things. We'll be checking back with you, of course, throughout right here on CNN.
Gerri.
WILLIS: Well, T.J., tough times in Texas, but in other parts of the country, people are focused on back to school. Many parents are wondering just how to pay for all the supplies in this tough economy. Now some retailers are stepping in with special deals to help strapped consumers stretch their dollars. Here's CNN's business correspondent Jennifer Westhoven.
(BEGIN VIDEOTAPE)
JENNIFER WESTHOVEN, CNN CORRESPONDENT, (voice over): Summer time. Families finally get a break to relax, but this mom is already thinking about school.
JEANETTE MATOS, MOTHER: I'm starting to think about school books, book bag, pencils, crayons. Things to go back to school. WESTHOVEN: Back to school is critical for retailers. The second largest shopping season after Christmas. But with gas and food prices running high, retailers are competing for what's left over. The National Retail Federation says back to school sales are only predicted to rise by a puny 1.6 percent, roughly half of last year's nearly 3 percent rise. Even that wasn't so hot.
To lure shoppers through the doors, they've got gimmicks. JCPenney is offering more fashion, new lines, and is running ad spots in movie theaters.
KEN HICKS, JCPENNEY PRESIDENT: What we're doing is offering our customer more looks and more brands and more ideas at those very smart prices that we've offered in the past.
WESTHOVEN: Other stores are sharply cutting prices. Wal-Mart started its season the day after the Fourth of July. Sale signs are everywhere.
TRACY FERSCHWEILER, WAL-MART STORE MANAGER: Twenty-four-count crayons for 22 cents, a bottle of glue for 30 cents. Those are the items that you have to have day one of school. And we're making them -- these prices are the same prices you paid 10 years ago.
WESTHOVEN: Staples is going further, selling basics like pencils and folders for a penny. When Jeanette Matos shops with the girls, she's looking for one thing -- sales.
MATOS: With the prices of things rising, anywhere you can get a sale, that's where you should be. So, yes, it helps.
WESTHOVEN: But even with the staff trying to make the shopping fun . . .
UNIDENTIFIED FEMALE, (singing): Fly me to the moon.
MATOS: It's a little awkward. We should be on the beach now or taking in the sun.
(END VIDEOTAPE)
WILLIS: All right, stuff for a penny. That's amazing. But what happened to the rebate checks? Are people using them?
WESTHOVEN: Well, it turns out they already used them. So 20 percent of some parents said in a survey that they kept some of the rebate checks. But that's what they said they would do. Did they really do it? There are a lot of analysts who think that the National Retail Federation forecast is way too rosy. There are a lot of people forecasting flat to down sales. This summer a lot of teens couldn't get jobs, so they don't have money to buy their own clothes. So it's a big deal. And even though I think it's summer right now, who thinks about Santa and Christmas. This is seen as the harbinger of holiday sales. They don't look to good.
WILLIS: And holiday sales very important to retailers. Jen Westhoven, thank you for that.
HOLMES: Well, a lot of people and a lot of businesses are hurting these days, but not every industry is hurting. Why it's a big day for Big Macs. And we'll tell you why your salary may be going up, but why it might not help too much.
ISSUE NUMBER ONE rolls on next.
(COMMERCIAL BREAK)
HOLMES: The nation's number one burger flipper is all smiles today. The fast food giant, McDonald's, you see there, says it earned $1.19 billion. Or that's $1.04 per share. That is an indication that despite the slumping economy, some folks are still spending their money at McDonald's even though other fast food restaurants are seeing fewer customers.
WILLIS: Well, so just how did McDonald's manage to get customers back in their door?
Ali Velshi sat down with the Big Mac himself, McDonald's CEO Jim Skinner.
(BEGIN VIDEOTAPE)
JIM SKINNER, CEO, MCDONALD'S: Well, we took our eyes off our fries, as we like to say. Instead of focusing on the customers and is the restaurants and McDonald's, we started chasing opportunities that we thought would develop over time for the growth of the brand. And when we went back to the core, focused on customers and restaurants and our revitalization plan and we slowed our growth substantially, it was about getting bigger. And we decided we needed to get better versus getting bigger. So we focus more on our existing restaurants, focused more on our customers and the restaurants that we had versus those that we were building.
ALI VELSHI, CNN CORRESPONDENT: All right. Let's talk a little about food prices. We know it's hit all of us across America. It's got to hit you. Almost every component. I was looking at a Big Mac the other day and pretty much everything in there has gone up in price. How do you handle price increases in food the way you've seen?
SKINNER: Well, first of all, it's important to know that we have a great supply chain. Our supply chain partners, who are independent suppliers by the way, are an enormous competitive advantage for McDonald's in terms of mitigating costs, being able to deliver high quality goods and services at the best prices. Then we have a great treasury department that does a great job on out contracts and sourcing that mitigate some of that.
Having said that, the purchasing index, which is up over 8 percent over year-to-year is certainly impacting us. We can't mitigate all of it. We do take price increases. We take a price increase to about 4.5 percent. So we get to about half of it. The rest of it we either mitigate through cost control or we must have more visits to be able to compensate for that to maintain our margins and our cash flow for our franchisees. The fact is, we've done a good job of doing that, but we don't get it all. So we absorb some of that.
VELSHI: Tell me about the employment situation in McDonald's. What's it like to be an employee of McDonald's today? Are the wages competitive? Are the benefits competitive? What's the reason why one would choose to work at McDonald's?
SKINNER: Well, I think the wages are competitive and certainly the benefits are competitive. We try to do the best we can to make sure that we're accessing or giving access to our employees for health care and other absence and the benefits. But I wouldn't say that they're extraordinarily better than the others in the competitive environment. But I will say, in terms of the opportunity over the long-term, certainly that opportunity is better at McDonald's for people to grow and to prosper.
VELSHI: You're talking about opportunity to advance?
SKINNER: Opportunity to advance.
VELSHI: To grow with the company.
SKINNER: That's right.
VELSHI: All right. When you -- if you -- I suppose you can, because you're the boss, what would you choose? What's your favorite thing on the menu?
SKINNER: My favorite thing on the menu is a plain Quarter Pounder. Just the meat and the bun. I'm from Iowa. The meat and the bun.
VELSHI: What you do is you develop your menu to make sure your core customer doesn't -- still feels like it's the same McDonald's they know.
SKINNER: Well, first of all, we're always improving our core. As I said, 70 percent of the visits are around a core menu item. So it's important for us to make sure that we're always following up and being diligent on the quality of the Quarter Pounder, for example. Quarter Pounder with cheese. Your favorite, the Big Mac.
VELSHI: Absolutely my favorite.
SKINNER: Ali, and if you like chicken, try a snack wrap, OK.
VELSHI: All right. I'll try one.
SKINNER: You'll like it. Believe me. You can have a Big Mac and a snack wrap. But just taste it. You'll figure out . . .
VELSHI: That's why I look the way I do because I would happily have a Big Mac and a snack wrap.
(END VIDEOTAPE)
HOLMES: Oh, Ali.
Well, listen up to this folks, you might be set for a raise next year, congratulations, but we'll tell you why it might not help you out all that much. You are watching ISSUE NUMBER ONE.
(COMMERCIAL BREAK)
HOLMES: All right. A new survey says bosses nationwide are expected to raise workers' salaries next year at the same rate as this year. So I would like to say thank you ahead of time to my bosses. But there's a problem here. The increase may be offset by rising inflation and lower bonuses that are tied to company performance this year. The Labor Department says inflation rose 5 percent last month. That is more than most Americans will receive in that bonus next year.
WILLIS: Time now to get you some help with your money questions. It's time for the Help Desk. Let's get right down to it. Laura Rowley is with Yahoo! Finance, Dani Babb is the author of "The Accidental Landlord," and Steve Hargreaves, hey, he's with CNNMoney.com.
Welcome all. Let's get the first question.
All right, it's from Marie in Florida. She asks, "since I live in Florida, I am very interested in solar energy. The cost is way too high for the average person. If enough people choose to go this route, will the cost come down? A credit on taxes just doesn't work for the average person like me."
Dani, what do you say?
DANI BABB, AUTHOR, "THE ACCIDENTAL LANDLORD": I say that over time that the price will absolutely come down. And that we do need to have some sort of -- more incentivzed tax breaks.
WILLIS: Right. I think it's a struggle for folks out there who are trying to save money on their energy bills. Not a lot of ways to do it unless you introduce some insulation or something like that. I know a lot of people struggle with it.
Vern in Ohio asks, "two of my credit scores are in the 800 plus range," wow, "but the third is 685. This is because a couple of years ago I signed a car loan for my daughter and a few months back she made a couple of late payments. Is there any way to bring that third score up?"
What do you say, Laura?
LAURA ROWLEY, COLUMNIST, YAHOO! FINANCE: There is, actually. I called TransUnion, one of the big three credit bureaus in Chicago, and the best thing to do is go back to that auto lender and ask them if they'll remove it from the credit report. Assuming you're in good standing now and you're paying your bills. What's interesting is it only showed up on one credit report rather than all three. If it was a major lender, it would show up on all of them. That indicates it maybe a smaller lender. Somebody you might have a relationship with. And you can go and ask them to remove it from the report. Otherwise it will stay seven years.
WILLIS: You know, I've got to say, don't sign on to other people's debt. Even if it's your -- you know, it's a good idea not to do that because you are on the hook. It's a real problem. We get that question a lot.
Robyn asks, "if our home is paid off and has an appraised value of $155,000 and we have $30,000 in student loan and credit card debt, would it be wise to use the equity in our home to pay off the debt? We both contribute 10 percent of our income to our 401(k)s and the companies match at 3 percent. However, we have very little in liquid savings."
What do you say, Dani.
BABB: I would say that if the return on investment is there, you should do it. So in other words, if the interest rate you're going to pay on the HELOC, home equity line, is lower than that you're paying on the credit cards, you should go for it.
WILLIS: Quick, easy answer.
ROWLEY: Make sure your job is secure.
WILLIS: Well, that's always important, right.
OK. Let's go to Jill's question. "Has any legislation or action come from" Congress "the hearings on oil speculators." Of course we heard a whole lot, Steve, right, from Congress complaining about speculators driving up the price of oil. Did anything come of it or was it grandstanding?
STEVE HARGREAVES, WRITER, CNNMONEY.COM: They're working on it. There are plans afoot to require more disclosure so we can find out who exactly is placing bets on what. And there is legislation calling for them to limit the amount of contracts the speculators can hold. Expect to see more action on it in the coming weeks. So far nothing's been done, but keep an eye on it.
WILLIS: It's a practical matter, though. Is that something they can really, you know, change dramatically, do you think? Do you think that even the regulators seem to be reluctant to change those rules?
HARGREAVES: They can certainly ask for more information. And most people say that getting more information wouldn't be a bad thing. You know, the more transparency, the better. But, you're right, you know, it's a very big market and most people say the evidence really points to the fact that speculators are not driving up the price of oil.
WILLIS: Very interesting. OK. Well let's get Jeff from Kansas, his question in. "I live in the Kansas City area and I am planning to buy a house within the next six months. I heard your experts talk about a general move from the suburbs to the city because of rising gas prices. If I am considering future value of property, is it wiser to buy in the city or to buy outside the suburbs?"
Dani.
BABB: Well, this is a great move, Jeff. A great time to buy. The answer is, it depends. And it depends on a lot of things. How stable are the jobs in your particular market? Are boomers moving away? If they are, they tend to move to suburbs and not to the city, which could offset the move to the city. And then check for median price stability in that particular area before you move.
WILLIS: All right. Great advice.
Laura, any thoughts?
ROWLEY: Yes, I would say talk to your realtor and get 12 months of comps for both the city and the suburbs, so at least you have a trend line for where prices are going.
WILLIS: That's a good idea. I like all of that.
OK. Well, great panel. Thank you. Laura, Steve, Dani, we appreciate your help today.
BABB: Thank you.
ROWLEY: Thank you.
HARGREAVES: Thank you.
HOLMES: Well, just how much do you really know about your money and your finances? We want to know what you think you know. Log on to CNNMoney.com and click on the Quick Vote. Poppy Harlow will have your results coming up next.
And while you're there, they've got all kinds of cool stuff on there for you to check out and to help you manage your money. That's CNNMoney.com.
(COMMERCIAL BREAK)
WILLIS: Well, how comfortable are you with your personal finances? That's today's Quick Vote question.
HOLMES: And Poppy Harlow has the Quick Vote answers.
Hello, there.
What are they saying?
POPPY HARLOW, CNN CORRESPONDENT: Well, there are a few other whizzes out there just like you, right? Forty-three percent of you say you are a whiz when it comes to personal finances. Forty-four percent of you say you're just starting out. You're a novice. Thirteen percent of you are totally clueless. And if you're watching ISSUE NUMBER ONE, that is very unacceptable because we inform you here every single day. But if you want to know more, log on to CNNMoney.com. A lot of good information there.
WILLIS: Absolutely. And on this show too. And, T.J., we really appreciate having you here this week.
HOLMES: Thank you for having me.
WILLIS: Absolute pleasure.
HOLMES: Thank you for having me. Have me back any time.
WILLIS: All right. Well, OK, tomorrow.
HOLMES: All right.
WILLIS: It's time now to get you up to speed on other stories making headlines. CNN "NEWSROOM" with Don Lemon and Kyra Phillips starts right now.
