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Issue Number One

McCain's Economic Plan; Obama's Economic Plan; Candidates & The Economy; Pet Project; Protecting Your Money

Aired August 01, 2008 - 12:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICK SANCHEZ, CNN ANCHOR: Nearly half a million jobs lost this year.
Congress about to go home, but did they do anything about the high gas prices that you are dealing with?

What the candidates are saying about fixing your economy.

And also, we're going to talk about where you stand with your house, your job, your savings, your debt.

Issue #1 is your economy. ISSUE #1 starts right now.

Are you ready to go? Because we are.

From the ISSUE #1 headquarters to the CNNMoney.com news room, we are all over the stories that matter to you economically.

Hello and welcome to ISSUE #1. I'm Rick Sanchez. Ali and Gerri are off today.

We're going to begin with jobs.

The unemployment rate shot up to a four-year high in July. That's the most people out of work in four years. It could be somewhere in your family -- or someone in your family who has lost a job, maybe a friend, maybe a neighbor. This is a grim report for a lot of people.

Let's do this, let's bring in Allan Chernoff. He's been checking on this for quite some time and he's joining us now with some of the numbers.

Allan, what are you finding out?

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Rick, of course, just another month of job losses. It gets more depressing every single month. And we've been losing jobs every single month this year, as Rick said.

The unemployment rate up to 5.7 percent now, a rise of two-tenths of one percent. And this is the highest level in more than four years. A full percentage point higher than it was just a year ago.

The job losses in July, 51,000. As I said, every single month this year we've been losing jobs, 463,000 thus far. You want to talk about recession? I mean, economists can debate it, but if you know anyone who has lost a job, for them this is most definitely, most definitely a recession. And it's happening throughout the economy, not only manufacturing autos, of course, but also construction, retailing, services, computer industries, even, telecom, retailing.

The list goes on and on. Perhaps only in the energy industry are we really seeing some serious job growth right now.

Now, there is an interesting issue here, though. If you look at that one-month number, the 51,000, and the big picture, economists would say, well, that's not really all that bad for one month. So why did employment shoot up?

What's happening here is that a lot of people are going back into the workforce. People who have not been working. But they're saying, hey, I've got to get more money to pay for gas, to pay for the higher prices at the supermarket. These people are going back, they're looking for jobs, and a lot of them are not finding those jobs, Rick. So that's a real big problem here.

SANCHEZ: You know, it's one thing to look at numbers. And numbers tell guys on Wall Street and, you know, smart guys like yourself what the trends are. But does it really reflect what's happening right now in America? Are things as bad or as good as the numbers indicate?

CHERNOFF: How about worse than the numbers indicate?

SANCHEZ: Really?

CHERNOFF: No doubt about it, because what we have right now is we have a lot of people who have part-time jobs, and they want full- time employment. They can't find those jobs. So, Rick, that really hurts, as well. That's an extra bunch of people who are getting hurt.

SANCHEZ: And is pay being affected by this? I mean, just because you're employed doesn't mean you're gainfully employed, right?

CHERNOFF: Yes. Well, average hourly earnings, that's part of this report, up by only 6 cents an hour. It comes out to about 3.5 percent a year, and believe it or not, inflation is much higher than that right now, closer to 5 percent.

SANCHEZ: Bottom line, fewer people are working. Since the beginning of year, half a million perhaps, 500,000. And those that are working are making less than they probably have made in the past.

CHERNOFF: Or their rate of salary increase or wage increase is not keeping up with inflation.

SANCHEZ: That's the upshot. Thanks so much for the bad news, Mr. Chernoff. We appreciate it.

Whenever a big number comes out, like the job report that we were just talking about with Allan, all eyes seem to turn to the biggest indicator of all, Wall Street.

(BUSINESS REPORT)

SANCHEZ: Jobs in California taking a big hit because of a drastic step taken by Governor Arnold Schwarzenegger.

CNN's Dan Simon brings us this story today.

(BEGIN VIDEOTAPE)

DAN SIMON, CNN CORRESPONDENT: Rick, this right here is the executive order that the governor signed. By signing that document, it rolls back the salaries of 200,000 state workers to the federal minimum wage of only $6.55 an hour.

This, no doubt, is very unpopular, highly controversial. So why did the governor do it?

Well, he says he basically had no other choice, that the state is facing a major cash crunch. The state looking at a $15.2 billion deficit, and Republicans and Democrats in the state legislature have been unable to reach a consensus.

Take a look.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I understand this will affect people at a time when they're already struggling, and so I want to apologize to all the state employees for having to do that. When I sign this order, thousands of pink slips will start going out across the state. And I'm also canceling all overtime, except for public safety and 24-hour medical care.

SIMON: Schwarzenegger's move also eliminates 22,000 part-time jobs.

Now, here's the thing. The Democratic state comptroller says the cash situation for California is not quite as bad as Schwarzenegger makes it out to be. So he vows that workers will actually get their full salaries. So, it's possible that this whole situation could wind up in court. Obviously, Schwarzenegger doesn't want it to go that far, he would prefer that the legislature would go ahead and get a budget passed, and this whole situation would come to an end.

We should also point out that once the budget is signed, that workers will get their full pay, but in the meantime, if you're a state worker living paycheck to paycheck, this could really hurt.

Rick, back to you.

(END VIDEOTAPE)

SANCHEZ: All right. Thanks a lot.

Dan Simon following that for us.

CNNMoney's Poppy Harlow is on a much-deserved vacation. "Quick Vote" goes on, though.

Here it is: Do you believe the future of jobs is in technology, manufacturing, health care, or energy? Log on to CNNMoney.com right now.

Want to know what you think. Vote. It's good practice for November, by the way. Results coming in later in the program we will share.

Also, did Congress go home without addressing sky-high gas prices, without doing anything about America's energy situation? They wouldn't do that, would they? Would they? Would they?

Also, the one single biggest mistake that we made to get into this economic mess in the first place, and the one way that we the possibly fix it. We've got it.

Issue #1 big on the campaign trail. We're going to be taking you there. We're all over this. We'll have it for you, right here on CNN.

(COMMERCIAL BREAK)

SANCHEZ: Right here from New York, let's do this -- let's get a quick update now on the price of gasoline. Little by little, things are getting a little bit better.

AAA's latest numbers put the average nationwide price of unleaded gas at $3.90 per gallon. That's $3.90 per gallon. That's a drop of more than a penny since yesterday, and the 15th straight day that gas prices have actually gone down a little bit. Gas is down about 21 cents a gallon since mid-July.

If only it would keep going.

Welcome back. I'm Rick Sanchez.

All week we've been tracking the energy debate for you on Capitol Hill. Gas prices might be down, but not enough to really ease the pressure at this point, right? So surely Congress is going to do something about this problem, at least when it comes to energy, since they know that so many Americans are thinking about this.

So before they pack up and they head to go to the beach for the rest of August, they dealt with it and they came up with a really good solution that most of us can at least consider and that will make us feel good.

So let's go to CNN's Brianna Keilar and find out exactly what they did for us.

And it is, Brianna?

BRIANNA KEILAR, CNN CORRESPONDENT: Well, some of them are going, but most of them are gone, Rick. And they'll tell you though, they're not going to the beach. If you ask them, they'll say they're going back to their home districts to talk with constituents and kind of get a handle on what's going on back home.

But actually, a lot of senators presumably left last night. A different story, though, here on the House side of the Capitol building.

This is the parking lot behind me, and I see Texas plates, Indiana plates. I see a Rhode Island plate. So, presumably, representatives from those states, kind of the stragglers, if you will, on the last day of school, they haven't left. But let me show you some pictures that we shot earlier of what was really just a mass exodus here on the House side.

The House did have some votes today, unlike the Senate, but none of them were on energy legislation. So Congress taking off here for a five-week-long break without coming to any agreement on how to deal with high gas prices. Getting out of town, and trading blame as they went.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: First of all, we're demanding that we not have a recess. In just a few minutes, those steps are going to be covered up with members of Congress making the ultimate race to the airport when they should be staying here. You can't make this stuff up. Congress has a nine percent approval rating and we're going home without solving the number one issue in the nation?

UNIDENTIFIED MALE: ... three years ago, five years ago. We are now paying for 20, 30 years of inattention to our energy needs, and we still do not have the support from Republicans to do what really needs to be done.

(END VIDEO CLIP)

KEILAR: The sticking point here, of course, offshore oil drilling. Republicans say protected areas need to be opened up for new oil drilling, increasing the domestic supply of oil. Democrats say that's not going to decrease the price of gas and that oil companies should just drill on leases they already have.

So obviously disagreement here. Both sides saying they're going to continue to keep pressure on each other during the break. But the point is, Rick, this is a break, a five-week-long break, where there's not going to be any legislative action on this issue.

SANCHEZ: You know, we should mention to our viewers that you had a Republican there who you talked to and you had a Democrat there who you talked to as well, both of them expressing their own frustration over this, both of them with different arguments. But in the end, to the viewer who's watching you and I have this conversation right now, it seems inexcusable that something as important to this country right now as this would essentially not be dealt with.

Is there any possibility at this point that this thing could be salvaged? Or is it done, Brianna?

KEILAR: Well, it's not that it's done. It's just, in a point, put on hold as far as legislative action goes through September.

I should mention there are some bipartisan proposals, maybe a glimmer of bipartisanship in this. Proposals in both the House and Senate that have been presented that include an array of possible solutions: conservation, renewable energy, and yes, offshore oil drilling. But at this point, Democratic leadership really not budging. They don't want to see oil drilling. And we're just going to have to see where they pick up when they come back in September -- Rick.

SANCHEZ: That's great stuff.

Brianna Keilar really giving us a bird's eye view of what's going on there. That's why she took her location to the street, so you could see some of the people who are just making a decision, who are supposed to be enacting laws, who are saying, look, we couldn't get it done, we're going home, we'll try again in September.

Good stuff. Brianna Keilar with that story.

It doesn't seem like Congress is going to be able to help out where gas prices are concerned. But are those high prices really hurting you that much at this point?

I think you and I both probably know the answer to that if we've been filling up our tanks any time in the last couple of months. But we did a poll to see what Americans are saying about this and thinking about this.

Who better than political analyst Bill Schneider to go to now with these results?

Bill, how much are the gas prices specifically hurting Americans right now?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, three- quarters say they're causing a hardship, and, in fact, more than one- quarter say a severe hardship. People are really hurting, and they're hurting pretty badly.

You see that 27 percent, severe hardship, and another half say a moderate hardship. Well, that's an awful lot of people who are hurting because of these gas prices.

Now, here's an interesting question. Congress did pass a housing bill to help people who are facing foreclosure, but they can't pass an energy bill, which is an even bigger problem to larger numbers of Americans. Why the difference in that?

Well, probably because there's no agreement on what needs to be done to lower gas prices. Republicans say oil drilling, Democrats say it won't help for years, there's other ways to do it. Democrats say you've got to do something, we have speculators. Republicans say it won't do any good.

So you decline to do anything to help all those people out there who are hurting.

SANCHEZ: All right. So we're facing some high gas prices right now, but we've had high prices in the past, as well. They always went back down.

Do people think like the late 1970s, during the end of the Carter administration, that this will somehow resolve itself once again like it did in the past?

SCHNEIDER: Well, there's an increasing view. It's now a majority who say they will never go down.

You know, when gas prices bounce up and down, that convinces an awful lot of people, somebody is manipulating the market. But right now they believe -- 52 percent say, no, they are never, ever going to come down.

And what that means is people are beginning to think about and, in fact, carry out some permanent changes in their lives. They're talking about they're buying smaller cars, they're using more public transportation. People are talking about denser housing, moving into the city so they don't have to commute long distances.

This is really causing a substantial change in the American lifestyle.

SANCHEZ: That's amazing, getting into the psyche of Americans like that. And you almost get a glimpse into the future, don't you, Bill?

SCHNEIDER: Well, a lot of people think we are.

SANCHEZ: All right. Thanks so much. Sure appreciate it.

This whole economic mess, jobs, high gas prices, the mortgage meltdown, there has to be some kind of solution out there, right? We'll check one out and we'll tell you about it. We'll share.

You're watching ISSUE #1.

(COMMERCIAL BREAK)

SANCHEZ: Welcome back. I'm Rick Sanchez.

You're going to love this story.

All right. You go through an airport security, right? That's what the airport looks like. You board a plane, you get in your seat, and you settle in for a flight.

I know, this is wallpaper video, it doesn't match what I'm talking about. But just follow along with me here.

Yes, let's come out to camera. OK.

When you get on a flight, all you want is cold water, right? If nothing else, give me some cold water.

So you get out your wallet. Now, if you're flying US Airways, that's right, you've got to pay for water. Effective today, juice, soda, coffee, tea, even water is going to cost you when you fly.

In fact, water is more expensive than coffee when you fly. Huh?

US Airways says that the passengers are going to be offered free beverages during unusual circumstances, like if you're stuck on a runway for three or four hours. Yeah.

But otherwise, take out your wallet, folks. Get ready to pay. That's not unusual these days.

By the way, are you worried about your job? Are you worried about your house and the value of your home? Are you worried that the economy's going to be going down the toilet sometime soon and it might have a very serious effect on you and your family?

Yeah, a lot of Americans are worried about that these days, all the polls seem to indicate. The government, business, homeowners, all pretty much messed up right now. And it left our housing market and our economy in shambles.

All right. This is what we're dealing with. So what can we do for you? Here's our next guest.

He wrote a book. It's about what happened. It's called "Financial Shock" -- or shock!

Mark Zandi is the chief economist and co-founder of Moody's Economy.com.

I guess, Mark -- great title, by the way.

MARK ZANDI, AUTHOR, "FINANCIAL SHOCK": Thanks. Appreciate that.

SANCHEZ: Because that's really what it is, isn't it?

ZANDI: It is a financial shock.

SANCHEZ: I guess what people would want to know is, how in the hell did we get here?

ZANDI: Well, you know, there's a lot of factors, but three key ones. Hubris: we all thought prices for homes would continue to rise ad infinitum into the future -- homeowners, lenders, regulators, investors.

SANCHEZ: Right.

ZANDI: And we began to speculate. And that speculation created the bubble that we're now paying the price for.

SANCHEZ: Someone watching us right now would say, come on, don't we have a whole bunch of smart people out there who were supposed to be making sure that something -- while I'm busy doing my job every day, isn't there someone overseeing?

ZANDI: Well, that's the second big problem, and that's a lack of regulatory oversight. In most times, you would want regulators, the Federal Reserve and other institutions, to watch over to make sure that speculation doesn't get out of hand, that lenders don't make loans to people who can't afford it. But unfortunately in this environment, that failed. It was a failure of regulatory oversight.

SANCHEZ: Is it because politicians decided at some point down the line that we didn't need regulation anymore, that the market would take care of itself and it would always figure things out?

ZANDI: Yes, that's a big part of it. You know, we've been in this period really for 25 to 30 years of deregulation, the idea being that the market can solve all problems. And that came to a head in this housing boom. And we're paying the price for that, to some degree.

SANCHEZ: There's something going on where, I remember when George W. Bush and Dick Cheney were running as candidates. They said, you know, we're going to be the CEO presidents. And a lot of Americans stood up and took notice and said, well, that means they're going to be conservative in their policies, there's going to be fiscal responsibility, and things are going to be good for the average American.

Looking back seven years, what happened? Where was the confluence of events that somehow got us to where we are today that's so different from what we were promised?

ZANDI: Well, I mean, to some degree, we got derailed by events.

SANCHEZ: Right.

ZANDI: I mean, there was 9/11 and many other things that came along the way. So...

SANCHEZ: To be fair.

ZANDI: To be fair. To be fair.

SANCHEZ: All right.

ZANDI: But, you know, I do think that we got caught up in the idea that, you know, if we let markets run on their own and left unfettered, that they will solve all their problems and they won't muck up the process for all the rest of us. I think that philosophy just got taken -- was taken too far. And that really is the basis for this bubble that we got into.

SANCHEZ: Is that where we need to go then? Do we need to go in a direction? And I suppose that would be arguing, to a certain extent, to what some of the Democrats have been arguing, where we need to get back in there and handle this thing more from a governmental standpoint, right?

ZANDI: Well, I don't think it's Democrat and Republican. I think everyone's now coming to the realization.

SANCHEZ: But don't the Democrats -- don't Republicans generally say, let the market take care of itself, it's the greatest system in the world? And the Democrats are the ones who say, no, you've got to go in there and you've got to tweak it once in a while?

ZANDI: That's true, but the reality is, it's got to be somewhere in between. And if the pendulum swings one way or the other too far, we've got a problem. If there's too much regulation, then people who should get loans don't get loans, the economy doesn't perform as well as it should. If there's not enough regulation, we get this mess that we're in today.

SANCHEZ: And right now we've swung too far in the direction of laissez-faire?

ZANDI: Right. And so -- laissez-faire is a good way to put it, and now we need to push the pendulum back more towards the middle so we get this middle ground.

SANCHEZ: That's great analysis. Did I just say that right? Analysis -- I'll try that again.

ZANDI: I think it's laissez-faire, but maybe not.

SANCHEZ: Well, you know, it's a TV thing for us guys. You economists, you can do those words.

ZANDI: I don't have the French accent though.

(LAUGHTER)

SANCHEZ: Thanks so much, Mark. We appreciate it.

From the housing mess, to the record deficit and our energy crisis, we're going to tell you what the candidates are saying in their own words. French or not.

And struggling to feed those four-legged friends, some pet owners are turning to, get this, a pet food bank for help. We're going to tell you by taking you there.

This is ISSUE #1. Stay with us.

(COMMERCIAL BREAK)

SANCHEZ: I welcome you back. I'm Rick Sanchez.

There's the White House. There's me, here at CNN. We have the best political team on television, as I'm sure you know or have heard. We're committed to making sure that we have all the information that you need to be able to make some of the best decisions by the time we get to November. So every day we're going to be bringing the words straight from the mouths of our candidates. What they say, unfiltered. Today we're going to be hearing from them as they tell you what they're going to do to try and solve what apparently Congress was unable to do, the energy bill, the energy crisis. First up, here's Senator John McCain.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: Senator Obama says that he wants energy independence, but he's opposed to new drilling at home. He's opposed to nuclear power. He's opposed to an innovation price to electric cars. My friends, we must begin immediately in drilling offshore so we can get to the oil that's off our own coast. We have to begin that drilling. And Senator Obama opposes it.

He said that the high costs of gasoline doesn't bother him, only that it rose too quickly. Yesterday, he suggested we put air in our tires to save on gas. My friends, let's do that, but do you think that's enough to break our dependence on Middle Eastern oil? I don't think so.

So I believe that every energy source needs to be part of the solution. We need to develop new alternative energies like wind, solar, tide, biofuels, but we also need to develop more existing energies, like nuclear power and clean coal. Nuclear power is safe. Clean coal technology is vital.

My friends, nuclear power is safe. There are some veterans here in this room who served, who served on ships that had nuclear power plants. We sailed them around the world for more than 60 years and we've never had an accident. And I can tell you that the French, we always want to imitate the French, right? Eighty percent of their electricity is generated by nuclear power. And in case you missed it, we now have a pro-American president of France, which shows, if you live long enough, anything can happen in the world and America.

But most importantly, most importantly, and you know this, but it's the compelling argument, we can't keep sending $700 billion a year to foreign countries that don't like us. And some of that money ends up in the hands of terrorist organizations. It's got to stop. And we will stop it. And we've got to stop it.

(END VIDEO CLIP)

SANCHEZ: There is an animated John McCain on this day. Happy to be able to bring you that. Also, we're going to be hearing what Senator Barack Obama may be equally as animated, saying about how he intends to fix our energy crisis. His words as well.

First, though, there's some extreme heat that we need to tell you about. CNN meteorologist Chad Myers is following this for us.

Where, Chad? Where? What's going on?

CHAD MYERS, CNN METEOROLOGIST: You know, all the way through the Midwest, it is just going to be 100, 110, 102 today in Denver. In places that really don't get all that hot. But also hot around a fire. A fire in Montana. Near a ski resort, in fact. Right near Red Lodge, Montana.

This has now burned now 9,000 acres near the town of Red lodge. That's about 60 miles southwest of billings. Officials yesterday lifted an order to get those people out of the way.

They had 90 homes evacuated but they lifted that order today. It may have to go back in because the winds are gusting up again. There you go, Montana fire, just charred -- look at that 9,400 acres already and some near the ski resort there near Red Lodge.

Also now back out into California. We're getting a little bit of this weather to help out near the Yosemite National Park area. The winds dying down, people going back to their homes, but some people don't have homes to go back to I'm afraid. We'll clear that up for you as we get -- 45 percent contained only right now.

An awful lot of rain across parts of the southeast. Let's check the temperatures now and check the radar. The rain is going to be all across the southeast, but not in places that you really would hope.

There's the rain there. We needed some rain across the Midwest. Why? Because we have a huge dome of high pressure right there all the way from Nebraska through Denver and into -- look at that, hot. That must be 15 states there. And all of those states, well at least some spots, breaking a record high today in cities all across parts of the Midwest. Kansas City, Dallas and Denver, there's the big time heat, even for today and for tomorrow.

Denver, you're going to bridge (ph) 100 degrees like you did yesterday. A new record in Denver, Rick. We're going to run it at least 20 days in a row of temperatures over 90 today, almost 100.

Back to you.

SANCHEZ: You always get a feeling with Chad Myers that, A) he knows his stuff, and, B) he loves talking about it.

MYERS: That's all I do is talk, Rick.

SANCHEZ: Thanks so much.

MYERS: All right.

SANCHEZ: Good update.

Just before this news update that we just did with Chad, we were showing you what John McCain had to say about how he thinks we can attack our energy problems. Well, he said he wants to look at all the sources of power. From wind and solar, and you heard him say nuclear several times. By the way, he did not say nuclear. Did you notice. Nuclear. And he also talks a little bit about clean coal.

Let's go now to the other side, Barack Obama. He says how he would lower your gas bill.

(BEGIN VIDEOTAPE) SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: We need to bring down gas prices. But first of all, we've got to provide relief to families. So that's why I've said that I'm going to provide an energy rebate, right now, putting money into the pockets of Americans, hundreds of dollars that will offset the rising price of gas just to help you get through the next several months. And you won't have to trust the oil companies to pass on the savings to you because you're going to get these rebates directly.

We also need to crack down on speculators who manipulate the market. It's time to close loopholes that allow them to gain the system. It's time to make sure that Washington work for the American people and not the special interests. And we can crack down on those speculators right now to help bring down gas prices.

And we also -- let me just say this, we do need to increase domestic production where we can. And as president, I will. Right now, oil companies have 68 million acres in lease. Sixty-eight million acres in leases that they are not using. Instead of giving oil companies more leases when they're not using 68 million acres that we've already given them, I would say, let's have them use those leases and start producing more oil. And if they use all those up, then maybe we can start talking about giving them more leases. But we're not going to be having them get sweet heart deals now when they're not doing what they need to do.

We need to give them a choice. You use those leases or you lose them. If we drill in the 68 million acres that are already made available, we can double our domestic oil production, increase our national gas production by up to 75 percent.

Now, let me just make one last point on this drilling business. If I thought that we could solve all of our problems by opening up areas for drilling outside the existing moratorium, then I'd be for it, because I know how bad folks are suffering. I've met people who can't go on a job search after they lost their job because they can't fill up the gas tank.

I met teachers who were teaching at a school that they loved but because it was an hour away they had to quit their job. They couldn't afford filling up the gas tank. I know families that are having to cut back on food for their family because of the new cost of a compute.

So I know how hard people are fighting. And if I thought that drilling outside the existing moratorium would help give them relief, I'd be for it. But the truth is, we can't drill our way out of this problem.

(END VIDEOTAPE)

SANCHEZ: "Cannot drill our way out of this problem," is what Barack Obama says. John McCain, on the other hand, says, drill, drill, drill.

All right. You heard what both candidates are saying. Are they connecting with Americans on this issue number one when it comes to the economy and especially when it comes to this latest thing about our energy policy? What kind of energy bill we need to get out there, which obviously Congress didn't even come up with. Eamon Javers is with politico.com. I love politico.com. Every night before I go to bed.

EAMON JAVERS, FINANCIAL CORRESPONDENT, POLITICO.COM: Thanks. So do I.

SANCHEZ: My wife complains, in fact.

Let me ask you about this, because you've got one guy saying, look, it's about speculators who really messed up the price and we can bring it way down. And then you have the other guy saying, no, look, we've got to drill. Is there something in the middle, I mean, here?

JAVERS: Yes. And, well, there are problems with both approaches, right? I mean the question with drilling is, whether the stuff you drill out of the earth now actually affects gas prices at the pump any time in the next couple of years. There's real questions about whether that would actually help in the immediate short-term here in the next couple of months when people are really concerned.

On the other side, there are questions with what Barack Obama is saying, too, about these oil speculators. A lot of folks in the economics world think that what's going on with gas prices here is driven by supply and demand. China, India coming online, sucking up huge amounts of oil, that's what's driving the rise in gas prices, not whatever's going on in the speculative oil futures market, although that might have some smaller impact.

So there are problems here with what both politicians are saying. But, look, it is the season of campaign promises. We've heard this before and we hear it every four years.

SANCHEZ: I was just hearing the -- help me out here, the former CEO of General Electric, who was on the air the other day and -- Jack Welch.

JAVERS: Right.

SANCHEZ: And he was saying, the only reason our economy is not in total disarray and shambles right now is because of the stimulus package. Which makes me think, what happens when everybody spends that money? Are we going to need another stimulus package?

JAVERS: Well, there's talk of another stimulus package. Barack Obama came out today with a proposal that would send every worker $500, every family $1,000 as sort of a rebate from the oil companies. He would pay for this by what's called a windfall profits tax on the oil companies and that would be designed to sort of offset your costs of increased gas at the pump.

So there's talk of more stimulus packages to come here. But if the last one had worked, you know, maybe we wouldn't be in a situation where this recent jobs report was so terrible and disastrous where economic growth hasn't been as anemic as it's been recently (ph).

SANCHEZ: Yes, but hold on, couldn't we be much worse if it hadn't?

JAVERS: I could be. It could be.

SANCHEZ: In other words, as bad as it is, imagine how bad it could be.

JAVERS: Right. And far be it from me to second guess Jack Welch. I mean, you know, it could be a lot worse.

SANCHEZ: He probably has a little more money than both of us, huh?

JAVERS: Yes, exactly. Put together.

SANCHEZ: Three economic things that you're going to be hearing endless comments about as we get closer to November. What are they?

JAVERS: Yes, I think you're going to hear a lot about taxes. Everything is going to be about taxes. McCain's going to try to frame Obama as a tax raiser. Obama's going to try to say that McCain is for these tax cuts for the rich. That's one thing.

SANCHEZ: Right.

JAVERS: The second one is, you're going to hear a lot about trade. Barack Obama wants to go in and renegotiate the NAFTA free trade agreement. John McCain thinks it's fine and actually traveled to Colombia to emphasize the benefits of global trade. So that's one that you're going to hear.

And then gas prices. As we've heard this week, we're going to hear a lot about gas prices. These are three issues that really hit voters in the gut and you're going to be talking about them, you know, every day between now and November. I guarantee it.

SANCHEZ: The good thing is, both of them can pronounce the word "nuclear."

JAVERS: Yes. Well, it's better than me. I don't think I can pronounce it, especially on live TV. Nuclear.

SANCHEZ: No, let's go with nuclear. Let's make that the standard now.

JAVERS: OK. Fair enough.

SANCHEZ: Oh, that's too funny. Thanks so much. We appreciate Eamon Javers joining us now from politico.com.

A fat cat in foreclosure. By now we've heard all the princess chunk. Well, we're going to tell you how 44-pound famous feline landed on the street. Can you imagine? Look at the size of that thing. Also, some are struggling to feed their pets these days. But now a place for them to turn to. That and a whole lot more next on ISSUE NUMBER ONE.

(COMMERCIAL BREAK)

SANCHEZ: That overweight -- boy is that thing big. The overweight cat that became an overnight sensation this week is an apparent victim of the nation's mortgage mess. You knew we had to figure out a way to get this story into this, right? Here we go.

The former owner of Princess Chunk, that's the name as the cat's become known, has come forward. She says that she had to abandon this 44-pound feline after she lost her home in a foreclosure. A New Jersey shelter is caring for the cat, which is actually a male, by the way. And we're told that hundreds of people have called now hoping to adopt fatty.

All right. Here we go. Aside from -- these guys are laughing at me -- aside from some of the fat cats, four legged or otherwise, this tough economy is sparing seemingly no one. As household budgets are drained, some families really do have to make some very difficult decisions when it comes to feeding themselves or their animals. Pet food bank in Atlanta, there's one of them. At least one pet food bank is trying to make sure that it doesn't come to that by helping people who maybe even don't even have enough to feed their animals. Here's Rusty Dornin.

(BEGIN VIDEOTAPE)

RUSTY DORNIN, CNN CORRESPONDENT, (voice over): Last week, Regina Upchurch couldn't afford to fill five-month-old Shala's (ph) bowl with regular dog food. So she gave her table scraps. Upchurch does seasonal tax work and security at the local sports arena. She's raising two grandchildren. Like many others, she's strapped for cash right now.

UNIDENTIFIED FEMALE: And how about some treats?

DORNIN: But then Upchurch heard about this. The Help Save Our Pets Food Bank in Atlanta.

REGINA UPCHURCH, PET OWNER: I couldn't believe it. I said, no, nobody's going to give us no food to help me feed my baby for this month. And, sure enough, they say, yes. There wasn't no, why you need it?

DORNIN: No questions. Just enough food for one month.

The food bank is the brain child of animal lover Ann King, who knows many pet owners are suffering tough times.

ANN KING, HELP SAVE OUR PETS FOOD BANK: You're totally desperate. I mean, it really is, am I going to feed my, you know, kids here or am I going to feed my, you know, dog? And they had to like turn them in. DORNIN: Kibbles and canned food come from corporate and personal donations. King says they've helped more than 1,500 people since the bank opened three weeks ago.

KING: We're getting phone calls from all over the country asking for help and how to help set up programs in different states so they can do the same thing.

DORNIN: A realtor, Anne Taylor, has personally felt the effects of the housing crisis on her pocketbook. And that's meant cutbacks on how much she can spend on her pets.

ANNE TAYLOR, PET OWNER: I spend, I would say, about $15 a week as an average, week to 10 days. And instead of having to purchase something strictly on credit, this has given me the opportunity, again, to just to keep the quality of life for my pets.

DORNIN: Shelters in many areas are full. Pet owners had to give up the animals because they either moved or couldn't afford them.

KING: They get them to the shelters and the shelters are full, they can't take them, so they just go down the street and opens up the car door and dump them out.

DORNIN: Dave York works with the local animal shelter. Their numbers are up 20 percent this year.

DAVE YORK, ANIMAL SHELTER DIRECTOR: It's definitely, for all the years that I've been in the business, I've never seen it this bad.

DORNIN: But for people like Regina Upchurch, this small handout will help her keep her four-legged friend.

Rusty Dornan, CNN, Atlanta.

(END VIDEOTAPE)

SANCHEZ: Good story, isn't that?

Well, more Americans are losing jobs and Congress going home without addressing the energy problem, the energy policy, or the high gas prices. What do you make of that?

We want to wrap up your week knowing where you stand on the economy. We have a star-studded panel that's going to do just that. We're all over issue number one. Stay with us. We'll be back right here on CNN. Here I go to the panel.

(COMMERCIAL BREAK)

SANCHEZ: Welcome back. I'm Rick Sanchez. This is ISSUE NUMBER ONE.

Let's talk about some of the big headlines.

First of all, housing -- or, pardon me, the unemployment numbers came back today. How do they look? We're going to break that down. And then we're going to talk about housing. And then Congress goes away without doing anything about energy in this country.

Let me introduce you to these three gentlemen who are looking somewhat befuddled right now, but I guarantee you they're going to be on their mark in just a minute. Mark Zandi is with Moody's economy.com, Mike Santoli is with Barron's, and, of course, there's CNN's senior correspondent Allan Chernoff joining me once again.

All right. Let's start with the news was about two hours before we went on the air, we got the housing numbers. And some people were saying it's going to be over 6 percent. I think it was something like 5.7. So it's not as bad as it could be, but it's still bad.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: The unemployment rate.

SANCHEZ: The unemployment rate.

CHERNOFF: The unemployment rate. Yes, it is certainly a disappointment, but not a shock. You know, the economy is in bad shape. Companies are seeing their profits declining. A lot of big losses out there. We saw General Motors. They're laying off workers. It's going to continue for a while. It is a drag on the economy.

SANCHEZ: Are we hearing there's something going on with Exxon as far as -- what's going on there, Mike?

MIKE SANTOLI, ASSOCIATE EDITOR, BARRON'S: Well, Exxon reported the largest quarterly profit of any company in the planet's history yesterday. But again, interestingly, the market was disappointed with it because they have such high expectations for Exxon's ability to capitalize on high oil prices.

SANCHEZ: You made more than anybody in the history of the world, but, by golly, why didn't you make more?

SANTOLI: And actually there's an interesting reason why it didn't make more because . . .

SANCHEZ: That's crazy.

SANTOLI: Because refining gas -- crude oil into gasoline is very unprofitable with high crude oil prices. Exxon buys crude oil in the open market to push it through the pump. So that's actually where they got squeezed on profit margin.

SANCHEZ: How big is the numbers that came out this week about the deficit? I mean a lot of people -- I keep going back to this. There's a lot of people in this country who are going to say, by golly, dagnabit (ph), I pay my bills on time. I make sure me and my wife and my kids don't spend more than we really have in the bank. How come my government keeps screwing this up?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: Well, they are big. We're on track for a $500 billion budget deficit. And next year the budget deficit will be a record amount. And, going forward, it's only going to get worse because the math, the arithmetic, is extremely daunting with Social Security, Medicare and Medicaid. And really that's the big problem here. It's the demographics. The boomers are aging. They're going to start using a lot of health care. It's driving up health care costs.

SANCHEZ: Are you saying like there's no way out of this thing?

ZANDI: Well, the only way out is if Democrats, Republicans and some smart people get in a room and decide, you know, what are we going to do about it in terms of spending, taxes, and how we're going to (INAUDIBLE).

CHERNOFF: I would say there's something else that's going to get us out of all this, and that's just the economy recovering. What's going to happen at some point is, the stock market is going to turn, always anticipating better times, and what will happen is that the fat cats out there, and the people who aren't maybe that fat, the people who have money will feel better. They'll go out and spend it. That will get the economy moving again.

SANCHEZ: Yes, but here's the problem with that. We're living in a time for the last, I'd say, 20 or 30 years where people have been sitting around saying, yes, but you know what, I got my house and it's worth so much money I can always depend on that. I've seen numbers this week that say there are incredible numbers of Americans out there whose note on their house is so much more than what they put into it. They're in a hole. How are they going to be able to get themselves out?

CHERNOFF: Not those people. Those are not the people who will lead us out of this recession.

SANCHEZ: But there's so many of them.

CHERNOFF: There are lots.

ZANDI: Ten million. Ten million. There's 10 million folks. There's 51.5 million people with first mortgage debt. Ten million of those folks are under water, meaning the value of their home is less than their mortgage debt itself. And that's rising. Median house prices are still falling.

SANCHEZ: Well, because those are the people who are watching us right now and they're listening and they're hoping that there's somebody out there. You're saying, though, that the big guys are going to start investing and somehow it's going to trickle down, Mr. Reagan?

CHERNOFF: At some point. At some point.

SANCHEZ: Trickle down? Is that what it is?

SANTOLI: Well, actually, he's saying it's going to trickle up for one thing in terms of tax revenue and hopefully revive the labor market. But this is not yet the moment for the turn I would argue.

SANCHEZ: No. No.

CHERNOFF: Not yet. Not yet.

SANCHEZ: What do you guys say, by the way, because I'm hearing everything from two years, to three years, to five years to -- I heard one guy on the phone yesterday say something like a decade.

ZANDI: For what?

SANCHEZ: For us to see something change here, at least in terms of housing and the economy.

ZANDI: Well, you know, housing, in terms of price declines, another year, I think. There's just too much excess inventory out there. And prices are down 15 percent from the peak. We've got another 10 percent to go (ph).

SANCHEZ: So it's a long haul.

ZANDI: Yes.

SANCHEZ: Let's not try and quantify it, but it's a -- guys, great conversation. Wish we could keep going.

We're going to take a break. We're going to be right back. Stay with us. It is ISSUE NUMBER ONE.

(COMMERCIAL BREAK)

SANCHEZ: We asked you a question and here's what you said. The question was, where do you think the future of jobs is? That's today's Quick Vote. Here are your responses.

Thirty-five percent of you said it's going to be in energy. Thirty percent of you said it's going to be in technology. Thirty percent say it's going to be in health care. Only 4 percent of you think it's going to be in manufacturing. Isn't that interesting.

Let's get right back to the news now. CNN's "NEWSROOM" with Kyra Phillips, starts right now.