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Issue Number One
Alarming Amount of Americans Applying for Unemployment ; John McCain Addresses Jobless Americans and Energy Solutions in Ohio; Looking into Iraq Oil Revenues
Aired August 07, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CO-HOST: Nearly half a million Americans are applying for jobless benefits. What the candidates have to say about jobs in America.
Why Iraqi oil profits aren't all used to help pay for the war.
The airline industry is in bad shape, some calling for a drastic measure.
And why two big auto giants are talking about teaming up.
Issue #1 is your economy. ISSUE #1 starts right now.
From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we are all over the stories that matter to you.
Hello, everyone. I'm Christine Romans. Gerri Willis is off today.
We begin with startling numbers on Wall Street. The number of Americans filing for unemployment benefits jumping to the biggest number in six years.
Let's get you straight to the New York Stock Exchange and CNN's Susan Lisovicz -- Susan.
SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: Hi, Christine.
Well, I guess in some ways it's not a surprise when you think about the companies that have just recently announced layoffs, companies like General Motors, Weyerhaeuser, Starbucks, Bennigan's, all cutting or slashing jobs. The actual number is 455,000. Those are new applications for jobless benefits.
The four-week moving average, which is considered more reliable and important, is above 400,000, as well. And that is a recessionary red flag to many economists. Remember, the unemployment rate stands at a five-year high, 5.7 percent, and many folks think that will continue to rise because the housing market isn't getting any better -- Christine.
ROMANS: And Susan, we're learning more about just what the retail consumer is doing. We know that they're cutting back on the luxuries and they're paying just for the essentials if they can, right? LISOVICZ: Well, it's no surprise. I mean, when the jobless rate is going up and people are filing for unemployment claims, yes, it's going to curb spending. Who does best? Discounters.
So consider what Costco did last month. Its sales shot up 10 percent. Wal-Mart sales rose 3 percent, but that was lower than expected.
Everybody's talking about the end of stimulus checks and consumers continue to spend cautiously. Wal-Mart's is very close to payday. Mid-tier retailers stuck in a hard place like Gap, JCPenney, Kohl's. And even the affluent. We've seen a lot of anecdotal evidence, Christine, that they're pulling back, as well.
Saks says they're seeing weakening business trends in this quarter. And so this is a bad sign for back to school. That's like the second biggest event for retailers after the Christmas holiday. So expect to see lots of promotions, Christine, which is good for us, but bad for retailers.
ROMANS: All right. Susan Lisovicz.
Thanks, Susan.
ALI VELSHI, CO-HOST: All right. Well, what the candidates are saying about jobs, obviously a big topic of discussion today.
CNN's Ed Henry is part of the best political team in television. He's live right now in Lima, Ohio, with more.
Hello, my friend.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Ali, good afternoon to you.
John McCain has been very blunt in recent days about saying even before these new numbers that the jobs picture in the United States is very bleak right now, and that basically there needs to be a surge of new jobs. He's also been saying the country, very bluntly, is worse off now than it was four years ago.
It's rare, obviously, for a Republican candidate in this case to say that about his own sitting president, President Bush. But it's obvious that John McCain's got no other choice but then to try to separate himself from the president, from this economy, if he has any chance of beating Barack Obama.
And the key is, in a substantive way, John McCain has to now, in these town hall meetings like the one that's just beginning behind me here in Ohio, lay out for the American people, what would he do in a substantive way differently to try to fix it? He's laying out in part a plan to cut individual and corporate taxes, try and spur the economy.
Also, secondly, he's trying to pivot of off all of this, to say in a more broad way that he believes Washington is broken, can't fix the economy, can't fix the energy situation, and that Barack Obama is not experienced enough to effect that change. But John McCain believes he can.
The challenge, of course, for McCain is that Obama keeps pointing out John McCain has been in Washington for 26 years, so why are we at this situation right now? The key for John McCain then is to come back and try to restore that maverick reputation he once had rather than one as a Washington insider -- Ali.
VELSHI: All right, Ed. And you're right outside of that town hall. Let's go inside and listen to Senator John McCain in Lima, Ohio.
(JOINED IN PROGRESS)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I need your help. I need your support. And we can win in November if we can carry Ohio and Lima. And I need you. And I'm asking for your support.
(APPLAUSE)
And by the way, I wish Senator Obama was here with me today, because I've asked him to come with me to the American people in a town hall meeting, one I think the most beautiful part of democracy, the best part of the process, because after I make relatively brief remarks -- remember, I'm a senator -- but relatively brief remarks, I want to do what's important about a town hall meeting, and that's respond to any questions or comments you might have for me.
And before I go any further, there's no more patriotic part of America than right here. And I'm honored. I'm honored and grateful for the presence, not only of Admiral Tom Lynch (ph), but every veteran who is here today and comes from this state.
(APPLAUSE)
Would you raise your hands so that I can say thank you, thank you for your service? Thank you.
Just stand up, will you? Just stand up, please. Thank you. Thank you. Thank you and God bless you, and thank you for being here.
Thank you. Thank you, sir. Thank you, and God bless you.
It's pretty obvious to me we have veterans of every war here. And thank you to our greatest generation, and thank you to our Iraqi war veterans. I'm very grateful.
Now I'd like to speak to you very briefly about the issues that are at stake in this election and about the choices we face.
Now, my friends, you may have noticed that I've been called a maverick. Sometimes it's meant as a compliment, sometimes it's meant as a criticism, sometimes worse. But what it really means, that I understand who I work for. I don't work for a party. I don't work for a president. I don't work for special interest. And I don't work for myself.
I work for you and the country we love. That's who I work for, and that's who I'll work for as president of the United States.
(APPLAUSE)
I spoke up against the administration for the mistakes in Iraq. I fought for the surge strategy that's going to bring our troops home with victory and honor not in defeat, but with victory and honor. I spoke up.
(APPLAUSE)
I spoke up against out-of-control spending. I spoke up against the administration and Congress and Senator Obama when they gave us an energy bill with more than giveaways to big oil and really no solution to our energy problems.
I want to take a minute here on this issue because I think Senator Obama might be a little bit confused.
Yesterday, he accused me of having President Bush's policies on energy. That's odd, because he voted for the president's energy bill and I voted against it. I voted against -- it had $2.8 billion in corporate welfare to big oil companies, and they're already making record profits, as you know.
Senator Obama voted for that bill and its big oil giveaways. I know he hasn't been in the Senate that long, but even in the real world, voting for something -- voting for something means you support it and voting against something means you oppose it.
Anyway, my friends, just like on the energy bill, I've argued for reform and change in Washington for years, and it hasn't made me friends. It hasn't made me friends in Washington.
My friends, I was not elected Miss Congeniality again this year. But I don't answer to them, I answer to you. I answer to you.
You will always know exactly where I stand and you will always know, no matter what, I always do what I believe is right for our country. I will put my country first. If there's anything you take from this meeting, I will put my country first.
(APPLAUSE)
For his part, Senator Obama is an impressive order. I applaud his talent and I applaud his success. All Americans should be proud of his accomplishments.
But Washington is full of talented talkers, my friends. And unfortunately, on issues big and small, what Senator Obama says and what he does are two different things. Senator Obama says he's going to change Washington, but his plan is to raise your taxes and spend more of your money. It's not my idea of a solution of what troubles Washington. In fact, it sounds a lot like the problem.
In the few years he's been in the Senate, he has requested nearly $1 billion in earmarked pork barrel spending. That's $1 million almost for every day that he spent in office.
We need to end this out-of-control spending in Washington, and when I'm president, we will stop it. And I'm proud to stand before you to tell you that I have never asked for nor received a single earmarked pork barrel project for my state. I'm proud of it.
I will veto. I will veto.
(APPLAUSE)
I will veto every pork barrel bill that comes across my desk. I will make them famous, and you will know their names, my friends. You will know their names. We will stop this corruption.
(APPLAUSE)
We'll stop this corruption in Washington. And it is corruption. Former members of Congress now are residing in federal prison because of this system.
You know, I often steal a lot of lines from Ronald Reagan. Ronald Reagan used to say, "Congress spends money like a drunken sailor, only I never knew a sailor drunk or sober with the imagination of Congress." That's a pretty good line. It gets a laugh.
I use it so often -- I'm not making this up -- I received an e- mail from a guy that said, "As a former drunken sailor, I resent being compared to members of Congress." You know, you can't blame him. You can't blame him.
(APPLAUSE)
Senator Obama says he'll only raise taxes on the rich, but in the Senate he voted for tax hikes that would have impacted people making just $42,000 a year. He's proposed increases on income taxes, capital gains taxes, dividend taxes, Social Security taxes. Pretty much anything you can tax, he wants to tax more.
We have, my friends, the second highest business taxes in the world. Second highest. And Senator Obama thinks the way to keep jobs here at home is to make taxes higher. Raising taxes in a bad economy is the worst thing that you can do, because it will kill even more jobs and send more jobs overseas.
What we need are policies that create jobs. What we need is an economic strategy, an economic surge, a successful economic surge to keep jobs here at home and create new ones. And I don't have to tell anybody in Lima, Ohio, I don't have to tell anybody how tough things are. I don't have to tell you how difficult it's been. And I want to look you in the eye and tell you that I'm going to restore our economy, and I'm going to restore it in the heartland of America, and we're all going to be part of a team in a bipartisan fashion that gets it done.
(APPLAUSE)
We need to open new markets to U.S. products. We need to reduce the cost of health care. We need to end the out-of-control spending that's putting the debt on the backs of our children and our grandchildren. That's unconscionable.
Senator Obama says he wants energy independence, but he's opposed to new drilling at home, he's opposed to nuclear power. He said the high cost of gasoline doesn't bother him, only it just rose too quickly.
Tell that to the people that are driving the oldest automobiles the furthest to work. Tell them that the only problem is the price of gas rose too quickly.
He actually thinks that raising taxes on oil is going to bring down the price at the pump. He's claiming that putting air in your tires is the equivalent -- is the equivalent of new offshore drilling. That's not an energy plan, my friends. That's a public service announcement.
My friends, we need to...
(APPLAUSE)
We need to drill offshore here and now. We need to drill offshore, and it can affect the price of a gallon of oil -- of gas.
And my friends, when we exploit and find these new reserves of oil off our coast, it will reduce the price of a barrel of oil. That's just a fact. When you increase supply, obviously the price of whatever it is is going to go down.
So we've got to do it, and we've got to do it quickly. We don't have to wait.
And by the way, Jim mentioned with an energy crisis, with people in this room deciding how they're going to be able to go and fill up their gas tank and do the things that they planned on doing in this month of August, Congress does what? They go on a five-week vacation. A five-week vacation, and not address the energy crisis that's facing this country.
And by the way, the speaker of the House of Representatives will not allow a vote. Will not allow a vote on offshore drilling. Is that democracy? I don't think so. I don't think so.
So, my friends, when I'm president of the United States, I'll call them back into session and I'll keep them there until they get the work done, get the job done for you.
(APPLAUSE)
Now, we all agree, we need to aggressively develop advanced alternative energies: wind, solar, tide, and biofuels. But we also need to understand that the United States of America's sitting on the world's largest coal reserves.
Clean coal technology is part of our energy future. And, my friends, a lot of that is here in the state of Ohio, as we know, and in the heartland of America.
Clean coal technology, we can invest money in acquiring that technology, developing it, and creating thousands of jobs here in the heartland of America. We can do that.
And by the way, we need to stop sending $700 billion a year to countries that don't like us very much. Some of that money ends up in the hands of terrorist organizations, and it's got to stop. It's got to stop. It's got to stop.
(APPLAUSE)
Thank you, sir. Thank you. We'll give you a schedule of our next town hall meeting. We look forward to having there.
And by the way, finally, my friends, in Iraq, Senator Obama says he wants peace. But today, he still will not acknowledge that the surge has worked and that Americans are winning, and we are going to come home with honor and with victory and not defeat. Remarkable.
(APPLAUSE)
His policy -- his policy of unconditional withdrawal regardless of the facts on the ground could result in renewed violence and a third Iraq War. My friends, I'm proud of this success, but I also want to say again, al Qaeda's on the run, but they're not defeated. OK? Let's make sure of that.
You will see more of these spectacular -- tragically, more of these spectacular suicide bombings. Don't underestimate the nature of the enemy. And thank God for the service of the brave young Americans that have done so much in uniform in this country.
(APPLAUSE)
Behind all the words, Senator Obama's agenda can be summarized as this: Government's too big. He wants to grow it. Taxes are too high. He wants to raise them. Congress spends too much, and he proposes more.
We need more energy, and he's against producing it. We're finally winning in Iraq, and he wants to forfeit.
The bottom line, Senator Obama's words, for all their eloquence and passion, don't mean all that much. And that's the problem in our nation's capital today.
It's not just the Bush administration and it's not just the Democratic Congress. It's that everyone in Washington says whatever it takes to get elected or to score the political points of the day. And that's the problem in Washington.
(APPLAUSE)
We don't need another politician in Washington who puts self- interest and political expediency ahead of problem-solving. We need to start putting our country first and come together to keep American families safe and help them realize their dreams for a better life.
Now, my friends, before we start our discussion, which is so important, I just want to tell you this. We will disagree on specific issues. We should. We need to have the dialogue and discussion in America. I learn more from my encounters with you than I can ever tell you.
These are tough times for America. And I want to tell you there have been times in my life when I've had the opportunity to put myself or my ambitions first. But I have always put my country first. And even if we disagree, I will put my country first.
I'm proud to be here. Thank you.
I'm proud to be in Lima, Ohio, proud to be with the Lynches (ph) and with Congressman Jordan. And I'm most proud to be with you.
Thank you very much. And God bless you. And God bless America.
Thank you.
(APPLAUSE)
VELSHI: And that's John McCain in Lima, Ohio, speaking to a crowd, getting a standing ovation from them now that he's finished the initial part of his remarks. He's going to open this up to questions and we're going to keep an eye on this. We may be staying with this for questions.
But even when we leave a live event like this, you can always go to CNN.com/live and follow these speeches, because they are important to listen to. In this particular case, Senator McCain has been speaking a great deal about energy and energy policy and what he would do to change things. He's opening up to questions now.
MCCAIN: We have work release program persons here.
You want to give her the mike? There you go. Thank you.
UNIDENTIFIED FEMALE: I have like a double question. How come you don't respond more aggressively to not just Obama's questions, but some of the media questions when they accuse you of flip-flopping, when mostly what you do is listen to your constituents, and then because you listen to them, you change your mind? Specifically like on immigration, the fuel -- the fuel, economy and so forth. And then instead of -- you don't get -- you don't get negative, but you just don't respond aggressively enough.
MCCAIN: Well, let me just say that there's a careful balance. Really. There's a very careful balance between responding to attacks which were initiated a long time ago by outfits like MoveOn.org and others, the left wing liberal outfits, and at the same time, setting the positive agenda for the future of this country.
So it's a very careful balance you have to maintain. And I think when -- what Americans really want, what they really want to hear, is how are we going to fix these problems? How are we going to keep them in our homes?
How are they going to keep health care? How are they going to keep it affordable and available? How are we going to reduce this energy independence, which is environmental and economic and a national security issue?
So it's a careful balance between the two.
And could I just mention, on the issue of offshore drilling, of course. I mean there's people in this room that may be a year or two ago didn't care that much about offshore drilling, much less support it.
But when we saw the price of a gallon of gas go up over $4, we said, look, what are our options here? What are our options? And one of our options has to be offshore drilling.
And by the way, on that subject, on that subject, I met with a group of independent petroleum executives. And they said -- despite what you'll see from others -- but the people in the business said using existing capabilities and facilities we have, within months we could increase, within months. It's their statement, not mine, that we could increase our supply.
(APPLAUSE)
And in a period of a year or two -- in a period of a year or two, we could see significant increases. And my friends, if they say that it takes a number of years, well, let's start now. Let's start now. Why say it'll take too long when it won't?
So all I can say is -- and I'll be glad to hear your follow-up -- you've got -- Americans want to hear positive things. Americans are very pessimistic now. Americans want a restoration of hope, of trust, and confidence. So you can't get into this game where you just are going back and forth.
And also, I want you -- I want you and every person in this room that supports me to be proud of our campaign at the end of it. That's a very, very highly important thing to me.
VELSHI: John McCain in Lima, Ohio. He was just answering a question about why he doesn't fight back more aggressively when he's accused of flip-flopping. He was giving an answer to that.
He also was pointing out a centerpiece of his campaign, that offshore drilling will result in a lower price of oil and gasoline in a matter of months, not years, as some of the critics of that plan have said -- Christine.
ROMANS: Ali, on the other side, Senator Barack Obama has also spent a great deal of time on the jobs issue, on energy, on Americans' independence on the oil front.
CNN's Jessica Yellin is live in Washington with more on jobs in particular.
Hi, Jessica.
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Hi, Christine.
Well, Senator Barack Obama's economic policy director has put out a statement already about the latest jobs information. And I connected with the Obama campaign. Jason Furman (ph) is their director, and he says, "The latest statistics are yet another sign of how dire the economic situation is for millions of Americans without a job, and the millions more who are struggling to pay the bills."
This is where they take a ding at Senator McCain. He says, "Senator McCain may believe that we've made" -- quoting McCain -- 'great progress' economically over the last eight years, but Barack Obama believes Americans are hurting like never before and that we must act now."
Well, the jobs issue is a sweet spot, if you will, for the Obama campaign, because one of his most aggressive attack lines is that America needs a new economic future, and that he really has a solution that represents real change. It plays into the whole message of his campaign. And he has proposed both what they're calling short-term and long-term solutions.
Let's listen to what he said -- he outlined as one of his short- term solutions to put more Americans back to work.
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: We need to start rebuilding America. Rebuilding our roads, rebuilding our schools, rebuilding sewer lines and bridges and water systems. And we could put people back to work right now who many may have been laid off of construction jobs or other manufacturing work. And not only would that create immediate job growth, but it would also spur on more economic activity for people who supply contractors. You need cement, you need steel, you need big machines, and now suddenly that can help to kick-start the economy.
(END VIDEO CLIP)
YELLIN: So, Christine, he's proposing a $50 billion immediate stimulus, which the campaign says would create a million jobs right away. And then part of the long-term solution is transitioning to a green economy, which would create new green jobs and give people opportunities to job train, which would be a twofer, if you will, help the environment and reduce our dependence on oil, and also create this new economic base for all these employees who would work in this economy.
So a very effective area or an area that Barack Obama likes to be talking about is this jobs economic topic.
ROMANS: Especially since economists are saying that a half a million jobs could be lost before this particular slowdown could be over.
Jessica Yellin.
Thank you so much, Jessica.
VELSHI: All right. Iraq is making a whole lot of money on oil, so why is it not being used to pay for the war there?
Plus, what is market manipulation? And why are some people saying it is to blame for sky-high gas prices?
We're covering issue #1 for you, right here on CNN.
(COMMERCIAL BREAK)
ROMANS: Here are some numbers for you. American taxpayers have spent nearly $50 billion rebuilding Iraq since 2003. By the end of this year, Iraq will have amassed nearly an $80 billion surplus thanks to soaring oil prices.
Shouldn't one erase the other?
Brianna Keilar is live right now in Washington -- Brianna.
BRIANNA KEILAR, CNN CORRESPONDENT: Well, Christine, Iraq's projected oil revenues in this new report by the Government Accountability Office has many people wondering why the U.S. has picked up so much of the tab for reconstruction.
(BEGIN VIDEOTAPE)
KEILAR (voice-over): Record high oil prices. A pain at the pump for Americans, but a windfall for the Iraqi government. A new report says Iraqi oil revenues since 2005 could total up to $169 billion. With the U.S. government on the hook for almost $50 billion in more reconstruction costs, members of Congress are fuming.
UNIDENTIFIED MALE: This is not rocket science. They've got tens of billions of dollars of surplus in banks around the world. $10 billion in American banks alone. They wrote a check to get that money into the bank. They could write a check to reimburse us for these reconstruction costs.
KEILAR: Shortly after the U.S. invaded Iraq, a top Pentagon official told Congress rebuilding would be paid for with oil money.
UNIDENTIFIED MALE: There's a lot of money to pay for this. It doesn't have to be U.S. taxpayer money.
KEILAR: But it didn't happen that way. Since 2003, the United States has largely funded security, as well as infrastructure for oil, water, and electricity in Iraq. Now news that Iraq has projected to have a surplus of as much as $80 billion this year. But White House Spokesman Tony Fratto said Iraq is now footing most of the bill for rebuilding and dismisses suggestions that Iraq reimburse American taxpayers.
TONY FRATTO, DEPUTY WHITE HOUSE PRESS SECRETARY: The reimbursement to the United States is that we will have a long-term ally that will stand with us in this very critical part of the world.
(END VIDEOTAPE)
KEILAR: And an Iraqi lawmaker told CNN that Iraq needs to set aside that surplus money in case the price of oil, which is Iraq's primary source of revenue, drops significantly. But, Christine, still a lot of folks in Congress very exasperated with the numbers in this report.
ROMANS: Sure.
Thanks, Brianna.
For the 21st consecutive day, gas prices have fallen. According to AAA, the price per gallon went down another penny overnight, giving us a new national average of $3.85 for a gallon of regular unleaded. Diesel is down 2 cents from yesterday. It's now about $4.61 a gallon. But diesel fuel still reflects a 56 percent jump in price from this time last year.
VELSHI: All right. Well, there's a lot of blame going around about who or what is responsible for these rising oil prices. Our next guest says it's not the headlines or supply and demand or the U.S. dollar, it's a case of market manipulation. Robert McCullough is an energy analyst and managing partner with McCullough Research. He's got a lot of experience in this area.
Mr. McCullough, thank you for joining us.
You've studded Enron. You've studied the natural gas, trading. So you've got a bit of a history in studying market manipulation and its effect on the prices of energy?
ROBERT MCCULLOUGH, ENERGY ANALYST: I've been at this for many years. Almost 30 at this point.
VELSHI: Now, tell me, you have -- I've read your research and I must say it's very thorough. But a guy like me is not going to understand it all that well. I get the sense, and tell me in plain English if this is true, you are saying, supply and demand, the low U.S. dollar, do not explain the price surges that we've seen in the price of oil, particularly in the months from -- in the beginning of June to the beginning of July. The surges were so great and there was no logical explanation for it.
MCCULLOUGH: Absolutely. For an economist, we'd like to see a case study, an example of something where we can actually check the numbers. Starting in June, we had a massive increase in the price of oil. All the way up to $146. That was the peak on July 3rd. Since then, the price of oil has fallen back down to $120.
So the question someone has to ask is, what happened in June and July? The answer is, very little. We checked the impact of the Saudi oil expansion announcement. That had very little impact. We also checked the Russian production data. That had very little impact.
VELSHI: So, in fact, your research indicates that the things that happened in that one month, if it were a supply and demand issue, the market would have responded by oil prices being lower?
MCCULLOUGH: Absolutely. The interesting thing about the Saudi announcement is the prices continue to increase after they announced increased production. That simply goes against the grain.
VELSHI: OK. So what then, or who, is to blame? If you think that by process of elimination you've arrived at, look, it's not fundamental, it's not supply and demand, it's not really the dollar, it's not manipulation, who, theoretically, is manipulating this or who is manipulating this?
MCCULLOUGH: Well, the first thing is, the oil industry is far more concentrated and we now have a variety of very large players. CFEC (ph) data indicates that one trader has a position of $18 billion sometime in this year. Those numbers are so large they enable people to make swings in prices.
The best model we would recommend is the Enron manipulation of natural gas from July 2001 seven years ago. At that point, they were large enough that they were able to run up spot prices, convince people the long-term prices were much higher, sell long-term contracts, use the proceeds to pay for their losses in the spot market.
Now, that model says we would see rapid spikes, rapid increases and rapid decreases, without ties to fundamentals. That's potentially what we saw these past two months.
VELSHI: One of the things you arrive at in your report is that there's just -- it's very unwielding the way the energy markets are regulated. And if somebody were to be trying to manipulate it, they could probably get away with it just by virtue of the fact there's to many agencies and they don't keep track of the right stuff. You think some of this could be solved if the government just got itself together and created a single form of regulating and overseeing the energy market or the oil market?
MCCULLOUGH: Absolutely. There are to many cooks in the kitchen and they didn't bring their utensils. We collect very little data. The different agencies have conflicting agendas. They don't, in fact, have a full set of data. And point of fact, we know more about almost every fuel that an American buys than oil. Electricity, gas, coal.
VELSHI: OK. Well, this is a great discussion. And we can have more of it, I hope, in the coming weeks and months as this issue isn't going away.
Robert McCullough, thanks very much for sharing some of your research with us.
Christine, a very interesting discussion.
ROMANS: Sure is.
All right, the economy on the campaign trail. How the candidates are connecting with the voter. That's next.
Plus, big issues with the airlines have some asking if now's the time to take some drastic steps. We're on it.
You're watching ISSUE #1, the economy, on CNN.
(COMMERCIAL BREAK)
ROMANS: The housing market is seeing a very small increase in the latest pending home sales report from the National Association of Realtors, rebounding from a very disappointing May to a 5.3 percent jump in June. Pending home sales reflect the number of homes under contract for sale.
VELSHI: Well, jobs and energy. Big topics on the campaign trail. But are the candidates connecting with voters? Rick Newman is with "U.S. News & World Report."
Rick, welcome. Thank you so much for being with us.
RICK NEWMAN, "U.S. NEWS & WORLD REPORT": Hi, Ali.
VELSHI: They certainly are trying to connect with the voters.
NEWMAN: They are.
VELSHI: I mean this is all they are they're talking about right now. It is issue #1 on the campaign. What's working, what's not working for these candidates?
NEWMAN: Well, we're three months from an election, which means it's time for sort of make believe quick fixes on things politicians can't really do that much about. So everybody wants to say how we're going to lower gas prices. We've had the Bush administration trying to do this. Gas prices have been going up, not down. Now we've got proposals from both Obama and McCain saying that we're going to do these things like release some oil from the Strategic Petroleum Reserve to try to bring down prices, talking about offshore drilling to try to bring down prices today. These are generally things that are either a drop in the bucket that will make practically no difference today or are going to take years before they make any impact on the oil market.
VELSHI: Rick, if this were a crisis in and of itself -- energy, housing, the economy -- it would only be multiplied by the fact that we have an election. So it's going to reach crisis pitch. Does that lend itself to better, more real solutions as we get closer to Election Day or more desperate, possibly cynical moves to get votes?
NEWMAN: Cynicism in the campaign. Come on, Ali. How can you possibly be saying that on TV?
I think that both candidates have some good ideas for energy reform in their energy plans. These are just not things that anybody can do in a month. You know, for instance, calling Congress back to pass a law to allow offshore drilling. That's going to do practically nothing to lower gas prices today. This is just one of those things. It's like trying to control the economy. Politicians just have very few levers to do this, and even few levers with a product like oil that's traded on the international markets.
VELSHI: But that's not what our viewers or your readers want to hear. They are still struggling . . .
NEWMAN: Of course not.
VELSHI: I mean with the great discount in gas, it's still $3.80 something, oil is still $120 a barrel and they'd -- it could work for the candidate who says, I have a quicker solution.
NEWMAN: There's still a big disconnect among many consumers who, they want to do the right thing in terms of buying a more efficient car or a more environmentally friendly car, but they want it to be cheap. And I think what we're discovering is, it's not necessarily cheap to do these things. In fact, one of the things that might actually break our dependence on oil is if gas stays expensive and perhaps even becomes more expensive because that means the alternatives to cheap gasoline or cheap internal combustion engines suddenly become a lot more appealing and there's a lot more incentive for automakers to make breakthrough electric cars, breakthrough plug- in hybrids and maybe even a hydrogen car that doesn't run on fossil fuel at all.
VELSHI: The American voter is a lucky player in this election because whether it's taxes or healthcare or all of these things, there are distinctions between the candidates. But what I am hearing is a campaign about energy, that is going to resolve more and more about offshore drilling.
NEWMAN: Right.
VELSHI: John McCain, once again a few minutes ago, he just keeps hammering away at the fact that that is the solution. He just said again, it could be a matter of months before there's more oil on the market, not the years that his critics are saying. Is this going to be worth what it comes down to?
NEWMAN: Well let's say there is more drilling in U.S. waters, that puts more oil into the market, more domestically-priced oil. Even if that does bring the price down, we're just going to stay with oil. I mean, gas prices come down to $3, maybe $2.50. Who wants a hybrid anymore?
VELSHI: We start looking at our own cars again.
NEWMAN: Who want an electric car? Who's going to invest the money in batteries that you can charge in your garage if gasoline is really cheap? It goes away as an issue and not much will change.
VELSHI: America has done very well with its back against the wall sometimes.
Rick, good to see you.
NEWMAN: Thanks, Ali.
VELSHI: Rick Newman from "U.S. News & World Report."
ROMANS: All right, Ali, we've talked about business troubles in the airline industry. Now some are saying it's time to take drastic steps.
And we're talking jobs in America. More specifically, the security of your job.
ISSUE #1 rolls on next.
(COMMERCIAL BREAK)
ROMANS: It's a rough year for the airline industry. High fuel costs are hurting their bottom lines while customers are furious with new fees for everything from drinks, to baggage, to pillows. As the airlines struggle to cope, some are wondering if it's time for an industry overhaul. Bill Tucker reports.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT, (voice-over): Between flight delays -- in June, 30 percent of all flights were delayed -- luggage delays, checked baggage charges, most airline passengers have reached their limit.
UNIDENTIFIED MALE: It is very frustrating. And it's unacceptable to me.
KATE HANNI, FLYERSRIGHTS.ORG: Most passengers are saying, just charge me for the ticket, charge me for the cost of an actual flight and don't charge me for my bags.
TUCKER: The fees don't end there. There are charges for eating and drink. Even charges for a pillow and a blanket. The industry calls it a la carte pricing. It's a big change from the traditional pricing of tickets but it means the cost of a flight can be significantly more than the cost than just the ticket. CAPT. JOHN PRATER, AIR LINE PILOTS ASSOC. INTL.: This system is not working. We need a conference just like we do on scheduling practices and capacity of airplanes. Let's put one together on pricing of the markets.
TUCKER: In the past six months, the number of flights flown has been cut by more than 8 percent. By the end of this year, the Airline Transport Association says about 100 smaller airports have lost or will lose at least one commercial airline. About 30,000 jobs will be lost. And no one knows where the price of fuel will be, but it was up 70% percent from January through July. Already this year, nine airlines have gone out of business and two were in bankruptcy protection while they reorganize.
VAUGHN CORDLE, AIRLINE FORECASTS: Financial distress is quite dramatic today. We estimate the industry will lose over $6 billion this year at $120 oil. And the balance sheets will take many years to recover. They can't put money back into the competitive resources. So customer service will actually get worse.
TUCKER: The situation is so bad, there were some that were calling for the re-regulation of the airlines, or perhaps for a government takeover of the industry.
(END VIDEOTAPE)
TUCKER: There is one exception, Southwest Airlines, which is advertising that they have no add-on fees. They're different because of oil price hedging as a result of trades mostly made years ago. Southwest says they've paid about $51 per barrel for 71 percent of their fuel needs this year instead of, Christine, the current price of about $120 a barrel.
ROMANS: And, let's see, Congress is out for the next five weeks. I could imagine the industry would really like some sort of comprehensive energy policy to pull prices down.
TUCKER: They would like energy stabilization. They need to know what their fuel costs are going to be, ideally lower, but they would like them to be stabilized.
ROMANS: All right, Bill Tucker.
Thank you so much, Bill.
VELSHI: All right. We're talking about fuel. It's a question everybody wants answered. Will gas prices keep falling? We'll take a closer look.
And check this out. We're going to help out your love life. Important information on couples and money that you are not going to want to miss. We are all over it.
ISSUE #1 right here on CNN. Stay with us, love birds.
(COMMERCIAL BREAK) ROMANS: Oil prices, gas prices, jobs in America, common concerns for just about all of you out there. Let's get right down to it. Jack Otter is with "Best Life" magazine, Hilary Kramer is an AOL money coach and Steve Hargreaves is with CNNMoney.com.
Let's start first with energy prices. Twenty-one days now of lower gas prices. Does it continue?
STEVE HARGREAVES, WRITER, CNNMONEY.COM: Yes, probably. Oil prices have held steady around, you know, $120 or so a barrel. And wholesale gasoline prices are down about 50 cents. And so it takes a little while for that to catch up at the pump. But over the next couple of weeks, I would expect gas prices to continue falling.
ROMANS: A little bit of relief. But we know from this week that people are tapping into their savings, tapping into their CDs and their money markets to pay for the rising cost of their life. People have got a lot of deep digging to still do even though the prices are coming down a little bit, don't they?
HILARY KRAMER, AOL MONEY COACH: That's right. Because it's more than just energy prices. It's commodity prices in general. What's happening in the supermarkets and what -- all across the board in any kind of, especially, discretionary spending, prices are up, even in the cheapest of the supermarkets and even in the fast food stores.
ROMANS: What we do know is, we know that there are a little bit of home sales purchased -- the homes market getting a little bit better in the most recent months. Is it enough, Jack, to get excited about a rebound in the housing market? Or is this just a transition?
JACK OTTER, DEPUTY EDITOR, "BEST LIFE": I hate to be the wet blanket, but I don't think so at all. The probably with those early reports, most of them compared the good number with May, which is when kids are still in school and people aren't buying as many houses. If you compare this June to last June, we're down 12 percent. And that's the real number. So I'm afraid -- and also, people need to keep in mind, the housing market is not like the stock market where you can go up 300 points in a day. The housing market is illiquid. People don't want to sell their house for less than they think it's worth. So these things are going to go on for a while. I'm afraid we're not at the bottom yet.
KRAMER: Right. And the other problem with housing is that when you hear statistics, you look at it in a bubble. The bigger picture is that prices continue to drop.
ROMANS: Right.
KRAMER: OK. So if you have a house for sale in certain areas of the country, you're going to get 20 percent or less than you would have 12 months ago. So other statistics about sales and volume doesn't really matter.
ROMANS: Which is why we're starting seeing even more of the financial institutions freeze up those HELOCs because they can't value your house to tell you that, oh, yes, you can take $50,000 out to send your kid to college. That's a lot of trouble if you think that you're going to be able to use that money for a big purchase.
OTTER: That's the problem with bubbles is that, one the way up, everything gets inflated too much beyond its value, and then on the way down, everything gets locked out even to an unreasonable degree. I mean, if you own a home, if you've owned it for the past 10 years, you are way up in value. There's probably not much risk there. But still, when markets freeze, markets freeze and even good deals don't get done.
ROMANS: Is now a time to buy a house? And for who would it be a good time to buy a house?
KRAMER: Well, I've always said it's a perfect time to buy a house if it's for the long-term. If you're talking 20 years or more. Especially now it's a great time because you can buy someone else's upgrades. You can have a house for $300,000 but someone put another $300,000 in renovating and you can pick that up for let's say $300,000. So then therefore it's the right time.
But don't try to be a speculator in this market because we have a liquidity crisis. We don't have any money on the street. So individuals can't borrow money, corporations, banks, large organizations. So don't just buy because you think you're going to make money. This could be just the very, very beginning of the crash.
ROMANS: Gee, those days are over when people uses their houses as an ATM. But people who planned on using the equity in their house to send their kid to college or to help their older parents retire, that's something that could really be a crunch going forward.
HARGREAVES: Right. Definitely. And it's also more expensive to buy a house now. You know, mortgage rates have been going up. And, you know, lots of banks won't do that 10 percent mortgage anymore. So people have to go out and get private mortgage insurance.
ROMANS: Quickly on jobs. Another 455,000 people lined up for unemployment benefits for the first time. There's some statistical noise in there, as they call it. But that's a whole lot of folks lining up every week to get jobless benefits. I mean, is the worst behind us or ahead of us for the job market?
KRAMER: I believe it's really ahead of us. Now that doesn't mean that we're not going to come out of it and have, you know, a rip roaring economy and a bull market again. But for right now, everyone should have money set aside and should have an emergency fund of at least 12 months of your base needs and your family emergency expenses set aside because there could be a lot more layoffs coming.
OTTER: It's important to note that it's a 140 million workforce out there. So 455,000 is awful for every single one of those people. But in the big picture, 99.5 percent of people kept their jobs.
ROMANS: All right. Jack Otter, thanks so much, "Best Life" magazine, Hilary Kramer and Steve Hargreaves. VELSHI: All right. Couples and money. Dangerous territory. But there are ways to navigate through it. You won't want to miss this. Back in a moment with more ISSUE #1 right here on CNN.
(COMMERCIAL BREAK)
VELSHI: Couples and money. They go together like oil and water. Money is the number one cause of stress and disagreement in relationships, even in a few TV relationships.
ROMANS: That's right. But our next guest says, hey, you know, you can make this work. Alison Brower is the executive editor of "Redbook" magazine and joins us here.
You know, Ali and I would not make a very good real life couple because we are very different on money.
VELSHI: Right.
ROMANS: I'm conservative. He's a little more -- I mean look at his suit.
VELSHI: A little looser with the money.
ALISON BROWER, EXEC. EDITOR, "REDBOOK": Well, that's very typical. A lot of couples who have opposite spending and saving styles do get married and become attracted to each other. And that's why the problems come up, because they have very different styles.
ROMANS: What's the number one mistake? The number one mistake the couples make?
BROWER: The number one mistake that couples make is not knowing where their money goes. Not talking about it. You know, you've got two people instead of one. You're spending separately. If you don't make a budget and really focus on every bit that's coming in and out for both of you and really know where the money is going, then you're going to find yourself in a shortfall. And they just don't talk about it.
ROMANS: A lot of people don't make a budget.
VELSHI: Great tools all over the Internet, by the way.
BROWER: Absolutely.
VELSHI: Money.com has one where it tells you what's the budget. When you try and budget, you realize you miss a lot of the incidentals. Most of us spend money on things that aren't on the budget. We budget for the mortgage or things like that. People . . .
BROWER: It's not much fun to keep track of those tiny expenditures.
VELSHI: No, but they're the ones that add up. BROWER: But if you do it for two -- just a couple weeks, then you get a sense of it and then you can control it better going forward.
VELSHI: Times are tough. We've seen jobs lost. People are looking to tap into their 401(k)s because it's the last place to go in many cases. You say bad decision.
BROWER: Terrible mistake. First of all, this is your future. This is your, you know, future for when you're older. And, second of all, when you take that money out, you think it's a stop (ph) debt (ph) solution, but huge taxes and penalties when you take money out of your 401(k). And if you decide to borrow from your 401(k) and you change jobs or lose your job in this economy, your employer could demand that you repay that loan and then you're stuck all over again.
VELSHI: So you almost say get another job rather than tap your 401(k)?
BROWER: If you can find another source of income or just strip the spending down to the bone, that's the way to go. 401(k) is an absolute last resort in a serious emergency. A medical emergency or that kind of situation.
ROMANS: That's probably the best personal finance advice anybody can have is just to -- just don't raid it.
But letting the credit card bill slide, this is what couples can really get in this trap too. It's really important to keep on top of them.
BROWER: And often couples have a lot of cards, his, mine, and theirs, plus the one for the long-term expenses. Having a lot of cards makes it harder to keep track of. You can't miss those payments. If you have a real problem, call your credit card company. Often they'll work with you, especially if you've been a good customer. But I think people feel like, oh, everybody misses a payment now and again. That's not really going to help your credit score, that kind of thinking.
VELSHI: And that's one of those things. Well, right, you need great credit. Now one of the mistakes you say is people miss the due dates.
BROWER: They miss the due dates and those late fees can be $30,$40 these days. And, you know, you do that on more than one card. And then it can also send your interest rate up right away and it stays at that higher level. So those little mistakes, big cost.
ROMANS: And cash advances? No cash advances. Don't do the cash advance.
BROWER: Oh, that is the worst way to get money. They're so expensive, those fees. And over the course of a year, it could be -- you could be paying 300 percent on your money with a cash advance. ROMANS: Should one person in the couple be the financial guru and the other one take the back seat, or should you try to be co- financial pilots?
BROWER: You know what, in most cases, there's one person who's going to be in charge, and that's how it should be. But you need to have the regular check-in. Whether it's weekly or monthly, there has to be check-ins so that both people at least have a sense of what's going on. But the truth is, usually one person's a lot better at it than the other one.
ROMANS: All right. Alison Brower. Than you so much for joining us, Alison.
BROWER: Thanks.
VELSHI: And we're back tomorrow, noon Eastern.
"CNN NEWSROOM" with Don Lemon and Randi Kaye starts right now.
