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Politics and Money; Dead Zone; Talk Radio; I.O.U.S.A.; Top Financial Stories; Rising Tuition Costs

Aired August 24, 2008 - 15:00   ET


BRIANNA KEILAR, CNN NEWS ANCHOR: I'm Brianna Keilar in Atlanta. YOUR MONEY starts in a moment. NOW IN THE NEWS, dozens of people today were killed in a plane crash in Kyrgyzstan. A government official quoted by the "Associated Press" says at least 71 people when an Iranian jetliner crashed shortly after taking off from Kyrgyzstan's main aerpt. Officials say 120 people were onboard. The Boeing 737 was headed for Tehran.
A search with helicopters and sniffer dogs is underway in the French Alps after an avalanche swept down Mount Blanc. Ten people are missing on one of Western Europe's highest mountain. The avalanche was triggered by a falling block of ice. Eight people were rescued and taken to local hospitals.

Florida's governor warns that more flooding could be in store in parts of the state already hard-hit by Tropical Storm Fay, now a tropical depression. President Bush today, declared major disaster area in Florida, making the state eligible for federal funds. Fay is blamed for 11 deaths in Florida and one in Georgia.

I'm Brianna Keilar in Atlanta. YOUR MONEY starts right now.

CHRISTINE ROMANS, CNN NEWS ANCHOR: Welcome to YOUR MONEY where we look at how the news of the week affects your bottom line. I'm Christine Romans. Coming up on today's program, the Democrats are up first in primetime, but will the convention convince voters Barack Obama is the man to turn to, to turn the economy around?

And then a chilling new movie portrays this nation on the brink of financial ruin. It's a desperate call for Washington and all Americans to begin living within their means. We'll examine what can be done before it's too late.

Speaking of debt, have you tried paying for college lately? Find out what you can do to keep out-of-control college costs down.

But first, the momentum builds. The Democratic convention gets under way in Denver, this Monday. It essentially gives Democrats four uninterrupted nights to make their case to the American people that they can fix this economy and they can lead. Here to break it down for all of us is our all-star panel, Daniel Gross from "Newsweek," Jeanne Sahadi playing for the home team here at, and Stephen Moore with the "Wall Street Journal."

I want to start with you first, Dan, and ask what it is that the Democrats need to achieve on the economy, in particular, in the next four, five days.

DANIEL GROSS, SR EDITOR, NEWSWEEK: The big picture and small picture. The big picture is the Republicans have had their way for eight years, cutting taxes, they promised everything would work out great. It hasn't. Incomes are below before they were in 1999, inflation is up, unemployment is up. That's the big picture. The small picture is specific things that Democrats will do if they are allowed to control both major branches of government to address anxieties about healthcare, unemployment and energy.

ROMANS: That's a big order. That's a tall order. But, constructive narrative, as say, over the next four days, so that McCain is a continuation of Bush, the last eight years of Bush, and that they need to (INAUDIBLE) the Democrats if they're going to make some big changes.

GROSS: Right. And this is where McCain has done some damages. You know, in 2003 he opposed the Bush tax cuts as a matter of deep principle. Now he supports them as a matter of deep principle. And long the line, you know, he likes to -- he's run these ads saying, you know, things are worse off than they were in '04. But meanwhile surrogates are saying there saying, oh things are not so bad. So, you know, McCain has some issues being connected to the Bush economic legacy and they have to hit those a little harder.

ROMANS: Stephen, let me ask you, does my money, my wallet, my bottom line, is this play top billing at the both of these conventions?

STEPHEN MOORE, WALL STREET JOURNAL: It always does, Christine. And I think this year is no exception. I think on the economy, the problem that Barack Obama has is that so far he hasn't been able to convince voters, especially these middle class, anxious voters, that his program of change is going to do much to make people better off. Republicans have done a pretty good job over the last six weeks of saying, look, he's talking about change, but it's more taxes, trade protectionism, more government spending. And so, that's the challenge, I think, for Obama, not just to say I'm for change, but for change that will actually make people better off in the wallet. So far, he has not made that case.

ROMANS: And Stephen, you said that the liberal tag that some of his opponents are putting on him it's hurting him.

MOORE: Yeah well look, the last month has been a terrible month for Obama. He squandered an eight to 10 point lead. This is the first time in a long time, actually, that the Democrats have not had a good lead going into the conventions. So, I think for the Democrats, the convention is much more important than the Republicans. They have to come out of this, Christine, with a nice, sizable lead to bring them into the fall months.

ROMANS: You know, they are all really doing -- I would say pretty good job of building up the momentum. I mean, we are all on kind of pins and needles every day for new developments and they're sort of building this whole thing into a road show before -- before next week. How important, Dan, is the convention, I guess, overall? I mean, you point out, I guess rightly, that the conventions have become a little bit less important every after year, I mean, four years after four years.

GROSS: There's this artificial drama that the campaigns create about the announcement and timing of the vice presidential announcement and the kind of counter-programming the parties are going to do against one another and the media eats it up because this is what we do.

But, when you look at the numbers, not that many people are really paying attention. In '04, 20 million viewers watched on the cable news networks and on the big broadcast channels, 120 million people voted that year. So, if one out of six, one out of five voters is watching, obviously, it's relevant, but it's not determinative.

MOORE: But, you know, this will be the first time for a lot of Americans they'll really get to see Barack Obama up front and personal. You know, a lot of Americans have not paid that close attention to the primaries. So, it is critical he knock that speech out of the park. But Dan is right, you know, I bet that the ratings for the Olympics are going to be two to three times higher than the number of people who watch these conventions.

ROMANS: That's interesting. Jeanne, I want to talk about Social Security. It's not, I guess, as sexy as all of the drama and the hoopla, the balloons and confetti at convention or the Olympics, for that, but Social security is something, you've just done a piece on this, that whoever is the next president, pretty much has to take control of, at this point.

JEANNE SAHADI, SR WRITER CNNMONEY.COM: Well, if they're serious about helping the program...

ROMANS: They are saying they are.

SAHADI: They say they are, but they actually haven't been that specific. Between the two candidates, Obama's been the most specific. This past week, or rather, last week he came out with a more specific proposal what he wants to do to boost revenue to the system. He wants to raise taxes on people who raise more than $250,000, the payroll tax that goes into Social Security. He wants to raise it by two to four -- charge it two percent to four percent on income above and that amount would be split between employer and the employee. But it wouldn't go into effect for 10 years. People give him credit for being specific and taking on a politically divisive topic, but they say that's just a down payment on the deficit that Social Security will be pacing over the next few years.

Senator McCain says he would rather not raise taxes. He wants to reduce the growth in benefits and senator Obama, just the reverse. But the truth is, whoever takes office next year is going to have to basically concede to Congress what Congress wants to do and you're going to have to have it be a bipartisan solution. Candidates acknowledge this, but you know, Senator Obama says I don't want to raise the retirement age. Well, he may have to.

ROMANS: All right, Dan and Stephen, I'm going to let you guys respond to the Social Security, very sticky issue of Social Security when we come back. Our panel is sticking around. You better stay tuned as well, because coming up, from- offshore drilling to alternative fuel, it's Obama versus McCain on all things energy, next on YOUR MONEY.


ROMANS: Welcome back to YOUR MONEY more lively political talk with our expert panel in just a moment, but first, John McCain and Barack Obama have been squaring off on energy all summer. This week McCain went so far to visit an off shoring drilling platform to make his point. CNN's Ed Henry has that story.



ED HENRY, CNN WHITE HOUSE CORRESPONDENT (voice-over): Images are crucial in any campaign, so for better or worse, John McCain has now attached himself to this massive oil rig, 150 miles off the coast of New Orleans.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: A whole lot of oil and natural gas, as we speak they are producing 10,000 barrels of oil a day.

HENRY: A dramatic way for McCain to lambaste Barack Obama's skepticism about boosting offshore oil and gas drilling.

MCCAIN: Senator Obama opposed this new drilling. He said it won't solve our problem and that it's, quote "not real." He's wrong and the American people know it...

HENRY: Obama has said he is open to such drilling but only as part of a broader energy fix that includes electric cars and other alternatives to oil and gas.

BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: We have to fundamentally change how we use energy in this country, fundamentally. We have to do it because we're sending $700 billion to foreign nations. It's a huge transfer of our wealth...

HENRY: McCain also wants to boost alternative fuels, but does not want to wait to move forward on offshore drilling and the American public seems to agree. A CNN Opinion Research poll last month found 69 percent of Americans favor an increase in offshore drilling. But, the poll also found only 51 percent believe more drilling will reduce gas prices in the next year, a point environmental groups have jumped on to defend Obama.

GENE KARPINSKI, PRES., LEAGUE OF CONSERVATION VOTERS: Senator McCain's plan is a shameless hoax and he should know better. New drilling in protected areas offshore is going to do nothing to reduce gas prices.

HENRY: McCain insists an all of the above approach is needed to deal with the current crisis. MCCAIN: We all know that conservation will not put us, will not be sufficient to put us on the road to energy independence.

HENRY (on camera): Both sides agree they want energy independence, but how to get there is one of the sharpest, most substantive policy differences between these two candidates.

Ed Henry, CNN, Washington.


ROMANS: Our own sharp political discussion continues with three seasoned observers: Dan Gross from "Newsweek," Stephen Moore with the "Wall Street Journal," and our own Jeanne Sahadi from

Stephen, let me ask you first about energy. Both of these guys up with their energy plans, they are different and on drilling, they keep going back and forth at each other, you know, kind of, I guess Obama says he grudgingly accepts a little drilling, you can add it to a whole armory of different things to do on energy. But, you know, how important is this disagreement with these guys about drilling?

MOORE: It's huge. And boy, Christine, have the Democrats flubbed this issue. You know, this is an issue they have just been getting creamed on. It's a no-brainer for most Americans, we have to drill more, we have to drill more in Alaska, we have to drill more in the outer continental shelf where we have more oil than Saudi Arabia. And you know, when you're facing a situation with $4 gasoline, Americans have really come around.

By the way, John McCain has come around to this because a few months ago he was against it. You're right, Barack Obama has started to shift a little bit more in the drilling camp, but he's captive, as the Democrats are, to the kind of radical environmentalists who want no more drilling.

ROMANS: Dan, what do you think?

GROSS: I think you have to say the McCain 2.0 version is working better than the 1.0, remember the gas tax proposal? That went over like a ton of lead. Economists didn't like it, the public saw it as a gimmick. For a variety of reasons, oil drilling is seen as more accessible. It's a job creator, it's, you know, we have it, it's sort nationalism, it's security...

ROMANS: (INAUDIBLE) they just don't like it.

GROSS: I think the environmental -- the official environmental community does not like it and the Democrats have, so far, have stuck with them. Although, you see on the Senate, there's this talk of the gang of 10, five Democrats, five Republicans, working out on a compromise. I think the best thing, actually, for Obama would be if some deal was cut sooner rather than later. He should be No. 11 in the gang of 10 then and get it off the table for the next three months. ROMANS: Let me ask you both about the fact the oil prices -- gasoline prices, rather, have been down some 34, 35, 36 days in a row and down 40 cents from the all-time high. You could almost say that the market is doing more, right now, for gas prices than any of these guys' plans currently could have achieved, right, Stephen?

MOORE: Well, that's true. The price of oil has some down from a high of about $148 a barrel down to about $115, so that's been a big relief. You know, and it's funny...

ROMANS: Only $115. Oh, kills me. Cheap at $115.

MOORE: Who would have thought we'd be cheering about 3.99 gallon gasoline. But it feels like a bargain, now. But, this problem isn't going away. We're going to see continued fluctuation in oil prices. And if you look at the polls, Christine, as you know, what's the No. 1 issue to Americans, still today?

ROMANS: Gas prices.

MOORE: Gas prices.

ROMANS: Gas prices.

All right, let's talk about Social Security, quickly. Because we talked about that earlier with Jeanne, and I wanted to get both of your response. Jeanne, tell us a little bit about how this is kind of -- we know it's a ticking time bomb. There's a movie out this week "I.O.U.S.A" which really hits on this about the unfunded liabilities that we're passing on to our children and grandchildren. Do either of these guys have a solid plan for fixing our entitlement problem?

SAHADI: No, they don't. To their credit they acknowledged they need a bipartisan solution, but they also come out and say, I want to do it this way, I don't want to do it that way. The truth is, they got to do it both ways, and that means raising taxes and slowing the growth in benefits.

Senator McCain favors slowing growth, Senator Obama favors raising taxes. They really are going to have to work with Congress, even if it's a Democratic-controlled Congress and Senator Obama is elected, you know, they're still going to have to get enough votes in the Senate to pass anything, so it's got to be a bipartisan solution.

ROMANS: Are we going to hear anything about this kind of reform at the convention, do you think?

GROSS: I think it'll mostly be attacks from the Democrats saying John McCain and the Republicans want to -- you know, they disliked Social Security from the beginning of the 1930s, they wanted to dismantle it and privatize in the '90s, let's not gamble on that going forward.

MOORE: You know, Dan is right about that, Christine. Remember, that just two years ago, it seems like a lot longer than that, that George Bush came out with a reform proposal, to actually -- first president in 50 years to try to deal with this, he got shot down by the Democrats and so I think the Republicans aren't going to want to even mention this word Social Security. But, don't forget the next president is likely to inherit a budget deficit of over $600 billion.

ROMANS: Unbelievable. Stephen, let me ask you one last question about McCain and who could shore up at least the perception that McCain is a little weak on the economy. Does he have a critical opportunity here to pick a vice presidential pick who shores him up on that front? Or are there other issues that trump that for him?

MOORE: You know, conservatives that I talk to, Christine, keep saying we want a Ronald Reagan on the ticket. But guess what, there isn't a Ronald Reagan out there. And so, it's frustrating to conservatives. I think that the guy who is kind of the front-runner right now, is Mitt Romney. He does have a lot of business experience. But we'll see. I don't see any superstar out there for John McCain. And I believe, actually, that a vice presidential pick can hurt a ticket more than it can help them.

ROMANS: That's a very good point. All right, Stephen Moore, editorial "Wall Street Journal," thank you so much. Dan Gross, senior editor of "Newsweek," and our very own Jeanne Sahadi, Thank you, everyone.

Coming up after the break: an environmental hazard so severe, it's called the Dead Zone. We have that amazing story and pictures, next on YOUR MONEY.


ROMANS: New York's famous sky line could have a new addition, wind turbines. New York's mayor Michael Bloomberg announced plans to generate power from skyscraper mounted turbines and offshore wind farms at an energy conference in Las Vegas, this week. Possible locations for offshore wind farms include the windy coast off of Queens and Brooklyn and Long Island. The mayor said he wants New York City to be No. 1 in the nation when it comes to developing clean energy, but the plans are still in the developmental stages.

This summer's historic flooding across the Midwest is now having devastating environmental consequences hundreds of miles down the Mississippi River. The floodwaters are expanding in areas of the Gulf of Mexico where life cannot exist. It's called the Dead Zone and that's where we find our Allan Chernoff.


ALLAN CHERNOFF, CNN NEWS CORRESPONDENT (voice over): Louisiana fisherman Terry Pizani looks across the water with a sense of loss. What used to be the best fishing grounds in the Gulf of Mexico, he says, are barren.

TERRY PIZANI, FISHERMAN: You don't see nothing. You usually see bait fish on the water, but you don't see no bait fish, nothing. Nothing's there. I don't have no kind of testing material to test the water, but I know something's wrong.

CHERNOFF: This is the test: 35 miles into the Gulf of Mexico, oceanographers sample water deep below.

(on camera): This sensor measures the oxygen level in the water. The deeper it goes, the less oxygen it finds, and in this part of the Gulf of Mexico, there's virtually none at the bottom.

LORA PRIDE, LOUISIANA UNIVERSITIES MARINE CONSORTIUM: We're not finding enough oxygen to support life, aquatic life.

CHERNOFF (voice over): The Dead Zone, a vast portion of the Gulf of Mexico's sea bed that loses most of its oxygen. It forms every summer, but this year it's especially large: 8,000 square miles, nearly as big as New Jersey. Scientists say the cause is hundreds of miles up the Mississippi.

Farmers across the Midwest use tons of nitrogen and phosphorous to fertilize corn, allowing them to satisfy growing demand from ethanol factories and developing countries. This summer's flooding caused much of the fertilizer to run off into rivers that flow into the Mississippi.

NANCY RABALAIS, EXEC DIR, LOUISIANA UNIVERSITIES MARINE CONSORTIUM: The size of the low oxygen zone has increased in proportion to these nutrients reaching the Gulf.

CHERNOFF: The fertilizer flowing into the Gulf triggers an overgrowth of microscopic algae.

PRIDE: These things will fall to the bottom, and as they decompose they consume oxygen.

CHERNOFF: The lack of oxygen causes bottom dwellers -- fish and shrimp -- to swim away in search of oxygen. Clams, crabs, starfish and other slow moving sea life suffocate.

To find lots of shrimp, fishermen like Terry now have to travel far, to the edge of the Dead Zone, an expensive proposition with the cost of diesel fuel still high. So, many boats are idle, others are staying away from their home port in Grand Isle, Louisiana, a disaster for seafood processor Dean Blanchard, who buys shrimp from fishermen.

DEAN BLANCHARD, SEAFOOD PROCESSOR: Yeah, all my boat has to go somewheres else to try to make a living. It's a shame. You know? This is the finest shrimping ground in the country right here and they just shut us down. They just shut it down. It's unreal.

CHERNOFF(on camera): With demand for corn growing, experts say the Dead Zone could expand in coming years, an environmental hazard that threatens Louisiana's seafood industry.

Alan Chernoff, CNN, in the Gulf of Mexico.


ROMANS: Coming up next on YOUR MONEY -- on talk radio these days, it seems about all Republicans and Democrats can agree on is that they don't agree on very much. So, what happens when a liberal and conservative talk show host join me on the set? You'll have to stay tuned to find out.



ROMANS: It's election season and the phones are ringing off the hook at political talk radio shows. Polls say the economy is issue No. 1, but is that really what callers are most concerned about? I'm joined by two Sirius radio political talk show hosts, conservative Andrew Wilkow, host of "The Wilkow Majority," and liberal host Mark Thompson, host of "Make it Plain with Mark Thompson."

Gentlemen, thank you for joining me.

Mark, what are they talking about out there?

MARK THOMPSON, MAKE IT PLANE WITH MARK THOMPSON: Well, the economy is important people are concerned. I get a lot of calls people wondering about these tax issues, who is going to raise their taxes, who's going to give them a tax cut? We have a lot of conversations about that. That seems to be the No. 1 issue my callers are calling about.

There is a lot of discussion about gas prices, how that's affecting everyone. My audience has come out to be pretty much split on this issue of offshore drilling as people get more education about it. One of the things we've learned, though, is that it may very well be a red herring because it appears that whatever Congress does on offshore drilling, it's still going to be up to the individual states to decide whether or not they're going to approve it, so there may be a lot of debate about it now, and also the fact of the matter is whatever it may yield, it won't yield anything for a few years.

ROMANS: I think McCain, for a long time, had also said that he wanted to leave it up to the states, you know, the people who we're going to be drilling off their coast, that's who he wanted to leave it up to. But there has been so much discussion about offshore drilling. You know, is that what people are talking about when they're calling into you? Let's drill, let's drill now?

ANDREW WILKOW, THE WILKOW MAJORITY: It's the laws of supply and demand. The supply is there, we have to go get it. This idea that it's going to take 10 or 12 years for something they were saying 10 and 12 years ago. So, had we actually started 10 or 12 years ago, we wouldn't be talking about it now.

They talk about the tin pot dictators and foreign oil. They want to get us off the foreign oil, well, we have plenty of it in the shale in the upper Midwest, we have it in Alaska in the ANWAR, and we have it off the coast of Florida and California.

With today's technology -- the amazing thing about progressives is they talk about being progressive, yet they're acting as if it's 1978 and we haven't, you know, advanced in technology. There's a whole cornucopia of new technology that would make our extraction environmentally friendly. And yeah, of course, you go after the alternative fuels, we should be running cars on ethanol or hydro cells or whatever it is we can get our hands on, we should be doing it without cutting off the supply that we use, the type of energy that we use now.

ROMANS: Liberals do not like the idea of just randomly drilling for oil when they think we should be really pursuing some renewable and some, you know, oil is eventually will be dead, when that is, I don't know. You know, they want to be going after some other things.

THOMPSON: Yeah, well, the 10-year piece also is applicable, there. I think what Al Gore said recently is that it may take 10 years or we should be thinking about 10 years moving off of our oil addiction and oil dependency. Ten years to see something from the drilling, 10 years to move off of it. It's a choice that has to be made. I don't know the two can happen simultaneously.

I think one of the things Obama has proposed is that he'd like to do a little of both, that was the compromise. He would be willing to go ahead and change his position somewhat on offshore drilling in exchange for more support and more funding and more research in some of these alternative areas. But, looks like it's a race to see what we can accomplish in the next 10 years.

ROMANS: Let's talk about foreclosure a little bit. You know, in the very beginning of the whole foreclosure mess, there were a lot of people -- and I'm sure some of your callers who were saying, listen, people got themselves in over their heads, you know, they took out a financial contract that they were never going to be able to pay back and there were a lot of -- even for middle class voters who were just like what was going on? Why were some of these people taking out some of these loans, now we are seeing how some these loans were written and we're seeing it doesn't matter who took them out or why, but it has spread out into the rest of the financial system. What are people saying now about fixing the housing crisis and foreclosures?

WILKOW: Well, the fix, so every time Americans get themselves into a mess, it should be the responsibility of another group of Americans who didn't do as they do as they come bail them out.

ROMANS: And the government always fixes everything properly, right?

WILKOW: Oh yeah, there's no better solution than the federal government. The amazing thing is, is that if you focus in on Maslow's hierarchy of needs, if you look at things we as Americans purchase, we tend to put our wants ahead of our needs. So, people took out loans they really couldn't afford in the first place and then fill their homes with stuff they couldn't afford after that and then say, gee, I can't afford my mortgage payment.

There are of course circumstances were there are people that fell on hard times, their jobs were lost.

ROMANS: Predatory lending.

WILKOW: There are certainly a whole mix of things, but we never seem to hold anyone accountable. The answer is, you know, I did this, we did this, this happened over here, now the federal government has to solve the problem, now the federal government has to come in and infringe on the people who didn't engage in this type of, as you said, taking out of the contract. We have to make them pay for somebody else's mess.

THOMPSON: Yeah, but those on the right tend not to have the same position when it comes to helping be bail out corporate America, so to speak. So, this is not really about bailing anybody out anyway, and I'll admit, there has been a lot of discussion on my show about people putting themselves in this position. The fact of the matter is, there were these types of predatory lending practices.

And disproportionately targeting African-Americans, other minorities, even women, single women, single women who were heads of households, and there ought to be something to one, protect people from being put in that position again and give people a little help so that they can try to climb up out of it. If we can help out some of these other big corporate giants, we ought to be able to help out the American citizens.

ROMANS: Well, what we do know is that the United States government is involved to a degree I can never rember in the market, right now, and that has got to be something that drives conservatives crazy.

WILKOW: The federal government was never meant to be this big.

ROMANS: Right.

WILKOW: The federal government was never meant to be this big and overbearing. If you just go back to the Constitution and look at what the federal government was supposed to do, Congress had the power to raise taxes, provide, you know, basic security, to protect liberty and property, and they're supposed to get out of the way of the states and the states are supposed to get out of the way of the individuals. That's the end of the story.

ROMANS: All right, the shows are "Wilkow Majority" and "Make it Plain with Mark Thompson." Gentlemen, thank you so much. Come back because there's so many great to talk about and we want to hear what your listeners are saying.

Coming up, ominous words from billionaire, Pete Peterson.


PETE G PETERSON, BILLIONAIRE: We are slipping this huge, hidden check for our free lunch to our children and our grandchildren and you ain't seen nothing yet.


ROMANS: We'll get a sneak peek at the new movie warning Americans about the perils of debt before it's too late.

(COMMERCIAL BREAK) ROMANS: Is the United States like Rome before the fall? A new documentary warns of looming economic peril for America. It's a simple, powerful message to the men who want to be president and will be screened alongside the political conventions in Minneapolis and Denver. Brooke Anderson reports.


BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT (voice-over): When you think of horror stories you normally don't think U.S. economy, but that's exactly the subject of a new documentary, and it's pretty scary stuff.

PATRICK CREADON, WRITER, I.O.U.S.A: The government has made more promises than it can possibly pay for.

ANDERSON: The title of the Patrick Creadon film sums it up: "I.O.U.S.A."

DAVID WALKER, FMR COMPTROLLER GENERAL: The real problem is a housing problem, and it's the sub prime crisis. In reality we have a much bigger sub prime crisis with regard to the federal government's finances.

ANDERSON: How bad is it? The government owes more than $9 trillion. The Medicare and Social Security program face long-term deficits projected at more than $40 trillion, money future generations will be forced to pay.

CREADON: That's just not fair. When you spend other people's money, which is what we're doing today, it's mean.

WALKER: Our financial condition is worse than advertised.

ANDERSON: David Walker, who recently resigned as head of the Government Accountability Office has a prominent role in the documentary. He insists if political leaders don't embrace financial reform, the picture won't be pretty.

WALKER: You could find the situation where the government is going to have to cut back on doing a lot of things that the people have now taken for granted or where income tax rates may have to more than double.

ANDERSON: Failing that, the nation could see much higher inflation or interest rates, Walker argues. The impact could far exceed the current economic downturn.

WALKER: If we get a crisis, it will be much more dramatic than the one that we're facing today and it will affect tens of millions of Americans.

CREADON: We have three daughters.

ANDERSON: Creadon says he made "I.O.U.S.A" largely out of concern for his kids' generation. CREADON: If the debt stopped growing right now, we'd probably be OK, we could probably handle it. It's not today's problem, it's what lies ahead.

ANDERSON (on camera): For these guys.

CREADON: For these guys, my assistant editors.

ANDERSON (voice over): Brooke Anderson, CNN, Hollywood.


ROMANS: Earlier this week I spoke to the executive producer of the film, Addison Wiggin, about the $9 trillion national debt and exploding trade and budget deficits and how they will affect each and every one of us and our children. I asked him whether the most pressing deficit of all was perhaps not fiscal, but as David Walker, former head of the GOA says, in fact a leadership deficit.


ADDISON WIGGIN, EXEC PRODUCER, I.O.U.S.A.: You have the vice president telling the former treasury secretary that deficits don't matter. And what he meant by that is not that economically they don't matter, but they don't matter politically because a large part of what we do in the film is we show that the man on the street, you know, average citizen, really doesn't understand the issues that are at hand, and therefore, they don't know enough to hold elected officials accountable.

And that's what we made the film for is we want to make sure, in an easy to understand and entertaining way, people are engaged in this conversation, because as you point out, we have a budget deficit that will be about $480 billion this year, the largest in the nation's history, we have a savings deficit, most Americans followed the bad example set by their government, and they spend more than they take in, and we have a trade deficit that even though exports are rising at an historic rate, our consumption levels are rising even faster and we have a historic trade deficit, as well.

ROMANS: Bottom line here, is it the American people are living beyond their means? The example set by the American government, which has long been living beyond its means? And somebody has to pay for that, eventually.

WIGGIN: Eventually. And that's what we point out in the movie, the way that we're conducting our affairs right now, that the people that are going to have to pay that, many of them haven't even been born yet and not only is it fundamentally wrong, but it's mean to do that to somebody that you don't even know.

ROMANS: David walker, former head of GAO, now at the Pete Peterson Foundation featured in this file. We had him as guests on this program before and he has long said for this situation to change, you have to fundamentally cut the American living standard for our kids, our grandkids down the line. I mean, we might not have the living standard down the road that we have right now. And he can actually equate it to Rome before the fall and has the numbers to back it up.

WIGGIN: That's right. In fact, that's how we ended up working with David. We -- my writing partner Bill Bonner and I had authored a book called "Empire of Debt," and the day that we sent it out to Congress because we thought nobody in Washington was paying attention, David had given a press conference where he did, he likened the finances of the government to Rome before the fall. And you know, we had just written a book called "Empire of Debt," drawing the same analogy. When we went to make the movie, David was at the top of our hit list of people to talk to.

Turns out, he actually had read the book and drew some inspiration from it. He didn't agree with everything in it, but it helped kick off our relationship and David becomes the lead protagonist in the film. Bob Bixby, the executive director of the (INAUDIBLE) coalition, also a partner in David's fiscal wake-up tour, the two of them become a narrative arc of the film as we follow them as they go around the country and try to educate people outside of the beltway about the four deficit that the country is facing.

ROMANS: I'm going to will tell you, Addison, that it's very complicated stuff but you managed to make it simple to understand with fantastic graphics and it's something that every American family who has to balance a budget of their own should watch or take some understanding -- you know, take some -- some counsel from what's happening at the upper levels of the American government.

Do you think an almost $9 trillion national debt is something that the next president, whoever that is, can ignore? It must be attacked immediately, right?

WIGGIN: Well, presidents have been doing a pretty good job of ignoring it for a long time. And Congress just actually voted to up the debt ceiling to $10.6 trillion, so we can expect that if this conversation does not take place that both Congress and the next president will continue to ignore it. That's really why we put the film out now, and that's why we are talking about it on the -- you know, on CNN. And we want to get people involved in this conversation so that it's not a subject that can be ignored.

ROMANS: Very into the movie, you have four or five pieces of advice that people can do, aside from just pressing on your elected officials to do something, save money on your own, if you're a grandparent, put money away for your grandkids. What are some of the things people watching right now can take away in their own small way to try to do?

WIGGIN: Well, they have to really understand that if we don't address this issue, as you point out, our standard of living is going to be diminished in the future and that's something that people need to recognize. We expect a lot from our government, but we have to learn how to pay for what we are expecting them to do. And likewise, in our own families, in our own financial future, you have to, if you expect to retire well, you're going to have to do a lot more planning than most Americans are used to doing at this time.

(END VIDEOTAPE) ROMANS: Addison Wiggin is the executive producer for the film "I.O.U.S.A." the film made its nationwide debut this week in Omaha, Nebraska, with no less than oracle himself Warren Buffett in attendance and Alan Greenspan in the film says no human civilization has been able to survive without putting provisions away from the future. And right now, this civilization is not.

Up next on YOUR MONEY, it may be the silver lining of the housing mess. Find out why not may be the right time to buy a home.


ROMANS: Our good friend Jennifer Westhoven is here on YOUR MONEY with one of the top businesses story of the week. One that I find fascinating is the sick days story, States trying to maybe mandate paid sick days.

JENNIFER WESTHOVEN, CNN NEWS CORRESPONDENT: Yeah, I think there are so many people who are really worried when they get sick, you know, you really can't just afford to miss a day of work. Right now that's the case for 46 million Americans, they get no paid sick time. Well, the federal bill stalled out that would have given seven paid sick days a year to workers who put in 30 hours a more a week. So now, about a dozen states are taking matters into their own hands. Now, the bill would cost small businesses. They have been against this in many states, but also mean safer and healthier workplaces in some cases. I mean, you think about people who are handling your food or people who work with children and they can really spread disease spread further.

ROMANS: Some of the critics, though, have said that it would force small businesses to have just very -- fewer -- lower hours, so they'd be below that threshold, just so they could mean their own costs and that it could inadvertently hurt workers. But there's always the give and take when you talk about new rules like that. Meanwhile, we're looking at a good news/bad news story about the decling home price.

WESTHOVEN: Right. We know the bad news. The prices keep falling. It's rotten. The good news, the silver lining really in this is that they're getting more affordable. More than half of the homes sold in the latest quarter were considered affordable and that means families in the United States who make the median income, which is $61,500 a year, so it is a big jump in affordability. The most affordable city is Indianapolis and the least affordable is right where we're sitting, New York City. The median home price in New York City is $481,000.

ROMANS: And that's for a closet, I'm sure.

WESTHOVEN: That is my guess. You can can't get a bedroom for that in Manhattan.

ROMANS: Unbelievable.

All right now, meanwhile, we have been complain about all the nickel and diming that's been going on at the airlines, but there is a new service they're rolling out that maybe business travelers might be in. WESTHOVEN: Yeah, and I think maybe you know, leisure travelers too, because you know, you're stuck in that tiny seat, you can at least roam freely on the Internet, right, at least you can get a little bit of freedom in one way. So, American Airlines is going to start, they're trying out on 15 flights, they're trying wireless Internet access.

So, they just started that this week. You boot up your computer, you have to pay $10 were $13 depending upon how long the flight is and then you could get some work done, you could play games, whatever you want. It's supposed to work at the speed of regular broadband. American hopes to have this on all of its flights by next summer and a few of the airlines are testing it out. It's still in the starting stages, though. But, I think Delta says they'll have it on flights by fall. So, I think they would be the first to have it across their...

ROMANS: I really do think it's a fee that people will be willing to pay for, it's a service that they're willing to pay for on some of these flights. All right, Jennifer Westhoven, thanks, Jennifer.

Coming up, the economy is slumping, but college costs are soaring. We'll tell you what you can do to survive the rising tuition bill.

But first, this week's "Right on Your Money."


(voice over): Paying off debt, buying a new car, or paying for a vacation may seem like good reasons to withdraw money from your 401(k). But it may be more costly in the end.

LYNNETTE KHALFANI-COX, PERSONAL FINANCE EXPERT: Taking money out of your 401(k) should be an absolute last resort, financially. The problem is that when you tap into that 401(k), really you're foregoing the potential savings you could be building up for your golden years.

ROMANS: But some people have no other options.

KHALFANI-COX: Especially now, with the economy being in a recession, a lot of people are cash strapped and there may be very legitimate reasons for taking what's called a hardship withdrawal from your 401(k).

ROMANS: A hardship withdrawal allows access to your account to pay medical expenses, cover a down payment or foreclosure, pay college tuition or cover funeral expenses. But there are major financial drawbacks.

KHALFANI-COX: If you take a withdrawal, that's considered an early subornment if you've to the yet reached the age of 59-1/2 and you will be subjected to ordinary income taxes and a penalty.

ROMANS: And that's this week's "Right on Your Money."

(END VIDEOTAPE) ROMANS: More than 11 million college students head to school in the next few weeks, paying for college is one of the biggest financial obstacles most families will ever face. And tuition costs are on the rise.


DIANE KOSTALIS, AMANDA'S MOTHER: This is all college stuff, so see if there's anything here.

ROMANS: For the Kostalis family of Bethlehem Township in Pennsylvania, back to school time means college tuition bills are on their way. And the cost goes up every year.

SANDY BAUM, COLLEGE BOARD: The real problem with tuition and fees going up so rapidly is that family incomes have actually been stagnating.

ROMANS: Since 1998, median household income has only increased just over one-third of one percent, adjusted for inflation. Meantime, average tuition shot up 53 percent for four-year public colleges and 33 percent for private schools. Last year, one year of college averaged about $6,000 for public schools and nearly $24,000 for private, not including room and board.

KOSTALIS: You can't expect an average family to pay that kind of money when they're struggling to make the mortgage and put food on the table. How does that happen?

ROMANS: That question remains partially unanswered, as 18-year-old Amanda packs for Moravian College. Thanks to large economic scholarships, grant money, and loans, they say they're responsible for only $8,000 of the $38,000 bill for Amanda's freshman year. The family feels they got a great deal, and yet it's still a burden.

KOSTALIS: UNIDENTIFIED FEMALE: It's almost another mortgage payment every month. My husband and I work very hard. He's a chef, I'm a substitute schoolteacher. My salary will basically be paying her college.

ROMANS: And even then, Amanda expects to graduate $21,000 in debt, a figure she and her mom find hard to grasp.

AMANDA KOSTALIS, COLLEGE STUDENT: Because I have nothing to compare it to in my life. I don't have a job, I don't have a house, I don't have anything like that to pay for.

D KOSTALIS: I'm actually appalled, as a nation, that college and school costs are so high that they're cutting out the whole middle class. And these are the kids that they're bright, they work hard, they're going to be the ones that go out and make a difference in this world, and we're cutting them right out of it.


ROMANS: To make ends meet, Amanda's mom says they'll have to cut back on almost everything from entertainment to vacations to shopping. Her biggest fear comes in two years when her 16-year-old son will also head off of to college. Mrs. Kostalis says she has no idea how they'll manage with two children in school.

Now, there's not a lot you can do about rising tuition, it's pretty much out of your control, but there are some steps students can take to keep their finances in order once they're in college. First, make monthly budget on how much you'll have to spend on necessities, entertainment and transportation to and from school and stick to it. Also, factor in textbooks. Students pay about $900 on books each year. You can buy used books from your school's network or Web sites like or Finally, ditch the credit card. Use cash or debit cards to pay for day-to-day purchases. If you must have a credit card, use it, experts say, for real emergencies only.

Thanks for join us for this edition of YOUR MONEY. Ali Velshi is back with me next week. So, we'll see you here there then, Saturday at 1:00, Sunday at 3:00, see down then.