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Open House

Election Day Only 10 Days Away: Who Is More Likely to Turn the Economy Around?; Critical Steps to Lower Your Home Heating Bill This Winter; Tips on How to Make Holiday Shopping and Travel Affordable

Aired October 25, 2008 - 09:30   ET

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

GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is OPEN HOUSE, the show that saves you money.
Later in the program, winter is on the way and we have critical steps you need to take to lower your home heating bill.

Plus, holiday shopping and travel tips that make it affordable, yes, affordable to get away for Thanksgiving and Christmas.

But with Election Day a little more than a week away, we begin with the race for the White House, with jobs and money on everybody's mind, it's no surprise folks are stressed out. We asked how you think things are going in the country today.

Now, 75 percent of you say things are going badly. Only 25 percent say things are fine. How are you feeling? Our CNN Opinion Research Corporation Poll found about 3/4 of you, you're stressed, you're angry, nearly as many say you're scared. Now, these polls really do reflect how Americans are feeling and those feelings could affect how you vote. So, which candidate can better quell your fears and who is more likely to turn the economy around?

Stephen Leeb is the president of Leeb Capital Management and Stephen Moore is with the "Wall Street Journal."

Welcome to you both, thanks for being here. I want to start, Steven Moore, with you. You know, we've had, we've seen planes from these candidates months ago about the economy, but the world has changed. There's a credit crunch on, we've seen that, stock market dramatically lower. What are these candidates saying now and who is making the most sense on the economy?

STEPHEN MOORE, WALL STREET JOURNAL: Well, Gerri, it's a really good point that, you know, these presidential candidates drew up their economic plans nine months or a year ago, before this, you know, nuclear bomb was dropped on the economy a couple of months ago and so now they're scrambling to find new kind of solutions to these huge financial problems.

A lot of experts I talk to, Gerri, say both these presidential candidates may just get rid of their whole program and start over again when they're elected president because it's a whole new world, as you just said.

WILLIS: Steven Leeb, can this economy swing the election? Will it make the difference in who wins?

STEPHEN LEEB, LEEB CAPITAL MANAGEMENT: One point, Gerri, which is very important, just picking up on your polls, 24 or 25 percent of the country feel good about things, 75 percent feel lousy, stressed, angry, whatever. That's 24, 25 is exactly George Bush's approval rating. And what that tells you is if either candidate wins, in other words, if we avoid another Florida wins, heaven forbid, either candidate is likely to inject a lot more confidence into this economy, a lot more confidence.

And that by itself is a plus. You don't have to like Obama or McCain in particular. Either...

WILLIS: Voters are ready for a change.

LEEB: A change. But in terms of the policies and you know, I come from this from a totally non-partisan point of view but it's time, in my opinion, to try trickle up, rather than trickle down.

WILLIS: All right, all right, we'll get to that in a minute, but I want to get back to Stephen Moore for just a second. You know, people have lost a lot of money in the markets, retirement accounts have lost $2 trillion. Who's got the best plan to help us out with our 401(k)s here?

MOORE: Well, I think the worst thing you can possibly do in a recession -- and it could be worse than a recession, given these big losses you're talking about -- I think the one thing all economists agree on, you don't want to raise taxes right now and especially you don't want to raise taxes on people's investment, you don't want to raise capital gains and dividend taxes. And so, that's been part of the Obama plan.

Now, hopefully he's going to change from that and say, look, in this kind of environment, I'm not going to raise these taxes. But, I think right now when McCain is talking about maybe, you know, keeping those tax rates low, I happen to think that's probably the better fiscal plan, right now. But, Obama has been saying, maybe I won't raise those taxes given the current fiscal situation.

WILLIS: What do you make of that, Stephen Leeb? The tax issue is so complicated.

LEEB: It is complicated, but Obama is not really raising taxes overall. What he says he if's lowering taxes for 95 percent of the economy. Now, Gerri, if you look at data on median income, it's gone down for the last eight years in real terms. There's no spending unless people can afford it. And there's going to be no investment unless there are customers that are spending. We really have to focus at this point on that bottom 95 percent and less on the top five percent.

MOORE: But, you no I what the problem with that is Stephen, is how are people going to be able to spend money if they don't have jobs? And you know, the employers, you talk about those top five percent, those people who would pay these higher taxes under the Obama plan, the one question that Barack Obama's never been able to answer to anyone's satisfaction is how are you going to create the jobs the economy needs so people do have income if you're raising taxes on the small businesses in the economy? You know, half of all employers with more than 20 employees would pay higher taxes under that plan.

WILLIS: All right. We're going to have time for taxes a little later in the show. But, I want to ask both of you about healthcare. Stephen Moore, you want to start with you. McCain wants to put in place a tax credit, $5,000 for American families to take care of their healthcare bill. Isn't this going to encourage employers to stop giving employees healthcare coverage?

MOORE: Well, you know, in the grand scheme of things, I think, Gerri, we need to move away from the employer-sponsored health plan. You know, there's an old joke that General Motors isn't a car company anymore, it's a healthcare company that happens to make cars. You know, this is a real problem with our economy is that employers -- their biggest cost right now is healthcare and so, under the McCain plan what he's hoping to do is shift people into individual plans by giving them a very generous credit.

And by the way, most Americans could would come out ahead under this plan financially and move away from...

WILLIS: I got to give Stephen Leeb here, a chance to get in.

LEEB: Gerri, the only thing I will say is what the candidates are saying about healthcare is not what you're going to get. In a Democratic Congress, a tax credit that takes the onus off employers, that's not going to go. Just forget about it. It's a non-starter. I mean, if there is a problem in this country, it's the insurance companies. I mean, why do we need these massive insurance companies whom we have to filter everything through and who make these incredible profits? I don't know. Someone has to answer that question. And I don't know what the answer is.

WILLIS: You know, there are more questions than answers today and we're going to bring you back. Stephen Moore, Stephen Leeb, stick around. It is countdown to Election Day and we are separating fact from fiction.

And how some folks are getting by in the economy by making some very small changes.

(COMMERCIAL BREAK)

WILLIS: With the two candidates trading jabs back and forth about who's going to raise your taxes, lower taxes, or create jobs, it's hard to tell what's fact and fiction, especially when it comes to your bottom line. Here to break down the true and not so true statements from the candidates is Bill Adair, he is editor of Politifact.com.

Welcome to you, Bill. Let's get right down to it. Obama recently talked about "Joe the plumber" and I think everybody's heard about "Joe the plumber, now. Obama said, "98 percent of small businesses make less than $250,000" and would not see a tax increase under his plan. Bill, who's right, Obama or is "Joe the plumber" right who said, yes, indeed, I think I'm going to get a tax increase?

BILL ADAIR, POLITIFACT.COM: Obama's right here. We gave this one a true on our Truth-O-Meter on Politifact. Obama is basing his comment on some research done by the Tax Policy Center, which is a respected, non-partisan group and it has found indeed that about -- only about two percent of small businesses would be -- would see a tax increase under Obama's plan because they would make more than $250,000 a year. So, true on the Truth-O-Meter on that one.

WILLIS: True on the Truth-O-Meter. OK, another one. In a McCain Web ad, now, this has been very controversial, the ad says, "Obama raises taxes on seniors and hard-working families to give welfare to those who pay no taxes." Is this ad right, or is it wrong?

ADAIR: It's wrong. We gave this one a false on our Truth-O- Meter. It's wrong in a couple ways. The first part where it says it would "raise taxes on seniors and hard-working Americans," that's only true if those seniors and hard-working Americans earn more than $200,000 a year as individuals or 250 if they're families. So, it's wrong in that way.

It's also wrong as describing Obama's plan as welfare, which is what we think of a government handout for someone who's not working. Indeed, Obama's plan is actually a refundable tax credit that's targeted largely at people who do work. So, this one gets a false on the Truth-O-Meter.

WILLIS: All right, Bill. Well, it's go to the next one. And this is interesting because it's about healthcare, big issue for working Americans and seniors. Senator Obama has said, "Senator McCain would pay for part of his healthcare plan by making drastic cuts in Medicare, $882 billion worth." What's the verdict, Bill?

ADAIR: This one also gets a false on our Truth-O-Meter on Politifact. Obama's making a big leap here, he's relying on a research done by a liberal think tank, but McCain really hasn't said what Obama contends that he said. McCain has said that he would pay for his health plan through some increased efficiencies in Medicare and some other savings and stream lining the program. Now you could question how effective those things might be, but in terms of what McCain has said, he has said that there would be no cuts in Medicare. So, Obama gets a false for this one.

WILLIS: Very controversial. All right, let's go to the next one. Finally, Senator McCain has said, "between 40 percent and 50 percent of tax filers do not owe any income tax." Now, is this one true? This is also very controversial. I know a lot of people are saying how can this be true? True or false, Bill?

ADAIR: This one got a mostly true. McCain's just a little bit off. He says 40 percent to 50 percent of filers don't pay taxes, it's actually 38 percent, according to the Tax Policy Center. This one that I think surprises a lot of people, surprised us, that it's that high. But that includes the people who either, through credits or deductions, have either zero tax liability or actually get a refund, so mostly true for McCain.

WILLIS: Well, great information, Bill Adair, thank you for that.

ADAIR: Thanks for having me, Gerri.

WILLIS: OK, now we figured out the facts. Let's bring back Stephen Leeb and Stephen Moore. I want to start with Stephen Leeb.

I know you want to talk about taxes. Your man, Obama, the guy who you say has the right policies has been accused of trying to redistribute the wealth. Do you agree?

LEEB: No, I don't. I think that, look, we've had trickle down effects. That was started with Reagan where you cut taxes on the rich and you hope it trickles down to the poor. It hasn't worked. We are in a tremendous crisis now because we are not spending. We are not -- and there's no mystery why not, Gerri. As I said before, median real incomes have gone down for eight years. How can Americans spend?

Now, Stephen says that we need to tax cuts or not to raise taxes or else we will have too much unemployment. Well, even if unemployment were to rise to 10 percent it still means 90 percent of the workforce is working and you have to empower those people to spend and that will improve business. I think trickle up has to be tried.

WILLIS: All right, let's give Stephen Moore a chance to get in here. Does Stephen Leeb have you right here on what you think about taxes?

MOORE: Well, I think it's a disaster to raise taxes right now. I think, if you look at -- I want to go back to the small business issue because it's really important. It's true that 98 percent of small businesses don't make over $200,000, but those aren't the employers that create the jobs.

It's the ones that do make $250,000 or $500,000 or a million or more and those are the ones that are major employers if you raise their taxes -- let's say you raise the business's taxes by $50,000 or $60,000, that's one less worker that business can employ. And about half those businesses that make -- that have over 20 employees would pay higher taxes. So I -- Look, I do think we need to do a whole array of things to turn the economy around. I think Stephen's right about that, but you don't start by pouring gasoline on the fire by raising taxes.

LEEB: You know, I'm against taxes and I don't want anybody to get a tax hike -- the rich, the poor. Everybody should not get tax hikes. But, if you have to choose a particular segment of the economy that needs to be singled out for help right now, it has to be that bottom 95 percent. Ideally, and I hope Obama will see this, and I'm not disagreeing with Stephen, it would be nice for them to get a tax cut and the other guys -- the rich could have no change in their taxes, but you've got to give tax relief to the 95 percent of this economy that have seen no gains in real income.

WILLIS: I think we're going to have to leave it there. I want to say thanks to both my guests. Stephen Leeb, Stephen Moore, thank you so much. Tax cuts for all, my friends.

All right, how some folks are downsizing higher lives and saving a whole lot of cash. We'll show you how you can do it, too. And you can still plan those holiday getaways at an affordable price.

(COMMERCIAL BREAK)

WILLIS: In today's economy, that big house you always dreamed of, well, it probably just brings big mortgage payments which can be tough to afford these days.

CNN's Thelma Gutierrez takes a look at a creative step some folks are taking to scale back big-time.

(BEGIN VIDEOTAPE)

THELMA GUTIERREZ, CNN CORRESPONDENT: Gerri, how far would you go to get rid of your mortgage payment or to have the freedom to walk away from your job if you could? Well, some Americans are unloading their possessions and they're learning to live small for peace of mind.

(voice over): In the middle of California wine country, Bill Kastrinos is learning less is more.

(on camera): How many square feet?

BILL KASTRINOS, TINY HOUSE OWNER: It's 98 square feet on the first level.

GUTIERREZ (voice over): For Jay Shafer, smaller is better.

(on camera): How many square feet here?

JAY SCHAFER, TINY HOUSE OWNER: Depends on how you count it, but usually just say 100.

GUTIERREZ (voice over): They live in teeny, tiny homes, not much bigger than a child's playhouse.

SCHAFER: On this side of the room, we've got a couple puppy chairs flanking a boat fireplace.

GUTIERREZ: Oh my gosh, where do you sleep?

KASTRINOS: This is the sleeping loft upstairs.

GUTIERREZ: There's barely enough room for two people.

SCHAFER: A stove and a refrigerator, even a little toaster oven.

GUTIERREZ: But Jay and Bill say owning a tiny house is the tradeoff for living without debt. These days, that's something to envy.

SCHAFER: I would say I am living on less than $15,000 a year mortgage free.

GUTIERREZ: Jay's utilities bills about $75 a year. He says, thousands are unloading clutter and getting rid of big homes to join the small house movement.

SCHAFER: I look around and I do see a lot of people who seem like they are slaves to their homes.

GUTIERREZ: Jay says purging allowed him the freedom to walk away from a job he didn't want.

SCHAFER: I didn't want to pay rent or a mortgage forever, so my plan was to escape the rat race.

GUTIERREZ: Now, he designs small homes for people who want a scaled down version of the American dream.

SCHAFER: Above the kitchen is the access to the loft.

GUTIERREZ: This is the toilet/shower, and imagine climbing a ladder to bed every night.

(on camera): Are you making a political statement here or is this about being practical?

SCHAFER: It's both. It's a very practical thing for me. If I didn't have a 100-square foot house like this, I probably couldn't afford to live in this county. Aside from that, politically speaking, I like the idea of showing people how little a person could need.

GUTIERREZ: Bill and Sharon Kastrinos joined the movement out of necessity.

KASTRINOS: We had a construction business in southern California and things started slowing down with the economy.

GUTIERREZ (voice over): So she started building small homes. In six months, they've already sold 11.

(on camera): What do you think you have gained in exchange?

SHARON KASTRINOS, WIFE: I think the freedom, the tremendous burden that's off your shoulders. Small is OK and it might even be better.

GUTIERREZ: So, how much do these tiny homes cost? Well, they range between $15,000 and $45,000 and you could park them pretty much anywhere you can park an RV -- Gerri.

(END VIDEOTAPE)

WILLIS: Thanks for that, Thelma.

The price of home heating oil is down and that's good news, but you will still want to keep your monthly bills low. Here is how to do it without spending a lot of money. Now, first off, insulate your hot water pipes. These pipes are located off your water heater, which is typically in the basement where temperatures are cooler. Insulations helps the water stay warmer in the cold basement and it can have a big impact on your bill, gutting it by as much as 25 percent.

Check the filter on your furnace to make sure it is operating as efficiently as possible. Furnace filters should be changed once every six months. Look, dirty filters, they can cut your furnaces efficiency by 20 percent, and that, of course, means higher bills. Now, a $20 filter is an investment you can't afford not to make.

And get a programmable thermostat. By regulating the temperature of your home, automatically dropping it during the day when you are not there, for example, you cut costs. Look, for the average American home, leaks from roofs and windows are the equivalent of keeping a window open all year long. Seal those leaks and save yourself a bundle.

The price tag for air travel is up, but with the holidays right around the corner, you can find good deals. You're watching OPEN HOUSE, the show that saves you money.

(COMMERCIAL BREAK)

WILLIS: From bag fees to fuel surge charges, (INAUDIBLE) it just seems airlines are charging for just about everything these days. With oil prices dropping from the highs we saw this summer, relief is in sight, especially if you're looking to travel for the holidays. Our friend Rick Seaney, CEO of FareCompare.com, he's back with us.

Rick, great to see you.

RICK SEANEY, FARECOMPARE.COM: Good to be back.

WILLIS: Now, as a reminder, last summer you were telling us, if you didn't get your holiday booked, now or before now, actually, September, you were going to be in big trouble. How is it shaping up, now?

SEANEY: Well, it's changed a little bit. I mean, in July 4, we had a -- close to $150 for a barrel of oil, now, it's below $70. The problem is, we have traded that oil crisis for an economic crisis and we're seeing up to 20 percent of business travelers not flying, now. So the dynamic is sort of kind of stabilized -- still very expensive, but there are pockets of softness. So, if you haven't purchased your ticket yet, you still may have a chance.

WILLIS: All right, so we need to find those pockets of softness, I guess. Let's talk about the fees, because this has been particularly nettlesome for travelers. They don't like the fuel surcharges, they don't like the bag fees. Any relief there? You know, those gas prices, oil prices going down. Are they giving us a break?

SEANEY: Really, we're not going to see any change in these fees. I don't know if we'll see any new fees coming in, but the bottom line is these fees are going to be with us for a long time. Airlines are putting us in the al a carte generation probably for the next generation for the next decade.

WILLIS: A la carte. I don't like the sound of that. So, no new fees, you are saying, obviously. Let's talk a little bit, thought, about the sweet spot of booking your travel. When do you book it, what time of week, what time of day? What's the best thing for the best price?

SEANEY: Right, I mean, just this week, we've had tons of airfare sales, even a little bit around the holidays. They tend to file these airfare sales on Monday and they match them through Tuesday. The problem is, the airfare sales go away on Friday, so don't shop on the weekends, start shopping Monday and Tuesday, you will always get a better deal.

WILLIS: Well, that's some good news. And when you say soft spots like you did earlier, any place you can direct us for really good deals?

SEANEY: You know, right now, I'm actually going to London for Thanksgiving. It's the cheapest I have seen this time of year with $350 fuel charges on average and $150 in taxes, the tickets are going for $50 each way, base airfare.

WILLIS: Unbelievable. Anywhere else you can point us to where people are going to get a break? And then, what is your outlook for next year? What do you see coming up?

SEANEY: Well, there's pockets down in Florida that are adding a little bit of seats. There is a big problem across the country because we are losing over 200,000 seats a day by the end of the year. So, it's going to be difficult to find great prices this late in the game, but there are some spots there.

You know, for 2009, you know, Europe, I think, is still going to be cheap. The currency is really looking good on the U.S. side now, against the European currencies. I think we'll see some cheaper prices to South America and Latin America. I just think for domestic travel, it's going to be tough for the next year or two.

WILLIS: All right, Rick Seaney, thank you for that. We appreciate your time, today.

SEANEY: Sure.

WILLIS: You can hear much more about the impact of this week's news on "YOUR MONEY" with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN. As always, we thank you for spending part of your Saturday with us. Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.