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Reforming Health Care; Where Your Money Should Be Invested Right Now; Be Careful of Consequences of Negotiating Your Credit Card Debt; The Biggest Climate Change Bill in History: What Does That Mean to You and Your Money?; Blame the Boomers

Aired June 27, 2009 - 13:00   ET


ALI VELSHI, CNN HOST: Hello, welcome to YOUR MONEY. I'm Ali Velshi.

Coming up, when it comes to the markets what goes up must come down or is it the other way around? We're going to look at where your money should be invested right now.

Are you worried about your credit card debt? You can negotiate your credit card bill. Be careful. Be very, very careful of the consequences. We'll tell you about those.

Plus, with Washington dealing with the biggest climate change bill in history, what could the words cap and trade mean to you and your money?

And blame the boomers. Why they might be responsible for the current economy and the effect that they are going to have on your future.

Let's begin with a very important topic, your health care. When it comes to reforming health care Washington has drawn its usual partisan line in the sand. President Obama cites the damage that he claims would be done without major overhauls to the current system.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It will not add to our deficits over the next decade. We will find the money through savings and efficiencies within the health care system. Some of which we've already announced. We also will ensure that the reform that we pass brings down the crushing cost of health care. We simply can't have a system where we throw good money after bad habits. We need to control the skyrocketing costs that are driving families, businesses, and our government into greater and greater debt.


VELSHI: Republicans like New Hampshire Senator Judd Gregg say the soaring national debt makes the Democrats' proposals untenable.


SEN. JUDD GREGG, (R) NEW HAMPSHIRE: This bill is headed to a $3 trillion, $4 trillion price tag, unpaid for, added to the debt. There's no reason to aggravate that with another $80 billion of basically walking around money. It just doesn't make any sense at all.


VELSHI: One of the central questions and points of contention is whether there ought to be a government-run insurance option to compete with private health insurers. Democrats including the president say it is critical to driving health care costs down. Republicans strongly oppose it and in warning against it they've been repeating one statistic in particular.

Our senior congressional correspondent Dana Bash takes a closer look at their claims.


DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT (voice over): In the roaring health care debate this is a Republican mantra.

SEN. JON KYL, (R): The government-run insurance company would displace 119 million happily insured Americans.

SEN. MITCH MCCONNELL, (R) MINORITY LEADER: The 119 million Americans could lose the private coverage they have.

BASH: From the Senate floor to this conservative TV ad.

UNIDENTIFIED FEMALE: 119 million off their current insurance coverage leaving no choices in health insurance.

BASH: That's the rhetoric but what's the reality? To try to get the answer, we went to the source, John Sheils of The Lewin Group that authored the study Republicans are touting. We're hearing 119 million people will lose their private insurers. Is that accurate?

JOHN SHEILS, THE LEWIN GROUP: I don't think you should think of it that way. No one is going to lose their private insurance. We think 119 people will voluntarily move to the public plan.

BASH: So his findings show Republicans are only telling half the story. Republicans are right that if a government-run insurance plan could charge consumers less by paying hospitals and doctors lower Medicare rates, private insurers would lose 119 million people but what Republicans are not saying is that 131 million people would get government-sponsored insurance including 28 million currently uninsured.

SHEILS: The public plan is going to have very low premiums, premiums so low that 119 people will make the choice to go to the public plan.

BASH: But another reality check. A public plan with hard-to- compete with low rates is the most extreme possibility. House Democrats are considering something close but a leading Senate public insurance option would result in just 10 million to 12 million people leaving private insurance according to Sheils' data. Sheils knows both sides used his study to make political arguments but does agree with one central Republican point. Government competition could crush some private insurers.

SHEILS: If you give the government such a strong price advantage in a competitive situation, very few people are going to stay with the private coverage.

BASH: So Sheils says Democrats also have a point when they say private insurers with the best prices and quality should survive. Now we should point out that The Lewin Group which conducted this study is now owned by United Health Care which is a private insurance company. But Shiels insists he had total control and autonomy over his health care study.


VELSHI: Well, soaring health care costs are hurting both employers and individuals. Costs are rising at double the rate of inflation and four times the rate of wages. Health care spending doubled over the last ten years and is expected to double again over the next ten years so you can see why Washington is tackling health care now. Even in the midst of a current recession.

Grace Marie Turner is the president of the Galen Institute. Richard Kirsch is the campaign manager for Health Care for America Now and they join us now to try and make this a little clearer. I want to ask you both now to sort of bring yourselves away from that partisan debate that we've been hearing about because our viewers really need to understand what this discussion that is going on in Washington means to them.

Grace Marie, let's start with you. This discussion about a public insurance option. What do you think this means?

GRACE MARIE TURNER, PRESIDENT, GALEN INSTITUTE: Well, it really does mean creating a new government program that would very likely look a lot like Medicare, paying doctors and hospitals less, in many cases less than their cost of actually treating patients. We see what happens now. Those costs get shifted to the private sector and it would mean that private insurance would become much more expensive and it would be much harder for businesses and individuals to afford private coverage.

VELSHI: But if there was a public option why wouldn't everybody switch over? In other words let's say my private health insurance got too expensive and there was a public option.

TURNER: Well you may very well. Especially if the government is mandating that you buy health insurance and that your employer pay for your health insurance as they're also considering. So yes you're going to go to the cheaper option. One of the things that we know over time is that that reduces the quality of care. You wind up with waiting lines, rationing. Massachusetts is finding this already. The waiting time in most parts of the state to get to see a primary care physician is 100 days.

People are still having to go to hospital emergency rooms to get care because they can't find private physicians to see them. So we would find that we have many of the same problems we see in other countries that have moved toward a larger government role in their health sector.

VELSHI: Richard, what's your response to that?

RICHARD KIRSCH, CAMPAIGN MANAGER, HEALTH CARE FOR AMERICA: Well, over the last ten years health care premiums for insurance companies have gone up four times as much as wages and, in fact, as we know, the current health care system literally is bankrupting American families, 3 out of 5 personal bankruptcies in this country were contributed to by medical costs. Most of those people had insurance but the insurance wasn't good enough if they got seriously ill. Businesses are struggling to pay health care. Our economy is suffering. We have to change the system.

VELSHI: It sounds like we are having two different discussions here. It sounds like Grace Marie you're talking about the quality of care deteriorate for those people who have insurance and Richard you're having a conversation about the some 50 million plus Americans who don't have health insurance or those who don't have quality insurance. Where is the middle ground here, Richard?

KIRSCH: Well, it's not true that if you spend less quality goes down, in fact just the opposite. Places like the Mayo Clinic and the Cleveland Clinic spend less and actually get better quality. There's no relationship between spending and quality. In fact, a lot of the places that spend too much have worse quality because they're doing unnecessary tests and doctors or hospitals have the wrong kind of incentives. We need health care that works for everybody and we can make that more affordable and that's the middle ground here but we got to make it affordable for families and businesses.

VELSHI: All right. Grace Marie, how do you bridge that gap, the idea that you keep health care quality up, improve it in some places, and, yet, deal with this number of people in the country who don't have adequate health insurance or any health insurance at all.

TURNER: You know, Ali, I think that we all agree on the diagnosis of all the problems you just mentioned. We agree that those are the problems.

VELSHI: Right.

TURNER: The more people need coverage and we need to get the costs down. The question is how do we do that? Do we really believe that the government is going to be able to get costs down, increase quality, to provide more efficient care when everything we know is that the private sector is much better able to do that?

VELSHI: Let me just challenge you on that. The private sector hasn't achieved that. We have 50 million uninsured people.

TURNER: We have 50 million uninsured people because of flawed policies, you know, generous tax breaks for people with job based insurance, generous subsidies to people with public coverage. But nothing to lower income Americans who are working and struggling to provide a roof over their heads and they can't afford health insurance. They need subsidies to purchase health insurance.

They want private health insurance. Poll after poll shows that the American people do not want the government to take over the health sector. We need to figure out how we equalize the tax subsidies so everybody gets the same break and if they want public insurance, fine. But give them a choice on a level playing field of being able to have private insurance.

VELSHI: Richard, what is the solution to this? This is going to get stuck in a political fight. What is the middle ground that achieves your goal and her goal?

KIRSCH: We're actually talking about our position. The president's position is a middle ground. It is giving people a choice between private and public insurance and operating on a level playing field. One of the things Ali that has been amazing to me is to hear private insurance companies whining they can't compete against the government.

Private insurance companies have 150 million customers, billions to spend in marketing and name recognition. If they can't compete it must be because they know that the American public doesn't trust them and the denials and delays of care that we have all the time in the high prices, we need competition between a private insurance plan and public insurance plan. That's all we're saying. Let's give Americans both those choices. That's so we can change the system enough to move toward a system that guarantees good health care for everybody.

VELSHI: All right. I hope that both of you will be able to come back; we're going to have to continue this conversation another time. Richard Kirsch is the campaign manager for Health Care for America and Grace Marie Turner is the president of the Galen Institute. Thanks both for trying to clarify this a little bit; it's going to be an ongoing discussion. We'll have it many times.

Well the markets are up and the markets are down and your 401(k) is all over the place after taking quite a pummeling last year. So coming up next what you should be doing with your money right now.


VELSHI: The U.S. economy has shown signs of life recently and the market has been responding. Now a lot of economists warn that there is still more pain to come even if this recession ends in the next few months. The price of crude oil has continued to take higher and the markets are pulling back a little bit so begs the question, what are you supposed to do with your money right now?

We've got somebody to tell us. Ted Parrish is the director of investment with the Henssler Financial Group. Ted good to see you. Thank you for being with us.


VELSHI: Good, I am well. Listen these markets are a bit confusing. We will go back to about the first week of March. That was when they felt like they hit the bottom and there have been some very strong gains since then. Some of our viewers have been involved in the market since then. Some are thinking about getting in but recently we've seen them kind of move sideways. What's going on?

PARRISH: The market is just taking a breather. It was up 40 percent from the bottom at one point, you know, a lot of negative activity in the economic data that banks were in crisis and now we see some money coming back into the market because we've seen that the banks are not going to all go out of business and I think investors have gotten a little more confidence but the recent downturn in the past couple weeks was just a little profit taking.

VELSHI: You're talking about being a long-term investor and one of the things that I think it is useful for our viewers to understand is that to be involved in what I call equities or the stock market, really one of the best ways to do it is either through mutual funds or index funds or something called Exchange Traded Funds. One of your recommendations is an Exchange Traded Fund. Tell me what that is first of all an Exchange Traded Fund.

PARRISH: An Exchange Traded Fund is basically a bucket of stocks that actually trades like a stock instead of like a mutual fund that you have to wait until the end of the day before you know what price you're going to buy at. It trades during the day. It gives an investor an opportunity to buy different sectors of the market or an index fund of the market as a whole.

VELSHI: Like a basket of stocks. It could be the S&P 500, it could be the Dow.

PARRISH: Definitely.

VELSHI: And you have a particular recommendation which I thought was interesting, it is the I shares U.S. Regional Banks fund. The ticker symbol is IAT. Tell me about that.

PARRISH: Actually purchased shares of IAT -- actually purchased shares of IAT back in about May because a lot of the funds, stocks were a little dangerous so it gave us an chance to get a whole bucket of regional bank shares that we thought were a good value at the time and we didn't want to take an individual stock risk. We wanted a more diversified approach.

VELSHI: It would sound weird to some of our viewers that you are recommending they buy bank stocks.

PARRISH: Well, we still have a position in financials in our portfolio. We were very cautious and we sold out some of our financials in 2007 and that helped us a lot but a lot of those companies are great values right now. The businesses are going to survive. There will be growth on the other side. The regionals on the one hand are a whole lot better than the multinational banks because they're in areas that are more focused. You can focus on an area like the south, that is a higher group area and on top of that I think the regionals know their customers. VELSHI: They're a little closer to their customers and they might have a better handle on their credit. However, some people do like the stock market. You're buying individual stocks. I think you should do your research if you're doing that but you have done that research and you recommend General Electric.

PARRISH: Yes, General Electric is a company that has gotten a lot of attention lately because of their capital business. One-half of their banks are financial but I like the company because it's a direct way to take part in a huge infrastructure play that's going on globally. There's been almost 700 stimulus bills or acts done globally and a lot of it focused on infrastructure spending. GE will help take advantage of that spending globally.

VELSHI: All right. The other stock that you recommend is Striker Corporation. The ticker is SYK. They're in the business of medical equipment. This is a big discussion that we're having today.


VELSHI: And throughout America about the health care debate. A lot of people say I don't want to get involved in health care because I don't know what's going to happen. Why do you like Stryker?

PARRISH: The health care situation in America is going to get a lot more hairy as the year goes on. All of the companies will be under pressure. Stryker has a history of 31 straight years of 20 plus percent growth. They make hips, knees, and elbows so their market will only grow bigger as the aging baby boomer population continues. Stryker is trading at a valuation that's pretty cheap historically and I think that you're still going to see growth in the 12 to 15 percent range. And 50 is the new 40 as they say and Stryker facilitates that.

VELSHI: All right. So the idea is that regardless of the health care debate they make something that people in an aging population are going to need.

PARRISH: Yes. You know, one thing that the Democrats and Republicans can agree on is that the cost of health care has to come down. The rubber meets the road with the two parties when you talk about expanding the base of the insured population. They all want to get costs down. What that means is that all of the health care companies will be squeezed. Their margins will be squeezed some way or other but Stryker will still do well I think.

VELSHI: Ted good to have you here. Thanks very much for being with us.

PARRISH: Thanks for having me.

VELSHI: All right. Ted Parrish.

Well if you can't pay your credit card balance listen up. Some credit card companies might actually be ready to make a deal with you. But there is a catch. There is always a catch.


CHRISTINE ROMANS, CNN HOST: So how much credit card debt do you have? Would you like to settle up maybe a $4,000 bill for $2,000? Credit card companies dealing with more and more troubled customers are increasingly willing to settle your delinquent accounts for less than the money owed. Does it sound too good to be true?

Well there are some important reasons why you should really think about this before you do it. Jack Otter is a personal finance journalist. Jack when we look at a chart of this, the percent of credit card debt that is 30 days late or more, it has skyrocketed.


ROMANS: Six percent of all credit card debt. It is not a pretty picture. The chart tells a story of credit card companies that are finding out their customers can't pay on time.

OTTER: Absolutely.

ROMANS: They're carrying these balances. Are we in a situation where these credit card companies are going to say you know what? You've got a low credit score. You owe us $6,000. We'll take $4,000.

OTTER: They are saying that but this isn't the first conversation that someone is having with their credit card company. This has been an ongoing conversation. They have missed bills. They haven't been paying anything. The card companies -- the ugly thing about that graph is it hasn't slowed down. It is passing 6 percent and headed straight up. So they read the writing on the wall and they say OK. Let's get whatever we can.

ROMANS: Get whatever we can.

OTTER: I think another factor here is that right now as you know credit card companies are not very popular.

ROMANS: Really.

OTTER: Surprise, surprise. One thing they have, though, they have kind of a hall pass from Wall Street. Nobody expects credit card companies to blow out earnings next quarter so I think they're thinking let's take all this bad stuff and get rid of it right now and set us up for better growth in 2010.

ROMANS: So in a way it's your bailout. Here's your bailout. The credit card company wants to give you free money or at least accept less money from you than you owe them. But you have to be very careful about this. It's not for everybody.

OTTER: Sure. It's going to hurt your credit score. My theory is that most of the people having this conversation --

ROMANS: Already have a bad credit score?

OTTER: Exactly. Their score has been destroyed. I think it's up to them to make the big, important decision that they are going to change their financial ways from this point forward. Take a little bit more hit and start gray to black and then move forward.

ROMANS: That's something. When I talk to people, people about credit card debt, sometimes especially when they file personal bankruptcy or something, ten years later they can be in credit card debt again because the behavior hasn't changed. That's kind of a problem underlying all of this. Who are the best people to do this? I mean, should anybody take this deal or if you're young and you have a long future in front of you and you don't want to saddle yourself with a bad credit score right now.

OTTER: Maybe it's because it wasn't last year that I graduated from college.

ROMANS: You're kidding.

OTTER: Surprise, surprise. I feel as if in that situation you might have a little more flexibility. The total number is probably lower. Ikea Furniture for your first apartment instead of years and years of building up credit card debt. Is there a way to pay that full amount so you don't have that on your score? Can the bank of mom and dad come up with an arrangement where you're paying them maybe with interest if dad's tough, you know? But at least he's not going to report it to Experien.

ROMANS: And if you make a settlement how long does it stay on that credit report? Is it the full seven years?

OTTER: The full seven years. That's tough. Now, again, if you clean up your act from that point on, I don't think that six years from now it's going to kill you.

ROMANS: Some people they might not have another choice. This might be a little late for them to get a little debt off the table and they might simply not have another choice.

OTTER: And $2,000 instead of $4,000 is a pretty good deal especially for somebody ...

ROMANS: I have to say, you have to examine the behavior that got you to the credit card debt in the first place. You know? Something we just -- if nobody is going to give you anymore credit then maybe that will fix it in the end.

OTTER: Otherwise it's just a temporary reprieve.

ROMANS: That is right. All right. Jack Otter, personal finance journalist. Thanks, Jack.

VELSHI: It's the single biggest piece of climate change legislation in our history but hear how much it could cost you personally and whether it's worth it, next.

(COMMERCIAL BREAK) VELSHI: The Waxman Marky Bill also known as the American Clean Energy and Security Act is a source of great deal of controversy. The bill aims to promote low carbon energy sources and to establish a federal carbon cap and trade program to cap greenhouse gas emissions at 17 percent of 2005 levels by the time we get to 2020. I know it sounds complicated. It is. That's why we're talking about it.

Under the system's major corporations who are emitting co2 or other greenhouse gases into the atmosphere will be given a limit on how much they can emit. Companies who go over the limit have to purchase carbon credits elsewhere. In some cases from those who haven't used up their emissions limit.

Both sides of the story are very far apart. Howard Gould is a cofounder of The Clean Economy Network. Stephen Moore is editorial writer for "The Wall Street Journal" and they are two friends of our show because they have a way of making complicated things very simple.

Guys, without getting into the big politics of it just yet I want to ask you, start with you, Howard, what does this mean? What is the implication of this bill and how should we be thinking about it?

HOWARD GOULD, COFOUNDER, THE CLEAN ECONOMY NETWORK: Well, this is a big thing that I think that everybody has been waiting for a very long time. This is a bill that is designed to lessen the emissions into the atmosphere because we have a significant problem going on right now and it's also an attempt to get America off of foreign oil. This bill could actually do both things with out necessarily costing America all that much money or at least cost the consumer all that much money.

VELSHI: Stephen, what's the danger? These people who oppose it say it will in fact cost a great deal of money and make all sorts of things more expensive for Americans.

STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL:" Yeah, you know, Ali, I don't think this is really that complicated. I mean you are right it sounds complicated but what this really is is a big energy tax on American manufacturers and American consumers. So what it means is that it's going to be more expensive to produce things in the United States now and what it means for the people watching the show, it's going to be more expensive to heat your home, to air condition your home every time you go to the gasoline pump, gas is more expensive.

We get a lot of our energy today from coal. About half of our electricity comes from coal. This is really oriented towards trying to move us away from that. I just will say this, Ali. At a time when our economy is flat on the back, our manufacturing sector is in such bad shape I just think it's highly irresponsible to be even talking about a bill like this that's going to cost so many jobs.

VELSHI: Do you agree that it's going to make energy more expensive?

GOULD: I think that basically what they have shown, the EPA has come out with a report saying that each household it will cost $111 each and the Congressional Budget Office is basically saying it'll be $175 a year. I think $175 to try and clean up the atmosphere, make companies more efficient and sustainable as well as actually getting us off foreign oil, is probably well worth it and to add to that actually the lowest income people out there will make money off it.

They're talking about getting a $40 tax rebate on this. So this is, you know, look. I agree that it's not the appropriate time to do this from an economic standpoint but I think there is also agreement to say it is absolutely the time that this needs to happen because from an environmental standpoint we need to address this issue ASAP.

VELSHI: Go ahead.

MOORE: The problem with that Ali is that you know you can't solve global warming by having one country reduce its emissions because the likely effect that almost all economic studies show is that our manufacturing declines because we have this new tax and a lot of those jobs and those plants will move overseas.

We know that's the case because it's what's happening in Europe now. They're a couple years ahead of us on this and they're seeing a lot of the union workers in places like Britain and Europe really saying wait a minute why are we doing this, we're losing all our jobs.

VELSHI: So you're saying that those industries that are polluting are emitting more than the limits will allow them, will move to jurisdictions or countries that don't have those rules is that what you said?

MOORE: That's right.

VELSHI: Howard?

GOULD: I think you can address that a couple ways. The big emitters right here are the coal producers. You can't go overseas necessarily and get coal that is actually here in the United States for one. So I think that covers that.

Also, there are jobs being created out of this bill. You're talking about people now getting involved in solar, wind, thermal, hydro geo. So there are jobs being created.

Also now there is talk about if you manufacture something that is high intensity in terms of its emission of co2 and they send -- you send it overseas they'll be taxed bringing it back into the United States.

MOORE: Great protectionism.

VELSHI: Stephen, what's the solution? If you guys are both agreeing it's a dicey time to be asking people to pay more money for anything. Stephen are you disagreeing that we need to deal with this at all or we need to deal with it and make sure every country is part of it or do we just not deal with this? MOORE: I think we've got such a major economic crisis on our hands right now Ali that this is the absolute worst time to be talking about this. We have 9.5 percent unemployment. We know other countries are going to do this. That's why they want the United States to go first. We got to concentrate on getting jobs and manufacturing back and that's not going to happen with higher energy prices.

VELSHI: Will this stimulate jobs and alternative energy that the president keeps talking about?

MOORE: Yeah, it will. What happened in Europe is for every green job they created they lost two jobs in manufacturing.

VELSHI: Howard, do you think that might happen here?

GOULD: Do you think we'll lose jobs?

VELSHI: Well you'll create jobs in alternative energy but Stephen says in Europe for every one they created for green energy they lost two.

GOULD: I don't know that I tend to agree with Stephen in some ways. I don't know that Europe is exactly the best model to looking at this. It's kind of like the cell phone system that operates here in the United States. We have the worst one because we were the first to build it. Everybody else has a better one. They were the first ones to build this. The system is not perfect. There are a lot of mistakes. I think we're correcting a lot of those mistakes and I think we will come out on top of this one.

VELSHI: OK, you two gentlemen I really do appreciate the fact that you've taken great time to explain this to us and I think our viewers should understand this is a very big deal. Take some time to read up on this, learn about it, because it is going to impact, regardless of which one of these guys you believe. Both of them agree it is going to have an impact on your life. Howard Gould thanks for being with us. Stephen Moore always great to have you too there.

Listen up all you baby boomers. Why you might be to blame for the current recession and what you should expect in the years to come.


ROMANS: Blame the banks. Blame the borrowers, the politicians, and the boomers? Can the baby boomer generation really be the cause of America's financial ills?


ROMANS (voice over): While we're playing the blame game for the financial crises, add baby boomers to the list.

UNIDENTIFIED MALE: Blame it on the baby boomers? You can't blame it on anyone.

UNIDENTIFIED FEMALE: It's the debt caused the problem. UNIDENTIFIED MALE: What's going on now goes far beyond just the baby boomers.

ROMANS: Credit crises or not some say we were headed for tough times even before this meltdown.

Money manager Harry Dent wrote, "The Great Depression Ahead."

HARRY DENT, AUTHOR, "THE GREAT DEPRESSION AHEAD:" We've had this boom since the early '80s where this rising baby boom generation in increasing numbers has been earning and spending more money. We've been saying for a long time that right around this period late in this decade that this massive generation would peak and their spending and productivity would peak and they'd start to become savers.

ROMANS: Seventy eight million Americans were born between 1946 and 1964. Dent says typically they hit a spending peak at age 46, level off at 50, and spend less the rest of their lives. The youngest boomers turned 45 this year. Retail experts say the huge buying group is slowing down.

BRITT BEEMER, CHAIRMAN, AMERICA'S RESEARCH GROUP: Just group historically it's always been the buyer of big ticket items. They were the ones to drive new car sales for years and years. They were the ones that drove people buying their second vacation home.

ROMANS: Accounting for 40 percent of consumer spending but as boomers retire that number will drop, the economy will stay sluggish for years, Dent says, and we should have seen it coming.

DENT: Every 40 years this happens. The generation cycle. We get major peaks in the stock market and the economy.

ROMANS: Boomer blame was a theme in some commencement addresses. The boomers abandoned the thrift of their parents and practiced the art of spending borrowed money. Indiana Governor Mitch Daniels in a commencement address called his generation self-absorbed, self- indulgent, and all too often just plain selfish. But some economists say don't blame boomers alone.

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: It's not baby boomer centric; it's not centric to any one given demographic. Consumers spend within the context of the incentives they're given and the incentive was to die in debt and, unfortunately, we're all still alive and we owe a lot of debt now.


ROMANS: That we do. OK. Blame them or not, boomers are certainly feeling all of this. According to a Pew Research Center survey 55 percent of baby boomers say it's likely their income will not keep up with the cost of living making them more pessimistic about their future.

So how are baby boomers going to affect the economy now and in the future? Could it slow down the end of this recession? Douglas Holtz-Eakin is the president of DHE Consulting and the former director of the Congressional budget office, also advisor to Senator McCain's campaign for president. Welcome to the program.


ROMANS: Let's talk a bit about how the boomers could slow down a recovery. Could that be a factor?

HOLTZ-EAKIN: I think it's going to be a very real factor. We know that households in general have lost an enormous amount of wealth in this recession. Their housing value, their stock market portfolios got hit hard and they started with a lot of debt. We would expect everyone to save more to rebuild that wealth going forward but the boomers are closer to retirement and they're a big chunk of the population so we'd expect them to save more and have a bigger influence. They say that is less spending and I expect consumer spending will be sluggish going forward.

ROMANS: The two sort of factors here, we talk about blaming the boomers for this whole thing and there is the fact they rejected the frugality of their parents and really perfected the art of spending someone else's money then there is also just the big size of the cohorts that they say demographics, just this huge size and they start to slow down to retire, when they start to take their money out to live on. That has a huge impact for the rest of the country.

HOLTZ-EAKIN: It's a huge impact for the country. It's a huge impact for the world quite frankly. The United States has been the last retail market for a decade now. China, India, Europe, Japan you name it, they counted on selling goods into the United States. As we come out of this recession the whole world has to find a different way to do business. We are going to need export more to other countries and we are going to need to have spending by businesses instead of just households.

ROMANS: Let's talk about the baby boomers' health care and Social Security needs. This is big, too. The youngest boomers start turning I think they start turning 45 this year so you're talking about 15 or 20-year period where there will be more pressure on health care and Social Security?

HOLTZ-EAKIN: We've seen this coming for a long time. It is really vivid in the federal budget, past 2011 you see the Medicare lines ramp up, you see the Social Security spending ramp up. And to be quite frankly we are not in a position to pay those bills. There needs to be serious work on Medicare and that's part of the health care reform debate this year. It's obvious that we need to fix Social Security and we probably should do it quickly.

ROMANS: What do you see in terms of the health care debate that you like, that you don't like? Do you think we're addressing these issues in that?

HOLTZ-EAKIN: I'm not really happy with the quality of the debate so far but hopefully it's early. I'd like to see a bipartisan bill because that would be more durable and it will have a consensus kind of feel to it. But the big focus has to be on how we deliver care in America. We spend too much. We don't get enough quality for what we spend. Given the likelihood we'll have a bigger demand in the future we need to fix that efficiency problem.

ROMANS: And on Social Security?

HOLTZ-EAKIN: Social Security we simply have to right now make reforms that don't need to affect current retirees, they don't need to affect people who are close to retirement but they do need to slow the growth in benefits. And the easiest way to do that is to have less generous benefits than promised for people like me, the lucky baby boomers who have had good incomes and concentrate the benefit more on the lower income folks.

ROMANS: Let's talk a little bit about what all of this means, the baby boomer retirement boom and the fact that these boomers have been so hurt right now that they are facing a retirement that is even in more jeopardy. They don't have a lot of time to make up for it. What does this mean for them and what does it all mean for the next generation?

HOLTZ-EAKIN: Well, for them I think it means they delay retirement in many cases. There was a study put out by the Congressional Budget Office a few years ago that looked at people being prepared for retirement, about half of the folks were OK. About a quarter of the folks were obviously in trouble and the remainder if they just worked two or three more years could put themselves in a good position.

What we've now seen a bad enough recession that we'll see more people working those two to three more years. That will delay the ascension of the next generation into management jobs and those slots occupied by the boomers. We'll see the ripple effect all through the labor force.

ROMANS: And for the next generation? I worry if all of these people taking their money out to retire on what does that mean for stocks and what does that mean for consumer spending and what does it mean for the size of the economy?

HOLTZ-EAKIN: If we do our business right and we give the incentives for businesses to invest, that spending will drive the economy. We will also make the jobs for the next generation have more productive, they'll get higher wages and that is a recipe for them to have a standard of living that is better than the one we have. But if we don't do our job well they won't get those investments and will leave a burden of debt to them that are unfair and they will properly be chagrined about what their parents did to them.

ROMANS: All right. Doug Holtz-Eakin, thank you so much, DHE Consulting.

HOLTZ-EAKIN: Thank you.

VELSHI: Well, air travel has dropped in price but it's still not easy. Have you absolutely had it with air travel? One industry leader says he has the answer for improving your flying experience. That's next.


VELSHI: Well if you're an airplane enthusiast like I am a little bit of disappointment. Boeing is putting its 787 Dreamliner on hold yet again. This is the fourth delay for the Dreamliner which was supposed to debut more than a year ago. This time Boeing says the holdup is due to structural modifications. Boeing has not set a new date for the airplane's maiden voyage. And travelers hoping to take advantage of clear, the fast track program through airport security, think again.

Not only did the company shut down its express security lanes abruptly this week but it also says it's not going to issue refunds on the $200 annual fee. Well airline passengers in the U.S. have come to expect long delays, cramped seats, and the loss of free perks that they used to regard as routine.

Tony Tyler says he knows how service within the U.S. could be greatly improved. He served as the CEO for Cathay Pacific Airways since 2007. I spoke to him on a recent visit to Hong Kong.


VELSHI (voice over): Give me your sense first about the changes that we're seeing to the airline industry internationally and the profile of the business traveler that the industry has depended upon for so long?

TONY TYLER, CEO, CATHAY PACIFIC AIRWAYS: In all cases the business traveler has deserted us and that is the problem, given up the front of the airplane further back of business, so our first class traffic has dropped enormously. We were very dependent on financial services industry, being based in Hong Kong, Hong Kong being a financial center. The people filling our business, bankers, brokers, lawyers, accountants, ipos, mainland Chinese companies, going around the world, and road shows, that sort of thing. Unfortunately that activity is not happening.

VELSHI: You have been around during SARS; you have been around during the Asian financial crisis how this is different when it comes to being an airline and planning for the future?

TYLER: This is worse. The trouble with this particular crises is the lack of visibility. Nobody can tell you when it is going to end. It will only end when world economic growth starts to pick up again. If you can tell me that I would be a happy man. The problem with the airline industry internationally, because of sovereignty of traffic rights you don't get cross border mergers and acquisitions that you get in every other industry.

This is one of the reasons the industry is so fragmented. One of the reasons profitability in the industry is chronically poor. Why the industry never returns cost of capital. So, it is a real structural problem for the airlines. What should happen is the government should get together and tear up the international laws that drive the industry into this cul-de-sac. But I really don't think that is going to happen.

VELSHI: But if they did that, and there was more consolidation, what would the effect be on the passenger?

TYLER: It would be good. I think it's -- it would be good you would have fewer airlines, but they would be bigger, stronger airlines that could genuinely offer service to more destinations. You would still have a competitive industry.

VELSHI: You keep talking service. And certainly for the American passenger that has been an issue over the last few years. But the American carriers have been very aggressive about Asia, about direct routes to Asia, about traffic going that has been back and forth. What is your proposition to my viewer who is watching this who is an American who might need to or want to travel to Asia?

TYLER: We offer a level of service that I think, U.S. carriers for various reasons are unable to reach. That's something that we are very proud of.

VELSHI: Why do you think that is? Why is it difficult for U.S. carriers to reach that level of service?

TYLER: I think the infrastructure in the United States is poor, if I may say so; I don't want to offend anyone watching this. But to say that some American airports are third world level is actually being a bit rude to some third world airports. Everybody who lives in Asia just dreads going through the U.S. airports system because of the very poor provision security arrangements compared to what we do in Hong Kong and most cities in Asia.

It really compares poorly. U.S. carriers deal with it day in, day out. It has a huge cost burden to them. It causes all this disruption which again has costs and damages the reputation of brands off the carriers. I am very glad I am not trying to run a U.S. carrier it is a tough job.


VELSHI: And that Hong Kong airport is a very efficient one. Tyler acknowledging that he has got something easier to work with than a lot of American carriers actually do.

Listen, we have been telling you a lot about cash for clunkers now why this new program might be like so many other deals out there, simply to good to be true.


VELSHI: OK, you have heard about it, the cash for clunkers program. It sounds very simple. You take your gas guzzler, you buy a more fuel efficient car, and the government gives you about $4,000 toward the new vehicle. Not as it seems. CNN Money senior writer Peter Valdes-Dapena has been following this stuff every day. When it first came out he told us he didn't think it sounded as good as it was. Now he is telling us again, guys it isn't what you think it is. What's up, Peter?

PETER VALDES-DAPENA, SENIOR WRITER, CNNMONEY.COM: Well the thing you need to remember here is that $4,000 that you are talking about, that's not a rebate. That's in place of your trade in.

VELSHI: That's what I didn't understand when this first happened. If you have a gas guzzler, you trade it in for a more fuel efficient vehicle you don't get any other money. This is the money you get.

VALDES-DAPENA: The Federal government is simply bidding for your car. If you trade it in, you get a slightly fuel efficient vehicle, you get $3,500. That's great provided your vehicle is worth less than $3,500 to begin with. If you have something that's worth more than that or that is worth close to that then it is like well my benefit here is really maybe nothing, maybe $500, is that really enough, I mean the idea is to motivate people to buy a new car.

VELSHI: Right and if you were sitting on that gas guzzler, I know you wrote this in your story, if you sat on a gas guzzler like that, that was worth that little money throughout the time when gas was going to $4.09, $4.11 a gallon you may not have had a choice?

VALDES-DAPENA: Right. And probably you are not somebody who would have been shopping for a new car anyway. The real thing here, let's look at this realistically. Let's see if your car is even worth $2,000, $1,500, is that enough to make it worth it to you to suddenly buy a new car when you wouldn't have been in the market to buy a new car before. Probably not. You really should be looking maybe at a used car you can save thousand of dollars there and not bother with the cash for clunkers program.

VELSHI: This money doesn't go to you if you buy a fuel efficient used car?

VALDES-DAPENA: No, not a used car. Only for people who buy new cars. So and really, people that can benefit from this are people that are frankly not going to be looking at new cars to begin with. That's one real problem with this program. I think it will spur some sales. But mostly because people are confused by it. People are going to get into the market. This cash for clunkers thing doesn't make any sense.

VELSHI: Or if you had clunkers sitting around and you were in the market. But you are saying it is a narrower audience than what the government might have thought. Let's just talk about this. If you have a car that gets 15 miles to a gallon, and it qualifies, in another words the $3,500 that you might get from the government is more than you would get on the market for it. How little can you spend to get into a car that is more fuel efficient that would qualify and give you the rebate?

VALDES-DAPENA: Sure. Well if your car, there aren't many cars that get 15 miles a gallon. Realalisticaly this is going to apply mostly to people who drive trucks and SUVs.

VELSHI: OK. VALDES-DAPENA: When you get into the truck market yes, those people are a little better off. You can probably get a pickup truck, even that gets better fuel economy and they will qualify for some money under this program or you can get a small SUV. Certainly if you are willing to downsize your vehicle, you can do very well if you are willing to trade in a big SUV and get a small crossover or something that is much smaller or a small car.

You get a maximum benefit from this and do pretty well. But you have to be flexible in the type of vehicle you are looking for. You will get the most benefit by really changing vehicle class and vehicle size when you trade in your old one.

VELSHI: Peter, if anybody wants more information on that tune in. Check out Peter's articles on

Thanks for joining us, Peter. Thank you for joining us for YOUR MONEY. Make sure to follow us on Facebook and Twitter at Christine Romans and at Ali Velshi. You can join us every week for YOUR MONEY Saturdays at 1:00 p.m. Eastern and Sundays at 3:00. Also log on 24/7 to Have a great weekend.