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Budget Under Attack; Food Bank Lines; FEMA Blasted by Congress for Lack of Planning; Is the F-22 Raptor Worth Fighting For?; Fargo, North Dakota: Recession Free

Aired February 26, 2009 - 14:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: Hello, everyone.

President Obama pushing forward today on his first budget and so are we. A long-term big bucks plan right for the economy and (INAUDIBLE) and already under attack. One republican says President Obama is making President Bush look like a tightwad.

One expected battle in the fiscal firefight, the F-22 Raptor never seen a military conflict, but the most expensive fighter jet ever keeps valuable jobs alive.

Hello everyone, I'm Kyra Phillips in the CNN world headquarters in Atlanta. You're live in the CNN NEWSROOM.

We're going to give you the bottom line on the budget. But for too many of you out there, the bottom line means an empty cupboard, an empty table, an empty stomach. We're pushing forward taking you to the front lines to the fight against hunger.

But first to the Pentagon, Robert Gates, the decision he made about flag draped coffins.

ROBERT GATES, DEFENSE SECRETARY: Address two subjects today. First I would like to make an announcement regarding the department's policy toward media coverage of the return of our fallen heroes at Dover Air Force Base.

As you know, the president asked me to review this policy. After receiving input from a number of sources, including all the military services, and organizations representing military families, I have decided that the decision regarding media coverage of the dignified transfer process at Dover should be made by those most directly affected, on an individual basis, by the families of the fallen. We ought not presume to make that decision in their place.

I've tasked a working group to quickly come up with a plan to implement this new policy. Further, I've tasked the working group to examine ways in which we might further assist the families of those who have made the supreme sacrifice for our country.

Second, earlier today, the White House unveiled the federal government's fiscal year 2010 base budget for the Department of Defense. The remaining FY 2009 supplemental figure in the fiscal year 2010 war costs budget. The remaining '09 supplemental of $75.5 billion will allow us to continue to support operations in Iraq and Afghanistan, including the ongoing shift of forces in both countries. The 2010 war costs estimate of $130 billion is our best estimate at this point for the next fiscal year. The FY 2010 base budget of almost...

PHILLIPS: All right, Secretary Gates covering two issues there. The first one, the story we brought to you at the top of our hour. And that is the fact that he has decided to lift the ban on media coverage of coffins of war victims when they arrive at Dover Air Force Base.

As you can remember, our Ed Henry actually asked the president of the United States that question directly.

Ed, when he gave his speech at the White House. So I guess in a way, you had kind of the inside scoop, this was probably going to happen. Let's talk about what this means for us, for families of the fallen, and it should be interesting to see how military personnel respond to this as well.

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: It's a very sensitive topic indeed, Kyra.

This was at the president's first primetime news conference in the east room a few weeks back. I asked the question because he's been pushing for openness and transparency, promising that. As you know, there have been critics in recent years who have said that the Bush administration was trying to use that policy of banning the media at Dover Air Force Base when the flag-draped coffins came in from Iraq or Afghanistan as a way to hide the cost of the war, the full cost. Not just financial, but the human cost as well.

But I can tell you, after I asked the president that question, he said he was reviewing the policy, he was going to have Secretary Gates take a look. I heard from some families on both sides. I heard from one gentleman in New Jersey, for example, who called me and I spoke to him for about 45 minutes. He very passionately said he does not believe cameras should be there, because he thinks it's a mortuary he said at Dover Air Force Base and that we have no place being there. He lost his son, this man in New Jersey, in Iraq, 19 years old, as I recall several years ago. And so he was very passionate about it.

I think what you're seeing from Secretary Gates, what I've been hearing from White House officials in the last hour or so is that Secretary Gates was trying to find a middle ground, where there would be more openness and transparency, but there would be privacy respected for those families who say, look, this is just a difficult grieving process. We don't want the media there.

There's also been a concern from Secretary Gates that some families might not live anywhere near Dover Air Force Base in Delaware, and it would be a hardship for them, because they might feel that if the media was going to be there and it was going to be live on CNN, the arrival of the flag-draped coffin, they might have to fly in from Iowa, Montana, you name the state, and it might cost the family a lot of money. So, I think what I'm hearing from White House officials, they left this to Secretary Gates to try to find a middle ground, if you will. This is very similar to what's done at Arlington National Cemetery, where funerals at Arlington National Cemetery, the burials will be open to the media, if the families allow it. That's the key, if the families allow it.

PHILLIPS: Ed, too, I remember, especially at a lot of the hot times where the war in Iraq was extremely controversial among the American people, and then, of course, we ended up seeing what the polls told us, and how America felt about that war. And as President Bush ended his time in the White House, a lot of people were saying, we need to see those, because it puts in reality the number of men and women who are dying in this war. A war that many Americans said never should have happened in the first place.

HENRY: Certainly that was one thing we heard from many critics of former President Bush that there should have been more openness about this. And that when you, you know, keep it closed, critics called it hiding, the true cost of the war, then people don't feel the sacrifice in their bones unless their own family is affected.

Let's not forget it's not just about Iraq as well. This president now moving forward, President Obama has now said he's sending 17,000 more troops to Afghanistan. That's about a 50 percent increase of our presence on the ground.

So this is obviously a big deal. Even as the president gets ready in fact to make his speech tomorrow in North Carolina about what he's going to do in Iraq and start bringing more troops home, he's sending more troops to Afghanistan. This is still a big, big issue, obviously.

PHILLIPS: Another big, big issue with big, big numbers, the budget. The smoke has been pouring out of that magic wall as you've been laying everything out for us. Why don't you give us a little one-two on what you've been able to find out, paperwork?

HENRY: Absolutely. I think one of the most important issues for our viewers, obviously, is health care. There are more than 46 million people who are uninsured. The president is saying inside this budget that he wants to have a fund of $634 billion reserved for health care reform. He's going to leave some of the details to Congress in terms of what they're going to actually do with it.

Let me move that one over. You can see, the big question is, how is he going to get that $634 billion? How is he going to pay for it? He's going to change the itemized deduction rate for families with incomes over $250,000.

What does that mean? That means, basically, right now, if you're a couple making at least $250,000 a year, if you had $10,000 in mortgage interest or charitable contributions, at a tax rate of 35 percent, you get back $3,500.

Now, the Obama administration wants to cap it at 28 percent, so you would only get $2,800 for that deduction. Your tax liability increases by $700. If you do that all across the United States for wealthy Americans that brings in over $300 billion in revenue but it's a tax increase that a lot of people may be upset about.

Let's take a look at some of the other taxes that are going to be here. You're going to hear republicans already talking about them, specifically here, reinstate the 36 percent and 39.6 percent rates for those taxpayers earning over $250,000 again, for a married couple. What does that mean in layman's terms? That means the Bush tax cuts will expire at the end of 2010. And so those people who were benefiting from the Bush tax cuts will see their tax rates going up a few percentage points.

That's going to bring in more revenue. It won't go to health care, instead it's going to go to deficit reduction is what the administration is saying.

I'm using red because as you know, there's sort of a lot of red ink right now. So we're going to use the red.

The president promised on Tuesday night that he is going to cut the budget deficit, which is about $1.3 trillion in half over the next few years. But it's going to be a heavy task when he's also at the same time, there are some spending cuts in here, but he's also spending a lot more money for things like health care - Kyra.

PHILLIPS: Ed Henry, thank you very much.

HENRY: Thank you.

PHILLIPS: Well, if the early reaction is any indication, the fight in Congress over that stimulus bill was just a warm-up. In one corner, House Speaker Nancy Pelosi.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D) HOUSE SPEAKER: At long last the president who came here on Tuesday to deliver an address to a joint session of Congress, talked about the challenges that we face, it was a message of realism, but it was also a message of optimism and hope. In just a few days later, he has sent to the Congress the blueprint, the outline of his new budget a new era of responsibility renewing America's promise.

(END OF VIDEO CLIP)

PHILLIPS: In the other corner, House republican leader, John Boehner.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, (R) MINORITY LEADER: The president sent his budget to Congress today. Middle class families are making sacrifices and cutting their expenses. It's time for Washington to do the same. We need to do that by stopping out-of-control federal spending. The American people know that we can't tax and spend our way to prosperity. And it's just the formula that appears the president's budget is relying on.

(END OF VIDEO CLIP)

PHILLIPS: The real fight begins in April. That's when the White House sends up its official line by line spending plan for fiscal 2010. Democrats and republicans alike want the president to spare a super expensive fighter jet from the chopping block. They say it's a matter of security for troops and jobs for civilians.

(BEGIN VIDEO CLIP)

YESENIA PEREZ, WORKS ON F-22: Pretty scary to think that your whole life, your daily bread, you know, can be just to rely on somebody's decision.

(END OF VIDEO CLIP)

PHILLIPS: Just how valuable is the jet, and would pulling the plug really kill off more than 100,000 jobs, like at least one senator claims. We're keeping them honest. Chris Lawrence joins us later this hour.

In the meantime, unemployment lines keep getting longer. A new report shows jobless claims hit a record high. And JP Morgan Chase is cutting more jobs.

Susan Lisovicz at the New York Stock Exchange with the bad news.

Hey, Susan.

SUSAN LISOVICZ, CNN FINANCE CORRESPONDENT: Hey Kyra.

Well, we're going to talk about the record that's set for continuing claims. That is, anybody receiving unemployment benefits for one week or more, that number is now above five million. That is the highest number on record.

We also got first-time claims, just for one week, and that jumped worse than expected to 667,000. Just for one week. Double the amount that we saw in the same week last year. Lots of analysts think that these first-time claims will rise as we are in the trenches of this recession and may in fact reach 750,000 per week in the coming months. Which is, of course, one of the reasons why stimulus and the efforts to restore the banking sector are of huge importance.

While we're talking about the banking sector, and jobs, let's talk about JP Morgan. Considered one of the healthiest big banks, it's cutting another 3,000 due to its purchase of Washington Mutual. WAMU was heavily exposed to the housing sector. This is on top by the way of JP Morgan cutting 9,000 jobs that was announced in December. JP Morgan also acquired Bear Stearns about a year ago.

One of the reasons why that JP Morgan is rallying, up eight percentage shares, Bank of America up about eight percent as well, is that the proposed budget from President Obama is setting aside $250 billion more for the financial sector if needed. So we're seeing some movement in stocks, in the banking sector, higher. The Dow is hanging on there. But at its high of the session, Kyra, blue chips are up 133 points, and we've given back quite a bit and the NASDAQ is under pressure right now - Kyra.

PHILLIPS: A lot of pressure. Susan, thanks.

We're spending a lot of time talking about the U.S. economy, but it's a similar story overseas, too. In the UK, the Royal Bank of Scotland has reported the largest corporate loss in British history, about $34 billion. RBS plans to restructure and cut up to 20,000 jobs. It looks like Japan is headed for its worst recession since World War II. Standard & Poor's says that Japan's economy could shrink four percent this year.

A Senate report says that FEMA didn't get it right after Hurricane Katrina and it's still not getting it right. We're going to tell you more about this indictment of FEMA's response to the storm, more than three years after it hit.

(COMMERCIAL BREAK)

PHILLIPS: Rising demand, dwindling supplies, food banks across the nation are facing both right now. We're going to take you to the front lines of the battle against hunger. It's a growing crisis and its right in your backyard.

(COMMERCIAL BREAK)

PHILLIPS: They never thought that they would go hungry. They never dreamed of taking a handout. But too many recession-plagued Americans are facing empty cupboards, empty tables, empty stomachs and too many food banks are facing rising demands and dwindling supplies. Hungry in America, we're pushing this story forward to raise awareness of a crisis right in your own backyard.

Here's our Brooke Baldwin.

(BEGIN VIDEOTAPE)

BROOKE BALDWIN, CNN CORRESPONDENT (voice-over): On any given day, the garage doors at the Atlanta Community Food Bank are wide open. In this recession, they have to be.

BILL BOLLING, EXECUTIVE DIRECTOR, ACFB: We've been through down times. We've never seen anything like this.

BALDWIN: The food bank serves as a hub, more than 800 agencies come here for food to give to those in need. Ernesta Ingram's non profit feeds more than 700 mouths a month.

UNIDENTIFIED FEMALE: It's really tough. Fewer donations are coming in.

BALDWIN: She says her group, can't keep up. ERNESTA INGRAM, SW ECUMENICAL EMER. ASSISTANCE CTR.: We actually have to split what we normally give on a weekly basis. And share that actual amount with other families. So every family who actually comes and knocks on our doors will be able to get some food.

BALDWIN: Same story, different agencies.

LARRY STARR, CARES: If we don't continue at a higher level of donations after two or three more months, we may very well be looking at having to reduce food.

PEGGY JORBAN, ST. THOMAS THE APOSTLE: Now we could shop every day. I mean, every time I turn around there's no eggs.

BALDWIN: Part of the reason, the type of people now in need. The executive director at the Atlanta Community Food Bank knows that firsthand.

BOLLING: I've literally had calls from people saying, I've been a supporter, I've had my kids down to volunteer. We love the food bank. And I'm thinking, I wonder why you're calling. Finally they'll say, you know this has to be the hardest call you've ever made, Bill, I need some help.

BALDWIN: Last December, Feeding America, a national organization fighting hunger, conducted a survey of 160 food banks nationwide. Ninety-nine percent reported seeing first-time users. Seventy-two percent say they can't adequately meet the needs of their communities without adjusting the amount of food they distribute.

Ernesta Ingram may have no choice but to fill up less and feed fewer, until the economy finally turns around.

INGRAM: I know I'm going to have to make some decisions about how we're going to continue.

(END OF VIDEOTAPE)

PHILLIPS: Brooke Baldwin joining us live now.

Brooke, there's so much talk about the demand for food but how is the supply at these food banks actually holding up?

BALDWIN: The supplies specifically here Kyra at the Atlanta Community Food Bank, as you can see, we're standing in one of the multiple warehouses here. The supply is pretty good. But the big problem, simple economics, is demand simply outweighs the supply.

And I want to make a point. You had asked me last hour about volunteers. They're doing well. In fact, folks who are laid off, we met someone, we'll walk outside and show you part of this, we met someone yesterday who was laid off, has a Ph.D. He came in to volunteer. They're seeing strong volunteers, but they could always use more. Demand you can see -- loading up over here, demand is great. Supply, they need more food. PHILLIPS: So also, Brooke, so many kids rely on schools for meals at least for lunch. And spring break is coming up. So will demand be even greater do you think?

BALDWIN: It will. And it's a great point. Something I hadn't thought about. We talked to a couple of the different partner agencies yesterday, and they said, yes, think about it now, the supply, the demand is already great. Some of these schools provide kids in need breakfast and lunch. Take away school, you have spring break, that's two meals a day that the families will need to feed. They're coming to the food banks. They will be in an even greater lurch. And if the economy doesn't improve, Kyra, by summer, it's tough to even think about for some of these folks.

PHILLIPS: It's good to see volunteerism is up that's for sure.

BALDWIN: Yeah.

PHILLIPS: Brooke Baldwin, appreciate it so much, yes.

Something I want to show you now, it's a map that we were able to -- actually, that we came across where we found some pretty interesting numbers. To kind of give you an idea, wherever you live in the state, you can actually look at how bad the hunger problem is specifically in your state. This is the hunger at home map. It was put together by Feeding America. You can actually go online and look at this yourself at feedingamerica.org and my dear friend and meteorologist Chad Myers is going to help me work this weather map, because this is his baby.

This is where Brooke is in Georgia, we clicked right on that state. Look at this, the food insecurity rate, 12.6 percent. What is the food insecurity rate? Well in other words it's the amount of people who cannot afford a consistent supply of healthy food to live on. Then we just started bumping around, we went over to Texas. Look how high the number is there. Food insecurity rate 15.9 percent. That was one of the highest statistics that we found.

Then we were bumping up and we looked at Ohio. I'll tell you why we picked this state specifically for a second. Food insecurity rate, 12.7 percent. Why do we look at Ohio? For a number of reasons. Take a look at this videotape from Wilmington, Ohio. This is actually -- these were the lines -- well, DHL, you'll remember, had the massive layoffs there, about 8,000 people were laid off there. And these were hard working Americans, one day they had a job, the next day they didn't, standing in line to get food in Wilmington, Ohio. And we actually had a chance to catch up with some of those people within that long line. Let's go ahead and take a listen.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We're raising two grandkids, and we only have one income. So, it's a big, big blessing.

UNIDENTIFIED FEMALE: It's tough. It's just tough. Because we're helping support not only our family, but our children's families, too.

(END OF VIDEO CLIP)

PHILLIPS: You want more proof of the growing hunger problem in the United States? Here it is. People lined up in the cold weather this month for a charity food drop in other places, too, not just Wilmington, Ohio, where the DHL laid off thousands of people.

Here's some other people that we were able to talk to as well, experiencing it across the state.

OK. Apologize for that. We don't have that.

Let's talk about the food drop that was organized by Feed the Children.

President and founder Larry Jones has spent a good deal of time overseas helping people in need. And here he is actually at a village in Ethiopia years back. And here, comforting a woman in Armenia, after a devastating earthquake in 1989. But now Jones says his group is facing a new crisis, and that's right here at home. He joins us now live from Oklahoma City.

Larry, really good to see you.

LARRY JONES, PRESIDENT., FEED THE CHILDREN: Thank you, Kyra.

PHILLIPS: Well, we showed the video. We talked to the families out of Wilmington, Ohio. And I know this state touched you pretty deeply as well. Tell me why.

JONES: The reason it touched me is because like you said, they're the hard working people, people that were really hard working. You know we've had the new poor, which is those who work, but don't make enough money to feed their families. Now you have the new was working poor. That's who we're ministering to in Wilmington.

The sad thing is that the ripple effect, there's going to be so many other businesses that are going to fall because the DHL closed. The day before I got there, Daylight Doughnut it closed. The mayor said that probably one out of five businesses will close. But other people are saying it will probably be two and possibly three businesses will fold because of what took place at the closing of DHL.

PHILLIPS: You know Larry, you expect this in the third world country, but not in our home turf, not in the United States of America. I mean, when you see these lines, it's really hard to understand -- this is like Katrina.

JONES: Yes, it is like Katrina. These lines are probably going to be getting longer, because we let people know, we're really putting a band-aid on a cancer. But we want those people to know that we're there to help them and do what we can in the moment. But at the same time, right now we're preparing to go to Elkhart, Indiana, the city that has the highest unemployment rate in the state of Indiana.

This is going to be going across the nation. We're calling our caravan Americans feeding Americans, Emergency Caravan.

PHILLIPS: And of course Elkhart, Indiana, is where we saw the president of the United States gave his speech also.

Larry, how many times do you sort of sit back, sometimes in your office, or working with your volunteers, and think, wow, there are still so many rich people here in the United States, even with all these people suffering. If they only gave $1 a day, what kind of difference that could make. You tend to wonder why people just don't want to give automatically when they have so much.

JONES: I'm telling people it's going to take the government, it's going to take the churches, it's going to take the charities, it's going to take all of us during this difficult time to make sure that our neighbor and the children of America do not go hungry.

PHILLIPS: Do you think it could get as bad as the 1930s Larry where we saw the bread lines?

JONES: I think it could. Because they're saying some of the stimulus package will not kick in until 2012. That's really almost four years from now. So consequently, we're going to have to be helping our neighbors and our friends, because like I said, this problem is so large.

And all we're saying is to our friends, is, start your rolodex. Give us a call. We have 55 trucks. We hope that people will, whatever surplus they've got, the other day we got a truckload of Star-Kist Tuna, we got a truckload of canned goods. Somebody gave me 4,000 bags of 10-pounds of potatoes. And that will be all going to Elkhart, Indiana.

PHILLIPS: Wow, that's fantastic. Larry, just before we let you go, Sonya, let's go ahead and bring up Larry's website. This is feedthechildren.org. You can see right there, the lead story, heat or eat. Just click on right there, to please help now. It actually lays out exactly how much it costs to help a certain amount of people in the family. So, Larry, tell me how this works. You can check on like $14, or $36. It tells you exactly where that money is going and who you're helping, right?

JONES: It tells you exactly where the money is going. The other thing that's really important is the gifts in kind, as people have friends who have food, school supplies, clothing, last year Crocs gave us over a million pairs of shoes. So, whatever people have that they have a surplus of, give us their names, their addresses, we'll get to them. And then we'll see that it gets in the hands of those who really need it.

PHILLILPS: Larry Jones, Feed the Children, you've got an amazing heart Larry. I have a lot of respect for you. Thanks for your time today.

JONES: Thank you.

PHILLIPS: The first lady back out on her rounds meeting federal employees, today telling EPA staffers they work for an agency of change.

(COMMERCIAL BREAK)

PHILLIPS: As President Obama was unveiling a budget with a huge boost in EPA funding, the first lady was seeking to boost EPA morale. Michelle Obama visited the Environmental Protection Agency this morning. She thanked staffers for their passion and said, the EPA's priorities are everybody's priorities.

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: Barack Obama is going to need you. Michelle Obama is going to need you. Malia and Sasha Obama are going to need you. And millions of children just like them are going to need you rolling up your sleeves and rededicating and recommitting, knowing that the work is going to be tough, but everything you do, every piece of blood, sweat and tears that you pour into the work, is going to make the difference in our nation, in our planet. So, get to work.

(LAUGHTER)

(END VIDEO CLIP)

PHILLIPS: Well, redecorating can wait. Presenting his spending plan for this year and next and projecting many years beyond that, President Obama says frills have to give way to fundamentals. Those include anti-recession spending in the short term, with record deficits, and long-term investments in health care reform, education and renewable energy.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Just as a family has to make hard choices about where to spend and where to save, so do we, as a government. You know, there are times when you can afford to redecorate your house, and there are times where you need to focus on rebuilding its foundation. Today we have to...

(END VIDEO CLIP)

PHILLIPS: Well, this year's shortfall looks to be a staggering $1.75 trillion. But if all goes exactly according to plan, it will shrink to less than a third of that by 2013.

The nation's economic crisis measured in more grim ways. Earlier today, we learned that new jobless claims have taken an unexpected jump. Six hundred and sixty-seven thousand Americans are now filing for unemployment claims for the first time. That's an increase of 36,000; experts had expected a decline. And the number of people receiving continuing claims has now hit a record 5.1 million.

In other news, more bad news for the nation's largest carmaker. General Motors announced today a $9.6 billion net loss in the fourth quarter of last year. That was worse than expected. And in the last three months of the year, it's burned through $5.2 billion of its cash reserves. This comes as GM executives are in Washington to talk about restructuring future loans.

FEMA is on the hot seat again. A Senate committee issues a stinging indictment of the disaster relief agency more than three years after Hurricane Katrina. We're going to find out what the panel says.

(COMMERCIAL BREAK)

PHILLIPS: Can you believe it's already been three years since Hurricane Katrina? And the Federal Emergency Management Agency is under fire again. A new report criticizes FEMA for not having an adequate housing plan if another disaster strikes.

Special investigations unit correspondent Abbie Boudreau here with her report.

You would think, after all of that, that, you know, it wouldn't be an issue, that they'd be prepared.

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: Yes. No, it's pretty scary stuff, the stuff that came out of this report. It was a nearly 300-page report released today by the Senate Subcommittee on Disaster Recovery. It spent nine months investigating FEMA's performance after Katrina and concludes that the agency still comes up short.

After the 2005 hurricane, FEMA acknowledged it needed to do a much better job in responding to the next disaster. But the report shows the agency still does not have a comprehensive disaster housing plan. It says there still isn't a network of state and local shelters, and there's few programs to help the low income and disabled. And no clear plan on how much the agency would have to rely again on those trailers to house hurricane victims.

At a news conference today, Senators Claire McCaskill and Mary Landrieu said the report clearly shows FEMA is not doing its job.

(BEGIN VIDEO CLIP)

SEN. CLAIRE MCCASKILL (D), MISSOURI: This report, which the subcommittee co-chairman will lay out for you, is a damning indictment of the continued incompetence of FEMA as it relates to housing needs of people in the most dire circumstances imaginable.

SEN. MARY LANDRIEU (D), LOUISIANA: There is some urgency to get this right. And this report is hoping, that is our great hope, that it'll give the Obama administration and a new incoming administration that is not, in my view, in denial an opportunity to get it right.

(END VIDEO CLIP)

BOUDREAU: The subcommittee is making a number of recommendations, including setting up a program to repair rental properties, putting in place a national housing plan to be administered by HUD, and telling FEMA to provide specific costs to all available housing options. A FEMA spokeswoman says the agency could not comment on this because it's still reviewing the report. But, it points out, it's provided more than $10 billion worth of housing and rental assistance to more than two million households.

PHILLIPS: All right, so now we have a new administration. A lot of people wondering, will it be a priority. I mean, I remember during the campaign, a lot of people coming forward saying, we want to hear from you, the candidates, what are you going to do to help us out.

BOUDREAU: Right, well now there's the new administration. We're still waiting to find out who will be the head of FEMA. But we do know who the head of - the secretary of Homeland Security is, which is Janet Napolitano, the former Governor of Arizona. And we do know that she's already been reaching out to certain senators, saying, I acknowledge there's still a problem there, what needs to be done. And they're looking into it.

PHILLIPS: All right, and you also heard from Mary Landrieu, also, the senator. I mean she's got kind of a grim outlook here about what's going to happen and what's happening now. Or I guess the lack of effort being put into this.

BOUDREAU: Well, I mean, she's frustrated. I mean, she's the one who goes down there and sees the problems day in, day out so she knows what's going on. And she said to me, especially frustrated because of the fact she expected FEMA, over the last three-plus years, to figure out what some of these problems were. So people wouldn't end up in toxic trailers, once again, if there's another storm. And she feels that that report shows they haven't figured those answers out yet and she's disappointed.

PHILLIPS: And we both have been there recently. If you've got money, it's not a problem. If you're poor, you're still struggling.

BOUDREAU: Absolutely. I mean, I'm still getting calls from community leaders that I met through my reporting that are telling me, listen, there are problems. We have senior citizens who are living in abandoned buildings, you know, that we need to get out of there. There's no electricity. It's a dangerous condition. But they don't know what to do. So they live in these abandoned buildings and they have nowhere to turn, they feel. So hopefully, with the change in the new administration, Senator Landrieu feels as though there will be changes. There will be positive changes and that there need to be sweeping changes with FEMA.

PHILLIPS: We'll be following them. Thanks.

BOUDRAEU: Thanks.

PHILLIPS: Well, from hero to example in an instant.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Jim saw him coming, pushed the three people out of the way, and caught the truck head-on. (END VIDEO CLIP)

PHILLIPS: And he was still in intensive care when he found out about his jaywalking ticket.

(COMMERCIAL BREAK)

PHILLIPS: The F-22 Raptor, should it fly or should it die? This fighter could get knocked out in budget cuts. The decision is expected next month and a lot of jobs could be on the line.

Here's CNN Pentagon correspondent, Chris Lawrence.

(BEGIN VIDEOTAPE)

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT (voice-over): Is this jet President Obama's latest weapon in the fight against unemployment? He has to decide whether to keep building more F-22 Raptors, or shut the line down.

YESENIA PEREZ, WORKS ON F-22: It's pretty scary. To think that your whole life, your daily bread, you know, can be just relying on somebody's decision.

LAWRENCE: Yesenia Perez helps build parts for the F-22 in Florida. She'll likely lose her job if production stops.

But each F-22 costs around $143 million to build; paid for with your tax dollars. So critics are asking, could that money be better spent?

DANIELLE BRYAN, PROJECT ON GOVERNMENT OVERSIGHT: I think it's crazy to be making national defense decisions based on jobs programs.

LAWRENCE: And here's of the catch, al-Qaeda doesn't have jets, and we're not fighting China or Russia right now. So the Raptor's a fighter jet, without a fight.

We asked the jets' manufacturer, Lockheed Martin.

(on camera): Has the F-22 ever actually fired a shot in battle?

LARRY LAWSON, LOCKHEED MARTIN: We have not. The Air Force has is not employed the F-22 in an operational theater yet.

LAWRENCE (voice-over): The thing is, the Pentagon already has, or is building about 190 Raptors. And the defense secretary says, he doesn't need more.

ROBERT GATES, DEFENSE SECRETARY: Something along the lines of 183 is a reasonable buy.

LAWRENCE: But nearly half of Congress wants more. CNN has obtained letters signed by hundreds of republicans and democrats, urging President Obama to keep building the Raptors. SEN. JAMES INHOFE (R), OKLAHOMA: If you want our kids that we send off to battle to have the best equipment, then we need to have F- 22s.

LAWRENCE: They argue more jets are needed to maintain America's air dominance and help the economy.

SEN. SAXBY CHAMBLISS (R), GEORGIA: We're looking at somewhere around 100,000 jobs that are going to be lost all across the country.

LAWRENCE: But would that many people really lose their jobs? Keeping them honest, we did our own math. A recent economic study by the University of Massachusetts found $1 billion of military spending generates 8,000 to 9,000 jobs. So, if you spent three to four billion a year on the F-22, you get maximum 36,000 jobs. That's a lot of people, but far less than what they claim.

(on camera): Especially when you consider this, some of these plants like Northman Grumman tells us, a lot of their workers would get moved over to another projects, not fired.

(voice-over): Lockheed Martin says, no one can predict who'll be America's enemies in 20 to 30 years.

LAWSON: It's not about today, it's about decades from now.

LAWRENCE: But the president is fighting in an economic war now. And in the battle for creating jobs, economists found education, mass transit and infrastructure all generate far more fire power than military spending.

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PHILLIPS: All right, Chris Lawrence joining me now.

Chris, the president released his budget plan today. What does this mean for the F-22 and the Pentagon as a whole?

LAWRENCE: Well, we're not going to know just yet. Think of this budget sort of like chapter one of a book. You get to know the characters, but the plot is still to come. What this is, is a top line. We don't get the details until the Defense Department starts to work through it and presents its actual budget line numbers to Congress.

Now, there's been a tremendous amount of secrecy here. Secretary Gates has asked everyone to sign a letter, basically saying that they won't talk about the details of this budget until it's done. But we know some parts of it. We know there's going to be a pay increase of about 2.9 percent for the troops. We know that that is less than what they asked for last year as a pay increase. And we know they're going to increase the size of both the Army and the Marines by a few thousand troops each.

PHILLIPS: And then Chris, there's this controversy going on, whether the Raptor is essential to our security, our military arsenal in the time we're living in right now, right? Whether it's worth the money, it's capabilities worth the money?

LAWRENCE: That's right. It has to do with a lot of these big weapons systems, whether we need them, whether they are simply Cold War weapons for a very different type of war, whether we need them. The advocates will argue that, hey, 30 years ago we were fighting a Cold War; 30 years from now, we might be fighting another Cold War. And that these systems are so complex and so expensive, you can't wait until the moment that you actually need them to order them. It's got to be ahead of time.

PHILLIPS: Pentagon correspondent Chris Lawrence. Chris, thanks so much.

LAWRENCE: Yes.

PHILLIPS: Low unemployment, no housing crisis and an economy kicking. Where the heck is this fantasy land. Fargo, a city where recession happens to someone else.

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PHILLIPS: Well, our "Outrage Story" from Little Rock now. Last summer, McDonald's employee Nigel Haskett saw a guy beating up on a female customer. Well, he jumped the dude, forced him outside and then the guy shoots him. Three surgeries and $300,000 in medical bills later - listen to this - his worker's comp claim is denied. You see, the adjuster feels that Nigel's injuries weren't directly related to his work. But one bright spot this week. The owner of that Mickey D's says that if Nigel's appeals are denied, he'll cover his medical bills.

A Denver man's going to have a big hospital bill of his own on top of an outrageous $22 fine. Jim Moffitt (ph)) drives a city bus. He and a passenger step out to help two old ladies cross the street. Well, Jim sees a truck bearing down on them. So he pushes the other three out of the way, and then the truck nails him. Knocks him out of his shoes, knocks him out of his hearing aids, lands him in intensive care. Now get this, Jim Moffitt (ph) and the other good Samaritans ticketed for jaywalking.

Oh, and all the many uses of Emeril Lagasse's cookware.

(BEGIN VIDEO CLIP)

ELLEN BASINSKI, HIT ROBBER WITH SKILLET: And I whacked him. And he came up and looked at me like, lady, why did you do that? And I hit him again.

(END VIDEO CLIP)

PHILLIPS: Hey, and his face didn't even stick. Thanks, Emeril. The 70-something is now describing how she dealt with four intruders who broke into her Ohio house and tried to take her money and her Jack Daniels. The suspects ran off. Police arrested four teens later. They probably recognized one by the Emeril logo stamped on his face.

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PHILLIPS: Times are tough. That's hardly news. But here's news. Some communities are thriving with stable home prices, low unemployment. And one of those places is Fargo, North Dakota.

CNN's Gary Tuchman found out for himself.

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GARY TUCHMAN, CNN NATIONAL CORRESPONDENT (voice-over): Whatever happened to the bullish economic days? When the housing market was vibrant, when there were plenty of jobs, when government budgets had surpluses?

(on camera): Those days still exist, but probably not where you are. You have to come where I am, to Fargo, North Dakota. Where the typical morning temperature this time of year is around zero. And the unemployment rate isn't much higher.

(voice-over): Dennis Walaker is the mayor of Fargo.

(on camera): Is the city of Fargo, North Dakota in recession?

MAYOR DENNIS WALAKER, FARGO, NORTH DAKOTA: No, we're not.

TUCHMAN (voice-over): The unemployment rate is 3.4 percent, so low that most economists consider it full employment. At Appareo Systems, an aerospace firm, the 44 employees here are not enough.

DAVID BATCHELLER, APPAREO SYSTEMS: So we're going to grow more than 50 percent this year in personnel, more than a 100 percent in revenue.

TUCHMAN: This ironworker is so busy he has no time to talk to me on the ground.

(on camera): OK, let's go. So, how's business out here?

UNIDENTIFIED MALE: It's really good.

TUCHMAN (voice-over): The wind-chill temperature in the negative digits doesn't cool the workers' outlook here as they build an office building.

(on camera): So, there's a lot of projects?

UNIDENTIFIED MALE: Absolutely.

TUCHMAN: And you can always find work?

UNIDENTIFIED MALE: Absolutely. You can quit your job today and go find another job. Easy.

TUCHMAN (voice-over): Business downtown is booming. The housing market is still decent.

(on camera): So the homes aren't losing the value here?

WALAKER: No, they're not.

TUCHMAN (voice-over): And North Dakota has the largest budget surplus in the nation. One of only four states with a surplus this year. So what the heck is going on here? You hear a consistent answer at the Fargo's curling rink.

UNIDENTIFIED MALE: People in the upper Midwest are very conservative. They don't tend to overextend themselves and stuff.

UNIDENTIFIED MALE: There's just a work ethic up here that you don't see everywhere.

TUCHMAN: Yes, North Dakota has oil production and agriculture, but so do a lot of places. What seems unique in this region...

WALAKER: We didn't get caught up in the subprime mortgages. And, I think, our bankers need to be significantly applauded for that.

TUCHMAN: The Gate City Bank is one of the largest in North Dakota.

(on camera): Do you think you make less money because you don't give riskier loans?

STEVE SWIONTEK, CEO, GATE CITY BANK: Yes, I believe we do. But that's OK.

TUCHMAN (voice-over): They feel conservative bankers and savers have helped keep their economy steady over the years. Not too many highs, not too many lows.

SWIONTEK : We have well over 12,000-plus mortgage loans that we service, and we had three foreclosures last year. And this year, I don't see it to be much greater. It could be three to five.

TUCHMAN: There is concern here, business isn't as robust as it was a few months ago, and the unemployment office is a bit busier. But...

UNIDEINTIFIED MALE: Somebody I was talking to said, we're not signing up for the recession.

TUCHMAN: Even in the frigid cold, the iron is still hot.

Gary Tuchman, CNN, Fargo, North Dakota.

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PHILLIPS: Well, that does it for us on this Thursday. We'll see you back here tomorrow. Rick Sanchez takes it from here.