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Issue Number One
McCain Campaign Speech; Outlook on Campaign Tactics; Novel Home Sale Approach; Global Food Fight; The Not-So-Friendly Skies; Feeling Foreclosure
Aired June 04, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SEN. JOHN MCCAIN (R) PRESIDENTIAL CANDIDATE: I am hopeful because of the success, that we will be able to withdraw more troops, but it has to be dictated by events on the ground, not by some politician's ideological driven schedule and plan for withdrawal. So I say with respect, Senator Obama was wrong. He was dead wrong when he said back in January, excuse me, October of 2007 he said, quote, I am not persuaded that 20,000 additional troops in Iraq is going to solve sectarian violence there. In fact, I think it will do the reverse. Every statement of his was to withdraw our troops, set a timetable for withdrawal.
My friends, if we had done that, then al Qaeda and these jihadists and extremists would have just laid back and wait until we left. And other thing would have happened. The Iranians, the Iranian's influence would have dramatically increased and in addition to that, the people who had to stay in the region would have had to adjust to the region, because America's presence was no longer there. So there was a lot at stake there that we had to lose. And what did we have to gain? A functioning democracy in Iraq and it's tough. Democracy's tough. We know that. Look at what's going on in Washington today if you think democracy isn't tough. Look at the gridlock we're in.
But the point is though that we will have not a person like Saddam Hussein who was one of the most brutal killers in history, who had already acquired and used weapons of mass destruction and clearly was intent on doing so in the future. For a democracy that is functioning, flawed by functioning, also a reduction in influence of the Iranians. Let me just say a word about Iran.
Iran today is bent on developing nuclear weapons as we all know. Iran has dedicated itself to the policy of exterminating the state of Israel. Just a week or so ago the president of Iran said that Israel was a quote stinking corpse and reiterated his nation's policy, dedication to the extinction of the state of Israel. My friends, they are developing nuclear weapons. Also what is totally unsatisfactory is that the Iranians are making, are manufacturing and shifting into Iraq the most lethal explosive devices that are killing young Americans. That is not acceptable.
Senator Obama wants to sit down without any precondition across the table and negotiate with this individual. My friends, that's not right. That's naive. That shows a lack of experience and a lack of judgment. So, my friends, it's been long and it's hard and it's tough. And every once in a while, and you might recall by the way back over a year ago with my campaign when it was declared dead, in fact, I was reminded of the words of Chairman Mao who once said, it's always darkest before it's totally black. I said I would much rather lose a campaign than lose a war. I meant that then and I mean it now.
Every once in a while, every once in a while, my friends, you have an experience that puts everything into the proper priority. That happened to me in Wolfboro, New Hampshire, last August. I was at a town hall meeting, conducting a town hall meeting. A woman stood up and said, Senator McCain, would you do me the honor of wearing a bracelet with my son's name on it. My son Matthew Stanley who was 22 years old, was killed in combat outside of Baghdad just before Christmas last year. I said I would be honored to wear that bracelet. Then she said, Senator McCain, I want you to promise me one thing. You want you to promise me that you do everything in your power to make sure that my son's death was not in vain. I take her charge very seriously, my friends. I take it very seriously.
GERRI WILLIS, CNN ANCHOR, ISSUE #1: You've been listening to the presumptive Republican nominee John McCain at a town hall meeting in Baton Rouge speaking to a group there, complimentary to both of his Democratic challengers, even inviting Obama to a weekly town meeting where the two could debate, of course also defending his stance on the Iraq war as well, saying the remnants (ph) of the jihadists are on the rise (INAUDIBLE) Barack Obama and John McCain will face off to become the next president of the United States. So what can we expect going forward? CNN's Jim Acosta is in Keystone, South Dakota. Hi there Jim.
JIM ACOSTA, CNN CORRESPONDENT: I think you heard the headline there and that event from John McCain there in Baton Rouge, Louisiana. The senator from Arizona is challenging Barack Obama to a series of 10 town hall meetings between now and the Democratic National Convention which happens later on in August. Senator McCain essentially taking this campaign one step forward beyond the controversy that we saw emerge last night when Senator Clinton did not concede this Democratic primary race to Barack Obama. This is really a preview of the coming general election fall campaign, Senator McCain trying to make the case that he is better prepared to lead this country when it comes to issues like Iraq and foreign policy issues. Barack Obama is having none of it. He is trying to make the case that Senator McCain would amount to a third Bush term and that is exactly what Senator Obama said last night at his big event in the twin cities in Minnesota.
(BEGIN VIDEO CLIP)
SEN. BARACKOBAMA (D) PRESIDENTIAL CANDIDATE: It's not change when John McCain decided to stand with George Bush 95 percent of the time as he did in the Senate last year.
McCain: You'll hear from my opponent's campaign in every speech, every interview, every press release that I'm running for President Bush's third term. Why does Senator Obama believe it's so important to repeat that idea over and over again? Because he knows it's very difficult to get Americans to believe something that they know is false.
(END VIDEO CLIP) ACOSTA: Now this town hall meeting proposal coming from John McCain echoes an agreement made by President Kennedy and Barry Goldwater. This was supposed to occur during the 1964 campaign. It was in agreement between both of those two gentlemen to engage in a series of town hall meeting style debates. That never came to pass obviously because of what happened to President Kennedy and moving forward now, Barack Obama is essentially leading this primary season in his very fierce battle with Hillary Clinton behind him. He is planning to campaign next in Virginia which is very interesting. He is making two campaign stops there in the commonwealth, basically putting forth the new Democratic battleground plan for the fall campaign. Democrats, including Barack Obama, see Virginia very much in play. It is a state where the Democratic governor and one Democratic senator. So Gerri, Barack Obama would definitely like to see that fall into his column come November. And the other big story that is happening here today is, of course, the Hillary watch. Everybody is watching to see what Senator Clinton is going to do next. As she said last night in New York City, what does Hillary want at this point? That is a question that basically only she can answer, Gerri.
WILLIS: Well, Jim, I can't imagine two presumptive nominees for their parties with more to contrast themselves, Barack Obama and John McCain, fascinating conversation. Jim, thank you for that.
ALI VELSHI, CNN ANCHOR, ISSUE #1: The economy is going to be issue number one in this election. That is why we call this "Issue #1." So we want to take a look at how the candidates come down on some of the economic issues that are going to be most important to you in this campaign. CNNmoney.com's senior writer Jeanne Sahadi has been looking into the candidates' plans. We're also joined by CNN political, senior political analyst and former presidential adviser David Gergen. David, let's talk a little bit first about this challenge that John McCain put forth, a meeting a week, a town hall meeting a week starting next week here in New York and then moving all around the country until the convention. How unorthodox is it? Sounds to us who watch it as viewers, good idea. I want to hear these guys talk. Might be a few too many. It's 10 or 12 meetings he's talking about.
DAVID GERGEN, FMR PRESIDENTIAL ADVISER: I think it shows the advantage that John McCain has now. He has a clear field and he's the only person around. Barack Obama is still having to repair the rifts in the Democratic party and pay a lot of attention to what does Hillary want and John McCain will take the initiative on this. This is the second time. Remember, John McCain challenged him to go to Iraq and then Obama who said probably he would go to Iraq and it looks like he is following McCain's lead. Now this on the town hall is a little trickier. John McCain also said I don't want to debate. There are three big debates set up in the fall. And debates have been a traditional staple of American presidential politics for a long time now. I do not think they can duck the debates. But the idea of some town hall meetings is actually, I think a lot of Americans would welcome that. Not this many and not just starting in June. I mean he wants to start in four weeks.
VELSHI: June 10th or 11th?
GERGEN: Most Americans -- why don't you give us a little breather now? This is the summer. We've got some conventions coming up. Let's have a fall campaign.
VELSHI: Give us all a break.
GERGEN: CNN might like this, but we would like to go to the beach.
VELSHI: If they did this Jeanne, there are some places that these two candidates can now show their contrast. In fact, on economic issues, Hillary Clinton, Barack Obama were not particularly far apart. On health care they had some distinctions. Now we've got, particularly on health care and taxes some very clear distinctions. Tell us a little bit about how they differ on taxes.
JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: Big difference, Senator Obama wants to maintain the Bush tax cuts for everyone except high-income taxpayers. Senator McCain wants to maintain them for everyone. Senator McCain also wants to lower corporate tax rates. He wants to introduce a simpler income tax system with two rates as opposed to the five or six he had currently. He would give taxpayers a choice. Senator Obama has also proposed some new tax breaks for the middle class.
VELSHI: David, you've been a presidential adviser. While this whole idea of lifting the Federal tax on gasoline for the summer gets a lot of traction out there, the bottom line is taxes are going to be much more important in the long term for Americans. How do their positions differ politically? Does one stand out better than the other?
GERGEN: I think that Senator Obama and the Democratic Congress - there's going to be a Democratic Congress -- is going to move toward raising taxes. That's just going to come. It's going to come on energy. It's going to come on general taxes on people above $250,000, (INAUDIBLE) There's going to be upward pressure on corporate taxes. There's going to be upward pressure on capital gains taxes and possibly on dividend taxes so there's a lot to pay for and Senator McCain by contrast is going to be standing very clearly for lower taxes. The argument from the Obama people is we had all these lower taxes under George Bush. What did it produce? We had the lowest rates of growth under any president since President Eisenhower. According to some economists, he just wants to double down on something that is not working. Senator McCain will say you are hard pressed. You are already paying $4 at the tank. These guys want to come along and actually increase your costs?
SAHADI: I think that even the people who are opposed to the tax cuts are going to be in favor of keeping them in place for people in the lower and middle income group.
WILLIS: Simply because they're so stressed financially.
GERGEN: (INAUDIBLE) on energy change. Cap and trade, the system (INAUDIBLE) that both Senator Obama and Senator McCain are supporting incidentally in front of the Senate, means raising the costs for utility rates and raising the costs for gasoline. That's just built into the legislation.
VELSHI: That's going to have to work. We are still waiting for better policies or clearer policies on energy other than we'd like to reduce our dependence on foreign oil. But what we do again have a very clear distinction and for most Americans this might be the most important one that they feel right now, is their differences on health care.
SAHADI: Right, a huge complex issue. Biggest differences, Senator Obama would have mandates in his plan that children be covered. There would be no mandates under Senator McCain's plan. The big difference in Senator McCain is that he would change the tax incentives for getting health insurance. He would level the playing field between folks who work for employers who subsidize their cost and people who have to buy on their own. They get no tax break whatsoever. It would move the health care system away from an employer centric model. Critics say this could be bad for people who are older and sicker. It could make care more expensive for them. On the other hand, for the younger and healthier folks, it could be a boon because they wouldn't have to pay (INAUDIBLE).
GERGEN: I think this is an issue that is going to deserve an awful lot of exploration because Senator McCain is much more market- oriented (INAUDIBLE) McCain was saying. It also raises questions for people that do have current employer insurance whether they in fact would wind up with the same levels of health care or whether their insurance would shrink under this new system. What would it do for the uninsured? Would it bring the uninsured in or not? Democrats would argue the McCain plan does not. The Republicans argue if you leave it up to the market it will be more efficient and actually more people will be covered over time. This is a very intricate, but important debate.
VELSHI: All right. Let's go back actually -- thanks to Jeanne Sahadi, senior writer with cnnmoney and to David Gergen, senior political analyst for CNN, former presidential adviser. Let's go back and listen into John McCain, who is in Louisiana delivering his speech.
McCAIN: I want two things to happen. One is that once a person has remained in the military for a period of time, that person can transfer those educational benefits to a spouse or family member. As you know, a lot of military people, most of them now have families. They want to educate their children and their spouses may seek education, so we want to have it at a point where they can transfer those benefits to family members and to their children.
The other thing is, I think that my fellow veterans would agree, the great strength of America military is not so much in our officer corps, of which we are proud. The great strength of American military is our noncommissioned officers, our chief petty officers, our sergeants. They are the ones, the leaders and the ones that do the sacrificing. I say with all due respect for the officer corps, but it's the noncommissioned officer that almost makes the British military and American military unique in the world because they are the true leadership and backbone.
So I want to increase those educational benefits as the members of the military stay in and remain in the military, so we will maintain this core of vital leadership and right now the legislation has no incentive to do so. You get the same benefits after like three years as you do after 12 years or more. I respect Senator Webb a great deal. He is a combat veteran and a person who sacrificed a lot for our country. I believe we can sit down together and give transferability of these educational benefits and also increase retention of these very -- let's be very clear. It's very expensive these days to train a member of the military, the equipment and technology that we have to train them in so that we can keep more people in. There is a study that shows that retention would drop by 16 percent if we didn't put incentives for people to remain in the military. I want to work on it. I've offered to sit down with Senator Webb and others. There is no reason why we shouldn't be able to work this out. I hope that you will support our position on both transferability of educational benefits as well as incentives to retain people in the military so they'll make a career out of a very honorable profession. Yes, ma'am?
WILLIS: We've been listening to the presumptive Republican nominee John McCain speaking to an audience and taking questions from that audience live right here on CNN. He challenged his rival Barack Obama to a series of town hall meetings and discussions, getting a lot of interesting conversation going this afternoon.
Up next, folks from around the country sound off on the presidential campaign and our own Roland Martin is talking to them on CNN radio. We'll check in with Roland.
Plus gas is closing in on $4 a gallon. Why the pain in the auto industry might go on for some time. This is "Issue #1."
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
RICHARD ROTH, CNN CORRESPONDENT: What do you think? Obama is now the presumptive Democratic Party nominee.
UNIDENTIFIED MALE: I have kind of mixed emotions. I'm happy, but I wanted Hillary.
ROTH: Will you vote for Obama?
UNIDENTIFIED MALE: Yes, definitely.
UNIDENTIFIED FEMALE: I don't really care for him. I was a Hillary person.
ROTH: Will you vote for him?
UNIDENTIFIED FEMALE: No, I would not. ROTH: Would you vote for McCain?
UNIDENTIFIED FEMALE: Yes.
(END VIDEO CLIP)
WILLIS: That was CNN's Richard Roth talking to voters in New York City this morning. Good thing about "Issue #1" is that you can vote every day. It's time now for our daily quick vote. Poppy Harlow from cnnmoney.com is here with today's question. Poppy.
POPPY HARLOW, CNNMONEY.COM: Hey Gerri, well, you heard it here. The battle is certainly on in the race for the White House. The presumptive presidential nominees have very different views when it comes to some very key economic issues. But the show is about you so we want to know what you think. Here is our question today. What is your key economic issue this election year, gas prices, health care, jobs or housing? Weigh in on cnnmoney.com. We'll bring you the results a little later.
WILLIS: Great question. Thank you for that Poppy.
VELSHI: All right, it's always interesting to talk to CNN viewers during a time like this. CNN's Roland Martin is doing just that live right now on CNN radio and at cnn.com live. Let's listen to him and there he is. Are you talking to somebody Roland or is that me you are listening to?
ROLAND MARTIN: I see myself, Ali, but I can't hear you.
VELSHI: Listen, that's all right. Listening to me isn't always that valuable. Tell us what you are doing. Tell us what he is doing right now? He's on the radio. What we could do while we're figuring...while we're figuring out his audio, I just wanted to go back to that shot of Roland for a second. If somebody's in that room with him, what you can do is tell him to open up his jacket a little bit because I think the story right now is that tie that Roland's wearing. I'm trying to get a story in that. Everybody seen his tie? There's an APB out for the rest of his tie. Can we see Roland for a second? Let's go back. Can you tell him to open his jacket up for a second because his tie is missing a piece. Open your jacket, Roland. He can't hear me. We are going to go back and we're going to find out where the rest of Roland's tie is. It's a creative situation, Gerri.
WILLIS: The mysteries. Coming up, desperate times created measures. How one seller is using an unconventional method to find buyers in this tough market. Plus pets feeling the effect of the housing crunch.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Pets are being abandoned. Some at the shelter and some just left in the home or turned out in the streets.
(END VIDEO CLIP)
WILLIS: Latest four-legged victims of the mortgage meltdown. That's next on "Issue #1."
(COMMERCIAL BREAK)
VELSHI: Breaking news just into CNN. The international Olympic committee has picked the four finalists for the 2016 summer Olympics and they are Rio, Tokyo, Madrid and Chicago. The windy city is a finalist to host the summer games. The IOC won't be picking the winning city until October of 2009. The next summer games will be held this year in Beijing. Gerri.
WILLIS: Love Chicago. Chicago rocks.
In a real estate market where there is an excess of homes for sale, sometimes it takes some creativity in order to sell. Mimi Young (ph) of our affiliate KING in Seattle explains what one seller is doing to make his home a little more appealing.
(BEGIN VIDEOTAPE)
JUSTIC WILCOX, HOMEOWNER: There are a total of four bedrooms in this house, 2 3/4 bath.
MIMI YOUNG, KING CORRESPONDENT: Justin Wilcox is trying to sell his (INAUDIBLE) home.
WILCOX: Put in a granite floor with some porcelain tiles, brand- new full-sized pantry, lots and lots of storage space.
YOUNG: In an unusual way.
WILCOX: Over the course of several weeks I'll drop the price of the house down between $5,000 and $10,000 each week until I find the buyer who thinks that the price is fair.
YOUNG: Wilcox wants potential buyers to bid on his home in what he calls a reverse auction.
WILCOX: It's just like a normal auction but instead of the price going up over time, it goes down.
YOUNG: With a newly remodeled kitchen and bath, this 3,000 square foot home is on the market for $499,000. Every week he'll lower the price until someone bites. He even set up a Web site to let people know as soon as the price drops.
WILCOX: Instead of me dictating to the buyers, here is how much you should pay for my house, I said, buyers come take a look at my house. Tell me what you think it's worth. I've got an idea of what I think it's worth. Over a short period of time we'll meet somewhere in the middle with a price that we both think is fair.
YOUNG: In a real estate market where there is a surplus of homes for sale, Wilcox knows he needs to get creative to get his house stand out.
WILCOX: It's going to cost me a couple of months of time on the market and a couple mortgage payments. But I figure it's worth it to try something new and something that maybe could change the way we sell real estate.
(END VIDEOTAPE)
WILLIS: If you are selling your home in this market, it may require more than just putting up a "for sale" sign, much more. Kendra Todd is a Yahoo! finance columnist and real estate broker. Kendra, good to see you again.
KENDRA TODD, YAHOO! FINANCE COLUMNIST: Good to see you.
WILLIS: Some of these incentives are crazy. You talk about folks who are giving away plastic surgery, for goodness sakes. Is this over the top?
TODD: Absolutely. There is a difference between getting creative and getting your house sold. We are seeing things like people offering mineral rights on the land's houses, even writing buyers into their inheritance when the sellers pass on. These are very extreme. There is a difference between extreme incentives and effective ones.
WILLIS: Well let's talk about that. Let's start with some incentives that might make sense. What are the kinds of things that you might add in that would just sweeten that offer enough to get a buyer?
TODD: Gerri, there's one thing that people are looking for. It's show me the money. It all comes down to common currency. Whatever is going to reduce the bottom line in today's economic climate, people are concerned about the economy. They want to know that they can pay less for a house, pay less for their monthly mortgage and get a lower price period, so anything to reduce that bottom line.
WILLIS: We've got reduce the price, paying points, down payment aid. Those are all kind of common (INAUDIBLE) you have in there. At the end of the day, isn't it the price of the house that really matters? Isn't that the most important thing to consider?
TODD: Absolutely. People don't want a plasma television. They want a lower mortgage payment. People feel like they have to get creative in these desperate times, but get creative with the bottom line, period, reduce the price. That's the number one thing sellers don't want to do, especially because a lot of them are upside down. In many cases their mortgage payments and their loan amount is more than the house is worth. It's a tough situation.
WILLIS: Very tough situation. Let's talk about some of those gimmicky offers you've seen out there. Tell me a little bit about those.
TODD: These gimmicky incentives really started with developers. They used to work in past real estate markets, but not so much today.
WILLIS: Free car. TODD: I would love a free jaguar, who wouldn't or cruise or a five-star vacation? The bottom line is that this doesn't get houses sold. If you look at the numbers, it just doesn't work. It might get more foot traffic through the door. They are going to buy the house for the best price.
WILLIS: Let's talk a little more about the kinds of strategizing you have to do. A friend of mine trying to sell a condo in Vegas. He said he priced way below market but his prices were dropping every single month. The last thing he wanted was to have that deal fall out of bed at the closing table. Anything else you can tell people to just get that extra edge if they're selling in this market?
KENDRA TODD, YAHOO! FINANCE COLUMNIST: Absolutely. Well, first of all, from a buyer's perspective, if you're looking at a piece of property that has all these incentives attached to it, calculate their cash value. Go to the seller and ask them to reduce the sales price by the amount of all the incentives because you have to be careful. Whenever there's an incentive added to a property, it's probably getting paid for somewhere down the line. It's probably not that free.
WILLIS: OK. So this is the buyer's side of the equation.
TODD: Yes.
WILLIS: You want to make sure you understand the real value of some of this stuff. Because some of this is not worth very much at the end of the day, right?
TODD: No, it's not. But from the seller's perspective, to make sure a deal sticks, you can do things like contribute to mortgage payments down the road. Paying for a certain amount of property taxes or homeowners association dues. Home warranties. There's a lot of things that you can do to get that deal to stick so that the buyer doesn't get cold feet at the closing table.
WILLIS: The last thing you want to have happen.
Kendra Todd, thanks for that advice. We appreciate it.
ALI VELSHI, CNN ANCHOR: All right. Up next, we're going to take you back to Roland Martin. He's live on CNN Radio and cnn.com Live.
Also, gas prices are approaching the $4 a gallon mark. What does that mean for the next car that you buy?
Plus, why the Chinese are blaming the United States for high food prices.
And displaced by your foreclosure? Well, you're looking at the latest victim of the mortgage meltdown. We'll tell you about the sad trend of pets that are left behind in foreclosures.
You're watching ISSUE NUMBER ONE right here on CNN.
(COMMERCIAL BREAK)
VELSHI: All right. CNN's Roland Martin is live on CNN Radio and cnn.com Live right now talking about politics. And, you know, times are tough. The economy is tough. Roland, give me a thumb's up if you can hear me. He might. He's talking to somebody right now. I think he can probably hear me, but he's in the middle of a conversation because he's talking to people, he's talking on the radio right now. I'm just going to see if he can actually hear me. Let's listen into Roland for a second.
ROLAND MARTIN, CNN RADIO: All right, Namari (ph), I totally appreciate it, man. Thanks a lot. Folks, give me a call, 1-877-266- 4189. We'll be coming back. We'll talk with Joe Paglarulio (ph), a radio host out of Houston/San Antonio. We'll take more of your phone calls and read your e-mails as well.
I'm Roland Martin. This is a CNN Radio special.
VELSHI: And there he is. Roland Martin is there. He has just taken a break there.
Roland, you can talk to us for a minute? This technology usually works very well.
All right. Let's talk about gas prices for a second. We have AAA reporting another record at the pump. The national average for a gallon of regular unleaded is $3.98. That's up half a cent. AAA says prices are up 10 percent from a month ago. More than 26 percent from year ago levels.
WILLIS: Cuts in the airline industry. Jobs are going away. Planes being taken out of service. We'll tell you what it means for your air travel.
And time for some answers. Finally, the Help Desk is stand buying. Send us your e-mails to issue1@cnn.com.
(COMMERCIAL BREAK)
VELSHI: Record high gas prices are having a dramatic effect on the U.S. auto industry. Just in the past day, GM has announced plant closings and, with that, job cuts. Auto sales in the U.S. are showing huge drops. Rick Newman is with "U.S. News & World Report" in Washington and joins us now. He follows this very closely.
Hey, Rick.
We saw the car sales for May following the trend we saw in April when gas hit $3.50 a gallon. Now at almost $4 a gallon nationwide. Americans have turned their back on trucks and SUVs. They are running the other way. They can't unload them fast enough. And the auto companies don't think this is a trend that's going back now. They think this is what the future is going to hold.
RICK NEWMAN, "U.S. NEWS & WORLD REPORT": I think that's the real significance in what GM said yesterday when it announced it's closing these four factories that build trucks and SUVs. This is a big deal for a car company. It takes years to turn around an assembly line and change your plans and go from one type of model to another model.
And I think what GM is saying is, and what the CEO, Rick Wagoner, did say is, we think this is a permanent shift towards smaller cars and higher gas prices. So we're changing our long-term plans in a major way that's going to cost us a lot of money. So that has -- you know consumers should be paying attention to that. If you think gas prices are likely to go back down, the smart money seems to be saying, they're not going back down.
VELSHI: Well, as recently as, you know, two years ago, the car companies were still saying, at least the American car companies, still saying that people are buying these SUVs. They're OK with it. They're not minding. They want the power. They want these big trucks. Should they have seen this coming earlier? I mean, they've been making some changes. But we have seen that trend in trucks and SUVs dropping for a couple of years now.
NEWMAN: I think the maestro who figures out how to predict where gas prices are going to go will definitely dominate this market. And probably this is like predicting next week's weather. You know, so the cars are on the market now are basically designed when gas was about $1.50. You know, imagine a five-year lead.
So the companies are in the best position right now are the companies which is mainly Toyota and Honda, a familiar story line, that really have the best range of all kinds of cars. Those companies -- those automakers have some big cars, but they also have a lot of small cars. So they have the right cars at the right time. And the Detroit automakers don't.
VELSHI: Can these automakers retool? General Motors, I think, has, what, 75,000 workers. Something like that. Nineteen thousand of them are taking voluntary leave from the company. They say these new round of factory closures are going to mean more jobs. Like at some point, do they remain competitive? This is the biggest car company in the world, General Motors. Can they turn that ship around?
NEWMAN: They can retool. But it's just going to take a long time. For GM -- you know, GM keeps talking about the Chevy Volt. Well, that's not coming until 2010. That's supposed to be an electric plug-in car that could get 50 or 100 miles per gallon equivalent. That's just going to be one model. And they'll be lucky if they field that by 2010. Compared to Toyota, by then, will probably have 10 hybrids on the market.
So GM has a lot of talent. So does Ford. So does Chrysler. But it just takes a long time to turning something around that's this complicated. And we're looking -- yes, all three of the Detroit automakers just have to get smaller and leaner. I think they can do it. It's just going to be a while.
VELSHI: Rick Newman, good to talk to you. Rick Newman is a chief business correspondent with "U.S. News & World Report."
NEWMAN: Thanks, Ali.
WILLIS: As gas prices rise, so do food prices. They're soaring around the world. So who's to blame for high food costs? Some are pointing fingers. CNN's Eunice Yoon takes a look.
(BEGIN VIDEOTAPE)
EUNICE YOON, CNN CORRESPONDENT, (voice over): In India, food courts packed with middle class families. These days, eating bigger meals, more frequently, with greater choice. To Anshul Singhal it's a sign of the good economic times.
ANSHUL SINGHAL, BUSINESS CONSULTANT: It's people who are poor and the poor are getting rich and they can afford to eat (ph) three times a day.
YOON: But some point to this prosperity as one key cause of record high food prices. New economic power houses, like China and India, or often blamed, at least in part for the current food crisis. U.S. President George W. Bush had pointed to growing consumer demand in India as one reason prices are going up. But many in this part of the world say the real gluttons are . . .
PRADEEP MEHTA, DIRECTOR-GENERAL, CUTS INSTITUTE: (INAUDIBLE) the rich countries. They not only consume much more, the amount of food that you wasted is just huge (ph).
YOON: He might have a point. According to a report by the Food and Agriculture Organization, the average American eats 3,770 calories of food a day, compared to 2,940 calories in China, or 2,440 calories in India. Americans are also some of the biggest consumers of beef, a food that takes a lot of energy to produce.
Chinese agriculturalist Zhou Li goes as far as to call the United States a "food imperialist." Li says America food aid and farm subsidies discourage farmers in poorer countries from raising their own crops. Some also blame high food prices on the international push to use grain as fuel for cars instead of food for people. American agro-economist, Lester Brown, agrees and says he's not surprised the debate over food is turning ugly.
LESTER BROWN, PRESIDENT, EARTH POLICY INSTITUTE: What we're now seeing is the emergence of a politics of food scarcity unlike anything we've seen before.
YOON: And many food experts say that the blame game is set to getting even uglier, as nations battle it out in this global food fight.
Eunice Yoon, CNN, Beijing.
(END VIDEOTAPE)
VELSHI: United Airlines is the latest airline to announce cuts. Not just jobs, but planes. One hundred planes to be taken out of service and some 1,500 jobs to be cut. And say good-bye to T.E.D., United's low-cost, coach-only carrier. Rick Seaney is the CEO of farecompare.com. He joins us now to talk about this.
Rick, this is a big change. They're taking the 737, some of them, out of service. Those are the workhorse of the airline industry. They're saying they're old and not very fuel efficient.
RICK SEANEY, CEO, FARECOMPARE.COM: Yes, I think that what you're seeing here is basically a continuation of what has to happen when you have three major events -- high fuel prices, stumbling economy and currency conversion. I mean, all those in combination are giving the airlines the biggest ulcer they've ever had.
VELSHI: Let's think about this for a second. I mean let's think about the transport industry in the United States. The trucking industry. When fuel goes up, they increase, they pass that directly on to their clients who pay more for shipping. When UPS and FedEx feel fuel increases, they pass that directly on to the clients in terms of shipping. And not else gets affected.
The airlines pass on these fuel charges. I think we've had 15 or 16 attempts this year. And then they take away the peanuts. And then American Airlines charges you $15 for the first bag. They nickel and dime you all across the board.
At some point, do the fuel charges not -- are they not doing what they're supposed to do? Are they not -- the airlines are saying, we're passing this on to consumers. Why then are we losing on every other front as well?
SEANEY: Well, I think the big problem is, is that, you know, there's this -- when you want to raise airfares, let's say you wanted to double airfares because the cost of fuel went up by 30 percent, 40 percent. Then what would happen is, the plane would then be a third full or a half full. So you didn't really gain anything.
So the airlines, it's really difficult for them to pass on fuel costs. They've raised or attempted to raise over 39 times since the beginning of January of last year.
So they're doing a good job of getting those increases in. But there's this tipping point where, if you raise it too high, the planes won't be full and therefore you just have to continue to cut capacity. But you can only cut capacity so much before you can't meet your financial obligations.
VELSHI: So what's the future hold? I mean, we've talk about this. We know there are airline mergers in the works. But for the traveler, what do they expect the airline industry is going to look like a year from now, five years from now?
SEANEY: Yes, you know, it's all based on fuel. I know it's relative to the fuel cost. And if fuel stays where it is, we're going to have less service, which actually might be OK for issues with delays and things like that. Prices are going to be up. Not double, not triple, but certainly up 20 percent, 30 percent, 40 percent. And there's going to be basically difficult for leisure travelers to get cheaper stuff unless they're willing to be flexible and travel on days like Tuesday, Wednesday and Saturday when basically that's when the best prices are.
So it's going to clang the entire dynamic. You still have the low-cost airlines out there nipping at the heels of the legacy airlines. And you've got the growth area in international travel, which is even starting to slow down just a little bit.
VELSHI: All right, Rick, we'll continue to keep in touch with you. Rick Seaney, the CEO of farecompare.com.
SEANEY: Great. Thanks for having me, Ali.
WILLIS: Up next, we're opening up the Help Desk. Answers to your e-mail questions. The address issue1@cnn.com.
You're watching ISSUE NUMBER ONE.
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WILLIS: Welcome back to ISSUE NUMBER ONE.
It's that time of the show when we hear from you and answer your money questions. Let's get right down to it. Bob Moulton is with Americana Mortgage. Kendra Todd is the Yahoo finance columnist and real estate broker. And CNN's business correspondent, Stephanie Elam, as always.
All right, guys, let's get right down to the questions.
Number one from Andrew. "What is the most effective way to purchase a house without paying too much for it? Owners seem to be listing homes at the same price they paid or higher instead of what they are worth on the market right now."
Kendra, what do you make of that?
TODD: Well, a home is only worth what someone is willing to pay for it. So people need to realize there is a distinct difference between an asking price and a selling price. So go out there and make offers. You'd be surprised. People that are listening their houses at $500,000 but, at the end of the day, they're accepting $380,000.
WILLIS: Wow, that's a big difference.
Bob, I want you to weigh in because you're in the marketplace. You know what's going on. Tell us just a little bit about what you're seeing with prices. Kendra's in Florida. You're up here in the New York area.
BOB MOULTON, AMERICANA MORTGAGE: Yes, pricing is very localized. And people do have their house out there still at the high water mark. Somewhere where we saw prices in 2003 and 2004. If you think you want to pay a lower number for that house, if the house is listed for $400,000, you want to pay $350,000, offer $300,000 and meet somewhere in the middle.
WILLIS: Lowball. MOULTON: Everything is negotiable. Each seller is motivated very, very differently. People ask me for advice, should I lowball, you know, 10 percent? Find out from your realtor, why is that person willing to sell?
WILLIS: And go with your own guts sometimes if you know a lot about the marketplace.
Let's answer Jennifer's question in Arkansas. She asks, "if interest rates are going down, why are the long-term rates going up?"
Stephanie, make sense of these rates.
STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Well, you know, the thing is, everyone hears the Fed's Fund Rate. That's a rate that we hear all the time that they're cutting. Well, actually, your long-term mortgage rate, that's actually connected to the 10-year Treasury yield. So that is actually controlled by bond traders. And so they're worried about inflation. So if the Fed cuts rates, then they're worried about inflation. So they're going to demand more, and therefore your price is going to go up.
WILLIS: Your mortgage rates go up. Very well done.
Devinder, and I hope I'm pronouncing that correctly, "what help is there for people who lost their down payment and their equity due to falling prices? Our bank doesn't want to refinance because we owe more than the house is worth now."
Kendra, so many people caught in this horrible situation where they owe more than the house is worth. What do they do?
TODD: You know, I wish there was a straight answer for such a screwed-up real estate market, but there isn't. You know, the best answer is, they're just going to have to wait it out or try and negotiate with the banks. You do need to realize that lenders do exist to do more than just collect monthly mortgage payments and they're getting in situations where they are willing to negotiate in some cases.
WILLIS: All right. Tough situation.
MOULTON: This is a similar situation that we saw about 15 years ago. Prices went up dramatically in the 1980s, dropped in the early 1990s and you really have to ride it out. It's like buying a stock. If it goes down the following week, hold on to it. If it's your primary residence, you're enjoying it, you're getting a tax write-off. Enjoy the home, make the payment and hopefully it will come back in five years or so.
WILLIS: Can be easier said than done, though. A lot of people out there really have to move. It can be a vice grip for some folks out there.
Audrey asks, "my husband and I have been looking for a home for the past two years with no success. Our purchasing power is $410,000. The homes are so overpriced. How does someone in our circumstance find an affordable home in today's market?"
Bob, weigh in.
MOULTON: You know, talk to your realtor. Go on to Zilla (ph). Go on to Property Shark. Do your homework. You need to understand what's happening in your marketplace. You need to understand where prices are going. They could be dropping 5 percent. They could be dropping 10 percent. People are looking to buy the house at the absolute bottom price. But again, if you're going to live in it, if you're not a speculator, you have great interest rates right now. Mortgage rates are at 6 percent. If you wait for prices to come down, mortgage rates could be at 7 percent or 8 percent. You're going to be locked into a higher payment.
WILLIS: Guys, great answers, tough questions. Kendra Todd, Yahoo! columnist, Bob Moulton, who's right in that industry, and Stephanie Elam.
Ali, over to you.
VELSHI: Thank you, Gerri.
Still ahead, the silent victims of the mortgage meltdown and what's being done about them. That's next on ISSUE NUMBER ONE. Stay with us.
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VELSHI: Well, what's your key economic issue this election year? That's today's Quick Vote question. Let's check in back with Poppy Harlow from cnnmoney.com.
What are they saying?
POPPY HARLOW, CNNMONEY.COM: Hey, Ali.
Well, no surprise here. It is gas prices. Fifty-nine percent of you said gas prices are your key concern. Sixteen percent say health care. Seventeen percent say jobs. Just 9 percent say housing. So it looks like gas has replaced housing as the big concern.
VELSHI: Well, I think there's been a lot of attention to it and people see those signs all the time and then they turn on the news no matter where you are and you hear about it. So interesting responses.
Thanks, Poppy.
Gerri.
WILLIS: My issue is paying for all of those.
One of the most heart wrenching side effects of the foreclosure, pets, left behind when owners lose their homes. CNN's Kate Baldwin takes a look.
(BEGIN VIDEOTAPE) KATE BALDWIN, CNN CORRESPONDENT, (voice over): The local animal shelter should be the last place hit by the housing crisis. But animal advocates say nationwide this is one of the unexpected consequence of the struggling economy.
BETSY SAUL, CO-FOUNDER, PETFINDER.COM: When someone's losing their home and they become in such financial straights, people feel shame for that. And the other thing that people feel a lot of shame about is relinquishing a pet.
BALDWIN: Betsy Saul is the co-founder of petfinder.com, the nation's largest online pet adoption agency. While the evidence is largely anecdotal, Saul says Pet Finder's network of shelters has been flooded with animals, many handed over because of foreclosure, like these dogs in California.
RICK JOHNSON, SACRAMENTO SPCA: The fellow that turned them in was terribly distraught. At that they had tried friends. They had tied advertising.
SAUL: And you've got pets not leaving. Pets coming in more. And no donations coming in. That's a tough spot.
BALDWIN: And with such limited space in shelters, Saul says many families are turning to desperate measures.
SAUL: Pets are being abandoned. Some at the shelter and some just left in the home or turned out on the streets.
BALDWIN: Until the economic strain eases, animal advocates hope families turn to people like Joanna Harkins before they give up.
JOANNA HARKIN, ALLIANCE FOR STRAY ANIMALS & PEOPLE: I can take their animals, market them and try to get a good adoptor.
BALDWIN: Harkin finds temporary foster homes for animals in Washington D.C. when shelters are no longer an option.
HARKIN: So really there is a way to transition animals onto a better situation.
BALDWIN: A better situation for both the pets and the owners.
Kate Baldwin, CNN, Washington.
(END VIDEOTAPE)
VELSHI: Wow, that's broader than the normal impact that we cover with the stuff in the mortgage crisis.
WILLIS: It's true. And it's a very sad story.
VELSHI: And who could expect those animals to actually be able to read the fine print on the mortgage documents. That's not even nice. The economy is issue number one. We here at CNN are committed to covering it for you. ISSUE NUMBER ONE will be back here tomorrow, same time, 12:00 p.m. Eastern right here on CNN.
I don't know why you laughed at that.
WILLIS: Time now to get you up to speed on other stories making headlines, including the very first interview with Senator Barack Obama since becoming the presumptive Democrat nominee for president. CNN "Newsroom" with Don Lemon and Brianna Keilar starts right now.
