Return to Transcripts main page

Issue Number One

Tropical Storm Edouard Continues Churning; Presidential Candidates & the Economy: McCain and Obama Tout Tax Plans; Obama Lays Out Energy Policy in Michigan

Aired August 04, 2008 - 12:22   ET

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

CHRISTINE ROMANS, CO-HOST: Senator Barack Obama in Lansing, Michigan, spending the last half hour with a benchmark address on his energy policy, essentially saying he would, if president, immediately direct the full force of the United States government, the full energy of the private sector, to get rid of our dependence on Middle Eastern and Venezuelan oil in the next 10 years.
Unveiling three big steps -- among them, a middle class energy rebate immediately of $1,000 per family, a tax credit to buy fuel- efficient vehicles. He says his plans for renewable energy and for fuel efficiency in vehicles could increase the number of American jobs by some five million over the next few years. And also, he says he thinks that he can push a reduction of our demand for electricity by some 15 percent as well.

An aggressive benchmark speech on his energy policy and plans.

We're just getting started on the issue of energy today.

Next, we're going to tell you the other side, what Senator McCain has to say on energy.

Plus, we're going to break down how these two candidates are faring on the energy issue.

And a look at the controversy of offshore oil drilling. And speaking of offshore drilling, we're going to check in on those oil rigs in the Gulf of Mexico as a tropical storm moves dangerously close there.

You're watching ISSUE #1.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Like all compromises, this one has its drawbacks. It does include a limited amount of offshore drilling. And while I still don't believe that's a particularly meaningful short-term or long-term solution, what I've said is I'm willing to consider it if it's necessary to actually pass a comprehensive plan.

(END VIDEO CLIP)

ROMANS: Senator Obama unveiling his energy plan. You've heard from Senator Obama on energy.

Let's check in on the McCain plan right now. CNN's Ed Henry is live in Washington with more.

Hi, Ed.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, good afternoon, Christine.

The McCain camp this morning being very aggressive about pushing back against Senator Obama, pointing out that a key part of this rollout -- he has a new ad as well, Obama does, on energy -- that a key part of this rollout is attacking oil companies and their profits. The McCain pointing out a factual error in all of that by pointing out that back in 2005, in fact, John McCain voted against an energy bill that had billions of dollars in tax breaks for oil and gas companies, while Barack Obama in 2005 voted for that energy bill. So the McCain camp being aggressive about pointing out while Obama is now saying that McCain wants to fall in line with the White House and go for tax breaks for oil and gas companies, that in fact McCain has previously opposed that, while Obama supported that bill.

Secondly, the McCain camp ripping into Obama's idea that now he would be in favor of tapping the nation's Strategic Petroleum Reserve in order on a short-term basis to increase the oil supply in the nation. They point out that just last month, Obama said that was not a good idea, and they would only reserve that for real energies. And, of course, when he said that last month, gas prices were higher as a national average than they are right now.

And finally, on that issue you mentioned on offshore oil drilling, the McCain camp pointing out that Obama has previously called offshore drilling basically a gimmick, now saying he's open to it as a possible idea as part of a grand compromise, but still not quite supporting it fully. Not saying he's on board with it, saying maybe he's open to the idea.

So what the McCain camp is trying to say is that they think that Obama is shifting a bit here, while McCain for a long time has had a more comprehensive approach, that he wants to include offshore drilling, he wants to include more nuclear power, and wants to attack this from many different levels -- Christine.

ROMANS: All right. Ed Henry.

Thanks, Ed.

Because of sky-high gas prices, the energy issue will likely remain a top priority for the candidates.

CNN Senior Political Analyst Bill Schneider is live in Los Angeles. He's here to talk about offshore drilling.

Bill, was this a flip-flop or a softening of a position, or how do you describe the new position, or the position now on offshore drilling for Senator Obama? WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, Senator Obama calls it a refinement of his previous position. He wants, he says, limited new offshore oil drilling if it is part of a comprehensive plan like the bipartisan energy plan that is now making its way through Congress. He was under pressure to do so, among other things, from public opinion, not just form his opponent.

Take a look at the polls. When we asked Americans just last week, do they favor new offshore oil drilling? More than two-thirds, it's over two to one, said they favor new offshore oil drilling, which, of course, McCain does favor. So there was a lot of pressure on Senator Obama to fall in line behind at least limited use of new offshore oil drilling, though he says that he also wants energy companies to take advantage of the oil leases they already have, which they have failed to exploit.

ROMANS: You know, Bill, every president since Nixon has mentioned energy dependence. And these two men both say that, you know, it's something that has to happen now. What do we do about this? And can these gentlemen, on their own, either of them as president, do it alone or does it have to be a comprehensive, bipartisan push? Does that, you know, handcuff them?

SCHNEIDER: Well, comprehensive and bipartisan are very important words. That's the only way anything gets done in this country. That's the way we made some progress on energy in the 1970s when we were last faced with a crisis.

Look, what Obama just talked about, Senator Obama talked about a complete transformation of the American economy. You don't do that with a partisan program. Do you that with a very comprehensive program. He talked about in 10 years no oil from the Middle East or Venezuela. These are very ambitious proposals.

The difference between the two proposals, and they have a lot in common. They both talk about less reliance on foreign oil. They both have a push for cleaner fuels. I would say that Senator Obama talks relatively more about the demand side, Senator McCain about the supply side. That is, Senator Obama talks about conservation, about more tax -- more fuel efficient cars, increasing the fuel economy of our cars, cutting oil consumption 35 percent, whereas Senator McCain talks about increasing production, more entrepreneurial incentives and both talk about encouraging more alternative fuels.

ROMANS: All right. Bill Schneider. We're going to keep breaking it down, looking at all the nuances of both of these plans.

Bill in Los Angeles. Thanks, Bill.

We're keeping a close eye now on Tropical Storm Edouard churning in the Gulf of Mexico, and more specifically what the threat is to offshore oil rigs.

CNN meteorologist Chad Myers is live right now in the CNN hurricane headquarters -- Chad. CHAD MYERS, CNN METEOROLOGIST: Well, you would think it would be doing more to the oil markets today than it is. But right now, so far so good. This thing is still a tropical storm. Not really forecast to be a hurricane until it gets much closer to Texas.

But let me show you where this is. And the graphic you had behind you told the story. Every white dot that's on that map is an offshore either rig drilling or rig pumping right now. So here it is, and it is still going right through Houston right up through the shipping channel. That will be for tomorrow.

See what it looks like right now. Winds are 45, gusting to 60. It's still about 270 miles from Galveston, but it is moving to the west at about eight miles per hour. And there's the forecast for it for tomorrow sometime. Remember, we always talk about a cone. This could still go left. It still could go right. Could go to Beaumont. Could go to almost down to Corpus Christi. That's why there are watches for you there.

Now we can actually see it on the radar. That's how close it is to land. Normally when they're out there, Christine, when they're out there way out in the Atlantic, we don't have a radar because, well, the radars don't go that far because the earth curves away. We can only show you satellites. But here we can actually show you the radar picture.

And it's getting a little bit more -- a little bit better organized, I think. This is very warm water. The water's almost 90 degrees out there in the Gulf of Mexico. That's the fuel. That's the height (ph) test, if you will. That's the 93 octane it wants to get a little bit faster.

ROMANS: All right. Chad Myers. Thanks, Chad.

OK. What Barack Obama and John McCain are saying about taxes and what that could mean for you.

Plus, why the U.S. isn't the only country going through some tough times these days. And why a popular staple at one fast food restaurant could be going through some major changes of its own.

You're watching the home of issue #1, the economy, CNN.

(COMMERCIAL BREAK)

ROMANS: Right here on CNN, we want you to hear what the candidates are saying in their own words. Senators Obama and McCain have been touting their tax plans. First, let's hear what Senator John McCain is saying.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: Senator Obama and I have fundamental differences on economic policy. And many of them concern tax rates. He supports proposal to raise top marginal rates paid by small business and families, to raise tax rates on those with taxable incomes of more than $32,000, raise capital gains taxes, raise taxes on dividends, raise payroll taxes and raise estate taxes. That's a whole lot of raising. And, for me, it's a families, individuals and small businesses, it will mean a lot less money to spend, save, and invest as they see fit.

For my part, I believe that in a troubled economy when folks are struggling to afford the necessities of life, higher taxes are the last thing we need. The economy isn't hurting because -- my friends, the economy isn't hurting because workers and businesses are under taxed. Raising taxes eliminates jobs, hurts small businesses and delays economic recovery.

Under my plan, we will preserve the current low rates as they are so businesses, large and small, can hire more people. We'll double the personal exemption from $3,500 to $7,000 for every dependent in every family in America. We'll offer every individual and family a large tax credit to buy their health care so employers can spend more on wages and workers don't lose their coverage when they change jobs. We'll lower the business tax rate so American companies open new plants and create more jobs in this country, not going overseas.

Now, there are honest differences as well about the growth of government, but surely we can find common ground in the principle that government cannot go on forever spending recklessly and incurring debt. Government has grown by 60 percent in the last eight years because the Congress and the administration have failed to meet their responsibilities and Americans are angry about it, and they should be. And next year, total federal expenditures are predicted to reach over $3 trillion. That's an awful lot for us to be spending when this nation is already more than $9 trillion in debt or more than $30,000 in debt for every citizen of this country. That's a debt our government plans to leave for your children and mine to bear. And that's not only a failure of financial oversight, it's a moral obligation.

(END VIDEO CLIP)

ROMANS: And now the other side. Here's what Senator Obama has to say about your taxes.

(BEGIN VIDEO CLIP)

OBAMA: If I'm elected, I will put $1,000 tax cut into your pocket. Ninety-five percent of Americans will get tax relief under my plan.

I will provide a mortgage interest deduction for people who currently don't qualify so that homeowners get a little bit of relief. We're going to eliminate income taxes for seniors who are making $50,000 or less so they get a little bit of relief. And I'm going to support parents who are struggling right now by expanding the child care credit and making sure that families have paid sick leave because a lot of folks don't. And we're going to make sure that we have equal pay for equal work so that every woman in America is being treated the same way that men are being treated because that's just the right thing to do. Now I don't want to wait until I'm president to do it. I want it done now. So yesterday I announced a two-part emergency plan to help struggling families make ends meet and get our economy back on track.

The first part of my plan is to tax the windfall profits of oil companies and to use some of that money to help you deal with rising gas prices by getting a rebate to you right away.

Now, this is an area where my opponent and I disagree. He opposes using that money to help you pay your bills. The other day we learned that Exxon Mobil made nearly $12 million in three months. To put it another way, they made $1,500 every second. That's more than $300,000 in the time it takes you to fill up your gas tank.

Senator McCain actually wants to give oil companies like Exxon another $4 billion in tax cuts. I don't know about you, but I don't think we should be giving tax breaks to oil companies at a time that they are doing better than they have ever done before and you are doing worse. I think it's time to use some of those record profits to help pay for your record prices at the pump by putting $1,000 emergency energy rebate into your pockets right now.

(END VIDEO CLIP)

ROMANS: So now let's hear from someone who follows these issues every day. James Ledbetter is the editor of "The Big Money" section of slate.com.

James, thanks for joining us.

First, these two candidates on taxes.

JAMES LEDBETTER, EDITOR, SLATE'S "THE BIG MONEY": Right. Well, McCain is using a tried and true Republican strategy, sort of saying to the audience, the other guy's going to raise your taxes. I'll never raise your taxes.

It often works. It sounds very appealing. The question is whether McCain is really a credible messenger for this kind of message. He has gone all sorts -- all over the map about taxes historically. He was opposed to the Bush tax cuts when they first came in. Now he says he not only supports them, he wants to extend them. And I think some of his own tax cut proposals are going to interfere with his desire to balance the budget. So a lot of even McCain supporters are having trouble predicting exactly what it is he's going to do.

With Obama, the windfall profit tax I think is a very appealing idea. The $12 billion in three months sounds like a lot of money. Again, a populist appeal at a time when . . .

ROMANS: Give a little bit to the driver, give a little bit to the people who are running this country (ph).

LEDBETTER: It sounds good. The thing is, we had a windfall profit tax in this country between 1980 and 1988 and it didn't bring in anywhere near the amount of the money that was originally predicted for it. So can it actually be implemented? I think that the tax breaks for oil companies, there does seem to be a kind of consensus building around that. But the windfall profit tax is going to be a much tougher sell.

ROMANS: Let's talk about the energy policy. The speech today. More than a half an hour of Senator Obama sort of unveiling what Bill Schneider called an absolute retooling of the American economy. Is it really as benchmark as all that?

LEDBETTER: Well, I think it's an important speech. I think it takes a certain kind of politician to go into a place like Michigan where it has been historically very difficult to talk about the environmental movement and sort of flip it on its head and say, we can create jobs by endorsing things like industrial policy for green energy and tax breaks for energy-saving cars.

The tough part is that $7,000 tax cut for hybrid cars. Fifteen percent efficiency is an extremely high level. A lot of states have passed legislation like that and have found it very difficult to meet that 15 percent. So that's a very high benchmark. I think the 10 percent goal for alternative energies by the end of the first term is probably feasible, but the subsidies for these kinds of businesses are going to be a real tough sell with certain sectors of the country.

ROMANS: And, bottom line, how does he differ so -- I mean he says McCain -- walk me through how he is at odds with McCain on this.

LEDBETTER: Well, McCain doesn't support these kinds of subsidies for alternative energy. He wants the market to take care of it. McCain is adamant about drilling on federal lands. Obama seems to be shifting about that, but today he was back on again saying it's, at best, a psychological relief.

ROMANS: But in the hopes of some kind of comprehensive reform, he would agree to it.

LEDBETTER: Right. And that may yet turn out to be what happens. I think, you know, McCain's fundamental message here is to rely on the free market, not government subsidies.

ROMANS: All right, James Ledbetter, slate.com, thanks so much.

Next, more on the issues that matter to you -- your job, high gas prices, the security of your bank and the money in it.

Plus, think fast food is a bargain? Why the dollar menu, as you know, could be a thing of the past. We're all over issue #1 right here on CNN.

(COMMERCIAL BREAK)

ROMANS: We're back now on ISSUE #1 and focusing on your money.

Ryan Mack is the president of Optimum Capital Management. Paul La Monica is with CNNMoney.com. And Allan Chernoff is a CNN senior correspondent.

Allan, let me start with you and the Obama speech today on energy policy. I mean does he get voters this way by coming out with such a big plan that, you know, Bill Schneider called a retooling of the American economy? Does it woo voters?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Every single politician, not just the candidates for president, everybody has got to be dealing with this issue because this is concerning all Americans right now. So they know they've got to come out with a plan. They've got to come out with answers. You see Obama now saying, hey, you know, we will need to do some offshore drilling. So it's no surprise at all.

I think what's very interesting, though, you notice today, the price of oil is down yet again, even though we have that storm, even though we still have a lot of conflict overseas, geopolitical problems. There's a real possibility, possibility, that when either of these two gentlemen enters the White House, that we no longer have the kind of energy crisis we have right now.

ROMANS: And the price of gas has been coming down for a couple of weeks now, in fact. But that doesn't mean both of these gentlemen aren't going to be talking an awful lot about pocketbook issues I can expect right through the convention.

PAUL LA MONICA, EDITOR AT LARGE, CNNMONEY.COM: And keep in mind too -- yes, definitely. A lot of the reason that oil has been coming down, a lot of people say that that's probably because of demand in the U.S. and globally starting to decline. So in some respects, there's a little bit of bad news in the good news that oil prices are going down. It's not necessarily a supply reason. I think it's a lot of people speculating that demand, because of the economy, being so weak here.

ROMANS: Well, that's the whole idea, the best thing for energy prices, for consumers, is the worst thing for consumers, which is, you know, a recession, or something close to it, can dampen the demand.

RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Yes, definitely. And speaking about Obama's speech specifically. I think if he were to be asked today, are you again offshore oil drilling, he would say yes. But in order to move the agenda forward for the country, he would be willing to compromise on this thing because a lot of those things in that bill do discuss other issues, such as renewable energy resources that are within his original premise of, you know, in hydrogen cars and what not. So he wants to be able to just move his agenda forward as well.

ROMANS: I think it's pretty clear that he's no fan of offshore drilling and he's been outright opposed to it before. But he's talking about, you know, not sacrificing the perfect for the good, I think. And that is so political. I mean, in a way, I mean it maybe shows that he's willing to work a little bit with the other folks in Washington.

CHERNOFF: You have to.

ROMANS: Right.

CHERNOFF: You've got to do that. And, you know, he definitely wants to bring all the alternative energy forward. I mean, that's necessary. But we're in a situation where we need basically all battle stations . . .

ROMANS: Manned.

CHERNOFF: Exactly.

ROMANS: Or personed, I guess, would be the way that I would put it.

Well, let me ask you quickly though about whether they can get it done, either of them. Because we have been talk about the dependence on foreign oil since the Nixon administration and, you know, both of these gentlemen are senators. So they've been part of the policy making regime here. So can we really do it?

MACK: I think that one key issue also that recognizing that oil is a global commodity. And increasing offshore oil drilling, if they increase supply, does not necessarily mean OPEC will say, OK, now let's just start decrease our supply in order to keep the price the same. So I think we do need to have a bipartisan agreement to have all individuals come to the table so we can figure out all -- and even T. Boone Pickens, an oil guys, says, look, you know, we can't drill our way out of this situation. We need wind. We need solar. We need all sorts of alternative sources to make sure that this thing can move forward so we can relieve our independence..

ROMANS: All great stuff, guys. And we're going to pick it up where we left off, next.

(COMMERCIAL BREAK)

ROMANS: Back now with Ryan Mack, Paul La Monica and Allan Chernoff.

For some time now, some of the energy guys have been saying, you know, if you've got a recession, these high energy prices are going to hurt the economy. And then as the economy gets hurt, then that's going to dampen the demand for energy. Are we seeing that?

CHERNOFF: Most definitely. And we're seeing what's called demand destruction, which sounds . .

ROMANS: Oh, get out the econ textbook.

CHERNOFF: Sounds horrific, but it's actually, as you say, it's a good thing in the larger picture. Environmentally, it's probably a good thing. And also, in terms of the price of oil, it's helping out.

ROMANS: Where is there agreement between these two candidates on our energy policy and energy dependence? I guess it is that we have got to figure out a way to be less dependent on foreign oil.

LA MONICA: Yes, clearly, you know, both of them have to stress that we can't be as dependent on some of the foreign production of oil and that we need to find alternative sources of energy. It seems that McCain, obviously, prefers more of the free market approach. And there is some merit to that. But I do think you're going to need, to a certain extent, to have some legislation come in, in order to really get the country moving in more of a direction away from oil.

ROMANS: And that's the bipartisanship in the work in Washington that you were talking about.

MACK: Exactly. Definitely. I think this is, while we have to -- this is one of the most important elections in years. I mean regardless of who you're voting for, you have to really analyze these individuals' stances because this will dictate the future of this economy in terms of whether you are for offshore drilling or against offshore drilling. And a lot of distinct differences between these two candidates of which you feel -- of which you agree with the most.

ROMANS: Just in the past few days we've gotten more information about sort of the status of the American worker and the kitchen table economics. You know, we know about the jobs. We heard from last week the jobs destruction continues for seven months in a row. We know that employers are cutting back on the number of hours that people are working. The people that they aren't firing, or not hiring, they're having them work fewer hours. And we know a little bit about income and spending numbers, too. Walk me through what we know about the kitchen table economics right now.

CHERNOFF: Today we learned that income grew at a very slow pace in spite of the fact that a lot of people were getting those stimulus checks back in June. The number that came out today was for June. And that really tells us, you know, people are not getting that much money into their pocketbooks. It's a real problem. The economy is suffering. People are really feeling it. And not only at the gas pump.

MACK: I think if you look at the CEO of MasterCard, Selander also said, there's an increase in uses of debit cards. So it's a law of supply and demand. People are understanding that we don't spend what we don't have because if we've done that, look what has happened before. Let's start making sure we're being more responsible.

ROMANS: Personal finance experts saying, hey, these stimulus checks are great for the economy, but let your neighbor spend them at the mall. You should pay down your debt and save it.

LA MONICA: I think that the hope was that there would be some more saving, paying down debt. And I think the biggest concern now is that if we had all this spending, we saw numbers last week that said the second quarter of the economy grew at a surprisingly better rate than many might have expected. Will that happen in the third and fourth quarter without the effect of the stimulus checks? That remains to be seen. And a lot of people are skeptical in what we're going to see in terms of growth in the second half of the year. ROMANS: Got to leave it there.

Allan Chernoff, Ryan Mack, Paul La Monica, gentlemen, thank you so much.

Coming up, why fast food bargains could be the latest victim of the economy. ISSUE #1 is on it, next.

(COMMERCIAL BREAK)

ROMANS: Inflation worries are hitting McDonald's dollar menu. The fast food giant is testing higher prices for its double cheeseburgers and some other popular sandwiches. You know, it's even rethinking some recipes with an eye towards trimming its costs. Some McDonald's restaurants are making the burger with only one slice of cheese. Parish the thought. Others are selling the double cheeseburger for up to $1.19. While the dollar menu has brought in a lot of traffic to McDonald's, franchisees complain that it's simply not profitable.

We're back tomorrow at noon Eastern. Let's get right to your news with Don Lemon and Randi Kaye.

"CNN NEWSROOM" starts right now.