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American Morning
Citigroup Reaches Deal with Government; Obama's Iraq Plan; Obama Education Strategy; Mumbai Terror Attacks: Brand New Video Surfaces; Higher Rates for Those Making Over $250K
Aired February 27, 2009 - 07:58 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KIRAN CHETRY, CNN ANCHOR: And we are tracking some of the biggest headlines for your bottom line this morning. Breaking in just the last half hour, Citigroup and the federal government reach an agreement for Uncle Sam to take a bigger stake in the struggling bank. So what could it mean for the market and for your money? Today, Christine Romans will break it all down. She is standing for a big new report also about how bad our recession is and whether it could get worse.
Also, American troops coming home. President Obama says he will pull U.S. combat forces out of Iraq in the next 19 months, leaving between 35,000 and 50,000 troops behind to advise Iraqi forces. The president's official announcement comes later today in Camp Lejeune in North Carolina and our Barbara Starr will have all of those details from the Pentagon just ahead.
We also have a panel of experts breaking down the president's military strategy from Iraq to Afghanistan. Is there enough money to go around? Are there enough boots on the ground and what exactly will the mission be? We're going to turn to them in just a moment as well.
But first, back to that breaking news that we're telling you about. It could have an immediate impact your money and investments. The federal government is taking a much larger stake in troubled banking giant Citigroup. A stake as much as 36 percent. Christine Romans is here to give us the details. So before it was about an eight percent stake they had.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: That's right.
CHETRY: You and Ali were pointing out that this doesn't necessarily mean the federal government is pouring more money into Citigroup. So what does it mean?
ROMANS: It's a critical point, Kiran. That's right. It's not necessarily more taxpayer money going into Citigroup. It's the kind of investment that the government made with our money in Citigroup has now been changed to a different kind of investment which means the government now owns essentially 36 percent of Citi. It also means that they're going to be changes on the board, Kiran. There will be new board members who will be coming in and the government says that its got some new terms that it's going to have. It's going to have more of a say, they say, in what goes on with Citi.
Now, what does this mean for your money if you bank at Citi? There will be no difference -- there will be no difference at all. This is a company that says that its clients and its partners are not going to be affected by this change whatsoever.
And remember, your money is safe in the bank. I want to keep saying that over and over again. Your money is safe in the bank. It is insured by the federal government. Your money is safe. If you are a shareholder in Citi, however, and you probably are in your 401(k) somewhere, it's a very widely-held stock, we'll watch today to see how the stock responds. You've already been hit...
CHETRY: Right.
ROMANS: ... pretty badly if you're a shareholder in the stock.
CHETRY: The ultimate question also and the reason all of this is happening is because we want our banks to work the way they're supposed to work. So, what does this do toward that goal?
ROMANS: This is the government now for the third time stepping in and increasing its control of this to make sure that there is enough money, that there are enough reserves to protect this company for any kind of future losses. Keep in mind, the company and many other banks that have been saying they have enough money on hand, they have good capital, as they've required -- capital, that they're meeting all their capital requirements and they're in OK shape, but the markets have been pretty brutal on these financial companies.
CHETRY: All right. We'll watch and see what their stock does today as well. Christine, thank you
ROMANS: Sure.
CHETRY: John?
JOHN ROBERTS, CNN ANCHOR: Details about the president's plans for Iraq leaking out of the White House right now. The official announcement just a few hours away. But President Obama has been promising to turn the military's attention from Iraq to Afghanistan since the campaign trail.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will end this war in Iraq. End it.
(END VIDEO CLIP)
ROBERTS: A new CNN poll just out this morning finds more than two-thirds of Americans think that the president should pull our troops from Iraq. Mr. Obama says that he's going to have the combat troops out by August of 2010. That's just 19 months. Is that a realistic time frame?
Joining me now with a look at the president's plan, CNN's chief international correspondent Christiane Amanpour, our veteran Baghdad correspondent Michael Ware and a Washington former NATO Supreme Commander General George Joulwan. He studied the progress of Iraqi security forces for Congress in 2007.
And General, let's start with you. This window of 19 months, just three months longer than the president's original plan, but is it realistic to get all combat forces out of Iraq by August of next year?
GEN. GEORGE JOULWAN, FMR. NATO SUPREME ALLIED COMMANDER: Well, I think the key word they've used was responsible withdrawal. He's consulted with his military commanders on the ground, with the Joint Chiefs of Staff, all recently. And he's come up with a plan that I believe his commanders and the Joint Chiefs support.
So I think it's doable. The key is going to be this year. We're going to have elections in July. We're going to have a national election in December. All of that will play into it and I think he will adjust as he goes along. But I think it is reasonable, given where we are now in Iraq.
ROBERTS: You know, of course, Christiane and Michael, not all of the troops are going to come out of Iraq. They're talking about a residual force of 35,000 to 50,000 in a, quote, "non-combat role." Is there such a thing as a non-combat role?
CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Yes, there is. You can be there. You can pull back and you can be there as a reserve to help in any emergency. I think the key, as General Joulwan said, it's not just this year, it is this year, but it's also beefing up the Iraqi security forces.
Look, we've been talking about this almost from the very beginning. The only way that the United States can pull out in a safe way is if the Iraqi security forces are up and running and capable of running and securing their country. And, also, if the elections go OK in December, whether there's a real chance of solidifying the notion of political pluralism.
ROBERTS: You know, Michael, some people say there is no such thing as a non-combat role for American troops in Baghdad. You spent so much time there. Would you agree or disagree with that?
MICHAEL WARE, CNN INTERNATIONAL CORRESPONDENT: Well, it is walking a fine line. And we did hear from the commanders on the ground there before the Bush administration signed a new agreement outlining the American withdrawal that combat, support troops, what do these definitions mean? What's a combat soldier? What's a support soldier?
You can stretch those definitions if you're not very careful. So, they will be restricted far more than even they are now. They won't be roaming the streets on patrol, so that their exposure will be way down, but Iraq is Iraq and anything could happen.
ROBERTS: Of course, as the troops draw down in Iraq, they will be beefing up the force in Afghanistan. General, we had a CNN/ Opinion Research Corporation poll out yesterday that found that 64 percent of Americans believe that the U.S. is not winning the war in Afghanistan. What are the -- what are the goals going forward there and how do you define an end game in Afghanistan?
JOULWAN: Well, I think, really, I would talk an end state, not an end game or an end date. And I think what needs to be built up in Afghanistan, like Iraq, is civilian capacity and, in many cases, that's not military forces, it's civilian agencies. The military has to create the secure environment. That's absolutely necessary in Afghanistan.
And we saw what the surge did in Iraq, but it's the civilian agencies that are going to bring about true peace. And so, what we need to see is a balance mixture of military and civilian agencies in Afghanistan. And I think the shift over to Afghanistan is very much in our national interests and it should take place sooner, rather than later.
ROBERTS: Christiane and Michael, I was talking to former Senator Chuck Hagel last week. And I said to him, can the U.S. win in Afghanistan and he said, if you look at history, that would suggest no.
AMANPOUR: Well, you know, yes. But then today is not last century. And when the United States forces came into Afghanistan, they were welcomed after 9/11 when they sent the Taliban and al Qaeda packing. Some of the biggest "loyajugas" (ph) that were held there, the big meetings there, had standing ovations for the United States and international troops.
So, we don't want to take a specious point from yesteryear and transplant it right now. The point is, what are the troops doing there? Are they going to help secure the place as the General Joulwan said and make it possible for the vital nation-building? And this is the question which I have for this administration. Are they going to continue an environment where we can have nation building or are they just going to go against the militants and al Qaeda and I think it's very, very important they do both.
ROBERTS: Michael, you may be spending a lot of time there in the near future. Do you think that the U.S. can win in Afghanistan?
WARE: Well, it depends on a definition of a win is. As in Iraq, as the surge was unfolding, when General Petraeus took command of the war there, the goals and the aims, the definition of a win was revised from this noble concept of a shining democracy as a beacon to the region to a state that can administer itself and poses no threat to the United States or the region. Perhaps we have to see what do we call a win in Afghanistan.
AMANPOUR: Well, I'm going next month and I know that there has been a huge amount of progress made and so, for the United States, it's vital to keep it and to secure that progress, for instance, in women's affairs and other such things. And by the way, they can be a non-U.S. combat role, if possible. Look at Bosnia after the war there. Tens of thousands in U.S. and other forces -- they didn't go into combat, they kept the peace.
ROBERTS: But be safe, both of you, if you head over there. General Joulwan, thanks for being with us this morning. Appreciate it.
JOULWAN: Thank you.
ROBERTS: Kiran?
CHETRY: Now, it's seven minutes past the hour. We fast forward to the next step in the president's plans for the military. President Obama heading to Camp Lejeune in North Carolina to make his official Iraq plan announcement. So, stay with CNN. You can see the president's remarks live, 11:45 Eastern time or if you're away from your TV, cnn.com/live.
Well, the Senate is reportedly set to investigate the CIA's alleged use of torture during the Bush administration. Sources say an intelligence committee review is aimed at uncovering information on the use of water boarding and other interrogation tactics inside of secret CIA prisons. This review could be announced publicly as early as today.
Also right now, the State Department is focusing on America's anti-drug efforts. At 1:30 Eastern, it will release its International Narcotics Control Strategy Report -- John.
ROBERTS: Brand new this morning. Chilling video apparently showing the gunman in a Mumbai hotel moments before last November's attack. This morning, we're tapping into the global resources of CNN to bring you that video. We'll have it for you coming up. It's 8 1/2 minutes after the hour.
(COMMERCIAL BREAK)
ROBERTS: Welcome back to the Most News in the Morning.
Stories developing right now. Bailed out Bank of America subpoenaed over bonuses. New York's Attorney General wants to know the names of Merrill Lynch executives who received close to $4 billion right before the two banks merged.
Battle lines forming this morning over President Obama's new budget and the eye-popping bottom line. $3.6 trillion in spending with a deficit of $1.75 trillion. Among the new political land mines surfacing a global warming initiative that could boost your utility bills.
Republican Mike Huckabee ripping former President Bush and Senator John McCain over the bailout. Listen to what he said in front of a conservative audience last night.
(BEGIN VIDEO CLIP)
MIKE HUCKABEE (R), FORMER ARKANSAS GOVERNOR: With all due respect, Senator McCain dramatically suspended his campaign, flew back to Washington, not to champion those Congressional Republicans, but to join meekly Barack Obama in voting for the bailout, a bailout that most Americans opposed.
(END VIDEO CLIP)
ROBERTS: Huckabee also suggested that McCain might have won the White House had he come out against the bailout.
CHETRY: Education is one of the president's top budget priorities. He made that clear when unveiling his budget, and the billions going toward education included in it.
(BEGIN VIDEO CLIP)
OBAMA: We must make excellence the hallmark of an American education.
(END VIDEO CLIP)
CHETRY: And CNN's Kate Bolduan sat down with the man who will carry out the president's education strategy. She's live in Washington for us today.
Kate, hi there.
KATE BOLDUAN, CNN NATIONAL CORRESPONDENT: Hey, there, Kiran. The Department of Education's budget has effectively doubled in recent weeks. Thanks to the $100 billion in the stimulus package, and there's a spending increase in the president's 2010 budget. As you said, it's clear education is a top priority for President Obama. To learn more, we went straight to his new education chief.
(BEGIN VIDEOTAPE)
OBAMA: It would be the goal of this administration to insure.
BOLDUAN (voice-over): President Obama wants an innovative approach to education.
OBAMA: By 2020 America will once again have the highest proportion of college graduates in the world.
BOLDUAN: Ambitious goals. We sat down with a man in charge of making them a reality, education Secretary Arne Duncan.
(on camera): What right now can you say is your number one priority as the secretary of education.
ARNE DUNCAN, EDUCATION SECRETARY: We want to dramatically improve the lives of our children. And I'm just convinced education can get a lot better in this country at every level -- early childhood, K to 12, higher ed, and we have this remarkable once in a lifetime historic opportunity to do that.
BOLDUAN: Duncan is shy on specifics of how he is going to spend all the new money, but he does have a strategy.
DUNCAN: I think I have a reputation for really being data driven. And I'm going to take the same methodology here -- is we're going to look at the data, program by program, district by district, and we'll be able to tell pretty quickly what's working and what's not.
BOLDUAN: Two ideas measure by international standards and try a longer school day or year.
DUNCAN: We have a significantly shorter school year. 20, 25, 30 days versus India, versus China, other places. Our students are to competitive disadvantage.
BOLDUAN: Duncan is now working in the shadows of one of the country's worst school systems. D.C. public schools have been ranked last in reading and math scores. Unfortunately, that's not his only battle.
KEVIN CAREY, ANALYST, EDUCATION SECTOR: There are 50 states. There are 14,000 school districts. 90,000 schools. But they all have their own ideas, their own funding sources, their own local leadership, so the challenge from Washington, D.C. implement broad national policies a mix.
BOLDUAN: And with a high school dropout rate at 30 percent and squeezed state budgets threatening teachers and classrooms nationwide, Duncan's challenges are mounting.
DUNCAN: None of this is going to be an overnight success, but we can and we must do dramatically better.
(END VIDEOTAPE)
BOLDUAN: And so I asked Duncan in the end what his measure of success for himself will be. He said improvement in high school and college graduation rates. So we can expect to hear more on how he plans to do that in the near future. But we are already seeing some moves to increase funding and access to college financial aid -- Kiran.
CHETRY: Kate Bolduan for us this morning, thanks.
ROBERTS: Terror on tape. We'll show you the brand new video from inside one of the hotels during last month's massacre in Mumbai. It's 15 minutes after the hour.
(COMMERCIAL BREAK)
ROBERTS: Breaking news just in to CNN. Protests heating up right now in the streets of Islamabad and Pakistan. Police there fighting back protesters with tear gas. The crowd is furious because Pakistan's Supreme Court ruled that opposition leader Nawaz Sharif and his brother can hold elected office. Outrage also boiling over because of President al-Zardari's decision to impose executive rule in the country's biggest province Punjab.
And we've got chilling new video to show you this morning. It takes you inside one of the hotels in Mumbai during last November's deadly terrorist attacks.
CNN's international security correspondent Paula Newton is live in London now, and she's got the details.
And, you know, when you look at what was going on on that tape, you can't imagine what was going through people's minds who were inside that hotel.
PAULA NEWTON, CNN INTERNATIONAL SECURITY CORRESPONDENT: Shear terror, John. And the eyewitnesses I spoke to described exactly what you're about to see in this video. And that is these gunmen running around this hotel almost zombie-like preying on people and on a hunt to kill.
(BEGIN VIDEOTAPE)
NEWTON (voice-over): The just released CCTV footage appears to show the lobby of the trident hotel seemingly empty and then two gunmen enter. The sheer fire power and determination of the attackers chillingly on display. They take out communications at reception, blowing away computers and then moving on.
The surveillance camera footage was released by police to CNN's Indian affiliate CNN-IBN. CNN has been unable to authenticate the video, but it may give more insight into the calculated, almost robotic movements of the gunmen bristling with weapons and ammunition, stalking targets from room-to-room at will.
Some three months after the Mumbai terror attacks, Indian police are still trying to piece together exactly who ordered such an attack and why. More than 160 people died during the three-day siege. The sole surviving suspect Pakistani national Mohammad Ajmal Qasam was this week charged with murder and waging war against India. He could face the death penalty if found guilty.
But the Mumbai terror attack has aggravated already tense relations between Pakistan and India. India says the other nine attackers who died were also Pakistani. Pakistan recently acknowledged its territory was used to plot the attack and several suspects have been charged.
While the footage here appears to show the deliberation of the attackers, why they were hunting down Indians and tourists that night is still far from clear.
(END VIDEOTAPE)
NEWTON: Yet, they were so dispassionate, really, walking around like zombies, perhaps getting their orders by remote control. What Indian authorities want to know now, John, is who was giving those orders and why.
ROBERTS: What's really incredible, too, Paula is how they were able to set up these strong rooms in the hotels for weeks prior to these attacks without raising any alarms among any of the employees.
NEWTON: It was said to be in many cases an inside job. The Indian authorities do have evidence of that. The key here is how to prevent this kind of attack in really any city around the world again. ROBERTS: Well, maybe they'll get some tips on how to do that from watching this videotape. Paula Newton for us in London this morning. Paula, thanks so much.
CHETRY: Well, if you find your paycheck going up during this recession, your tax rate may soon do the same. The president's plan to pay for his $3.6 trillion budget. It includes more taxes on people making more than $250,000. It's 21 minutes after the hour.
(COMMERCIAL BREAK)
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: We have an explosive in building number one. There's smoke all over the place. (INAUDIBLE)
CAROLYN MANNING, CNN HERO NOMINEE: My brother-in-law was killed in tower one on September 11th. After September 11th, I saw a picture of an Afghan family who had also lost a family member because of the Taliban and they had to flee their country. Our family has five kids. We lost a family member, too. We just naturally went from that to let's show the refugees that we welcome them.
My name is Carolyn Manning. And I started the "Welcome to America" project to help refugees in Phoenix, Arizona.
How are you? You're doing well.
The families that we help come from places where there has been war and genocide. And some refugees have never lived with indoor plumbing and they've never flushed a toilet.
All right, let's go.
The "Welcome to America" project is the community, and it operates by community volunteers. My husband and I, many a time, have been out here pulling furniture and before work, after work, this is our life.
UNIDENTIFIED MALE: Thank you very much for all your help.
MANNING: All right. Let's go on to the next family.
When they sit foot in the United States, they had been invited here. I want the refugees to feel like this is their home.
Welcome to America.
And that's what America has been built on. It's our history. It's who we are. And they're a part of it.
UNIDENTIFIED ANNOUNCER: Tell us about your hero at cnn.com/heroes.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
CHETRY: Welcome back to the Most News in the Morning.
We're breaking down President Obama's budget -- $3.6 trillion. It is a staggering figure. Here are just a few of the big programs that would benefit, and we're showing them to you now.
Health care, one of the most talked about. It would receive $634 billion. Big chunks of that money would be spent on covering the uninsured, as well as cancer research. Now, education, something the president has talked a lot about. $46.7 billion planned for education in 2010. 2.5 billion will be set aside to help low-income students go to college. And then, of course, there is defense spending. This is always a big chunk of the budget, of course, but nearly 534 billion in spending on tap for 2010. That's up 4 percent because of commitments in Iraq as well as troop increases in Afghanistan.
The president setting aside $130 billion for those two battle fronts. But many Republicans are livid in all of this spending, including the man who almost became the president's Commerce secretary. That's Senator Judd Gregg.
(BEGIN VIDEO CLIP)
SEN. JUDD GREGG (R), BUDGET COMMITTEE: Where is the restraint in spending? You know? This budget doubles the debt of the federal government for five years. Triples the debt of the federal government in ten years. Runs up, obviously, massive deficits over this period. Never really gets us back to a point where we're on a glide path towards getting control over the cost that we're passing on to the next generation.
(END VIDEO CLIP)
CHETRY: And with a price tag of $3.6 trillion, who is going to pay the bill if that budget passes? Well, it depends on your paycheck. Because it could be you.
Carol Costello is covering that side of the story from Washington this morning.
You know, it's very interesting, because that big spread the wealth, it became this huge criticism on the campaign trail and now it's another way that many are criticizing this budget who are against it.
CAROL COSTELLO, CNN CORRESPONDENT: Yes. There's still criticizing the spread the wealth thing, because that's kind of what the president is doing. But, you know, the president's job is not easy. He needs money and where do you find money? Well, you find it in the pockets of those who have it.
(BEGIN VIDEOTAPE)
COSTELLO (voice-over): It is a daunting task. By the end of this fiscal year, America will have a deficit to the tune of $1.75 trillion. How do you cut that in half by 2013 and pay for pricey new programs? At least, in part, by taxing the rich.
OBAMA: And we'll save billions of dollars by rolling back tax cuts for the wealthiest of Americans, while giving middle-class tax cut to 95 percent of hard-working families.
COSTELLO: Not unexpected.
OBAMA: $250,000 a year.
$250,000 a year.
Yes, asking the folks who are making more than $250,000 a year, a quarter million dollars a year, to go back to the tax rates they were paying in the 1990s.
COSTELLO: Mr. Obama has talked about taxing the rich ever since, well, Joe the Plumber.
OBAMA: When you spread the wealth around, it's good for everybody.
COSTELLO: Back then, spreading the wealth meant Mr. Obama would let the Bush-imposed tax cuts for the wealthy expire. Today it means a whole lot more. The president is also proposing to reduce deductions on mortgage interest and on charitable contributions. Raise taxes on capital gains and dividends, and require wealthy Medicare beneficiaries to pay more for medical care and prescription drugs.
UNIDENTIFIED MALE: Lady, a woman of your beauty has no need for such decorations.
UNIDENTIFIED MALE: How dare you!
COSTELLO: Some say that amounts to robbing the rich to pay for the poor.
UNIDENTIFIED ACTOR: And go play Robin Hood.
COSTELLO: "The Wall Street Journal" trashed Mr. Obama's plan, insisting Mr. Obama is selling the country on a 2 percent illusion. Some economists could not disagree.
GERALD PRANTE, TAX FOUNDATION: You can't pay for everything with just raising taxes on high-income people, so you have to look somewhere else. You have to either cut spending or raise taxes on other people if you want to solve the entire problem.
COSTELLO: President Obama has vowed to find savings of $200 billion a year, but in order to cut the deficit in half, Mr. Obama would have to double the tax rate for the wealthiest Americans. Something he certainly not proposing now.
(END VIDEOTAPE)
COSTELLO: Imagine the outcry that would cause. Of course, President Obama's idea could work if the economy starts to boom over the next couple of years, or if Congress finds ways to really slash spending. But as economist Russell Roberts from George Mason told me, only one recent president has been able to keep his promise to balance the budget, Bill Clinton. And he did that with the Republican-controlled congress. Roberts says the toughest battle President Obama faces? Convincing his own Democratic Party to cut the budget by the billions.
CHETRY: Good luck. All right. Carol Costello for us this morning. Thanks.
COSTELLO: Sure.
ROBERTS: It's 30 minutes after the hour. We're following breaking news this morning. Dutch investigators say the Turkish Airlines flight that crashed in Amsterdam fell almost vertically into the ground, making only a short track in the muddy field. Officials say the sudden drop indicates that the aircraft may have experienced a wing stall where it stops producing lift but investigators say it's still too early to speculate on the cause. Nine people killed and more than 60 others were injured in Wednesday's accident. There were a total of 135 people on board.
The price of gas going in the other direction this morning. According to AAA, the national average is now $1.88 cent a gallon for regular. Today's increase ends 11 straight days of declines. Right now, just eight states have regular gas prices averaging $2 a gallon or more.
And right now, we're waiting for a new report from the Commerce department. It's expected to show just how far the economy shrank last quarter. Christine Romans and the entire CNN Money team are here to break down the news and explain what it means for you and your money coming straight up.
America's troops in Iraq getting word this morning that most of them will be coming home. President Obama is planning to pull combat troops out by August of next year. He'll make that announcement at Camp Lejeune hours from now.
Our Barbara Starr is live at the Pentagon this morning. And Barbara, does the military feel that they can do this in just 19 months?
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, John, by all indications, whether they feel they can or not, they will. They have, of course, now agreed to what the president has decided. But let's have a little bit of a military reality check here. You know, a phased withdrawal from Iraq had already really been decided under the Bush administration. There had been an agreement with the Iraqis that the U.S. would be out by the end of 2011.
This announcement of a 19-month withdrawal certainly does accelerate that but about 50,000 or up to 50,000 troops will stay on the ground and that means more U.S. troops, in fact, will be rotating in. It's not over for them. They will be going in and taking their tour of duty to be part of that residual force. The job of those troops will be to continue to train the Iraqis, to conduct counter- terrorism operations against Al Qaeda in Iraq and to protect American assets in that country.
So, for them, Iraq certainly does remain a combat zone. The announcement today will be full of all kinds of political statements, but the reality is the war may be about to end, but it is not over. John.
ROBERTS: So let me just go back to what you said at the very beginning. So the Pentagon agreed to the plan but do they necessarily agree with it?
STARR: Well, I have to tell you, I've just spoken with a senior military official who says that some commanders, their starting position was they wanted to see something a little slower, a little more cautious, more like a 23-month withdrawal. But, again, it's really important to remember that for the Obama administration, they are coming in on the tail end of what had already been decided, that everyone would be out by the end of 2011.
So the question for the Obama team was how much did they want to accelerate that? How close did they want to get up to living that campaign promise of 16 months. It looks like they went for the middle ground here.
ROBERTS: Barbara Starr for us at the Pentagon. Barbara, thanks so much.
And of course, you can see the president's remarks live from Camp Lejeune in North Carolina this morning at 11:45 Eastern right here on CNN or if you're at work and you don't have a television set but you do have a computer, you can follow it on cnn.com/live.
CHETRY: We have breaking news. New numbers out on the economy. Unfortunately, not good news. Economy shrinking at a faster than expected pace. Gross domestic product, which is the broadest measure of economic activity, activity that continues to shrink in this recession environment. We have Christine Romans and Ali Velshi with us right now breaking down these new numbers. It's faster than they expected, the shrinking?
ROMANS: Right, and the number is 6.2 percent. The economy shrank at a 6.2 percent analyzed rate. What that means, folks, is that the recession is worsening, that the end of last year was much weaker than we thought and that there are lot of people saying that continued into the beginning of this year. This is evidence that the economy is weak and getting weaker.
What are the problems? Just about everything. The only thing that is contributing to growth in this economy is government spending and when you look at our exports, the things that we make and the services that we make and the goods that we make that we are exporting around down the world, they plunged almost 24 percent. Our imports also plunged because the American consumer and American businesses and American factories just aren't buying the things either from domestic producers or from foreign producers that they once were. It is a sign that this economy is indeed quite weak. Now, how does it compare? You go back to the early 1980s, that was the last time we saw the economy shrink like this. It's just shy of what we saw in the early 1980s.
And I've been looking at these numbers because we always say, you know, the economy is so weak, so weak. There were times, after the '80s when you saw months like this when you saw sharp rebounds. No one is forecasting that right now. But keep in mind the economy can be this weak and in subsequent months and years can rebound.
ROBERTS: That's the thing. It's the worse in a quarter century but the economy got pretty good actually.
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Yes, what we have seen though like GDP is the measure by which we compare country's growth, the size of the GDP. The American economy is the biggest in the world because it has the largest GDP. The issue is after the last several recessions, the recoveries have been softer. The job creation has been less than the previous ones.
So we've been on a trend where we have a recession and then the recovery just isn't as sharp in each case. So that's our concern. Do you come back ultimately and create jobs out of this recession? This is good news if this is the worst, if this is the bottom of it. It is worse than we expected it to be and GDP takes into account so many of the measures that we talked about on a regular base.
ROMANS: Right.
VELSHI: We talk about unemployment. We talk about the housing crisis and we talk about different economic indicators. GDP is a much larger measure and it supposedly measures everything that is produced in our economy. There are a lot of people who say it's not an accurate measure but it doesn't really matter because at this point we've measured everything.
Christine and I joked how we pull out measures now that look like they might be hopeful about the economy. Measures we wouldn't have talked about a year ago.
CHETRY: Right. And you guys also point out oftentimes that we are looking in a rearview mirror to see where we are now.
VELSHI: Absolutely, correct.
CHETRY: But what does it mean when these declines and these shrinking is happening at a much faster pace than the smartest economic minds both inside and outside the government predicted because that is what happened here?
VELSHI: You know, this isn't a chemical reaction, this is the people's reaction. This is people who aren't doing things, who aren't spending and aren't engaged in the economy and businesses that are reacting to that. As a result those businesses are profitable, they end up laying people off and this is the cycle.
So again, it still comes back to the idea and a lot of people don't like it when we say this but the reality is this is not a mechanical economy. It's not a planned economy. It kind of becoming one with a lot of government spending we've got. This is an economy based on people thinking that they will make money if they invest in a house or a business. And that's not happening right now.
ROMANS: It means the recession is worse than we thought it was and it means the fact that we keep saying, they think it's going to be down five percent. The best minds in the world when it's down to 6.2 percent. It means that we're underestimating how bad it is.
ROBERTS: All right. So let's tie two of these things today. The current GDP numbers and then the president's budget plan. In the president's budget plan it focuses on assumptions that the economy will grow 3.9 percent in 2010 -
VELSHI: Right.
ROBERTS: And four percent for the subsequent three years.
VELSHI: Yes.
ROBERTS: Which some people say that's overly optimistic based on these latest numbers, it doesn't look like that is overly optimistic.
VELSHI: Could be. I mean, remember GDP, you get the first number, you got a revision. You get -
ROMANS: This is the second read.
VELSHI: You get four in total. Of each quarter. So who knows what this quarter will look like two more revisions down the road. But we are talking about the economy possibly recovering. The White House and Ben Bernanke are talking about the economy possibly recovering at the end of 2009. That's a long way away in this economy. Every day is about five days worth of news in money these days.
ROMANS: At least.
VELSHI: Yes.
ROMANS: I know. I mean, you look at numbers like this. I don't know about you, Ali, but I'm looking at these export numbers down 23 percent for American exports. I mean, that's a big hit.
VELSHI: It makes sense right? We are a consuming society and we are simply consuming less.
ROMANS: Sure.
VELSHI: And we are simply consuming less and a lot of economists, I know you had them on the show who say this is a sea change. Europe and the United States have got to consume less. They got to change their habits and we are doing that.
ROBERTS: So we allowed your shameless plugs for your latest book. Why don't you give us a shameless plug for your program this weekend.
VELSHI: Absolutely.
ROMANS: That's right.
VELSHI: Saturdays at 1:00 p.m. and Sundays at 3:00 p.m. Christine Romans, my TV wife and I to "Your Money" and we work all these things down. We have some great conversations about it and we get to spend an hour -
ROMANS: And like most couples, we don't always agree.
VELSHI: That's right.
ROMANS: So it makes for some fireworks and so --
ROBERTS: As long as you stay together.
VELSHI: That's it.
ROBERTS: Thanks, guys.
CHETRY: Well in this economy, they have no choice.
(LAUGHTER)
ROMANS: Whether they like each other or not.
CHETRY: All right. Guys, thanks.
Well your money and your urgent concerns for the future. Gerri Willis is here with some tips but you need to know to stretch your paycheck even to get by without one if you've lost your job. She's going to join us in just a moment. It's 39 minutes after the hour.
(COMMERCIAL BREAK)
ROBERTS: Welcome back to the Most News in the Morning. Millions of Americans are living paycheck to paycheck, if they even have one anymore. The cost of living is increasing as thousands of people lose their jobs every week. But our personal finance editor Gerri Willis is here with some strategies that you need to know to make the most of your money every day. Good morning to you, Gerri.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hey, good morning, John. Good to see you. Managing your money day-to-day means paying attention to the little things you spend money on in the middle of every day like lunch. Let's look at how you can get some lunch time savings. Every day, you probably spend about seven bucks buying your lunch. You save $4 a day if you didn't do that and it costs you $3 to bag it. And this really adds up over time. You can save after a year $960. After two years, almost $2,000. That is a vacation so that would be great news for a family that is really struggling out there. One financial adviser told me it doesn't pay to stick your head in the sand.
(BEGIN VIDEO CLIP)
GREGORY OLSEN, PARTNER, LENOX ADVISORS: Be aware. I've heard so many stories from people recently, I don't even open the envelopes! I don't even look. That's the worst thing you could possibly do because there may be things that you're doing that are completely and totally wrong for this market.
You should be looking to rebalance and you should be looking, if you can't continue to lose money, to be more conservative. And I really get upset when I find out that people are putting their head in the sand and not paying attention. So the first bit of advice I would give to people is make sure you're opening up your statements and you understand what is going on with your portfolio.
(END VIDEO CLIP)
WILLIS: All right. So that was Greg Olsen, guys. He is saying essentially that you need to pay attention to your 401(k), those savings as well. To manage your money effectively, you want to be sure that you know how much your balance is in your 401(k) and exactly what you're invested in. Guys?
CHETRY: Good advice. Unfortunately, I was taking the wrong road. I was doing what he said not to do.
WILLIS: Really? Well you know, we could talk just a little bit about how you save money in this market. A lot of people go wrong by, you know, using credit cards in the wrong way and that is a big mistake.
Let's talk a little bit about how people use credit cards the wrong way. What do they do? Well, they are paying their monthly bills with credit cards. You can't pay your utility bill with credit cards. That's a big mistake. They make impulse purchases. That's an easy way to get into trouble with credit cards. They pay other credit cards with credit cards or even their mortgage. Big mistakes here. You're going to run up a lot of debt.
The average family has some $9,000 in credit card debt. That is always a big mistake. Now there are times though when it makes sense to use credit cards because credit cards have a feature which allows you to dispute some of the purchases on the credit cards. So let's say you're making a big ticket item, you're a little worried about whether that big screen TV is actually going to work in your house and maybe you buy it with a credit card and pay it off immediately.
CHETRY: They also sometimes offer warranties if you buy them on a credit card that you wouldn't extend the warranty.
WILLIS: Absolutely. Yes, great idea. And buying online. You know you want to have that extra piece of mind that if you have a problem, you can actually return it. So there are do's and don'ts with credit cards but that's typically families get in trouble with their credit cards.
ROBERTS: You know, back to what you were saying of the top two about doing things, changing your behavior to save some money. I mean, I'm Scot by heritage. I love being frugal! It's like hard- wired in your DNA!
(LAUGHTER)
WILLIS: But you're in a good position here right now. I've heard you say in the past, for example, that you actually save money for your kids' college education...
ROBERTS: 529, yes.
WILLIS: ... so you don't have to worry about paying that for that over time.
ROBERTS: Of course, it costs more than it was a while ago.
CHETRY: People start to wonder, you know, the 529 that we opened up for our oldest child is now worth half of what it was when we took it out. So you say to yourself was that the best way or is that money going to come back?
WILLIS: How old is your child?
CHETRY: Three.
WILLIS: Wow. A lot of time! You got a lot of time on your hands to build that right back up. So I think that is the big question, how close are you to that purchase you need to make.
ROBERTS: Six months.
WILLIS: And if you're close. Six months. That's a problem.
ROBERTS: Yes.
WILLIS: Absolutely. But you can make a difference by making small changes.
CHETRY: Want to trade kids? You can deal with the tantrums and I'll deal with paying for college.
ROBERTS: There you go.
WILLIS: Is that fair? I don't know.
CHETRY: Thanks so much.
WILLIS: My pleasure.
CHETRY: Well, breaking up is hard to do if you can't afford it. Many couples are now staying together because the economy is too tough to get a divorce. Not too healthy, but necessary for financial survival. Very odd situation that some people are trying to make work. Christine Romans takes a look at their struggles. It's 46 1/2 minutes after the hour.
(COMMERCIAL BREAK)
CHETRY: Well, the economy is keeping people together for better or for worse. Many unhappy couples are staying married and living longer. No, not necessarily. They are living together longer because they can't afford to unload their homes. Christine Romans is back with us now. Unfortunately, there are a lot of us that know people like this.
ROMANS: I know.
CHETRY: I mean, maybe not to that extreme but say we better find a way to get along because we can't afford not to.
ROMANS: And I tell you when I first started covering the financial crisis, personal finance people would tell me, look, you got to not take any kind of risks in your marriage. And I said in your marriage? Exactly right. Because now is a real tough time to get divorced. The decision to end a marriage is personal, it's emotional and it's all too common and once you finally decide to untie the knot, what happens if you can't sell the house?
(BEGIN VIDEOTAPE)
ROMANS (voice-over): It's hard to do. Just ask Sallie Frederick. She is getting a divorce, but she and her husband of 15 years still live together and not because they want to.
SALLIE FREDERICK, DIVORCE IMPACTED BY ECONOMY: My husband lives in the guest room. And he comes home on Wednesday nights, early to have dinner with the kids. And the other nights, he comes home late to give me my space. So it's not perfect. It's been difficult.
Come on, Sammy.
ROMANS: While her husband didn't want to appear on camera, she describes the divorce as an already painful personal experience made more difficult by the recession.
FREDERICK: I really depend on my friends and family for emotional support and I can't talk on the phone. I don't have privacy. My computer is in the kitchen, so I don't write things on the computer that I don't want someone looking over my shoulder and seeing.
ROMANS: Celebrity divorce attorney Raoul Felder says the Fredericks made the right choice.
RAOUL FELDER, MATRIMONIAL ATTORNEY: As far as the house is concerned, it's very sticky. People have to decide how much they hate each other because if they can still live with each other and the house or apartment is big enough, they ought to stay together and wait for a rising market.
ROMANS: Add divorce to the list of casualties of the recession. The American Academy of Matrimonial Lawyers says 37 percent of attorneys polled reported fewer divorces in a bad economy.
GABRIELLE CLEMENS, DIVORCE FINANCIAL PLANNER: Now things have gotten so bad that because they can't sell their house is because their assets are down so much and because their debt is so high, they can't afford to get divorced. So now we've reached the actually next level of they can't afford to break up even if they wanted to.
ROMANS: As for Sallie Frederick, she says after legal bills for two divorce attorneys, the couple switched to a less expensive mediator. She hopes the divorce is complete next month. But the couple plans to remain under the same roof.
FREDERICK: Right now, there are 20 houses on the market in town that are in our price range and there are no buyers. So my broker has pretty much prepared me that the house is going to sit for quite a while.
(END VIDEOTAPE)
ROMANS: The divorce attorney Raoul Felder says the average divorce takes about eight months and might be best for a lot of people, he says to quote, "tread water for now." He says trading in a little bit of misery today could save you a lot of money down the road. Stay together, he says.
CHETRY: And for this couple I know, it's fascinating. But what is this couple's hope that they will be able to sell the house and separate or they'll somehow work it out.
ROMANS: They think the divorce is done in a month and the house isn't going anywhere.
CHETRY: Christine, unusual set of circumstances facing people because of this recession. Wow. Thanks -- John.
ROBERTS: Well, the Catholic Church going underground in its search for a few good men. Our Alina Cho will join us live to explain. It's coming up on 53 minutes now after the hour.
(COMMERCIAL BREAK)
ROBERTS: The Catholic Church launching a new campaign to inspire young men down in their luck to serve, and they are looking to find some new recruits, and they are looking in an unusual place. Deep underground. CNN's Alina Cho goes to great depths for this one.
(BEGIN VIDEOTAPE)
ALINA CHO, CNN CORRESPONDENT: The Franciscan friars need a few good men, and they are going to the front lines to find them.
The New York City subway. FATHER BRIAN SMAIL, VOCATIONAL DIRECTOR, HOLY NAME PROVINCE: Day shift, night shift. How about a life shift?
CHO: Great.
That's the catch phrase of this unusual ad campaign targeting men age 22 to 38. A new generation of friars badly needed. A thousand posters, 200 in Spanish, plastered all over the subway. You have to say, it's a little out of character.
SMAIL: It is, but these days, if you're looking for people, for the Franciscans or anywhere else, you have to be creative. You have to go where people are.
CHO: The timing couldn't be better. Anecdotally, the bad economy is driving more people to church. People suddenly having deeper thoughts. Father Brian Smail used to work at a bank. Do you feel like if we're going to get them, we're going to get them now?
SMAIL: Absolutely, or at least it's a very opportune moment. Because a lot of self reflection going on in our society. People have seen that there are limits to the system.
CHO: Since the ads debuted in late December, traffic to the friars Web site is up 40 percent and so far 40 men have called.
FATHER JOHN O'CONNOR, DIRECTOR, HOLY NAME PROVINCE: Some people call and say, what does it pay? What is the salary? And others basically, how do I sign up? Then we have to explain to them, now, it's a little bit more complicated than that.
CHO: For the record, six years of training and outside of food and shelter, the only pay comes from high above. That has not deterred 29-year-old George Camacho. He recently lost his job and saw the ad on the subway, and something about those smiling faces grabbed him.
GEORGE CAMACHO, POTENTIAL FRIAR: It's not the stereotypical priestly activities. They are not super quiet or super formal or incredibly serious. They are, like, so outgoing. They make jokes and they just enjoy their life.
CHO: A brotherhood with a vow to serve.
SMAIL: What should I be doing with my life? And service is the big draw for people now, especially young people. They want to give something back.
(END VIDEOTAPE)
CHO: Now if you look back on history, tough times have actually been good for Franciscan friars. After World War II, their numbers skyrocketed and men were coming home from war and they were re- evaluating their lives and they were actually signing up. Now the same seems to be happening today in smaller numbers. The recession has cost people to say maybe there is more to life than making money, maybe it's finally time to get back. And you know the response has really been overwhelming. Not just for men interested in becoming a friar but from the greater public. They are calling in apparently and saying good on you for doing this, what an interesting ad campaign. And you know what? What took you so long. There has been a lot of negative press with respect to the Catholic church and now something positive and all over the subways.
CHETRY: And you were also saying that a change in family size and dynamic is actually making it harder for them to recruit.
CHO: Yes, that's absolutely right. Twenty, 30, 40 years ago, Catholic families were much larger generally speaking, four, five, six children in some cases and most would get married but some would not. And parents would say listen it would be great if one could go to the convent and one could become a friar. Now the two children, they're saying we want grandchildren. We want our kids to get married. So it's really interesting how things have changed.
ROBERTS: Yes. It is interesting to look at how some people are adjusting their course in life because of the recession. Thanks, Alina.
CHO: You bet.
ROBERTS: And thanks for joining us on this AMERICAN MORNING. We'll see you back here bright and early again on Monday.
CHETRY: Keep watching because up next on CNN, Heidi Collins in the CNN NEWSROOM.
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