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Open House

Obama's Economic Plans and What They Mean For You; Tips on How to Keep Your or Finding One That Pays Well; Rethinking Retirement; Open Enrollment and How to Maximize the Benefits

Aired November 08, 2008 - 09:30   ET

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

GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is OPEN HOUSE, the show that saves you money. A little later in the program, open enrollment, job security and saving for retirement.
But we begin with the transition to power. No honeymoon period for president-elect Barack Obama as the ailing economy is still issue No. 1. So, what are his plans, and what will they mean to your bottom line?

Joining me now, CNNMoney.com senior writer, Jeanne Sahadi, personal financial expert, Lynnette Khalfani-Cox and Justin Fox, editor-at-large for "Time" magazine.

Welcome, all. Jeanne, I want to start with you. You know, the economy was definitely issue No. 1 for voters out there. Let's talk a little bit about what Obama says, what kind of quick fixes, the first things he might be doing to put into place to start off his administration.

JEANNE SAHADI, CNN MONEY.COM: Couple things, he called for a few weeks before the election. He wants to extend unemployment benefits, he wants to exempt jobless workers from having to pay income tax on those benefits. He's going to get a lot of support for that in a Democratic-led Congress. He also wants to create a job credit for small businesses and I guess large businesses, if they create jobs in the United States. So, he would give them $3,000 tax credit per hire. He wants to...

WILLIS: A long list, here, you have.

SAHADI: He's got a long list, yeah. And he's going to get a lot of support for some of those initiatives in the Democratic Congress. They have been trying to pass a second stimulus bill; the White House isn't onboard yet. President-elect Obama also wants to give money to states and localities for infrastructure spending.

WILLIS: All right. Well, Justin, we know what the wish list is. What are the things he actually needs to accomplish first?

JUSTIN FOX, EDITOR-AT-LARGE, TIME: Well, I mean, what he needs to do is make sure the economy doesn't keep spiraling downward for years and years, and that's what a lot of these things are aimed at.

But in broader terms, I mean, basically what he's going to be trying to do -- and I think during the campaign, especially early in the campaign he was talking about lots of these ideas that he's been thinking about and talking to people about for years, they've completely shifted gears for at least the first year of his term. It's just going to be about spending lots of money to try to keep the economy from getting worse.

WILLIS: Right. Lynnette, let me get to you with one of the specifics here that Jeanne was referencing, this tax credit to get business owners to hire people. Is that actually going to work?

LYNNETTE KHALFANI-COX, PERSONAL FINANCE EXPERT: I think that it will, but it's going to take some time to kick in. Everybody's word ever worried about unemployment being above six percent, right now, we've got nine million people out of work. And so the expectation is that in early '09 those numbers will start to tick upward. The tax credit may help to triage the situation a bit, and to encourage employers to, in fact, hire more workers.

WILLIS: Right. We're going to see some of those numbers ticking higher yet this year, I think.

Jeanne, let me get back to you on housing solutions. I know one of the things that Obama said is let's have a 90-day moratorium on these foreclosures. Tell me more about how he wants to solve the housing crisis. After all, this is where all the trouble started to begin with.

SAHADI: Well, he basically said he wants the financial institutions that are getting money from the financial rescue package to have a 90-day moratorium on foreclosures, give people a chance to rework their loans. Meanwhile, the government may, in fact, come up with a new mortgage plan even before he gets into office.

It was big news last week and then they sort of backed off from it because there's been disagreement from the White House and debate between Treasury and the FDIC. But, he is very interested in preventing foreclosures because that, more than anything probably, will help -- you know, in the economic front and...

WILLIS: Yeah.

And Linda (SIC), yeah, let me ask you about this because this is one of those things, you know, you hear the policy prescriptive, but you wonder as a practical matter it will really work. What do you make of that?

KHALFANI-COX: I think that something major has to be done. We're tracking foreclosure right now at a rate of 200,000 foreclosure filings per month, according to RealtyTrac's data. That's just an enormous amount of people out there losing their homes or very much at risk of losing their homes.

WILLIS: But does the 90-day moratorium, will that really be the one thing that brings that brings, that arrests this problem and stops it?

KHALFANI-COX: I think that it can stop the downward spiral that we've seen. I talked to a lot of consumers out there who say they feel like they're stuck in the system where they're in a tremendous backlog, and the months keep ticking away, week after week, month after month, they're not getting any relief. The other programs...

WILLIS: This would put the brakes on it.

KHALFANI-COX: Right. The other programs haven't helped as much, the FHA secure program to allow people to swap out of adjustable rate mortgages into fixed rate loans, the Hope for Homeowners program, none of those have made the widespread impact that federal regulators and, you know, government officials were hoping. And hopefully that moratorium will do something to stem the rising tide of foreclosures.

WILLIS: All right. Justin, I want to get to you. There's another issue out there on the topic of housing that Obama talks about, and that's the ability of bankruptcy judges to write down mortgage debt in bankruptcy proceedings. So, instead of your house being worth $300,000, it's worth $200,000 with a stroke of a pen. This has obviously been very controversial with people in the housing industry. Is that the one thing that could actually save this housing industry?

FOX: I mean, that is a really big thing, and it's been -- Democrats in Congress have been wanting to do it for the past year. The administration has threatened to veto it every step, and it's really the banking industry that hates the idea. I think everybody else in housing is, whatever, anything that works. I -- yeah, I -- I think that's worth trying because my concern with the foreclosure moratorium, with everything else, is most of the people who are being foreclosed upon are still going to be foreclosed upon.

All you -- all we're really talking about is trying to get people at the margins who conceivably, under slightly different circumstances, could keep making their payments. And I think by giving bankruptcy judges that power, which they have over all your other assets, just not your first home, that provides a path to at least sort of winnowing out, OK, here are the people who can keep making payments, let's find a way to do it.

WILLIS: You know, we haven't even gotten to taxes, yet. We'll of to get to that in the next block. All right, Jeanne, Lynnette, Justin, stick around. More in just a moment on the transition to power, including what proposals will likely be slashed from the budget, how it could affect you, next.

(COMMERCIAL BREAK)

WILLIS: Well, the election may be over, but issue No. 1 is still the economy and the transition to power is underway. Back with us once again, Jeanne Sahadi, Lynnette Khalfani-Cox and Justin Fox. Welcome all back again, this time, though, to think about taxes.

Jeanne, I want to start with you. You know, taxes were one of the most controversial issues in this campaign, lots of mudslinging, lots of proposals. Can Obama get done what he has set out, which is an ambitious policy? SAHADI: It's really unclear right now. People are saying it's going to be very hard for him to raise taxes on upper income earners at this point because the economy is so low. He wants to basically increase the top two tax rates and increase the capital gains tax on them. Ultimately people think he will do that, but maybe not in the first six months. It may not be in his honeymoon phase.

FOX: 2011.

SAHADI: Yeah, he's got to pick his fights early on and right now it's stimulus, stimulus, stimulus and then we'll see.

WILLIS: Just as Justin said earlier. Let's talk about health care. Obama says coverage for all. Is that going to happen? And is it going to happen any time soon?

I think it's pretty clear that's not going to be one of the things he comes out with his right now it's stimulus, stimulus, stimulus, then we'll see.

WILLIS: Just as Justin said earlier. Justin, let's talk about healthcare. Obama basically says coverage for all. Is that going to happen and is it going to happen any time soon?

FOX: It's not -- I think it's pretty clear that's not going to be one of the things he comes out with his first month in office. I mean, Rahm Emanuel, his apparent chief of staff, is known for pushing this idea of just increasing healthcare for children, and not dealing with the broader problem any time soon. And I just think that's -- it's going to be incremental on healthcare. I think he's going to be wanting to be moving towards this universal healthcare system, but the lesson of the Clinton years is wait a little bit on that.

WILLIS: Well, you know, it is sort of that, you know, gorilla in the room, right? The experience is the healthcare debate before.

Lynnette, tell me, what's the one thing out of his policies that will be eliminated? You say there's one thing that's just not going to go.

KHALFANI-COX: I think the tax cuts, obviously, he talked about folks who are making $250,000 or less, we heard so much about "Joe the plumber" and those kind of things. Frankly, something will have to be sacrificed and I wouldn't expect any tax cuts for folks who are at that level or below.

WILLIS: OK. Well, you know, obviously that's going to be one thing that will be debated and we'll be watching. But, I want to talk about some of the names that have been floated as advisers. Justin, I know you've looked at these names: Robert Rubin, Jamie Dimon, a major financial executive, Larry Summers, a Treasury secretary, as well, Paul Volcker, a former Treasury secretary. Tell me what you make of these names. Who are the most likely leaders to be coming out of this, you know, really laundry list of potential names to advise a president? FOX: My sense is that some of these names like Rubin and Volcker, they're going to be wise old men advising the administration. They're not...

WILLIS: But not employed?

FOX: I mean, Rubin, I think, has said repeatedly he doesn't want to be employed. I don't know about Volcker. And I guess the question is maybe we should be looking at people who are less in the public eye like Tim Geithner, the president of the New York fed who...

WILLIS: He's actually a big powerhouse.

FOX: Yeah, he's a big powerhouse.

WILLIS: Not well-known, but very important.

FOX: He worked at the Treasury Department under Rubin and Summers so he knows his way around there. I mean, it is -- there's a lot of -- it's a return of a lot of the faces from the Clinton years. We're definitely seeing that.

KHALFANI-COX: And my sense that he's already getting a lot of input and advise from some of these names, Summers, Rubin, et cetera. So it's not like these are, obviously, he said they're not new people on the scene, but not new to Obama either, he's already been taking their counsel.

WILLIS: Will it be the biggest and brightest minds, do you think, Jeanne? What do you think is shaping up for the advisers?

SAHADI: You know, people on the Republican side who voted for Obama they keep citing his team of economic and his brain trust, basically. They really like the guys who are surrounding him, giving his advice. Just like Tim Geithner, he was very instrumental in doing this troubled asset relief program.

And what they are looking for is some sense of continuity when secretary Paulson leaves, because we've got, you know, this huge financial crisis, this enormous package and a lot of debate over how it should be used. So, there is some thinking that there should be a sense of continuity in who's going to be running that.

WILLIS: Right, what about another economic sometitimulus stimulus? You know, that's been talked about a lot, the Democrats have talked about it. You know, when would it happen? How early would we see it?

KHALFANI-COX: I think a very high probability of a second economic stimulus package passing, I think there's going to be tremendous amount of support for that. I would expect it to happen very soon, much sooner rather than later.

FOX: Yeah, this month.

SAHADI: Except that President Bush is not going to sign it. He's going to wait for Obama to sign it.

(CROSSTALK)

KHALFANI-COX: Certainly (INAUDIBLE) after January 20, after inauguration.

FOX: Maybe something smaller this month and go for bigger stuff later.

WILLIS: Quickly, just to get a quick read on all of you guys, how likely is it that Obama's program could turn the economy around in his first tenure in office? Could it happen - Lynnette.

KHALFANI-COX: I think it could happen, but it's not going to be because of his economic programs and policies alone. There's a lot of factors at work here. I mean, we're looking at a housing downturn, we're looking at unemployment issues, we're looking at really a global recession, and so there's a lot of factors and some of which are, frankly, outside of his control. But, I do think there is an opportunity for things to start to turn around in the stock market, in the housing market in particular.

WILLIS: Right -- Justin.

FOX: Well, yeah, I think even the gloomiest forecasters who they talk about a horrible, horrible recession, they're talking about something that goes for a year or two and that leaves time for, you know, morning in America in 2012.

WILLIS: Jeanne, what do you make of his prospects for making things better?

SAHADI: I think that he couldn't make them worse. I mean, think that - and by that I mean the Treasury secretary and the Federal Reserve have done a lot to kind of, as much as they could, get ahead of this having fallen a bit behind before. And that's the sort of thing that -- with those things in place it may actually give him a boost up. He's coming into office and he -- he can't help, but look good if something goes well. I think. I really think...

WILLIS: Well, maybe (INAUDIBLE) on his side. Jeanne, Justin, Lynnette, thank you for that. Lots more important stuff to get to you today on your bottom line. We have some very important job advice you won't want to miss.

(COMMERCIAL BREAK)

WILLIS: The number of job cuts announced in October rose by the highest amount in nearly five years, that according to one study. So if you're worried about how to keep your job or just trying to find one that pays well you want to listen to our next guest.

Brad Karsh is the president and founder of Job Bound, a career consulting company and he joins us now from Pittsburgh.

Good to see you, Brad. BRAD KARSH, JOB BOUND: Hello. Good to see you, as well.

WILLIS: You know, we're so used to talking about like how do you find a job if you don't have one, but let's please start with people out there who are employed and are so afraid of losing their own job. What are the essential steps they should be taking to make sure they don't get laid off?

KARSH: This is a tough time for everybody, so especially people who are in industries that think they may be subject to layoffs, and let's be honest, that's a lot of industries, right now. There are a few things you can do.

One, I think you need to try and make yourself as indispensable as you can to the company. Make sure that you have a specific role, a specific task so then when it does come time for layoffs they think, hey, we can't get rid of Jim, he's the new business person. We can't get rid of Josh, he's the guy who's got the best relationships with our clients. You have to make sure that for something that's important to your company you are the person who handles that with the best ability in the organization.

WILLIS: All right. Brad, what if -- what if the worst happens, you do get laid off. What are the steps you take? One, two, three. What do you do?

KARSH: First thing I tell everybody, take a pause, take a deep breath, think. What do I want to do next? Our first natural reaction is to try to get a job back in exactly what we were doing in the past, same industry, same type of company, maybe in a different organization. But, what I advise people to do is think: Is this what I want to keep doing? If the answer to that is yes, I do, then there are a couple ways you can go about it.

One, be flexible. Maybe you're not going to be able to get a job at the same type of company. Maybe you won't be able to get a job in the same geography. Maybe you won't even be able to get a job at the same exact level. So, the more flexible you are, the better your options are when it comes to the job search.

WILLIS: All right. Let's talk about the resume. First impression you are going to give a potential lawyer. You say there's one big mistake almost everybody makes on a resume.

KARSH: Ninety-nine out of 100 people write a job description resume as opposed to a list of accomplishments. And by job description resume I mean, they describe not only what they did but what everyone has ever done in the history of that job description. So, if you're a salesperson, they might write on their resume: Sold products to customers.

Well yes, I know that everybody does that in sales. I want to know what you specifically did, your accomplishments, the scope of what you have done and the results of what you have generated. So, infuse your resume with specific numbers. WILLIS: Right, OK. Well, you know, there's the interview and, you know, lots of potential pitfalls. First off, if I've been laid off, do I tell the interviewer I have been laid off. Am I up front about that?

KARSH: I don't think you want to volunteer that information, you don't want to walk in and say, hey, by the way, I was laid off from my last job. But the fact of the matter is, they may know that and that may be something right now that's much more prevalent in the job search category than it was, let's say, 10 or 15 years ago.

So, if they ask, of course, you never want to lie, you want to tell them the truth. Our company went through a downsizing. I was let go as a result of a reorganization. And I think you want to just say to that and then move on, you don't want to dwell on the fact or get into a lot of the details. A job interview is about looking forward from your perspective. You can reference the past, but focus on what you can do in the future.

WILLIS: All right, Brad though, is there anything else I should not be saying in this interview?

KARSH: Well, I don't think you necessarily ever want to say anything bad about a previous employer or a previous manager that you worked for. And sometimes people go into interviews and they want to tell their whole story.

Well, I worked for this boss and he was horrible in this way and that made me act accordingly. Stay away from dirty laundry, stay away from baggage from previous organizations. Again, if interview and you are talking a lot about the bad things that happened at a previous company, my hunch is that you're just going to do that about my company five years from now when you leave my organization. Keep it positive.

WILLIS: Keep it positive. Well, you certainly did that. Brad, thanks for your help today. We appreciate it.

KARSH: Thank you.

WILLIS: Rethinking retirement. Times are tough and forcing some to remain in the workforce for longer than they had planned. But first, open enrollment season is upon us and it is time for tips to maximize the benefits coming your way.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Healthcare costs, including co-pays and out of pocket costs are projected to rise eight percent from last year. So, making the most of open enrollment is essential. Your benefits are part of your compensation and in these tough economic times, it's important that you get as much out of your plan as possible.

First off, get disability insurance. Your most important asset is your ability to earn an income. And disability insurance is especially vital if you work in a high-risk field. Take advantage of flexible spending plans, a tax-effective way to pay for the out-of- pocket transportation and health care costs.

Consider alternative coverage. More companies are requiring that employees pay bigger potion of the cost of coverage for their dependents. If your spouse can get coverage on their own, evaluate that option. And keep contributing to your 401(k). It may be had to watch your balances fall, but if you have a decade or two before retirement, you could benefit by staying invested.

(END VIDEOTAPE)

WILLIS: Well, the DOW is down more than 30 percent from the tides of last October and likely taking your 401(k) with it and that is forcing some to put off retirement a little longer than they've expected.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Three professors, three similar stories. A lifetime of savings chipped away by a falling stock market.

PROF. HARRY KEYISHIAN, FAIRLEIGH DICKSINSON UNIV: We're down one-third, I understand.

WILLIS (on camera): So when you see the stock market plummeting on any given day, how do you feel about that?

PROF. JUDITH WATERS, FAIRLEIGH DICKINSON UNIV: Very depressed, because I realize that there is a good chance that I won't be able to recoup.

PROF. RICHARD CHAMPLIN, FAIRLEIGH DICKINSON UNIV: To have this anxiety of up down, up down is upsetting.

WILLIS (voice-over): Twenty percent, 30 percent of their retirement saving, maybe more, sinking along with the DOW, that's five years in living costs by Judith Waters' estimate.

WATERS: I feel cheated. I feel there are people sitting on a lot of money and they didn't care about me and they didn't care about their own employees.

WILLIS: Judith's fund manager, the TIAA Kreft, says calls from anxious investors are up 200 percent over last year. Anger and fear on these calls are so common, they've set the egg timer to let them vent. Staying put might not be a bad strategy, they say, but then comes the key question, whether to put off retirement or not.

(on camera): According to the AARP, 70 percent of older workers say they will delay their retirement. The reason? Overwhelmingly, they say they need more money to support themselves and their families.

(voice-over): At 76, Harry Keyishian worries about providing for his children and grandchildren.

KEYISHIAN: Maybe we won't be able to help the tuitions the way we use to.

WILLIS: For Richard Chaplin, recovering from a stroke, it's the looming healthcare costs.

CHAPLIN: I'll be, basically stuck with Social Security. OK? I won't be able to provide for myself for nursing home, et cetera.

WATERS: People are losing their jobs.

The problem with retirement is it's not easily reversible.

CHAPLIN: The market for seniors is like crossing guard, cashier in a supermarket. I mean, I would not do that period.

WILLIS: So, for now, all three continued to work in the profession they love as long as they are able.

WATERS: And, you know, I'm never going to retire.

(LAUGHING)

(END VIDEOTAPE)

WILLIS: Well, weathering this turbulent market is tough whether you have years to retirement or decades. But, everybody should try to set their emotions aside. Don't panic. Keep your emotions and your financial decision separate. If you are five or more years from retirement, your savings have plenty of time to recover and grow.

Remember, saving for retirement is a long-term job, not a short- term one. And don't stop socking it away. It's impossible to call market bottoms. Missing a few of the markets best days can cripple your returns and the history of purchases of stock mutual funds proves it. There have been just three times in the past 20 years when more money flowed out of stock funds than into them. Two of those times came just before major bull markets and the other time, right now.

If you want to do something other than sit on your hands, there is one smart move to consider before the year ends. Consider the IRA into a Roth IRA. You'll minimize the tax impact, plus you may be able to write off some losses against income. Check with your tax professional for details. By investing consistently with a diversified portfolio, stocks and bonds, keep your head, you will be well-prepared when it comes time to retire.

OPEN HOUSE is all about your bottom line. Weill be back next week, right on CNN. You can also catch us on "Headline News" every Saturday and Sunday at 3:30 p.m. Eastern Time.

And don't forget to tune into "YOUR MONEY" with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN. Your top stories are up next, CNN "NEWSROOM" with T.J. Holmes and Betty Nguyen starts right now.