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American Morning
What to Expect in Obama's Economic Address to the Nation; Dow Opens at Its Lowest Level Since 1997; Fire in New York's Chinatown Kills 1 and Injures 20; North Korea Claims to be Preparing Missile Launch
Aired February 24, 2009 - 07:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN ROBERTS, CNN ANCHOR: Crossing the top of the hour now, and here are this morning's top stories.
Breaking news overseas, right now growing concerns over a long- range North Korean missile sight. Pyongyang insists that full-scale preparations are under way there to launch a satellite, but American officials are skeptical.
In 2006, North Korea fired a long range missile from that same site. That missile failed 40 seconds after takeoff, but if it works properly, it could possibly reach Alaska or even Hawaii.
And just in this morning, it's cheaper to fill up your car or truck. According to AAA, the national average for a gallon of regular is now $1.90. It's down a penny overnight. Today is the tenth straight drop.
And the White House hoping that President Obama's third choice for commerce secretary will be the charm. Officials say he's close to naming former Washington Governor Gary Locke to head the Commerce Department. Locke was the country's first Chinese-American governor. The president's last choice, Republican Senator Judd Gregg, stepped aside citing irreconcilable conflicts with some of the president's policies.
Well turning now to breaking news, the Dow will open this morning at its lowest level since 1997, and that's having a huge impact on stocks around the globe. CNN money team is tracking markets overseas and right now there is red ink from Asia to Europe.
Just under 14 hours, all eyes will be on Capitol Hill with President Obama giving his hugely anticipated speech to Congress and the nation, trying to give the economy a shot in the arm. But with expectations growing from Washington to Wall Street, millions are really feeling the pain on Main Street. And we're hearing about it directly from you, our iReporters.
(BEGIN VIDEO CLIP)
VICTORIA THA, CNN IREPORTER: I spend a lot of time worrying about my job. I mean, I just started my job probably about eight months ago and I was under the impression that, you know, my company was doing really well. All of a sudden we're hearing, you know, people that have been with the company for like 15, 20 years are getting laid off. And so, I think, you know, having some sort of confidence being restored would definitely help.
(END VIDEO CLIP)
ROBERTS: This morning, concerns like that launch our coverage. Christine Romans and the CNN money team are here and ready to go. Suzanne Malveaux has also dialed in to her sources at the White House today and some of the best economic minds around are live in our studio with us this morning.
We also want to hear from you as well. Go to Web site, CNN.com/am. Send us an e-mail or iReport. And for now, let's kick things off with Christine.
People are going to be looking to the president tonight to instill a little bit of confidence, a little more than we've received so far.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: You know, John, and that's exactly the word we've been talking about, confidence. There's just a real lack of confidence here. And I wish we could say I would like to buy $700 billion of confidence please, and put it in the economy but you can't do that. So that's why they're doing all these other things to try to figure out how to get the confidence back. It's just not there and that's what Wall Street is telling us. That's what the stock prices are telling us.
The Dow is down some 34 percent since that first bailout in October. Thing about a third of the value wiped away. The S&P since it hit its peak back in October, 2007 is down 52 percent. It's been cut in half. That tells you the extent of the problem, the extent of the crisis.
Sam Stovall of S&P calls it a mega meltdown when anything is down more than 40 percent over a period of time. This qualifies as a mega meltdown. Others have called it a slow motion crash over these past months. We're still in it and what we know, I think as Americans, we want to be able to say OK, I just bought this and now I've invested in this and now I have solved this problem, but that's not the way it is this time. We are playing defense and the recession, the housing crisis, the fragile banking system is definitely in charge.
ROBERTS: And you start to see the results in mainstream America as well. Just going up the streets of New York, you start to see businesses closing. You know, a lot of real estate offices are closing and there are other businesses that are beginning to close as well.
ROMANS: There's going to be some pain in the months ahead. I mean, Jeffrey Sachs was just saying this. There are other economists have said this. There will be pain in the months ahead.
The thing is as Americans we have to remember as well that we are a resilient economy. We have a government that is really clearly trying to tackle this in many different angles and fronts as it can. There's a public will to make some painful choices. There's spending -- have I said it again? We're spending an awful lot of money to try to get ahead of this.
The hope is, after a painful (ph) this year, I don't know how long it lasts, honestly. I don't know how long it lasts, but then there's something to turn it around after that.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: And Christine, you and I were talking before about the anxiety. A lot of people have the question being, you know, you've got this huge economic stimulus packages, the first $700 billion, the second $787 billion, where does the money come from?
ROMANS: Right.
MALVEAUX: That it's borrowed money, it's coming from the Chinese. I had a chance to talk to Peter Orszag, the director of OMB, to ask him, is this fiscally responsible on our part, on our government's part? You know, you saw the secretary of state, Hillary Clinton, visiting, talking to the Chinese. We are dependent on the goodwill of relationship with that country because we're essentially just increasing our long-term debt.
ROMANS: Right. We are -- make no mistake about it. This is something the Republicans have done a very good job of pointing out repeatedly. We are borrowing money to fix a problem that was caused by borrowing money that we couldn't afford to give back. I mean, we're creating, we're borrowing money to create a debt to fix a debt problem. It sounds a little crazy but that is essentially what we're doing.
KIRAN CHETRY, CNN ANCHOR: And as we mentioned in less than 14 hours from now, President Obama is going to be making his first address to Congress and of course to the American people and the pressure is on.
We have a brand new CNN/Opinion Research Corporation poll showing 62 percent of Americans asked say that the president's speech will likely make them feel more confident about the economy. On the flipside, 37 percent say it's not likely they're going to feel more confident about the economy after listening to the president.
So the question for Suzanne this morning, of course, a lot of expectations on the shoulders of the president and what he's going to say tonight. But, you know, what does he really need to say and how difficult is it going to be to strike that balance, realistic versus not being too gloomy?
MALVEAUX: Right, I talked to a lot of his advisers and they realized that this really is a balancing act here, because we have former President Bill Clinton said, look, you know, you need to add some sort of optimism, some sense of hope here. It's not all doom and gloom, and you have to give people confidence. So that is the one thing that's really lacking here is that when he goes for it, he talks to the American people, they believe him. They get it. They know he's trying.
But Wall Street, every single time he speaks, the Dow Jones goes down. They know that they've got a problem here. And so he is really going to be saying, look, there's going to be sacrifice here. I have some goals in mind. Fiscal responsibility, I'm going to try to cut the federal deficit in half by the end of my first administration, that there are specifics that he is going to work towards, but that is probably the biggest challenge.
ROMANS: I would argue that even if he didn't talk about the economy, it would still, you would still have trouble in the stock market. Honestly, because the Bush administration tried to sort of, I won't say cheerlead, but they didn't address as things started to turn south, granted we didn't know at that time or they didn't know at that time how serious it would get. But they kind of had hands off and we'll continue to say, you know, we have strong underpinnings. We're a resilient economy and it still kept going down, remember? So, I mean, I guess I would kind of argue -- maybe this is solace to the --
MALVEAUX: You think there's no hope?
ROMANS: No, no, I don't think there's no hope. I think that there's something that's happening here that's working itself out. There's a global de-levering happening, I mean, a very painful dislocation happening in the global economy and that no matter what the president says, it's working its way through right now, and that's just the way it is.
CHETRY: Right. So, you know, really, as much as he would like to, he can't speed it up and none of us can speed up I guess what kind of has to happen. So you just (ph) want a chance because there have been critics and Bobby Jindal is one Republican governor of Louisiana who is going to be one of I think three declining some of the stimulus money.
MALVEAUX: Right. The Republicans over there.
CHETRY: Seven billion dollars for the federal unemployment funds, right, allocated in the stimulus plan. So you had a chance to talk to him yesterday. What is he saying about all of this?
MALVEAUX: It was interesting because President Obama essentially, he's trying to capitalize off of the disagreements between Republicans themselves that we saw spill out over the weekend in the National Governors Association. California Governor Arnold Schwarzenegger very much in support of this. Jindal, as you mentioned, very much against it.
He hopes that by pitting these guys against each other in some ways he has some political cover. I spoke with Jindal and I said look, you know, the president says 99 percent of what you're talking about, you're in agreement here. So this is all political, and here's how he responded.
(BEGIN VIDEO CLIP)
GOV. BOBBY JINDAL (R), LOUISIANA: I continue to say as I've said before that certainly I think there could have been a very different stimulus bill written. There could have been a stimulus bill that was truly targeted and temporary, focused on infrastructure, focused on the kinds of tax credits that would have gotten investment moving in the private sector. So, it is not just limited to those provisions that we identified on Friday.
For example, $1 billion for the census. For example, $300 million to buy cars for the federal government. For example, $50 million for the National Endowment for the Arts and the list goes on and on. There are several, several spending -- there are several dollars included in the stimulus that it's not apparent to me why they necessarily had to be in the stimulus package, what they have to do with actually stimulating the economy.
(END VIDEO CLIP)
MALVEAUX: But the Obama administration, the president is banking on the fact that everyday Americans aren't particularly listening to what he's saying, Jindal is saying. And they believe, look, if there's money available we want to be able to use it. We want to, you know, help ourselves but at the same time we want government money to help us as well. So they don't think it's going to be really very much of a threat.
CHETRY: Right. And just an important to point out, Bobby Jindal is saying that he's rejecting this money because it would require permanent changes, right, in their state law that could adversely affect unemployment.
(CROSSTALK)
MALVEAUX: Right. And it would take power away from him, right.
CHETRY: Suzanne, thanks so much.
ROBERTS: Well, job cuts are skyrocketing. The stock market is plummeting. It's a disastrous combination, but the CNN money team is on top of issue number one, the economy, and our panel of experts here to break it all down. Your questions get real answers, just ahead.
And a nation that needs and expects answers tonight, what will the president say to ease an uncertain country? We'll ask White House Press Secretary Robert Gibbs.
It's 10 minutes now after the hour.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
VICTORIA THA, CNN IREPORTER: I spend a lot of time worrying about my job. I mean, I just started my job probably about eight months ago and I was under the impression that, you know, my company was doing really well. All of a sudden we're hearing, you know, people that have been with the company for like 15, 20 years are getting laid off. And so, I think, you know, having some sort of confidence being restored would definitely help.
(END VIDEO CLIP)
CHETRY: It's one of our iReporters, Victoria Tha, echoing words that many have been expressing over and over again. People are worried frankly about whether they're going to keep their jobs. They're worried about the economy and just worried about the future in general.
CNN money team covering things from all angles and our expert panel is here to sort it ought. We turn to leading economists. Lakshman Achuthan is with us as well as U.S. managing editor for the "Financial Times," Chrystia Freeland, and former Wall Street banker Bill Cohan. Thanks to all of you for being with us this morning.
Let me start with you, Chrystia, actually. We heard from that woman talking about the fear factor that's growing in the country, this crisis of confidence. And as we look to the president tonight speaking at 9:00 p.m., what does he need to say to reassure folks that it's really not the end of the world?
CHRYSTIA FREELAND, U.S. MANAGING EDITOR, "FINANCIAL TIMES": Well, I think it is actually hard for him to absolutely reassure people. And I think that what we heard from Barack Obama actually from the moment of the inauguration is a willingness to tell the truth and to strike quite a somber tone. And that's been a pretty sharp contrast with George Bush who, as Christine was saying, was much more of a cheerleader, much more inclined to say don't worry about it, everything's fine. We're Americans. We're going to be great.
I actually think that Obama in the medium term is doing something really smart and is winning the confidence of people in his leadership by being more realistic. So even though, you know, everyone from Bill Clinton to the punditocracy is starting to say to Obama, you have to be more cheerful.
CHETRY: Right.
FREELAND: You have to say things will be great. People know that things won't be great right away, and I think actually it's very wise of the president to not be offering false reassurance.
CHETRY: The question, though, William, I mean, as we saw yesterday, we have the Dow now at what? 7011, lows we haven't seen since 1997. And you know, some of the analysis is that people are just simply pulling up stakes and saying I got to get out now. And so, what can the president say about that, people who are wondering, wait a minute, my financial plan to just, you know, dollar cost average or throw some money in investments, I'm not doing that anymore because I can't trust the system?
WILLIAM COHAN, FMR. SR. MERGER & ACQUISITIONS BANKER: Well, is everybody speaking so far this morning, there's definitely one of these periodic crisis of confidence in this country. So what should he say? He's an extremely articulate speaker. He's an extremely invigoration in terms of when he talks to us, so here's an opportunity for him in addition to being quite honest about what's going on, maybe throw in a little we have nothing to fear but fear itself. But why not take a serious look at what's happened here because there's been a lot of myths created on Wall Street, especially by a lot of the CEOs who perpetrated this crisis. Why not appoint something like a 9/11 commission or a commission that occurred after the 1987 crash to say let's take a serious look at this. It's going to take some time to figure it out but until we get the real answers about what happened instead of the myths about what happened, which is what we've been get so far, we're never going to get beyond it and I think that's what we need to do.
CHETRY: And, Lakshman, let me ask you about that because can we learn from the past? We heard so often this is something we have not seen before.
LAKSHMAN ACHUTHAN, MEMBER, NYC ECONOMIC ADVISORY PANEL: Right.
CHETRY: These are unprecedented times and the other thing we're hearing a lot about is wait a minute, we keep saying this is a deeper recession, a longer recession and now people are talking depression.
ACHUTHAN: Right. Not a depression, to keep it in perspective here, but a very, very severe recession. The worst certainly that any of us have experienced probably our parents. Our grandparents, if you ask them, they'll say, you know, I remember it was worse because, you know, they're thinking back to the Great Depression.
But I'm struck by the conversation so far because yes, you know, it's very important it's kind of like when Obama is talking, it's like daddy's home. Hey, we're going to clean up this mess. I've got a plan here. It's not you're not going to like the plan but, you know, this is based on reality and the reality is we're in a severe recession.
Your lead-in was a young lady talking about how she's afraid about her job.
CHETRY: Right.
ACHUTHAN: That is what half of America is feeling and so no matter what you say during a speech, at the end of the day if you're afraid about your job, your confidence is going to be challenged.
CHETRY: Right. Chrystia?
FREELAND: The one thing I would say quickly responding to Lakshman and Bill, is in terms of the plan, the one part of the plan that I think they don't have right yet or even very clear is what they're doing with the banking system and that is the big reason they're getting hammered by Wall Street. It's the big reason we're seeing the sell-off and until they have a clear, viable policy on what they're going to do with the banking system, I don't think that they can claim we have a plan in place.
ACHUTHAN: Absolutely.
FREELAND: And we're just going to see it through. ACHUTHAN: Well, they completely -- they completely changed direction. In September, the plan was let Lehman fail, was teach them a lesson. Now, it's like oh, my gosh.
(CROSSTALK)
CHETRY: We shouldn't let Lehman fail, right?
ACHUTHAN: We're never going to do that again. And so every single large bank has the faith (ph) of the government behind it if that's what the market decides.
FREELAND: But they had in --
COHAN: Well, in fairness, I think it's important to give Tim Geithner the time to figure this out because there are not easy solutions. Right now, you think you're a little skeptical of that but the time has come to get on with it, I agree. But --
CHETRY: And so let me ask you, this Wednesday, quickly, because we do have to wrap this up, we will be joining you guys in a couple more minutes.
But, William, they're starting this -- they're doing stress tests for the bank. They're determining the health.
COHAN: Very important.
CHETRY: There's a lot of people that are holding their breath waiting for the outcome of that.
COHAN: Well, I think we know the outcome in many cases, OK? I mean, Wall Street is not monolithic. Some people have done very well here. Some people have done the right thing. But firms like Citigroup and Bank of America have done some silly things and, you know, need to take their medicine.
UNIDENTIFIED FEMALE: Right.
COHAN: All right. Well, we got to leave it there for now, but we'll join you guys in a couple of minutes.
William Cohan, Lakshman Achuthan and Chrystia Freeland, thanks to all of you -- John.
ROBERTS: An uneasy nation waiting for answers and reassurance, as President Obama puts the finishing touches on tonight's critical speech. Can he calm the markets and the masses? We'll ask White House Press Secretary Robert Gibbs. He's there live standing by.
Robert, we'll be with you in just a moment. Stay with us.
(COMMERCIAL BREAK)
ROBERTS: President Obama less than 14 hours away now from addressing a joint meeting of Congress and an uncertain nation. The speech comes as stocks hit a 12-year low. The administration considering unprecedented steps to save the economy as well.
Joining us now live from the Briefing Room at the White House is Press Secretary Robert Gibbs.
Robert, it's good to see you this morning. So we've got the Dow here...
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Thanks for having me.
ROBERTS: ... down at levels that we haven't seen since 1997. We've got banks, insurance companies, the auto industry all lining up for billions of dollars more in bailouts. You're frantically trying to stop the bleeding here, and so far it's not working. Why?
GIBBS: Well, look, John, we've been here about a month, and let's review what's happened so far. We have a recovery and reinvestment plan that's now the law of the land. And, as you'll hear the president talk about tonight, he's already working on getting tax cuts to the American people and creating jobs. The bill has already done that.
But you'll hear him talk tonight about financial stability, about a housing plan for responsible homeowners that have played by the rules. You'll hear him talk about re-regulating the financial industry so we don't find ourselves at this point again. And you'll hear the president end tonight with a strong, hopeful message that we've met many of the challenges that have always faced this country and come out on the other side for a brighter America. And I think that's what you'll hear tonight.
ROBERTS: Robert, he said much of that already, albeit not all at the same time as he will tonight, and still the markets do not have the confidence that they need to get going again. What more can he say to give them that confidence?
GIBBS: Well, look, we've got a lot of challenges, and we didn't get here overnight, John. And I think whether it's a Wall Street investor or a family at home watching this program, we're not going to get out of this overnight. I'm not -- you know, whether we've hit the bottom or not is hard to tell, but what this president is focused on is taking steps each and every day on the things that I just mentioned, to put people back to work and to get this economy moving, growing, and going again. That's what he's focused on. It's going to take awhile to do that, but he's focused each and every day.
ROBERTS: What about all of this talk in recent days about nationalizing or at least partially nationalizing some banks, not the system itself but at least some banks. Citigroup is among them. Is that going to happen?
GIBBS: Well, I don't want to get into what Citi might be talking about with financial regulators or financial authorities now. But I can tell you this, as I've said from this Briefing Room and from the podium behind me is that our banking systems should be privately held and regulated by the government. That's what we've always had, and that's what we'll always have in this country. ROBERTS: Right. But then, you know, but it comes to a point, though, where the government may have to put so much money into these banks that you do have to take a position as the majority shareholder in the bank. Do you see us coming to that point?
GIBBS: Well, again, without getting into the specifics, I think the president is anxious to get the credit system flowing again, so that banks are lending to families and small businesses. But we can do that with a privately held banking system. That's what this president believes.
ROBERTS: We've got a lot of people, Robert, asking us about the tax rebates here, the tax cuts, and exactly how much money it puts into their pocket. It's been done in lump sums before. It's not going to be in a lump sum now. It will be paycheck to paycheck. Adds up to about $65 a month for the average American family, and so many people are wondering, well, how much of a stimulus can that really be. And then there are other people who say well, if I get that money, I'll save it. So how much of a stimulus would that be?
GIBBS: Well, what we think and the reason that it was designed the way it was, to give people more in their paychecks each and every month is, what we found when Congress did this last time through a lump-sum payment, that people understood they weren't going to see that month after month.
They instead were getting a one-time check, and they tended to put that in a piggy bank or a savings account. What we believe that is if people begin to see a change in their paycheck each month, they'll begin to use that money, spend that money, and get this economy moving again. That's what I think that we'll see and people will start to see in their paychecks beginning April 1st.
ROBERTS: And you're also talking about cutting the deficit in half. Cutting it in half would be about $530 billion a year by the end of the first term. And $530 billion is still a staggering figure in terms of the deficit.
But one of the ways that you say you might get there is to raise taxes again on people who make more than $250,000 a year. Republicans are saying, whoa, you're talking about raising taxes again in the middle of the worst economy that we've seen since the 1930s. How can you do that?
GIBBS: Well, again, John, as you just said and I think it's important for viewers to understand, that's for people that make $250,000 a year or more. You may hear a lot from members of the Republican Party in Congress. Understand that none of them make $250,000 a year or more.
They're well-paid. They've got good jobs. They're not going to see their taxes go up because they don't qualify for that threshold.
ROBERTS: Right.
GIBBS: This is returning some fairness to our tax code. We're going to give tax cuts to working families. We're going to raise taxes on the very small percentage of people that have had it good for many, many years, and restore some fairness to our tax code and start helping working families again.
ROBERTS: Robert, one quick question before we go. Are you going to put this helicopter contract on hold?
GIBBS: The president, when he read the story in the paper about ten days ago, we were on the airplane. We talked about this. We were both surprised that the airplane that we were on, which is huge, cost as much as the helicopter we were on.
ROBERTS: Yes.
GIBBS: The president talked to the secretary of defense, and I think as he said yesterday to Senator McCain, we don't need any new helicopters at the White House.
ROBERTS: So does that mean you're going to put that contract on hold?
GIBBS: That's exactly what he talked to the secretary about.
ROBERTS: All right. Robert Gibbs this morning from the White House. Robert, it's good to talk to you. Thanks very much.
GIBBS: Thank you, sir.
ROBERTS: Looking forward to tonight.
Twenty-six minutes now after the hour.
CHETRY: Economy, dream crusher for students?
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: How do you tell your child you can't, you know, afford the college she wants to attend?
CHETRY: She's got the grades. She's got the drive. But now her Ivy League plan may die. Financial aid, our special college series continues.
You're watching the Most News in the Morning.
(COMMERCIAL BREAK)
ANNOUNCER: This is CNN Breaking News.
CHETRY: We're coming up at 29 minutes past the hour, and we're following breaking news this morning.
A tragic story out of Chinatown in Lower Manhattan this morning. Fire officials say at least one person is dead and another injured after a four-alarm blaze in New York's Chinatown. A six-story apartment building went up in flames around 4:00 in the morning. For awhile, we've been showing these pictures and they were saying the fire was not under control yet, but within the past couple of minutes we got word that they have now controlled the fire. One hundred sixty-eight firefighters were at the scene trying to knock down those flames. Investigators are saying they still do not know what caused that fire. One firefighter did suffer minor injuries and again one person killed and about 20 others injured in that apartment building fire in Chinatown this morning.
Also developing right now, a new warning that kids with -- the parents with kids in college need to hear this.
Universities in Arizona warning students to stay out of Mexico for spring break. This is a rite of passage. A lot of kids especially from Arizona University go down across the border for spring break. There have been drug-related murders, though, that have reached record levels south of the border. Shootouts in broad daylight, not out of the ordinary now, in places like Tijuana. Even government officials say they're not safe.
And Rupert Murdoch, owner of the "New York Post" and News Corp., is personally apologizing to readers for a cartoon parodying last week's chimpanzee attack. In a statement, Murdoch says he understands the hurt the cartoon has caused, and Murdoch says the only intent was to "mock a badly written piece of legislation." The NAACP has called for News Corp. to fire the "Post's" editor in chief as well as the cartoonist -- John.
ROBERTS: A story developing right now. In uncertain times when stock are collapsing to a 12-year low, President Obama is putting the finishing touches on the critical speech to the nation that he'll deliver tonight. People are getting impatient and uneasy as the bills pile up. And they want answers. We want to see what's on your mind, right now, like what you're going to do with your stimulus dollars.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You're talking about a $65 break.
UNIDENTIFIED FEMALE: Right.
UNIDENTIFIED MALE: How would that help you?
UNIDENTIFIED FEMALE: Oh, I'd put it away. I think everybody, you know, they want to you put it back in the economy, and I understand that but I think everybody wants to pack a little bit more money away in their savings. And I would probably do that for a good full year and just $65 a month adds up.
(END VIDEO CLIP)
ROBERTS: Some of the best money minds in the nation are here all morning long, trying to make sense of the meltdown for you. Managing director of the Economic Cycle Research Institute Lakshman Achuthan is with us, U.S. managing editor of the "Financial Times," Chrystia Freeland also here and "Daily Beast" contributor William Cohan who is the author of the upcoming book "House of Cards: a tale of hubris and wretched excesses on Wall Street." We're looking forward to read that book as well, it should be a very interesting tone.
So you know, people are, you know, pulling in their belts even President Obama looks like he's pulling in the belt, putting this helicopter contract on hold. Robert Gibbs making a little bit of news a little while ago, a sign everybody has to pitch in and do their part here, I guess, Lakshman?
ACHUTHAN: Absolutely, I mean, look this is what a recession is. The president, Washington, the Congress are trying to deal with the fact that we're into the second year of what looks to be the most severe recession since World War II. Now you can legislate, you can make laws, you can pass bills, you can try to slow the pace of the decline but you cannot change the course of the business cycle.
So we'll do things like we'll do tax breaks and we'll do spending plans, and this will make it better than it otherwise would have been, but it will not change the fact that the recession now has to run its course.
ROBERTS: Yes. So looking ahead to what he's going to say tonight it's interesting, Chrystia, to note that in recent polls, the majority of Americans given the high points on his, you know, handling of the administration thus far. They also give this plan high points but nothing in it seems to have worked just yet.
FREELAND: Well, if you mean it doesn't seem to have worked because the Dow actually has been sinking like a rock, I think the key thing that's missing not in terms of the rhetoric but in terms of an actual plan is really a clear plan on dealing with the banking system. And Bill was saying earlier that we have to give Geithner some time and this is complicated. And that's absolutely right but the problems for this administration is the markets are not giving them time.
ROBERTS: And you heard Robert Gibbs there, who was saying, listen, we're not going to talk about what plan we have for the bank but it would seem to be an indication that they're thinking about, at least taking some sort of majority shareholder stake in places like Citigroup.
COHAN: Well they have a huge investment so it would actually help Citigroup ironically if they converted their preferred stock into common stock to help Citigroup's equity numbers, and they're probably going to have to do the same thing at B of A.
But I think ultimately this is healthy. There is so much excess in the system that de-leveraging and shaking all this out is ultimately going to be better for our economy. It's very painful. You can't fight the economic cycle and people don't like it when we're in the middle of it and it's very painful.
ACHUTHAN: Yes, and one other point to the extent that the stock market is an instant flash poll every day, as to what are we thinking, what's going on. We have to remember, the stock market is a short leading indicator of the business cycle. So Clearly it's telling us we don't have an upturn yet. There are longer leading indicators of the business cycle that are still falling so that means the stock market is extremely challenged no matter what happens here.
ROBERTS: Although here's an interesting contraindication that I found. American Express did a poll of small business owners, that talked to them back in October, a reason to talk to them again. Back in October, 18 percent of small business owners according to this poll, and it was an online poll but they claim it was accurate said that they were worried about their business folding. Now that number is down to 13 percent.
Is that an indication that the business climate may actually be getting better or people used to bad times?
FREELAND: Let's hope it's an indication that business climate is actually getting better. I think the thing that I would say on Lakshman's point about the business cycle is, I think we can't be overly confident that nature will simply take its course, because we have seen in other countries, in Japan is the real horror story that we worry about now. That nature can take its course over a very long time.
ROBERTS: Right.
FREELAND: And I think no one wants to look at a lost decade that lasts that long.
ACHUTHAN: Agreed. They must be doing something and that's why they're acting. I'm not suggesting they shouldn't but they ultimately, if you're really, really good, you can tame the business cycle. You cannot control it. And to your point on this poll, by the way, I mean, if the credit card company says hey, how's your business doing. If you say it's not going well they're going to pull your credit. You got to be a little careful.
ROBERTS: It's a loaded question. But we also talk about this idea, Bill, of credit. And it's been frozen and when is it going to loosen up? I was talking to a person in New Orleans over the weekend who bottles energy drinks. And he'd been wanting to do some expansion. You know, plenty of banks out there who said, yes, we got some money but never got any letters of commitment over the course of about three or four months. Last week they got a couple of letters of commitment. Are things starting to loosen up?
COHAN: I think that's a very important point. I think since the beginning of January, things are beginning to loosen up. It's not as terrible as it was back in November and December. There's the credit markets are loosening up, banks lending to one another, banks are lending to corporations. How about that?
A huge Roche pharmaceutical deal just occurred. I mean there's definitely lending going on, and I'm not saying it's anywhere close to normal but it's not nearly as severe as it was and I think maybe that's part of the confidence that is starting to seep back in a little bit.
ROBERTS: But a small sign of optimism out there in a sea of woe.
COHAN: Small.
ROBERTS: Thanks very much, folks. Good to talk to you this morning. Kiran.
CHETRY: All right. Speaking of polls, a new CNN opinion research poll out minutes ago. It's giving us an idea of what's on the line tonight for President Obama as well as the nation. 62 percent of you say that the president's speech is likely to make you feel more confident about the economy. Those are big numbers to live up to and even bigger challenges to face the morning after.
And tune in to CNN tonight 9:00 Eastern, President Obama will make his first address to the nation on the state of the economy, and you can see it live right here on CNN and cnn.com.
There's uproar over O.J., the drink, not the man. Tropicana paid $35 million to change their carton. So why, after all that, did they decide to throw the whole thing down the drain?
(BEGIN VIDEOTAPE)
ROBERTS (voice-over): Is Mexico's drug headed here? New fears, new turf, America.
UNIDENTIFIED MALE: It's spilling over the borders. It's very much a consequence of our failed prohibitionist policies.
ROBERTS: The dangerous drug war, too close to home. You're watching the most news in the morning.
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CHETRY: Welcome back to the Most News in the Morning. Mexican druglords aren't just bringing narcotics into the U.S.. Police say that violent cartel clashes are actually spilling into the U.S. as well and the problem's only getting worse, and that's heating up debate over the so-called war on drugs inside the beltway.
Our Jim Acosta is tracking this developing story for us from Washington. Good morning, Jim.
JIM ACOSTA, CNN CORRESPONDENT: Good morning, Kiran. With so much attention focused on the economy these days, the war on drugs was barely mentioned during the campaign, and now President Obama has some difficult decisions to make. Just as a dramatic surge of violence is flaring up south of the border.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: (SPEAKING FOREIGN LANGUAGE)
ACOSTA: After more than 6,000 people died in drug-related violence south of the border last year, there are fears that Mexico's narco war is headed north.
VINCE VASQUEZ, BORDER SECURITY ANALYST: Part of the drug related violence and cartel violence in Phoenix so this is something that I think you'll begin to see more and more reaching the interior of the United States.
ACOSTA: Just before he took office, President Obama pledged to support Mexico's crackdown but critics of the U.S. war on drugs argue it's time for a change in policy, aimed at reducing demand.
ETHAN NADELMANN, DRUG POLICY INSTITUTE: The border violence in Mexico has not been this bad since the Mexican revolutions of 100 years ago. It's spilling over to the borders. It's very much a consequence of our failed prohibitionist policies.
ACOSTA: Three former Latin American presidents recently wrote in "The Wall Street Journal," the war on drugs has failed and it's high time to replace an ineffective strategy with more human and efficient drug policies.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Let's do what's smart.
ACOSTA: During the campaign, Mr. Obama promised a new approach.
OBAMA: I think its time we took a hard look at the wisdom of locking up first time nonviolent drug users for decades.
ACOSTA: The White House says it wants to focus more on prevention and treatment and less on prison time. The administration is considering Seattle police chief Gil Kerlikowske, a prevention advocate, for the nation's next drug czar.
The question is whether that means change for federal drug enforcement agents battling traffickers. The clash captured in the DEA's own reality TV show. And there are foreign policy implications. The Bush administration had promised $1 billion in aid to Mexico's army, an echo of U.S. support for Colombia's drug war. Opponents of the drug war ask, who is winning?
REP. RON PAUL (R), TEXAS: I don't like pot, but I hate the drug wars, so I would repeal all the prohibition, but I wouldn't even bother taxing them.
(END VIDEOTAPE)
ACOSTA: Changing drug policy, says one expert is sort of like changing directions in an aircraft carrier. Slow is the key. For now the administration is not talking about legalizing or decriminalizing drugs, something that would require the consent of Congress, Kiran, they just can't do that on their own.
CHETRY: Right. It's also interesting that we've been reporting this morning, schools in Arizona, three big universities there were a lot of the kids enjoy spring break going down to Mexico, they are warning them that it's not safe and so they may want to re-think those travel plans.
ACOSTA: Right. I think that's something that could be spreading to other universities across the country. As you mentioned earlier in the show, it is a rite of passage for college students to head down south of the border for their spring breaks but the State Department.
We should note, just over the weekend, issued an updated travel warning for Mexico, telling Americans that you enter these border areas at your own risk, not only are there these shootouts on the streets of many of these border towns, when these clashes occur with police and soldiers in Mexico, a lot of times Americans cannot leave the area on their own. They have to wait until the violence goes down, and so this is one of those situations where the State Department is saying you are going into these areas at your own risk.
CHETRY: Right. And it's important, and we're not talking about Cancun. We're talking about areas --
ACOSTA: Right. Nueva Loredo, Tijuana, exactly, these areas across the border, but you know if you're a college student, you know, at a university that's right across the border in the United States, a lot of times you can't afford to go down to Cancun. So spring break means going across the border and having some fun in those border towns and what the United States government is now saying, the State Department is saying that is not as safe as it used to be.
CHETRY: Right or driving 22 hours straight in an old Volkswagen but that's a different story.
ACOSTA: That's right.
Kidnappings are a big problem in those interior sections of Mexico and I know this is more on television but they have 100 Mexican police chiefs beheaded last year in this country, which is why one of the experts we talked to yesterday mentioned there is a psychological aspect that's developing with the war on drugs in Mexico, and it's something that is starting to look like real war that we see in other parts of the world.
CHETRY: Very scary stuff. Jim Acosta for us this morning in Washington. Thank you, John.
ACOSTA: You bet.
ROBERTS: We are monitoring breaking news this morning. North Korea says it's preparing for a missile launch, but what exactly is on the launch pad? We're tapping into the global resources of CNN for answers to that question.
The president makes his case for economic recovery in prime time tonight. We are focused on your money and what the president's economic fix means for you. Our panel of economic experts is here to answer your questions.
And a $35 million makeover that just went down the drain. What made Tropicana drinkers so furious that they took matters into their own hands. We'll tell you. It's 45 minutes after the hour.
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UNIDENTIFIED FEMALE: How has the economic situation affected you?
UNIDENTIFIED FEMALE: Actually, graduating with my MBA in three months, and I don't have a job yet so it's kind of scary.
(END VIDEO CLIP)
ROBERTS: The exploding cost of a college education was a problem long before the economy tanked but now many people, many hard-working parents are forced to tell their kids that they can't afford any school in their top five.
Our Jason Carroll joins us now with part two of our special look at education and financial aid. A lot of people having tough times.
JASON CARROLL, CNN CORRESPONDENT: Very tough time. I remember when I was in school, the big deal was reputation of the school, reputation, reputation. Now it's also tuition being factored in. One national poll showed 88 percent of families have reduced discretionary spending to try and save more toward their child's education. But the reality is, for many families, that simply will not be enough.
(BEGIN VIDEOTAPE)
CARROLL (voice-over): As Mia Sarah Abedullah sits in class, she focuses not just on the lesson of the day, she also daydreams about her future.
MIA SARAH ABEDULLAH, STUDENT: I have a lot of goals and they're all pretty intense but I'm set on making them happen.
CARROLL: One goal that this high school junior, get into a prestigious university, maybe even an Ivy League school. Mia says she has the grades, the drive, but what her family no longer has is the money.
ABEDULLAH: I'm looking into "C" schools as opposed to like big name universities that I was previously really obsessed with.
CARROLL: Mia's father passed away eight years ago and just this last year her mother was laid off after working 22 years in the financial industry. She was torn on how to break the news to her daughter.
ANNA ABEDULLAH, MOTHER: I couldn't tell. How do you tell your child, you can't, you know, afford the college she wants to attend?
CARROLL: Do you remember sort of what the feeling was, I mean you're not going to have the exact words but when your mom came to you and said you know we're going to have to reevaluate this?
ABEDULLAH: It was dream-crushing kind of. She didn't want to disappoint me, but you know, there's no way to not.
CARROLL: A national survey showed just over half the families polled are now considering limiting their child's college choices to less expensive schools like public colleges. The economic downturn means fewer families can count on equity in their homes as a way to offset tuition like they did a few years ago. The other problem, many parents are unsure about their future on the job or like Anna Abedullah, are out of a job.
ANNA ABEDULLAH: It's aggravating. I mean, 22 years of working and you figure you're going to, OK, continue working and then I don't know where to take it from there.
CARROLL: Mia does. She applied to a few New York state schools where tuition would be as little as a quarter of what it would cost at Columbia University, but she still hopes with a job and some financial aid, her Ivy League dream can come true.
ABEDULLAH: I believe that if you like think -- if you dream about it enough, you'll get it. So I hope so. Fingers crossed.
(END VIDEOTAPE)
CARROLL: Yes. Well our fingers are crossed for her as well. Another point about Mia Sarah. She was diagnosed with leukemia some time ago and fought her way through that and she and her mother say if she can fight her way through that, they can find a way to beat this financial situation.
ROBERTS: You mentioned in the report that she has very good grades.
CARROLL: Yes.
ROBERTS: Could she qualify for scholarship there?
CARROLL: Well, quite possibly but you know what the problem is, John? There are so many people now in her boat with lots of kids out there, lots of students with great grades. They got the test scores. They got the extracurricular activities, so the competition now for scholarships is even more so than it was even just a few years ago.
ROBERTS: What about -- we heard some Ivy League colleges were making college much more affordable for people under a certain income bracket?
CARROLL: That is true. There are many Ivy League schools out there --
ROBERTS: Do they still do that in this economy?
CARROLL: Yes, they can.
ROBERTS: The endowments are losing so much money.
CARROLL: Their endowments are losing so much money but even so they realize they got to do something. So what some of them are doing are they were limiting tuition increases but even with that, for some parents, it's still out of reach.
ROBERTS: Oh, yes. It's out of reach for a lot of parents.
CARROLL: Yes.
ROBERTS: Thanks very much, Jason Carroll this morning. Tomorrow whether college is even worth the price tag, many students could be paying off loans for years, even decades to come. And in a tight job market, can you find the job to do that. You can also follow all these stories online. Head to our Web site at cnn.com/am -- Kiran.
CHETRY: Well, major marketing trouble for Tropicana. The company spent $35 million on an ad campaign, they changed the whole look of the carton and then had to dump it. We'll tell you why.
Also , who is behind at least a dozen laser incidents that can blind pilots who are trying to land? One investigators are finding out this morning. It's 52 minutes after the hour.
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CHETRY: Welcome back to the Most News in the Morning.
You probably noticed on your last trip to the grocery store, maybe you didn't, I did though I got to tell you. Tropicana dropped its well-known carton that we've shown for years, the one showing an orange with a straw in it and instead opting for a more understated look. It was just a simple glass of O.J. but apparently many consumers hated it and Tropicana is feeling the squeeze.
Lola Ogunnaike has more this morning. You have to scratch your head with all the things to worry about in the world, but I thought it was a different drink. I didn't even know it was still Tropicana orange juice.
LOLA OGUNNAIKE, CNN ENTERTAINMENT CORRESPONDENT: A lot of people thought it was a different brand. They launched this in January and they really thought it was going to take off. You know what the old one used to look like, the orange with a straw in it, and it's an iconic image, and it's been around for decades.
They launched this new one, and they spent $35 million dollars on the ad campaign alone, Kiran. And it bombed royally with customers. Not only did they not like it, they voiced their opinions on the Internet. We went online to find some of the more angry comments and people were not shy at all.
One fan of the old look, she wrote, "I would never buy the new packaging. It looks like a generic 100 percent O.J. brand. Where is the orange and the straw? I love that image." Another had this to say. "True story when I first saw the packaging in the store, I thought I was on "Candid Camera." It's horrible."
And yet another person says I've been a huge fan of Tropicana for years. I'm even a "fan" of it on Facebook," which is kind of weird. "The new packaging is terrible!"
CHETRY: And the interesting thing is I thought the same thing. I thought it was just a generic brand and switched it up on me. It's funny, you realized how subliminal advertising is. Because something didn't seem right to me. I couldn't find where does it say pulp free? Where does it say (INAUDIBLE).
OGUNNAIKE: I spoke with a marketing expert about why they would even bother to make a change like this. And here's some of what she had to say.
CHETRY: OK. Let's hear it.
(BEGIN VIDEOTAPE)
OGUNNAIKE: What is it about this that has caused such a furor? What is wrong with the new packaging?
LINDA KAPLAN THALER, THE KAPLAN THALER GROUP: They had a perfectly wonderful package. The straw was coming out of the orange. What says purity more as the straw going straight into the orange? And then they put this glass of what looks like kind of diluted orange something. And it just doesn't look as healthy. It doesn't look as pure.
The other thing is, if you want to find out if there is pulp or calcium, you got to like read fine print. It used to be you walk by and it went no pulp! Some pulp! Calcium with pulp! Now, it's like (WHISPERING) some calcium, some pulp. That's what people want to know. They don't want to know it's 100 percent juice. What else could it be?
OGUNNAIKE: But do you think it's interesting especially right about now that consumers are worried about something that appears to be on the surface so frivolous. Then who cares about the packaging?
THALER: Here is the point. People feel powerless. They feel like they can't control anything. They can't control the state of the economy. They can't control the housing crisis but they can control what's on the package of their orange juice. So they can go in, they can write in. They can blog and you know what, it gets changed' and people feel empowered.
(END VIDEOTAPE)
OGUNNAIKE: So empowered, Kiran that Tropicana released a statement yesterday. They said we heard our consumers and we listened. We appreciate their love and passion for Tropicana, and when they told us they miss the look of the Tropicana, we responded, and we're bringing back the original. The original comes back on Monday, Kiran. so --
CHETRY: One thing I did like about the new one is that instead of just a plain old orange cap, it's a little mini orange that you used to close it back up.
OGUNNAIKE: Guess what, Kiran, you are not alone. They are keeping that because consumers did like that. But everything else going back to the original.
CHETRY: Hey you know what? $35 million down the drain except they got a lot of free advertising about this, right?
OGUNNAIKE: Sure. Is this a giant publicity stunt? I don't think so. But obviously, we're talking about it and I'm about to drink some Tropicana.
CHETRY: Cheers.
OGUNNAIKE: How about you? Cheers.
CHETRY: Thanks, Lola. Fifty-eight minutes after the hour.
(BEGIN VIDEOTAPE)
CHETRY (voice-over): America running on uncertainty.
UNIDENTIFIED FEMALE: I feel a lot of time I'm worrying about my job.
CHETRY: Before the president's speech on the economy, get a bottom line from a panel of the best economic minds out there.
Plus, pointing lasers at pilots. Twelve planes in 20 minutes.
UNIDENTIFIED MALE: Suddenly, they're dealing with blindness or an incredible distraction.
CHETRY: Who is trying to take down these planes? You're watching the Most News in the Morning.
(END VIDEOTAPE)
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