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CNN IN THE MONEY
Consumer Price Index Very High; Rush To Meet Bankruptcy Deadline; Democratic Party Is Two-Fold On Many Issues; Focus On Apple Stock; Couples Consider Honesty About Finances Very Important; Genetic Information May Be Used By Companies;
Aired October 15, 2005 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SUSAN LISOVICZ, CNN ANCHOR: Changing bankruptcy laws touched off a Chapter 7 stampede.
And way out of work. We'll tell you what author Barbara Ehrenreich learned when she posed as a middle aged, middle class job seeker.
All that and more, after a quick check of the headlines.
FREDRICKA WHITFIELD, CNN ANCHOR: Hello again. I'm Fredricka Whitfield.
Iraqis have made their voices heard on a referendum for draft constitution and now their votes are being tallied. Officials predicted a more impressive turnout than the 60 percent back in the January's transitional government elections. A U.N. election official say there was steady turnout across the country despite some sporadic violence.
The deadly bird flu strain has officially made its way to Europe. The European Union confirmed its existence in ducks in Romania. The strain doesn't easily infect humans in its current form. But officials fear it could mutate and possibly lead to a global pandemic. The bird flu is blamed for 60 deaths since 2003.
Thousands are gathering at the National Mall in Washington for the Millions More Movement. It marks the tenth anniversary of the Million Man March, only this time, men and women of all races are invited to attend. The Reverend Jesse Jackson is among those taking part in the day long event, which encourages helping others, it also pay tribute to Gulf Coast hurricane victims.
I'm Fredricka Whitfield at the CNN Center in Atlanta. More news at the bottom of the hour. IN THE MONEY begins right now.
LISOVICZ: Welcome to IN THE MONEY. I'm Susan Lisovicz, sitting in for Jack Cafferty. Coming up on today's program, the sound of silence. As the Republicans get slammed, the Democrats are shutting up. See if that's a sign of a party on the skids and if campaign finance is a factor.
Plus resume massage, anyone? Author Barbara Ehrenreich takes us inside the weird world of the white-collar job seeker. And getting some on the side. Your partner may be leading a life you don't even suspect. We'll look at the dirty little secret called financial infidelity.
Joining me, a couple of IN THE MONEY veterans, "Fortune" magazine Editor-at-large Andy Serwer and "Lou Dobbs Tonight" correspondent Christine Romans.
Well, gang, if you've put gas in your car over the last 30 days or, so you already knew this, but the government just gave us confirmation on Friday, CPI, consumer price index, highest in 25 years?
CHRISTINE ROMANS, CNN ANCHOR: What I think is interesting is that when you strip out food and energy, CPI wasn't as bad as Wall Street had thought. And what I say is, can you strip out food and energy in your budget? I don't think you can strip food and energy from your budget.
LISOVICZ: That core rate.
ROMANS: There are a lot of reasons why some people are trying to downplay these higher prices. You look at tuition. You look rent.
LISOVICZ: Health care.
ROMANS: Housing prices even though some places they are tapering off a little bit. You are still paying a lot more for a lot of different things.
ANDY SERWER, "FORTUNE" MAGAZINE, EDITOR AT LARGE: I love the fact that economists don't eat or drive. That always cracks me up. It's interesting, I think. There is inflation and, you know, if the Federal Reserve is concerned about inflation, why shouldn't we be?
I think the hurricanes are inflationary. You talk about energy prices, but also lumber, steel, plastics, drywall prices are going up and that is going to impact the economy. And when the trucks taking the stuff all the way across the country are paying higher prices for diesel, it's going to come back into our wallets.
LISOVICZ: They are passing it along to us. And I think that if there was any sense that the Federal Reserve was going to stop raising rates maybe by the end of this calendar year, forget it, and that's one of the reasons why you've seen the markets so spooked recently.
Well of course those higher energy prices affect politics as well. And the president and his party feeling a lot of heat. You'd think that the Democrats might respond. You remember the Democrats, right? They're that party that ran against the Republicans in the last presidential race? Well, now the GOP is taking hits on everything from Tom DeLay's indictment to Harriet Miers and the handling of the war in Iraq. And just when you'd expect the Democrats to jump in and bag the wounded elephant, they're -- where, exactly?
CNN political analyst Ron Brownstein is going to help us figure out what's going on and whether campaign finance is part of the picture. Ron is also a political columnist for the "L.A. Times." And it is always good to see you, Ron.
RON BROWNSTEIN, CNN POLITICAL ANALYST: Good to be here.
LISOVICZ: So maybe the Democrats just figure that maybe they should just stay on the sidelines and enjoy the show. Is that what they're doing?
BROWNSTEIN: Well there's actually a big debate in the party now. Yes, I think the dominant view in the Democratic Party is two-fold. One, the job of the opposition party is to oppose and that you define yourself to the public mostly by what you oppose of the president, and so there's more emphasis on resisting his initiatives than putting forward their own.
Second, the second sort of dominant view is yes, when your opponent is having a rough time, stay out of the spotlight and let him debate with himself, especially with the Harriet Miers nomination that has split the Republican Party like very few things President Bush has done.
The other point of view in the party says all that is well and good, but if you look at the polling right now, the Republicans are sinking and we're not gaining. Assessments of Democrats in Congress are no better right now in most polls than Republicans in Congress, and that's not saying much because the Republicans are really hitting bottom.
SERWER: Ron, I know we're all looking at the 2006 elections. I want to look beyond that and talk about 2008. I see this huge disparity. I see Frist, I see Jeb Bush, I see McCain, I see Rudy Guiliani on the one side and I see Hillary Clinton who is perhaps, not perhaps, is a controversial candidate on the other side. I mean, isn't this just going to be game over if down the road then?
BROWNSTEIN: Well you know Hillary Clinton seems to me in almost as strong a position if she runs in 2008 as George W. Bush was in 2000. She would have enormous support from the institutions of the party. And also, Andy, she has the ability, as we saw in 2004, we saw the first candidates go outside the campaign finance system and raise unlimited sums. Well what's unlimited squared? She would be able to raise a lot of money.
There are other people out there looking at the nomination. You have people exploring more centrist candidates, Evan Bayh, the senator from Indiana; Mark Warner, the outgoing governor of Virginia; Russ Feingold of Wisconsin -- the senator could run an almost populous campaign from the left, he's already gone to her left on Iraq. And there are several other candidates that are sort of exploring it.
But certainly it would be like the Republicans in 2000 situation, in which she would be the presumptive nominee if she runs and someone would have to figure out a very good way to beat her.
ROMANS: And Ron, who is the real leader of the Democrats right now? I mean who is going to step out and be the Newt Gingrich "Contract with America"? And do they need to do it now?
BROWNSTEIN: Well I think that's part of the problem. They don't have someone that everyone can agree on to be the leader. Nancy Pelosi, the House minority leader, Harry Reid, the Senate minority leader are engaged in a project trying to find more of an agenda on a "Contract with American" Newt Gingrich as you mentioned.
But it is important to remember that the Republicans in 1993 and 1994, which is a period that everybody talks about here, didn't come out with a contract until very late in the game. And for most of that election cycle, like the Democrats now, they focused most of their fire on trying to derail the president's initiatives.
The question will be whether Democrats can come up with something by the end that a large, broad segment of the party feels comfortable with. Part of the problem here, is that they have obviously strong positions right now in states that lean Democratic. The question is, where do the Democrats running in the red states -- both the Senate and the House -- want to go, and will they sign on to a broader party message?
LISOVICZ: And that's what I'm thinking, tick, tick, tick, tick, tick. Before you head to the White House, you will have the midterm elections. And you don't think that the Democrats are well positioned to take advantage of these blunders in the GOP?
BROWNSTEIN: Well, here's the real challenge. The national numbers are bad for the Republicans. There's no way to put a positive spin. Two polls come out this week with the president's approval rating under 40 percent, approval rating for Congress is under 40 percent, over 60 percent of Americans say the country is moving in the wrong direction. Those are bad numbers for the party in power and they will likely produce some headaches next November if they don't improve for Republicans.
The question is, are they strong enough to overflow -- the unfortunate metaphor this fall -- into the areas where Republicans have been strong in the past? Democrats are not going to win the Senate back unless they can win some of these red state seats -- in states where President Bush won in 2004, I'm thinking of places like Missouri, Montana, Ohio, Tennessee. And same thing in the House -- they'll have to win some districts that have traditionally leaned toward the Republicans.
And the big question I think in these next 12 months is, is the discontent enough to corrode and erode the Republican position, in places like that, not just like Pennsylvania and Rhode Island and places that lean Democratic.
LISOVICZ: Well we'll certainly be waiting for a response, because it's a lot of important issues that you were talking about, Ron Brownstein, CNN political analyst, also political correspondent "L.A. Times." Thanks for joining us, Ron.
BROWNSTEIN: Thank you. LISOVICZ: When we come back, swiped out. The bankruptcy laws are about to get a lot tougher. We'll tell you about the stampede to file for Chapter 11.
Plus, oh, my pod! Sure the iPod is hot, but stick around and we'll tell you about an Apple product that's even hotter.
And coming out of the closet, about what's in the closet. See if your partner is out to buy on the sly as we learn about financial infidelity.
ROMANS: Broke, busted, wiped out, in the hole. Our consumer culture has about as many words for bankruptcy as the Eskimos supposedly have for snow. However you say it, starting next week, filing for bankruptcy is going to get a whole lot more painful. A new law takes effect on Monday and there's a stampede to get in now before going belly up gets even more painful.
Nathalie Martin will tell us more about that. She's a law professor at the University of New Mexico and a resident scholar at the American Bankruptcy Institute. Nathalie thanks for joining us.
NATHALIE MARTIN, UNIVERSITY OF NEW MEXICO: You're welcome.
ROMANS: We've seen a rush the last couple of weeks -- 100,000 I think people filed last week for bankruptcy, 68,000 the week before. Who are these people? Who is most likely to be rushing right now before that deadline?
MARTIN: OK, right now, what we're thinking is that these are people that heard the news that bankruptcy is going to become a lot tougher as of Monday and I think some have also heard the misinformation that bankruptcy won't be available at all after Monday. But most of them just feel that the new law is more complicated, more difficult and more expensive for consumers, so they're trying to get in before the deadline.
SERWER: So one-point-something million people declared bankruptcy last year, it is over a million people, let me put it more simply. That is just truly staggering. You are talking about 100,000 the previous week, 100,000 this past week. These people, are they the bottom rung of our society? Are they middle class people? And are they in debt because of credit cards? Do they have health care problems? What's going on here?
MARTIN: For the most part, most of the bankruptcy debtors are from the middle class so they sort of take up that middle area, you know, middle, a little bit above a little bit below. And the studies suggest that yes, health care problems are a very significant factor in filings, as are job loss and divorce.
So those seem to be the main precipitating factors. But of course viewers need to know that as we go forward and the bankruptcy system becomes more stringent, it's very important to protect yourself by not carrying too much consumer credit because that puts you at a greater risk.
LISOVICZ: But you know Nathalie, we know the reasons why people go into bankruptcy. Sometimes they're beyond their control, a sudden loss of a job, a sudden traumatic illness, divorce, divorce with children, and these kinds of things. With these new tough law that's just days away now, what can people do?
MARTIN: I think the main thing is what I mentioned a minute ago. You have to be very protective of yourself and if at all possible, get the balances paid down now. Put some money in the bank, and try to save money in case of an emergency, and also, what a wonderful thing to be able to earn interest on your money rather than paying your money to others and let them make money off of you.
ROMANS: I think one of the drivers of this legislation, though, is that there are some people including Chuck Grassley; a lot of the people who have been really pushing for this is that not all people who file for bankruptcy are victims. Some of them have self-inflicted wounds here, people who are carrying a mortgage that's too big, people who maybe let their health insurance lapse because they're living a life they can't afford -- one reason why people who, making a lot of money, two-income families might be faced with bankruptcy. Are those kinds of people going to have a harder time, because that's what it's supposed to be targeted for.
MARTIN: You're absolutely right. Those are the people that it's targeted for. It's really targeting at the people who have an income that's above the median income in their state, because those are the people that potentially could have to pay a payment plan under the new law, rather than discharging most of their debts.
I mean, whether or not those are the primary people who file for bankruptcy or whether it's mostly the people below that line, the bottom line is, we really do have to carry less consumer credit, and so that will help the people that lose a job. It will also help the people who don't lose their job but who are as you said, overextended for whatever reason.
SERWER: Let me ask you about this whole credit-counseling wrinkle in this new bill, because it sounds a little dicey to me or a little silly, if I may be so bold. First of all, it costs money. These people don't have money. In many cases it costs money.
Second of all, it comes so late in the game. You're telling people how to manage their money and their finances once they are already at the door of bankruptcy.
And third of all it seems to be steering people toward debt management programs, that these credit counselors may be benefiting from them in terms of getting some sort of payment back. Does that not make sense?
MARTIN: You're raising a really good point. As we all know, if we watch the news and read the papers, the consumer credit industry has taken a couple of hits recently. So I think there are many people who agree and are very skeptical about this initial credit counseling that's required in order to get into the case. Unfortunately, the new law also requires, I think a debt education course later in the process that will be more helpful.
On the way in, I agree with you. I don't think people are in a position to benefit from this and they are probably not in a position to pay for it either. The second course is one that you take before you get discharged from bankruptcy. And I'm hopeful that one will be useful because it will provide information that people don't seem to have about how interest is calculated, how credit cards make their money, and how to budget and so on and so forth.
LISOVICZ: I'm curious -- and we talk about benefits. The credit card companies certainly lobbied for this new bankruptcy law. Are there any -- is there any reciprocity here? I mean, they're the ones that solicit us daily. My mailbox is full of this stuff and you know, for teenagers, for young adults, this is what gets them into trouble early. Are there any restrictions on who they solicit and how often, that kind of thing?
MARTIN: The point you're making is exactly why I keep asking people to take matters into their own hands. There really isn't anything in this law that deals with the problem that you've identified. We need to take control of our own lives and say no to all of those solicitations.
SERWER: All right. Staying solvent I hope is Nathalie Martin who is a law professor at the University of New Mexico and also with the American Bankruptcy Institute. Thank you for coming on the program.
MARTIN: Thank you for having me.
SERWER: You're welcome.
Coming up after the break, the big craze for the little white rectangle. Find out if the iPod fad is giving Apple shares a boost.
Plus thinking inside the box, getting back to the cubicle can be hard stuff if you are middle class and out of work. We'll speak with an author who found out about that firsthand.
And what your body can tell your boss. Find out why IBM took a stand on genetic testing in our new feature called "Brainstorming."
ROMANS: Now let's take at the week's top stories in our "Money Minute." The recent bankruptcy filing by auto carmaker Delphi is raising concerns that General Motors may be headed in the same direction. Analysts believe that Delphi's collapse will cost GM $11 billion, because of the carmaker's big stake in Delphi. And GM is still struggling with huge employee health care costs.
If you're expecting a pay raise, maybe you should just have your boss send it over to the local filling station. A new study by Salary.com expects American workers to get an average pay raise of about 4 percent this year, but almost all of that will be spent on gas because of skyrocketing prices.
And you're not alone if you've ever called in sick when you really weren't sick. CareerBuilder.com says 43 percent of workers said they called in sick with bogus excuses last year. Some of the lamer excuses -- and I'm not kidding -- "I'm too drunk to drive to work."
ROMANS: And "God didn't wake me."
SERWER: OK, wide-awake over here. Also this week, Apple reported its quarterly earnings quadrupled -- that with thanks to strong demand for both iPods and Macs. But overall sales of iPods fell short of analysts' high expectations, causing Apple shares to sell off a little bit by midweek. But it's nothing short of a stellar year for Apple stock, which is up about 165 percent from where it was trading at this time last year. That makes Apple our "Stock of the Week".
In fact by the end of the week, the stock was right back up at a 52-week high, an all-time high. The stock is up about 9.5 times over the past two and a half years. It has a market capitalization of $44 billion as opposed to General Motors, which has one of $15 billion.
A very eventful week for this company, I believe. They had to take the iPod to the next level and I think they did.
LISOVICZ: The video iPod and then the one with the gigabytes so 20,000 songs -- 2,000 songs took me forever to download the stuff, and now you can have it for years.
ROMANS: Mine was stolen in checked baggage in an airport.
SERWER: You want to get another one?
ROMANS: I want to get another one, but I'm waiting because there are so many changes. There is the Nano and now there is the video one. But it keeps changing. The technology keeps changing. I'm wondering how long Apple can really coast on this whole iPod trend. At some point, everyone's going to have one.
SERWER: Well, they're changing over from really being a computer company to a technology company to iPod Company. I think the Nano is a real stroke of genius, which is the real small one. There are two things the video one and the Nano.
First I will talk about the Nano. The Nano is small, it's light, and it's unbelievable. I think every person who has an iPod is going to get a Nano. They'll have a replacement cycle there, which is genius.
The video iPod is a bit of a Trojan horse. It is a starting block, it is a starting point. It doesn't have tons of video available. Right now you can get some Disney product on it. But it's kind of cool because you can get a few episodes of "Lost" or "Desperate Housewives," three episodes, load it onto your iPod and then go on your flight. So that is pretty good. A little screen, but of course then you can take the video with you and then uplink it to a PC or they hope a Mac. So I think this is really working.
LISOVICZ: Of course.
SERWER: You know skeptics said they were going to run out of steam with this product. I think they're doing a terrific job and it's the opposite of the Gillette razor model because what you were supposed to do is give away the razor and sell the razor blades really expensive.
Apple has it the other way around. The songs are very cheap. They don't make a lot of money on it, they've got to keep selling the hardware. But I think they're doing it. And I've said it before, I'll say it again, I think Steve Jobs is one of the true business geniuses of our times.
LISOVICZ: They have a whole cult following, tribute to him. It's not only his personality, it's his creativity, the fact they're so easy to use, and all demographics here.
SERWER: Great software.
LISOVICZ: We're not just talking teenagers using the iPods, and they're affordable, right in time for the holidays.
LISOVICZ: They're firing on all engines.
ROMANS: Don't put them in checked baggage.
SERWER: No. My only quibble with Steve Jobs, hey, Steve, get a new outfit. We're tired of the black tee shirt and the black pants. Any way just a small point.
Coming up on IN THE MONEY, "On the Line" author Barbara Ehrenreich found out why it is so hard to be a white-collar worker who is out of a job. We will hear from her after the break.
Plus Victoria isn't the only with a secret. Find out how some people treat shopping like others treat sex.
And start, pump, engage brain. See how smart you are about saving energy, as we tell you about our "Fun Site of the Week."
WHITFIELD: Hello, I'm Fredricka Whitfield in Atlanta. IN THE MONEY continues in a moment, but first here are the headlines "Now in the News".
The counting is under way in Iraq, where millions of people went to the polls today to cast ballots on the nation's proposed constitution. The draft must approve by a majority of Iraqi voters in order to take effect. If the constitution is rejected, a new assembly elected in December would write the next version. The number of people killed in Pakistan's earthquake is approaching 40,000. And relief workers say there will be more deaths if the area does not get some much needed aid very soon. Rain, snow and frigid temperatures are delaying efforts to reach many of the survivors.
One person is dead after a fire engulfed several train cars at a switching station in Texarkana, Arkansas. It is not clear what caused the victim's death. A police spokesman says one train car carrying a dangerous chemical exploded and the fumes are - quote -- "definitely poisonous." People in hundreds of nearby homes have been evacuated.
More news at the top of the hour. Now back to more of IN THE MONEY.
LISOVICZ: The job search can be a gut wrenching, nail biting, and pride swallowing experience. Why would anyone put themselves through it if they didn't have to?
We are going to ask our next guest that very question. Author and journalist Barbara Ehrenreich went under cover as a white collar job seeker for her new book "Bait and Switch: The Futile Pursuit of the American Dream." She joins us now to explain why she did it and what she found. Welcome back Barbara.
BARBARA EHRENREICH, AUTHOR, "BAIT AND SWITCH:" Glad to be back with you again.
LISOVICZ: We last talked to you about your last book, which was "Nickel and Dimed", about blue collar poverty. And in many ways that was, it was really a natural progression to this next book, which is actually very sad to say. Can you explain?
EHRENREICH: Yes, I hadn't been really interested in the plight of white collar workers until after I wrote "Nickel and Dimed". I began to hear from many people who were in very low-wage jobs like $7, $8 an hour, were writing to me about their difficulties and they said they had college degrees, maybe masters degrees, too, and they had once held what they thought was a secure white collar job until that downsizing or layoff or outsourcing or whatever came along, and really ended up pitching them into poverty.
ROMANS: Why is it harder now, Barbara, to be middle class than maybe a generation ago? What did you find?
EHRENREICH: There's been a change in corporate policy, you know, really in the '80s and '90s, toward away from seeing workers as assets, and toward seeing them simply as expenses. Now, first it was the blue-collar workers who were eliminated with the outsourcing of manufacturing in the '80s. In the '90s a lot of corporations began to turn on their white-collar professional and managerial workers, too. It's like a fad, the more you can get rid of, the more the CEO is paid, the more he out-sources, the more he's paid.
So this is just a direction that Corporate America has been going in, and this means that you can't count on getting out of college and then going to work for a company, and being loyal to that company, and having that company be loyal to you, and finally ending up, you know, with a gold watch and a comfortable pension. That is not the white- collar career trajectory anymore.
SERWER: Barbara, I mean obviously everyone sympathizes with people who have been laid off and fired. But I'm wondering, what are these companies supposed to do? You have an Alcoa or Hewlett-Packard that is competing with global companies, companies in Third World countries -- obviously you know all of this -- manufacturing with very low cost labor. These are not charities, these big businesses, so what do you suggest they do?
EHRENREICH: Well I'm not so sure that this is a good approach to doing business. When you downsize, as much as many of our companies have, they've cut to the core. That means the people left behind are often doing the job of two. They're exhausted. They're insecure. They're anxious. They suffer from something called survivor's syndrome. So you know, this may be backfiring in the way we do business today.
LISOVICZ: You described Andy Serwer perfectly, anxious.
SERWER: Thank you, insecure.
LISOVICZ: Survivor's syndrome. We're all survivors. We know working in this business that's for sure. Barbara, we know about the outsourcing. We know that the good union jobs are fast disappearing, but let's go to the next step. You're saying that what can be done is almost an activist agenda. Is that really realistic?
EHRENREICH: Well, I don't know. White-collar people don't have a tradition of getting together to make change. They tend to be very individualistic, and they do, though, now come together, unemployed white collar people, in a lot of networking groups, in a lot of coaching situations that sometimes are quite exploitative and don't offer that much help, as I found out when I tried them. So they're coming together but not in an atmosphere or an environment in which they can speak freely about what happened to them, share stories and what they think might be done.
I want to see this happen. I want to see people start coming together to talk about these things without having some other agenda imposed on them by the networking group leader or whatever it is.
ROMANS: Right. You also sort of described the coaching sessions as sort of kind of voodoo almost. I don't know how much you can get out of something like that when people keep telling you that you have to be more optimistic and you have to go out and do this. If you're part of a massive downsizing, you can be as positive as you want to be. If somebody's going to do the job for $1.50 an hour you can be as positive as you want, but that wage differential is just -- it's too romantic for your CEO.
EHRENREICH: Thank you for putting it that way. The problem is that the laid off person is often confronted with a kind of victim blaming ideology when he or she goes out there to seek help from coaches and networking groups. You're constantly being told it's all your own attitude. That's what changes everything -- if you're positive, you know. So you're taught to look inwards rather than to look at the policies that are really creating this situation for them.
SERWER: Barbara, is it your impression that American management is a bunch of dopes, you know, people out of Dilbert incompetence? Are you suggesting that? Obviously a generalization.
EHRENREICH: You're putting words in my mouth. But yes, I'll accept it. Look at the weird emphasis on personality testing in the white-collar world. Everybody wants to test your personality, the career coaches and the corporations. Yet we know these tests are completely discredited. They have no predictive value. They're useless. So what is that about?
Why -- another question, talking about dopiness at high levels. You are told as a white collar job seeker that the most important thing is not your skills or your experience. It's how likable you are, how nice, how cheery, how upbeat.
Well, you know, when I think about composition -- competition coming from China and India, I don't know how we're going to face it if our offices are full of a bunch of likable people getting along nicely together, but who don't have skills or competence. I mean, this is what gets us through to Michael D. Brown running FEMA. Likable chap, knew the right people but you know, no preparation whatsoever for the job. So I think there's some real slackness in American corporate culture. I kind of -- yes
ROMANS: Barbara Ehrenreich, we have to leave it there. But we are going to have you back because this is all very fascinating stuff. The new book is called "Bait and Switch." Barbara Ehrenreich, thank you so much Barbara.
EHRENREICH: Nice to be with you.
ROMANS: There's lots more to come here on IN THE MONEY.
Up next, 'til debt do you part. We will hear about how financial infidelity can shake up a marriage
And more pain, less gain. Allen Wastler of Money.com looks at the debate over changing the mortgage interest tax deductions.
SERWER: Here's a news flash for committed couples. Being true may have more to do with money than matrimony. According to a new survey, one-quarter of couples say honesty about finances is more important than honesty about fidelity. The "Redbook" magazine/Lawyers.com report is published in the November issue.
Stacy Morrison is editor-in-chief of "Redbook." Stacy, welcome to the program. This is really surprising to me. Exactly how prevalent is this? STACY MORRISON, EDITOR IN CHIEF, "REDBOOK" MAGAZINE: One-third of couples admitted they'd deceived their partner in some way by hiding something that they'd spent money on.
ROMANS: What does that mean? Does that mean like you bought a sweater and you hid it and took the tags off so your husband didn't see? Or does it mean you're buying stocks behind his back?
MORRISON: The largest quantity of deceit is about discretionary purchases like you mentioned -- the golf club, the gadget that you have to have. But we also, in our reporting, found amazing variety. There were huge investments made and lost, that hadn't been revealed to the partner -- nest eggs spent. And in one case, actually we found a woman who was squirreling away money because she was so nervous about her partner's spending habits that she felt she had to protect herself.
LISOVICZ: Well I guess that explains the statistic then that is just so mind-blowing, one in four say honesty about money is more important in a relationship than fidelity in a relationship.
LISOVICZ: Because you can in fact ruin the relationship and end your nest eggs.
MORRISON: Absolutely. And trust is, of course, the bedrock of any relationship. And talking about money is much more challenging for people today than talking about sex. Money represents our values. It represents security. It feeds our self-image and all three of those things are complicated enough to discuss on their own. What makes it worse is that opposites do attract in love and money, so you end up with hoarders are with spenders, money worriers are with avoiders, and so on.
SERWER: All right. I don't think you're suggesting that you should lie about intimacy and fidelity, you should be honest about -- never mind.
LISOVICZ: You're digging a hole, Andy.
SERWER: I know, I'm getting bad and my wife watches this program. In any event, things are a lot more complicated today, Stacy -- second marriages, third marriages, step-kids, same-sex partner, same-sex spouses. Is this part of that problem?
MORRISON: Well, I think what you're really seeing is we've had such massive change in the last 40 years. Women are now contributing to the family income in a much bigger way. It's much harder for households even with two incomes to sort of keep up with the skyrocketing real estate. Of course our consumer culture has just completely taken off and now even buying a coffee is a very expensive option. It's not 50 cents.
ROMANS: Right. MORRISON: So it's really hard. You sort of keep up and you see everybody else seeing it and you want to have it, and then also, because we partnered with Lawyers.com, partly because there are serious issues involved in how partners come together already saddled with individual debt. And there's a sense that stays away from me, but it's not true. Once you marry, that becomes debt that the two of you have to share and plan for and deal with together.
ROMANS: This is, Stacy, why I think some -- I believe that some couples when they get married or live together or in a partnership, they should merge their finances and some just shouldn't.
MORRISON: That's true.
ROMANS: Some should be able to spend their own money and they should be able to have their own investments and their own 401(k) and that you look at the whole picture and figure out how you end up when you're 80, but you each are in charge of your own money. So many people fight about money. It is the cause of a destruction of so many marriages. It's different for every couple.
MORRISON: Yes. And all the articles that we do in "Redbook" magazine, couples definitely say that money, 67 percent of couples say that money is the number one source of conflict. And so when you are talking about making plans for yourself as couples, it's so important to think about the long-term in what's shared. It's not so important whether you merge your money or if you don't, even though 50 percent of couples today still do actually fold all of their accounts together.
What's more important, and more indicative of whether you'll be successful as a couple, is whether you sit down, once every two months, and talk about short term spending and if you sit down at least once a year and talk about your long-term plans, what are your goals of the family, is it to save to buy a house, is it education, retirement, a big, fabulous vacation -- to really target where you're going and then budget in the discretionary spending.
LISOVICZ: It's interesting. Despite the fact that women work and they draw their own incomes, it's traditional that you found in your survey that the men invest and the women are the spenders for the home. That's unchanged, right?
MORRISON: No. It's very much the same. It was quite a surprise for us, in that women who are always charged with the grocery money and the average household bills, that's still very much the case. And two-thirds of couples, the men are tending to do the long-term thinking. But that just captures, it's so critical for both parties in the couple to do the long-term planning together because what your long-term goals are, really is what should drive your short term spending. You can't do one without the other.
SERWER: Stacy, quick last question. I got to ask you, who lies more, men or women?
MORRISON: The truth is -- I have to say it -- is women, but only by 7 percent, so don't get excited.
ROMANS: She's talking about finances, not fidelity.
SERWER: Duly noted.
ROMANS: Stacy Morrison, editor-in-chief of "Redbook" thanks so much for joining us.
MORRISON: Thank you.
ROMANS: There's much more on the way here on IN THE MONEY. Coming up, see why a company would want to check out your body. We'll look at IBM's decision on genetic testing for job candidates on our "Brainstorming" segment.
And if you think Corporate America shouldn't play in your gene pool, or you've got something on your mind, send us an e-mail. The address is INTHEMONEY@CNN.com.
SERWER: IBM announced this week that it will never use genetic information when it decides whether to hire someone. Most Americans weren't aware that was even an option. In these days of concern over health care costs and employer liability could genetic testing be the wave of the future? That is the question in the center of our "Brainstorming" segment this week.
And you know, guys, I was a little surprised by the announcement just by the fact that they used the word never. I could understand them saying we're not going to. But this could be something that could be useful. Obviously, there's scary implications, too.
ROMANS: Explain to me what it means. It means like you want to go for a job interview and in the old days you take a drug test. This, you take a blood test or a chromosomal test and they find you're going to die probably between the ages of 60 and 80, you have a higher risk of breast cancer and you might get diabetes.
LISOVICZ: It's more invasive then what you would do if you were applying for a life insurance policy, which is pretty invasive.
SERWER: I mean it can show whether you have a propensity to use drugs and alcohol, cancer, heart defects.
SERWER: We were talking before to Susan before about the player for the Chicago Bulls, Eddie Curry, who didn't want to take one of these tests and the Bulls waived him and the Knicks picked him up. But he could be taking a test that would show whether he would have a genetic heart defect.
LISOVICZ: I mean that kind of makes sense to me. That is a case where you are hiring someone and paying them a lot of money.
LISOVICZ: That's right, for a short amount of time, so it's like a racehorse. You want to make sure that you're acquiring this talent.
ROMANS: What about your privacy? That's your information. If you don't want to know that information, if you want to live your life and not know what lurks out there, I mean why should your employer know it?
SERWER: Well I guess that's what sort of what Eddie Curry was saying. I don't want to know. Why should you be able to find out? Why should you be able to find out, I should say.
LISOVICZ: The Congress -- the Senate passed the Genetic Information Nondiscrimination Act. Did you know that?
SERWER: Well there's no question that this is going to go forward in some form. You're right; it is sort of like drug testing taken one step further.
ROMANS: A big step further.
SERWER: Where are we going to put the limits and all of the ethical questions? You talked about athletes using drug-enhancing drugs, and implants that will make people go faster and where do you draw the line? These are these medical ethical questions that we are going to be looking at in the future. They're very hard for us to figure out right now.
LISOVICZ: There's no question that IBM with a huge global workforce -- 300,000 or so global employees -- it's taking the step, though. It's going to have a big impact.
ROMANS: For the record, it says it will never do this.
SERWER: Never is a long time.
LISOVICZ: We'll see if, in fact that is the case.
Coming up next on IN THE MONEY, keeping the home fires burning. See how smart you are about saving energy when we show you our "Fun Site of the Week."
Plus it's time to hear from you, our audience, as we read some of your e-mails from the past week and you can send us an e-mail right now. We're at INTHEMONEY@CNN.com.
LISOVICZ: One of the biggest, sacred cows in America is the mortgage interest tax deduction. But Web master Allen Wastler says some folks think it's time to scale it back a bit. Allen joins us now with that and the "Fun Site of the Week." Allen, you are fired up about this one.
ALLEN WASTLER, MONEY.COM: I'm fired up about this. This tax panel is the biggest bunch of malarkey.
ROMANS: They're bipartisan.
WASTLER: They were given a mission, make it fairer, make it simpler, provide for economic growth, make it revenue neutral. This doesn't do any of that! First of all, OK, right now the deduction limit for mortgage interest is $1 million. We'll scale is back to $300,000 unless you're married and filing jointly, in which case it is $500,000 and then you get all that -- these are the same numbers. They're moving around the same numbers again.
Second of all, fairer. What this does is basically you're hitting the rich again. I happen to believe you should treat rich people the same as poor people. But a lot of people, Comrade, think no, no, no, we should take the rich and help feed the poor. I think that's unfair. But beyond that, think about this, a lot of people have put their money into property. That's worked out pretty well over the last couple of years, hasn't it? So all of a sudden you're bringing more people, lining them up for the big tax punch. Thank you very much.
LISOVICZ: What they're trying to do, right, to get rid of the alternative minimum tax, or is it alternate?
WASTLER: They didn't do that.
WASTLER: Alternative minimum tax.
WASTLER: Because a lot of us got smacked around on the AMT. So great, they'll just smack us around over here on the mortgage deduction. I have a big idea. This is my idea. If you look back at 1952, corporations provided 32 percent of the nation's tax receipts.
ROMANS: Oh, I know where you're going. Don't do it!
WASTLER: And in 2003, they provided 7 percent. I looked up 2004; they kept the figures only 10 percent. Maybe it's time we pony up a little on that and let's go through all of the pork exemptions we had in the last tax go-around.
ROMANS: Allen Wastler, I'm voting for you.
WASTLER: Oh, they need an exemption for this and that. If you are going to start doing that, don't mess with our mortgage interest deductions.
ROMANS: Allen, you shouldn't be worried about the mortgage interest deduction because I have faith. I have faith in that high- powered, high-paid lobbyist in Washington for the banking industry that will never let that happen.
WASTLER: I think you're right there, Christine.
LISOVICZ: Before we get even more upset, let's go to the "Fun Site of the Week."
WASTLER: OK, energy, big topic these days, right? But how much do you truly know? I was fishing around on Yahoo! one of the government information sites trying to get in fornicated. And I found this wonderful quiz and it's a tough quiz. I only scored a 30 and the producing staff did about 40. What is the largest coal producer in the world? Germany, Russia, China, or Spain? Notice the United States is not on there.
SERWER: China, I guessed China.
WASTLER: There you go, it is China.
ROMANS: It is the largest everything in the world.
WASTLER: What country produces the most nuclear power?
SERWER: France. France. How come France isn't there?
WASTLER: Because that would be wrong. It is the United States. Ooh!
SERWER: Oh the U.S. of A, all nuclear all the time.
WASTLER: Which state produces the most crude oil?
SERWER: Cal. Cali.
WASTLER: OK, there you go.
SERWER: Oh, still Texas. Still Texas.
WASTLER: Those are some of the easy questions. So you can find the link for this on our show page. Put your knowledge to the test!
SERWER: I think we batted zero. I did.
SERWER: That was not a "Fun Site of the Week" actually, in many ways. It's a provocative --
WASTLER: Hey, it was fun for me watching you guys scramble.
LISOVICZ: There you go. Fair enough.
Now it is time to read your answer to our question about whether you think the U.S. economy is at a low point or about to get worse.
Bill wrote: "For now it's OK, but when the housing boom slows and the Gulf reconstruction ends, we're headed for hard times. So to pay their mortgages and other debts, many Americans will soon drop out of the consumer economy and bring many retailers to ruin."
He's an optimist. Bruce wrote: "It depends which Americans you're talking about. The very wealthy and the politicians are doing great and will continue do so. The middle class is not and will soon disappear all together."
Not an optimist.
And Don in a Fort Worth, Texas wrote: "Right now we have 5 percent unemployment, GDP growth and record-high home sales. What kind of a low point do you call that?"
SERWER: We need some happy pills.
LISOVICZ: We ended on a fine note. Now, for next week's e-mail "Question of the Week", have you donated to the relief funds for the victims of the recent South Asian earthquake, and if not why? Send your answers to
And you should also visit our show page at MONEY.com/inthemoney. That is where you find the address for our provocative "Fun Site of the Week" on energy. Study up everybody.
Thanks for joining us for this edition of IN THE MONEY. Thanks to "Fortune" magazine Editor-at-large Andy Serwer, LOU DOBBS TONIGHT correspondent Christine Romans, and MONEY.com Managing Editor Allen Wastler.
We will see you back here next time. Enjoy the rest of your weekend.
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