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YOUR MONEY

What Voters Are Worried About; Politics and the Economy; Owing More on Your Mortgage Than Your House is Worth; Record Highs for Oil

Aired March 1, 2008 - 13:00   ET

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


FREDRICKA WHITFIELD, CNN ANCHOR: Hello again, I'm Fredricka Whitfield. An accident at a Florida airport killed two people today, two others said to be in grave condition. The plane's both home-made experimental flyers both went up in flame.
Three out of the four major presidential candidates are on the trail today. They are scrambling to nail down last minute votes ahead of Tuesday's critical primary. John McCain confident with his delegate need taking a break at home in Arizona.

Prince Harry returned home to father and brother today. The British military pulled him out of Afghanistan after word got out he was on the front lines. Prince Charles says he feels great relief now that Harry is home safe.

CNN's "BALLOT BOWL" one hour from now. Right now, time for YOUR MONEY.

ROMANS: Welcome to YOUR MONEY where we look at how the news of the week affects your wallet. I'm Christine Romans.

Coming up on today's program on the campaign trail, find out what voters in key states are really worried about ahead of Tuesday's primary.

Plus, a troubling trend, a growing number of Americans owe more on their mortgage than their home is worth. Millions of Americans, in fact. We will hear from a woman who is in over her head.

And new record highs for oil this week. We will talk to energy tycoon Boone Pickin (ph) about how that is playing into the presidential campaign.

But first, the value of your biggest asset, your home, is falling, down almost nine percent in the fourth quarter, according to one gauge. And the credit crunch caused by the housing crises is making it harder to get home equity lines of credit, decent terms on credit cards, even making it harder to get student loans.

At the same time, higher costs are eating into your budget. The government says wholesale inflation rose more than 7 percent last year that is the worst inflation level since 1981, food, gas, heating oil, prescription drugs, all more expensive. The economy is flirting with recession, as we know. All this bad economic news has raised the threat of stagflation. That curse of the 1970s, slow growth, high inflation, high unemployment. Fed chief Ben Bernanke though says he is not concerned.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: I don't anticipate stagflation. I don't think we are anywhere near the situation that prevailed in the 1970s. I do expect inflation to come down.

(END VIDEO CLIP)

ROMANS: He is wrong about stagflation. That is not good for your money, your jobs, your investments, is it any wonder why consumer confidence is tumbling? I am here in the studio. Ali is on the road on the CNN Election Express. We are here to help you through it all and to make since of what is happening for your money.

Ali, what are you hearing there?

ALI VELSHI, CNN HOST: Hey Christine, all those things that you just said, compounding into Ben Bernanke and President Bush saying it's not as bad as it looks or there is no recession, that's not what I am hearing on the ground in Texas. I have been here for more than a week. I will tell you, Texans, like the rest of Americans, are resilient. They are not in a bad mood about it; they are very concerned about the economy.

Before we get into the details about what they have been telling me, let me give you a bit of a flavor about what I have seen on the road over the past week or so, take a look.

(BEGIN VIDEOTAPE)

VELSHI (voice-over): We are actually out here talking about politics and the economy. It is a big concern for people. Are you worried about the economy?

UNIDENTIFIED MALE: Oh, yeah.

VELSHI: This is my ride. We are all out of cars. Did somebody say I am all hat and no cattle? Oil hit another record today.

UNIDENTIFIED MALE: On average, it costs everybody out here 70 cents a mile just in diesel fuel when freight is only paying $1.30 or $1.40 a mile, we can't make a living at that.

VELSHI: The average Americans that they pay for it at the pump, I guess people don't necessarily always register the different ways in which fuel impacts inflation.

UNIDENTIFIED FEMALE: We are fixing to go up on prices because the cost of gas is causing our delivery prices to go up. None of us are making as much money as we were.

UNIDENTIFIED FEMALE: I think we are good, genuine authentic human beings.

UNIDENTIFIED MALE: I think it is grand that you are CNN. I think it is wonderful that you would come and visit us.

VELSHI: Exactly our point. We want to get out there and actually talk to people. If you can figure out Texas, it would probably help you figure out the country.

(END VIDEOTAPE)

VELSHI: That's kind of the impression I have had Christine over the past week. As you can see we have talked to everybody about the important issues, oil, inflation, jobs, the economy, the markets, housing, and mortgages. But in the end this is a country in one state. That's the feeling that we have been getting from talking to Americans here in Texas Christine.

ROMANS: All right, Ali.

CNN chief political analyst Bill Schneider now joins us from Washington to look at the issues, what they are on the minds of voters as we head towards Tuesday's show down. Looks like the economy is still top on the list of concerns for voters in Texas, right, Bill?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: It certainly is. For once, we have bi-partisan agreement, how about that, among Republicans in Texas that we spoke to, the economy ranked number one on their list of concerns. Nearly a third mentioned it as their top issues. When Texans are asked about their top concern, after the economy, illegal immigration ranks pretty high, 22 percent. Notice the bottom of the list, number 5 is the Iraq issue, with just 10 percent.

If you look at Texas Democrats, we find the economy once again, tops the list, even higher as the major concern, 43 percent sites the economy. Notice here, the Iraq issues rates higher, 20 percent among Democrats and just 10 among Republicans. The illegal immigration issue is down to single digits, just six percent. It was 22 percent among Republicans. While they agreed that the economy is the top issue. The two parties give different priorities to the issues of illegal immigration and the war in Iraq.

VELSHI: That's a point that we have seen here on the ground. When we speak to Democrats, the immigration issue here in Texas a border state, probably the one that has become most the vocal in this issue in many cases, is very low on the list of Democrats. We are still getting the economy in terms of gas and inflation and housing and employment, immigration below that. When we talk to Republicans even this morning here in San Antonio, we are hearing immigration as a much bigger issue. Christine.

ROMANS: Let me ask you. Who do voters think is the best to handle the economy in all these issues? Bill, what are you hearing on that?

SCHNEIDER: If you talk to Democratic voters in Texas, the answer is it is pretty close. Hillary Clinton has a slight edge. A lot of Democrats remember her husband's strong record on the economy. You can see here 52 percent of Democrats prefer Clinton for managing the economy. She has more experience, they believe and she was part of the Clinton administration.

Barack Obama, 45 percent, a little bit behind that. It's pretty close. Hillary Clinton is hoping to ride this edge on the economy to victory in Texas where this poll was taken. Also, in Ohio, which is a state that's even in more economic distress than Texas, a lot of the voters want a candidate who can deliver. Clinton promises to deliver. Obama inspires. You might ask, can't they have someone who does both? That's what Franklin Roosevelt did when he was president.

At the moment, they say Clinton is better at delivering and Obama is good at inspiring.

ROMANS: Bill, let's talk about Ohio. Because this week we had Clinton and Obama trying to out anti-NAFTA each other. That is clearly an issue that plays in Ohio. Let's listen to what those candidates said.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: We need to have a plan to fix NAFTA. I would immediately have a trade time-out.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: We have to stop providing tax breaks for companies that are shipping jobs overseas and give those to companies that are investing here in the United States of America.

(END VIDEO CLIP)

ROMANS: Now John McCain, the Republican front runner of course who will be against one of these two later on in the year, he says he is the biggest free trader of them all and that he believes in free trade. What is Ohio and this free trade battle, how is that going to play out?

SCHNEIDER: Ask any economist, they will tell you free trade produces winners and losers. A lot of the losers on the trade issue live in Ohio. There are a lot of blue collar and a lot of manufacturing workers who have lost jobs. They are suffering because of it. They feel like they have lost a great deal.

Economists pay a lot of attention to the winners, but politicians have to pay a lot of attention to the losers. Particularly in Ohio has lost a lot because of NAFTA and other trade deals, particularly their jobs, health insurance, futures and they are angry.

Politicians like Clinton and Obama are hearing from them. They hope that the issue of trade will help them get elected if McCain runs as an ardent free trader. There are not big differences between Clinton and Obama on trade. Although, Obama constantly reminds audiences that it was Senator Clinton's husband who signed NAFTA.

ROMANS: They both opposed CAFTA (ph). Let me ask you quickly about this economic populism. Is this something that is state by state and comes up now and won't be as big a part of the campaign as we move on into the fall? SCHNEIDER: Economic populism always works. Economic populism is criticism of trade. A lot of voters say, in principal, free trade is fine but it better not hurt me or workers in the United States. It's an issue that always resonates when workers feel vulnerable and threatened as they do now.

ROMANS: I suspect we will hear more about what is free trade and what is fair trade and the like. Thanks, Bill Schneider. Also, Ali Velshi there in Texas. We will get back to him.

Up next on YOUR MONEY, what to do if you owe the bank more than your house is worth. There are millions of Americans who own more than the house is even worth.

(COMMERCIAL BREAK)

VELSHI: I am Ali Velshi in Texas. I am riding the CNN Election Express across the country talking to Texans about the economy and this week that we have talked about inflation. Oil has hit new records. The market has stumbled again. The big story of the last year has almost taken second place but it is one that Americans are feeling across the country, the issue of home prices and mortgage problems. Christine Romans is in New York and she has more on that -- Christine.

ROMANS: Thanks, Ali.

You know, a rising number of Americans are facing a situation not seen since the great depression. They owe more on their homes and their homes are now worth. Some will hold on. Some will lose their homes. Some will just walk away.

This week, we met one Massachusetts family struggling to get out from underneath a mortgage they could no longer afford as the value of their house tumbled.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): This is a house in Worcester, Massachusetts, Heather Distefano says her family can no longer afford to live in.

HEATHER DISTEFANO, HOMEOWNER: When I first moved in here, my mortgage was $1300 a month. Now, my mortgage is up to $3100 a month.

ROMANS: She and her husband bought the house in 2005 for $306,000. After months on the market, today, the only offer is for $240,000. Her adjustable rate mortgage payments have increased, she knew they would but not this much. And she never figured the value of her home has decreased.

Their $79,000 household income isn't enough for them to hold on for the housing market to improve. After rising monthly payments, annual heating bills and taxes and health insurance for her family of three.

DISTEFANO: We were just drowning in debt. ROMANS: There are almost nine million other Americans like her who owe more than the house is worth. Goldman Sachs forecast some 30 percent of all mortgages will be upside down by the end of the year. That's 15 million homeowners. Some tap the equity in their home. Some bought homes they could never afford in the first place. Others want to sell but are trapped by falling home prices.

LARRY SUMMERS, FORMER TREASURY SECRETARY: We are in territory, the likes of which we have not seen in this country in a very, very long time. Loans have been extended with much more generous terms, much more smaller down payments than have been traditional and the fact that we are seeing an unprecedented break in house prices, means we are going to have more people with negative equity than we have ever seen before.

ROMANS: Summer says the voluntary plans for lenders and the federal government so far have not done enough to help homeowners. Heather Distefano says she spent three months calling banks and government hot lines to no avail.

DISTEFANO: I want somebody from the government to please help us people that can't afford our homes.

(END VIDEOTAPE)

ROMANS: The family is desperately trying to negotiate a short sale, turning the house over at a loss for the bank to sell instead of a more costly foreclosure. No luck yet for the family. An auction is set for June.

If you are in this situation, what are you supposed to do? If the mortgage bill is greater than the value of your house? Greg McBride senior financial analyst at Bankrate.com has some sound advice on this.

A short sale, let's start with that first. That's what this family is trying to do. They have a buyer who wants to pay $240,000 for this house, a house they paid $306,000 just a few years ago. What is a short sale?

GREG MCBRIDE, BANKRATE.COM: It involves getting together with your lender and saying, I realize I owe you more than it is currently worth. I can't sell it for that. I know I owe you $200,000. I only can sell it for $175,000. I have a buyer for that. Are you good with that? Both parties are cutting their losses. It's easier to take the short sale for less than they are owed rather than foreclosing. For the borrower, it does get you out of the house but it does have credit consequences so it is a last resort.

VELSHI: Hey Greg, it is Ali here in Texas, under the proposal that the government put forth and introduced last month, the short sale is one of the options. Is that an option open to everybody who is under water and has to sell their house? Will any bank agree to that or is there a point in which you have to be in a very tight squeeze to be able to take advantage of that. MCBRIDE: At least for now you have to be in a tight squeeze to take advantage of that. Again, this is not a free lunch because it does have long standing credit consequences to the borrower. Lenders have to be discriminating in terms of just how many of these do we want to do and to what extent. They don't want to be engaging in short sales for people that could well keep up with the payments on the loan until a later date.

ROMANS: Let's talk about some of the other options. You can stay in this house. History is a guide. When people are a little bit under water, most people stay in the home and they make the payments and wait to ride out the market. What are some things you can do? You can rent out the house. Tell me your choices.

MCBRIDE: The first thing is, being upside down on the home isn't by itself a crisis. That's when that is coupled with something else, another circumstance, the need to sell the home or rent it, an inability to keep up with the payments. If you can keep up with the payments, just stay put. That's the first thing.

Then you are really not necessarily in a situation of distress. If it is not a primary residence, you can look to rent it out even if you have to rent it out at very, very inexpensively. Every dollar a tenant pays is a dollar you do not. The last report is to contact the lender and try to negotiate a short sale.

ROMANS: And you know there is something about when these mortgages were taken out, the woman in the piece that we just showed you, she got an interest only loan and then it adjusted. Now, she is stuck because the market has come down. There are people who took a lot of equity out of their homes. Other people who got a home they were never really going to be able to afford. You have to be careful about rewarding risky or speculative behavior. Some people are going to have to lose their homes. Is that right?

MCBRIDE: That's absolutely right. There is a real movement to avoid preventable foreclosures but not throw a blanket over everybody and just bail everybody out. It is really about weeding out those that can make it if we make some modifications to the loan now versus somebody who, hey, look, any modification is just going to kick the can down the road and they are going to end up defaulting at a later date.

ROMANS: All right. Greg McBride, Bankrate.com thank you Greg.

Coming up right after the break, as the credit crises continue, are student loans the next domino to fall? Find out if it is going to be harder to borrow money for college next.

(COMMERCIAL BREAK)

ROMANS: Welcome back to YOUR MONEY.

I want to bring in Jennifer Westhoven to talk about the slowing economy. One of the unintended consequences of the credit crunch, it is harder to borrow money to go to college at the very time it is so important to make sure that your are getting the quality education and retraining in what is a very diverse in changing economy.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: You wouldn't think, how does the subprime mortgage mess affect students. It is shaking up the whole banking systems. One of the nation's largest student loan agencies says it will stop issuing U.S.-backed college loans. This is the Pennsylvania Higher Education Assistants Agency, but it is the latest of several state agencies across the country saying they are either going to cut back all together or halt some of these lending to students.

Basically, it means it is going to get more difficult and more expensive for a lot of students to try and get a loan in the next academic year at a time when we might be seeing some changes in the job market. Education is so important.

ROMANS: Meanwhile, credit cards, people are choosing to pay off their credit cards instead of making their house bills is that right?

WESTHOVEN: This is a really alarming story. It is not a statistic. It is just they talked to a lot of credit counselors. This is an alarming spike. People are paying off their credit cards before their mortgages.

Basically, what that means, right, is that they are giving up on their mortgage. They know they can't afford it. They are using that credit card to buy them a little room for the next few months. They are really on a downward spiral. If you can't pay your mortgage, it is big trouble. It could mean a lot more foreclosures on your way.

ROMANS: And probably falling home prices. If people are walking away from homes that means that banks are not going to get what that person paid for them.

WESTHOVEN: Falling home prices, we could get to the bottom then. So far, they have been moving down. We need them to come up more. We have to bring Ali in on this next one; he has been traveling a lot. And Jennifer is going to do a little story here. About airline, and when you fly back from your big bus ride, you are going to have to pay more?

WESTHOVEN: How did you pack, Ali, light or heavy?

VELSHI: That's the reason I like this bus. We put our luggage into one of the little bins and drive off. I know what time I am going to arrive. I know what city I am going to. When I get off in that city, my bag is there. What is this week's airline stick, Jennifer?

WESTHOVEN: The airlines are all looking for money. This could become the new industry standard, U.S. Airways is the second airline to start charging you $25 if you want to check two bags. The industry before was you could check two 50-pound suitcases and that was basically for free. I never pack like that. Initially when I read this story, I thought, if you want to pack that much, you should pay extra. You have to cover the cost.

VELSHI: No, no, you absolutely shouldn't. I never used to pack like that until you couldn't take anything through security. You have to decide how many ounces of nonsense you take through in a silly plastic bag. I have been giving U.S. Airways a lot of slake, I hope they are listening to this, because we have been giving them a lot of slake for the last year, 2007 was a disaster for airlines. They lost bags; they couldn't get people into the air on time.

Reservation lines were longer than the other airlines. The airlines owe Americans a break. It is just not right to keep nickel and diming us when the performance in the airlines in 2007, we all knows this, because we reported on this a lot, was disastrous. I am putting out an open invitation to any of the CEOs of the major airlines to come and talk to us. No one has talked to us. If Continental wants to come and talk to us, we will find you.

ROMANS: Would you accept that invitation? I don't know if I would accept that invitation. Ali is all hot under the collar about the airline performance. I agree with you. I used to think that I could travel with one bag. Now that I have a toddler, I travel with a pack and play and stroller and car seat. It will cost me a lot more to fly. If I am going to pay for it, I want to make sure those things are going to be in the city I go to, that I will end up with all my stuff. I'm not sure about that.

VELSHI: I tell you what; I will give them $50 extra to guarantee the plane gets off on time, landed on time, one or both of my bags there at the carousel when I get out. Take your 50 bucks at the end.

ROMANS: I thought that was the fuel sir charges too. Jennifer Westhoven, Ali Velshi, we are going to have to leave it there because we will never solve the airline crises.

Coming up, a Texas tycoon tells us why he thinks the price of oil is ready to retreat. Watch out, still $100 a barrel by the end of the year.

(COMMERCIAL BREAK)

WHITFIELD: Hello, I'm Fredricka Whitfield, "Now in the News," near Daytona Beach, Florida, a plane trying to land crashed into another plane on the ground killing two people. Two other people were seriously injured. It happened at an air park in Titusville.

Three days before Tuesday's key presidential primary, the Democrats Hillary Clinton and Barack Obama, and Republican's John McCain and Mike Huckabee all trying to sway voters ahead of contests in Texas, Ohio, Rhode Island and Vermont.

In Gaza, fighting escalates between Israeli forces and Palestinian militants. Palestinian sources say at least 45 people have been killed today, at least two of its soldiers died in the clashes.

And "BALLOT BOWL" is coming up at the top of the hour. Now, back to more of YOUR MONEY.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I don't think we are head today recession. But no question, we are in a slowdown.

UNIDENTIFIED MALE: What's your advice to the average American who is hurting now facing the prospect of $4 a gallon gasoline?

BUSH: What did you say? You are predicting $4 a gallon gasoline?

UNIDENTIFIED MALE: A number of analysts are predicting $4 a gallon gasoline this spring when they reformulate.

BUSH: I didn't know that.

(END VIDEO CLIP)

ROMANS: The president hadn't heard those predictions of $4 a gallon gasoline. But I bet you Ali Velshi in Texas heard those. You know, in some parts of the country, you are already seeing well over $3. The Department of Energy already predicting $3.40 to peek by this spring, Ali. Gas prices for a lot of people is the economic issue, it is the thing that they face every week or even more frequently then that.

VELSHI: A whole lot of people down in Texas use pickup trucks and there are a lot of truckers, big truckers who put diesel in their vehicles, diesel selling for over $3.50 a gallon. It is not unreasonable. I don't think for somebody who is in office or running for office it should seem that far fetched. We are over $100 per barrel of oil.

ROMANS: You are absolutely right. Hitting 102, 103. You know in the month ahead Ali, there could be a little bit of relief at the pumps. According to Texas oil investor, he predicts the price of a barrel of oil will drop 10 to $15 this spring. But will it stay there. We are going to have to ask Boone Pickens who is here with us. Legendary oil investor, Welcome to the program sir.

T. BOONE PICKENS, FOUNDER, BP CAPITAL: Thank you.

ROMANS: Tell me a little bit about what you are expecting to happen with oil prices. I am looking at 102, $103 a barrel. A lot of people are catching their breath this week on prices, what it is going to mean for consumers. Is this the last gasp of this big rally that we have seen?

PICKENS: I don't think so. I think the second quarter could drop off to $85, $95 a barrel. It will pick up again in the third and fourth quarter in the year. We will be over $100 a barrel at the end of the year.

VELSHI: Boone, it's Ali here in Texas. First of all, you have a beautiful state here; you have been here for a long time. Texas is a state that makes a lot of money off of oil. You as an oil man for decades you are going into wind I am a big fan of wind power. A lot of people who don't take it seriously. Tell us the story of wind power and why you are in it?

PICKENS: Ali, we are going to have to have 150,000 megawatts of power, electricity in the next 10 years. There is no way we can get that other than -- you can't get there quick enough with nuke. Second, you could get there with coal but coal is now having a difficult time environmentally.

So where do you go? You are going to have to go to wind and solar. That can be accomplished. You are not too far from Sweetwater, Texas. You should go up there. It would be north of you. Go up to Sweetwater and see what's going on there as far as wind power is concerned.

ROMANS: Let me ask you this. Ali, get on the bus. Get going. You have another town to visit.

VELSHI: That's the beauty of the bus. We can go to Sweetwater.

PICKENS: It will be worth the trip I am not kidding you. It is a destination point now to see what's happening in that west Texas town.

VELSHI: Boone, you are a legendary investor, but the size of your investments a little bigger than most of ours. Viewers can get involved in, but a lot of people are saying, well, energy prices are going the way they are even if we are going to an economic downturn. Is there a benefit in investing in alternative energy? Are you a believer in that or if somebody has energy in their portfolio, should be it in more traditional oil exploration and development?

PICKENS: I think they are all good. I think the traditional and I think the alternatives, I think I have even come around on ethanol. Ethanol is something that we should use in this country. Somebody says, well, it is not as good as gasoline or diesel. We are now pouring out of this country a half a trillion dollars a year. Over a billion dollars a day goes out for the purchase of foreign oil. I don't like that.

I think that's a poor use of our money. I think we should be in this country; the leadership should come forward with a plan to use alternative energy here in the United States, not pour out of this country. In 10 years, we will have -- there will be somewhere between 5 and 10 trillion dollars that we will pour out of this country for foreign oil.

ROMANS: All right. Boone Pickens we have to leave it there. Thank you so much for joining us, sir. I appreciate your perspective on all this, on oil prices, energy prices, leadership and, of course, wind.

Coming up, which candidate has the best tax plan for your money? We will explain when we come back.

(COMMERCIAL BREAK)

ROMANS: All right, Ali, time for a quiz about the almighty U.S. dollar. Name the year movies like "Bonnie and Clyde," "Cool Hand Luke" and "The Graduate." Which you are going to be seeing right here.

VELSHI: Way before I was born. ROMANS: I am not sure really. The year was 1967. Why is that year significant? Well, the good old American dollar this week experienced a '60s style flash back; the dollar index hit the lowest level in the middle of the week since 1967. The dollar is now so weak; some stores in New York City are accepting the European currency, the Euro. Can you believe it Ali?

VELSHI: I was in Laredo the other day, which is a city of 250,000 on the Mexican border. The retailers in Laredo were doing very well, because even the Paso is strengthened against the dollar. People come in to the United States from Mexico to shop and go back. That's what it has come to.

ROMANS: Well it is just interesting to think how different the economy was when the dollar was so weak. I want to ask you about the candidates on the campaign trail. Tuesday, an important day in Texas. What are these three major candidates saying about taxes, housing, and jobs? Tell us where they all stand on our money?

VELSHI: These are the concerns people have. Taxes have not come up a lot in my conversations with people. Taxes, though one of the most important things for the economy, don't tend to be big issues of the moment until they become big issues of the moment.

Let's talk about where they stand. John McCain the biggest issues between McCain and the Democratic candidates, McCain would keep the tax cuts in place that President Bush put in place in 2001 and 2003 for all earners the. He would cut the corporate tax rate by 25 percent and repeal the AMT, the dreaded alternative minimum tax that eats away at middle income earners.

He would like to ban any new Internet and cell phone taxes, which is kind of interesting not something that we talk about all that much. Take it over to Barack Obama and see what he would do. He would repeal the tax cut for high income earners only but not for everybody else. Would eliminate taxes for low income senior citizens. He would implement a $1,000 tax credit for working families under a certain income level and he would reform capital gains taxes.

Hillary Clinton too would repeal the taxes for high income earners, not middle income or lower income earners. She would reduce personal exceptions and provide a $1,000 child credit for families with a certain income or lower. That's where they stand on taxes.

On housing, John McCain says he would help legitimate homeowners out of their mortgage foreclosure mess but he does not want to help people who were speculative, hard to know what that means. You know, Christine, a percentage of these homeowners were speculators. Barack Obama says he would issue some sort of a credit for struggling homeowners and create a scoring for mortgages to be able to score them and is interesting in a penalty for lenders who commitment fraud.

Hillary Clinton has been the clearest and the earliest on her mortgage situation on what she thinks about housing. She would like a 90-day moratorium on sub prime foreclosures. The government last month had a 30-day moratorium on foreclosures and a five-year rate freeze on adjustable rate mortgages. As you know Christine that second point is a big deal. Adjustable rate mortgages are fixed in the market. That is a very hard thing to get government regulation into it. That's where they stand on those two main issues.

ROMANS: In terms of housing and fixing the housing crisis and the housing bailout, there is a battle shaping up between Republicans and Democrats. Republicans don't want to reward risky behavior by the banks and by homeowners. We don't know which percentage of homeowners were just making really risky, maybe greedy choices in which were really --

How do you test for that? How do you know? How many home owners who need help get overlooked? You have got a real issue coming up about how to fix this right now.

VELSHI: The problem is whether you want to fix it or not, we saw almost half a million people loose their homes in the United States in 2007 to foreclosure. There are some that say that number to be higher. The number of homes lost.

When the housing market continues to drop, when you put that much inventory back into the market that affects everybody else's housing prices. I spoke to somebody yesterday who said in his neighborhood, 16 houses are for sale in foreclosure in a middle class neighborhood. That affects everybody's property value, so I don't know what the fix is. It's complicated.

ROMANS: It certainly is complicated. All right. Ali Velshi in Texas, thanks, Ali, on the Election Express.

Coming up next on YOUR MONEY, one economist explains why we are headed for tough times. Like we haven't seen since the great depression.

(COMMERCIAL BREAK)

ROMANS: Ali, I want to ask you, are you ready if you intend to live to the ripe old age to 95, which I think you will, a couple need to save some $550,000 outside of regular daily retirement expenses to pay for health care costs. This is according to a 2007 study. Numerous other studies, Ali, show that a majority of Americans are not saving enough for health care and retirement.

You can make sure you are ready by maxing out your 401(k) investments through your jobs, increasing your savings by $50 a month in your taxable savings account. Ali, that plays into that growing money fears. I think a lot of Americans aren't ready. It is hard to be ready for something like that down the road when you are not ready for borrowing for college right now, for filling up the gas tank, trying to figure out how to pay for a mortgage that might be worth more than your house.

VELSHI: In effect, a lot of people were saying part of the problem they have right now, retirees, for instance, not intimately connected with the day to day movements of the economy, but their income is set and their expenses are much higher. I was hoping we could bring Greg Hunter along for a day of this trip. His pet issue is inflation and how much it really is. That is the number one issue I have been confronting on the road in Texas. Everything they pay for is more expensive.

ROMANS: Ali, we did bring Greg Hunter back. Last week he was talking about economist John Williams. We caught up with him this week. We brought him back. We want to talk a little more. You have been incredibly pessimistic about what is happening right now. A lot of people in Washington are saying they are not embracing what is happening in the economy.

GREG HUNTER, CNN CORRESPONDENT: A year ago, Ben Bernanke, the head of the Fed, Hank Paulson, the head of the Treasury, even the president said the sub crime crises was going to be contained. There are 9 million houses under water now. Experts say that number could easily double, 15 to 20 million houses could be under water in a year or two. That's not contained.

So, when you hear Ben Bernanke this week talk about how we are not in a recession. We don't see a recession. The president, same song. Not in a recession. Not going to be in a recession. It makes you wonder. Are these guys going to be wrong in the future? Here is what John Williams of Shadowstats.com says about what's coming down the road.

(BEGIN VIDEO CLIP)

JOHN WILLIAMS, SHADOWSTATE.COM: Where are we going? We have a severe recession ahead of us with higher inflation than we are seeing now. It will be probably the worst business cycle I have seen since the great depression. I wouldn't want to be the president in the 2012 election. Whoever wins this upcoming one is going to take blame for a real bad economy.

(END VIDEO CLIP)

HUNTER: With that kind of prediction, hear that, inflationary depression is coming down the road. My first question was, wow, what do we do? I am not the kind of guy that gets on the air and tells people what to do.

Listen to what John Williams said. He makes these predictions to Fortune 500 companies and hedge funds around the country. This is the guy that gets paid for his advice. We are lucky enough to get him on CNN to tell you what you should do with your money. Listen to what he says you should do.

(BEGIN VIDEO CLIP)

JOHN WILLIAMS: It's a bad time for stocks, for bonds with the higher inflation and what's going to be weakness in the dollar. That will tend to push the long-term rates higher pressing on bond prices. Very simple cash. You want to be liquid. You want to be safe. I would hold a little bit of gold as a hedge against inflation.

(END VIDEO CLIP) HUNTER: Robert Schuler at Yale University the famous economic professor up there, reports the same thing. So does Mayor Yulrabini (ph) over at NYU, saying the same thing. These are guys that are educated; saying look out there is a big pie coming in your face.

VELSHI: Greg, let me ask you a question. I was listening when President Bush made his speech. Ben Bernanke was testifying before Congress. I was listening. Senators were asking about inflation. Everybody in America, certainly in Texas, spent this week talking about inflation and how serious it was in 2007 and how bread and milk and cheese and all of that is more expensive.

Ben Bernanke with a straight face said to Congress, no no, core inflation is quite contained, under 3 percent. Core inflation is inflation that excludes food and energy. This is a problem when we say that is contained. No one in America buys stuff that excludes food and energy.

HUNTER: The king has no clothes. The king is buck naked. Another thing he blurted out, which I can't believe he blurted out; it is my reoccurring theme that the banks are in trouble. He says there is going to be increased bank failure.

ROMANS: He said some small banks will likely fail. That caused markets to be very concerned by the end of the week. The Federal Reserve chairman said some banks are going to fail.

HUNTER: Why did he feel obligated to say that when he wasn't pressed? I think the banks are in trouble. There is a lot of evidence that shows that.

ROMANS: We all talk about inflation, inflation, inflation, the word is stagflation. The Fed chairman said he thinks that inflation is going to come down and we will not have stagflation, that threat of the 70s. We will talk about this again next week.

Still to come on YOUR MONEY, we will preview Tuesday's primaries, what's really at stake. First, this week's right on your money.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): Not everyone gets a head start on retirement. Some people have to play catch up.

JACK OTTER, DEPUTY EDITOR, BEST LIFE: If you are in your 40s, start saving more. The rules for the 401(k) allow people to put up to 15,000 in their 40s. You should be maxing that out. With any luck, you're getting a company match. You might be putting away as much as 20 grand a year.

ROMANS: Also, consider your investment potential for growth.

OTTER: You need to invest more aggressively. Put a larger percentage in stocks than bonds. Invest in stock funds, ideally in index funds. Maybe 80, 90 percent of your portfolio. You are going to see some ugly years. If you are 40, you are looking at retiring around 65, over 25 years you should get much better growth from stocks and you may very well have to be in the position where you have to say, I can't retire at 62, 65, I will have to put it off to 67.

ROMANS: Another great way to save is a Roth IRA.

OTTER: That's an individual retirement account. The great thing about it is you pay no taxes when you withdraw the money.

ROMANS: That's this week's tip right on your money.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

ROMANS: Hi, Ali. Politics, money, potential recession, government bail outs, housing, wrap it up. What will be so important for Tuesday for the primary?

VELSHI: What I keep saying Christine is that Texas is a country in one state. It is very varied. There are places where the oil prices are not bothering people, they are making enough money off of it. Other parts, where gas prices, oil prices and inflation are the big issues here. Texas is the second biggest economy in the country; it is the second biggest employer in the country.

The main issues here are inflation, gasoline, taxes. I had a lot of people talk to me about health care. There are going to be looking very, very closely and we are going to stay with Texans all the way to the primary and find out how they are voting and what decisions they keep making.

ROMANS: All right, Ali Velshi. Thanks, Ali, so much. Can't wait to see what you come up with over the next few days when your trip through Texas. It has been great to see you. Stay right here for more.

VELSHI: Texas has been missing you, too. I have had a lot of people coming up to me saying they really love you and they wish you can come down here.

ROMANS: That is so sweet. You know my brother-in-law and sister- in-law live in Fort Worth, so Texas is on my list for the summer for sure.

Ali Velshi, stay right here for more from the best political team in television. You can make sure to catch CNN's primary coverage Tuesday night. Thanks for joining us for this edition of YOUR MONEY, we will see you next week Saturday at 1:00 and Sunday at 3:00. You can see Ali all weekend, all the way through Tuesday from Texas. See you then.

(COMMERCIAL BREAK)

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