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Candidates and the Economy; Auto Industry Woes; Paying for College
Aired September 6, 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 CENTER: Oh but first you have to tune into YOUR MONEY and then we'll look at the top stories right after this.
KAREN MAGINNIS, CNN METEOROLOGIST: Good afternoon everyone, I'm CNN meteorologist Karen McGinnis. We are still watching what is tropical storm Hanna wind its way up the mid-Atlantic towards the I-95 corridor. Reporting winds near 50 miles an hour as it really races up the eastern seaboard but lengthy delays at New York's airports, Newark, and also in Philadelphia, and New York in excess of four-hour long delays at JFK.
And also we're reporting that in Philadelphia, misting conditions, low visibility. Delays there about 40 minutes or so. Still a little bit of a tornado watch left. Right across Chesapeake Bay area. And mostly we're look at a wind and a rainmaker, some reports of flooding in central sections of Virginia between two and five inches of rain. It looks like this will just rain itself out across the northeast.
YOUR MONEY begins right now.
ALI VELSHI, CNN HOST, YOUR MONEY: Welcome to YOUR MONEY, where we look at how the news of the week affects your bottom line. I'm Ali Velshi.
CHRISTINE ROMANS, CNN HOST, YOUR MONEY: And I'm Christine Romans.
Coming up on today's program, tackling issue number one, the economy didn't exactly take center stage at either political convention. We'll look at what the candidates need to say as we head down the homestretch in the race for the White House.
VELSHI: Plus, oil prices are in a slump and that's going to spell relief for drivers this fall but could the next big storm change all of that? Find out what industry experts say about oil prices.
ROMANS: And the high cost of college, how middle-class families are dealing with the hefty price tag. And what the presidential nominees want to do to help.
VELSHI: But first, political fanfare took center stage this week. A dismal jobs report on Friday that reminded many viewers that the economy is still issue number one. Just hours after the Republican National Convention wrapped up in St. Paul, Minnesota, officially nominated John McCain as the GOP candidate, the Labor Department came out with dismal news. The unemployment rate in the United States has reached 6.1 percent. That's the highest level since September 2003, 84 percent jobs were cut in August alone and more than 600,000 jobs have been eliminated since the beginning of the year. So it looks like the economy continues to be a top concern for many Americans, Christine. And we're here to look at more from the candidates, as the weeks roll on.
ROMANS: That's right, Ali. Politics and money. While both the Democratic and Republican conventions provided plenty of political theater over the past couple of weeks, they didn't exactly provide hard and fast solutions for our economy's biggest crises. Stephen Moore of "The Wall Street Journal" and Daniel Gross from "Newsweek" join us now to take a look at what both tickets need to address in the coming weeks.
Gentlemen, thank you for joining us. Let me start with you, first, Steven. I want to stick with the most recent, and that, is the Republican National Convention. What -- what did they say there about the economy and how to fix it? It's a little tougher for the Republican, isn't it?
STEPHEN MOORE, "THE WALL STREET JOURNAL:" It is. It's like, John McCain is swimming upstream especially with these new numbers on jobs, which are very disappointing. We've had now about four straight months of very negative job growth. You know I think that for the Republican base, this convention for Republicans was a big success.
I think the deficiency was I don't think that John McCain or Sarah Palin fully enough really talk about what they're going to do to fix the economy. They did talk about the fact that you know Obama wants to raise taxes and McCain wants to cut them but I think they're going to need to be more specific because if the economy's hurting like this in November, the -- change may overwhelm the Republicans.
ROMANS: The issue for the Republicans is they have to say that something's wrong with the economy but ideologically you don't necessarily want the government to go in and fix it.
DANIEL GROSS, SENIOR EDITOR, "NEWSWEEK:" And the real interesting dynamic here is this inversion. Usually the Democrats have a tough time constructing a narrative. You know, cut taxes for certain people, credits here and the Republicans have a very easy time. Cut taxes, free trade, we'll have growth.
This time it's the opposite. Obama laid out a pretty specific list of things that he would do on health care, economy, housing, et cetera. Republicans are kind of had this mixed message. On the one hand, there's I feel your pain. On the other hand, it's, you know, that pain is just mental. Right? This kind of glass half full. The economy's OK. But on the other hand, in an acknowledgement that we're not quite as well off as we were four years ago and that's a real challenge for them to construct in the few sentences. What the problem is. And what the solution is.
MOORE: You know the other component of this, though, by the way, and prior to the Republican message between now and November 4th is going to be, look, raising taxes, the kind of Obama plan that was laid out is exactly the wrong solution. At least this is what Republicans are going to say. That you can't tax your way back to prosperity. The big government of the problem and that's going to be I think the real clash between these two parties over the next seven weeks.
ROMANS: Are people going to vote on taxes, are people going to vote on housing issues, and housing rescue plans, what are people going to vote on do you think Stephen?
MOORE: I think that taxes are always a big issue. It better be if Republicans are going to win because this is the paid-earned issue, Christine, since Ronald Reagan. The Republicans are the party of tax relief. What's interesting is Democrats in this election, for the first time in a long time, are saying, we're going to provide tax relief for the middle class. If they can pull that off, they can win.
ROMANS: Can they full off, though, Dan? Here's my question. We have ourselves in kind of fiscal -- fiscal dire straits in a lot of different ways. Do they have the ability to do what they want to do?
GROSS: Neither party has the ability in the short term or the long term to enact their campaign goals. But you know --
ROMANS: Certainly not all of them.
GROSS: Or even a small percentage of them.
ROMANS: Well, that's depressing.
GROSS: But I hate to break it to Steve, but there's more to life than marginal tax rates and I think that, while taxes are an important issue, it's these background issues. Job loss, health care, economic anxiety, concerns about globalization. That will ultimately kind of assume a greater prominence in people's mind-set in the voter's mind- set this year and what's troubling them. It's not the -- they're not worried about the fact that taxes might go up in 2010. They're worried about their health care, their job today.
ROMANS: And I --
MOORE: That's true, but let me just point this out, I think that the message that the candidate is going to have that's going to win is Washington is broken. Every institution of Washington's broken. And whichever candidate can convince the public that they are the reform candidate, you know, it's interesting that in the Thursday night speech that John McCain kept talking about fighting for you and reform, that's interesting coming from the incumbent party.
ROMANS: Let me ask you about Sarah Palin, quickly, both of you. Dan, first let me ask you about Sarah Palin. How did she play? How did the Sarah Palin, governor of Alaska, how did that card play now that it's out on the table with the rest of them?
GROSS: The speech she gave was well received in the hall and I think well received generally, but this is a semester. And that was the opening test. She's got a lot more tests in front of her.
ROMANS: Stephen? MOORE: I think, this was about as good of a political speech as I've seen in 20 years. I mean I think that people were truly blown away by it. She totally electrified especially the conservatives and don't forget, Christine, this was a big challenge for John McCain. As to convince conservatives that he's one of them. So I'll make another prediction. If John McCain loses this race, Sarah Palin is the instant front-runner 2012 for the Republicans. That's how good she was. And Democrats are now even saying; we've got to stop attacking Sarah Palin. She's too good. We've got to aim our barbs at John McCain.
ROMANS: Dan wants to see more unscripted moments though. Anyone can write a speech and really deliver it, right?
GROSS: Right, the next big issue is going to be her getting in front of the press, press conference, these debates, interacting.
ROMANS: Dan gross, "Newsweek." Stephen Moore "The Wall Street Journal." Thank you both and we hope to see you soon.
VELSHI: Coming up next on YOUR MONEY, as Barack Obama and John McCain audition for the highest office in the land, find out what a president can really do about helping you find a spine and secure your own job.
And later, oil prices continue their slide. Find out where gas price headed this fall and why the next major hurricane may not change their course. Stay with us. You're watching YOUR MONEY.
ROMANS: A whopper of a job report out Friday showed 84,000 jobs were lost in the U.S. in August. Far more than the 75,000 expected. Once more? The unemployment rate reached its highest level since September 2003. So let's take a look at where the candidates stand when it comes to jobs and wages.
Senator John McCain wants to give job growth a shot in the arm by cutting corporate tax rates. He said he'd leave the minimum wage at $7.25. The level it will reach next year and to help job seekers find employment, McCain wants to consolidate federal unemployment programs and retool training programs.
Senator Obama, on the other hand, said he'd fund federal workplace training programs and push for stronger unionization in industry. He's in favor of raising the minimum wage to $9.50 an hour by 2011. And he would future -- and he would tie future hikes to inflation. And Senator Obama would also like to establish a tax credit for companies that maintain or increase full-time workers.
VELSHI: Well, both presidential candidates have laid out some ideas about increasing job security and job creation in this country. Christine touched on some of them. But can who ever win the White House really do anything about job growth and job losses? Let's find out from, Lakshman Achuthan is the managing editor of the Economic Cycle Research Institute. Lak, good to see you.
LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: You too. VELSHI: People will want to know about this. It may be one of those decisions that assist them in making -- deciding who they cast their vote for. Because when you see as many job numbers, jobs lost when you see 600,000 jobs lost since the beginning the year chances are you know somebody who lost a job and you might be worried about your own.
VELSHI: What's going on in this job situation? Are we likely to continue to see more of these jobs lost next few months?
ACHUTHAN: We are. The numbers from 22 were kind of a head fake. It's really in the end about jobs growth and/or the lack thereof. And this is consistent with the recession so far which means that you will see more of it. In terms of what can do you about it or just leading in here, what are the different policies that might work?
The fact is that the president, in particular, can't do a lot. He either can take the blame or get the credit as the case may be in the near term. Right for the next year or what I mean is like the next year or so. And in the longer term I think that they can do quite a bit in the terms of designing the playing field. That is the policy debate that you are seeing. Should we design the playing field this way or design the playing field that way.
VELSHI: What is the best design for a playing field that is going to create more jobs? Because fundamental we talk about inflation, we talk about energy prices, we talk about food, we talk about housing, we talk about credit. But you need a job first.
ACHUTHAN: Yeah, well the thing is, it's a policy debate. And I don't have a -- I can't weigh on one side or the other that policy debate and however I think that we're always going to have the ebb and the flow of the business cycle. Having a recession is not a failure of an economy. Its part and parcel of a free market and you'll have cycles and inflation and other things too.
The question is I think both sides of the aisle could improve that timing of their policy decisions. What we're going through now, we've spent $100 billion, or more easily on trying to avert or mitigate this downturn if we'd done it literally a quarter or two earlier the old adage, a stitch in time saves nine, does mean something. It does work and I think there is a huge policy --
VELSHI: Should we have added the stimulus checks earlier?
ACHUTHAN: Stimulus checks earlier. Some of the other Fed moves earlier. Not a lot. Don't do anything massively different, just do it earlier. That is a huge policy opportunity for both sides the aisle.
VELSHI: Here's what the White House said this morning after the jobs numbers came out. They said we want to see the economy return to strong jobs growth. Americans need to know that the economy is growing. Including the very strong growth rate in their last quarter and we're seeing some other encourage signs like the strong increase in productivity growth. So they're saying that the economy is growing. You're saying it's in a recession. Isn't that part of the problem, that if they can't acknowledge where it is, they can't fix it.
ACHUTHAN: Yeah I think part of the situation is when you're in office, you're a cheerleader and you just will not admit that anything is going wrong until after the recover has begun. That's kind of normal. I recall back to President Carter. His economic adviser during the recession said it was a recession, and got in trouble. OK, instead of recession I will call it a banana and then the banana lobby got really upset and then he ended up calling it a kumquat in the end.
But the thing is that I think that recognizing where you are is really important to the extent that it can help you move quicker on your policies. I mean these are lots of good ideas that are coming up. I think that people are focused, policymakers in trying to do something. It'll help mitigate and eventually give us a recovery. The good news is, you know, the outlook is ultimately good. We will have the business cycle upturn. There is no doubt about that.
VELSHI: The jobs that we're losing heavily every year -- every month, seem to be in manufacturing, construction. Those manufacturing jobs are not likely coming back in those numbers.
ACHUTHAN: No, no no. Not in the large numbers and it will probably have to be in more skilled areas and so I think they're both onto something they tune into that. And also this manufacturing aspect is something that has clouted I think the assessment of the economy this year.
Because the manufacturing sector was held up, temporarily, by exports abroad. Now if you open up your eyes and look around the world you see the entire world is flowing so the prospect of manufacturing to ship abroad is not likely and that is why we are why we're in the soup for a while.
VELSHI: Lakshman Achuthan, good to talk to you.
Lakshman is the managing editor of the "Economic Cycle Research Institute."
ROMANS: All right, Ali, coming up after the break. Worth the wait, free TV and fancy snacks aren't enough to save one airline from finishing last in its class. We'll explain next.
VELSHI: Jennifer Westhoven joins us today from Atlanta. Jennifer good to see you again. Listen, we've been seeing oil prices go down and gas prices go down. It's not helping the automakers. We're still seeing auto sales dropping.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: We still are. General Motors is hoping that these lower gas prices are going to help out that maybe more people will start thinking more about SUVs and trucks again but I tell you last month very tough numbers for the auto industry. Their sales plunged during the month.
And we're talking about Detroit here, General Motor, Ford, Chrysler; we're talking about double-digit losses. Five months in a row, by the way, of auto losses. Now Toyota and Honda also saw losses. But they weren't nearly as bad as Detroit. Basically what you have is a lot of people who are thinking about buying cars are veering away. They don't even want to look at trucks or SUVs on the dealership lots right now and instead they're fighting over the two small pools of smaller cars that had good fuel efficiencies.
So that's what's helping some f the aged auto makers. And in the meantime it means that Detroit is really banking on 2010, because that is when all these new cars that they are starting to build right now that have the better mileage that is when they are going go on sale and that is also when they are going to start seeing some savings from the new contract that they have with the united auto workers. So General Motors is saying we will see a bottom but some analyst say boy that is a long time between now and 2010.
VELSHI: And there are a few people like me who are considered -- like me I've had a car that's a few years old. Not really ready to get rid of it then but by the time that I am ready to get rid of my current car it'll probably be the coolest thing in the world to drive a small efficient car so I won't get into that kind of thing as well.
VELSHI: Maybe you got a big one, right. I probably net good for the environment because I drive so little.
ROMANS: But he does fly.
VELSHI: We both flew this weekend.
ROMANS: And I would like to say that I had an on-time flight this too.
VELSHI: I did too.
ROMANS: Yours was on time.
VELSH: An on-time flight and both flying from the hurricane zone and that's got to have been interesting.
ROMANS: But still a lot of problems.
WESTHOVEN: It is a news flash when you're on time. Yeah it's a news flash when you're on time, right? That's how bad it's gotten. Get this if you fly Jet blue you got a 1 out of 3 chance that you're not going to arrive on time. Jet blue has the worst on-time rate in these latest monthly statistics that come from the Transportation Department.
Partly because Jetblue flies so much in and out of New York and really it's the New York airports that are just notorious for their delays. And that's something that we also saw in this monthly roundup of statistics as well.
Finally, we'll take you to Sony. Did you guys hear this?
VELSHI: No but I tell you just read about this and I just got back from the hurricane. What I did last night sort of calm myself down as I put some candles up in my apartment and I went to sleep, and I've got -- my wall is scorched from the candle.
ROMANS: The guy is on a barrier island during hurricane Gustav and he survives and then he almost burns his house down.
WESTHOVEN: I'm glad that you're not scorched.
VELSHI: I am too. Watch out, people. My point here is you can get scorched when where you don't imagine.
WESTHOVEN: Right. And so Sony, this is huge recall. 440,000 computers from all around the world. Their laptop computers that we're talking about. Basically there can be a problem near that hinge. Where the computer can overheat. Sony says there have been 200 reports of problems and I think its 15 people have suffered minor burns. And you know we think about Sony because it was just two years ago that Sony had that major recall of batteries all around the world that weren't just these Sony products. They were in other laptops as well and those computers were going up in flames. So at least this is just isn't overheating but probably costly.
ROMANS: And I guess now we know what we could get Ali for Christmas in the New Year, we can get them scented candles.
VELSHI: I like candles.
WESTHOVEN: I'm getting him the electric candies.
ROMANS: Yeah. There you go.
VELSHI: Candles that can't catch fire. Jennifer Westhoven, good to see you. We look forward to seeing you back here in New York soon.
ROMANS: All right. Coming up, sunny forecast as hurricane season roars on, we'll take a look at whether oils southward migration can continue.
And later, rising costs and the race for the White House.
VELSHI: Yeah, how college tuition is draining American's middle class and what the candidates say they can do about it. >
WESTHOVEN: But fit, this week's "Right on your Money."
(BEGIN VIDEO CLIP)
ROMANS (voice over): Transitioning into a new job could potentially damage your 401(k). And figuring out what to with your nest egg can be a challenge.
You really have four options. You can cash out your 401(k) asset. Rollover into your new employer's 401(k). Leave your 401(k) assets with your old employer. Or you can rollover your 401(k) into an IRA, an individual retirement account. LYNNETTE KHALFANI-COX, PERSONAL FINACE EXPORT: Now are there pros and cons with each of those. But by far and away the absolute worst thing that you could do is to take a withdrawal and have that cash come right to you. The reason is that you're going to pay abundant amount of taxes and penalties on what you think might be a nice chunk of money.
The best thing to do is to roll it over if your old 401(k) plans to your new one.
VELSHI: Whatever you choose to do, keep saving for your family and your future. And that's this week's "Right on your Money."
MAGINNIS: And good afternoon, everyone. I'm CNN meteorologist Karen Mcginnus. It looks very ragged now but still nonetheless tropical storm Hanna hanging in there and winding its way very rapidly up the mid-Atlantic coast up into the northeast.
Major delays out of that particular corridor from JFK to Newark and also in Philadelphia, but in New York, we could see delays up to as long as five hours. Our tornado watch has been discontinued. It had been in effect across much the mid-Atlantic coastal sections but this storm system is winding its way up toward the north and northeast. It'll be weakening considerably.
Now they could see quite a bit of rainfall in the New York City and there's a big tennis tournament taking place there. The U.S. Open. And that could be affected as well. Then there is Ike, Ike is expected to move across the Turks and Caicos and it looks like the beginning of the workweek.
We could see Ike move across Cuba through the Florida straits. Then into the Gulf of Mexico. YOUR MONEY begins right now.
VELSHI: Hurricane Gustav whipped through the Gulf of Mexico. It shut down oil production in the Gulf for days and caused some damage but instead of oil prices spiking, they went the other way. What is going on with oil prices? I'm joined by Stephen Schork, he is the editor of "The Schork Report. Which tracks energy and shipping markets.
And Peter Beutel, analyst with the Energy Risk Management Firm. Cameron-Hanover, thanks to both of you for being with us. Stephen, I was -- until I lost blackberry service while I was down in the Gulf of Mexico I was getting your reports on oil. I mean, I was a little confused. We thought that the storm is the first one really since Katrina that's whipped right through the oil-producing regions through the Gulf of Mexico. It'll damage things for sure. But oil prices going down? What was behind that?
STEPHEN SCHORK, PUBLISHER, "THE SCHORK REPORT:" Yeah, if there was going to be a reason for oil prices to move higher, Ali, this would have been it. But then again, if you asked me a month and a half ago, Russia's invasion of Georgia and they're essentially sitting on top of a major thoroughfare of oil to the west wasn't going to cause oil prices to go higher, and then a hurricane's not going to cause oil prices to go higher.
Clearly, Ali, this market was a bubble. It is still a bubble. There's still air inside of that bubble to be led out. We have to appreciate that price is a function of a trader's input to fundamental event. If we look at chart of prices from March up until July this market went straight up. It went parabolic. These were reactions to fundamental events but the problem, Ali, was there were no fundamental events that were driving that price higher. Therefore, a lot of air in that market and that air's still being led out of the market regardless of the Russians. Regardless of Gustav. Regardless of anything at this point.
VELSHI: In other words, Peter, you know when I remember back during hurricane Katrina, the night before it hit, oil prices hit $70 a barrel for the first time. But that was a tighter market. You had some reason to go up because there was some event. As Stephen says, we're so much higher already than we should have been. What do we now need to think about the way that oil is going up? My feeling is that with the economy continuing to falter with this jobless rate being greater than before, we're going to see more pullbacks on demand for oil and gas, not less.
PETER BEUTEL, OIL ANALYST, CAMERON HANOVER: Yes, I have to agree. And I have to agree with everything that Stephen's just said. Basically on the way higher, we discounted events that never happened. Now that these events are happening, prices are too high for us to move higher. So it does look like we can move lower. It does look like we're going to see prices continue to weaken despite what looks like a fundamentally improving or strengthening situation.
We've lost a lot of supply over this storm. We lost 2.5 million barrels a day of refinery production. Look at something like distillate imports. These are at very, very low levels. We should be going higher but this market is looking at a weakening economy, demand destruction and in a strengthening dollar and all of these factors is putting pressure on oil prices.
VELSHI: Stephen, what's your view of demand destruction, what Peter was just talking about? The fact that you know prices for oil on gasoline went so high and we saw it at about $3.50 a gallon on the way up, Americans started saying, no to SUVs and big trucks and then at $4, boy they really ran the other way. Do you think that that demand destruction stays in place for a little while, Stephen?
SCHORK: Oh, absolutely. Because even if we look at gasoline prices and more importantly, diesel prices on the year-on-year basis we're still -- gasoline prices are still 30 percent higher than a year ago. Diesel prices are still 50 percent higher than a year ago. Absolutely, Peter's on board, that there's rampant demand destruction in this market. There's no reason to think why we are going higher.
We have to remember, when oil is at $140, $150, who was telling us that that price was justified? It wasn't the producers. It wasn't the end users. People like T. Boone Pickens, people like Jim Rogers people like Goldman Sachs. All people that run hedge funds and if they're telling us that prices should be going higher you know what they've got a vested interest in prices going higher. And therefore this market psychology has changed and as Peter just said, we've had a nice rally in the dollar and that's been the trade now for the past year. Sell the dollar, buy commodities. Sell the dollar, buy more commodities. That's changing now the dollar's strengthening. And all of those people who sold those dollars who have to buy back those dollars.
And you know what; we have to start selling all of those commodities that they're buying. And if this is a bubble, like all bubble, we'll go back to where we started from. And therefore this bubble started at $70, almost up to $150. And the coast is clear now for a run back down to $87 crude oil.
VELSHI: Do you hear that Peter?
BEUTEL: Absolutely. I think he's right on the money. You know, August 22nd a year ago, Ben Bernanke came out with what I called his myspace speech. Where he was like, I've got this new transparency. My friends are JPMorgan and Goldman Sachs and Jean-Claudeferse. And I'll be cutting interest rates for the next eight months. That gave a lot of investor's free rain to go into commodities.
Around April, he decided it was time for him to play his cards closer to the vest. Since then in July, we've seen the dollar start to strengthen and it looks to me like we could see prices come back between $68 and about $85. Somewhere in that with the ideal number being right around $79 bucks.
VELSHI: All right, well this interesting information, as we always do, we'll hold you guys to come back and talk to us about what you said was going to happen when it happens. But we do appreciate how clearly you've put your case forward to both of you. So they both think that oil is going down, somewhere in the $70, $80 range. Interesting stuff. Christine.
ROMANS: All right, Ali, coming up on YOUR MONEY, we'll hear from the former comptroller Gener of the United States, who says our soaring national debt could put our economy, our standard of living and our national security at risk.
And, as college tuition prices sore we'll tell you what step the next president could take to make higher education in this country more affordable.
VELSHI: $9.6 trillion, it can't be many things. It's the national debt. The amount of money that the U.S. owes its creditors around the world and just to put that in perspective if we all got together and tried to pay that off, each American would have to shell off more than $31,000. And that's not bad part.
ROMANS: I think that that means your kids, too, kids, babies and grandkid. The numbers are climbing. Whoever wins the presidential election in November will be faced with this challenge. This challenge of dealing with the growing national debt. And all kinds of are deficits that we love to run in this country. Poppy Harlow from the CNNMONEY.com joins us here who has more. It is a big number. And a few years ago we thought that number was more patable in the five ranges and now it is back up to 9.6 and rising.
POPPY HARLOW, CNNMONEY.COM: Yeah, it certainly is. It's a big question in this race for the White House. Both candidates offering their so-called solutions to exactly what is going on for the economy, I recently sat down with David Walker, former comptroller general of the U.S. I asked him what issues that the candidates need to focus on. And if McCain and Obama are laying out viable plans for our economy.
(BEGIN VIDEO CLIP)
DAVID WALKER, FMR. COMPTROLLER GENERAL: First, the short-term economy. What can we do to minimize the possibility we're going to have a recession to stimulate growth so that the short term we can have some pain? What will we will do energy prices and what are we going to do about health care cost, et cetera?
But we also have another problem which quite frankly is much, much bigger. This country is in a $53 trillion financial hole. It grows by $2 to $3 trillion a year. We need to start doing something about it and they have little plans with regard to that.
HARLOW: Let's talk about the national debt because I think that a lot of people say, you know what, this is getting passed onto my kids. Why can't my kids pass it on to their kids? For me, for my family, why do I care so much? Why do I want my next president to change this? What does it mean practically speaking?
WALKER: It means that our future economic growth, our future international position, our future standard of living, and even potentially our future of national security is at risk. That's what it means. And people ought to care about those things.
HARLOW: Yeah, they ought to care and I bet that they do care but talk to us about what the next president needs to do immediately in those first 100 days. That first year in office to try to decrease that debt. Take it down from where we are now.
WALKER: Well the first thing they need to do is to acknowledge now both candidates that we're in a $53 trillion hole. That they will try to make it a priority to deal with it over a number of years. Secondly, we need a capable, credible, and bipartisan commission to make recommendations of the next president, of the next Congress, for an up or down vote in the Congress for statutory budget control, Social Security reform, round one of tax reform, and round one of health care reform. We can make a 15 trillion down payment if we go about it the right way.
HARLOW: Now let's say the next president doesn't tackle these issues like you'd like to see him and his VP do. What changes do you suggest then? What does Congress do?
WALKER: Well, the Congress ultimately is responsible for the budget. I mean they're the ones that have the fiscal purse, if you will. And congress frankly hasn't been helping lately. Since the budget controls expired in 2002, Washington's been totally out of control. It's been tax cut, spending increases and entitlement expansions, unfunded wars and a variety of other things. So Congress bears a responsibility as well. We need the congressional leadership to move towards more spending discipline and to move towards making this commission a reality.
HARLOW: You know and finally, energy policy, obviously weighs in here as well. Spending about $700 billion a year on oil from other countries. You know a lot of people say, hey the U.S. borrowing from China to buy oil from Saudi Arabia.
WALKER: To fight in Iraq.
HARLOW: There you go, taking it one step further. How is changing our current energy policy in this country help us with the deficit?
WALKER: Oh it does. It helps us with regard to our trade deficit. It helps us with regard to our balance of payment deficits. It helps us with regard to our budget deficit. It helps to improve our economy. It helps to be able to enhance our international posture. Strengthen our national security, lots of ways. We have to conserve. We consume too much in this country including of energy.
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ROMANS: All right, so what candidate can help us do just that? Of course I asked David Walker, which candidate he supports, who thinks would be best for the job? He says he's nonpartisan and he does not endorse either McCain or Obama. He was comptroller under both Clinton and Bush from '98 to 2001.
VELSHI: Let's speak frankly here as if we weren't on TV. I can't imagine a more boring topic than talking to the former comptroller general of the United States.
HARLOW: He was very interesting.
VELSHI: But it's a crucially, crucially important topic.
ROMANS: He boils it down like this; it's like Rome before the fall. All of these things, the United States does not have control of. Is like Rome before the fall and something that we should all take a look at especially our policymakers because they're in a position now to prevent a lot of this stuff from just running up crazy.
VELSHI: He talks about this $53 trillion. We said that the debt is 9.6 billion --
ROMANS: $53 trillion.
VELSHI: How do you get from 9.6 to $53?
ROMANS: It's what we've already spent and it is what we promise to spend. Including Social Security, Medicare, Medicaid, all that kind of stuff. What we haven't spent what we've paid for and all of our promises that we can't afford to pay for makes up to $53 trillion.
HARLOW: It's an unimaginable number. He really does put the onus not only on the candidate but also on Congress. And I asked him, that is why I asked him the question saying OK why do I care? If I'm about to go into retirement. Why do I care about this it won't get fixed in my life time? But he said you know it matters. This is what you're passing down to your kid and your kid's kids. This is also about our reputation as a country in the world in general. How the people view us and not you yourself have to deal with.
VELSHI: The country that is acting like somebody who is spending out of control on their credit cards and doesn't pay their bills.
ROMANS: There are people who say it simply doesn't matter and that what matters is getting re-elected every two years and reelected every four years and what matters is this a dynamic economy that can very quickly change. That the formula can somehow change so we don't have to worry those deficits. There are people who say that. And that is a philosophy that I think people who are running for office very easily rationalize.
VELSHI: I have been known to overspend in my time in the understanding that my income will probably improve and I'll pay that later and the point is you can do that as a government.
HARLOW: And if we look at incomes since 2000, the real income hasn't got any better.
ROMANS: Not going to let you do it anymore.
VELSHI: And our banks now are other countries.
ROMANS: Other countries who have their own national agendas and identities. And that is why the national --.
VELSHI: Check out that movie if you get a chance.
VELSHI: He's in the movie. We have to stop talking about this.
ROMANS: OK, it's gloom and doom. Coming up next on YOUR MONEY the economy is slumping but college costs are soaring. We'll tell you what the presidential candidates want to do to make your higher education more affordable. That brightens up everything.
ROMANS: More than 11million college students are heading to college this fall. Paying for school is one of the biggest financial obstacles most families face and tuition costs are rising.
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DIANE KOSTALIS, PARENT OF COLLEGE STUDENT: This is all college stuff. ROMANS (voice over): For the Kostalis family of Bethlehem Township in Pennsylvania, back to school time, means college tuition bills are on their way. And the cost goes up every year.
SANDY BAUM, SENIOR POLICY ANALYST, COLLEGE BOARD: The real problem with tuition and fees going up so rapidly is that family incomes have actually been stagnating.
ROMANS: Since 1998 medium household incomes have increased by only 1.7 percent adjusted for inflation. Meanwhile average tuition shot up 53 percent for four-year public colleges and 33 percent for private schools. Last year one year of college averaged about $6,000 for public schools and nearly 24 grand for private. Not including room and board.
KOSTALIS: You can't expect an average family to pay that kind of money when they're struggling to make the mortgage and put food on the table. How does that happen?
ROMANS: That question remains partially unanswered as 18-year-old Amanda packs for Mervian (ph) College. Thanks to large academic scholarship, grant money and loan the Kostalis family says they're responsible for only $8,000 of the $38,000 bill for Amanda's freshman year. The family feels they've got a great deal and yet it's still a burden.
KOSTALIS: It's almost another mortgage payment. Every month, my husband and I work very hard. He's a chef. I'm a substitute schoolteacher. My salary will basically be paying her college.
ROMANS: And even then Amanda expects to graduate $21,000 in debt. A figure she and her mom find hard to grasp.
AMANDA KOSTALIS, COLLEGE STUDENT: Because I have nothing to compare it to in my life. I don't have a job. I don't have a house. You know I don't have anything like that to pay for.
D. KOSTALIS: I'm actually appalled as a nation that college and school costs are so high that they're cutting out the whole middle class and these are the kids that -- they're bright, they work hard, they're going to be the ones that are going out and make a difference in this world and we're cutting them right out of it.
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ROMANS: To make ends meet, Amanda's mom says her family will have to cut back on just about everything. Her biggest fear comes two years when her 16-year-old son will also head off to off to college. Mrs. Kostalis says she doesn't know how they'll manage with two kids in school.
As those college costs sky rocket many voters are wondering what will the next president going to do about it to make higher education more affordable and what are the candidates saying on this issue? Tom Parker is senior associate at the Nonpartisan Institute for Higher Education Policy. Welcome to the program sir.
We know there's no debate. These costs are going up and up and up. We know that the money coming into American households is not going up and up and up. So it's a real bind for people sending kids to college at this point.
THOMAS PARKER, INSTITUTE FOR HIGHER EDUCATION POLICY: Yes, it is. Because families are squeezed in a number of ways, I guess I should say that almost every American family with a child who's interested in going to college faces this same squeeze. The lower income folks face the squeeze as well as middle income folks and increasingly upper income folks are feeling strapped about how to pay for college.
ROMANS: What could the next administration do to make college more affordable or is there anything that they can do?
PARKER: Well, there's not much an administration can do about slowing the increase in prices. But an administration can take steps to make more financial aid available to students and families who are struggling with this problem.
ROMANS: I'll be honest with you, I haven't heard much about this on the campaign trail except for a few lines here and there, and it's mostly about foreclosures, high gas price, things that are immediate right now. Although college tuition costs are also immediate, but have you been hearing about it on the campaign trail?
PARKER: There are some giant issues out there that are casting a little bit of a shadow over this issue, but the truth is this issue will emerge. Barack Obama already talks about this issue in his standard stump speech. I have to believe that if you have five kids growing up in Alaska, you're beginning to worry about college costs. I suspected this issue will show up in the debates.
ROMANS: Let's talk about John McCain then. You mentioned Sarah Palin, the governor of Alaska who has five children who just emerged this week as the running mate for the ticket for the Republicans. Let's talk about what the Republicans are saying about college affordability. What has John McCain said other than improving information for parents and sort of simplifying some tax benefits? What is his position?
PARKER: His main position is had a he wants to restore and reform the capacity that the private sector brings to helping finance higher education. And there's something to that because in countries all around the world where the same dilemma is emerging, people are turning to the private sector to try to help with this problem. We've had some abuses in that area in the recent past.
The Congress went a little bit overboard in correcting those abuses. I think that there is room to have partnerships with the private sector, which will help to bring more finance to families across the country. Barack Obama has a very different approach. He has a more detailed plan, incidentally. His plan calls for a $4,000 tax credit which could be used for college costs and adjusted so the lowest income families can be take advantage of the tax credit. As you know, ordinarily, a tax credit doesn't help people whose income is so low that they don't pay tax.
ROMANS: Bottom line here though is that college costs are going to continue to be expensive. This is sort of the key to the American dream; education and moving yourself up the ladder. Yet it's increasingly difficult to pay for it and you're graduating with a bunch of debt, on average.
PARKER: No question about it. You have to think of college costs a little bit the way you think of health care costs. The costs of delivering the product is substantial and is not easily contained. And that's what we're facing with higher education costs.
ROMANS: All right, Tom Parker, Institute of Higher Education Policy. Thank you, sir, for joining us; we'll talk to you again soon.
PARKER: Thank you very much.
VELSHI: Still to come on you're your MONEY why many Americans living on the coastline aren't ready for the next big storm.
ROMANS: You think by now folks living along the coastline would get it. When a hurricane is on the way, you board up and you leave.
VELSHI: That's not necessarily the case. As John Zarrella reports, many people are falling back into some dangerous habits.
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JOHN ZARRELLA, CNN CORRESPONDENT (voice over): Neil Rubin is getting a new garage door installed at his home.
NEIL RUBIN, HOMEOWNER: This one is supposed to withstand, 150 miles an hour in that area. Which is better than I had since I have the accordion shutters, why have a weak spot on your house?
ZARRELLA: And at garage door is considered the weakest spot in a home.
JACK TROUT, ELECTRONIC DOOR LIFT: You loose the garage, you loose the roof, you loose the contents of the house, and everything is gone.
ZARRELLA: But a new Mason-Dixon poll conducted for the National Hurricane Survival Initiative found a staggering 95 percent of the 1100 adults questioned didn't know this. And 30 percent said they would not start preparing their homes until a hurricane warning is issued.
CHUCK LANZA, BROWARD EMERGENCY MANAGEMENT: All the water is gone from the stores in 24 hours. The plywood is gone from larger stores. People need to make those plans early in the season.
ZARRELLA: The survey found bad habits resurfacing before the devastating wake-up call season of 2005. Katrina, Rita and Wilma an astounding 50 percent said they had no disaster plans or survival kits. Why the complacency?
(UNIDENTIFED FEMALE): Because we've been through it so many times that most times it doesn't hit us.
ZARRELLA: Emergency managers say while many people may not be prepared for the long aftermath, they do in most cases enough to survive a storm.
LANZA: People still, at the last minute, usually will make the right decision. Problem is they don't have a plan in place and they haven't bought the supplies that they need.
ZARRELLA: This may not surprise you. The high price of gas is compounding the under preparedness problem. That's because people aren't buying the supplies they need because they're spending so much money to fill up their gas tanks.
Another number coming out of the survey that you just shake your head over, 85 percent of the people polled said they had no intention of doing anything to strengthen their home against a hurricane.
John Zarrella, CNN, at the National Hurricane Center in Miami.
VELSHI: Folks are bold. Where I was, they weren't taking those chances.
ROMANS: Me, either.
VELSHI: Thanks for joining us for this edition of YOUR MONEY. We'll see you back here next week.
ROMANS: Saturday at 1:00, Sunday at 3:00. See you then.