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42 Days to Avoid Fiscal Cliff; Hamas Says Fighting to Stop at 2 P.M.; Huge Upheaval Could Follow Israel, Gaza Conflict; Hazards of Reverse Mortgages; Hostess, Unions Working Towards Settlement.
Aired November 20, 2012 - 13:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SUZANNE MALVEAUX, CNN ANCHOR: The White House and congressional leaders have 42 days left to come up with a deal to avoid the so- called fiscal cliff. If they can't agree, all taxes go up, massive across-the-board spending cuts, automatically will go into effect. After a meeting with President Obama Friday, congressional leaders sounded like they would have a deal and sound optimistic. Take a listen.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER, (R-OH), SPEAKER OF THE HOUSE: A constructive meeting with the president to talk about the America's fiscal problem.
SEN. HARRY REID, (D-NV), SENATE MAJORITY LEADER: But we all know something has to be done.
REP. NANCY PELOSI, (D-CA), HOUSE MINORITY LEADER: It was good. I feel confident that a solution may be in sight.
SEN. MITCH MCCONNELL, (R-KY), SENATE MINORITY LEADER: We're prepared to put revenue on the table, provided we fix the real problem.
(END VIDEO CLIP)
MALVEAUX: All right. Joining us to talk to about the fiscal cliff, what it could mean for the economy if it plunges over the cliff, Mark Zandi. He is an economist for Moody's Analytics.
First, Mark, explain to us, there's a lot of optimism here. But what would happen if they didn't come up with an agreement? What would be the impact of the economy immediately?
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Well, you know, I don't think it's a Wily Coyote moment. So on January 1, the economy would be OK. Clearly, with each passing day we don't get a deal, the angst would rise, the tension would become greater and the stock market would decline. Ultimately, it would be a problem.
But it's more -- I think "fiscal cliff" is the wrong word for this. It's more of a fiscal slope. It's going to take some time before it starts to do damage. So it's not like on January 1st that things are going to all fall apart. It's going to take a few days, a few weeks before that were to happen.
But if they don't reach an agreement, ultimately, they fail to reach an agreement, it would be a big problem. We'd go into recession.
MALVEAUX: And when you talk about recession, how do you define that? There's some groups that think the unemployment rate could hit almost 10 percent.
ZANDI: Yes, that's reasonable. So, if you look at the Congressional Budget Office -- this is the nonpartisan group that does a lot of the budget, forecasting -- they say if we go over the fiscal cliff and stay there, there is no agreement, then the economy would suffer a recession, such that unemployment would get back into the double digits. Of course, that probably understates the case because the world is going to be much more difficult to navigate through if we go back to recession, because confidence is weak and the Federal Reserve really has fewer options here. It can't lower interest rates because they're at zero. The world would probably look darker than that. Unemployment would be well into double digits.
We probably characterize it as another depression as opposed to a recession, so we don't want that to happen.
MALVEAUX: The main sticking point is taxes. Republicans say revenue has to be on the table, but the president, calling for a tax increase on the wealthiest Americans. Here's how he put it.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: What I'm not going to do is to extend further a tax cut for folks who don't need it, which would cost close to a trillion dollars.
BOEHNER: There are ways to put revenue on the table without increasing tax rates. We've talked about this now for over a year.
(END VIDEO CLIP)
MALVEAUX: So how do you get beyond that? I mean, they've been talking about it for a year, taxes versus revenue divide. Where is the room here?
ZANDI: Well, we'll get more tax revenue. It's probably a combination of higher tax rates on upper-income households. The president ran on this and he was very explicit about it and he won re-election. And therefore, I think it's highly likely that we'll see higher marginal rates on folks that make over $250,000 on a household basis.
I also think we'll get tax reform. And that's what Speaker Boehner's talking about. That is scaling back some of the deductions and credits in the tax code, again, for higher-income households. And that would also generate some revenue. And the combination of those two things would, I think, get us to a place where we need to go where we generate revenue.
But at the end of the day, if we solve the fiscal problems long run, we need not only more tax revenue, we also need more spending cuts, and a fair share of that has to come from reforms of the Medicare and Social Security system. So, we have to do all of the above. And I think that's what we're working towards.
MALVEAUX: All right. Mark Zandi, thank you very much. Hope that we get that resolved before January. Appreciate it.
Gaza, of course, one of the most densely populated areas in the world. Neighbor to Israel and Egypt. The territory home to Palestinians and Hamas. The violence there could spread throughout the Middle East. We'll take a closer look at Gaza as well as the region.
MALVEAUX: Deadly attacks between Israel and Hamas apparently are going to stop, at least for now, that, according to some officials. Hamas official telling CNN they have agreed to what they're describing as a calming down period. They're going to make that announcement about 30 minutes from now.
Want to take a closer look at this region, what this actually means to the folk there's as well as outside.
Josh Levs will walk us through it.
JOSH LEVS, CNN CORRESPONDENT: Hey, Suzanne. There's a lot to look at here. We're looking at surrounding region and the way that these countries can be impacted by what is happening.
Take a look here. Start off zooming in into-to-Egypt. I want you all to understand some things about Egypt in the way that it's playing out in what has become, for many people, in the area a crisis. We'll have a photo pop up here and that is of tunnels that are at -- where Gaza meets Egypt. This is something we've been doing a lot of reporting on. We also have video of it. Take a look. Egypt has been working to crack down on militants in that area, in the Sinai, who have been part, in some cases, of the smuggling operation. And doing that has meant cooperating with Israel on intelligence. But that, for Egypt, is very tricky. The last thing Egypt wants is to come across as supporting Israel. The new government led by President Mohamed Morsi is more openly supportive of Palestinians in Gaza. Hamas' political leader had a news conference in Cairo. Morsi comes from the Muslim Brotherhood. And Hamas -- a lot of people don't realize -- is an offshoot of the Muslim Brotherhood.
So the short version on Egypt is that is Egypt would benefit from increased peace and stability, actual peace and stability in Gaza, but the government right now could lose support if it seems in any way consolatory to Israel at a time of this brand new government.
We'll continue this video. Bring you up and over to Jordan. Because Jordan, in the big picture, has been one of the friendlier governments in the region to Israel over all. But there's something happening in Jordan in recent weeks that's important to understand. There have been protests and, in some cases, clashes by Jordanians upset over the economy and particularly gas prices. Some have taken an unusual step of even chanting against the king, King Abdullah. He's looking to cement support and calm things. So if anger grows, it could foment more unrest inside Jordan. And that is a concern for that government as well.
So, Suzanne, a conflict here between Israel and militants in Gaza can further the instability in these surrounding nations.
MALVEAUX: And, Josh, quickly, take us to the north. Lebanon and Syria playing critical roles as well?
LEVS: Absolutely. Let's touch on these.
We'll zoom in the video up to Lebanon. Lebanon has a long history of racked by violence. Recently, there was an intelligence chief killed in a bombing inside Lebanon. Also one more thing that you should understand when you think about Lebanon, and that is the role of Hezbollah. I believe we have video of Hezbollah here. Always a power struggle inside Lebanon involving Hezbollah, which the United States and Israel and some other countries consider a terrorist organization. It's fiercely opposed to Israel. Any conflict at all between Israel and Palestinians can further the instability inside Lebanon.
Finally, maybe last thing what we're talking about here, but absolutely not the least. If we zoom to the east in this map, we're going over to Syria, which has been one of the biggest stories in the world. Since March of last year, there's been this war raging there. And the opposition has been giving new figures lately about this war. The opposition has been saying that, now, as many as up to 40,000 people, getting close to 40,000 people, killed in the fighting in that region.
So again, this is the kind of thing that Tony Blair, the Middle East envoy for the Middle East quartet, is saying could cause more upheaval throughout the region if we see this continue between Israel and militants in Gaza with no solution in sight. He said it can cause more upheaval in a region that absolutely does not, at this time, need any more upheaval at all.
I'll tell you, there's a lot more to get on this at CNN.com. I'll tweet out some links from here.
Suzanne, as we hear what's coming up now, potential announcements, possible announcements of a halt to violence, all of those is something not just the world but the surrounding nations are watching very closely and, in many cases, very hopeful will happen.
MALVEAUX: Josh, thanks very much.
LEVS: You've got it.
MALVEAUX: He's a great explainer. If people want more, go to your site.
After seven days of rockets and air strikes, Hezbollah and Hamas, who control Gaza, say they are now potentially close to a truce. But, is a cease-fire going to hold? We will monitor throughout the day. Stick with CNN for the very latest.
Also, we're looking at this. What do Henry Winkler and Fred Thompson have in common? They both appear in commercials for reverse mortgages. We'll show you how reverse mortgages work.
First, this week's "Help Desk" answers questions about paying for college.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi, there. Here on the "Help Desk," we're talking about saving for college.
With me this hour are Greg Olsen and Carmen Wong Ulrich.
Carmen, this question is for you?
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I have a 4-year-old and 6-month-old. I'm wondering what long-term and short-term investments to should make for college funds.
(END VIDEO CLIP)
KOSIK: We can all relate to this.
How do we start saving early?
CARMEN WONG ULRICH, PRESIDENT & CO-FOUNDER, ALTA WEALTH MANAGEMENT: Yes, we can. You have to save early. Key is where are you saving? What are you putting it? You want the tax advantages of a 529. He's got two kids. If one kid doesn't use it al up for education, the other one can use it. Grandparents, family members, the holidays are coming, put money in there. Also where that is going? When you shop for 529 go to savingforcollege.com for free and shop around. Don't just look at fees. You want to be fee sensitive but also want to have lots of different assets to choose because you have to make changes as your children get closer to school. You want to be more conservative when they're in high school but, right now, his kids are young enough he can take a bit of risk.
KOSIK: Any other way to save for college besides 529?
GREG OLSEN, PARTNER, LENOX ADVISORS: 529 is absolutely the best way. Be systemic with savings. The 529 will be your best bet.
KOSIK: Keep up with it. Don't have a lag of time you're not contributing to it?
OLSEN: Yes, the dollar-cost-averaging strategy there.
KOSIK: Sound likes good advice.
If you have an issue you want our experts to tackle, upload a 30- second video with your "help Desk" to ireport.com.
MALVEAUX: If you're born between 1946 and 1964, you're one of more than a million, 80 million, Americans who and officially call themselves baby boomers. All this week, telling stories that affect this generation. Today, we're talking about boomer finances. Sounds like a good idea for baby boomers who need cash, borrow money against the value of your home. It's called reverse mortgage. We've seen celebrity ads on TV.
(BEGIN VIDEO CLIP)
HENRY WINKLER, ACTOR: Retirement your way. That's a pretty big promise. But if you're a homeowner 62 or older, one reverse mortgage can give you the retirement you deserve.
FRED THOMPSON, (R), FORMER PRESIDENTIAL CANDIDATE: Because if you're 62 years or older and own your own home, join hundreds of thousands of other Americans who have used a reverse mortgage as a safe, effective financial tool.
(END VIDEO CLIP)
MALVEAUX: All right. Some reverse mortgages are putting people actually in financial ruin.
Alison Kosik is joining us to talk about how this breaks down.
How does a reverse mortgage work, first of all?
KOSIK: The short answer, because it is complex, is that instead of you having to pay the bank, the bank pays you. Let's say you're 70 years old, you're low on cash, you don't want to sell your house but you own your house, so what you can do is squeeze the equity out of your house. Basically, using your house as an ATM, and basically hand it back over to the bank, telling them you want to take out, let's say $100,000 of equity and turn it into a stream of cash, and then you stay in your house. You have to qualify. Your home has to be paid off or close to it, and you have to be 62 years old. That's where these advertisements you showed, they end, because there is a ton of fine print after that.
MALVEAUX: Go through some of the fine print here. First of all, do you have to pay back the -- pay the money back?
KOSIK: That's a good point you make. That is the biggest misconception about reverse mortgages. You do have to pay it back. It is a loan. A loan means you have to pay it back. Remember the 70- year-old tapping the $100,000 in equity? That money has to be paid back and it costs much more than that because there are loan insurance fees and service fees, and these come every month. And then there's the interest. This is really the biggie. This is what people don't get. The interest, it compounds over time. It piles up, just like an unpaid credit card.
We put together this picture for you to give you an idea of how big it gets. When you go into a reverse mortgage, you own the house. You see the equity in the blue on the left side there. There is a lot there. You owe only a tiny amount of interest. You see the small red area in the same bar. Look what happens after 10 years, to the side there. Your equity drops because you're getting payments from the bank, but the interest builds up, and it is all due at the end, Suzanne, the $100,000 plus interest. And if you die, your heirs are responsible for paying it off -- Suzanne?
MALVEAUX: So, all the drawbacks, why do folks do it? Is there any benefit here?
KOSIK: Yes, there is. This is why people don't do it, oftentimes, because it is confusing and it is for older Americans. But some people get the reverse mortgages because what they can do is tap their home equity and still stay in their house. But the government says this should really be a last resort. There are other options for that. You can get a home equity line of credit. You can downsize to a smaller house or rent or you can refinance.
If you do decide on a reverse mortgage, you may want to check out the reverse mortgage guide on consumerfinance.gov, and talk to a mortgage counselor. You can find one on hud.gov -- Suzanne?
MALVEAUX: Alison, thanks. We appreciate it.
Tomorrow, we bring you, when it's time for baby boomers to retire, they don't stop being high energy and impatient. We'll talk with psychologist, Wendy Walsh, about how they can cope with a new stage in their lives.
Thousands of people could be out of work if Hostess closes shop. At the 11th hour, the maker of Twinkies and the union are at the table, trying to reach a deal.
MALVEAUX: Right now, in New York, negotiators are behind closed doors, trying to find a way to save more than 18,000 jobs in an 82- year-old American brand. Hostess Brand said Friday it was shutting down for good and liquidating the company.
Since then, grocery stores have experienced a run on Twinkies and other popular Hostess products. Check it out.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: So I got Zingers and Cupcakes and Ho-Hos and everything else left over.
UNIDENTIFIED MALE: What did you stock up on?
UNIDENTIFIED FEMALE: A little bit of everything for the kids. Some chocolate Twinkies, the Scary Cake, mini muffins, some cinnamon bread, that kind of stuff.
(END VIDEO CLIP)
MALVEAUX: Rene Marsh joins us from Washington.
Rene, I'm not one of those people that will be stocking up on Twinkies or any of that stuff. But there is a serious side to this story. This company says that -- they're in bankruptcy court yesterday, the judge tells them, look, go back and work out a deal with the striking union workers. Where are they at this hour?
RENE MARSH, CNN CORRESPONDENT: That was really an unexpected move here. No one was really expecting that in the final hour, the judge saying, you know, they want both parties to get together again in this last-ditch effort to compromise and really essentially save those more than 18,000 jobs that we're talking about here.
So now they're in this meeting. Will they walk out of this meeting with a deal? I hate to speculate, but I will say this. Both sides, they have been disputing issues like wages and concessions for quite some time now. So we're talking about one more afternoon where they're getting together to try and hash things out. That simply may not be enough time for them to settle their differences.
That being said, if they walk out of that meeting today without any deal made, that means they are back in court tomorrow, that liquidation process continues. And we should point out that Hostess is seeking permission to pay its senior management some $1.7 million in bonuses during that liquidation -- Suzanne?
MALVEAUX: If Hostess goes bankrupt and liquidates, does it mean the end of the Twinkie and Wonder Bread and these other kind of products?
MARSH: Well, not necessarily. Here's why I say that. Because there are several companies out there who are very interested in the Twinkie brand. Let's face it, the Twinkie brand still has some value to it. You just saw the video there, people stocking up on Ho-Hos and Twinkies. I went looking for Twinkies myself and couldn't find one.
So there is some value to the brand here. There are companies who are interested. One of those companies is Sun Capital Partners. Now, they have said they have some interest in taking over the brand and they have also said that, if they did take over Twinkie, they would reopen Hostess factories, they would keep Hostess workers and the unions. Those other companies who say they have an interest, they may do things slightly different, which may not include keeping those Hostess workers -- Suzanne?
MALVEAUX: All right, Rene, thank you. Appreciate it.
The man who was a long-time voice of Elmo has resigned from "Sesame Street." A man accused Kevin Clash of an underage sexual relationship but later recanted. But the allegation led to a clash coming out as a gay man, something he says he never tried to hide. In a statement, "Sesame Workshop" says, "Unfortunately, the controversy surrounding Kevin's personal life has become a distraction that none of us wants. And he has concluded that he can no longer be effective in his job and has resigned from 'Sesame Street'. This is a sad day for 'Sesame Street'." That statement coming out.
CNN NEWSROOM continues now with Deb Feyerick.
DEBORAH FEYERICK, CNN ANCHOR: Hey, there, Suzanne. Thanks so much.
We have got lots coming up for you in this hour. I'm Deborah Feyerick, in for Brooke Baldwin.
And we are beginning with breaking news. Officials are not calling it a truce, but they're not calling it a cease-fire either. It appears that Israel and Hamas are on the verge of agreeing to a time-out, standing down on attacks that have bloodied the region for the last six days. The latest death toll, 118 people, 114 of them Palestinians, have been killed as rockets and missiles crisscross the skies over Hamas.