President Obama's First Budget; "Slumdog" Heroes
JOHN ROBERTS, CNN ANCHOR (voice-over): Breaking news. More bailouts in a new budget. President Obama leaving almost $1 trillion of wiggle room. How much more the economy could cost you. Plus, drug wars moving north.</s>UNIDENTIFIED FEMALE: A community of 35,000, it became a conduit for criminals running cocaine.</s>ROBERTS: The U.S. takes down a powerful Mexican drug gang that set up shop in almost every state on this AMERICAN MORNING.</s>ROBERTS: Good morning, thanks very much for being with us. It's Thursday. It's the 26th of February, John Roberts along with Christine Romans. She's in for Kiran Chetry today. Good morning to you.</s>CHRISTINE ROMANS, CNN ANCHOR: Good morning. Big day. We get the president's big budget today. We've been spending so much money lately we forgot there's a regular budget process to go through, right?</s>ROBERTS: In addition to everything that we've been spending over the last six months...</s>ROMANS: That's right.</s>ROBERTS: ... oh, yes, there's that budget thing too, to keep the government running.</s>ROMANS: Yes. The next two hours we'll get more details so that should be an exciting big news driven day. That's right.</s>ROBERTS: Unbelievable.</s>ROMANS: Your money, my money, a lot of money to borrow.</s>ROBERTS: Kick us off this morning.</s>ROMANS: All right. We begin with news that could impact your bank and your money. According to the "Associated Press," a person familiar with the ongoing discussions between Citigroup and the federal government says the two are closing in on a deal. They reportedly reached a pact where the government could become one of the troubled bank's biggest shareholders boosting its stakes to nearly 40 percent. Right now, the government already owns about an eight percent stake. A slight dip in the price of gas. AAA reporting the national average for unleaded right now, unleaded regular now about $1.88 a gallon, down a penny from Wednesday. In the last 11 days, the price of gas has dropped nearly 8 1/2 cents. And brand new pictures from our sister network in India. A heroes welcome for those kids of "Slumdog Millionaire," that Academy Award-winning movie. A hundred lined (ph) up to the Mumbai airport to see the young stars return from the Academy Awards in Los Angeles. And this morning we know at least two of those kids are not in slums anymore. The Indian government awarding the poor actors with new homes for their families outside the slums.</s>ROBERTS: That's great news. And now breaking political developments and right now CNN's White House's unit learning new details of President Obama's first budget. It comes out in just a few hours from now. And we now know that it includes $634 billion to expand health coverage paid for by taxing the wealthy and trimming payments to insurance companies, hospitals and doctors. Also in the budget, $75 billion to cover the wars in Iraq and Afghanistan and the so-called $750 billion placeholder just in case the president needs more bailout money. This morning, we're breaking down how much it may cost you. Our Suzanne Malveaux live at the White House this morning. Ali Velshi and the CNN money team here in the studio. Our online team also ready to take your e-mails and iReports. Just go to CNN.com/am. And some great economic minds here in the studio to help break things down, give us context and perspective on all of this. But first let's start with Suzanne, the only reporter up at the White House this early. And she's loving it. And, Suzanne, it looks like parts of this budget could be a tough political sell, particularly this idea of rolling back some tax deductions for people making more than $250,000 a year.</s>SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: John, you're absolutely right. We got these details from the White House early this morning on some of the things the president is going to outline about 9:30 this morning. It is going to be a tough sell because what we're going to hear from President Obama is he has asked for Americans to make sacrifices, but he's specifically going to be asking for older Americans to make sacrifices, senior citizens, one and a half million seniors who essentially are going to have to pay more for their prescription drugs. Those are seniors who make more than $170,000 a year. Their Medicaid portion, they're going to have to be required to pay a little bit more on that. The other thing here is, John, is that you're talking about the wealthiest Americans, those who make more than $250,000. They're going to be losing as we know their tax break. The Bush tax cuts are going to expire. The Obama administration will allow them to expire. But the other thing that we're learning from the budget is that they're not going to be able to actually expense itemized deductions when you actually do your tax returns. There'll be some caps and limits to those who give to charities, for example. Not going to be able to take away so much when it comes to those deductions. So the president is going to be making his case here that there's going to be sacrifice but that it is going to fall on the wealthiest Americans. That is going to be a tough sell for some Republicans and fiscal conservatives who say look, the people who give to those charities are the wealthy. The people who provide and create those jobs are the wealthy. Is this the best plan - John.</s>ROBERTS: You know, we remember back to the fall, Suzanne, and the $750 billion financial industry bailout plan and all of the hand wringing and the controversy over that. He's looking to put aside another $750 billion. It's almost like a -- I don't want to say a slush fund because it's not that -- but it's a little pot of money just in case more bailout money is needed. What's the reaction to that there in Washington?</s>MALVEAUX: You know, obviously, that is going to be really the toughest thing that the president is going to have to deal with today initially in rolling out this budget. We already heard criticism from Republicans. We've already heard a lot of criticism from ordinary Americans who are saying, where is my money going here? The last go around there was not a lot of accountability and transparency, and that is the challenge for this president. He has already outlined a number of things, different task force, this Web site where Americans can go and see, you know, how they're tracking their dollars. Where is it going to actually be put? But they're asking for more money now, up to $700 billion. That is going to be very difficult to sell for those who are still doubtful that their money is really going to be tracked well in an accountable transparent way. So we'll see how that unfolds, John.</s>ROBERTS: I tell you, the figures that are being thrown around are nothing short of staggering. Suzanne Malveaux for us live at the White House this morning. Suzanne, thanks so much. And President Obama unveils his first budget proposal this morning at 9:30 Eastern. You can catch his remarks live right here on CNN or CNN.com.</s>ROMANS: All right. So let's dig deeper on all of this. Ali Velshi is here with us this morning. You know, from the very beginning with the big bank bailout, the $750 billion, you know, our sources were telling us, weren't they, Ali, that it's going to take more than -- you know.</s>ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: There's virtually nobody who doesn't. We're going to need more.</s>ROMANS: Right. It's going to take...</s>VELSHI: I think it's fantastic that this government is coming out and saying we're going to need more so we're going to actually account for it. That's the kind of accountability we've been calling for for over a year, so I'm happy it's here. But let's take a look at some of the struggles that this administration has with this budget. This is the -- the budget that we're going to look at getting announced today is the 2010 budget, so it goes into effect October 1st, 2010 for another year. So the budget we're working under right now is the 2009 budget. Let me just give you a sense of how much money it takes to run the government -- $3.66 trillion is this budget. Two-thirds of it is mandatory spending. This is if you're doing a budget for your house, this is paying for the lights. This is paying for the things that you don't have any options on. In our case it's Medicare, Social Security, and other things like that. These are obligations we already have. So only about a third of the budget is what we would call discretionary, the only place where there's some choices to make and of that third, one-half of the third or a sixth of the budget is defense spending right now. Now, it's something that this administration has been very clear about the fact, particularly with ending the war in Iraq, that it's going to try and get out of. Well, it's not going to be able to bring defense spending down to zero, but it's going to be a lot less than it was. So that's the problem. He's only got a sixth of the budget to really play with. Now, 3.6 trillion, this budget, that's 1.3 trillion more money than the government brought in anyway. So the fact is we're already in a major hole but just like, you know, people's own budgets, at least do them so you know what things are going to cost you. We then have to figure out how to pay for them.</s>ROBERTS: We talk about this idea of reducing the deficit by half to $530 billion.</s>VELSHI: That's right.</s>ROMANS: That's right.</s>VELSHI: Just in other words, reducing the amount, more money we spend than take in every year to just half a trillion.</s>ROMANS: And where do we get -- just a reminder, we borrow it.</s>VELSHI: We borrow it. We issue bonds for this and our credit limit is pretty high and, you know...</s>ROMANS: We've got a good history for paying it back.</s>VELSHI: We do.</s>ROMANS: People like to loan us money.</s>ROBERTS: I talked to Bill Clinton a week and a half ago. Remember back to those heavy days in 1999?</s>VELSHI: That's right.</s>ROMANS: Yes.</s>ROBERTS: 2000, when we were running surpluses.</s>VELSHI: Surpluses. We were looking toward getting the national debt down. Those days seem very far away.</s>ROMANS: And my principal bond traders are saying things like wow, you know, there'll be a day when there won't be bonds to trade anymore.</s>VELSHI: Right</s>ROBERTS: Yes. And nobody will be selling treasury bills.</s>VELSHI: Yes.</s>ROMANS: Right.</s>VELSHI: That will...</s>ROMANS: All right. Ali Velshi, we'll talk to you again soon.</s>VELSHI: Hey, we're going -- I think we're talking about iReporter, you think?</s>ROMANS: Oh, yes. I think we are.</s>ROBERTS: We are, yes. In fact, let's turn our conversation to one of our iReporters now. Something that we want to do everyday, we need your help too. Grab your camera, send us a video, click on the iReport link on our Web site, CNN.com/am and send it to us. This morning it's iReporter Jim Morrison from Brooklyn, New York.</s>JIM MORRISON, BROOKLYN, NEW YORK: By and large, I think the president's stimulus package is right on target. What I think it lacks is meaningful small business relief. I think it's time that maybe we put our money where our mouth is and took a look at giving businesses, say that make under $200,000 or $300,000 a year grows a piece of that bailout. I can tell you right now that $10,000 or $15,000 or $20,000 would be a lifesaver to these kinds of small businesses. We're not talking about billions and billions of dollars the companies like American Express are getting. We're talking about thousands of dollars for small businesses. And aren't America small businesses worth that?</s>ROBERTS: So he's talking about some kind of bailout money for small businesses.</s>VELSHI: Yes.</s>ROBERTS: And what's ironic too is that this reduction in the tax deductions for people or families making about $250,000 may trap some small businesses, as well.</s>ROMANS: Sure.</s>VELSHI: A lot of small businesses do their taxes as individuals.</s>ROBERTS: Yes.</s>VELSHI: But Jim's absolutely right. The engine of growth for jobs in this country has always been small businesses, not big businesses. So when you talk about recovering from this recession, it's going to be on the backs of small businesses. Now I should tell you, there are two things that have to happen for small businesses. One, they're running into major credit problems.</s>ROMANS: Right.</s>VELSHI: They're running into loans (ph). They depend on loans in order to make payroll. So we're hoping that whatever the government does with respect to banks, the second half of TARP is going to be helpful to small businesses. But there are two specific things that happen in the stimulus bill for small businesses and I wanted to show you what they are. First of all, it used to be that you could deduct immediately $128,000 worth of property or machinery. Now for the 2008 tax year, this is 2008 expenditures, under the stimulus bill that is up to $250,000 in property and machinery means cattle and calculators and shelving and all that kind of stuff. The other thing is they are speeding up the way in which you can write off those expenses with a special depreciation allowance, so both of those things should result in actual cash in your pocket for small businesses. So there is some stuff there. But Jim is absolutely right. That's where the answer's going to lie. Getting small businesses and money in their pockets to do that. Speaking of money in my pocket, you usually make me a few bucks every time I show up on this show.</s>ROMANS: That's right.</s>ROBERTS: Oh, yes, plugging that book.</s>VELSHI: Yes.</s>ROBERTS: What's it called? "Gimme My Money Back," please?</s>VELSHI: You are so good. You are so good to me, John Roberts.</s>ROBERTS: He reminds me of that "Ben Folds Five" stuff (ph).</s>VELSHI: John Roberts, I'm telling you, it is worth the $20 I've got to spend every time I come on to the show.</s>ROMANS: I love it. I love it.</s>VELSHI: Worth every last cent of it.</s>ROMANS: I love it.</s>ROBERTS: "Gimme My Money Back." All right. Thanks, Ali. We'd love to hear from more of you, our iReporters. Two questions we're asking right now. What do you need out of the stimulus package besides the $20 that Ali just gave me? And what are you willing to sacrifice in your life to give up or give up to make ends meet? Send us a video. Just click on the iReport link on our Web site at CNN.com/am.</s>ROMANS: But will he run and get us breakfast? That's what I want to know. Full disclosure, the president unveiled his first budget in a few hours. How does he plan to spend your money. The CNN money team is following up for us. It's about 10 minutes after the hour.