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Bulls & Bears
This past week's Bulls & Bears: Tobin Smith, ChangeWave Research; Eric Bolling, FOX Business News; Pat Dorsey, Morningstar.com; Matt McCall, Penn Financial Group, and Sarah Flowers, Democratic strategist.
Tax Hikes Could Be On Table to Pay for National Health Care: Is Wall Street Worried?
Tobin Smith, ChangeWave Research: There's no reason to worry… because tax hikes are coming. The government will start taking much more of the wealthy's income and begin giving it to the people who pay little or no income tax. But this won't work, considering the top 3 percent's income has dropped about 30 percent. Everybody will have to be taxed now.
Sarah Flowers, Democratic strategist: This isn't what's happening. We're finally seeing a little fresh talk from Washington. We have to look at the specifics here. Ninety-five percent of Americans are getting a tax cut as a result of the stimulus bill. If you're an average middle-class family, you appreciate the few extra thousand dollars in your pocket. If you are in the top two income brackets, then there's the chance they'll need to pay more of their fair share.
Eric Bolling, FOX Business Network: I do see tax hikes down the road; however it would be political suicide to do it before 2010. The Democrats need to keep that stranglehold on the White House and Congress. The thing to remember is that a substantial number of those in the top 5 percent tax bracket are small businesses.
Matt McCall, Penn Financial Group: President Obama has already changed two major decisions already in the first 120 of his administration. When the country is on the brink of a major recession, we start to talk about tax hikes. If tax increases get put in place, the recession could possibly get even worse. They couldn't come at a worse time.
Pat Dorsey, Morningstar.com: Let's take a step back. The market's action this week has absolutely nothing to do with taxes. The market does not necessarily go down every time tax hikes go up. There is more at work here in the market. But in terms of paying for health care reform, unfortunately common thinking says taxes will have to be raised to raise more revenue to pay for it. It's not that this country spends too much on health care; it's that we spend it in the wrong places. We spend more than any developed country in the world, yet get worse outcomes.
Will D.C.'s Spending Binge Drive Gas Prices to $3 Gallon?
Eric Bolling: I think $3 a gallon gas is a given this summer -- definitely on the West Coast. If you push massive amounts of government spending out the door from Washington, prices will go up with it. Its wealth redistribution and people will go out and spend with this free money. Retailers know people use gas every day, so they jack prices up.
Matt McCall: With all the free money coming out of Washington, somebody who doesn't have enough money to travel now can take a summer vacation. Inflation has a major effect on gas prices. Also, there will be more demand for gas, not just here but overseas too. At the end of the day, we won't see under $2 gasoline again. We're starting to see gas prices rise in accordance with demand rising again.
Tobin Smith: I don't think the government is going to do anything to alleviate gas prices. Look at California. Governor Schwarzenegger has effectively said that instead of tapping into the billions of barrels of oil and cubic feet of natural gas offshore, they should just tax marijuana. It's clear that federal and state governments do not intend to do what's necessary to offset rising gas prices.
Pat Dorsey: I think that gas going under $2 a gallon for an extended period of time is highly unlikely. That was under a period where demand was very low. The real reason for higher gas prices is fairly simple. Refineries are only operation at about 60 percent of capacity right now since demand has been so weak. In anticipation of summer and the high driving season, wholesalers and middlemen are buying more gas and restocking inventories. It has nothing to do with more spending coming out of Washington.
G.M. Closing 1000 Dealers to Save Money; Will It Cost You Money?
Matt McCall: Unfortunately, G.M. is closing down a lot of really good dealerships. You're going to start seeing a lot less G.M. dealerships, and thus people won't be buying GM cars anymore. The free markets should take control here. If a dealership can't make it, then let them go out of business. But for G.M. to cut all the jobs around 1,000 dealerships, some of them which are doing well, wasn't the right move.
Eric Bolling: Everyone is on the hook for G.M.'s bankruptcy. All of this should have happened months ago. That dealer network should be cut down now. The government should not spend another $30 billion to get G.M. down to size to get it through bankruptcy.
Pat Dorsey: It's not the free market preventing these dealerships from closing. Its state laws keeping profitable dealerships alive right now. G.M. had a fairly similar market share to Toyota, yet almost twice as many dealers. You don't need more dealers to sell more cars. When your market share drops as G.M.'s has over the years, you need fewer salespeople. Dealerships don't operate under free market principles.
Tobin Smith: G.M. used an odd matrix at the corporate level to decide who to cut out. There is a lot of politics involved here, and franchise laws prevent the free market from truly deciding which dealerships should stay or go. Whether we like it or not, we're going to have 3,000 less dealers here in the next six to nine months. It's a tragedy.