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Bulls & Bears
On Saturday July 25, 2009 Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Eric Bolling and Malia Lazu.
GOVERNMENT-RUN HEALTH CARE STALLS: IS THAT WHY STOCKS SOAR?
Tobin Smith, Changewave Research: This is absolutely a reaction from people realizing that this bill might not pass. Investors saw the possibility that the people who make the money and pay the taxes in the United States won’t get hit with a 5% tax surcharge. And additionally, maybe we won’t have to force millions of people into a health care plan the country can’t afford. That is exactly why the market came back this week.
Gary B. Smith, Chartman.com: I think everyone is getting the feeling that this whole socialist move by the government is at least slowing down a little bit. Tobin is right about health care. It won’t come to a vote until Congress is back in session after the summer recess. We haven’t heard much about cap and trade any more. We haven’t heard much about the second stimulus. So it looks like maybe this government tank moving toward our community is getting stopped at the wall. I think Wall Street likes that.
Eric Bolling, Fox Business Network: I don’t think this is why stocks soared. The Nasdaq has been up 12 days in a row before Friday and the health care bill had nothing to do with it. Health care was passing until Friday when the blue dog Democrats came out and said slow down a little bit. The market is really ingesting a lot of good news. There were some great corporate earnings in the last couple of weeks, along with some great corporate confidence numbers. Obviously when a recession gets long in the tooth, the market will start to come out of it. It has nothing to do with health care or cap and trade. By the way, I do think the Democrats’ health care reform plan will pass.
Pat Dorsey, Morningstar.com: I am not a fan of any of the health care packages being considered right now. But health care reform’s stall in Congress is not the reason for the rally the past couple of weeks. It is earnings season, and a lot of companies beat lowered expectations. Companies beating expectations gives people reason to buy stocks. I think the rally is much more tied to that than what has been going on in Congress.
NEW MINIMUM WAGE HIKE; WILL IT PROLONG RECESSION?
Eric Bolling: A minimum wage hike will absolutely prolong the recession. Seventy cents doesn’t seem like a lot of money, but it’s the third increase in three years. Seventy percent of all jobs are small business jobs. When small businesses have to pay thousands more a year to employees, they’re going to do one of two things: either raise prices on the things they sell or lay more people off. That means unemployment numbers will go up. These small business owners are being tapped to take care of everything from health care to increased wages to making up tax revenue shortfalls.
Malia Lazu, Democratic Strategist: I think the minimum wage hike is really good for workers. I think we so often put workers on the bottom rung of our economic priorities. We need Americans to start spending again. We need them to feel financially comfortable. This is $120 a week. I think we should be ashamed our minimum wage is $7.70 when in places like Canada it is $10. We can’t just say that this is going to continue to hurt small businesses.
Tobin Smith: Unfortunately we know statistically that 300 to 400 thousand jobs are going to be gone as a result of this wage hike. Small business owners at the margin can’t afford it. These 400,000 jobs that’ll be lost will only come back when the economy comes back. It’s a chicken and egg problem. If small businesses are going to be the only engine of growth, and we continue to pile on additional weight on their shoulders, it does lower our recovery rate. There is no question about it.
Gary B. Smith: This wage hike is good for workers with one caveat: it’s good for unionized workers. Unfortunately, the fact is that we already know what happens when you raise the minimum wage. It went up 50% from 1977 to 1981 and the economy lost 650 thousand jobs at that time. Workers at a unionized company will still have their jobs. But then the company can’t hire more people and end up passing these increased operating costs along to the consumer. It’s a lose, lose situation because employers get hit, as do consumers.
Pat Dorsey: The minimum wage hike will have a marginal economic effect at best. We need to face the fact that we are basically restructuring our economy—moving away from one that was overleveraged, too dependent on consumer spending, and selling toxic financial products. This restructuring will have a far bigger effect on how the economy recovers from the recession.
WHITE HOSUE MISSING DEADLINES: BREAKS FOR YOU TOO!
Gary B. Smith: This White House is fantastic at setting deadlines for the American people. But in terms of being transparent to the American public, they're a bunch of B.S.’ers. Obama is the king of B.S. The lesson the administration is teaching people is that we can basically meet our deadlines whenever we want to or feel like it.
Eric Bolling: The nonsense going on in Washington is proof that they're selling us a load of snake oil. They come out with projections—like we’re going to save a 100 billion here, a trillion there, cut this program back, etc. But these projections and deadlines are all just to get you to sign on the dotted line.
Malia Lazu: The President has been to be very careful setting timelines, especially when he has no control over what gets passed. He has to form and work with a coalition in Congress to get legislation passed—and this is not easy to do. It’s something the President has to be very careful of. He's made a lot of promises, and it’s not helping him out at all.
Tobin Smith: The President setting these deadlines was a little naïve. It’s almost as naive as saying you need to pass one trillion-plus healthcare bill by August 1st, otherwise it's going away. I think he shanked it, as we would say in golf, on these deadlines.