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Bulls & Bears
Democrats' New Rallying Cry for Government Care: Do It for the Deficit?
Gary B. Smith, TheChartman.com: This is almost laughable. We're going down the hole of bigger and bigger deficits and President Obama's solution is to create another massive government program that will supposedly help us out of the hole we're in. At the heart of this, the Obama administration wants a nationalized health care system for the 47 million uninsured.
Regina Calcaterra, ReginaCalcaterra.com: Every year, our federal budget uses $2.5 trillion worth of revenues. Why can't we take that and divide it up by applying it towards health care? We've had a century of uninsured Americans and there will always be an excuse not to take care of it. Finally we're being presented with an opportunity to solve this huge problem.
Joe Battipaglia, Stifel Nicolaus: The political class has made too many promises as-is. There's no way for them to simply shift money from one place to another. We're at the point where the government has to tax everyone to death or eliminate benefits. This just isn't going to work. The government has to stop pointing to Medicare/Medicaid as the example for what a public option would look like. The government has botched those programs!
Pat Dorsey, Morningstar.com: The fatal flaw of current health care reform proposals is that they focus too much on expanding coverage and not controlling costs. No one is talking about medical fees for results, rather than just performing services. These are the major issues that must be addressed if we're going to slow health care expenses and ease their overall burden on the economy and deficit.
Tobin Smith, ChangeWave Research: The idea that we can solve runaway health care costs by investing in prevention is like a diagnosis for a wrong disease. The real problem is we don't pay taxes for health care benefits in the U.S. We're the only country in the world that would do something that crazy. So, people over-consume health care. Also, tax revenues won't nearly cover the costs of a public option program. And that's not even thinking about the potential costs of fraud that affect programs like Medicare.
Now It's 'Cash for Appliances': Government Handouts Helping or Hurting?
Joe Battipaglia: Ultimately these handouts are going to badly hurt the economy. The spend-crazy Congress seems bent on doing this for everything now. These handouts show why the economy is still on its back and struggling to get on its right side. And it also picks winning and losing products in the economy, and that's just not what the government's role should be. I suspect many of the people who took on debt to buy things like cars in the Cash for Clunkers program are going to regret it.
Regina Calcaterra: The government just gave out tax breaks to a lot of people and they paid down their debts. These programs are designed to benefit the middle class. It's not targeted toward the rich, or low income individuals who can't get a loan. It was the middle class who went out and bought 700,000 cars with Cash for Clunkers. It's the middle class who's going to be the main reason for economic growth in the third quarter, and contributing to a much needed increase in sales tax revenues across the country.
Gary B. Smith: I think it's wrong to say only the middle class is taking part in these government handouts. A lot of very wealthy people are taking part too. Of course these programs increase sales--it's like Macy's having a 50 percent off sale. This is nothing more than a temporary increase in consumption. But pretty soon, GM, Ford, Chrysler, etc. will go back in the hole. Demand is always going to move up if you discount prices, but it will all go away once you take away those artificial prices.
Pat Dorsey: These programs do nothing for the economy besides providing a short-term boost in spending. The problem with this new Cash for Appliances program is that the money is going toward appliances made in Mexico or China. It does minimal good for our economy. It's insanity.
Tobin Smith: How about cash for vacations? It isn't like we have huge amounts of excess cash to hand out right now. The government is effectively borrowing this money. Stimulus programs in other countries were paid for with actual cash their governments had saved. When you run a $1.1 trillion deficit and the money is borrowed, you ruin the word "stimulate." It's like a vitamin booster shot--it only works once.
Reagan and Volcker vs. Obama and Bernanke
Gary B. Smith: President Obama and Ben Bernanke will do the inverse of Ronald Reagan and Paul Volcker. Reagan and Volcker cut taxes, cut the deficit, strengthened the dollar and cut inflation. Bernanke at some point is going to have to raise interest rates. Congress and the Obama administration are going to raise taxes, try to implement cap and trade, etc. This economy is headed the opposite direction it took during the Reagan years.
Tobin Smith: I'm not sure we're going to see the economic growth we witnessed under Reagan and Volcker, but Ben Bernanke is the right man for the job. Anyone who worked in the financial sector during Reagan's first term knows that they did things no one ever thought they would do—particularly raising interest rates. Bernanke is dealing with a very different financial world from the one that existed in the 1980s, but he gets that. The good news today is that we have two billion more consumers in the world than we did in the 1980s. They will help get our economy out of recession.
Joe Battipaglia: Things were very different during Reagan and Volcker's time than now. There was a 10 percent consumer savings rate that was ready to explode. The economy was underleveraged, and inflation had peaked. Today, we have a near-zero percent savings rate. We have $1.20 of debt for every dollar, and baby boomers don't have young kids to spend money on. This is a big issue.
Pat Dorsey: We are going to see a recovery, but it's going to be very different from the one in the 1980s. These are two very different recessions. The economic recovery in the 1980s came out of an inventory recession. The problem now is way too much debt across all parts of the economy. It's critical for these debts to be paid down—and it'll be painful and take time. We won't see a typical snap back from this recession.