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Bulls & Bears
On Saturday November 28, Elizabeth McDonald was in for Brenda Buttner. Elizabeth was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Matt McCall and Regina Calcaterra.
Pelosi: OK to Create More Debt to Create Jobs; Really?
Gary B. Smith, TheChartman.com: Nancy Pelosi has this completely backwards. Have the U.S. consumer spend money to create more jobs, don't increase the deficit. The government cannot create jobs. If that was possible, we'd have zero unemployment. Instead, she wants to rob Peter to pay Paul. We had a $700 billion plus stimulus package that has supposedly created 600,000 jobs, many of which were probably reported wrong anyway. If the government had just given significant tax breaks to people, allowing folks to go out and spend money at a local restaurant, buying a new TV, etc. that would have done far more to create jobs long-term.
Regina Calcaterra, Democratic strategist: We've only spent about one-third of the stimulus so far. We know it hasn't generated the number of jobs we wanted to create with it. Of the $2 trillion in tax revenue the federal government receives, only about 45 percent is from income taxes. Giving income tax cuts isn't going to do enough to create jobs, or generate new tax revenue. So we have to spend money to make money.
Matt McCall, Penn Financial Group: The government doesn't have to spend more to create jobs. And the supposed jobs it has created with the stimulus are unsustainable and not long-term. We haven't spent most of the first stimulus Congress passed. Yet people want to keep increasing the nation's debt with ineffective plans. You want to create jobs and decrease the deficit? Cut taxes for small business owners.
Tobin Smith, ChangeWave Research: If my only job was to get re-elected to office, I'd absolutely be saying we should spend more. But we keep getting into this failed idea that the government can effectively create jobs. The best way to create jobs is giving incentive to entrepreneurs to spend capitol and create commerce. Any plan presented by the government basically amounts to a transfer of wealth.
Pat Dorsey, Morningstar.com: We need to bear in mind that the U.S. is not Argentina. I certainly don't like where the deficit is right now. But Japan has run government debt at twice the level we have for the past decade—and inflation and interest rates haven't been a problem. We can't automatically link high debt to high inflation. However, the path we're on long-term is unsustainable.
Dubai Money Disaster Will Kill Government-Run Care in USA?
Matt McCall: The situation in Dubai really shines a light on the high levels of debt so many countries have brought on, and this includes the United States. If the U.S. continues to take on huge levels of debt, other countries are going to start wondering if they're going to get their money back. What if we reach the point where potential buyers of U.S. debt aren't interested any more unless we significantly raise interest rates? There are very negative consequences to adding on to debt levels.
Tobin Smith: I love the idea that some people are equating health care reform legislation to creating a huge snow world inside at hotel in Dubai. But I'd ask people to take notice to the size of Dubai's GDP, which is about the size of Hawaii's. From an economic standpoint, I don't think we can equate what's going on in Dubai with what could happen here in the U.S. in regards to debt levels and health care reform.
Gary B. Smith: This isn't about the gross size of Dubai's economy, which is relatively small, it's about the percentage size of their debt in relation to GDP. Dubai had about the highest debt to GDP level in the world. Fortunately, the U.S. is lower, but the lesson to be learned here is what happens when a country totally overextends itself. If you keep pushing the envelope, that's when you run into major problems long-term.
Regina Calcaterra: To say we shouldn't have health care reform based on what's taking place is Dubai is a ridiculous comparison. Health care reform would cost on average $80 billion a year over t10 years. It's a drop of water in the ocean. What happens in Dubai isn't something that's going to affect the U.S.'s long-term deficits. Dubai's economy is based on tourism and real-estate. What happened there and what's taking place in the U.S. isn't comparable.
Pat Dorsey: What we're missing here is the country's revenue base. The revenue base of Dubai is based in tourism and real-estate development. If you build a huge building which no one wants to live in, you can't take it back. You'll have a lot of debt on your hands. The country's getting hit especially hard because citizens don't pay income taxes. So the economic circumstances in Dubai aren't particularly comparable with the U.S. However, again I believe the U.S. is on its own unsustainable long-term economic path.
'Climategate' and U.S. Companies Will Stop Green Agenda?
Tobin Smith: Look at companies like AT&T, Verizon, and FedEx who are switching their vehicle fleets over to natural gas. They're doing it for economic reasons. They can operate much more cost effectively by using natural gas. It's a great example that if you let companies fight global warming the old-fashioned way, which is let the free market fix inefficiencies, everybody wins.
Regina Calcaterra: I'm actually not a big fan of the cap and trade legislation. There are actually a lot of companies and countries that are independently making sure they are environmentally sustainable long-term. However there will always be companies that will never self-regulate. That's why some form of meaningful legislation is necessary. But now is not the time for cap and trade legislation while we're in the midst of trying to recover the economy from a recession.
Matt McCall: I think you have to self-regulate. The free market has to figure this out. It will over time. Eventually, companies are going to put pressure on each other to become more sustainable and environmentally friendly. We don't need the government to get its hands in this and spend huge levels of tax dollars.