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Bulls & Bears
On Saturday April 3, Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Eric Bolling and Richard Goodstein.
Companies Taking Financial Hits From Health Care Law; Will It Cost Jobs?
Eric Bolling, Fox Business Network: Right now, companies are estimating a $3 billion hit from health care. There are some estimates saying this could rise up to $14 billion. These companies have two options -- either cut benefits for retirees and what they're due, or they have to lay people off or stop hiring.
Richard Goodstein, former Clinton/Gore campaign adviser: Health care reform is going to be good for jobs in many respects. These companies are losing a subsidy they've received from the federal government thanks to the prescription drug bill back in 2003 and realize they can no longer deduct it. So we're getting rid of a benefit for companies being paid for by taxpayers. These will be short-term losses. Over the long term, these companies are going to save tens of billions of dollars due to health care reform.
Gary B. Smith, TheChartman.com: No matter how badly we may want the government to create jobs, it just can't, at least not efficiently over the long term. It can move money or people around from one place to the other, but it can't do real job creation. I think we're going to see a huge escalation is company write-downs due to health care that will be far above current estimates. The money to pay for health care reform is going to come from entrepreneurs and businesses, and they're going to spend a lot more than they're going to save.
Tobin Smith, NBT Media: This $14 billion write-down estimate for companies is going to have to get paid in some way. But we've already see the empirical data for Obama-care -- it's Romney-care in Massachusetts. That plan has destroyed a huge number of jobs. Costs have skyrocketed. It takes 44 days to get a doctor there. Many doctors are pulling out of accepting state-backed health care plans. Health care reforms are going to raise premiums and hurt jobs.
Pat Dorsey, Morningstar.com: The government is closing this $3 billion loophole for companies. It was the equivalent of the government paying your mortgage and you getting to right off the taxes. Most of the companies announcing these write-downs are major industrial businesses with loads of retirees supported by relatively few active workers. There isn't a tech company, retailer, or health care company that has announced any write-down like this -- as in the most dynamic areas of the economy. We shouldn't get our shorts in a knot over closing a tax loophole for companies.
Will Taxpayers Pay More If Unions Don't Accept Givebacks?
Tobin Smith: Research my group has done shows that almost 300 cities in the U.S. will have to declare bankruptcy over the next 18 months if they don't get unions to make pay and pension concessions. Everybody has pulled back in the economy due to the recession. People are taking less pay for more hours and increasing their productivity. Yet unions keep demanding more and more, in terms of raises, benefits, etc. It's insane.
Richard Goodstein: It's unfair for cities and states to try and break deals with unions previously negotiated. But certainly, unions have to play a different game given the economic situation. But, if you're a cop, a teacher, or a firefighter, having to make benefit concessions on your previously agreed to contract doesn't make a lot of sense. We have hedge fund managers makings incredible amounts of money who scream bloody murder because their taxes might go up a bit. We need to somehow show some equity here.
Gary B. Smith: Democrats always play their firemen or policemen trump card. They never talk about the sanitation worker or the civil servant who's in charge of moving paperwork when you need some lousy permit cleared. I get the union's game. They signed these contracts, but hey signed them in good times. They were made on the assumption that economically, things were going to stay good. Clearly that wasn't the case. These unions want to keep their pay and benefits regardless of everyone else, and as a result, a lot of municipalities are probably going to have to declare bankruptcy.
Eric Bolling: Municipalities are under a lot of pressure to get unions to play ball and renegotiate these contracts. And it'll probably be too hard to break them. If they don't, taxpayers are going to pick up the tab. These unions have tremendous political power, and these municipalities have a very thin tightrope to walk along. Forcing unions into contract renegotiations could have serious political consequences down the line.
Pat Dorsey: The people who deserve the most blame in this are the elected officials at the municipal level over the past 20 years who've made unsustainable promises. They operated on the assumption that times would almost always be good. If you think you can keep upping property taxes and rely on ever-increasing revenues, then you can keep raising benefits till the cows come home. Things just don't work like that. When it comes to government jobs, pay has to be variably based--as in, when times are bad you get paid less, and when they're good, you get paid more. Unfortunately, there's just not a whole lot that can be done right now to save these municipalities.
Would Taxpayers Be Better Off Without President's Drilling Plan?
Eric Bolling: This "plan" is a deal. We'll open up a little bit more of these off-shore sites, most of which used to be open until a moratorium was put on these areas a number of years ago. But now they're opened up and a little bit more drilling will be allowed so moderate Republicans will get behind cap and trade legislation. The legislation would be a horrible idea. President Obama's plan is to give a little to get a lot. Cap and trade legislation would be a $600 billion to $1 trillion hit on our economy every year if passed.
Richard Goodstein: Right now, we're getting our clock cleaned by China and other countries who have committed themselves to reducing greenhouse gas emissions by virtue of investment in renewable energy and efficiency. The only way we can catch up is putting a price on carbon pollution to help reduce emissions and make our economy greener.
Gary B. Smith: There is no quid pro quo in all this because there is no quid! We're making a big deal about off-shore drilling in Virginia. This deal was already in the works. Unfortunately, the most potentially productive off-shore drilling areas are still off-limits. And much of these areas they are opening up are subject to congressional approval. President Obama gave up nothing in this, and what we'll get is this cap and trade tax monster.