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Bulls & Bears
This week Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Eric Bolling and Caroline Heldman.
New Fears BP Bashing Will Leave Taxpayers With Cleanup Bill
Eric Bolling, Fox Business Network: It's already unclear as to whether BP is going to pay out its dividend. Not to mention, thousands of workers have to be laid off due to new drilling policies. And the government is complaining about BP's new ad campaign apologizing for the spill. BP has lost about 40 percent of its market value. If the government keeps putting the pressure on BP's throat, you're eventually going to kill BP. And what happens? Taxpayers end up getting stuck with a bill that could easily rise into the tens of billions of dollars.
Caroline Heldman, Ph.D., Occidental College Professor: BP hasn't lost 40 percent of its value because of what the government has been doing, but because of what BP did itself. This temporary moratorium put in place by the government affects 33 deep water rigs out of a total of about 1,500 offshore rigs. It's a very necessary step in terms of getting a handle on proper safety precautions. BP engaged in negligent acts, though I don't think they'll go bankrupt. The costs will be high, but the bill isn't coming all at once -- it'll be spread out over years.
Tobin Smith, NBT Media: Taxpayers would have to bail out BP if it went underwater. Remember when the government came in and took over the auto companies. If BP really gets into financial trouble, what's to stop the government from coming in and taking the U.S. operations of BP hostage until some settlement happens? At that point, the dividend doesn't exist, the stock is crushed, and the best case scenario is another major oil company picks up the pieces. But the Obama administration's track record with corporate intervention is abysmal.
Gary B. Smith, TheChartman.com: Part of the decline in BP's stock price is certainly due to the rhetoric that's come out of the Obama administration. It really is a mentality of putting the foot on the throat. Unfortunately, BP is the only company that can really solve this problem. If that weren't the case, we certainly would have heard about an alternative solution by now. The way to do this is not pound someone's head against the wall. BP has paid out $1.4 billion in cleanup costs and about $33 million in claims. And the workers affected by the new moratorium number the tens of thousands. BP can certainly go out of business due to this leak, and if no one else steps in, taxpayers will be stuck footing the bill.
Pat Dorsey, Morningstar.com: There's little legal grounding for a company having to pay laid off workers. But the larger issue is the civil penalties for an oil spill. They can literally amount to thousands of dollars in penalties per barrel produced. You're talking about $170 million a day BP may have to pay out in liabilities. The reason BP's stock has gotten hammered isn't so much the rhetoric of the Obama administration, but the fact that new problem after new problem keeps developing. For example, this past week its stock took a major hit when a report came out that the relief wells might not work. Government action isn't driving BP's downward spiral.
Companies Hoarding Record Amounts of Cash and Not Hiring
Eric Bolling: We're $13 trillion in debt; the government keeps spending like crazy. Every business, from a large corporation to a small mom-and-pop store realize that tax hikes have to inevitably be coming. As a result, they hold back on making new hires and investments. It just makes sense to hoard cash. And it's an even more significant problem when we see banks restrict lending and credit. And unfortunately that's the case.
Caroline Heldman: Companies have been hoarding cash since last fall. This is nothing new. A recent survey by the Wall Street Journal shows that this cash hoarding is due to significant concern and skepticism about where the economy is headed. Companies are in a catch-22 right now. They're concerned about the economic recovery, and then they hold onto cash. As a result, they end up slowing any economic recovery from the recession.
Tobin Smith: I think a lot of people already believe tax hikes are coming down the road. I own a small business, and the income I get at that small business is taxed as personal income. I know tax hikes are coming, health care reforms are going into effect, and there could be a major piece of energy tax legislation that could get passed. So why would I go spend a bunch of money on making new hires and investments? There's just very little incentive to do so right now.
Gary B. Smith: Businesses are just worried right now. In this recent National Federation of Independent Businesses survey, about 35 percent of businesses are scared to invest because of potentially higher taxes and an expansion of government regulations and red tape. Businesses are sitting on the biggest pile of cash they've had since 1963. Something is going on here, and I think a lot of them believe it's just a bad business environment.
Pat Dorsey: It's obviously bad if you're not hiring people. It's kind of self-evident. Eighteen months ago, the credit markets shut down. Companies used to have continuing access to credit markets. You could get a loan when needed or float commercial paper as necessary. It's a different world out there, and it makes a lot more sense for these companies to maintain a high cash cushion.
Democrats Eyeing $10 Billion of Stimulus Cash for Teacher Bailout -- Report
Tobin Smith: Democrats are insane with this issue. You're devoting federal tax dollars for local school districts? This is what property taxes or sales taxes are for. This is an issue for cities and municipalities. The federal government was not designed to bail out the failed plans and institutions of local governments. There's no reason for the federal government to be getting involved with this.
Caroline Heldman: I can't think of a better way to spend tax dollars. This money goes to middle class families and brings almost immediate economic stimulus. It keeps unemployment numbers low. And what better way to invest in our future and global competitiveness than putting money into our kids and schools? This is a result of budgetary shortfalls, not a fundamentally failed system.
Gary B. Smith: As a part of the stimulus package, we've already spent $100 billion on education! The private sector certainly suffered during the recession. But the unemployment rate in the public sector is almost at full unemployment. Over half the states from the last ten years have added teachers faster than their student enrollment is going up. If I truly felt our education system worked, then maybe this extra spending wouldn't be such a bad idea. But it's not going to improve anything.
Eric Bolling: Public education is a huge section of the unionized workforce. The teachers unions have a lot of sway in Washington. And who do they support? The democrats. This is all about Washington shaking the teachers unions' hands so they'll shake back in the November election. There are a lot of better ways to spend unspent stimulus dollars