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Bulls & Bears
This week, Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Eric Bolling, Jonas Max Ferris and Caroline Heldman.
Battle Raging Over Tax Hikes as Job Worries Mount
Eric Bolling, Fox Business Network: Congress has to extend the tax cuts. If they don't, we'd see the total destruction of the job market. The Bush tax cuts were tremendously beneficial to small businesses. If you're a small business, be it under or over $250,000, it looks like you're going to see your taxes going up. If that happens, and businesses lose that money, do you think they're going to hire people? Instead of looking to expand your business or make new investments, you're looking at how much your taxes are going to get hiked. There's just no incentive to take on new hires or invest more in your business.
Caroline Heldman, Ph.D., Occidental College Professor: Letting the Bush tax cuts expire for income over $250,000 a year only affects two percent of small businesses. And President Obama is planning to provide relief to those small businesses to ease the burden. The number of actual number of Americans who'll be affected by letting the tax cuts expire for the wealthy is an extremely small number of people. It's not like we've seen an incredible expansion of jobs and economic growth as a result of these Bush tax cuts. Letting them expire, at least for the wealthy, is essential if we plan to get our deficits under control.
Tobin Smith, NBT Media: Of the total number of small businesses in the United States, about 70 percent of them are owned by people who report their income tax as a sub-S corporation. Those small businesses, depending on how much money they make, could be faced with a considerably higher tax burden. Let's not forget that about 5-8 percent of Americans pay 70 percent of the taxes. So these tax hikes would provide disproportionate levels of pain. But what'll be even worse for the economy is the hike in the capital gains rate. I think we'll see a lot of companies selling off stocks as they try to take in gains before the hike goes into effect.
Jonas Max Ferris, Maxfunds.com: This will be one of the biggest tax hikes in history because it's one of the biggest tax cuts getting reversed. I think we're mixing up the debate here though. There's the argument that tax cuts for the wealthy should expire, and then there's the increasing likelihood that the Bush tax cuts that benefited a lot of people earning less than $250,000 will expire too. This will affect a large percentage of taxpayers. Though there could be a benefit to this. The country is going down a long path to ruin because of our inability to cut spending. This makes foreign investors and other markets nervous. But raising taxes shows we're willing to get our fiscal house in order, and in turn, brings stronger confidence in our economy long-term.
Gary B. Smith, TheChartman.com: This administration seems to be tone deaf on what people really want and think. And it seems incapable of looking back in history to see what has happened when we raised taxes versus when we lowered taxes. We have evidence of this almost in reverse. The Reagan tax cuts took effect in January 1983. Up until then, economic activity was at a standstill. When the tax cuts were announced, GDP growth took off at over 5 percent and 7.5 percent in 1984. And of course in the fifteen years after those tax cuts were enacted, we saw the greatest period of economic growth our economy has ever seen. If we let the Bush tax cuts expire, there'll be hell to pay economically.
Financial Reform Giving Unions More Power in Boardrooms
Gary B. Smith: Unions are effectively a cartel. Unions control labor supply in order to jack up prices. They're extremely effective at that, and union employees make, on average, roughly 5 percent to 10 percent more than non-union workers. But look at, for example, union jobs in the manufacturing sector. They've obviously gone down considerably. And they've destroyed the auto industry, airline industry, etc. Employing union workers is like having a big tax on business, and it's something we just don't need.
Caroline Heldman, Ph.D.: Corporations play a larger role in our everyday lives than they ever have. I'm happy to see that these organizations with a great track record of actually representing employees, safety, wages, etc. getting a spot at the table. And they deserve a spot on the board of companies they're invested in. I don't think the founding fathers every could have imagined giving corporations personhood or the right to free speech. Now, more than ever, we need actual citizens represented on the board of these companies.
Eric Bolling: The unions have priced themselves out of every job market. They did so with the auto industry, airline industry, etc. Now they seem focused on the teaching market. You want free markets, you want free flowing capitalism, you want to have a corporate boardroom that's making the best decisions to keep the company in business, then the last people you want in there are union representatives. It would be a terrible idea.
Tobin Smith: These unions aren't going to own enough shares to make a difference in the overall governance of a company. Maybe, just maybe, they'd actually see how a real business runs. I'm on the board of multiple companies. When you're involved in a board and making decisions, you have to make imperfect calls on imperfect information. Maybe these union reps would see how many times their goals are frequently bad for the outcome of a company and its profitability.
Jonas Max Ferris: Owning shares is a good way to get into the boardroom. A lot of people on the board are put there by other members of management looking for a pay raise or more influence. So it's not like the current boardroom system is all that wonderful. But unions have been dying for a long time, and haven't been useful like they were 70 years ago when there were major labor issues. At the end of the day, it's the corporation that makes the decision for what direction to take the company. And I don't think we'll see some undue influence by union reps making those calls.
Oil Companies Moving Rigs Out of U.S. Over Drilling Moratorium
Eric Bolling: After the Obama administration said we're going to put the moratorium back on these 33 offshore drills, the Justice Department said "no" you can't do that. Now, the administration is trying another avenue, and trying to halt the drilling of 33 new wells. Oil companies and offshore operators and saying "forget it," packing up shop and moving outside of waters under U.S. jurisdiction. They're going to go to other parts of the Gulf, off the coast of Brazil, etc. This will kill jobs, and to keep them, you need more drilling.
Caroline Heldman, Ph.D.: Another spill of this magnitude could happen tomorrow. We learned this quickly when the oil executives testified in front of Congress. This is something we need to take seriously. The Obama administration is doing that. The 33 rigs affected by this decision hit 3 percent of rigs in the Gulf. I think that's a temporary loss we can take to make sure another disaster like this does not happen. There's no reason to believe the White House and Interior Department would extend this moratorium past the pre-designated 6 months.
Gary B. Smith: This moratorium is very significant. Not only is it giving huge incentive for oil companies to take offshore drilling to other waters, but if the moratorium became permanent, that would affect 120,000 jobs in Louisiana alone. The energy sector accounts for 16 percent of Louisiana's economy, not to mention the significant role fishing plays for the state's economy, about 5 percent. This moratorium is cutting your nose to spite your face.
Jonas Max Ferris: We have to stop acting like the drilling business was all hunky dory, and if it wasn't for this moratorium, everything would be fine. BP screwed up offshore drilling. Just give notice to the math on this. BP is looking at a $20 billion liability for this spill. Outside of the big oil players, this spill would bankrupt a company. The math just doesn't work out; the risk isn't worth the reward. It doesn't matter if you were pumping 100,000 barrels a day out of a well. It's too costly. So I actually think we'll see a lot of the smaller scale oil companies avoiding offshore drilling from now on, despite any moratoriums.