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IN FOCUS: Is a corporate tax holiday on repatriated profits the best way to boost jobs in America?
RICH KARLGAARD: Well, I think it would work on many levels. This is a terrific idea. $1.4 trillion that is one tenth the size of our GDP. That is a huge stimulus three times this little, piddly stimulus that Obama is proposing that would mainly extend unemployment benefits for state workers. You know this is a real stimulus. It would boost stock prices, it would cost a lot of money to flow into capital equipment expenditures and ultimately it would create jobs. I do not think you would see jobs immediately, but you would see them down stream in big numbers.
MIKE OZANIAN: No, no this is all hocus pocus stuff. Look, rational expectation will tell you companies are going to look towards the future that is why you need permanent tax cuts. We need permanent tax cuts so corporations can plan long term. Corporations, David, already have record amounts of cash. They are just not using it to hire right now because they see what is coming down the road with health care and so forth. They do not like those higher costs. You need a permanent tax cut to really spur job growth.
DENNIS KNEALE: Look I would love to make it permanent David, but let's take every bit we can get. We did this once before guys in 2004 for an experiment. Companies brought home $360, half of it was used for jobs or capital spending according to some studies I looked at. This is a great idea. John Chambers told me this over a year ago, he said ‘Bring home a trillion dollars, not a single dollar of it, a taxpayer dollar.'
ELIZABETH MACDONALD: Yes but you know, I understand take it as you can right? Get a tax cut out of these fiscal dips and maniacs in Congress who really don't know what they are doing. And I understand, don't let the perfect be the enemy of the good. I get all that, but you know you ant do social engineering with companies with what they do with the money. A senate report that I looked at, $150 billion was repatriated in the '04 tax holiday. Fifteen companies who repatriated cut 21,000 jobs, 840 companies who took advantage of that say repatriation didn't work. It didn't increase jobs and they used the money to do things like stock buybacks.
STEVE FORBES: That is absolutely right David, so yes you take what you can. In terms of deficit fighting, that would be another $50-80 billion to take for the treasury at no taxpayer expense. And even if companies just buy back stocks or pay dividends, others will put that money to work, especially when we get a good environment. So if you can get a trillion in the private sector, take it, because the government is intending to take that and more in the next few years.
MORGAN BRENNAN: Yea, I will echo other people on this panel and say I'll take it where I can get it. But going back to EMac's point, I have to echo her here and that is the fact that going back to 2004, the last time we had a holiday, the only people that really got a "holiday" from that were stock holders. According to a National Bureau of Economic Research report, between 60 and 92 cents of every dollar that was repatriated went straight into stock holders pockets, not jobs.
Did we just get proof Solyndra was not an isolated incident?
STEVE FORBES: Yea, imagine turning clean power into dirty politics, that is what happening when the government gets involved. We have a lot of venture capitalists in this country, if they see real possibilities, they will put long term risk capital at work. When politicians get involved, politics reign supreme. George Miller, Congressman from California, sons of lobbyists, he gets involved in this thing, raking off taxpayers like a swamp David. It breeds mosquitoes, government breeds corruption.
MORGAN BRENNAN: Look I am not going to argue that it is a hot mess and there needs to be some cleanup where these green loans are concerned, but let's not throw the baby out with the bath water here. We are talking about two companies out of 32. There is actually some really interesting companies that are very promising in this pack too like POET, which is going to be doing the first commercial grade cellulosic ethanol plant and you have AAS Core, which reported 21 percent net profit increase in the second quarter. So not everybody is failing and doing poorly in this scenario.
ELIZABETH MACDONALD: Here is the issue, this is a bipartisan issue. This program, by the way, really ramped up under the Bush administration. This is abuse of the public purse by both sides of the isle, this open fire hydrant of spending. You are letting basically big companies get dirt cheap financing from this China style, state-run bank, that is run by the treasury department which this bank, by statute, must provide this kind of financing. Other big companies that are getting department of loan guarantees are French companies like Arriva. We are also seeing Tesla access it. We are also seeing Ford access it. NRG accessing this government pot of money and it is not right, it is not fair, and it is not fair to the other businesses who are not doing it.
KYM MCNICHOLAS: Not necessarily, I do not think that is the case. When you are trying to solve big problems you have to take big risks. Take Vinod Khosla, he is one of the top venture capitalists in the green industry. He embraces what he calls ‘the fail strategy.' He gets the fact when he is trying to solve a major problem, he is going to invest in ten companies let's say to try and solve that problem. Nine of those ten companies he knows is going to fail, but that tenth company that does in fact succeed, he is going to see a huge return on that is going to make up for those loses.
RICH KARLGAARD: It wasn't his money and here is another effect that is really bad. It demoralizes the people who aren't politically connected. Now last week the greatest entrepreneur of my lifetime, Steve Jobs, died. Can you image if Steve Jobs and Steve Wozniak in 1976 were competing against government funded companies in personal computer space? It would have probably driven them out. This is just very demoralizing. Bill Clinton had it right, you should be able to play by the same rules and it is demoralizing when you can't.
Are Occupy Wall Street protestors just looking for a free ride?
KYM MCNICHOLAS: They are not only looking for a free ride, they are getting paid $11.44 an hour to protest for it, at least here in San Francisco. I was curious because I was stopped behind one of these protests in the financial district and they almost seem like professional protestors because they didn't look like they graduated college in the last ten years, I looked them up on Craigslist, and there was an ad asking for protestors. So my solution, why don't they just renegotiate some of these loans and that will provide for a little bit of leniency for them.
ELIZABETH MACDONALD: The real problem here is that these colleges and universities, the people running them think they are Donald Trump running these miniature, mini me, real estate empires, blowing out their college campuses with lavish restaurant cafeterias on the level of Equinox. David, I hear what the student protestors are saying and essentially what they are saying is look at our private college, tuition is going to double and in less than two decades to $341,000 for four years. That is a lot of money.
MIKE OZANIAN: David look, I think if you buy something you should have to pay for it. You should force other people to pay for something you bought. And to EMac's point, look Liz, I am proof that a college education doesn't necessarily make you smarter.
DEBORAH JACOBS: We have to do something about student debt. Student debt is going to be the next financial crisis in this country. The average law student graduates with $92 thousand worth of loans and many of those people now can't get jobs. How are they going to pay back their loan if they can't get a job? We need a loan program, a loan forgiveness program that is tied to the creation of jobs.
STEVE FORBES: David, the thing to do in terms of this whole thing in education is to get the government out of it as much as possible except for veterans. When the government makes these loans and do things like Pell grants, all that happens is tuitions go up, students and parents are left holding the bag. If you look at these colleges, most of them are bloated with staff. Government pours more money in, more staff, who pays for it? We the taxpayers.
INFORMER: Earnings Season Stocks
MORGAN BRENNAN: Lockheed Martin (LMT)
DENNIS KNEALE: Cisco (CSCO)
KYM MCNICHOLAS: Amarin (AMRN)