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$6.5 BILLION IN WASTEFUL SPENDING: SHOULD WE CUT THIS BEFORE WE RAISE ANY TAXES?
JONATHAN HOENIG: Yeah, I mean Tracy they are wasting our money. They're wasting our lives. They're talking more taxes. Meanwhile, they're spending, what; half a million dollars on a rock and roll documentary; eight hundred thousand dollars on a study of whether college kids like Facebook? Here's a hint. They like it. I mean, money on a chocolate promotion in New York? It's a total waste. The role of government is supposed to be limited. Limited and defined by the Constitution. It's not to fix the economy. It's not to create jobs. They're spending other people's money; throwing it down the drain. It needs to stop.
WAYNE ROGERS: Oh yeah, you've got to because you can't cover the gap just by cutting spending, but the spending is totally out of control. Jonathan is right. I mean, I laugh when I read some of this stuff. Six point nine billion dollars you know, that's nine zeros. I mean, Senator Coburn has pointed out these things; that's ridiculous. There's over a billion dollars given away to people for tax credits on housing who don't even own houses. It went all the way down to someone who was a four year old girl. She doesn't even own a house and they gave her money. I mean, this is insanity. The one I love; the best of course is the one you mentioned earlier of giving one hundred and eighty one thousand dollars to the study of how cocaine enhances the sex drive of Japanese quail? Please give me a break. We've got people in Congress who've gone nuts. This is nuts. This is out of control.
JEHMU GREENE: OK look, one person's wasteful spending is another man's innovation and research and development. I probably spend fifty thousand dollars on my chocolate budget a year. That was in Hawaii Jonathan, but here's the reality; I think we have to look at another list. If we were to get rid of the 2001 and 2003 tax cuts for the upper income earners, that's eight hundred and sixty-six billion dollars. So yes, Wayne is absolutely right. It has to be cutting, but also adding revenue.
JOHN LAYFIELD: Hey, don't forget $30 million to Pakistani mango farmers and none of them got the equipment. Only one of 13 farmers and the equipment didn't work. Look, what Jehmu is saying is a matter of making numbers do whatever you want them to do. You're taking that over 10 years. Let's take it over 100 years okay? Let's call it eight point six trillion. Let's call it whatever you want. Let's take it over a thousand and call it eighty six trillion dollars. Look, we borrow 42 cents of every dollar. You've got to understand what we're talking about truly, math-wise. If we go back to Clinton era rates upper income levels. Now we only borrow 39 cents of every dollar. It's only about forty billion dollars a year and that money right there doesn't hardly pay the interest on the newly accrued annual deficit of one point three trillion dollars. So you've got to look at real numbers. We're still borrowing 39 cents and that's with giving the rich the tax cuts. Taking them away from the rich; those numbers just don't add up.
NEIL WEINBERG: You know, Senator Coburn, he's called "Dr. No," but he should be called Dr. Nonsense. This is political pandering at its worst. We're talking about $6.5 billion here. That's how much Tim Geithner, our treasury secretary right now, is borrowing every day and a half. He's borrowing a hundred and twenty five billion dollars a month. So, we're going to be talking about rounding errors here? Utter nonsense. I know that people don't like pancakes for yuppies and there's lots of things we can throw stones at here, but this is nonsense. This isn't going to solve our problems. We have to get rid of Medicare and Medicaid benefits. We have to raise taxes. We can't talk about this silly stuff. In the end it doesn't matter, it's a rounding error. We've got much bigger problems here.
AMERICANS PAYING RECORD AMOUNT FOR GAS: PROOF INFLATION IS HERE?
JOHN LAYFIELD: It's incredible that the two things stripped out of inflation readings are both gas and food because that's the things that effect most American people. Look, if component prices go up in your iPad or your computer, folks don't have to buy those. They have to buy gas and food. They have set costs of their mortgage. They have set costs of their car payments and what the government policy has done, driving up food prices from two dollars to over seven dollars a bushel in corn because of this ridiculous corn-based ethanol and by not having any national energy plan, a true national energy plan, we're driving up costs too and what it's affecting is middle-America.
NEIL WEINBERG: They are very volatile and it wouldn't show you much if they did include it and we also should bear in mind the problem we're having is that incomes are declining. They're weaker; it's not that gas prices are going up. Since 1918, the average price is two dollars and forty five cents per gallon. It's not that much higher than that right now and we saw during the first Gulf War and we saw during the 2000's that we had gas prices go way up; double and still we didn't see much in inflation. It isn't a big inflation component and as we get smarter and more efficient it becomes less and less of a component. It's not something to worry about.
WAYNE ROGERS: Well, all due respect though Tracy, I don't think it's necessary that the government has to be in the business of controlling gas prices; lowering them or anything. I don't think it's the government's business to do anything. Competition will take care of that. The problem where inflation is coming from is the fact that the Fed is buying bills from the treasury. That's a method of printing money. It's not obvious. The public doesn't understand it, but that is loading up inflation. That is sooner or later going to grab us by the throat and kill us.
JEHMU GREENE: Well, I'm scratching my head here Tracy because I feel like I've heard so much arguing about clean energy and alternative energy like it's the spawn of the devil from folks on this panel and that's exactly why we need to pursue that through technology; through investments; through innovation and we are actually more fuel-efficient than we were 20, 30 years ago. We're moving in the right direction, but you can't just poo-poo every technology advancement when it comes to alternative energy and then be all up-in-arms about gas prices, but yes, when I go down to Texas and drive my mom's SUV it's very, very painful, but thank goodness we're moving in the right direction.
JONATHAN HOENIG: Well, a lot of factors influence energy. Unfortunately, green energy spending that Jehmu refers to actually pushes prices up, but doesn't bring them down, but inflation is here Tracy. It's not caused by the hedge funds. It's not caused by the evil, nefarious bankers. It's caused by the government, to Wayne's point. The expansion of the money supply and it is a covert, very destructive tax. I mean, event the last 10 years, your dollar is now worth about 25 percent less. That's a real tax on the rich, but especially on the poor as well.
HOUSING MARKET WEAKER THAN WE THOUGHT: WHAT ABOUT ALL THE HOUSING BAILOUTS?
WAYNE ROGERS: I mean, once again it's an incredible thing. Excuse me just a second. I have to read this because it's astonishing. The agencies that are uncoordinated that are created, comprehensive agencies, are giving out money to housing. There were four TARP agencies, three involving Freddie Mac and Fannie Mae, the Federal Reserve, the U.S. Treasury, and three more with FHA and a partridge in a pear tree. Merry Christmas America; they're stealing your money again. You know, it's unbelievable that they passed out all of this money and not a one of these programs worked.
JEHMU GREENE: Well, they did pass out all that money to the banks and they were incentivized and coaxed along when they probably should have been forced to do the thing that they don't want to do: principal reduction. This is on the backs of the banks and they are the ones who need to step up. Yeah, I will actually sit here and say surprising folks. Government intervention is not what's going to fix this problem. Let's have the banks start really looking at those two words they're running away from: principal reduction.
JONATHAN HOENIG: I'm getting a giggle out of Jehmu. She says, I'm against government intervention but I'm for government force. Well, they're kind of one in the same. The lesson here Tracy is that government fueled the bubble. They've prolonged the crisis unfortunately with just some of the hand outs that the panel has alluded to and Jehmu I've got to tell you; it wasn't just to banks at all. Hope for Homeowners, the Making Homes Affordable Act, the HFA; hardest hit fund. These are hundreds of billions of dollars passed out to homeowners. It should have been kept in the pockets of the taxpayers where it belongs.
NEIL WEINBERG: Well, I hate to disappoint John and Wayne here. On the one hand, yes, this alphabet soup the government created was a mess, but on the other hand, a lot of the money never got handed out. Part of the reason was the Obama administration did not want to get blamed for giving it to yuppies or giving it to people who were flipping homes. So, a lot of this never got started. You know, this is kind of like having police on the beat and then blaming them for crime or trying to judge them based on crime that never occurred. You can't do it. Where would the housing market be if we didn't have any of these programs?
JOHN LAYFIELD: This first home plan would have not been done by any community banker in the world. Look, this first home plan simply looked at total income against their mortgage payment. They didn't take into account student loans. They didn't take into account car loans. They didn't take into account any debts. No one in the world would have loaned someone that money just on those two parameters, but this is what the government place and so Neil is right. Very little of this money got out, but when you talk about the effectiveness of it, Wayne and Jonathan are right. It's been a massive waste of American money with this and it's done no good.
WHAT DO I NEED TO KNOW?
JOHN LAYFIELD: The Super Bowl is going on-line; buy (VZ) to score big-time profits.
WAYNE ROGERS: Bank on a Jefferies (JEF) rebound in 2012.
JONATHAN HOENIG: Find growth with value stocks like (IJS) in 2012.