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TIME TO PRIVATIZE CITIES IN AMERICA?
LORI ROTHMAN: Cheryl this country, the United States, is going broke. We are watching one city after another go bankrupt. Politicians are not making the tough decisions to rein in that spending. Cities are losing funding from the state as well as the federal government. Why not bring in private enterprise? They have all the cash in the world or as much cash they can have to maintain levels of risk. They can bring that on as well. So let them have it and we know that government is famous for, is notorious for running business badly.
JOHN LAYFIELD: I think you're going to see a privatization wave across America. You already see a lot of money on the sidelines from McCrary to Goldman Sachs waiting on municipalities, airports, toll roads; things of the sort to turn into a private sector option. That's going to happen just because of budgets just like Lori said. Cities get 41 percent, almost half the revenue from the state. The state gets 36 percent from the federal government. That is being cut off and these cities now; in San Bernardino they're firing crossing guards because they don't have the money. They have 12 counties in Oregon that don't have patrols outside the city. You're seeing funding cut everywhere and what you're going to see is a wave of privatization. Probably not whole cities, but you will see privatization.
IMOGEN LLOYD WEBBER: Yeah absolutely! It's worked in Hong Kong, it's worked in Singapore, however; I'm not sure it will necessarily work here in the United States. The big example everyone uses is Sandy Springs in Fulton County, Georgia, which is notoriously privatized, but Fulton County itself I think has suffered to the tune of about $38 million a year. It creates an us and them environment. So it might not always work, it has to be said, here in America.
WAYNE ROGERS: I think that expresses two sides of it I think that is true. The larger the city, the larger anything is, the much more difficult it is to manage it and operate it, but you know we've had four cities in the state of California that have gone broke just in the last couple of years. The city of Vallejo spent 80 percent of their budget on pensions for the firemen and the policemen. You can't continue that. The city of Bell, CA gave the city manager an $800,000 a year contract and then they retire on that. You cannot continue this so it's got to stop somewhere and I think John is right in the following sense that, if you contract out for a lot of these services and force people to bid on it, the competitive bidding process will help bring down those costs enormously.
JONATHAN HOENIG: There's a big difference Cheryl. I mean government is force. So physical force is what we need government for. It's how we put physical force under objective control. So the police, the courts and the military; they can't be privatized. That's the role of government. The problem is now that we need to be privatizing city services not city government. Keep the police as the only vital function of government and yes, to the panel's point, all the ancillary services; the health care, the education, the roads and the airports. Privatize them. I mean that needs freedom. That doesn't need government force, but that's exactly the way we have cities, and in fact governments, set up today.
GROWING WORKER PRODUCTIVITY: HURTING JOB MARKET OR HELPING JOB MARKET?
WAYNE ROGERS: Well productivity obviously helps the whole economy. For example, if you have two competitors making a product and one guy can make that product better or cheaper than the other one; he's going to succeed more. That produces more economic activity. The other people have to compete. That means they have to hire more people or create more jobs or do this better. In other words, every time you're doing it better you're creating economic activity that translates to the economy as a whole and that's best for everyone.
LORI ROTHMAN: Right, well here's the thing. It's great to be productive at your job, but a boss can only squeeze so much out of you. So at some point, companies are going to have to add workers and that's why productivity increase is often a leading indicator that we will get job creation. Now that said, if we're working and we're fortunate enough to have a job, we want to get paid for our extra productivity and that's not what's happening. Wage growth has not improved. It's been basically flat barely keeping up with the pace of inflation this year.
IMOGEN LLOYD WEBBER: Well at some moment, companies are going to have to start hiring because of that. At the end of the day, since 2008, we all know this; American companies have been streamlining away and the fact that productivity has increased is because the economy has gotten better. So therefore fundamentally, at some moment, because all of those companies are streamlined, if the economy keeps getting better they will have to start hiring more workers, which is a good thing, but that is dependent on the politicians in Europe and politicians here in America.
JONATHAN HOENIG: Is it better for the company to have a more productive worker? Yes Cheryl, it is better for the company. An economy should be measured by the number of jobs that are destroyed, not the number of jobs that are created. I mean it's that productivity, the destruction of jobs that frees us up to actually create new jobs and new wealth. There's a limited amount of wealth that can be created and you know what? If it wasn't for the cotton gin we'd all be in the fields right now. Think of all the backbreaking work that's been done away with thanks to productivity. I mean we have people who are literally employed right now to greet people at Walmart. That's a pretty amazing job. I'd rather be doing that and that's because of productivity and the American capitalist mentality.
JOHN LAYFIELD: Yeah it is but wah wah wah, you've got a job don't complain about it. I mean there's too much complaining out there about work life balance. That's the most ridiculous thing I've ever heard in my life. Look, what we have in the United States right now is structural unemployment, but not cyclical unemployment and that is a huge difference. Wealth is being created in different ways now. You have Facebook with a $40 billion market cap valuation with two thousand employees. That same market cap valuation for a CNI railroad has 22,000 employees. So you have employment being created in different ways and without a job creation event on the horizon we're going to continue to see structurally high unemployment, because these companies are getting productivity, technology's giving productivity and they don't need more employees, which is bad for the overall economy and good for business.
U.S. TANKING IN GLOBAL COMPETITIVENESS: PROOF WE NEED TO FIX FISCAL CLIFF RIGHT NOW (AND NOT WAIT TILL AFTER ELECTION)?
WAYNE ROGERS: Well you've got to fix it (fiscal cliff) now you can't wait. It's a typical political solution where everybody just kicks the can down the road and they say oh we don't have to worry about this until it's on us and the result of that always is some disastrous thing. For example like Dodd Frank, the bill was born out of a recession. It's a horrible bill. It's a disaster and that's what's going to happen again unless we get after it right now and the congress addresses this and does something about it.
JONATHAN HOENIG: It's heartbreaking Cheryl. This is the country that invented the phrase "to make money." You know we used to make fun of eastern European countries and Russia, these backwards centrally-planned economies, here and we used to make fun of the Trabant and the Yugo. Now we've got the Chevy Volt. We've essentially got the modern day equivalent of that. So yes, I'm worried about the "Fiscal Cliff", but I'm really worried about the moral revolution this country needs to get us back on the track towards capitalism and free markets.
IMOGEN LLOYD WEBBER: Well Switzerland and Singapore have always been outliers. You can slightly ignore them. As far as this survey goes, I wouldn't be too scared about it. Four European Union countries are ahead of America and I'm sorry European Union countries? They're like passengers on the Titanic and if you're a member of the Euro zone, you're a member of steerage. So quite frankly this survey? Whatever. I'm not too scared for you. You're still doing pretty well America. I'd much rather be here, I am here, than in Europe.
JOHN LAYFIELD: Wayne is right. We have the most inept Congress in history and that's done by the amount of bills. They passed 80 bills last year, was the most futile year ever. This year they've only passed 54 so far and 17 of those were renaming some type of federal building. These guys are getting absolutely nothing done and they're putting out horrible legislation, but the problem we also have is that you have a lot of tech companies now moving to China because of their depth of tech engineers. Our education system, Obama says he's the education president. So did Bush and Clinton and Bush and Reagan. They've all said that and none of them have done it. We've got to start doing something from the ground up.
LORI ROTHMAN: One word is uncertainty. This has been plaguing businesses of all sizes really for years now. What we've been talking about, this distrust, this frustration with Washington. The "Fiscal Cliff"; are we getting spending cuts? What's going on with taxes? No one knows. No one can make plans. Talking about productivity, companies are not hiring workers. They're not throwing out cap ex. They're not borrowing money because they just don't know what the future holds.
WHAT DO I NEED TO KNOW?
LORI ROTHMAN: Report says fantasy football costs employers up to $6.5 billion.
JOHN LAYFIELD: Bet big on the Cowboys and big dividends with (KMB).
WAYNE ROGERS: Get healthy returns with biotech companies and (MYGN).
JONATHAN HOENIG: Rising interest rates will help (DLBS) rise.