• With: Steve Forbes, Bill Baldwin, Neil Weinberg, Quentin Hardy, Mike Ozanian, Victoria Barret, Morgan Brennan, Elizabeth MacDonald, Dennis Kneale



    DAVID ASMAN: Talk of a possible budget compromise not shutting off the shutdown countdown clock. Lawmakers said to be close to a temporary government funding deal that only pushes back the shutdown deadline by a couple weeks. So the big fight just delayed. Republicans demanding big cuts, democrats fighting those cuts. But someone here says cut it out. America's $14 trillion debt is not a problem. That's our fiery flipside.

    STEVE FORBES: This debt is a disaster and not just the level but the fact that it's rising rapidly. Washington should remember where those resources come from, they don't come from Mars, they come from we the people either out of taxation, borrowing, or printing of money, which is another form of taxation, which is why stimulus never works. It didn't work for us in the 30's and hasn't worked for Japan for 20 years, it's bankrupting us today.

    QUENTIN HARDY: Of course, it's a problem but politics is more about pick your problem, which problem do you want. The problem I see is the problem right in front us of this week. January home sales are off, they revised the economic number in December down, HP reports PC sales are weak and there's a chip glut coming, that's consumer stuff. Consumers are slowing down. What's happened more than anything else, in the past couple of months there's a rally to get rid of the deficit and stop the government spending. The private sector is weak, the private sector can't do it on its own and it needs the government. We're in danger of doing what FDR did in 1937, cutting back on the spending too early, reinvigorating the deficit rather the downturn and bringing back a recession. I'm very worried that we'll have a second recession by cutting back too early.

    ELIZABETH MACDONALD: FDR also increased regulations, as well creating a mini depression within the Great Depression. What I see instead is lack of adult supervision in Washington DC over the fiscal dipsomaniacs who are pushing us to the brink because look at the issue is the interest costs on the debt, in other words when you take out a loan you have to pay interest. A lot of foreign governments including investors here and by 2020 the GAO is saying four items are going to soak up ninety two percent of the budget: Social Security, Medicare, Medicaid, and interests on the debt. And interest on the debt matters to a credit rating downgrade, to avoid it Congress would raise taxes to keep that interest cost sustained on the debt and that is a big issue. You mentioned money printing, it's taxation without legislation and so that's another issue with all this spending.

    MORGAN BRENNAN: No, we don't want more of that. And you know Elizabeth brings up a really great point that politicians in Washington for a lack of a better word need to grow a pair and take a look at entitlement reforms. Those are a huge part of our deficit and they're going to cause all kind of problems down the road. That being said discretionary spending the area that Republicans are looking to slash and burn right now is a much smaller part of our deficit. And I agree with Quentin it's a very necessary part, we need to spend right now otherwise we run the risk of hitting deflation much like Japan did in the '90s.

    VICTORIA BARRET: Those were very expensive jobs that came out of taxpayers wallets. History is useful here as it often is and a couple of economists recently looked at 44 different countries over a two hundred year span and tried to correlate what happens when you get high debt levels relative to economic growth and it turns out when you have high debt levels above ninety percent you see drastic reductions in economic growth. There is a cost to running deficits like this because as we said that it either leads to inflation or higher taxes or you know what we're beholden to China now because they own our debt. And we're paying out some four hundred billion every year in interest payments. It's just silly, it's a lousy way to manage government.


    DAVID ASMAN: Here they come, all fifty states expecting to see union members march on state capitols to show solidarity with Wisconsin teachers. The first wave launching just minutes from now. But first a controversial plan to get rid of teachers - pay them to quit! Several school districts across the country seriously considering it. Supporters say it'll save money. But Oz, you say the buyouts won't work?

    MIKE OZANIAN: No, David they won't because their fiscal problems are much too big. This is only going to solve an immediate problem, they need structural changes, they need teachers to contribute more to pensions, and they need teachers to contribute more to healthcare, if they don't do those things and also implement things that Governor Christie did in New Jersey, such as a cap on property taxes, then you're only kicking the can down the road.

    DENNIS KNEALE: Well, it may not be a panacea but it's certainly a right step in the right direction. I mean by offering buyouts and trying to trim them and tailor them to only the most experienced people you might also then be able to net up the worst teachers that have tenure protection from staying in a job for years and years beyond when they should've left it.

    VICTORIA BARRET: This has been tried in the past and you saw a real mix of aged teachers leaving and there were some older teachers, some younger teachers. So, I don't think it fixes the problem that Dennis is trying to fix and to Mike's point it's really just a band aid fix, the structural issues either the fiscal issues or the kind of cultural issues that we have in schools. So, it's kicking the can down the road as he said.

    BILL BALDWIN: Oh no, I'm in favor of buyouts if they're done right. Don't let the school districts decide who leaves because then it becomes a reward for bad performance. Don't let the teachers decide because then the good ones leave for better jobs and you're left with the clunkers. Get age based, sixty two or older, ten years of service you get ten thousand dollars for leaving.

    STEVE FORBES: It's like anything else. You have accountability and you have competition. You give the parents choices like you do in other areas and we'd have the best schools in the world. You can't fix a Soviet style system, open it up and the parents will fix it.


    DAVID ASMAN: To Libya - violent clashes there driving up oil here. Prices crossing $100 a barrel this week. And now airlines are sending airfares higher. Dennis, you say they're just using Mideast tensions are an excuse to gouge us?

    DENNIS KNEALE: Well, that's a good headline, but they are using it as an excuse to charge higher prices. I find it fascinating that airlines that are unable to make a lot of their flights take off within two or three hours of the scheduled takeoff are able to adjust those fairs within microseconds after they have something happen in the futures market. The one good thing though is that they can afford to raise those prices because consumers are spending again and in capitalism if you can charge more, you should.

    QUENTIN HARDY: Later on today I'm on my 5th flight of the week. And I am a broken man. No leg room, they charge me for the pillow, they charge me for the food, they charge for the bags, they charge worse than a cell phone bill. You know what really hurts in all this, they're not profitable. We're not really profiting off of this. You think you can abuse someone like that and then you think you can make money off it. I think they are actually generally money losing people and a lot of that is fuel costs and tension. They are passing on a price in their world, and I can't blame them for that.

    STEVE FORBES: If they are gouging they're toothless tigers. The only ones who make money are the people who supply the airlines not the private passengers themselves. The real gougers are the government who has taken all those taxes and not updating their air traffic controllers and air traffic control systems. If they did we'd be able to fly two to three times as many times as we do now and that would mean more competition and lower fares.

    BILL BALDWIN: No, I don't think the government is the main enemy. I asked a hedge fund manager why are we suddenly in love with airline stocks and his words were "Pricing Power." Those are scary words for a traveler like Quentin. What it means is that after years of consolidation with only one or two choices on many routes the airlines are entering gouge mode. Yes, that means of course they're going to pass through the fuel costs and then they're going to throw off another fifty dollars and then they're going to charge Quentin for his bag.

    MIKE OZANIAN: I'd like to see the airlines gouge more, I'd like to see them gouge like the grocery stores do, I'd like to see them gouge like media companies do and everybody else who tries to make as much money as possible. The blame here belongs squarely on the Federal Reserve for defusing the value of the dollar and the declining value of the dollar these last few years has caused oil to go up. Now, on top of that we have what's going on in the Middle East, that's the problem.


    DAVID ASMAN: We're back with our informers and the stocks they say are the safest bets in a shaky market.


    ELIZABETH MACDONALD: Energy Select Sector SPDR (XLE)