• With: Steve Forbes, Rich Karlgaard, Neil Weinberg, Quentin Hardy, Mike Ozanian, Morgan Brennan, Elizabeth MacDonald, Dennis Kneale




    DAVID ASMAN: Muammar Qaddafi's deadly defiance in Libya smacking you hard in the wallet here in the U.S. Since the clashes erupted last month, oil prices are surging to levels not seen in more than 2 years and gas prices spiking more than 30 cents. Some folks paying more than 4 dollars a gallon. Those high numbers have some here worrying it'll wreck America's already fragile economy. Their solution? Cut the federal gas tax. But would it work?

    RICH KARLGAARD: One month ago this economic recovery was starting to look pretty durable and American consumer confidence was the highest since the recession. Now that oil has gone up $15 a barrel and gas has gone up 30 cents a gallon, the economy looks a little more fragile. In fact you can project that about 100 billion dollars of commerce will vanish just on the price of oil alone. This administration needs to do everything possible to keep the price of energy low, including maybe a temporary halting of the federal gas tax.

    NEIL WEINBERG: I don't think it's any coincidence that we have the lowest tax on gasoline in the developed world, we also have the biggest addiction to gas guzzlers. We have a tax system which punishes certain behavior and rewards other behavior. One of the bad things we do around here is we use lots and lots of oil, we drive around in Escalades, and what we can do is, in Korea they pay $3, in Germany they pay $4 in taxes, just for taxes.

    ELIZABETH MACDONALD: No question that we don't want that, there is no lock box in the government for federal gas taxes. If there is it would sit right next to the pork barrel. If a high gas tax stopped congestion or modulated driver behavior than you wouldn't see the congestion you see in Great Britain, which has astronomical gas taxes. You've got congestion so bad in Britain they use global positioning satellites systems to untangle the traffic snarls over there.

    QUENTIN HARDY: Actually Liz in London they put a huge congestion tax on the city of London and its improved things immeasurably. It's a terrific thing to do. That's a different issue. You lower gas taxes, when is the last time we cut a tax in this country and then restored it, we're not going to get it back. And this is a temporary disruption in Libya. What really are we afraid of here? If there are more democracies, there will be less oil and our oil prices will rise? That's a strange thought. The problem with gas taxes is they're not applied correctly to the infrastructure and the overall underlying energy consumption. There were 6,000 different earmarks in the last highway bill and included a movie about roads in Alaska or a music museum in Virginia, that's the problem. The gas taxes should be applied to making driving more efficient.

    STEVE FORBES: The biggest tax on gasoline is the Federal Reserve printing too much money. When you trash the dollar, oil prices go up, gasoline prices go up, should have learned that from the 1970s, should have learned that from just a couple of years ago. Why not lower the gas tax? And if you don't, make sure that 18 cents does go to highway projects and not to all that silly stuff.

    DENNIS KNEALE: I love it when a card carrying conservative like Steve Forbes, who never wants government to interfere in this economy and in the free market, wants government to cut gas taxes to take the price of gasoline below where the free market wants it to go. Stick to your principals sir.


    DAVID ASMAN: Public union protesters planning to hit the streets in Ohio. State senators there just passing a bill to cut collective bargaining for pensions. And now more states pushing to convert public pensions into private 401(k)s. The Forbes boss says 401(k)'s are the way to save taxpayers money.

    STEVE FORBES: How it would work, especially if you are a new worker, you get in your pension fund what you and your employer puts in. No more grandiose promises like in California, the system out there under their assumptions the Dow would be at 35,000 today. People who are on existing plans, cap it, put them on 401(k)s, that way you've curbed the politicians, you have pensions that are sound. Taxpayers will like it and pensioners will like it because at the end of the day they'll have something and not just empty promises.

    QUENTIN HARDY: Let me open with a joke. A CEO, a union representative, and a tea party activist sit down in front of a dozen cookies. The CEO takes 11 cookies and he says to the tea party activist, "Hey look out, that guy wants some of your cookie." Now, it's even a better joke with an investment banker because then we all own $5,000. But the truth is what's funny here, the truth is 30 years ago we got rid of private sector unions and we got rid of pensions in favor of 401(k)s. Today the average working man's wages are down 20 percent and they are underfunded for their retirement. At the top we've gone from 80 times minimum wage to a 1,000 times minimum wage and our answer to the government unions is, "Hey, you need the same deal those guys got." Maybe we were wrong in the first place.

    MIKE OZANIAN: No, 401(k)s have worked in the private sector. And one of the things I really like about 401(k)s for the public sector is for years local governments have gamed the system by promising fictitious returns on their pension plans. And guess who gets caught with the tax bill? The common working man taxpayers, they are the ones who have to see their taxes go up to fund these crazy public pension schemes. And I think this will put an end to a lot of that.

    MORGAN BRENNAN: The money isn't there and I don't think anybody would argue that reforms do need to take place in pension plans. But moving to straight up privatized 401(k) program is not necessarily the answer either. Numerous reports have shown that Americans on 401(k) programs do not save enough for their retirement and that comes out of taxpayers' pockets later on down the road in entitlement payments.

    RICH KARLGAARD: Take a $50,000 a year retirement income plus health benefits, which is typical for a state employee, if you were to go out and buy an annuity to produce that kind of income with today's low interest rates it would cost a million and a half dollars. That money is not there, which means accounting is fraudulent and the only way to make up for the fraudulent accounting is to tax businesses and salary earners more, which would cause a capitol flight from the states that try to do that.

    20 percent DOWN MORTGAGES

    DAVID ASMAN: 20 percent down so you have "skin in the game." That's what the folks in Washington D.C. want you to pay next time you buy a house. With the median new home price above $230,000 and then unemployment rate near 9 percent not so many people have $50,000 lying around. But Dennis, you say this will help avoid another housing crisis?

    DENNIS KNEALE: It sure will. We had this big problem of abandoned houses and people turning the keys over to the bank and walking away because they owe more on the home than it's worth. And yet they can afford to make their payments. It turns out 75 percent of the time when you do that it's because you were able to buy your house with no money down at all. If you put 20 percent down and you can afford to make the payments even though the house is worth less, you will stay there to avoid losing $200,000 on a million dollar New York one bedroom.

    MIKE OZANIAN: I can't agree with Dennis because I only put 10 percent down on my home and I'm still paying my mortgage because I've been fortunate enough to have a job. But I happen to think the biggest problem is Fannie and Freddie because you get politics making decisions over mortgages not economics and you can still mix subprime, bad mortgages with good mortgages if you do what Dennis says. You have to get rid of Fannie and Freddie. I think 20 percent is too harsh.

    STEVE FORBES: And once upon a time, 20 percent was the norm and you had a 20-year mortgage and that's why mortgages are the best investment around. The politicians ruined it in the name of big home ownership. 3 percent down, Fannie and Freddie. Two thirds of the mortgages are owned by Fannie or Freddie or guaranteed by the government or forced by a government axe to take bad loans. So you put it all together, the housing market they've destroyed it. So whether you want 10 percent or 20 percent, it can't be 3 percent or -3 percent.

    NEIL WEINBERG: I think it should certainly be close to 20 percent, there's nothing holy about the number 20 percent it was just something bankers came up with years ago to protect themselves. But we do need as you say, skin in the game because without the skin in the game obviously people will walk away from the homes more quickly. But we also don't want to make it so people just can't afford houses. We need to find some medium, but it has to be with people having a real feel that they are owners because if you don't put any money into a house, you might have your name on the title, but you're just renting it.

    ELIZABETH MACDONALD: Fannie and Freddie, that's a sideshow right now because they may be exempt from this new rule and you've got 6 government agencies that would have to sign off on it anyway because it has to do with unqualified loans. I'll tell you something China has a higher down payment requirement, so does Canada and Canada has a better home ownership rate than we do.


    DAVID ASMAN: Tech stocks making a lot of investors a lot of money the past 2 years. So what names will keep making lots of money?


    NEIL WEINBERG: Vanguard Information Technology ETF (VGT)

    DENNIS KNEALE: Gannett (GCI)