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

    DISCLAIMER: THE FOLLOWING "Cost of Freedom Recap" CONTAINS STRONG OPINIONS WHICH ARE NOT A REFLECTION OF THE OPINIONS OF FOX NEWS AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE WHEN MAKING PERSONAL INVESTMENT DECISIONS. IT IS FOX NEWS' POLICY THAT CONTRIBUTORS DISCLOSE POSITIONS THEY HOLD IN STOCKS THEY DISCUSS, THOUGH POSITIONS MAY CHANGE. READERS OF "Cost of Freedom Recap" MUST TAKE RESPONSIBILITY FOR THEIR OWN INVESTMENT DECISIONS.

    IN FOCUS: WORK FOR MEDICAID COVERAGE

    DENNIS KNEALE: You know what, it is not welfare, it is workfare and I kind of like this idea. And it was Clinton who came along, seen as one of the most liberal, democratic presidents of all time and he is the one who ended welfare as we know it. Why can't we do something with Medicaid? If you are entitled to government and yet 45 or 50 percent of the people in this country don't pay any federal income tax at all, why shouldn't you have to do something to get your Medicaid benefit? Why not go ahead and contribute? You would feel better about yourself, you would get job training perhaps, but more than that, you have given something back instead of taking and taking and taking.

    QUENTIN HARDY: Well Dennis, as you know about 40 percent of people on Medicaid are kids, so you are including children in this. You are including people in wheelchairs or quadriplegics in this. Well, why not include people on food stamps in this as well? You know there are a lot of people you can include in this. It is true we are strapped for cash. It is true there is a recession. Were strapped for cash because we have had unfunded wars and a financial bubble that Wall Street abused, tax cuts for the rich. They are pushing it out to the poor saying let's reinstitute work houses. No Dennis, bad idea.

    STEVE FORBES: Well David, I think states should be allowed to do these kinds of experiments to see what works and doesn't work. My only beef with this is that it does not get to the real flaw of Medicaid, and that is lax market principle, and give real power to the patients to get control of medical costs. That is what's needed. The workfare part, nice, but does not get to the central part of the problem. But if Utah wants to do it, go ahead. I believe in freedom for the states.

    RICH KARLGAARD: No, do not expand it nationwide. I think it is a diversion. The real issue here is how do you get better medical care and drive down costs at the same time? Technology and market reform would do that. My goodness, look at the internet, look at computers, look at smart phones, look at practically every industry where you have a combination of technology and market competition. You get better goods at a lower price. I think this is kind of a silly diversion. Fine for Utah, I am an all-believer in federalism and states' rights, but nationally I think it would be a big diversion and mistake.

    VICTORIA BARRET: Yeah, I think both Quentin and Dennis are right here. Look, you've got two-thirds of the Medicaid population that you can't make work. Quentin is right; children, disabled people, the elderly. But you have got 27 percent who are adults that are below or near the poverty line. You can encourage them to work for their healthcare dollars. You can also take it a step further and incent good behavior. They will get extra health care goodies if they clean up their diet, if they stop smoking, if they walk more. These are things we can measure, track and then encourage better behavior and that will save us costs in the long run.

    MIKE OZANIAN: David, I will argue with you and all my capitalist friends here that is the incentives system that is wrong in Medicaid. States get reimbursed up to 60 percent for every dollar they spend. So the incentives is for the states to keep spending more so the number of enrollees increase, the number of services provided have increased dramatically over the years, that is why the cost of Medicaid has skyrocketed and we need to reverse the incentives system.

    FLIPSIDE: FORGIVING FORECLOSURES TO FIX THE HOUSING MARKET

    RICH KARLGAARD: Well the cleanest, simplest way to do it is you forgive the loans for people who are underwater and can't pay, but with a caveat you don't get to live in the house if you take that solution. This would be fast, it would be simple and it is equivalent to a bankruptcy proceeding in business. Both parties, the banks and the homeowner take a hit, you move on to it. The house is on the market, prices get set, there is transparency and we can move forward.

    MORGAN BRENNAN: Honestly, I think that sounds like a great idea because part of the reason this housing crisis continues to prolong, is how the government is involved. Most people don't realize 96 percent of all mortgage market is backed, or directly funded by the U.S. government right now, and the majority of that is in loan modification programs and keeping people in underwater homes. Yet, millions of Americans are choosing to walk away even so because it just does not make sense to pay a $300,000 mortgage on a house that is worth $200,000 now, so we would save a lot more money if we just forgave those foreclosures and stopped dumping money into these modifications.

    STEVE FORBES: The more the government gets involved in this, the worse the thing is. As you say, $1.5 trillion to rescue the housing markets, more underwater than ever before, prices are still falling down. How about the government just walk away, let lenders and borrowers work the thing out like they once did and everything will work out just fine.

    ELIZABETH MACDONALD: I agree with Steve. Having the government involved here with the housing crisis is sort of like giving bourbon to someone with alcohol poisoning. But you know the issue is, it is an important one, we are not in the era of Jimmy Stewart banks. We do not know who owns these foreclosed mortgages and the investors; you're going to break the contracts with the investors. And this is Wall Street. The sharks on Wall Street sliced and diced these mortgages, made a lot of money off of them, and sold them off to investors. We do not know who owns the mortgages on those foreclosed homes. That is why we are going to be in the weeds here for some time to come, and that is why it is very dangerous to pull out taxpayer money into a very opaque securities system here.

    BILL BALDWIN: Forgive, yes. Free ride, no. Listen, when corporations can't pay their bills, they do not get thrown out on the sidewalk by the banks. Oh no! They do a debt for equities swap. Let's bring that to the housing market. Here is how debt for equity would work: You have, let's just say, a $200,000 house with a $300,000 mortgage. I say get the bank to forgive 100 and take 50 percent of the appreciation above 200. Now you own stake in the house. You are not going to rip out the appliances on the way out the door.

    QUENTIN HARDY: In fact, it helps the banks and it is probably helping the banks more for the good of the country than giving the banks money did, where they just would give themselves bonuses. You keep people in the houses at least they are mowing the lawn; at least there is somebody there so it isn't being torn apart. If you throw them out directly, you are adding more supply to the market, that will crush prices, that will lead to dilapidation, that will punch the economy in the gut. You can do it. It is a free market answer I suppose, but believe me there will be a lot of whirlwind with it.

    CYBER WARS: NEXT BIG THREAT TO THE ECONOMY?

    STEVE FORBES: Well, as you have pointed out, David, it is already happening and Russia attacked Estonia a couple of years ago, brought that economy to a temporary halt. We know the Chinese are playing games hacking into our system, so it is already happening. Just as when airplanes come along, we knew they could bomb, cyber attacks are all dependent on electricity. We better wake up to it, we have to ramp up security.

    MIKE OZANIAN: No, I think that is an overstatement. I think it may be something serious we have to consider, but I always think physical death is much more serious, like what happened on 9/11. That is why I think President Obama's decision to start undercutting General Petraeus's surge is completely idiotic. I think we were making great progress there, and coming from that country, Afghanistan and Pakistan, that is far more serious to me than something that is going to come from our computers.

    ELIZABETH MACDONALD: Mike makes an important point and I agree that we're not losing yet, people on a battlefield. Listen, what is really ironic here is the country of China saying we need to partner together with the U.S. about cyber-attacks and a lot of cyber-attacks are coming out of China. The issue too is that there is no transnational law to cover cyber-attacks, and the issue is, it is happening. Also attacks on the IMF. We are getting a working group together and the United States is moving fast to do that. We need human capital to stop these cyber-attacks, sort of like we did with the SARS epidemic, where the CDC grouped a lot of these smart people together to go after these bad guys. That is what we need to do.

    VICTORIA BARRET: I do not think that is the right way to frame it. I agree with Mike, I think it is more like a tax in a sense that individuals, businesses and the government now have to spend a portion of their budget to make sure that no one gets into their system. It is not particularly productive spending. It is just making sure that you don't get caught and you don't get hacked. So it is more of a tax than escalating into the sense of war. It is too extreme.

    DENNIS KNEALE: Cyber warfare isn't the biggest threat to the U.S. economy. The biggest threat to the U.S. economy is the federal government and its policies, and what it has been doing. But cyber warfare clearly is coming here folks. The Chinese are better at it than we are and when the Defense Department recently came out said publicly, with an off the record statement in the Wall Street Journal, hey you know what, if you attack our electrical grid with a hacker, we might just send a missile down your smoke stack. What country has more smoke stacks than China? The problem is, we know that the defense Pentagon system, those are bullet proof but not the electrical grid and someone has to pay for that.

    INFORMER: SAFETY FUND STOCKS

    MORGAN BRENNAN: FedEx Corp (FDX)

    ELIZABETH MACDONALD: MACQUARIE INFRASTRUCTURE (MIC)

    DENNIS KNEALE: PNC BANK (PNC)

    BILL BALDWIN: GULFPORT ENERGY (GPOR)