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.
On Saturday, May 30, Brenda Buttner was joined by Gary B. Smith, Pat Dorsey, Eric Bolling, Tobin Smith and Steve Leser.
National Sales Tax for All: Worst Thing for Economy?
Eric Bolling, FOX Business Network: This is a horrible idea. Why try and emulate Europe: a continent ridden with chronic unemployment and stagnant economic growth. It doesn't work there, and it won't work in the U.S. It'll only bleed the consumer dry and tax rich people, not to mention poor people too. This would be an economic killer.
Tobin Smith, ChangeWave Research: If we did a national sales tax in the U.S., the bottom 70 percent of taxpayers would start to pay for their fair share, as opposed to the top 3 percent paying a huge portion of tax revenues. If we got rid of the income tax, and replaced it with a national sales tax, then you may be on to something. But on top of all the taxes we already have in this country? Absolutely not.
Steve Leser, OpEdNews.com: Everything needs to be on the table to take care of and pay down the deficit. Standard and Poor's recently said they may lower the credit rating on U.S. Treasury Bonds. A national sales tax could potentially pay for more than health care reform or other programs. A huge portion of it could be used pay down the deficit. There are a lot of good things you could do with that new revenue.
Pat Dorsey, Morningstar.com: If you impose a national sales tax, but lower others like corporate taxes, there could be a net benefit to the economy. But any type of sales tax is highly regressive. It would hit poor people far harder than wealthy people. In general, I think it would be a wash, and we'd still be in bad economic shape either way.
Gary B. Smith, Exemplar Capital: This would be an added tax, not a replacement for any other tax. Discretionary spending would plummet with a 25 percent tax added on to anything. Trips, auto purchases, etc. all would go out the window. People, especially given the economic climate right now, would have to start getting by on the bare minimum.
Unions Love Supreme Court Pick: Bad News for Jobs?
Tobin Smith: Judge Sotomayor is all about empathy. If you're weak and powerless in a court of law, you should get favorable judgment over the people who are powerful. Her decisions constantly fall into the classification of "judicial realism"—they are based more on empathy, not sound legal decisions.
Steve Leser: It was Sotomayor's decision with the Major League Baseball case that caused a cooling out-period for management and the union. It helped enable a settlement, and it has resulted in 14 years of labor dispute-free baseball. She ruled in favor of the union, and ultimately it proved to be the right decision.
Eric Bolling: I don't think you can take two cases out of 3,700 decisions she has made to prove that she's devoutly pro-union. She's not going to change the bench at all. Whatever she is, I'm all for her. She pulled herself up from the wrong side of the tracks all the way to the Supreme Court.
Gary B. Smith: The fact of the matter is that unions keep wages artificially high. They think they're protecting the worker, but in fact hurt the countless other workers out there who are not, or cannot get, into the union. Companies are hurt by reductions in profits, and in turn inhibit their ability to hire more workers. Sotomayor's decisions like the Major League Baseball case show she's for empowering unions.
Handouts for Down Payments on Homes: Here We Go Again?
Gary B. Smith: It just gets goofier and goofier. I'm getting past the point of irritation to just insanity. This would be like giving $8,000 to someone in 2001 to go buy a dot-com stock. This is another way we're going to artificially rein late the housing bubble. Where's this $8,000 coming from? It's from you and I on top of the trillions the government is already spending.
Tobin Smith: Houses are down 40 percent to 50 percent in major markets. Depending on circumstances, purchasing a home is actually cheaper than renting. But just giving money out to people to buy a home is what created the whole bubble in the first place. However, market conditions have changed so that people have to put 20 to 25 percent down on a home purchase, and so naturally you're going to get more responsible buyers.
Steve Leser: Nobody gets a loan now unless you have perfect credit, and enough money to pay for a large down payment on the house. The housing market has changed, and these loans would go to much more responsible potential homeowners.
Eric Bolling: I actually like this program. A lot of renters felt like they've missed the American dream. This loan program makes home ownership a possibility for a lot of Americans. Rather than getting a tax credit at the tail end of home ownership, people would essentially be getting this major benefit up front.
Pat Dorsey: My worry is not so much that these loans would go bad, but the larger issue of the privilege of home owning over renting. I've always thought it's ridiculous for mortgage interest payments to be tax deductible. Home owners and renters should be treated as economic equals. It's a major issue we need to wrestle with.
Tobin Smith: Defense up on North Korea threat; "NOC" jumps 40 percent by Dec.
Gary B. Smith: GM driven out of DOW! "DIA" up 10 percent by Labor Day
Pat Dorsey: Go natural! "XTO" leaps 50 percent in 2 years
Eric Bolling: Bad hurricane season! "OC" up 30 percent by Nov. 30
This past week, Neil Cavuto was joined by: Charles Payne, WStreet.com; Dagen McDowell, FOX Business News; Adam Lashinsky, editor-at-large, Fortune Magazine, and Matt McCall, Penn Financial.
Government Could Control 70 percent of GM; Good or Bad for America?
Charles Payne: What's ridiculous is how easy this administration dismisses concerns of people that dare say what is plain to see. During the campaign the Obama camp ridiculed the Bush agenda of an "ownership society"; liberal intellectuals have been pushing the notion for months that people shouldn't want to own homes and that renting is just fine. In fact the goal is to have this government own the means of production, control salaries and distribute wealth as they see fit. This country is great based on three pillars: constitutional freedoms, Capitalism and innate determination to simply be the best.
Now we are being told capitalism ran amok and is bad unless the government pulls the strings; we are also being told to expect and enjoy living a simply existence without boom and bust cycles and the constitution is also being threatened. Sure feels like socialism to me.
Matt McCall: The government struggles to do what they are elected to do: govern our country. Now we have a group of politicians (most of which have never run a business in their life) about to run a multi-billion dollar company owned by the taxpayer - the end result cannot be good. I am as qualified as the government to run GM; at least I run a business!
As much as the government and Obama claim they do not want to manage the day-to-day business of GM, actions speak louder than words. In March the government basically fired then CEO Rick Wagoner. He (Obama) also set the 6/1 deadline. And the Treasury was giving their input regarding GM's offer to bondholders.
With the government basically running GM the last few months the company has struggled and will end up in bankruptcy next week (I hope). Therefore, they have done a terrible job so far and it will only get worse. The government has already pumped in tens of billions into GM and it will take much more to get it right.
Government ownership will also invoke protectionism and hurt the free markets by limiting foreign automakers involvement in the U.S. marketplace.
I have been saying for months that the goal of the Obama administration is socialism. The government will own our major banks, the auto industry, large footprint in insurance, and eventually it will move into health care. This is terrible for capitalism, free markets, and entrepreneurship.
Adam Lashinsky: I take President Obama at his word that does not want to be in the auto business for the long run. Obama didn't make this decision, by the way. The Bush administration agreed to keep GM and Chrysler afloat. Obama took over that loan and now has no choice but to become the debtor turned owner.
President Pushes National Health Care; Do We Already Have It?
Matt McCall: If I am paying one penny out of my pocket to cover the health expense of the uninsured, it is national health care. This is another example of redistribution of wealth as the wealthier Americans with health insurance are called upon to pay for the insurance of the less fortunate. When did offering and paying for health care become the job of the government and insured Americans? If we live in a socialist society it is okay, but we have capitalism that last time I checked. Is health care a right or a privilege? I believe it is a privilege. The worst part about the current situation is that we are paying for in through a hidden tax and the government is slipping another one past Americans.
Charles Payne: There are so many programs in this country that help homeless with medical and dental and everyone is helped in emergency rooms. Sure we already have national health care, but we are going to pay a lot more to make it cover the most expensive procedures.
Adam Lashinsky: Please. There are all sorts of "hidden" costs for everything. The "increase" we pay in premiums for health insurance are beside the point that millions of Americans don't have adequate health insurance. This thesis is just an attempt to obscure that.
New Government Survey: Invasion of Privacy?
Charles Payne: Hell yes! If I get a form I'm going to write on across the page: None of your damn business! This is frightening. This is like investigating people without reading them their rights of charging them with anything. I think terror suspects at Gitmo have greater rights with their personal information.
Matt McCall: Of course this is an invasion of privacy. The government wants to know as much as they can about Americans so they can manipulate them better. The survey an also be used as a great research tool for campaigns -- the government will know exactly what to say to reach the voters and turn them in favor of more government involvement.
Since January the U.S. government has taken several major steps towards a socialist society by getting their hands in major U.S. corporations and now they want to get inside the head of the everyday American.
It is ridiculous that participants are required by law to answer the overly personal questions. A captured terrorist has more privacy rights than a law-abiding, taxpaying, U.S. citizen!
Stocks Ready to Jump at Least 100 Percent
Charles Payne: Rite Aid (RAD)
Matt McCall: MGM Mirage (MGM)
Adam Lashinsky: Yahoo! (YHOO)
Forbes on FOX
Can President Obama Keep His Promise to 'Create & Save' 3.5 Million Jobs?
Elizabeth MacDonald: It won't save jobs. And I like how this administrations thinks, "well, we inherited this mess," so that gives them carte blanche to blow out the government's balance sheet with this really reckless spending, and I think it's seriously out of control. We're talking about massive inflation down the road which will cause companies not to be able to pay for jobs, and we haven't seen one job saved just yet.
Quentin Hardy: I think it's doing exactly what suppose to, and it's a good thing. Look, we don't want to feds baling out the states perpetually, and these are state jobs, but the fact of the matter is if you look at the stimulus bill is what to provide temporarily unemployment insurance to policeman, firefighters, and teachers and that's what it's doing. It shouldn't be long term. It's speaking to the heart of this crisis.
Victoria Barrett: What it's going to do is temporarily assign some jobs and give more jobs to government bureaucrats who are more permanent and probably not very productive. That's my problem with the stimulus; instead of saying hey, the private sector isn't working right now isn't creating jobs. Although that is primarily the source of jobs of normal times, so the government needs to step in, so let's build some roads and bridges and create some temporarily jobs. That was just a fraction of the stimulus bill, instead just going to filling more bureaucratic positions.
Neil Weinberg: The fact of the matter is if you look at the Congressional Budget Office -- which is non-partisan -- they say this create over 3 million jobs this year and 3 million next year.
Mike Ozanian: The stimulus bill will not work. Team Obama has met the long bond and the long bond has won. Since Obama became president the long term yield on treasury has gone from 3 to 4 percent. That dollar you had in your pocket when Obama became president is only worth 93 cents today.
Evelyn Rusli: I have to disagree. The stimulus package is creating jobs, but its fuzzy math. Just because it's unproven doesn't mean that it's not good. The thing is there's no official tally, but it's not just the jobs in terms of construction workers to build the bridges, it's also the small business owners who decide we're not going to cut 20 percent of our workforce because we see a light at the end of the tunnel.
'Greenies' Go 'Overboard': Great News for Economy!
Jack Gage: Look, just as cardigan sweaters and solar panels on the roof of the White House were folly of the symbols of price controls under Jimmie Carter. These new symbols will be representative of the folly of this green movement by President Obama being perpetrated by the liberal left. So this is a great time to reflect on were its brought us and were its going to bring us in the future.
Evelyn Rusli: We don't want to backlash on the green agenda. The green agenda is a good thing. Fundamentally it is good for our economy and our country in the long term, because it promotes initiative as finding alternative fuels and we don't want to be dependent on fossil fuels or foreign oil in the long term.
Mike Ozanian: Look, this guy should be concentrating on opening up energy markets for the country and not closing them down. What really bothers me is if this makes the homes warmer in the summer, isn't it also going to make it colder in the winter.
Quentin Hardy: Let's start with the cartoon shows and how this is evidence that this is all over. Sort of the way that "Bevis and Butthead" proved that being stupid in America couldn't go on any longer or "The Simpsons" proving that disrespect was over in this country. "South Park" showed we were all tired of killing Kenny. Well, "The Flintstones" did get rid of that caveman thing once and for all. There is no relationship, OK. And as for us hating Dr. Chew for his statement of 11 years of cars of the road, I'm not a physicist, he is and he might have a point and if it's only nine years I'm OK.
John Rutledge: If you tax converted energy into goods and services you gets less of that stuff. That's what we call living standards. This is nonsense we need to get on with producing goods and services.
Elizabeth MacDonald: It's a negligible impact though, 20 percent of the Earth is land. So when you want to talk about green sustainable energy this is one, minor tiny way to go. A lot of companies are moving in to the green revolution: McDonald's, Home Depot, Wal-Mart. It is the wave of the future, but we need to really strong good ideas. Is a white roof idea one of them? It's a tiny footnote.
Make All Prisoners Pay for Jail Time to Free Up Taxes!
Kai Falkenberg: They're charging them something like $60 dollars a night to cover the expenses of being in jail. Look, if you call an ambulance in many parts of the country, you get charged for that service, yet we have convicted criminals in prison. They get free room and board they get free health care, they can even go to the gym for free and there are a lot of people who can pay for this. You got people like Martha Stewart and class action lawyers who are in prison making millions; they should be able to pay for their own.
Neil Weinberg: The fact of the matter is that most criminals do not have the money. If you force them to pay, where's that money coming from? Probably from their families. You know I think it's really a shame in this country we have 2 million people in prison. The only per capita countries that are close to us are Russia and Belarus. So I think if we are going to focus on reforming on fixing reducing costs for our prison population there's another way to do it.
John Rutledge: If you want them to stay out of prison give them incentives to stay out which means pay the rent on the place.
Victoria Barrett: It's a bad idea; the point of prison isn't to get a mint on your pillow if you pay up. The point of prison is to punish people for what you've done. You don't want people to stay in prison forever. We want them to assimilate back into society, and if you strip them of their savings that becomes even harder. It's hard enough as it is, as a prisoner, to try to get a job. So stripping them of their saving really seems kind of cruel.
Jack Gage: If we think about it from a tax payer's prospective, it's going to cost more to administer this than if we had a private ties prison system. Now Corrections Corp. of America it's a private company publicly traded that runs prisons and operates correctional facilities around the country and does so making a tidy profit. So this is something I think if we move to a model of that it would reduce exposure for tax payers and have a more efficient system.
Stocks Under $10
Neil Weinberg: Citigroup (C)
Evelyn Rusli: Cal Dive (DVR)
Jack Gage: China Digital TV (STV)
Mike Ozanian: Darling Int'l (DAR)
Government Bringing in 44 Percent Less Tax Money: Time to 'Cut' Taxes?
Wayne Rogers, Wayne Rogers & Co.: Well, I think history tells us that. You know, in 2003, with tax cuts came in, the tax revenue of the federal government went up over $200 million by 2006. It was up double digits. The economy improved. Tax revenue increased. The government took in more money. If you want to raise taxes, that doesn't make any sense. If they have to do something about it, they should substitute a consumption tax for the income tax, and that he wants the only way tax reform should be treated.
Regina Calcaterra, Democratic strategist: Well, actually, what we need to look at is whether or not we want the federal government driving a bus full of citizens through the desert with a half tank full of gas. We need to get to safer ground. The way we're going to do that is to make sure that we have revenues. We're want going to be able to do that if we don't increase taxes. But the way that we need to increase taxes is do it surgically. We need to go after the off-shore tax that have been costing us over $100 billion a year. Then we could be adding back to the tax base, and that's a good way to raise taxes and go after those who are actually tax cheats who are also American citizens who are benefiting from all the services that we provide here, but are not willing to pay those taxes.
Tracy Byrnes, FOX Business Network: The reason people go off shore is to avoid taxes here. You lower the tax rates, to Wayne's point, people don't have as much incentive to dodge history can go back even further. We saw it happen in the 1920's. They lowered taxes, tax revenues went up. Kennedy did it after Hoover and Roosevelt jacked taxes through the roof. Kennedy lowered them. Again, we see tax revenues increase anywhere from 47 percent to 54 percent. We've seen this.
Jonas Max Ferris, MaxFunds.com: I wish only people who desperately needed the government's plans got it. But there's nothing surgical about it. No one has the nerve to say this, but anyone with an accounting degree will tell you this, we don't bring in enough money, and can't just lower taxes and always generate more revenue. There's a point where you reach that doesn't work anymore. We need higher taxes to support all this new government spending.
John Bradshaw Layfield, www.custommuscle.com: A lot of the revenue problem has something to do with the property tax income play. Look, to Regina's point, she's a very smart lady, but I disagree with her premise. The premise is the government driving the bus. These morons in government could not run a one car parade. I don't want them driving the bus. From 2002 to 2006, property taxes went through the roof. Once property taxes came down because property prices came down, that short fall is what we're looking at right now, in addition to the economic boom that Wayne was talking about. That shortfall means the government never quits spending. They're bloated pigs who got bigger and bigger and bigger, and when revenues fell, they did not cut. They're trying to do it by increasing tasks. That's not the problem. The problem is spending.
Will D.C. Spending Make Mortgage Rates Double?
John Bradshaw Layfield: Yield curve is the highest it's ever been on record. The yield curve is the difference between the two year and the 10-year treasury. It's 275 basis points. People think it could go up to as much as 250, which is huge. The reason is the U.S. government is going to issue $2 trillion worth of Treasury bonds this year. There is not an insatiable demand for these bonds, and because of that, they're having to raise the rates to sell these bonds to investors who are now starting to think there may be something better than U.S. Bonds to be in. That is going to cause mortgage rates to go up significantly.
Mike Norman, Pitbull economics: Not right away. One thing the Fed really doesn't like is if they see interest rates rising and the economy is weak and the stock market's going down. If that is the case, then they're not going to let it happen. Yeah, the fed's not going to let it happen. Anyone who thinks it's set by the market at this point, I mean, you must still believe the earth is flat or something.
Tracy Byrnes: Economics aside, the bigger problem is sentiment. If people fear that rates are going to go up, they're not going to move again. This is going to continue to kill the housing market, because no one is going to want to get involved and no one's going to move and get out there, and the inventory will continue to stay.
Wayne Rogers: Well, I've lived through -- I'm an older person, so I can say this -- you know, in 1974, interest rates went to 16 percent. In 1981, they went to 21 percent, 22 percent. I've seen this before. And yes, it will happen again. It may not get to that level, but it will certainly -- they're certainly going to go up. The market is telling us that. And at some point in time, you can't just keep printing money and selling bonds or government securities to the Chinese. At some point, that's going to come home to roost, and interest rates are definitely going up.
Jonathan Hoenig: So Wayne's been on the money. The dollar is dropping like an absolute stone. We saw gold shoot up this week, all those foreign currencies doing very, very well. So I don't have a lot of confidence in the fact that Washington is driving the economy right now. And inflation, it's really caused -- it's not caused by the market.
Jonas Max Ferris: We had Carter's face up, and I can't think of a less similar situation. To JBL's point, we have this record spread with long and short-term rates. The exact opposite was a negative spread. It was like 1,000 negative things. You can't get a more different interest rate environment than the Carter administration, because our future is more like Japan, with these low rates. If you could lock in one under 5 percent, you should, period. Because it's your best hedge against long-term inflation. In the short term, you will see lower. You can get lower rates in a year. You actually do.
Will 'Cyber Czar' Log Off Last Piece of American Capitalism?
John Bradshaw Layfield: Absolutely nuts. Look, it's not the Wild West. We're regulated. We have all these security stuff you can… I run a Web store. www.custommuscle.com -- we sell everything from amino acids to multivitamins. And when we buy a product, we buy a product from an American manufacturer. We warehouse it in away house made by American workers. We have a warehouse manager. We have software. We also have UPS or FedEx that ships this thing. We have five different segments in American business that get a cut out of every order that comes through our web store. You put the government involved, someone's going to have to pay for that, and our razor thin margins and being able to offer best prices goes completely away. It kills jobs. It kills internet commerce.
Wayne Rogers: Well, I think it's nuts. I think every time the government gets into anything that has to do with, you know, limiting information to the public, it's terrible. They'll control it and all of that. I hope to God the ACLU is listening, because I want them to get in there and stop this.
Jonas Max Ferris: Yeah, cost to government, I don't see it, because a lot of agencies like the S.E.C. make money on fines. Now, in my opinion, the way I heard it Obama talking about, this is more like a police force for the internet, which I think we could have used 10 years ago. This is a little late. There's still a lot of people scared to do business on the Internet. I know that sounds like regulation of private industry, but I'm just talking about busting. My own business, we have 40,000 people in an email news letter, it was very expensive to acquire. We couldn't send it out because of all the spam and all the junk that ruined that business.
Tracy Byrnes: OK, but at the same time, they're going to tap the internet for money. I mean, sales tax is coming. You buy something from Amazon, you're going to pay sales tax on it. It's going to be a revenue raiser. And look, cyber-terrorism is somewhat of a concern. Hopefully the czar gets in on that as well and protects us, because that's probably the next thing we need to worry about.
Jonathan Hoenig: Terry, we don't need a czar. We need freedom. We need property rights. We need economic freedom and the rule of law. That's all we need. And this is just another way in which government's going to get into our bed and ultimately to control our lives.
Mike Norman: But I think Jonas makes great points, but I'm going to have to agree with the rest of the people. Looking at how confused policy has been up until now, it seems to me they're just going to screw this one up as well. It's going to end up costing people and gum up the Internet.
What Do I Need to Know?
Jonas Max Ferris: This show's been on for almost eight years, but if I pick a bunch of stocks and a bunch of them double in a few weeks, it's time to take money off the table. I've sold them and gone into a short-term government PIA, short-term government fund. This is where you want to put cash. I think the market is going to come back a little because it's getting ahead of itself. But PIASX.
Jonathan Hoenig: Well, the dollar is the weakest currency in the world, so I don't really support putting a lot of new money into dollars right now. I disagree with Jonas' fundamental premise, which is selling the winners and letting the losers run. I don't think that he wants the way to make money. GM is going to go bankrupt, as we predicted it would, and will be kicked out of the Dow Jones industrial average. I think Visa is the company that will replace GM in the Dow. There's a lot of talk, could be Oracle, could be Abbott labs, could be Cisco. I think Visa. We're still a consumer culture, and I think Visa is going to be the next entrant to the Dow.
John Bradshaw Layfield: Jonathan's got a great call in Visa. I would wait until after the summer facts come out. I think you're going to have a drop because of consumer transactions dropping off. Will Ferrell is the greatest actor since the great Wayne Rogers, but nobody's Wayne Rogers. He's got "Land of the Lost" coming out, Universal studios, a GE company. Entertainment is pretty much recession-proof. I like GE here. And I like Wayne Rogers.
Wayne Rogers: Obama's trip to the Middle East where he's going for peace is ill-advised. He should be going for security, because that's where the oil is. And therefore, we're going to have an up-shoot in oil prices.