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.
This week Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Eric Bolling and Caroline Heldman.
New Fears BP Bashing Will Leave Taxpayers With Cleanup Bill
Eric Bolling, Fox Business Network: It's already unclear as to whether BP is going to pay out its dividend. Not to mention, thousands of workers have to be laid off due to new drilling policies. And the government is complaining about BP's new ad campaign apologizing for the spill. BP has lost about 40 percent of its market value. If the government keeps putting the pressure on BP's throat, you're eventually going to kill BP. And what happens? Taxpayers end up getting stuck with a bill that could easily rise into the tens of billions of dollars.
Caroline Heldman, Ph.D., Occidental College Professor: BP hasn't lost 40 percent of its value because of what the government has been doing, but because of what BP did itself. This temporary moratorium put in place by the government affects 33 deep water rigs out of a total of about 1,500 offshore rigs. It's a very necessary step in terms of getting a handle on proper safety precautions. BP engaged in negligent acts, though I don't think they'll go bankrupt. The costs will be high, but the bill isn't coming all at once -- it'll be spread out over years.
Tobin Smith, NBT Media: Taxpayers would have to bail out BP if it went underwater. Remember when the government came in and took over the auto companies. If BP really gets into financial trouble, what's to stop the government from coming in and taking the U.S. operations of BP hostage until some settlement happens? At that point, the dividend doesn't exist, the stock is crushed, and the best case scenario is another major oil company picks up the pieces. But the Obama administration's track record with corporate intervention is abysmal.
Gary B. Smith, TheChartman.com: Part of the decline in BP's stock price is certainly due to the rhetoric that's come out of the Obama administration. It really is a mentality of putting the foot on the throat. Unfortunately, BP is the only company that can really solve this problem. If that weren't the case, we certainly would have heard about an alternative solution by now. The way to do this is not pound someone's head against the wall. BP has paid out $1.4 billion in cleanup costs and about $33 million in claims. And the workers affected by the new moratorium number the tens of thousands. BP can certainly go out of business due to this leak, and if no one else steps in, taxpayers will be stuck footing the bill.
Pat Dorsey, Morningstar.com: There's little legal grounding for a company having to pay laid off workers. But the larger issue is the civil penalties for an oil spill. They can literally amount to thousands of dollars in penalties per barrel produced. You're talking about $170 million a day BP may have to pay out in liabilities. The reason BP's stock has gotten hammered isn't so much the rhetoric of the Obama administration, but the fact that new problem after new problem keeps developing. For example, this past week its stock took a major hit when a report came out that the relief wells might not work. Government action isn't driving BP's downward spiral.
Companies Hoarding Record Amounts of Cash and Not Hiring
Eric Bolling: We're $13 trillion in debt; the government keeps spending like crazy. Every business, from a large corporation to a small mom-and-pop store realize that tax hikes have to inevitably be coming. As a result, they hold back on making new hires and investments. It just makes sense to hoard cash. And it's an even more significant problem when we see banks restrict lending and credit. And unfortunately that's the case.
Caroline Heldman: Companies have been hoarding cash since last fall. This is nothing new. A recent survey by the Wall Street Journal shows that this cash hoarding is due to significant concern and skepticism about where the economy is headed. Companies are in a catch-22 right now. They're concerned about the economic recovery, and then they hold onto cash. As a result, they end up slowing any economic recovery from the recession.
Tobin Smith: I think a lot of people already believe tax hikes are coming down the road. I own a small business, and the income I get at that small business is taxed as personal income. I know tax hikes are coming, health care reforms are going into effect, and there could be a major piece of energy tax legislation that could get passed. So why would I go spend a bunch of money on making new hires and investments? There's just very little incentive to do so right now.
Gary B. Smith: Businesses are just worried right now. In this recent National Federation of Independent Businesses survey, about 35 percent of businesses are scared to invest because of potentially higher taxes and an expansion of government regulations and red tape. Businesses are sitting on the biggest pile of cash they've had since 1963. Something is going on here, and I think a lot of them believe it's just a bad business environment.
Pat Dorsey: It's obviously bad if you're not hiring people. It's kind of self-evident. Eighteen months ago, the credit markets shut down. Companies used to have continuing access to credit markets. You could get a loan when needed or float commercial paper as necessary. It's a different world out there, and it makes a lot more sense for these companies to maintain a high cash cushion.
Democrats Eyeing $10 Billion of Stimulus Cash for Teacher Bailout -- Report
Tobin Smith: Democrats are insane with this issue. You're devoting federal tax dollars for local school districts? This is what property taxes or sales taxes are for. This is an issue for cities and municipalities. The federal government was not designed to bail out the failed plans and institutions of local governments. There's no reason for the federal government to be getting involved with this.
Caroline Heldman: I can't think of a better way to spend tax dollars. This money goes to middle class families and brings almost immediate economic stimulus. It keeps unemployment numbers low. And what better way to invest in our future and global competitiveness than putting money into our kids and schools? This is a result of budgetary shortfalls, not a fundamentally failed system.
Gary B. Smith: As a part of the stimulus package, we've already spent $100 billion on education! The private sector certainly suffered during the recession. But the unemployment rate in the public sector is almost at full unemployment. Over half the states from the last ten years have added teachers faster than their student enrollment is going up. If I truly felt our education system worked, then maybe this extra spending wouldn't be such a bad idea. But it's not going to improve anything.
Eric Bolling: Public education is a huge section of the unionized workforce. The teachers unions have a lot of sway in Washington. And who do they support? The democrats. This is all about Washington shaking the teachers unions' hands so they'll shake back in the November election. There are a lot of better ways to spend unspent stimulus dollars
Pat Dorsey: Unfortunately, we've come down this slippery slope of bailing out struggling industries. If you bail out one person, it becomes a lot harder not to bail out another. The best option here is to force a fiscal day of reckoning and make people realize we've made a lot of promises that are going to be impossible to keep since they were never properly funded. We just can't meet all the benefits promised to public workers. We've got to recognize that.
Tobin Smith: Protect yourself from iPad breach! [MFE] secures 25 percent by Labor Day
Gary B. Smith: Google's down but not out! [GOOG] rebounds 20 percent by 2011
Pat Dorsey: Hold on for a bumpy ride! [RIG] doubles in 2 years
Eric Bolling: $8 million local hardware stimulus boost! [HD] builds 30 percent in 1 year
Cavuto on Business
This week Neil Cavuto was joined by Ben Stein, Dagen McDowell, Charles Payne and Adam Lashinsky.
Critics: 512 Percent Oil Tax Hike Is 'Slush Fund' for Government Spending
Charles Payne, WStreet.com: The government wants to keep spending and taking from businesses, particularly successful businesses. The government hasn't spent a nickel out of this oil spill fund that we already have. The fund is approaching $3 billion, they keep whining, we have got fishermen who need money, a lot of people who need money and they can get money out of this fund. But they will never use a dime of it if they can punish the oil companies. I think the shareholders and independent owners of BP stations are the main target of the administration. I don't think that the administration likes shareholders or the thought of this capitalistic system and they're paying a price because of it.
Ben Stein, author, "Little Book of Bulletproof Investing": Upon whom does the tax fall? The tax will eventually fall upon either the shareholders of BP, who are completely innocent, or it will fall upon drivers and the oil users of the United States, who are completely innocent as well. This was an accident, there's no evidence it's a crime. If it's a crime, then BP stock holders should probably pay for it. If it's an accident why shouldn't it be borne by the insurers and the taxpayers? Everybody seems to forget these people are heavily insured. The real problem is they don't know how to fix the spill.
Dagen McDowell, Fox Business Network: Like Rahm Emanuel says, "never let a good crisis go to waste." It would be wasted by politicians who want to get their mitts on this money. Don't tell me that they're going to let that money sit there for years to come and then not use it, waiting for another spill. You just need to look at TARP and see how that was used. It was meant to bail out the banks and bail out the auto companies. It went on to try to rework mortgages for people and other pet projects. BP is swimming in money and it has the $10 billion in annual dividends that it can tap if it needs to, but what about smaller oil companies? A fund would discourage smaller companies from insuring themselves, and discourage them from being prudent with their money.
Adam Lashinsky, editor-at-large, Fortune magazine: We are going to have to find out how far the insurance will go, we don't know the answer to that yet. It's BP shareholders who are going to have to pay—they are BP, and they are the owners. There's a long history of people paying gasoline taxes, for example, that do go into the highways and a long history of people paying their property taxes that do go into the local schools.
Union Power in Question After Big Losses at Polls
Dagen McDowell: Voters in Arkansas told unions that they cannot be bullied, they cannot be bought. Take a look at the proposition out in Chula Vista, CA, where they voted to basically restrict labor agreements that would only go to unions. So, it wasn't just in Arkansas that we saw this happen. Voters saw that the unions enriched themselves at the expense of many. There is only one out of ten workers in this country that are in unions. They realize that the more power the unions get the more money they're going to get from the Democrats and people said, "no way." If you have unions who are in the pocket of the Democrats and the Democrats are in their pocket, it's a vicious circle where they enrich each other. If Americans stand up and put their feet down, then it will stop.
Ben Stein: Richard Trumka, the AFL-CIO head, put out a statement that said don't worry about the deficits, focus on jobs, jobs, jobs. Keep the spending up. The unions have figured out the way to return to life was to suck the blood out of the public sector. The unions are very, very weak in every other sector of this country, except in the public sector. In the public sector, they are thriving. They have an unlimited pot of money and it's going to ruin virtually every municipality in the U.S. This is a desperate situation, there is a death battle going on now between the tax payers and the government unions. I'm all for policemen, firemen, and prison guards getting paid extremely well, but the general situation with government employees and their pensions is catastrophic. I think Mr. Trumka has that in mind. No matter what you guys in the private sector do, I have found the fatted calf.
Adam Lashinsky: I think these unions essentially wasted $10 million trying to get Blanche Lincoln out of office. They could have used that money in races that would have produced a lot more productive results for their interests. I'm not really impressed by a relatively un-unionized city like Chula Vista, in Southern California. The interesting battle is going to be between Meg Whitman and Jerry Brown in California. We'll see just how much she'll go after the unions and how much he'll support the unions This is going to be a very important fight for the finances of the state of California. The real battle here is going to be over the public sector unions.
Charles Payne: I think there's going to a kind of civil war between local governments and public employee unions. We're just starting to see the beginning of it. We all love firemen and we love teachers but we read stories about retired fire chiefs making $190,000 a year. There was a time when I was growing up and people actually went looking for the union label because unions had a positive image. That's totally gone and I do think, given the loss they took in Arkansas, it's good for business and it's good for America. But these union groups are going to continue to fight hard.
Report: White House Wants to Let Agencies Spend Half of Their Saved Money Saved From 5 Percent Budget Cuts
Ben Stein: We've seen this over and over and over again—federal agencies giving a 2 percent trim, a 1 percent trim, or a 3 percent trim to their budgets. Look, they've got to go in there with a meat ax, and they're never going to do it because the public sector unions won't let them do it. Constituents won't let them do it and the media will be filled with sob stories about it. So it's just not going to happen.
Charles Payne: This might be the only window of opportunity to take a meat ax to the problem of bloated federal budgets. Fortunately, the public is really up for it. All these countries around the world are finally cutting back and getting spending under control. Granted they have had almost no choice but I think we're getting all too close to that point in the U.S. Politicians are finally starting to get the message, and these cuts have to start somewhere. The key is doing it fast enough because we're already hitting a crisis stage.
Dagen McDowell: You never hear politicians say that we're going to have to cut and change the requirements for Social Security and Medicare, ever. It's the $100 trillion unfunded liability that is going to pose huge problems for this country down the road. It doesn't matter how much federal agencies cut back, these entitlement programs are where the real crisis lies.
Adam Lashinsky: The fact is we aren't in a Greece or Hungary crisis situation yet. When we're there it's going to be relatively simple, I promise you. They will raise the retirement age and cut the benefits. It's just going to happen—it has too. It won't matter if there's public support or unions or seniors come out and fight it. It will happen because there won't be any other option.
Stocks From Our 'A-Team'
Charles Payne: Akamai [AKAM]
Adam Lashinsky: Anadarko [APC]
Ben Stein: iShares MSCI Index [EFA]
Forbes on Fox
David Asman was joined by Steve Forbes, Rich Karlgaard, Bill Baldwin, Neil Weinberg, Stephane Fitch, Quentin Hardy, Victoria Barret, and Elizabeth MacDonald.
In Focus: Are Business CEOs Best-equipped to Fix America's Budget?
David Asman: The private sector fix for our public sector mess. Former eBay CEO Meg Whitman and former HP CEO Carly Fiorina stomped their primary challengers at the polls this week. A smart choice for some at Forbes who say we need the corporate executives' business savvy to straighten out the government's budget disaster. Hi everybody, I'm David Asman. Welcome to Forbes on Fox! Let's go In Focus with Steve Forbes, Elizabeth MacDonald, Rich Karlgaard, Bill Baldwin, Victoria Barret and Quentin Hardy. Steve, let's start with you.
Steve Forbes: The CEOs could not do worse than the political hacks that we have in there today. Whitman and Fiorina are used to running companies. Whitman started eBay and built a great company, and Fiorina went into HP and had to shake things up. These are people who know that there is more to governing than speeches. They know how to work with people and get things done. That's what we need today—to shake up the status quo.
Quentin Hardy: Remember when Fiorina was an advisor to McCain and she said neither McCain nor Obama could be CEOs? She may have been right. She was talking about skill sets. It takes a very different skill set to be in government. Who says CEOs have the skills to be politicians? And they have big problems when it comes to running. Fiorina cut 30,000 jobs [at HP] and created jobs in India. And Meg Whitman didn't start eBay. She was a hired gun and she froze development. She created jobs at Amazon.
Rich Karlgaard: As candidates, I give Whitman and Fiorina a B. They do have their flaws. In many ways they are the mirror images of Obama. They are from elite schools, they are arrogant, they have thin skins, and they talk to us like we're 5-year-olds. But consider the opposite. Barbara Boxer is rated a 30 by the Chamber of Commerce and a zero by the National Federation of Independent Businesses. They are absolutely horrible for the creation of businesses. And Jerry Brown is stuck in the 1970s.
Bill Baldwin: I just don't trust business executives who go into politics, present company excluded Steve. (laughter) Let's look at a pattern here. John Corzine, Frank Lautenberg—they were big executives who went into politics and became big spenders. I just don't trust these people to cut budgets. Listen to Carly Fiorina. Is she actually saying what she's going to cut? Does she care? No! She's turning to mush now that she's trying to get votes. She says she's going to streamline government. I don't want her to talk about streamlining. I want her to say she's going to eliminate the Department of Education or the Department of Energy.
Victoria Barret: You can find a nice comparison to Meg Whitman in Mitt Romney who also was in consulting (they both were at Bain). He did great things when he went into Massachusetts as Governor. The state was facing a $1.2 billion deficit and within a couple years he raised fees, raised some taxes, and made some budget cuts. He turned the deficit into a $700 million surplus, and then he was able to cut taxes. I think CEOs have credibility with businesses. They know what to cut and what not to cut. He closed loopholes in the state's corporate tax structure. These candidates aren't perfect but I think CEOs can do better in this environment than a political junkie.
Elizabeth MacDonald: I think it depends on the individual and the courage and faith he or she has in the American people and the strong entrepreneurial spirit in this country. It's easy to dictate by fiat when you are running a company, when you decide the payrolls and the budgets. But when you are governing, you have to deal with separation of power and public opinion. In California, you have to deal with 37 million people. The Terminator-in-Chief in California, Arnold Schwarzenegger, proved how difficult it is. Remember what Harry Truman said about Dwight Eisenhower? He said 'Poor Ike, it won't be a bit like running the army. He'll find out how difficult it will be.'
Is a Law Protecting Unions Hurting the Oil Spill Cleanup Efforts?
David Asman: Well, did you hear about this? Foreign countries offering to send technology and equipment to help clean up the Gulf, but there is a law here protecting unions that is standing in the way. A law that the president could wave right now. Steve, why isn't he?
Steve Forbes: Precisely because he does not want to offend the unions. It's called the Jones Act, which wrecked the maritime industry in this country, so ships here have to have American crews and be built in American yards. It sounds like it would protect American jobs, but it destroyed them. Take the cruise industry for example. It's illegal to take a ship from New York to Miami unless it was built in the yard here, which most of them aren't because they're not competitive. It destroyed jobs and it's slowing the clean-up. If he got rid of that law he could bring in foreign ships and foreign equipment. But the President won't do it out of fear of domestic politics.
Stephane Fitch: I can't speak for the President but it sounds like a little bit of right wing partisan mischief. You're assuming that the President is putting his hand up here. What is really happening is the Coast Guard is deciding who should come help. One of the countries that is offering its help is Iran. Do you want Ahmadinejad's ships in our waters? I think the Coast Guard is well within its right, and is being smart about saying, let's be orderly about it. I have to guess (because we don't know the whole story) that it doesn't have anything to do with the Jones Act or the unions.
Elizabeth MacDonald: Fox News' Brian Wilson has been reporting that the Coast Guard is saying that this act could be standing in the way. Saudi Aramco deployed tankers in Kuwait in 1991 to clean up the spills there. The President should be calling in the Navy and the Cavalry to get in there and get it fixed now. We are dealing with a situation where the spill is at such depths and such pressures that trying to cap it is like trying to hit a dinner plate with a golf ball from two miles away, according to Michio Kaku, a physicist. We need to get the tankers in there to clean it up. That's the situation now.
Neil Weinberg: He doesn't want to take the blame himself. There is so much finger-pointing going on. Republicans want to blame the Democrats and the Democrats want to blame the Republicans. The truth, I believe, is that as a nation, we were totally unprepared for this. Maybe we all deserve blame here for wanting cheap oil, but not having the proper regulation for it. I don't think now that President Obama, who is a very calculating politician, is going to pander to unions and risk his popularity going down further. I don't buy it.
Rich Karlgaard: Neil says he is calculating but I say he is Hamlet. He's just absolutely paralyzed right now over the Jones Act. He hasn't even called the BP CEO Tony Hayward and it's been eight weeks. What's stopping that? The guy really thought the job involved hanging out with Paul McCartney and taking his daughters on the 747 to shopping trips in New York. Now he is hit with something hard and he's paralyzed.
Bill Baldwin: Can I break ranks with the Forbes team and say something good about unions? Maybe the unions aren't to blame here. The unions are a force of good and were a force of good in American history. They will save Chinese workers from abuse in the next century. I don't think the unions are in the way here. I don't think a union guy out there says don't clean up the beaches because it will hurt my job. I don't think that at all. I see two reasons why we're not waiving the Jones Act so far. I think Obama has a plot to make BP look worse, and I think he really, genuinely, totally underestimated how bad it would be, or else he would have had a waiver the day after the spill.
Do New Reports of Opposition to Walmart From Its Corporate Competitors Prove the Giant Retailer Is Good for America?
David Asman: You think it's just union and mom-and-pop shops that want Walmart out of town? Think again. New reports showing that Walmart's big corporate competitors are secretly funding the protests against its new stores. Victoria, you say this proves Walmart is actually great for America?
Victoria Barret: Yes. The competitors can't compete on simple things like price and convenience and service, so they're funding a consulting group to go out and create what looks like a grassroots efforts with activists and union leaders and moms to prevent new Walmarts from being opened. It shows how tough it is to compete with Walmart. You know, there is something to be said for American consumers getting everyday low prices. I should mention, too, Forbes did report on this one and a half years ago.
Stephane Fitch: It's distasteful and it's cheesy, but it's not fraud. Here's how it works. You hire a few moms and sympathetic people. They come out and actually say things that are true and create a little expert testimony that's also true, and then they go to the zoning board and pick a fight with Walmart. It's distasteful but it doesn't change these facts. Walmart's parking lots are too big. It doesn't pay its workers enough. Now I said it. Nobody paid me.
Steve Forbes: It really is, and it shows the free market works when it's allowed to work. Walmart saves a typical American household $3,100 a year. 1.4 million people voluntarily work for Walmart. It's been a leader on prescription medicines. It shows what free enterprise can do in healthcare. What is not to like?
Quentin Hardy: It's the influence of politics entering the business world. This is called the opposition research, right? You secretly have a report coming out to show someone's dirty side. To the extent there is some transparency, we now know who is doing this and why. It does point out difficulties about Walmart. What is wrong with it? Oh by the way, they are hiring people and boosting employment. We could use that in this country.
Neil Karlgaard: It doesn't stink. It's been going on forever. A company called Kroll just sold for $1 billion and what do they do? They spy on companies for other companies. Patricia Dunn, the former chairwoman of Hewlett-Packard got caught spying on her own board. This is how business is done.
Informer: Little-known Stock With Big Payouts
Stocks you won't find in the Forbes annual investment guide but that you should own:
Neil Weinberg: ICON Energy Fund [ICENX]
Bill Baldwin: Eli Lilly [LLY]
Stephane Fitch: American Campus Communities [ACC]
This week Cheryl Casone was joined by Tracy Byrnes, Dan Gerstein, Jonathan Hoenig, Max Jonas Ferris and John Layfield.
Liberals Demand for More Spending as Tea Partiers Call for Cuts
Tracy Byrnes, Fox Business Network: This is home economics 101. If my family is in debt and I go out and spend more, you know what happens? The debt collectors call and take my car away and then they take my house away. What the heck? The government is not getting this. Do you know, our government spent $134 billion more than it collected in May? We've had a budget deficit for 20 months now. When the heck are they going to realize you cannot spend your way out of debt?
Dan Gerstein, President, Gotham Ghostwriters: As usual both extremes are wrong in this case. The worst thing we could do right now is slash spending a great deal and have a deflationary effect in the economy. We're still in a deep recession in terms of the job market. Close to 10 percent in unemployment. We need to continue stimulating the economy. I also think the solution is not to cut spending or raise spending but spend smarter on things that stimulate investment and growth. We think we should cut spending to pay for that.
Jonathan Hoenig, www.capitalistpig.com: Right. Cheryl, it's as plain as the nose on their face. If government spending created wealth, even in small amounts, Portugal and Greece and Spain would be economic superpowers right now. They're not. It takes money for productive people and then I disagree. I think government spending is unproductive. Spain is a great example. They have a huge green job program, which I know is a big priority for the president. They also have unemployment up near 20 percent. I don't agree that government spending creates wealth. It spends for political purposes not economic purposes. It's a waste.
Jonas Max Ferris, www.maxfunds.com: I think both parties, both sides are kind of right in this equation. You can't buy yourself out of debt, to Tracy's point, you can't create wealth. But you can buy yourself out of a recession. The Chinese just bought themselves out of a slowing economy and now their economy is strong. In the short run, you actually want to keep the government spending. Look at retail sales number coming out. The economy is not strong enough to have the government pull out. On the flip side, to the tea party people, long-term, we have to make cuts so we don't go down like Greece. It would be nice to keep the short-term stimulus up and make the cuts to long-term programs like Social Security and Medicare, so we have a long-term balanced budget, but acknowledge the fact that we're in trouble.
John Layfield, www. nutritionmarket.com: If you look at what Ryangart has done with the IMF. The studies they've done cross 90 percent debt to GDP and you start losing a full percentage point. We're projecting $20 trillion in deficit by the mid-teens of this decade, right now, which is unsustainable, but that's if we have a rosy GDP. We are not going to have a rosy GDP because of the debt GDP ratio we just crossed and because what you see they're cutting spending 20 percent right now across the board in the U.K. And the economy is going to show down. The GDP is wrong and deficits will get higher. We have to at some point rein in ourselves fiscally.
D.C. Considers Cutting Mortgage Tax Breaks to Fix Budget Report
John Layfield: Absolutely. You look at what this administration has done. This administration over time and time again has punished the creation of capital. We bail out homeowners by taking homeowners who are paying their mortgages and increase their taxes and use it for homeowners who are not. We take a house tax, $8,000. The average home is $174,000 with 3.5 percent FHA. That means we're paying people $1,800 to buy a new home. Now we're saying to people who can afford a home, buy a home and when you pay your mortgage at the end of the year and you get a tax break, no more. It's ridiculous what this administration is doing.
Jonathan Hoenig: Cheryl, I think people will want to buy homes. They will want to buy them in a free country, right? A country where prices for homes reflect reality. I don't understand why people who rent or people who pay off their mortgages should be expected to subsidize people who carry a big mortgage.
Dan Gerstein: I take a very different approach on this. I think at this point with the housing market still kind of in a very tenuous recovery, we shouldn't be doing away with incentives to create home buying and more purchasing. At the same time, I think we should re-examine the deduction in terms of who gets what. We're subsidizing wealthy people who are buying homes which is totally unnecessary. That is just a wasteful give-away. If we're talking about cutting spending and closing the deficit, that is the perfect place to start.
Tracy Byrnes: It's not. You know what? They shouldn't give them the credit in the first place. They spend $16 billion on the first-time home buyers tax credit or the other one you can buy another principal residence. $16 billion. Now they're looking at themselves and they're like we got to get that money back so we're going to cut out the mortgage interest deduction instead. It's just like what John said, your taking from Peter to pay Paul. That is all the government continues to do.
Joans Max Ferris: I don't get a deduction on the payments for the car. John happens to be right on this thing. George Bush had a tax group that came up with the same conclusion years ago. It was a good idea then and it's a good idea now. You are actually stealing money from renters and subsidizing people to buy McMansions. This thing goes up to $1.1 billion. It doesn't make the houses more affordable. It jacks the price up but your payment stays the same. Every time the government creates these sort of incentives you'll see the prices go up faster than inflation. Look, you get to deduct health insurance and it goes up faster than inflation. You get to deduct all the mortgages and home prices went up faster than inflation. School tuition, if you get all the deductions there, it goes up faster than inflation. This is a bad idea. It only raises the price of the home.
Mom: Students Asked to Raise Cash to Fund School Budgets
Tracy Byrnes: It's the worst, Cheryl. Stay away from my kids. You got issues, you come to me. She is right about that. You know what? The adults screwed up the spending and the adults should fix it, not the kids.
Jonas Max Ferris: No, I'll tell you who is being shaken down by schools and it's big homeowners. That's who pays for school. They go around town. It's the school. And the kids should have to have the bake sale to pay for school trip, not the homeowner who doesn't have kids. Why do I pay for the school when I don't have any children?
Dan Gerstein: No, absolutely not, but there's bigger outrages. This is just the tip of the iceberg. Here in New York City, they are laying off all the young teachers because older teachers have tenure and seniority so a lot of good teachers are being laid off. That's totally backwards. That's the first thing we should fix.
John Layfield: No, it doesn't. This is what happens when the unions put themselves first above what they are supposed to be working for. I got stuck for five hours yesterday at London Heathrow because a bunch of air waitresses called a strike for British Airways union. This is what happens when unions get put first. It happens across the board.
Jonathan Hoenig: The public schools really are the worst possible of both worlds, all possible worlds in the economy. Not only do you have unions but you have a government monopoly. There is no free market in K through 12 education. I fear the unions are going to do to education or are in the process of doing what they did to airlines, steel, autos and the other industries they dominated over the years.
What Do I Need to Know?
Tracy Byrnes: A Texas man worth $9 billion died this week and he is doing the happy dance in the grave because his heirs are inheriting the money estate tax free. No estate tax in 2010. Die now. It comes back in 2011.
Jonas Max Ferris: The Dutch government is redefining "Going Dutch" by spending money on makeovers for women to get them off the other government programs and hopefully to meet a man through online dating. This is good for online dating in general. I own match.com.
Jonathan Hoenig: The Wall Street Journal reported the cost of raising a child to maturity is now $222,000. Tracy, you have three kids, right?
John Layfield: I'm going to the World Cup in two weeks down in South Africa. Today, USA starts against England.