Bulls & Bears

Will Congress Tie Payroll Tax Cut to Keystone Pipeline?

Which would pump up economy more?




AMILYA ANTONETTI: This shouldn't be that hard for anyone to figure out. The tax cuts are temporary and it's not going to change the uncertainty for small businesses and it's absolutely not going to put that much money at the bottom line for us to be able to go out and actually spur the unemployment. So, the pipeline absolutely, hands-down short and long term it's better and for the future growth let alone changing the power to be able to bring us as an alternative here back to the U.S. for oil.

TODD SCHOENBERGER: I do like the payroll tax cuts. Look, tax cuts pay for themselves and look, this pipeline; it's a pipe dream and it's not going to create the jobs that everybody says it's going to create. The GOP is trying to make it out to be that this is an environmental argument. That they're going to actually be able to pump in all this oil. The oil sits in the Gulf of Mexico. We're going to have a lot of people digging ditches for this pipe, but that is actually temporary Amilya because you're going to be looking at a couple of jobs and that's it. It's going to end, and if anything it's not going to help the overall economy because it's not going to pump up a lot of oil supply that's going to bring down gas prices. It's a wash.

SUSAN OCHS: I don't know. It might be Freaky Friday because I am agreeing with Todd. He's right. This is a tiny drop in the bucket versus the broader economic growth that we need. This tax cut is going to give us, at the minimum, one hundred and ten billion dollars pumped into the economy. This pipeline is talking about, at the maximum, six billion. It's a teeny, tiny little drop and you know these jobs Amilya, they're actually not permanent jobs. A lot of them are temporary construction jobs. So, we need a much bigger, broader plan. Even the number of jobs that they're talking about: 20,000. Even those, they're talking that those are work years. So one work year could comprise over, two workers could comprise over one job. So this isn't even 20,000 jobs. It's a fraction of what we need.

JONAS MAX FERRIS: In general tax cuts would be spectacular, but at this stage we have to pay for them with off-setting tax increases. So, it kind of neutralizes the effect. I'm all for tax cuts in a recession. We're not in a recession. We don't need to keep extending along these recessionary tax breaks that you've got that are bankrupting social security, which is where that money would go. We already have the Bush tax cuts extended. We don't need further payroll tax cuts at this stage in the economy. The pipeline doesn't cost the government money. That's the key difference at this point.

TOBIN SMITH: Well, look at the logic here. If extending these Social Security rebates is what it is that creates jobs, then when we end it next year is that going to eliminate those jobs? I mean you can't have it both ways on your logic number one. Number two, we're creating an asset with private capital; that's what XL Pipeline is going to be, and number three; remember that all that oil being displaced is oil that was coming from Venezuela. We're not in the business of building jobs in Venezuela. We should be in the business of building jobs in America.


TOBIN SMITH: It's amazing how capitalism works. If a cost is raised for a provider, the company or service provider is going to raise those fees. They're not going to cut their margin. We've talked about that; that's happened. The second part is, when you regulate out $6 billion of revenue from the banks that provide this service, remember this is a service, it has to come from somewhere. So what happens is, now the debit card guys, who order a $5 Starbucks, you're getting hit with an extra fee. That $6 billion has to come back some place, and finally, it hurts the small banks in America and the big banks, you know, get off scot-free and is that what Dodd Frank's supposed to do?

JONAS MAX FERRIS: Yeah first off, I don't know how the big banks get off scot-free. Look, this is something that was punishing merchants. It wasn't for the consumer. Merchants who do large ticket charge were paying these ridiculous fees because there's basically this oligopoly: Visa, MasterCard, and a bunch of these banks, and those fees are being shifted to those smaller merchants with the sub-$10 charge and ultimately be going to the consumer, but that's where it belongs. The consumer was paying cash with subsidizing the debit-card-swiping consumer or the credit-card-swiping consumer at gas stations, at Starbucks, whatever. It's not fair. In fact it's better. If you're a cash-spending person this rule will save you money down the road, because what's going to happen is the merchant's ultimately going to put these costs on to the consumer, and they're going to be like I'm not going to use my debit card if you're going to charge me 22 cents or whatever to buy five dollars worth of coffee and that's the end of the debit card and when that happens by the way, one last thing, they'll stop charging the debit card fees on the ATM. The $6 monthly because people say, I'm not going to pay it and that's what happens.

AMILYA ANTONETTI: I mean no, business owners are going to have to get smarter and fast on their feet. They're going to go to cash only, which is very customary on the East Coast. It's going to be harder for the West Coast, because that's not common practice. They're going to give minimum purchases and they're going to say, look, could you pay cash and here's the price and if you pay on the debit this is what it is because I'm passing my costs through, and consumers need to understand that this is what happens. When there's a lot of rules and regulations that increase the costs to the businesses, then businesses will pass them through. This is what happens.

SUSAN OCHS: This isn't about regulation, this is about the banks and Jonas is exactly right. There's an oligopoly in the payment systems market and the way that you know that the banks are not being straight up is that they're pushing people into cash. That's exactly right, but cash is so much more expensive for them operationally than debit cards. They should want people to be using debit cards. They should be charging for ATMs, but they're not doing that, and so this is just really a retaliatory move on behalf of the banks. It's exactly what they tried to do to retail consumers; B of A with the debit card fee. They're trying to get back for the Durbin amendment for these new swipe fees. Look, the problem you have in this market right now is that there isn't enough competition. What I think is really encouraging is that there are new players starting to come on the market who are getting around the payment systems and so you sort of don't have to have these held-up prices by Visa and MasterCard and the large credit card companies. That's where it's going to get interesting.

TODD SCHOENBERGER: Cash is king. Let's keep in mind that the American consumer has not realized this yet, than they have a real problem because that is actually going to save them money. Look, the only reason to be using these debit cards right now is for convenience and right now, if you want to give that up, you want to take a little bit longer on that point-of-sale checkout, that's what's going to happen, but you will be saving money in the long run if you just use cash.


TODD SCHOENBERGER: Listen, if you want evidence that's out there right now that the NLRB is absolutely pro-union, this is it. In their statement after they dropped their lawsuit, they actually said they are going to go after additional companies. So if that's the case, in such a fragile economic environment, we don't need the NLRB trying to paralyze economic growth.

SUSAN OCHS: I think this is a win for everybody. I think Boeing wins. I think unions win; the economy wins; U.S. exports win, which Boeing is a huge factor in. I think this is a good thing. You know, Boeing was accused of something by the NLRB and the best way for them to prove that these claims had no merit was for them to strike a deal with their union and continue to create jobs in Washington and that's what they've done. I think this is great.

AMILYA ANTONETTI: Yeah, but here's what it did. Now, it has spurred uncertainty across the business platforms in the business community. It shows again how quickly we can get dragged into something of no fault of our own and it had a domino effect. I mean, you don't think now that businesses are going to think twice about what's happening here? That Mr. Solomon is a dangerous individual and that foreign money is not going to want to come here if this is what's going to happen? This was wrong from day one. They absolutely way overreached. Way overreached and too many people allowed it to happen.

JONAS MAX FERRIS: Wasn't the NLRB created by FDR to give unions power in negotiations against retaliation? I mean, look, Congress is pro-management. The NLRB's not supposed to be pro-management. They're supposed to be pro-labor. That's a stale concept unfortunately today with outsourcing jobs and all these problems with unions, but that's what their job is. It's kind of an old-school fight they have, but it's basically saying; you're retaliating against workers that are striking by moving the jobs. Not to another country, but to other parts of America where there's low union levels.

TOBIN SMITH: Jonas, my dear Jonas. Remember, this was five work stoppages that affected almost $50 billion over 20 years for Boeing. If in the United States of America, a manufacturing company can't choose to locate its plant where it feels it has a lower propensity to have work stoppages, which could potentially kill the entire company, then we're in the wrong country.


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