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AN INTACT HEALTH CARE LAW: SEVERE IMPACT ON JOBS?
TOBIN SMITH: Absolutely Brenda, and here's why. The thing about fifty that's the new speed limit for the economy because if you have let's say fifty five or sixty employees now because of the new law you're going to take that down to forty nine because you'd be forced into mandated coverage. If you're under fifty guess what, you're going to stay under. But the worst thing are these franchisees, these companies that have been sort of hanging on by a thread trying to recover, and you're going to see unfortunately mass, mass layoffs and businesses closing because they just can't make a profit on this , and what does that mean? That means a lot less jobs not a little less jobs a lot less jobs.
JONAS MAX FERRIS: Yeah, and you get a tax deduction for getting insurance. Look, the whole concept of employees having to pay for insurance in the first place is what hurts jobs; it's been hurting jobs for decades. That's a bad system; no one has any proposals to get off that system so unfortunately this is just more of the current situation. Now, I will say hiring is a lot better off this week than it was before the Supreme Court because if this whole situation went bad you would've cost an employer more to hire somebody because then they would've had, they wouldn't have had all the mandated policies then all of a sudden premiums would've gone even higher than they're probably going to go. So they're actually marginally better off when it comes to hiring then they were a week ago.
GARY B. SMITH: Well, Jonas has the pretzel logic thing going. I got lost about thirty seconds into what the heck he was saying. Look let's, let me in my simple way - here's what I think has happened. The Supreme Court already decided that the mandate is a tax. Taxes are bad, taxes hurt the economy. To go back to Toby's point, the small business has fifty employees now has mandated via taxes to pay $100,000. That's $100,000 out of their pocket, there's already been small business that are saying, hey look I have to close one of my restaurants because I can't afford a hundred thousand. Now, the left will say, oh you get these tax credits you can apply for exemptions, okay fine I'll buy that, but the hundred thousand dollar costs doesn't go away. Here's what it does to jobs, the $100,000 is then sucked out of the economy so people then can have to pay less to go to those restaurants, less to buy things. Yeah, if you're in the health care industry that's the place to be. Anyone young, old medium out there go into the health care industry because that's where the money is flowing. Everyone else is going to suffer.
JULIAN EPSTEIN: I think that's right and I think business owners are making their decisions based on other things. Just let's put some facts on the table. First of all, the tax penalty according to the majority of the opinion of the Supreme Court, Chief Justice Roberts will affect a little more than one percent of the people. Secondly, ninety six percent of US businesses, all businesses under fifty employees are exempt. Third, those businesses above fifty employees the remainder of that four percent, ninety three percent of those already provide insurance, health insurance for their employees. What small business get here, and this has been studied by the CBO is they get thirty five to fifty percent of their premiums, back to them rebated back to them through the form of tax credits. So, you heard during the course of this debate an enormous amount of support, the roundtable, the business roundtable supported this, you had support from the hospitals, you had support from a whole host of businesses interests on this.
LARRY GLAZER: You know, this is the straw that broke the camel's back. For small and medium sized businesses in particular, they are under attack in this country right now. The regulatory environment, the tax uncertainty, look I talked to these businesses every day and they're saying you know what I'm not in the mood to hire. It's not just because of the health care law it's because the health care law in addition to everything else they're already dealing with. Now certainly, we can't blame the health care law for all the delays on Main Street, but it's not helping matters. It's not going to encourage anyone to go out and hire, and it's also going to hurt wages because companies are going to pass that through in forms of stagnant wages to existing employees.
CASH STRAPPED STOCKTON, CALIFORNIA BECOMING THE BIGGEST U-S CITY TO FILE FOR BANKRUPTCY PROTECTION. BANKRUPTCY TREND the TAXPAYERS' FRIEND?
GARY B. SMITH: Absolutely, Brenda. You have a city like Stockton that has almost a half a billion dollars in unfunded health care benefits that they owe. You have a city where you could retire at fifty years old and get health care for life. So they have a lot of problems and they're learning now a good lesson. A sad lesson but it's a lesson that they are able to now go back through bankruptcy and re-negotiate with these large unions these large pensions, and it's showing that these large public unions are not like the Borg where "resistance is futile." So you can actually tighten your belt. I think that's good for taxpayers, I think that's good for the people of Stockton and North Las Vegas and I'll tell you what probably a few other cities down the line.
TOBIN SMITH: I have dear friends in Stockton and I will tell you they've been the role model for everything that's horrible about government. First off they had people spending other people's money and building an arena, a new store owned by the government for crying out loud. Those things went upside down and secondarily they built a government that was based on transactions and property taxes all of which were not sustainable. This is the lesson that if you build a sound foundation your city will continue. If you build unsustainable, it goes down the tubes.
JONAS MAX FERRIS: Either all the lenders get hosed, this also hurts everyone else lending to other states and counties and stuff because in theory they're going to have to borrow and other towns that are solvent are going to have to borrow at higher rates because this loser town couldn't get it together. Look bankruptcy is important part of an economy. You don't just go bankrupt because you can't solve relatively ordinary problems. The specific problem here in Stockton is twofold. They can't raise taxes by decree because of prop thirteen and the property taxes and they cut union pay and all these ridiculous pensions. Those are two solid problems. Raise revenue, your property price are down eighty percent of that ten, you got to raise the property tax. You got to cut the benefits you just don't go bankrupt to solve your problems.
LARRY GLAZER: I agree, that this is that teachable moment that we all talk about, and in financial literacy we all want to be able to sit down at the dinner table and say look, this is what happens when you spend more than you have. This is what happens when you're broke. This is what happens and it's also a good lesson not just for municipal finance, but at the federal level, the federal government could learn a thing or two. You let things get out of control of $16 trillion of debt you're going to wind up like Stockton. And finally, I would say look Stockton is like a mini version of Mediterranean Europe. I mean you certainly don't have the sights you don't have the food, and you don't have the beaches, but you do have the debt problems. And this is exactly what could happen, and that's the example we all need to learn from this and reflect it in our own lives.
JULIAN EPSTEIN: Well, bankruptcy is a terrible model, it kills the bar market and takes a long time for cities to recover. The conservatives love to argue that problems are the public unions the fact of the matter is in dozens of states across the country public unions are making concessions on their pension and their other benefits. When folks have actually looked at this and studied it the impact of the public unions on the fiscal debt problems of local governments, there's an impact there, but it's not the major impact. The major impact has been the plummeting of the housing market and you know when George Bush was president in 2002-2003 and we had a recession, an economic downturn he was the one that said the federal government, I know I'm a minority here on this panel that thinks the federal government can play a constructive role when we have an economic down turn, but George Bush was the guy who said the federal government needs to step in and be the person of last resort here. Help teachers, help firefighters, help stabilize the local economy and it worked in 2002.
COURT OF APPEALS GIVING THE EPA more power TO REGULATE CARBON EMISSIONS ON BUSINESSES WITHOUT CONGRESSIONAL APPROVAL
LARRY GLAZER: This is going to get passed through the real issue here is the role of government, the role of bigger government and the role of government regulating. The government has a tendency to regulate first, ask questions later. That's just wrong and we need to do something about it or we're all going to pay the price.
JONAS MAX FERRIS: The EPA is about air quality not the economy. Look, when the EPA does something like make fuel for the environment for the coal plants, it raises your electricity bill ultimately, but when they say that cars have to be tiny and you get fifty miles per gallon that actually saves consumes money. They don't like to drive those cars, but you will spend less on the car and the price of gas.
GARY B. SMITH: This is an agency that has a $10 billion budget. It's grown almost thirty percent under the current administration. It is as Jonas says an environmental agency but in order to achieve that as a taxing agency. In order to do that it taxes, it hurts the economy.
JULIAN EPSTEIN: As a matter of constitutional law the Congress does not have the legislative veto that's been known for three decades at this point. This is the third time this week a conservative court has slammed dunk conservative arguments. The court is headed by chief judge David Sentelle who was an arch conservative. He said the science on carbon emissions is extremely solid, the need to reduce it by six trillion a day, six trillion metro tons is absolutely critical and that it will save consumers at the pump and it will reduce reliance on imported oil.
TOBIN SMITH: We can't afford it and certainly can't afford it at this time, there's a ton of reasons why we can't. I'll tell you that next week, how about that?
WORST STOCK PICKS/BEST PICKS
JONAS MAX FERRIS: FMC TECHNOLOGIES (FTI)
Down 20 percent since April 7, 2012
TOBIN SMITH: CENTENE CORPORATION (CNC)
Down 36 percent since February 11, 2012
GARY B. SMITH: RIMM (RIMM)
Down 50 percent since March 31, 2012
GARY B. SMITH: DELTA (DAL)
Up 32 percent since January 7, 2012
TOBIN SMITH: Linkedin (LNKD)
Up 16.7 percent since March 17, 2012
JONAS MAX FERRIS: Verizon (VZ)
Up 17 percent since February 18, 2012