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IN FOCUS: Democratic leaders saying entitlements should not be part of any fiscal cliff deal
MIKE OZANIAN: For the sake of the overall economy, we must put entitlements on the table. We must reduce the rate of growing entitlements. Over the last 4 years entitlement spending has grown much faster in the overall economy. This is one of the reasons why President Obama keeps borrowing more and more money and has this country in record debt, and that's hurt the economy. Take home pay has decreased significantly under President Obama; we must get entitlements under control.
RICK UNGAR: There's no chance that there is going to be a deal on this without entitlement cuts. I think what Sen. Durbin is talking about is the importance of focusing. We really want to get to a deal here and I think we all do. You're not going to do it by taking some wide spectrum approach. President Obama was clear about this when he spoke to the republicans at their gathering some years ago. He pointed out that the biggest driver of the United States debt is Medicare. He understands that we have to face up to our Medicare problem. That is where the energy needs to go; we need to find a solution to Medicare and taxes.
ELIZABETH MACDONALD: It's absurd what Tim Geithner is proposing and what the president is proposing. You hear the president now saying that tax hikes on the upper brackets will solve all the problems magically. It wouldn't pay for government spending for about a week and a half. When the president said he would stop the seas from rising I think he ought to mean now, to stop the oceans from red ink. The federal tax payers are now ponying up to cover the shortfall in social security. The white house has already said that, the CBO has already said that that is happening. What happened was LBJ in the 60s got governments mitts on social security funds to cover the cost of the Vietnam War and for the great war on poverty and the space trip to NASA, so that's the issue.
MARK TATGE: The problem with social security is we've cut the payroll tax. If we increase the payroll tax to the level that it was, I don't think we would have a problem with social security. I agree, entitlements need to be on the table, but let's look at the big pot here. Entitlements are 13 percent of the total budget; the big pot is defense spending, that's 24 percent; we spend $1 trillon on defense. Let's look at federal pensions, which are another 22 percent of the federal budget. We give pensions to members of congress, let's look at that. Yes, let's look at entitlements but let's look at the big honey pots and spending in the federal budgets.
VICTORIA BARRET: The problem is actually deeper than what your describing because this goes back decades. When you look at entitlement spending over the last half century, it has steadily crept up 4 percent every year that includes the adjustment for inflation and population growth. What then? Do you increase taxes 4 percent every year? That's absurd. At some point we need both parties to come together and smartly attack this entitlement creep. We mention Obama a lot, he hasn't helped the numbers certainly, but historically when you look at entitlement spending it goes up under republican presidents. I'm saying he can go into this and blame the republicans for the problem they have gotten him into.
JOHN TAMNY: The tax increase aspect is ridiculous because we don't have a tax problem or revenue problem, we have a spending problem. When you look at entitlements I think they are all an abomination. I don't think they should exist and they should be done elsewhere, but we did make these promises. The idea should not be to cut entitlements but to say those nearing retirement, you are going to be made whole but for those of you who are not congenially socialist who actually want control of your own environment you can opt out of these various programs, you don't have to participate in Medicare or social security. That's how you cut entitlements without cutting off the people who are in retirement.
Lawmakers still trying to hammer out a deal to fix the deficit. Now some experts are floating a new one: a gas tax
JOHN TAMNY: It will be hit on the middle class for the simple reason that Republicans and Democrats have been devaluing the dollar for the last 11 years such that Americans have been paying at nosebleed levels for gasoline as is. To add another tax on top of this is just offensive and it misses the point. We do not have a revenue problem in this country. Go back to Clinton's last year in office, we spent half of what we did and we were hardly living on the street or not eating. The idea that we can't cut spending now is really bothersome.
MORGAN BRENNAN: This is true which is why I am for discussions about the gas tax being hiked, but I have one stipulation and that's the fact that I think the government should be doing as much as they can to make the refining process better to tamp down the price of gas. This is why I'm game for this tax hike, it hasn't been raised since 1993, and it's at 18¢ per gallon whether it's $2 per gallon or $5 because it's not adjusted for inflation. Truth to the matter is, it funds the highway trust fund and we have been seeing a major budgetary shortfall by about 30 percent. We need to find ways to raise revenues for that.
MIKE OZANIAN: John is absolutely right; at a time when personal income is falling under President Obama we don't want to raise the cost of living for people that would be terrible. All these moms out there driving kids around, and people who drive to work, that's horrible. In fact, one of the problems is, the federal government raids this trust fund it's not like the increase in revenue from a higher tax would automatically go to rebuilding roads, that's not the case.
RICK UNGAR: I can be for this and shockingly I think John is absolutely wrong, we do have a revenue problem. I'll tell you why I'm for it, I've been listening to my friends on the panel, tell me week after week after week that if we just get more oil out of the ground in the United States, gas prices will go down. Guess what? Here we are being told that we are on the verge of becoming the oil superpower in the world, what better time is this there to start raising some revenue by apportioning taxes on people who use the gasoline. You have been telling me that prices are going to come down. Now that we are going to have all this additional oil, what a great way to raise some money!
ELIZABETH MACDONALD: The gas tax is going to go up even higher if we move to fuel efficient cars, if the administration has its way. Look, it does hit the poor and middle class hard we are talking about contractors, landscapers, truckers, plumbers, poor people who need to drive to get to work. Since 1934, when the gas tax was first launched there was only a 17 year period starting in 1956 when it actually went toward building highways; instead congress got its mitts on the money and starting spending on things like buying properties or renaming bridges or buildings or parks after themselves. Politicians made monuments to me and starting making the country look like Uzbekistan. The gas tax is not the way to go. It hits the poor hard.
VICTORIA BARRET: It's a tax on the movement of people and stuff. It's a really broad tax; it's certainly hits of people with lower incomes harder because they are spending a higher portion of their income on gas. At some point, this was good idea right? If you would have asked this question in 2004, you could have made a really strong case for gas tax. Now with our economies teetering on recovery, it's not the time for a gas tax. It's also a stealth tax; we forget we are paying it so it never goes away. To Mikes point, the funds never go to highways and certainly under this administration, there will be nothing done to encourage driving so the tax revenue will go somewhere else.
Unions win their ballot with Former Los Angeles mayor Richard Riordan
VICTORIA BARRET: The pension underfunded liabilities are massive. Either you are going to see hikes in taxes, we are already seeing sales tax increases or worse we are going to see bankruptcies. You're going to see what we have seen in other California cities including Stockton and San Bernardino, and that's bankruptcy. What that means is that, we all go to court, and it's a bankruptcy law versus pension law. On the streets, you see increased crime because current services are cut. So tax hikes along with some really other lousy outcomes if we don't see reform.
RICK UNGAR: The problem is Los Angeles is not the type of place where you want to run a test case like this. It costs a lot of money to put up these ballot initiatives. You have got people who the front runners to become mayor in spring of next year who were not going to support it. This was a non-starter. This was never going to work in the city of L.A. Take it somewhere else where you have a better chance of succeeding if you want to get this going.
ELIZABETH MACDONALD: Yes, put it in the ballot because there's nothing in the law, any law, that says you cannot change to 401ks. You can change to 401ks for future and new hires for their pension plans. You don't have to have the old defined benefits-by the way the private sector doesn't get. There is a $500 pension liability in the state of California according to Stanford University. Vicky is right, government services are starting to get cut across cities in California and so it doesn't cut it when you have things like ‘oh lets raise the retirement age to age 52 from 50.' It's not enough.
MARK TATGE: I agree that there is a problem with pensions, they are underfunded, and we need to do something about it. The big thing here is- let's be fair- the benefits that were promised to these employees and in some way we need to make them whole. In many cases, they were promised in lieu of pay. So you may make more money in the private sector, you make less in the public and you get more benefits.
MIKE OZANIAN: One of the things this will stop is the way that politicians get taxpayers to sign off on these pensions as they say, only so much is going to be in salary and we will make up the difference in benefits and high investment returns and they put in these phony 8-9 percent annual returns. When they don't materialize you get situations like California. Look what's happened to Detroit when they shut down entire streets because part of the problem is union pensions.
INFORMER: What stocks are better than winning the Powerball?
ELIZABETH MACDONALD: Johnson Controls (JCI)
52-WEEK HIGH: $35.95
52-WEEK LOW: $23.37
MORGAN BRENNAN: Equity Residential (EQR)
52-Week High: $65.72
52-Week Low: $52.94