Kiss jobs recovery good-bye?



RICH KARLGAARD: The first thing that would happen is that it would kill the stock market. The gain since 2009 would go in reverse. As companies saw their stock valuations go down, it became even more aggressive about trimming payroll. So you would see that awful spiral happening.

RICK UNGAR: When taxes are higher on dividends what happens? Well people don't want to receive dividends because they don't want to pay the higher taxes. So what happens? Companies see that money, they don't just let it sit there and do nothing, they reinvest it in their businesses. They do that so they can grow the business and in fact increase the share value. When they grow the business what happens? They have to hire more people. So yeah it hurts your pocketbook a little bit, I'll agree to that but if you're looking to increase jobs, it's a great way to do it.

STEVE FORBES: It did absolutely, and what Rick said should get him a good job at a university with that nonsense, he should get a job with the French government, they are about to do this crazy stuff. The fact of the matter is, when you raise the price of good things like risk taking and success, you get less of them. We tried this nonsense in the 1930s and failed. Japan has been trying this since the 1990s, with disastrous results for the economy. We have been doing it for the last 3 years, Hello!?

ELIZABETH MACDONALD: The tedious orgy of self-righteousness continues in Washington D.C. These politicians wouldn't know a responsible budget if ran them over on Kay street and backed up over them again. I love this debate because it comes at a time where John Kerry, Charlie Rangel, and Howard Metzenbaum did everything they could to reduce taxes, but here what we found. Capital gains revenue comes in more when you cut it. We saw that in 1997 and in 2003. In '97 it went up 28 percent, in 2003 it went up 21 percent. Heres the deal- Apple, Google, Facebook , Paypal- all angel investors- all capital gains money coming in to fund those companies which create even more tax revenues for the government.

VICTORIA BARRET: Well they need to fill their coffers and the easiest way to do that is to say that you are going after the rich. It seems like this sort of harmless thing to do because these people pockets are just flushed with cash, they won't even notice. The truth is, they will notice, they will invest differently. Dividend stocks will go down, the whole stock market will take a hit like Rich said. Also, the people who will really get hit are retirees. Half of all dividends in this country go to people over the age of 65. Suddenly those people are going to be sitting on smaller investment funds and they are going to take hits on companies because companies are going to reassess their dividend plans. Companies do respond to the dividend tax rate. You can see this really clearly in a graph that shows dividend payouts and the tax rates. Microsoft is a perfect example, they weren't issued a dividend and sitting on tens of billions in cash. Then the tax rate went down, and they issued a new dividend.

MIKE OZANIAN: No, why do you want to punish the most successful people? You want more success not less success. To go back to Rick's point, one of the problems is that these companies have all this cash on their balance sheet that they are not reinvesting in their businesses, and that's hurting profitability because interest rates are so low. All that cash is sitting there earning 1 percent. If that money was funneled back into plant and equipment, then you get an unemployment rate that is far below 8 percent which is where it should be in a recovery.


STEVE FORBES: That's right David, the more you bail out companies like this, the more the company leaks. This was simply a payoff to the united autoworkers union, it stiffed creditors worthy in a way of Argentina, and every major airline has gone through reorganization in this country, survived and learned to thrive again. Why couldn't the automakers have done it?

RICK UNGAR: I think the example that Steve often uses of comparing it with the airlines is not unreasonable. I think you have to be careful to not look at this in a vacuum. The situation at the airlines came at a time when the nation was not facing a serious financial crisis. It was a different set of circumstances. They were able to merge; they were able to find private money to help them get back on their feet. What we found with the auto industry is that that collapse came at the very moment when the nation was facing a very serious financial problem. Had it gone down, the impact would have been far greater than the loss of an airline, the entire Midwest would have suffered, it's arguable that the entire country would have suffered; it was not the same situation. So, fair enough when you use the airlines as an example, but let's put it in the context of what was actually going on.

MIKE OZANIAN: Never happened, David. The reason is, too much power was given to the UAW in their reorganization. Look and see what's happening. You have some plants where non-UAW workers have not been able to come back to work, unless they take a huge pay cut. Unprofitable plants have been given cherry-picked assignments because they were part of the UAW. Meanwhile, you have OPEL overseas losing tons of money yet because of this reorganization, GM can't close the plants after 2014.

MORGAN BRENNAN: I have my personal feelings about the bailout but the truth to the matter of whether it's a failure or not, it's much too early to say. Going back to his point about the stock market and the price of the stock right now, the treasury owns about 26 percent of that stock until it sells it off, whether it's for a loss or not, I don't think we could sit here and say that the bailout was a complete failure or not. In comparing Toyota's profits, against GM's profits right now, I don't think you can make that comparison either because Toyota is coming out of a bad year with recalls and earthquakes which is why CEOs are looking to push their profits this year. I think if you really want to make a comparison, you need to look at Ford vs. GM.

RICH KARLGAARD: As pointed out, the stock is down 50 percent during a time where the overall stock market is way up. So on an overall basis, GM is even worse than it appears. Why even bring up Toyota? Just compare General Motors to Ford, who wasn't bailed out. Ford is hitting the ball out of the park, developing great cars like the focus, and that's all you need. The definition of insanity is doing the same thing over and over expecting different results. When you have a UAW dominated company, you can't expect different results.

JOHN TAMNY: Well basically what would we expect any different when you bail out a company that company is no longer in the business of profit. Instead they are serving political masters who don't care about profit, hence something like the Chevy volt. The tragedy of the bailout and the irony of the Toyota news is that if GM had been allowed to go bankrupt, it doesn't disappear; instead it has owners like Toyota's management who actually have a clue about how to run a car company. Bailouts never work.


VICTORIA BARRET: Oh yeah, scrap it entirely. Yes, the fraud and abuse we are talking about that people are getting multiple phones is absurd but, fundamentally you have to ask yourself why is the government giving out cell phones? It's completely fostering an entitlement culture and you can get pretty cheap cell phone service. You go to Walgreens and get one of those cards, you get a temporary phone. You don't have to pay $100 bucks a month to have a phone. Also, it is a hidden tax we are all paying for it and half of us don't even know. So this is the worst form of entitlement hidden taxation.

RICK UNGAR: Let's be clear about a few things. First of all, its tax payer funded, not government funded. It is paid for by the people who use the phone service. Let's get to what is really interesting about this. This program which some of you might consider another socialist enterprise was created in 1985 under the administration of whom... Ronald Reagan. It was reformed however starting in 2010 under the administration of Barack Obama. The congressmen who are making a big fuss out of this is behind the times. Starting January 1st of this year, the reforms that were put into place by the FCC to get rid of the fraud that was taking place and to make the system work a lot better is already in progress. The time to complain about this has really come and gone this is already being fixed. A program that was started by President Ronald Reagan.

ELIZABETH MACDONALD: It's not good and it's a universal fine line item. Yes, it started under Reagan but the abuse is happening now and this should have been unplugged yesterday. What happens is everybody likes this, the phone companies like this because they get multiple lines and profits the government likes it because it gets a bigger bureaucracy to oversee it and the people who use it love it they get multiple phones but not the people who have to pay the bill, us.

MORGAN BRENNAN: Yes, get rid of the frauds, the abuses the FCC is already doing that they are projecting they will save $200M dollars cutting out some of those abuses this year. I say let that process happen before we scrap it all together. If you want to scrap something, scrap landlines they are also part of this program, they are obsolete.

STEVE FORBES: Absolutely scrap it. Cell phones today are the fraction of the cost of landlines was back in 1985. If the poorest of the poor in Haiti can afford cell phones, we Americans can afford them.