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.
Bulls & Bears
Brenda Buttner was joined by Eric Bolling, FOX Business Network host; Tobin Smith, ChangeWave Research; Gary B. Smith, Exemplar Capital; and Patrick Dorsey, Morningstar.com.
Job Losses Keep Mounting: Proof Stimulus Isn't Working?
Tobin Smith, ChangeWave Research: In Missouri, they took their stimulus money and sent it out as income tax refunds. "Shovel ready" is nothing but a lie. If you could actually take money and invest it in stuff that'd create jobs, that would be stimulus. Instead the stimulus package is paying off the payrolls of badly managed states.
Julia Piscitelli, Democratic strategist: Rather than 44 states losing jobs in April, it could have been 50 states. What President Obama said is we were going to save or create jobs. We are saving jobs, stemming the tide of an intense level of unemployment. It's exactly what Obama promised.
Eric Bolling, FOX Business Network: President Obama first said we'd create four million jobs with the stimulus, which then went down to creating or saving three million jobs. I'm not sure what that is. "Shovel ready" means give us money now and we'll figure out what to do with it later. Stimulus money continues to be used in ways that differ from what the American taxpayer was told the money would be spent on.
Gary B. Smith, Exemplar Capital: You can spin the numbers and look for little green shoots any way you want. Why not just claim the stimulus package saved 20 million jobs? Just the name "shovel ready" is a huge lie. For example, in the Washington, D.C. area, they've been trying to build a freeway connector between I-95 and I-270. They've been working on the zoning, contracting, and bid process, etc. for 10 years. These shovel ready jobs may not actually begin to exist until the economy is already back on track.
Pat Dorsey, Morningstar.com: We're looking for a quick turnaround, but there was plenty of pork in the stimulus bill. It was not well designed. The most important effect of the stimulus was psychological and restoring confidence. The idea was that with this amount of government spending, you would make up for the lack of spending in the private sector. Confidence is a leading indicator of business spending, and it's gone up in the past two to three months.
New Credit Card Law: Rewarding Deadbeats?
Eric Bolling: First it was mortgages, then cars, and now credit cards. If you pay your bills on time, here you are. Then there're the people don't pay on time. Now, credit card companies can't raise their rates. Those losses have to be eaten by those that pay on time, and their rates will go up. Essentially, we're bailing out deadbeats that should be paying their bills.
Tobin Smith: This is the business model the credit card industry was built on. What is different now is that do-gooders will have to essentially pay for people who are delinquent on their bills. This is do-gooderism running amuck. If we had let the market solve this, the bad guys would be out of business.
Pat Dorsey: The bad guys have gone out of business. People with bad credit ratings are not getting loans. If you're a deadbeat or have a bad credit score, you're not going to get a credit card. Why would you lend unsecured money to someone who can't pay you back?
Julia Piscitelli: This credit card legislation helps people who are in a hard time. This is for people who generally do pay on time, but may have gotten into a difficult financial situation. I don't feel bad for the people with gold and platinum credit cards who are going to have to pay a $20 a month fee.
Gary B. Smith: The government is deciding what is good and what is bad. They're legislating how much the credit card companies can make, and that money needs to go from customers doing well financially to those who aren't. It's another welfare program. Eventually though, people that shouldn't have had credit cards in the first place will be denied credit, and those who are credit worthy will start paying in cash more often.
Obama vs. Investors on the Markets: Who's Right?
Gary B. Smith: I think investors have it right, in terms of low confidence of where the financial markets are headed. California is about to declare bankruptcy. GMAC needs more money. Every day the government shows it wants to take over more and more institutions. It's depressing.
Tobin Smith: Our numbers have clearly shown we've reached a bottom with the markets. There has been a tremendous change in capital spending from corporations, and a major shift in spending patterns. You have to remember there is a difference between surveys that ask what you're investing in, and how you feel about financial markets in general. Nine to 12 months down the road, I think we'll see a mild expansion.
Pat Dorsey: I think we're far closer to normal than we were a few months ago. Credit spreads have tightened considerably. It's good to see the economy is getting back together. The particular Rasmussen poll we're referencing is problematic because it was conducted on one night with only 500 people. Market confidence bounces around a lot day to day.
Eric Bolling: Obama said the economy is returning to normal. But what's normal about government owning a huge portion of the financial industry, the auto industry, while regulating the earnings credit card companies can make. This is not normal. Though maybe it feels normal to Obama since he's interested in making the government bigger.
Tobin Smith: Terrorists beware, we don't play nice! "NICE" up 50 percent by Dec.
Gary B. Smith: CA money woes makes gold soar! "GLD" up 30 percent in 1 year
Pat Dorsey: Pfizer-Wyeth merger is a gold mine! "PFE" up 50 percent in 2 years
Eric Bolling: New fuel rules bad for cars! "ACH" up 30 percent in 6 months
Cavuto on Business
Neil Cavuto was joined by Ben Stein, author of "How to Ruin the USA"; Dagen McDowell, FOX Business Network anchor; Charles Payne, WStreet.com; and Adam Lashinsky, Fortune magazine, editor-at-large.
Californian's Vote Down "Tax & Spend" Agenda: Is D.C. Getting the Message?
Charles Payne, WStreet.com: I applaud the people of California. Washington thinks it knows what we want and that taxes are for the greater good. I think a lot of people out there blame others for their problems, and that President Obama has their back. I hope people start to realize the problem is themselves, but it may take awhile to reach that point.
Ben Stein, author, "How to Ruin the USA": I don't think Washington knows what its mandate is. Raising taxes on consumer products like wine and beer is insanity. This government is drunk with power and has the idea it can do anything it wants. It's out of control. And Washington isn't getting the message from taxpayers.
Adam Lashinsky, editor-at-large, Fortune Magazine: California leads the way with many things. I personally think the whole Howard Jarvis movement was wrong-headed because it led to direct democracy which is a bad thing—it's not what the founding fathers had in mind. I voted against these latest California ballot initiatives not because they represented tax hikes, but because they say that somehow the California assembly shouldn't be making decisions for us. They're our elected representatives.
Dagen McDowell, FOX Business Network: Why does everybody think the message that was sent in California will not get sent to Washington eventually? A nation of consumers is cutting back and saving more. If people are getting their own houses in order, won't they start demanding that from Washington? I think they will.
Auto Guys Smile in Face of Tougher Rules: Why?
Charles Payne: Unfortunately for us, the auto executives know the American taxpayers had their back. Unfortunately, the car companies can't go out of business. My question is, what happens if the car companies don't meet this 2016 deadline for new auto fuel mileage standards? Realistically this is a joke.
Dagen McDowell: These new auto mileage standards are doable. But who will be on the hook? The American taxpayer, because these standards are not based on what the companies make, but on what people buy. If we want to buy fuel sucking cars, then the government will have to come up with tax breaks who buy cars that are much more fuel efficient.
Ben Stein: These new auto mileage standards won't be easy to meet. It'll be much harder than the government has estimated. What we have in America now is what Italy had under Mussolini—the government told businessmen and unions what to do and that was that. The private sector has no more will to resist.
Adam Lashinksy: This situation with the auto companies is temporary. The government wants it to be temporary, just as the auto companies do. We are not going to have the government take control of the private sector as it happened in Italy under Mussolini. At the end of the day, entrepreneurs are going to help solve the problem with the auto companies and help them reach these new fuel standards.
Banks Giving Back Billions; Will Taxpayers Ever See a Penny?
Ben Stein: It was thought originally that taxpayers would get a high rate of dividend payments on preferred shares. They'll be paid back before much or any payments can really accrue. When the government goes out and spends money, regardless of what it spends it on, you can't count on ever seeing it back. It's like when you give money for your kid to go out and see a movie—you don't expect him to bring anything back.
Charles Payne: We have to figure out a way to stop taking taxpayer money and giving it to businesses, and instead start giving it to taxpayers. A tax cut would be the best thing here. We have to address the men and women on Main Street who have been ignored.
Dagen McDowell: The money that's coming back from TARP loans is going back out to smaller banks that are in trouble. This will be tremendously helpful in keeping small banks, who give out home, consumer, and business loans, from going under. It's like a revolving credit line, and it'll help get banks out of the woods.
Adam Lashinsky: Here's how the taxpayer has benefited from TARP. Last fall, the financial system didn't collapse. As a matter of fact, the banking system is relatively strong today. It's not ideal, nor lending as much as we might like but we didn't collapse. That meant a lot to all of us.
Most Recent Buys
Charles Payne: Apollo Group (APOL)
Adam Lashinsky: Vanguard Int'l (VGTSX)
Ben Stein: Bank of America (BAC)
Forbes on FOX
On Saturday, May 23, 2009, David Asman was joined by Bill Baldwin, Neil Weinberg, Mike Ozanian, Quentin Hardy, Victoria Barret, Jack Gage, Lacey Rose, and John Rutledge.
David Asman: Let 'em fail. High-spending, cash-strapped states want another federal bailout, but the best medicine for these high-rollers would simply be to let 'em fail?? California's on the verge of needing a bailout and dozens of other states are on the financial ropes. But, instead of hiking everybody's taxes to give even more money to high-spending states, some at Forbes say "Let 'em fail!"
Jack Gage: They can't go bankrupt, per se, but we can let them fail by not extending federal money or municipal money from the bottom up. This is where they have been giving standing eight counts… Throw in the towel before they do serious damage down the road. Look at New Jersey as a great example where they have let 220,000 residents in the last six year leave because of high tax burdens. They can't afford it.
David Asman: Responsible states like Texas don't want to bailout irresponsible states like California.
Quentin Hardy: Well, when they fail, don't you think they're going to get bailed out? Isn't how it works? To me, the problem is people forget that bond means promise. You are giving somebody a bond. You are creating this promise and obligation. The whole country seems to think you can just walk away from promises now. I don't think that's good, possible, or in any way healthy for the future of the country.
David Asman: Should we bail them out, Victoria?
Victoria Barret: No. And Quentin, you could still honor the bonds. You are still going to get tax revenue. You could do some severe cost cutting – California desperately needs it. You look at our $42 billion deficit… you look at our state pensions, which by some estimates are under-funded by $200 billion… that's because you can retire after 30 years and get 90 percent of your salary. That is a real sweet deal. But, it can't last unless we want to see our taxes sky-rocket even further. Cut costs!
Mike Ozanian: I go along with Victoria. I think you force them to cut spending. If they default on the municipal bonds, you will hurt taxpayers in the future because they are going to be charged higher rates when they borrow.
David Asman: So if they can't pay on the bonds, do you have a federal bailout?
Mike Ozanian: No. The reason Schwarzenegger is in the trouble he is in is because he refused to take on the unions. That is why New York state is having the problems its having.
David Asman: Very simply, do we have federal taxpayers bail out failing states like California?
Bill Baldwin: Absolutely not. Listen, there is no Chapter 11 for states, but states can stop paying their bills or as New York City called it when it had a default 34 years ago, a moratorium on paying bondholders. Put the cards on the table and let the bondholders accept the reality, which is that $100,000 a year pensions for state employees are well-secured and the supposedly secure bondholders are not. They won't get the money back.
David Asman: Neil, Forbes had a great piece not long ago about how these long-term pension plans by the states are bankrupting the states. You gotta make them face the music.
Neil Weinberg: You don't want to demonize teachers or policeman, but the fact of the matter is the states have been making promises they can't afford for years. The problem is you can't let the states fail because if they fail, their municipal bonds don't get paid – and that's pension funds and people's retirement. You just can't have that.
David Asman: Sound the alarm! A middle class tax hike is coming. This week, Congress released its health care plans and they are expensive! To make ends meet, Democrats and now some Republicans want to hike taxes on drinks like Coke and beer. And Quentin Hardy is ok with that??
Quentin Hardy: I think hiking prices is a good thing on things like Coke and sugar. I'm a beer guy myself, but obesity is a huge cause of the health problems in this country. I don't think you need to raise taxes on sugar, but you need to take away subsidies for the sugar and corn lobbies that get tax breaks to make people fat. That would send prices up without raising taxes on individuals. It would bring money to government coffers because they pay taxes.
David Asman: Mike, what is being done right now is actually raising the taxes on sugar drinks and beer.
Mike Ozanian: There will be a huge middle class tax increase. Quentin is too young to remember, but when Medicaid started, it represented less than 1 percent of government spending. Now, it is more than 8 percent. To pay for it, Obama is printing a lot of money, which is causing the value of the dollar to fall and that is a big tax increase on the middle class
David Asman: Are we getting a tax hike?
Bill Baldwin: Obama is running out of rich people's pockets to pick. There will be a big middle class tax hike. The question is, what is the best one? Don't tax goods… tax bads. Right now, we have a lot of taxes on income and savings. That's bad. Let's take things that are bad for society, like maybe sugar, certainly alcohol, tobacco, carbon, maybe chewing gum. These should all be taxed.
David Asman: Victoria, are middle class tax cuts, I mean increases, good for the economy?
Victoria Barret: Tax cuts are great! The real issue is this is just the beginning and eventually what we could see is a payroll tax to cover this new healthcare plan. It'd be similar to Social Security and Medicare, where it is taken out of your paycheck every month because just taxing soda probably isn't going to foot the bill.
David Asman: Jack?
Jack Gage: I think the big thing to remember is there was a promise made to not raise taxes by one dime on 95 percent of Americans. That is not true. More than 5 percent of Americans smoke, drink, or use gasoline. So, this is a problem where we have more than a $600 billion commitment through Obama's proposal to spending on reorganizing Medicare. And it's just not possible to fund it by raising taxes on the richest 5 percent. You can confiscate half of their income and still not pay for this. It has to come from somewhere else – the middle class.
David Asman: Neil?
Neil Weinberg: It will come from the middle class earners and the problem is that the alternative to this is just to borrow more debt and that is wrong. Ultimately we'd like to not spend as much, but the fact of the matter is we're going to have to spend some of this money, and it's going to either have to come from taxes or from debt. And right now I think debt is what we're drowning in.
Forbes on FOX Debate
David Asman: The number of green jobs soar in Michigan while the state's unemployment rate hits a nationwide high. Proof the president's push to go green will have this entire job market in the red?
Jack Gage: I think absolutely. If you look at what happened in Detroit, an industry, the automakers, were being targeted by the greenies who wanted to raise CAFE standards and their ability to turn a profit. Now, we go nationwide with it with the cap and trade situation where you will be putting the coal companies, oil and gas companies at a major disadvantage relative to foreign rivals.
David Asman: Do green jobs put the rest of us out of work?
Lacey Rose: No. Michigan has a rate around 13 percent because auto companies have not put out a car anyone has wanted to buy in years.
David Asman: That's a little unfair. We like Cadillacs and Suburbans.
Lacey Rose: Yeah, but the gas-guzzlers have not selling. And had they focused on going green years ago would, they would not be heading to bankruptcy court right now.
David Asman: Do green jobs cost jobs, Victoria?
Victoria Barret: Lacey and Jack are both right. Michigan's problem is really about the auto industry, but green jobs do cost us jobs because they are expensive. Numbers have been coming from Spain, which is proclaiming itself as the green capital of the world, showed it costs about half a million Euros to create one green job because you have to subsidize the industry that is not very profitable. Green jobs are expensive to create and that means less jobs elsewhere.
Quentin Hardy: I guess you don't think global warming is real? I do think it's real. I think that the evidence says this is a way we have to go. And I don't want to give money to Middle East potentates to fuel extremists, so I'd like…
David Asman: Nobody does. Don't create a straw man.
Quentin Hardy: I want to stop building gas-guzzlers. It's time to transform.
David Asman: Gas guzzlers are the only thing selling!
Jack Gage: That's exactly right. And it's the only car Detroit has been able to pull a profit from. This is something where over-burdensome restrictions on what these companies are allowed to build… and what they're able to sell them for… has strangled the profits out of Detroit and now the US.
John Rutledge: Green policies cost jobs. They help some industries, but hurt others by reducing jobs and raising costs. The economy does best when left to buyers and sellers to decide which businesses survive and which go to work. The geniuses in Washington take their personal whims, distort crisis, and use it to drive policies into the economy. Carbon tax, cap and trade, would be an utter disaster. Imaginary global warming is the driver for it. It is the biggest tax increase in the history of mankind. I love less pollution, but I don't want to lower output and productivity of people to do it.
David Asman: We're back with the sizzling-hot summer stocks that will pay off your summer vacation by Labor Day!
John Rutledge: Freeport McMoRan (FCX)
* John owns shares of this stock
Neil Weinberg: Lowe's (LOW)
Jack Gage: Regal Entertainment (RGC)
Terry Keenan was joined by Tracy Byrnes, FOX Business Network reporter; Cody Willard, FOX Business Network host; Wayne Rogers, Wayne Rogers & Co; Jonathan Hoenig, CapitalistPig Asset Management; Jonas Max Ferris, MaxFunds.com; and Nancy Skinner, radio talk show host.
Big Government "Explosion": Good or Bad for Economy?
Tracy Byrnes, FOX Business Network: This expansion of government is killing capitalism. Companies don't want to get any bigger because they're afraid of regulation. This new notion of "too big to fail," capping executive pay, consumers getting taxed more, or companies coming under tighter regulations, etc. does nothing but provide disincentive for the free market.
Nancy Skinner, radio talk show host: Since consumer spending has dropped, we'll stick with the analogy about killing the economy. We had a cancer patient, put them into chemo and now they're recovering, and training for a marathon. For the first time in seven quarters, we're starting to see some optimism. Bank of America is raising money; housing markets are falling less dramatically, all while laying the foundation to make sure something like this never happens again.
Jonathan Hoenig, CapitalistPig Asset Management: Why do we have a government to begin with? I don't think it's to run a car company, insurance firm, retirement scheme, or healthcare plan. The history of these types of government programs is a disaster. These initiatives are costing us a tremendous amount of money.
Wayne Rogers, Wayne Rogers & Co.: It's the magnitude of government I'm worried about. It has become too big to fail. We don't need all these government programs—it's out of control. Everything the government tries to run turns into a disaster. It has to be left to the private sector and competition. The only thing the government can do is stay away from business.
Cody Willard, FOX Business Network: The government is going to continue to say that if it hadn't bailed out the financial institutions, things would have been much worse. But, these bailouts are really just for the most politically connected.
Jonas Max Ferris, MaxFunds.com: We're on the road to France. If you have a government constantly willing to come in and pay for any mistakes or downturn in the economy, you'll have fewer economic downturns. But it always means you'll have less upside. There will be permanent unemployment. France doesn't have the entrepreneurship or ingenuity that exists in this country because the government takes up a much larger portion of the economy.
Gas Prices Spike as President Obama Pitches Fuel Plan
Jonathan Hoenig: Fossil fuels are a good thing. They are a productive component of our economy. President Obama's energy policies will raise prices. That's their goal. The greens' goal is to make energy so unaffordable no one can use it. Obama's policies will discourage investment in natural resources and misallocate money to unproven technologies.
Nancy Skinner: If the economy recovers, and we have no energy policy in place, we'll ultimately go to $200 barrel. The auto executives stood behind President Obama and said yes, they have new cars with very high fuel standards in the works, and can be in the marketplace soon.
Tracy Byrnes: Of course the auto executives said they had the technology. Obama is handing them a blank check. I'd say the same thing if I knew the government would give me anything. Gas is up because it's Memorial Day weekend. Twenty-five out of the last twenty-five years it went up before Memorial Day weekend. Oil is up because there's talk the global economy is recovering.
Cody Willard: The price of gas and oil is dependent on the macro economy. But, we're not going to have a traditional recovery. What used to be a profit seeking financial industry is instead being turned into an industry designed to strengthen political capital. Oil and gas prices will drop.
Jonas Max Ferris: The whole notion of the government telling corporations to make more fuel efficient cars won't work. As a country, we need to have less energy consumption and drive the price down. We do it by making people pay for it, not sticking it on the auto industry. It's our own fault. We buy the cars, and they make the cars consumers demand.
Wayne Rogers: We have to get to using alternative fuels at some point. I'm not against using fossil fuels. I just don't like being held hostage by men like Chavez and Ahmadinejad, and the whole Middle East. It's insane for our children and grandchildren. Something has to be done about it.
New Law Would Require Employees Get Paid Vacations; Job Killer?
Jonathan Hoenig: All these mandatory labor laws hurt employers and raise costs for businesses. When you raise businesses expenses, you cause businesses to create fewer jobs.
Wayne Rogers: I agree with Jonathan.
Cody Willard: I own a business and my employees don't get paid when they're not working. No one should tell me how to run my company.
Jonas Max Ferris: This law would demean all the legitimate labor laws we've passed, like child labor laws and minimum wage. Those types of laws protect American workers. This law is silly.
Tracy Byrnes: This is not how American capitalism works. We want fewer government mandates, not more. If you want more paid vacation, then don't work for Cody and work for a company that offers it.
What I Need to Know?
Jonathan Hoenig: Gold Rises as investors dump U.S. dollar; BUY iShares Comex Gold Trust (IAU)
Jonas Max Ferris: Home price index weak; stay away from bank stocks and buy BJ's Wholesale Club (BJ)
Cody Willard: Government will bailout more industries; short banks
Tracy Byrnes: GM restructures for nothing; taxpayers lose again
Wayne Rogers: Consumer spending causes more debt; Buy UltraShort 20+ Year Treasury ProShares (TBT)