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Bulls & Bears
On Sunday, February 28, Brenda Buttner was joined by Gary B. Smith, Tobin Smith, Pat Dorsey, Eric Bolling and Julia Piscitelli.
Democrats Claiming Health Care Plan Will Create 4 Million Jobs; Will It?
Eric Bolling, Fox Business Network: This plan will not create jobs—it's a jobs killer. There are a lot of reasons this just can't work. 75 percent of small businesses use the tax code as individuals. In other words, they make whatever money they do as individuals. So small businesses are going to get pushed into what amounts to a 45 percent federal tax rate. It's a rate that doesn't compete with any other country in the free world. Not to mention these businesses will get taxed now, even though many benefits won't kick in until 2014. This will have a devastating impact on jobs.
Julia Piscitelli, Democratic strategist: Health care reform will create jobs. It's going to insure 30 million people who weren't covered before. This is going to require doctors, nurses, clerical workers, technicians, etc. We're going to see a shift in patient care to more appropriate outpatient care. Conservative estimates say reform could create anywhere from 250,000 to 400,000 jobs per year.
Tobin Smith, NBT Media: Health care reform will be great for job creation—government job creation. The Senate's bill creates 118 new bureaucracies. Agencies designed to manage or monitor other agencies. So this whole new layer of bureaucracy is going to require a huge number of jobs. Then, with all the new taxes planned to hit small businesses and individuals in 2010 and 2011, you're talking about a net disaster.
Gary B. Smith, TheChartman.com: I think we really need to look at this 400,000 job number. The key question here is what kind of effect this will have on net jobs. Yes, we'll see many jobs shifted into the health care industry. But these jobs are getting paid for via taxes—money that could be used to create other jobs in the private sector. This is akin to saying a military draft creates jobs—no it doesn't. I just don't see any net jobs being created by reform.
Pat Dorsey, Morningstar.com: When you provide more health care to more people, you're going to need more providers. What kind do you need? Likely not the lower-paid areas of health care. Probably jobs along the lines of pharmacy tech, nurses, etc. If margins across the health care sector come down, that will reduce the incentive for a lot of research and development, with a reduction in the higher payer jobs that drive innovation. High profit margins really help create jobs in health care, and a reduction in those margins will likely have a negative effect.
White House Mulling Plan to Ban Foreclosures; Will You Pay?
Gary B. Smith: This plan would help no one and hurt everyone. Freddie Mac says that 40 percent of people who've had their homes foreclosed upon were speculators. Why do we want to save a person who's speculating on a home in Las Vegas? The vast majority of homes foreclosed on had very little equity in the house to begin with, so if they home gets foreclosed on, the person picks up and moves into an apartment. Most of the people foreclosed on should be foreclosed on. This plan would do nothing but put in a false bottom on the housing market.
Julia Piscitelli: This plan would help out regular and people and families who have hit tough times—not speculators. The government may put a hold on some foreclosures, others will go through. President Obama really wants to make sure the banks are doing everything they can to help them, and obviously they're not doing that. This plan is meant to put pressure on the banks to help out those who really need to be helped. It's for people who have temporarily hit tough times—it won't be used to just assist people who truly can't ever hope to afford the home they're in.
Eric Bolling: The government is the only entity dumb enough to encourage mortgage failures. That's essentially what they're saying here—if you want to speculate in the housing market, go ahead, we'll bail you out. Free markets are designed to make it not only okay to fail, but necessary. Failure spawns innovation, and innovation breeds success. Many people are in homes they couldn't and won't be able to afford. This has to be done to get people back into housing within their means. If the government doesn't let this happen, then the housing market will never really recover.
Pat Dorsey: This is a silly idea at its root because excess inventory is the biggest thing currently preventing the housing market from clearing. This is what's necessary for real estate to recover. Until the market clears, you won't get recovery. This plan being considered by the administration won't help this happen in the slightest.
Tobin Smith: This is just another example of the government trying to do well for people, but actually hurting folks in the end. When people normally take over a home, they spend thousands of dollars on buying new stuff. But if they're in a home that is potentially about to be foreclosed on, or they're still in it only because of government help, they're not going to spend anything on improving the property. Keeping people in homes who can't afford to be this is anti-capitalist and even anti-American, and incredibly bad economics. This will stall any economic recovery given the huge size of the housing market.
Blizzards Putting Green Agenda on Ice: Good for Economy?
Tobin Smith: Right now, the economy is jumping up and down saying "thank you!" Even Democrats are finally coming to a conclusion that all these ideas for the regulation of emissions out there are basically horrible for the economy and fraught with major flaws. People are starting to do the math on this stuff, and realize basically any of these plans will kill the economy.
Julia Piscitelli: Ultimately cap and trade legislation is going to help businesses in the long run. It may not be the best thing for the short-term, and time the implementation of any legislation correctly. Lawmakers are probably doing what I think a lot of people want them to do by taking a step back and really looking at the issue. Long-term though, cap and trade legislation would be a very good thing. We'll shift over to green jobs creating many new businesses and industry which will be much better for our economy long-term, not to mention more efficient.
Gary B. Smith: This is just another way for Democrats to shape the economy and give money to causes they believe to be right. This is really a tax plan that will cost the average family of four $4,500 per year. Not to mention, it'll kill off about 2 million jobs over the next 20 years. Any way you cut it, strict regulation of emissions by either the EPA or Congress would have a devastating economic impact. So the fact these plans seem to be stalling is great news.
Eric Bolling: This is just a way to raise taxes and gain more control over the economy. The administration wants control of health care, and of energy. And the EPA taking measures into its own hands is even worse. We have no idea what sort of specific actions it may take, which brings considerable uncertainty to businesses. The EPA regulating emissions is even worse than cap and trade. So it's a good sign this green push is cooling off a bit.
Pat Dorsey: There is not costless way to reduce carbon emissions. It costs money whether you call it cap and trade, or whether the EPA regulates things. The problem with trying to sell these plans politically is that you can't really rely on jobs being created somewhere in this supposed new green sector. Overall, these plans cost the economy money and jobs.
Tobin Smith: Forget Greece; bet on Turkey! "TUR" up 40 percent by summer
Gary B. Smith: Olympics ending, Nike still golden! "NKE" up 100 percent by Summer Olympics
Pat Dorsey: Jump into the Canadian beer market! "TAP" suds up 50 percent in 2 years
Eric Bolling: ACORN makeover? Make money with paper; "IP" up 30 percent in 1 year
Cavuto on Business
Democrats' Plan to Get Big Government Agenda Passed… Bit-by-Bit?
Charles Payne, WStreet.com: Now the administration's strategy seems to be the piecemeal this thing together, one by one. If they kind of knock down various goals one-by-one, it'll be a lot less noticeable for critics to potentially pick up on. The smart strategy though is to put together reforms bit-by-bit that the majority of people actually agree with. That's a good idea. Unfortunately, I don't think the administration will use this strategy to do that.
Dagen McDowell, Fox Business Network: The point of this is that hopefully these little crumbs come together without a whole lot of people noticing. The agenda for the Democrats isn't changing—how they get there is what they're trying to revamp. Four out of five voters disapprove with the way Congress is handling things, and 78 percent say government spending is out of control. With that level of opposition, the Democrats really have no choice but to pass these reforms bit-by-bit and keep it under the radar.
Ben Stein, author, "How to Ruin the U.S.A.": I think we'll see the think tanks adding up these various bits of health care reform, and we'll realize just what an outrageous amount this will cost over the long term. Those facts will enter the mainstream and outrage will rise up as people realize they're being snookered again, only by a different kind of tactic.
Adam Lashinsky, editor-at-large, Fortune Magazine: I think we're pursuing a glass half empty mentality. What we're starting to see here is Democrats starting to try and take what they can get, be it with health care, or a jobs bill. The jobs bill went from $85 billion to $15 billion with an emphasis on tax-cuts, and suddenly the Republicans back it. Democrats certainly take notice and realize trying to enact health reforms that most people in Congress can get behind might be the new way to go.
12 Democrats Taking on Toyota Took UAW Money: Conflict of Interest?
Dagen McDowell: This is a huge conflict of interest. Not only did these lawmakers take UAW cash, they also voted in favor of the bailouts of GM and Chrysler. Unions maintain their power by contributing to the election campaigns of sympathetic lawmakers, and clearly unions have an interest in hurting Toyota's brand. What we didn't see from these lawmakers is respect for the 170,000 or so workers directly or indirectly employed by Toyota in this country.
Ben Stein: This has been an amazing gift to U.S. lawmakers. This is what representatives are elected to do. They're representing their states or districts that have a large quantity of auto workers. It's clearly in their interest to bash a competitor like Toyota—they're just looking out for their constituents by doing so. But how many of these problems with Toyota cars can actually be attributed to an honest problem with the car? There seem to be considerable doubts about this, and that perhaps negligent drivers may have played a significant role in many of these accidents.
Adam Lashinsky: I think congressional members are going to be more than happy to go after bureaucrats. They'll pick on anybody—especially when the cameras are rolling. I don't think this kind of stuff is that influenced by campaign contributions. It's just open season on non-union companies right now, and these Congressional members are clearly on that bandwagon.
Charles Payne: I understand this is business as usual. What did these hearings do for the American people? I just don't get it. These dog and pony shows are practically daily occurrences now. But they're like an Abbot and Costello act. In the end, no one really benefited from these hearings.
Report: AIG Might Need More Taxpayer Cash After $180 Billion Bailout
Charles Payne: We've got to draw a line in the sand. No more, period. It's enough at this point. I hope AIG survives, and I think the less the government gets involved, the better.
Dagen McDowell: I think we're in too deep with AIG not to give them more money. Unfortunately, it's truly in the taxpayer's interest for this company to get turned around, and if they need the money, they need it. The same applies for Fannie Mae and Freddie Mac.
Ben Stein: We just can't let this company go. It plays too critical a role in the global economy. Unfortunately AIG was raped and looted by Goldman Sachs in the lead-up to it failing. This is an unbelievably bad deal for taxpayers, but we have to bail AIG out. But in the meantime, we should look at the role Goldman Sachs played in bringing the company down—something taxpayers are now paying for.
Adam Lashinsky: I think the potential of AIG needing more taxpayer dollars was a more boiler-plate comment that came out in AIG's quarterly report. If we read the regulatory filings correctly, this is language we've heard before. At this point, imagine we've invested heavily in a house and the toilet breaks. You're going to fix the toilet, whether you really want to or not.
Tea Party Rally Stocks
Charles Payne: McMoRan Exploration (MMR)
Adam Lashinsky: Palm, Inc. (PALM)
Ben Stein: Dow Diamonds (DIA)
Forbes on Fox
On Sunday, February 28, 2010, David Asman was joined by Steve Forbes, Rich Karlgaard, Bill Baldwin, Neil Weinberg, Mike Ozanian, Quentin Hardy, Victoria Barret, Elizabeth MacDonald, and John Rutledge.
Flipside: Should Unemployment Insurance Be Privatized?
David Asman: The ultimate jobless fix without a government fix: make Americans buy their own unemployment insurance. Will it work? Hi everybody, I'm David Asman. Welcome to Forbes on Fox. Let's get this Flipside from Steve Forbes, Elizabeth MacDonald, Rich Karlgaard, Neil Weinberg, Victoria Barret, and Quentin Hardy. Steve, you say privatize jobless benefits?
Steve Forbes: The states are always running these things down which ultimately means higher taxes because they have to pay back the federal government with interest. If they tie it to when you go to work, like with Social Security, you own the policy, if something happens you know you are covered and you won't be dependent on loans from Washington. And the private sector would end up doing it cheaper than the way the government does it now.
Neil Weinberg: The problem with this type of insurance is it really only works if everyone has it. It's a rainy day type of thing—you go out and buy an umbrella when it's raining. You buy unemployment insurance when you don't need it, when people are not unemployed. You need that universal thing. The way we do it now—take it out of the paycheck—is the best way.
Victoria Barret: Yes, we should privatize it. It's already mandated, so you could still mandate it, but have private insurance companies do it. They'll do it cheaply and states won't get into the hole they are in now. States are looking at budget deficits next year in the $50 to $60 billion range, and that's partly because of unemployment insurance.
Rich Karlgaard: I don't like this idea. The best way to insure against unemployment is to have a robust economy, one that's growing at 4 percent a year. That's what we need to concentrate on. And individually, if you have $1,000 to spend a year, should you spend it on unemployment insurance or on subscribing to Forbes and going to the gym and making yourself competitive in the marketplace?
Elizabeth MacDonald: This idea is probably a non-starter. No politician is going to say, "Kill unemployment insurance in this environment." Somehow, before the Great Depression, people existed without unemployment insurance. Now what we have in this country is a massive unemployment insurance fraud crime wave that could pay for the NASA space program five times over and for 12 million kids to go to college. So an unemployment insurance account, like an IRA, might be the way to go if you allow the public sector to pay for it for 6 months and then have a private, tax-deductible account.
Quentin Hardy: Let's look at the private health insurance system. In 2007, in the OECD (Organization for Economic Co-Operation and Development), the average cost per person was $3,000. In the U.S., the average cost per person was $7,900 and the life expectancy was lower. The privatization in that case had a worse result. It doesn't always turn out well. And you know if they have private job insurance, there's going to be some version of pre-existing condition and reason to deny you coverage and all the other hassle and pain we get in the system we have in America.
Are Lawmakers Bashing Toyota in Order to Help Trial Lawyers?
David Asman: Lawmakers laying into Toyota's head honcho this week. They say it was all about safety but the boss says it was all about trial lawyers. How so, Steve?
Steve Forbes: Look at Toyota's overall record; it's no worse than other car companies. These things take on a life of their own. There cars are perfectly safe overall. This is about campaign cash from trial lawyers who are licking their chops over this thing. There's a lot of publicity for the politicians. And the bottom line is, GM is now owned by the government and they all have invested interest—trial lawyers, unions, the whole kit and caboodle.
John Rutledge: I don't think it's the trial lawyers who are driving this. Of course they love it and they are big lobby contributors, [but] I think this is about politics. It's about UAW payoff and the government owning GM—it's what happens when you have a nationalized industry. As a young man, the first time I testified before Congress, I was very disappointed to learn that those hearings [had] nothing to do with policy; it's all about marketing for lobby dollars and for votes. That's all that counts; it's a big sham.
Bill Baldwin: I worked out a business plan for the Democrats and it works like this: there are roughly 2 million cars being recalled. $5,000 each is the diminution of the resale value. That's a terrible thing—that's $10 billion. There's going to be a class action [lawsuit] and according to my plan, all of the money goes to the lawyers. The consumers will get discounts on future purchases of Toyotas. According to established business plans, of course the Democrats get 15 percent of that—that's $1.5 billion. And the question is, how many Senate seats can you buy with $1.5 billion?
Elizabeth MacDonald: I think this is political grandstanding. Our U.S. automakers went through a lot of recalls in the past with congressional hearings that did not last as long as these hearings. But the issue of the conflict of interest here, with the government effectively owning Chrysler and GM, is an important one because the tort lawyers effectively do control Congress. If they sued those companies they'd be suing themselves because the tort lawyers exert such control over Congress.
Mike Ozanian: [More than] seventy percent of the lawyers' campaign contributions go to the Democratic Party, which is controlling this investigation, and they're looking at one thing: the $42 billion sitting on Toyota's balance sheet. That's what they want to get their mitts on.
Victoria Barret: I don't think that's what's really driving the political grandstanding here. For a politician, this is just too easy. You get to go up there an wag your finger at the CEO of a foreign company. There may have been innocent deaths involved—we still don't really know the facts. But there's a huge cost here to a lot of Americans. Toyota stock has and will take a huge hit for this and big pension funds have huge stakes in Toyota; that means that lots of retirees are going to take a hit, and I think they're taking that hit because of the political grand-standing much less than the actual facts.
In Focus: Will Washington "Scare Tactics" Bankrupt America?
(BEGIN VIDEO CLIP)
SENATE MAJORITY LEADER HARRY REID, D-NEV.: Men, when they're out of work, tend to become abusive… Jobs bring dignity and that's what this legislation is all about.
(END VIDEO CLIP)
David Asman: Harry's scare tactic apparently worked because the Senate did pass his $15 billion jobs bill soon after that speech. Rich says, using scare tactics to spend out tax dollars is a quick way to bankrupt America. Why Rich?
Rich Karlgaard: For the last 18 months, politicians of both parties, but especially Democrats, have convinced Americans that the only thing standing between us and another Great Depression is Washington. Two things have happened as a result of that: we've turned what should have been an average recession like the one of 1990-1991 into the worst since the Great Depression—a self-fulfilling prophecy—and we've left ourselves with a $1.6 trillion annual deficit.
Neil Weinberg: I think the American people are smart enough to understand that scare tactics are just part of politics: everything from President Bush with his weapons of mass destruction to the Democrats with their melting glaciers in the Himalaya. It doesn't make it good, but I think people are smart enough to see through it. I disagree with Rich. We did have a serious financial crisis and nobody was spending except the government.
Bill Baldwin: I think politicians are taking us on a road to ruin. The federal debt level, bad as it is, is only part of the problem. The bigger problem, I think, is moral bankruptcy. What we're doing right now with our policies is to say that people who work hard or save money will have that money taxed away and the money will be given to people who squander their money or shoot craps in the real estate market. That is our problem.
Quentin Hardy: If you talk to any cop, they'll tell you that Harry's got a point. Young men, out of work, with nothing to do, do tend to commit crimes. But I take your point. I call it ATF: addicted to fear. And it's not just there. You see it when Sarah Palin says there are going to be death panels, or when guys on TV say Obama is a socialist who wants to take over your life. You see it all over the place. People have to calm down and put things in perspective.
Steve Forbes: In the 1930s you should have seen a massive crime wave and despite the dilatants of the world we were remarkably well-behaved. Harry Reid makes a point: people who don't have something to do may do bad things, but that's almost beside the point. How do you get the economy moving again? Washington doesn't have the wherewithal to do it—people in the free marketplace will do it.
Informer: Stock Summit
David Asman: We're back, with a summit of our own! It's a Forbes stock summit to make you money:
Mike Ozanian: Atmos Energy (ATO)
Victoria Barret: GSI Commerce (GSIC)
John Rutledge: ProShares UltraShort 20+ Year Treasury (TBT)
Bill Baldwin: Accenture (ACN)
Will Bipartisan Tax Cut for Job Creators Fix Jobs Market?
John Layfield, Nutritionmarket.com: Absolutely this will work. Look at what it's done in Ireland. They had one of the worst economies. For the last eight years they've had one of the fastest growing economies because they lowered the corporate tax rate over there. Unemployment has gone from mid teens to single digits. America has the second highest corporate tax rate. Only Japan is higher. We are taxing Americans to death. We have got to get money back to businesses so they can reinvest and hire workers.
Mike Papantonio, Gannett columnist: No way will this work. We saw more tax cuts between 1999-2008 and now we have the worst unemployment at around 10-11 percent. Corporations don't buy the idea of creating jobs. They save their money so they can increase their profits. The trickle down idea is a lie. Tax cuts just doesn't do it.
Jonathan Hoenig, Capitalistpig Asset Management: The whole point is a job has to be productive. If you just give someone money, that's not a job. It's a subsidy. And it's those profits that create jobs. Jobs come from productivity and profits. I know people like to think business owners are like Scrooge McDuck and taking a bath in cash but that's not the case.
Tracy Byrnes, Fox Business Network: Lowering the tax rate also makes us more competitive. You put us on par with rest of the world which averages about 25 percent, you allow us to compete better. Right now we are at a disadvantage. Let's not forget our dividends are taxed twice. Once at the corporate levels and once again. Also you keep lowering taxes on the lower income people, you're not going to get any productivity whatsoever.
Wayne Rogers, Wayne Rogers & Company: I don't think corporate tax rates create jobs at all. If you cut taxes on individuals, that's what helps. Giving the small business guy a tax credit, that will help.
Will President Obama's Health Care Plan Lead to Government Run Health Care?
Tracy Byrnes, Fox Business Network: Yes absolutely. Look what they are doing. When you put controls on a business, in this case the insurers, eventually you're going to run these companies out of business. If that's what they are trying to do, then that's where we're going to end up.
John Layfield: They are trying to go after corporations that make a lot of profits. We need to fix the system before we start talking about going after the insurance companies.
Mike Papantonio: Profits aren't evil. But the profits of the five largest insurance companies were 13 billion dollars last year. Remember they told us, the only way they'd raise premiums was if we got universal health care. Then the next thing we know, this month they want to raise rates by 40 percent. These are the same companies that over the last year have raised rates by 400 percent for small business owners. By 2016 the average business owner is going to be paying 60 cents on the dollar to health insurance.
Wayne Rogers: Price controls do not work. Competition is what makes it work. We have to have more people competing in this market. All these states are raising rates because they do not have competition. The anti-trust laws were never applied to the health insurance industry. You must have completion. It has been proven time and time again. You do not need regulation in a free economy.
Jonathan Hoenig: If insurance companies are making all these massive profits, why aren't all these entrepreneurs looking to get into the business? Because this is not a free market.
Fritz Henderson Makes $3,000/Hour; Where's the Outrage in D.C.?
Wayne Rogers: This is one of the dumbest things I've ever heard in my life. Government, federal government, is so stupid. They're so far removed from the people. They go out, they push this guy out, they orchestrate him to be fired and then turn around and hire him at a rate of $60,000 a month? Please! Give me $10,000 a month and I'll do that job and be twice as good.
Mike Papantonio: I think there's going to be outrage! Here's the point: We hear all the time how you have to put the best people in place to run a corporation. So obviously someone in the administration thought this is the guy that we need to bridge the gap. I'm not the guy that buys into greed is good. Henry Kravitz should be be paid $57,000 a hour while the average American makes $30,000 a year. Greed is not good.
Jonathan Hoenig: Henry Kravtiz's investors pay him voluntarily. The democrats, with all their talk on say and pay. I don't even have a say on whether I own this company or not.
Tracy Byrnes: The government gets so up in arms about the craziest things and not one word out of them on this? You have got to be kidding me! That's because "we're sorry we kicked you out on your butt. We got to give you something to make up for it." And that's what it is. It's DC cronyism all over again.
John Layfield: Where is the outrage? This is Republicans and Democrats going after guys like Llyod Blankfein for making $9 million…Goldman Sachs profited 50 billion. They're paying the CEO 9 million, paying a consultant 3,000 a hour and it's an absolute disaster. What's equitable about that? They're rewarding failure!
What Do I Need to Know?
Wayne Rogers: one in four mortgages in this country are under water, everybody is saying the housing market is terrible. Now is a good time to buy a house. It's one of the best times to buy. Buy it now because you'll never get it as cheap as you will today.
Tracy Byrnes: Consumers beware. Citigroup came out this week warning their customers that they have a right to hold your money for 7 days before you can withdraw. Now it's a FDIC rule…any bank can do this. Citi is not doing it right now, no one else is. But its out there!
John Layfield: U.S. ranking in golds… Canada in 4th place. U.S. is a force to be reckoned with. Put your money in cash right now and look for opportunities.
Jonathan Hoenig: If you're looking for a real old school emerging market, risky and volatile…people talk about China. Check out Vietnam. There's an ETF, (VNM). You want to find risky areas that are doing well. If you're looking 5 years out, this is going to be a rocky but profitable ride.