What story will new retail and manufacturing data tell?

This is a rush transcript from "Sunday Morning Futures," May 3, 2014. This copy may not be in its final form and may be updated.


MARIA BARTIROMO, HOST: Mixed economic signals coming at us. Are we really moving ahead or could we just as easily backtrack?

Good morning, everyone. I'm Maria Bartiromo. This is "Sunday Morning Futures."

Wall Street encouraged by some good employment numbers but it comes as the GDP is moving at a snail's pace. The Dallas Federal Reserve president tells us what it all means.

The Keystone pipeline could bring a reported 42,000 jobs to America if the president ever makes a decision on the project.

Is there a way to get it going without his say so? I'll talk to a senator whose legislation just might make that happen.

Plus Senator Boehner now says there are enough questions surrounding Benghazi to warrant a select committee investigation. Is this endemic of an unfocused foreign policy in the Obama White House? Our panel will weigh in as we look ahead on "Sunday Morning Futures."


BARTIROMO: This week, new retail and manufacturing data will add to the economic story on top of mixed GDP and jobs numbers we were hit with last week. Joining us now to help us get a clear picture of exactly where we are in this economy, Richard Fisher, he's the president and the CEO of the Federal Reserve Bank of Dallas.

Richard Fisher, good to see you. Thank so much for joining us.


BARTIROMO: Can you put this all together for us? We had what looked like a very good jobs report on Friday but it came just a few days after that very weak 0.1 percent growth in the GDP report.

How would you characterize things right now?

FISHER: Well, I think we characterized it in a statement we issued after our last open market committee meeting. Clearly there were weather-related one-off events that occurred in that last quarter. The numbers were extremely week although personal consumption wasn't that bad.

And now we expect -- and I certainly expect personally -- to have the kind of numbers that we just saw reported the other day. And remember, Maria, the previous numbers for January and February and March were updated.

So we're moving in the right direction and it's getting stronger as we go through time.

BARTIROMO: What about the jobs picture overall? Let's break that down for a moment because while we saw almost 300,000 new jobs created, which was better than expected, great number, we saw 800,000 people leave the workforce in terms of the participation rate dropping; people just stopped looking for jobs.

FISHER: Well, first point is all of those jobs that you just mentioned that were created were created in the private sector and in state and local governments. You had job losses in the federal government. So that's an important thing to keep in perspective.

The private sector is beginning to hire. We would like to see that continue and in fact increase. This serious business and puzzle of why people have dropped out of the workforce is something that analysts keep contemplating and cogitating over.

But the main thing is that we are continuing to see job creation and ultimately over time, one would expect people that want to go to work are discouraged from going to work by virtue of alternative payments they can receive elsewhere, mainly from the government. Will start looking for work, join the workforce, be hired as business expands in the United States.

I expect that to happen.

BARTIROMO: All right. We want to really find out from you where are the jobs, who's hiring and why does the situation look so good in your part of the country versus others. Plenty more to talk about with the president of the Dallas Fed.

But first let's get the nuts and bolts of the story, the breakdown, these mixed economic numbers show. FOX News senior correspondent Eric Shawn joins us live.

Eric, good morning.

ERIC SHAWN, FOX NEWS HOST: Good morning, Maria, and good morning , everyone.

The unemployment rate did drop to 6.3 percent last month and of course that sounds like good news especially when you consider it was 7.8 percent when the president took office in 2009 and even hit 10 percent his first year.

But behind those numbers lies a troubling trend. More and more Americans simply giving up, not even looking for work. Yet despite that, President Obama in his weekly address yesterday boasted about the job numbers.


PRESIDENT BARACK OBAMA: My number one priority as president is doing whatever I can to create more jobs and opportunity for hardworking families. And yesterday we learned that businesses added 273,000 jobs last months. All told, our businesses have now created 9.2 million new jobs over 50 consecutive months of job growth.


SHAWN (voice-over): But some say a much more meaningful test of the economy is, Maria, what you just mentioned, the labor participation rate. That's the percentage of Americans who actually have jobs. You know, that rate dipped last month to the lowest point in 36 years, not since March of 1978 when Jimmy Carter was in the White House.

This April the rates stood at 62.8 percent, the same level it was in the second year of President Carter's term. In March of '78 it was also 62.8 percent. The Bureau of Labor Statistics records go back to January of 1948, when the rate was 58.6 percent. It hit its highest level in January of 2000 under President Bill Clinton at 67.3 percent. But since then it has been on a steady decline losing 4.5 points to its current level.

What all means that are record 92.8 million Americans are not in the labor force and that's up about 1 million people just last month alone and nearly 10 million more Americans don't have jobs and want one.

So while the unemployment rate looks good, the numbers, though, seem to tell a much different story -- Maria.

BARTIROMO: All right, Eric, thank you so much.

Back now with Dallas Federal Reserve president and CEO Richard Fisher.

Richard, let me ask you about the private sector hiring.

Where do you see the most job creation and the potential for jobs with those million people out there saying I'm in the minority, no job, no prospects for a job, who's hiring right now?

FISHER: Well, we're a high value society, Maria. So we're a service sector driven society. And obviously the expansion is coming in professional services, IT. A lot of high value added jobs. There is an interesting question. We have a skills mismatch. If you go to our Federal Reserve district or most other Federal Reserve districts, you're going to hear reports across the country that there are jobs available in certain highly skilled areas, but we don't have the educational basis for it or we don't have the immigrant pool for it or whatever it may be.

So there is a skills mismatch. That's part of the problem. But there is an issue of general economic expansion and overall aggregate demand as an economist would put it. And we have to see growth in that in order to bring these employment rates down and also pull people back into the workforce.

And one could say, I think that -- I think Texas is a good demonstration of this. We have the same monetary policy as the rest of the country. We create jobs twice or 2.5 times as fast as the rest of the country. Clearly fiscal policy has to incent people and businesses to use the cheap money the Fed has made available and widely abundant, put it to work in putting people back to work through capital expansion.

BARTIROMO: So Texas has created an environment which has been a positive environment for business and business therefore creates jobs.

FISHER: Absolutely. I mean, we see it -- by the way, a quarter of the immigrants that have come into this state over the last decade have been from California. So they are leaving an uncomfortable area. A big state, by the way, the most important state from the standpoint of overall population.

Coming to the second largest state, fleeing one because of the disincentives there, to come to another because they have an opportunity to work. People vote with their feet. We have terrible social services here in many regards. We don't have the same system and support for social services others have.

And yet people come here from California, from Michigan, from New York. What do they come for? To look for a job.

Let me give you a number that will put that in perspective. The denominator for unemployment -- so you have the number of jobs over those seeking jobs, were able to work, is growing by 10.3 percent since the end of the century, since the year 2000 here in Texas.

For the rest of the country it's been negligible. So we have a huge amount of people flowing in here. We're putting them to work. Our unemployment rate is more than 125 basis points less than the rest of the country. And yet we have the same monetary policy. That shows you that the fiscal policy of the state legislature, the incentives here, the regulations obviously attract job-creating businesses; they hire. They put people to work, more consumption takes place, society gets richer and we do better and we grow.

BARTIROMO: It sure does show that.

Let me ask you, Richard, you obviously are a voting member of the Federal Reserve. What does this most recent data tell us about interest rates, about the Fed's next move?

Would you expect that interest rates would be higher this year or is it a 201t affair when we will start to see rates really move?

FISHER: I think it's very hazardous to guess -- well, look, we're in the midst of paring back our large-scale asset purchases, as you know. We were buying 85 billion a month to add to the monetary base. And we are now reducing that. We've reduced to 55. We're going slower than that.

I personally expect us to end that program in October. That's the first step. Then we have to see how the economy is doing, including these broader measures of unemployment and where we stand before we can talk about how we might move the short term rate, which is the base rate that the Federal Reserve has the most influence on.

It's too early to tell, Maria. I'll make this prediction: sometime in the next 100 years interest rates will go up.



FISHER: How's that? You can bank on that.

BARTIROMO: We will take it. Richard, good to talk with you as always. Thanks so much for spending the time with us.

FISHER: Thank you, Maria.

BARTIROMO: Richard Fisher is president and CEO of the Dallas Fed.

The Keystone XL pipeline has been stuck in limbo for the last five years. It's supposed to be a job creator. The extraordinary measure some senators are pushing to move the project forward as we look ahead on "Sunday Morning Futures," next.




BARTIROMO: Members of the Senate now looking to take the decision on the Keystone XL pipeline out of President Obama's hands. Joining us now is Republican senator John Hoeven of North Dakota.

Senator, good to have you on the program. Thanks for joining us.

SEN. JOHN HOEVEN (R), NORTH DAKOTA.: Good morning, Maria.

BARTIROMO: Explain the bill and how likely it is that you can get this pushed forward on both sides of the aisle.

HOEVEN: It's a very simple straightforward bill that approves the Keystone XL pipeline project congressionally which was have authority to do under the Foreign Commerce clause of the Constitution.

And it's a 3-pager. The president has delayed this decision for six years. We're on year six. It is time for Congress to step up and approve this very important project.

BARTIROMO: How likely is it that you will get the 60 votes needed?

And then can the president veto it even still?

HOEVEN: Well, I've got 56 sponsors on the bill. So we already have a bipartisan majority. I think we're up to say 57 votes where they're committed. We have got four or five prospects.

So the challenge now is to get to 60 because obviously the administration is pushing back vigorously. So at this point I believe we will be proceeding to the bill probably the week after next. We will go to an energy efficiency bill and then the Keystone bill. Our challenge is to get 60 votes. And then yes, the president could veto it but there's more to that story, too.

BARTIROMO: What more is it to that story?

HOEVEN: Well, there's a number of bills going forward. I think if he were to veto this bill, if we can get our 60 votes and pass it, I think we would make sure that if he vetoes it, we bring it back and attach it to something that he won't veto.

BARTIROMO: I see. OK. So this is all coming together in about a week.

Let me ask you, what is your sense of why the president is pushing back so much? We know that most observers say this will create at least 40,000- plus jobs. We know that the State Department has come out with umpteen, how many reports now? Five reports saying that the pipeline can be built without harming the environment?

So what's the issue, do you think?

HOEVEN: Well, Maria, that's right on. And in recent polls, 70 percent of the American people favored the project. So he's holding it up because of some special interest groups. And now some of these groups have pledged huge amounts of money, millions of dollars for some of the candidates.

So that doesn't serve the American people. He needs to make a decision for the American people and that's to approve the project.

BARTIROMO: So in other words, this is politicizing and this is not leading, bottom line.

Bottom line here, Senator, are you going to be able to get anything done before the midterm elections? Isn't that the point, he doesn't want this to be an issue ahead of the midterms?

HOEVEN: We have such an incredible opportunity in energy, Maria. Look what's going on in my state. It's about jobs, it's about economic growth, it's about national security so we don't have to get oil from the Middle East.

This is a huge opportunity and I think it's going to be a real issue for the campaign. And if we don't get this project and the -- and other energy legislation now, I think come November there will be more Republicans in the Senate and we are going to get these things for the American people.

BARTIROMO: So you think this is going hurt the Democrats' chances in the Senate if, in fact, some of these things don't move forward?

HOEVEN: Definitely. Again don't just take my word for it. Look at the American people's response on these energy issues. They want the economic growth ,they want the jobs and they want energy security for this country so we're not getting oil from the Middle East.

BARTIROMO: All right. We will leave it there.

Senator, we will be watching the development. Thanks so much for joining us.

HOEVEN: Thank you.

BARTIROMO: Senator Hoeven, joining us today in North Dakota.

People also want a better tax reform. The U.S. has the highest corporate tax rate in the world prompting many American companies to keep their money overseas. Plus tax reform could help bring some of that money back to our shores. That's next. Stay with us on "Sunday Morning Futures."




BARTIROMO: Examining tax reform here in America, American companies stashing nearly $2 trillion overseas this year alone to avoid the 35 percent tax on corporate profits in the United States, the highest in the industrial world.

Could tax reform bring more of that money back home?

Joining us to talk tax reform is Maya MacGuineas. She is president of the Committee for a Responsible Budget along with Douglas Holtz-Eakin. He is president of the American Action Forum and former director of the Congressional Budget Office.

Good to see you both, Doug, Maya, welcome to the program.


BARTIROMO: So let's talk about this. It feels like it's a familiar story, doesn't it? Pfizer wants to acquire an international company, AstraZeneca, to get a better tax treatment. Caterpillar going up against -- testifying in Washington to talk about why it has so much money and the list goes on, huge multinational companies with so much money overseas.

What's the problem, Maya? Why aren't they bringing that money back here to America?

MAYA MACGUINEAS, PRESIDENT, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET: Listen there's no question that what we need to be doing is overhauling our tax code, both the individual and the corporate side. Chairman Camp put out a really smart reform. Many people talk about it as the best starting point you can imagine, where he really looked at how you would broaden the tax base by getting rid of a lot of the tax loopholes that are out there and bringing those rates down. We are clearly uncompetitive because we have such dramatically higher rates than everybody else we're competing with globally. And that means that our businesses are unable to compete, they're unable to plan, they're unable to invest and they're unable to create jobs.

But because of the political dysfunction in Washington, basically people have declared tax reform dead for the moment. And there's no reason not to be moving forward with that important priority and we're seeing how it's really harming our businesses and the pressures put on them by not moving forward.

BARTIROMO: And these locations are real. These are pocketbook issues that are hitting at the end of the day all of us because businesses are not creating jobs as a result.

Isn't that right, Doug?

HOLTZ-EAKIN: There's no question about that. If you think about what is wrong with the U.S. corporate tax code, the rate's too high, as you point out. But it's also true we're clinging to a system that might have been appropriate for 1950 but clearly is not appropriate now.

When a U.S. firm tries to get a market share in Brazil and competes against a German firm, the Germans pay the Brazilian tax and they're done. The U.S. firm pays a Brazilian tax and then it pays a second layer of tax back in the United States up to the highest rate in the world.

That means two things. Number one, we're not competitive. And so our workers aren't getting employed to provide those goods.

And number two, no one wants to be headquartered in the United States because you're saddled with this antiquated system. That's what we saw in the Pfizer-AstraZeneca situation. That's what we saw, for example, with Inbev and Anheuser-Busch.

Any time there is a large global merger and acquisition, the U.S. is going to lose the headquarters, will lose the jobs and we'll lose the other things that go with being headquarters, the support for the Little Leagues and the operas and all the social capital. This is a very damaging policy and we've got to change it.

BARTIROMO: We have a list of the companies, the top companies that have the most money overseas, Maya.

And this is all within the legal tax story. It's not that these companies are doing anything illegal by keeping this money overseas.

MACGUINEAS: No, that's right. So often, with the corporate tax code, what you see is corporations having to go through so much effort to try to take advantage of what the real tax laws are. But what they'd rather be doing is working on their businesses. And so it's a huge loss in terms of economic productivity and output because of trying to comply with tax laws and maximize your bottom line, which is what businesses have to do.

It's really harming the economy. The bottom line here is this comes down to jobs. If we were to reform the tax code in a way that made sense, I think that clearly you would see benefits to investment. You would see capital coming back to the United States. That would be invested -- that would create jobs.

And as Doug was saying, that would have a massive ripple effect. This is what the economy needs at this time, right. This recovery has not taken off as it should. And there is only so much you can do with trying to stimulate the economy through government. You really want to look at businesses which have the capital to be making investments, make an environment where they're able to invest in ways that would have huge positive effects for the overall economy. And so we are standing in our own way by not reforming these tax laws.



HOLTZ-EAKIN: Maria, I want to emphasize something that Maya mentioned, which is that the corporations would much rather be devoting their energies to building their businesses. And we have seen groups like the Alliance for Competitive Taxation, over 40 large global companies, come out in favor of tax reform.

They know that individually they may not lower their taxes. But they'll get out of the business of tax planning and back to the business of running their businesses. That's what they would like to do and that's what would benefit the economy.

BARTIROMO: Real quick, do either of you expect any progress on this before the midterms? What's to get politics getting in the way?


HOLTZ-EAKIN: I certainly do not.


MACGUINEAS: Unfortunately, politicians seem to be taking the midyear election off from doing real work. And it's hurting the economy.

BARTIROMO: It sure is.

Maya, Doug, good to have you on the program. Thanks so much for this. We appreciate your time today.

HOLTZ-EAKIN: Thank you.

MACGUINEAS: Thanks, Maria.

BARTIROMO: We'll see you soon, Doug Holtz-Eakin, Maya MacGuineas.

So how do we bring this nearly $2 trillion in corporate cash back to America? I put that question to a business leader who testified before Congress on this very topic, the CEO and chairman of Caterpillar is up next on "Sunday Morning Futures."




SHAWN: From America's news headquarters, I'm Eric Shawn. Here are some of the other stories making headlines right now.

The South Korean ferry disaster exposing huge safety gaps in that country's oversight of domestic passenger ships. Documents now revealing the sunken ferry exceeded its cargo limit on nearly every voyage it made in the 13 months before it sank. This as the Korean president visits and consoles the ferry victims' families for a second time, repeating her pledge that anyone responsible for the accident will be severely punished. The disaster has left over 300 people, many high school students, dead or missing.

The Ukrainian authorities say they have reclaimed a rebel-held television tower during a security operation. This as the government broadens its offensive against pro-Russian separatists. This on the heels of the worst bloodshed since this crisis began when at least 42 people died in the port city of Odessa on Friday, including dozens who were killed inside a burning building.

And don't worry, the doctors will still be in. You can catch "Sunday Housecall" at its new time, 12:30 Eastern, just two hours from now after Arthel and I bring you the news at noon Eastern.

I'm Eric Shawn. Now back to "Sunday Morning Futures." with Maria.


BARTIROMO: Thanks, Eric.

So we have heard this story before, American companies pulling in strong profits but then keeping that cash out of the hands of American tax collectors. The CEO of one of those companies recently testified before Congress that reforming the tax code to bring that money back from overseas. I spoke to Caterpillar's Douglas Oberhelman about that when I sat down with him right after his quarterly earnings were posted. I asked him first about those quarterly numbers.


DOUGLAS OBERHELMAN, CEO, CATERPILLAR: We saw really exceptional operational performance, which I'm happy about. Our sales year-over-year for the quarter were about flat. But our profit was up significantly, $1.61 versus $1.31 last year. We have really been trying to concentrate on lean manufacturing, on cost reduction, cost control, some restructuring and that all came through in the first quarter pretty nicely. So I was very happy with that. Our operating margin is tremendous in the first quarter, a lot good performance by our team.

BARTIROMO: Did the performance and the strength happen largely in the construction business?

What can you tell us about construction versus mining?

I know mining has been tough going for the entire industry for some time now.

OBERHELMAN: It has, Maria. In fact, the last two years have been pretty tough on our mining business. And all of our mining customers, for that matter. In fact we took our 2014 mining outlook down another 10 percent, to down 20 for this year over last year.

Our construction business, construction equipment business is doing better. We're raising it to about 10 percent, by about 10 percent for 2014. And our energy and transportation business was up about 8 percent. We're going to hold that about flat for the year-over-year. So I'm very happy with that.

And we're seeing a lot of recovery and some fairly good news around construction to make up for our mining but lots of risk out there in the world. I would say today geopolitics for the rest of the year are what we will all be watching. And that's why we held our top line flat because there is just a lot of caution and a lot of risk everywhere out there.

BARTIROMO: Where is the risk? In terms of mining and oil and gas, can you walk us through what you're seeing in terms of strength and laggards?

OBERHELMAN: With mining, what we're seeing is there's good news and bad news. The good news is that mine production on existing mines is continuing to increase. Copper, iron ore, even coal is going to be up this year in terms of mine production over last year.

The bad news is that a lot of our customers are deferring buying new equipment. There is some excess capacity of our equipment already at mine sites. That's being used up. So we're nearing the bottom or seeing the bottom in the mining industry.

Oil and gas has been strong and has been good for us. The gas fracking business has been tremendous. That continues apace. So all in all, puts and takes here everywhere, but kind of continuing story in mining for sure in 2014.

BARTIROMO: And of course we always want to hear your views on China.

Is the uncertainty coming as a result of what's going on in China? Did you see a slowdown in Asia markets?

OBERHELMAN: We have seen a slowdown in China the last couple of years that the offset to that is that we have really been working our strategy hard in China across our businesses, whether it's machines and construction equipment, mining, oil and gas, CAT Financial, our financial products division. We have really been taking that to the market there and our dealers have been investing.

So actually what we're seeing year-over-year in China is a 30 percent increase in our sales and revenues in China, 14/13 while the market has softened. And that's -- there is some risk there, that Chinese leadership is pushing reform. They are underway with a very large transformation of that economy. That brings with it risk and so we're watching that very closely.

BARTIROMO: You were reluctant to endorse a longer term guidance at the analysts' day. What can you tell us in terms of your expectations for the longer term now that the earnings report is under your belt?

OBERHELMAN: I'm going to stay away from that, too. I'll just talk about 2014. We did raise our profit expectation to $6.10 without restructuring. And that's what we'll say for the long term.

Again, I come back to long-term infrastructure needs around the world, the mining needs around the world down the road are -- will continue. World population is growing. And I'm optimistic in the long term about our business. But it's so hard to predict with all the risk, all the geopolitical events that we seem to encounter overnight.

So we're sticking to 2014 for now and making sure we get that done.

BARTIROMO: So. Well, I was reading one analyst's report earlier and he was expecting CAT to be capable of generating up to $17 billion in free cash flow over the next three years. Does that sound about right?

OBERHELMAN: Well, we had a great cash flow quarter in the first quarter. We had a record cash flow last year. We're working on that. We increased our buyback. We completed our last buyback in the first quarter. We bought back another $1.7 billion. So I'm optimistic about cash flow. I don't know what the number is going be. But going down the road we do have some room. Our capex is kind of flat this year over next year and we will be seeing, I'm sure, some more announcements on that in the future as we go forward.

BARTIROMO: Doug, let me move on to the tax story because of course we all have been watching Carl Levin sort of pressure you and so many others in the business over being able to avoid taxes in the U.S., totally legal in the confines of taxes here.

What should tax reform look like to get yourself, Caterpillar and others, to move money back here in the U.S.?

OBERHELMAN: A couple of comments on that, Maria.

First of all, it just points out the desperate need we have in this country for tax reform. Broaden the base, likely lower the rate, watch tax revenues grow. And we have been vocal on that for many years. But we just can't seem to get traction, even though there's bipartisan support for tax reform. We really need it.

And that's one of the things that came out loud and clear. In the case of Caterpillar, our effective tax rate is 29 percent, 30 percent year in and year out. Every one of our competitors that are non-U.S. based -- and that's most of them; we only have a couple that are based here in the U.S. -- all of our competition from overseas have a tax rate far lower than we do.

Our individual competitors, so we have to deal with that in many ways. So the need for reform is great. That's one of our messages to Washington consistently. I'm chair of the National Association of Manufacturers. That's been a leading initiative at NAM to simplify and reform the tax code, make it easier so we watch tax revenues grow and hopefully GDP grows as a result of that. It's a big part of that.

BARTIROMO: Why do you think we're not getting this done? Doug, you're one of several CEOs, multinational companies, that have that been talking about this. It's pretty clear that it's way too complicated and corporate taxes need to come down.

Why has it been so tough for politicos?

OBERHELMAN: I think it's tough for that reason because it's a political issue. What we have seen in Washington the last few years with the partisanship has -- just makes it difficult to attack anything. And this is a tough one. This is a big deal, kind of a thing that needs an awful lot of work and a lot of homework and there's a lot of political issues involved. And everybody has a constituency. So it's a tough one to get done but it needs to be done. We desperately need to do it.


BARTIROMO: And my thanks to Caterpillar chairman and CEO, Douglas Oberhelman.

And now with a look at what's coming up on "MediaBuzz," let's check in with Howard Kurtz.

Howie, the other big story of the weekend, Benghazi?

HOWARD KURTZ, FOX NEWS HOST: Yes, we're going to focus on these latest Benghazi e-mails, Maria, and much of the media, including "The New York Times," initially ignored this story but then it exploded in the White House Briefing Room, press secretary Jay Carney going at it with reporters from a number of different networks and trying to make it like it's some sort of FOX News partisan story. I understand you will be talking about Benghazi as well later?

BARTIROMO: Yes, we will talk about it with the panel.

Isn't it less of a Benghazi story and more of a story of the administration being straight with the American people?

KURTZ: Yes. This is all about the handling after the tragic attack and what was put out and who was in on the talking points, and the former NSA spokesman saying to Bret Baier, Dude, it was two years ago. But we're also going to talk about this remarkably weird and awkward interview that NBA owner Donald Sterling's gal pal gave to Barbara Walters on Friday and that raises a whole bunch of other questions about that story about the 80-year- old mogul's racist remarks in private.

BARTIROMO: Yes. That's going to be something to watch.

No you also interviewed the folks on outnumbered?

KURTZ: Four on one. Four women coming at me and we talked about women in TV journalism and this whole business about whether you have to have a lot of makeup and hair and look pretty to be on TV. So that's an interesting conversation and it was interesting to be outnumbered.

BARTIROMO: All right, Howie, we will be watching. We'll see you at the top of the hour. Thanks so much, Howie Kurtz.

KURTZ: Thanks, Maria.

BARTIROMO: Mixed reports painting a murky picture of the U.S. economy. Where it appears to be headed as we look ahead to the business week on "Sunday Morning Futures." That's next.




BARTIROMO: New reports sending mixed signals on the state of the U.S. economy.

Is the country really moving forward or are we just treading water?

Joining us now, our panel, Ed Rollins, a veteran Republican national campaign director; Judith Miller, an adjunct fellow at the Manhattan Institute for Policy Research; and Keith McCullough, CEO of Hedgeye Risk Management.

Good to see you.


BARTIROMO: Everybody, thank you so much for being here.

MCCULLOUGH: A pleasure.

BARTIROMO: How would you characterize things in the economy, Keith?

MCCULLOUGH: Not good. Not good. You have a zero on GDP. That's pretty clear. And a lot of people are talking about that being the weather. Just note to self, it's not the weather. We have inflation accelerating on two big components, number one housing. We have really the all-time high in U.S. rents. And that matters to people that need shelter, as you know.

And then food prices are just absolutely ripping year-to-date. So if you take those two big things, that's about 40 percent of the average American's basket. As that goes up, their cost of living goes up. And that's why the economy is slower than a lot of people would have thought.

BARTIROMO: And that's why the middle class is getting busted because they're sort of faced with all of these costs and they're not getting free stuff like the low end would get.

MCCULLOUGH: And they're not getting QE either.

BARTIROMO: They're not getting QE either, really.

MCCULLOUGH: Yes, we have done a lot of research on this. The median consumer -- so the 80 percent -- gets paid about 1 percent of their income from quantitative easing. They don't get all these dividend checks and buying oil futures. They just can't do it. So they can't really get that kind of a win-win-win that everybody else on Wall Street does.

BARTIROMO: And it feels like the Keystone pipeline would be low hanging fruit. That would be an instant job creator. And high-paying jobs, by the way.

ED ROLLINS, REPUBLICAN NATIONAL CAMPAIGN DIRECTOR: That's two things. One is it creates a substantial number of jobs and equally as important, it helps make us more energy independent. It would send a great signal right now to the Russians that we are going to get energy independent and we're going to have additional resources that we can trade and replace some of the stuff there. It needs to be built and should be built.

BARTIROMO: I'm glad you mentioned that, because it's not just an economic issue, it's a national security issue.

JUDITH MILLER, ADJUNCT FELLOW, MANHATTAN INSTITUTE FOR POLICY RESEARCH: Well, I also think that it's a political issue above all at this point, one that the president is desperately trying to avoid which is why we have this convenient postponement of this issue until after the midterms. Now how he gets beyond this after the midterms, I don't know, because for the Democrats, this is a core issue.


What about tax reform? I find this to be a real core issue. It's unbelievable you have got companies like Caterpillar having all of this money overseas, Apple, GE, you name it. These companies have billions overseas and yet we can't get anything done. And we are stuck with the highest corporate tax.


ROLLINS: You begin with a fundamental problem. Republicans want tax reform but they don't want to do any revenue increase. Democrats are not going to go through the process of tax reform without increasing revenue. And right now we have the highest amount of taxes coming in, somewhere in the neighborhood of $3.3 trillion with a $4 trillion budget.

So unless we basically somehow stimulate the economy, I think tax reform is dead. I think Dave Camp did a brilliant job of laying out how complex this is. And I just don't think anybody has the stomach to try and make it happen.

BARTIROMO: Yes, not to mention the $2 trillion that's overseas. That number has gone from $200 billion to $2 trillion --

ROLLINS: And will continue to (INAUDIBLE).

MCCULLOUGH: And then you have the other tax, which is this unlegislated tax, the policy to inflate. Don't forget that when you burn the value of your currency, that is an unlegislated tax on America. So you've got this kind of passive-aggressive tax which is really in cost of living for people, and that's starting to -- from what I can tell, really annoyed people.

BARTIROMO: So you think that we do have inflation even though the Fed says it's not worried about inflation?

MCCULLOUGH: Yes. They never have been. At $150 oil, they didn't worry about inflation at the all-time high food prices. They will never worry about inflation. They'll tell you to go eat an iPad, as you know. We've talked about this.

BARTIROMO: Right, right.

MCCULLOUGH: So the reality is that the American consumer is eating it. The average American household has $48,000 in income; they don't really pay income taxes, by the way, and their expenditures just live their life around $46,000.

So if you start to take up the cost of living, it really is the big squeeze on America.

ROLLINS: When you look at federal and state taxes, among the highest in the world, 39 percent is the business rate, but when you get to small business it's about 45 percent. Small business has to pay for it. Big companies can sometimes find ways around it. Small business creates jobs that are being crippled by (INAUDIBLE).


BARTIROMO: Yes. And small business is the job creator.

All right. From the Keystone pipeline to the Benghazi talking points to the situation in Ukraine, like our mixed economy, is the president's foreign policy all over the place? We will tackle that next with our panel on "Sunday Morning Futures."




BARTIROMO: And we're back with our panel, Ed Rollins, Judy Miller, Keith McCullough and we are talking from economic policy to foreign policy, Ukraine, developments, what's your sense about --

ROLLINS: My sense is that Putin has won the week. He clearly, basically, is now seeing that the sanctions are not going to have the impact economically on the country that people thought and, equally as important, the Germans now, German businesses are basically saying, don't go so fast; we're not so sure we want to get involved in the sanctions. They're going to go to war, even a trade war with the Soviets.

BARTIROMO: Well, the Europeans are handcuffed. They are getting 35 percent of their natural gas from Russia.


ROLLINS: There's no alternative for them.

BARTIROMO: And there's really no alternative and there's no real interest in pushing these sanctions, Keith.

MCCULLOUGH: No, and I agree with that. He won the week. He's probably going to run the table for the rest of the summertime because he controls the almighty petrodollar. And that's a huge tax not only in Europe on the Brent oil side, but here. It's going to be a tax. If he starts anything in any way, shape or form in the Middle East, the price of oil is going up.

MILLER: I still think midterm, long-term, Putin is in big trouble, Russia is in big trouble. Right now his ratings are at 80 percent. Popularity is overwhelming; however, when the Russians start to feel whatever pain the Obama sanctions can inflict with whatever sanctions the Europeans can muster, basically Putin is a thug with a foreign policy he cannot deliver the goods to his people, eventually Russians will get fed up.

BARTIROMO: Unfortunately we'll all get fed up. Because as oil goes up, that hits Americans just as much.

ROLLINS: He may be a thug, but we have a nice man who is president who has no foreign policy and unfortunately the thug seems to be winning that battle.


MCCULLOUGH: He's a transparent thug.


BARTIROMO: Transparent thug, OK.

MILLER: Well, I don't know. Is he a transparent thug on Benghazi?

BARTIROMO: Let's talk about it.

MILLER: No. Of course. Look, what happened this week is devastating or it should be to an administration that prides itself on its transparency. You basically have what Democrats love to call two sentences out of a 4- page memo, the Ben Rhodes memo, that Judicial Watch managed to pry out of the State Department that contradicts everything the administration has been saying about a nonpolitical motive for the explanation of Benghazi.

Of course we're now going to have a select committee. The Democrats must join this if it has any credibility. If they don't join it, we'll go on with the narrative that Benghazi is just a Republican cudgel to beat up on the administration. But the fact of the matter is basic questions have not been answered and now they've been called into question by the administration's own memos.

BARTIROMO: It's not just the Benghazi tragedy, and of course it was, but it's the administration being straight with the American people.

MILLER: That's what it's always about, the cover-up. Why don't administrations get this?

MCCULLOUGH: It's a huge issue in this country, transparency, accountability, trust. Great speech, great platform. But when you do the opposite, people get a little annoyed with this. And I think that this is a big issue with inflation in the country. People look at MIT's Billion Crises (ph) project, right now they are running a 3.9 percent -- they're saying inflation is 3.9 percent. The government says it's 1.3 percent.

Now who's right? All the guys that went to MIT are at the government or the other way around? The reality is that people don't like being lied to.

ROLLINS: The problem is, the public basically doesn't believe this administration anymore, whether it's health care or whether it's unemployment figures or now foreign policy which there's great lacking.

I started in politics 40 years ago in the Nixon administration. Nixon didn't authorize a burglary but Nixon covered up a burglary. In this particular case, highly ranking people made every effort to not tell the truth to the American public. And that will be detriment one more time to the president.

MILLER: Why didn't they just put out this information? Why didn't they release that memo when Darrell Issa was having his oversight hearings at the very beginning? They wouldn't be in this mess.

BARTIROMO: By the way, why now the select committee? Shouldn't this have happened -- all right, let's take a short break.

Then, the one thing to watch for in the week ahead from our panel on "Sunday Morning Futures," back in a moment.




BARTIROMO: We're back with our panel.

What's the one big thing to watch for the week ahead or the weeks ahead?

Keith, what are you looking at?

MCCULLOUGH: Well, I'm trying to figure out, Maria, whether or not people fundamentally and actually believe the GDP growth in this country will be 3 percent to 4 percent. And that starts next week.

Will the stock market start to go down, will the bond market continue go up? So again bond yields going to new year-to-date lows signal one thing, which is that growth is slowing and all of Wall Street is still expecting a number I can't mathematically get to, frankly.

BARTIROMO: One percent GDP last week and of course the jobs --

MCCULLOUGH: Oh, 0.1 percent.

BARTIROMO: 0.1 percent. (INAUDIBLE) percent.

Judy, what are you watching?

MILLER: I'm watching the Ukraine. This week it's -- we have to say is Putin going to be able to consolidate his hold over the eastern part of the country?

Can we shred forever the Budapest Agreement of 1994, which we guaranteed -- 2004 -- we guaranteed the territorial sovereignty.

What are the countries around Ukraine going to do?


ROLLINS: With nothing else on the congressional agenda that can pass, no immigration, no tax reform, no budgetary battles. If Benghazi flares up again for another week here, I think it will be the summer story.

BARTIROMO: All right. I'm watching Wall Street. JPMorgan said that trading is going to be down. We'll see if any other firms are going to follow suit and say the same thing. (INAUDIBLE) with Keith this market goes down.

That is it for "Sunday Morning Futures." Thank you to our panel. I'm Maria Bartiromo. I'll see you Monday.


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