again. is our new time slot will be fridays on fbn at 8 p.m. see you then. ♪ ♪ stay awake. >> and we're giving janice some driving lessons tomorrow. >> yowza. talk about a summer sell-off. the dow suffering its biggest point drop on friday in four years. the dow now down 10% since may. officially in correction territory. and someone here is saying it could drop us right back into a recession. are they right? hi, everybody. i'm dagen mcdowell in for brenda buttner. this is "bulls & bears." smith gary b. smith, john layfield, chuck rocha, welcome. this sell auch as you worried about the economy.

what is it saying? >> it does. ooh a week ago you and i were sitting in new york talking about the economy and i was worried about it. there are a couple things going on. one, i think the market always tells a story and it tells a story about what may happen in the future. we saw the worst weekly decline, dagen, since october 2008. we all remember 2008. it was horrible. i think we have the underpinnings of something that could be worse. you know, we have seen wages stagnant for like 30 years now. we've seen housing still not back to its old levels. demand for oil has dried up because economies across the globe are not growing, and labor participation rate is at an all-time low. add those things up and i think you have some serious storm clouds ahead. >> and, john, you have a government that does nothing but get in the way of people doing business. >> yeah. and the government has done nothing to help this economy. there's so much gridlock in

washington, d.c., on both sides that you don't have an immigration plan, a tax plan, you don't have any type of national energy plan. so there's nothing that opens up jobs in america. i disagree somewhat with my friend gary. i think what's happening right now is the second largest economy in the world, china, is slowing down. you're seeing a repricing of stock markets around the world. you look at china. goes from 7% to 5%. you say that's not much. still going to 5%. that's incredible. but that is a 30% decline. if you look at this in a historical context, look at the s&p, 500 in 1995, 20 years ago, a four time increase in 2000. it includes two big dips, a 1,500 to 1,000 twice during the housing crisis and also during the financial crisis. ronald reagan joemp simplified it saying markets go up, markets go down, but this is a correction long overdue. >> lisa, you had an economy in this country that contracted in the first quarter before bouncing back in the second. we are weak. regardless of how you want to

look at it, we are -- gary talking about wages have not been growing for years. you have very low labor participation rate. you have one indication of unemployment that is in double digits. people who want to work more but can't. is this a recession ahead? >> well, potentially. look, we've also had incredibly uneven economic growth as well. i think what's been happening here is the federal reserve has been propping up the stock market and there's no historical evidence to support that we can perpetually do this. i think if you couple that really with, you know, these regulations that we've seen under president obama and this regulatory state, as i said, we could potentially be heading for a breakdown. >> she's talking about regulations, chuck, but you have the new overtime rules, you have a health care system that has been completely torn apart, that was -- is and continues to be a burden on businesses. how can we not see economic weakness ahead? >> you know, it's weeks like

this that remind me my pathologist was a pretty wise man keeping his money? a cigar box. we're creating about 200 jobs a month, unemployment is down from 10% to 5% and foreclosures are at a ten-year low. obviously i'm a political consultant and this is not my forte, but looking at the 401(k) investment for everyday americans, whether you're a small business man like me or a mom and pop, most of your wealth outside of your home is tied into the stock market, it brings real concern to me. i think it is somewhat of a correction, but i think there has to be a big change or we'll constantly see the ebb and flows the wrong way in my opinion. >> gary, lisa brought up the federal reserve. that literally is the only thing that has been propping up the market, right? free and easy money that has been pumped into our system while you've got jack all coming from the federal government. >> exactly, dagen. i getsz there's two sides of

that coin. one is if the fe raises rates, what is it going to do to the stock market? and generally everyone agrees probably not good. on the other hand, when we see things like what happened today or friday rather and what happened this past week, look, the fed is supposed to just look at economic numbers and things like that, let's be serious. they look at what's happening with the stock market. so when we see, you know, a really bad, horrible week, that might give them pause to not raise in september. overall, though, they're going to have to pull back the punch bowl at some point. that's another thing along with those other stats i mentioned that's going to hurt the market. >> john, if we think this is a hangover, when they start really pulling away the juice, man, there is not a painkiller on planet earth that can get rid of that kind of hangover. >> gary b. says how in the world can they possibly raise rates in september?

look, they missed the boat. they should have raised them 9 to 12 months ago. they absolutely missed their window. the reason you raise rates is because you're trying to stop an overheating economy. that is not what's going on right now. you look at a disconnect between the stock market and the economy. the stock market is absolutely on fire right now. the s&p was 800 in january of 2009. it is now at 2000, a 2 1/2-time increase. there's no way you can say that the economy is on fire like that. what my friend chuck says is you're right, you're seeing a lot of green shoots but not great things going on in the economy because you're seeing the labor force participation rate still at a multidecade high. a disconnect in the stock market, i don't think the fed raises rates in september. hard pressed to say they might not even raise them in december. >> lisa, some good news, because of the points in oil and gasoline prices that will certainly put a lot more money in people's pockets. in addition, we've got the drop in longer-term interest rates,

mortgages are going to get a whole lot cheaper. that hopefully will give our economy a little bit of get up and go. >> well, absolutely. look, i think this oil boom we've seen, you know, it has nothing to do with president obama in the sense he's roped off more federal lands than a lot of previous presidents have. a lot of that is happening because of hydraulic fracturing and horizontal drilling on state and private land. we've talked about this economic uncertainty that americans are dealing and i think this is going to be an influential factor heading into the 2016 election. if you continue to look at the polls, the number-one issues that americans continue to express their concerns with is job and the economy. i think this kind of volatility in the stock market is going to play into that and could potentially affect voters' decisions heading into 2016. >> chuck, usually when someone is running for re-election, a president they will try and juice the economy, stimulus, make it look good before the election year. that's not the case this year. so is the president just going to sit back and just say, hey,

hillary, try and run on my record now? >> i think you'll see them concentrate on the positive things i started with, unemployment rate, how many jobs they've created. this week i was in the keys doing some fishing with a lieutenant colonel of mine. he was doing a lot of trading of stocks. he said, chuck, you i've worked hard, you have liquid atsz ets. here's the first time to invest, which is the first time i thought why would i want to invest you now? he said this is the time to get back in. it will readjust. it made me step back and say, oh my gosh i can talk to gary b. and john. then he talked about a bull market. and toy my best financial plan ong a fishing boat. >> i like the money in the cigar box in a closet because that's basically like buying gold, putting money in a nonperforming asset. gary b., what d do you tell somebody who says -- i've already gotten the questions, you know, in the last -- i got them this morning, several

hours. what do you do with your money? should i go to all cash? should i put money to work in the stock market? what do you say? >> well, two things. one, i say if you're fishing down in key west you don't even need to worry about the market. you're already doing great. okay? keep doing what you're doing. b, i always advise most people to take a very passive approach. balance it with something like the dow diamonds or the sby, gold and maybe tlt, all etfs. the tlt follows the bond market. every six months, rebalance. that's going great guns, put that in the stuff that's not. you'll have very average returns but you'll have safe returns that can weather just about any economic environment. >> okay. that was boring. >> i know. look, i would rather be down fishing in key west. >> we all need to take a page out of chuck's playbook. seems to be having a lot more fun than we are.

>> politics is a tough sport. >> guys, thank you so much. "cavuto on business" is about 20 minutes from now. charles payne is in for neil. what have you got? >> we'll reveal more of donald trump's tax plan. and a new planned parenthood battle is erupting. hundreds of protests breaking out across the country today. they're targeting gop senators. we're all over it at the bottom of the hour. ? thanks, charles. we can't wait. up here first, the donald out with a plan to save tax dollars and stop illegals from crossing our border. put an end to birthright

hillary clinton he's still trailing her in the head to head polls. . should a child born to illegal immigrants in this country automatically gain citizenship? donald trump says no. he wants to stop illegal immigration and save taxpayers billions. do you agree? >> it's harder than a yes-or-no answer. yes, i agree for the most part. look, this came out of the 14th amendment. it's an embarrassment to our country that we even need the 13th, 14th, 15th amendment to tell people it's not okay to own other people. children of slaves were given citizenship. that should have happened. it's not meant to cover something like what's going on now. there's two different points here. 400,000 babies are born to undocumented people in the united states every single year. it costs billions of dollars. a lot of those people have been

here 10 to 20 years. that is not the problem. the problem is the one who is get pregnant and come to our country and have that baby specifically so that baby becomes a u.s. citizen. there are distinctions. the latter part i disagree with and it's a serious problem we need to stop. >> chuck, i will say harry reed was once in favor of this. '93 he wrote a piece in "the los angeles times" about it in the mid-90s. now he regrets it but it's not unthink to believe say this and think it. >> let me give you the mexican red neck version of this where i come from. there's no black or white. we have to fix our broken immigration system. undocumented workers bring in $13 billion of revenue to our economy. we have a system that needs to be fixed. chamber of commerce, organized groups saying let's fix this thing. donald trump is throwing red meat to the right of the right and it's smart politics because he wants to win the nomination. we should look at these people

as people. they aspire to be americans. they want to be here. they want to pay taxes. but let's give them their shot. >> but would doing away with birthright citizenship, lisa, donald trump is not the only republican candidate to think this. harry reed obviously changed his mind over the years. but about a half a dozen candidate who is back this idea including rinn santorum and ben carson. >> no doubt that illegal immigration is costing our country money. the average illegal immigrant has a zent grade education and poorly educated households, whether they're native, u.s. citizens or illegal immigrants end up taking more from benefits than they end up paying in taxes. so there's no doubt about that. politically speaking i think that it is probably stronger ground for republicans to look at things like securing our borders, looking that you're actually utilizing the laws that are on the books and defunding sanctuary cities and looking at things like that than looking

towards ending birthright citizenship. >> i will point to this, gary b., that there is something that's even been written about in liberal publications called birth tourism. it's not just a problem with people from mexico who want to come here and have children who are citizens. it is also a problem with people coming here from china. there was a raid by the feds in california on these maternity hotels earlier this year. that is a problem and people want it fixed. >> i agree, dagen. i think we need to divide up into two separate category, one, the economic impact and two the morality or sense of right or wrong impact. i disagree with lisa a little bit. there's been plenty of studies shown, lining up with chuck's point, the children of the lanlts and the illegal immigrants themselves contribute more via payroll taxes, sales taxes, et cetera, than they take

out of the economy. on the flip side, donald trump points ut i believe we spend almost $50 billion a year on education. now, the other part, though, that i think galls people a little bit is you're at the line on the ride at the amusement park. you've been waiting there for 20 minutes. someone comes to the front of the line and cuts in. is it a big impact on you? no. you have to wait an extra ten seconds. but it galls you a little bit that you put in the effort. i think that's how people in the united states feel now. we put in the effort, we lived here, grew up here, did everything right, now these people are coming over the border and taking what we developed. that i think is the issue as chuck so rightly points out we need to fix. >> we've also seen an obama administration even ignoring his action on immigration late last year. you have deportations are dropping dramatically because they're only deporting people who have just come over the border, who are criminals and

who are possible terrorists. >> part of the memorial hospital where president kennedy was taken, up to 70% of their births are from undocumented workers. we have an immigration issue with those that are here and those coming over just to have babies here to become citizens. the latter is the problem. >> thank you, guys and lady. better enjoy streaming that video now because lawmakers are going to make it a whole lot

all you streamers out there will be steaming when you hear this. some states now looking to tax you for every video you stream and download. it's to make um for lost revenue from falling dvd and cd sales. lisa, you say this will kill innovation. how so? >> absolutely. this better not happen before the next season of "house of cards" or i'll be upset. your end up hurting online businesses and it stifles the economy. this is a bad thing. >> chuck, this is bad. how can you say this is not bad? >> a lot of us who spend time at work doing research or watching a lot of john layfield rapping videos, we all do it and might as well admit to it. tax that. as long as the rich guy is taxed the same amount i'm taxed, tax us all. then you can reduce other taxes that are not fair for anybody. if you want to tax me a lit bill at a time, bring it on. >> thanks, wrasz ler. >> i was like 0 for 2,000. i had a worse than general record against the undertaker.

don't watch any of those videos where i lost. i agree with chuck, schs not bad, but i agree on the tax. it's not fair to tax dvds, shows, movies and not tax something online. it's not a fair competition. i hate myself for saying this but you need to tax it. >> gary b., you hate john too for saying that. >> i would never publicly say that i hate john, but i do disagree with him and i agree with lisa on this. look, if you want to hurt an industry -- we basically in the united states, we're reduced to two industries that we can really be proud of, the internet and entertainment out in hollywood. take the internet. we have the greatest innovation there. uber, netflix, google, for crying out loud, we tear envy of the world. now these governments because they're addicted to the revenue flow that they lost, they want to go in and tax, i.e., hurt

these industries. you want to see what regulation taxes do. look no further than the coal industry. basically the government's trying to shut down the coal industry with their regulations and their taxes. that's what's going to happen to the internet innovation we've seen. >> lisa, this goes exactly -- and gary was beginning to touch on it. you lose the tax revenue from dvd and cd sales. rather than going out and looking for another source, how about you try and cut your spending for once in a lifetime? >> why don't you let the economy flourish and businesses flourish and let innovation flourish? specifically allow me to watch the next season of "house of cards" without being taxed. >> chuck, before we go, i'll let you get in a ric flair whooo real quick. >> whooo! >> that was just like the nature boy. >> i love it. >> lisa and chuck, thanks for

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predictions. gary b., go. >> i am scared. i like gold. i think it's up 50% in a year. >> john? >> i'm scared too but go with gold power liminers stocks. >> what about your prediction?

>> apple. >> gary b., do you take a bite of an snl. >> john's next pick will be netscape so i think we can all kind of move on. >> i love you both dearly. thanks for joining "the cost of freedom" continues right now. cavuto on business. donald trump starting to outline a tax plan, cuts for everyone but some more than others. >> at a minimum we have to simplify our system and i would like to see a reduction in taxes, a reduction in all taxes but especially corporate and especially for the middle class. >> hello, everyone. i'm charles payne in for neil cavuto. the donald proposing lower tax rates targeting companies that promote jobs. love him or hate him, is this the right plan to get the economy back on track? farry says absolutely. also here, ben stein, gerri willis, and