the last 200 years america has come a long ways from no plans no problem.kekekekekekekekekeke. >> we'll be back tomorrow. you have to tune in tomorrow. abby: every saturday. >> stocks rocketing the dow soaring past 21,000. and unemployment claims falling to a 44-year low. but is the federal reserve about to do something to turn it all upside down? hi, everybody, i'm dagen mcdowell and this is bulls and bears. the bulls and bears this week. gary b smith, jonas, jay, welcome to everybody. john, is the federal reserve with an interest rate hike maybe this month going to wreck it all? >> i think they certainly could. you have to understand. even the fed goes to their target rate of just under 3%

in 2018 of historically low rates. but specifically on tax cuts and regulation reform that have been promised. now, if you have a rising rate environment that generally hurt stocks, and if you have that lag time, the market can't go up forever. we're in the second longest bull market ever and at some point, i think if the fed raised rates before we see either application of tax cuts or a defined plan when we're going to get those tax cuts, i think we're going to be in for a rough patch. >> will interest rate hikes wipe away any future benefit of the tax cuts? >> there's a lot of risk in raising rates because, first of all, the federal reserve is a in a tough situation. they're timing what's going on in the trump administration and we don't know exactly when we're going to get the tax cuts, the regulation cuts that are going to offset the drag of higher rates. i mean, the reason we do get out of a 0% obama economy is because there's going to be higher inflation, more optimism. that has to be there when they

raise rates, or it's going to come crashing down and cause a recession because that's what happened if we didn't have a optimistic mood. some of that is psychological and can be there without the tax for a while. but this timing game is very difficult. and you have other problems like the interest on the debt that becomes much more expensive and then on top of, say, raising the defense budget, it's going to be a real budget burst. dagen: but gary b, the federal reserve did hike rates in september and it hit record after record after record into the new year. >> exactly, dagen. let me go back on a couple points, and i'll double back to that. and number one, john is right. the market can't go up forever, although i hope it goes up just in our lifetime just straight up. that would be very nice. >> i do too. >> number two, jonas is absolutely right. he's getting to the point of this whole fallacy of we got these super smart people behind the curtain like

wizard of oz pulling on the cords hoping to manipulate the economy. it's absolutely idiotic. remember, this is the fed that has called seven of the last three recessions. it totally missed the housing crisis. it kept saying we do get 3% growth when we've been at 1.5% growth. so i think the fed, they're better off putting into an ibm deep blue computer and letting them run the interest rates. finally, back to your point. is there a correlation between interest rates and really anything? i looked at the correlation between interest rates and housing. interest rates and gdp. interest rates and employment. there is none. interest rates at best follow the economy on upwards. i hope it's the case this time around. but -- look, it's going to be a quarter point increase, as you point out, dagen, it has no affect on the market. i don't think it's going to have almost any affect on the average american. dagen: how about, lee, it actually having a positive impact? optimism is up.

when people feel better, they can actually lift the economy. and if they see rates going up, that could, again, reinforce that feeling and, by the way, what about saviors? giving them a little bit of a break in the money that they're stocking away? >> yeah. i'm not sure it's going to be that bad of a thing? you're talking to folks -- a lot of people are expecting it to happen already. i think people are expecting it to happen a few times this year. so if it does happen, i don't think we're going to see a huge impact on the market. i'll tell you what i think is going to have a huge impact on the market. come august, there's no tax reform. but i think this is expected, and it could be as you say for saviors and millennials right now who are doing a good job of saving are going to like to save more when they have better interest rates. dagen: would the fed interest rate hike wipe away any benefits of the very pro growth policies that are on affect? >> possibly. and that's what janet yellen has said. this is all dependent, and this is what she has said on the investment in infrastructure bringing the jobs back to america, which is residential on a sustainable infrastructure that donald trump has proposed.

now, if that happens, then that's good for the middle class. if it doesn't happen, this is only going to benefit wall street who has been driving up the economy. because the reality is there is a shrinking middle class and if it doesn't work, it hurts them. dagen: gary b, doesn't janet yellen have to worry about keeping her job if she wants to stay until january of next year? >> it certainly puts her in a very precarious position. look, the people are human. they want to pleas th please the president, no matter who it is. there's no doubt that her and the president are at odds. i think in this case she can slip in that quarter point rate hike without trump going ballistic. any more after that, then she better be looking for another teaching job because donald trump's not going to like that. and when her term is up, i don't think she'll be staying on. dagen: john, to that point, gary b pointed this out, the

federal reserve is very hesitant. at the beginning of not this year but last year, they were falling for four interest rate hikes. we've gotten two in two years. we got one interest rate hike last year. they're calling for three right now. it's probably going to be a lot less than that. >> yeah. i completely agree with what's been said with gary b that they are politically motivated. look, they had a chance to raise rates 18 months to 24 months ago, and they missed that window of opportunity. they missed it i think for political reasons. they also helped create the bubble of housing. you look at what interest rates can do to the potentially to the market, i don't think the interest rates alone are going to be the thing that hurts because you look at 2004 last time you saw interest rates highs significantly. first two months, the market was down. then over the next 24 months, the market was up 35%. so it's not interest rates alone. it's the promise that we have of a tax reform bill, specifically a corporate tax cut. if we get interest rates rising, i think the market will use that as an excuse to

either pause or pull back if we don't have that corporate tax reform. >> and janet yellen and the federal reserve, jonas, they don't really believe in the trump policies. in everything that he has laid out when they adjusted their growth targets at the end of the year, they factored in no impact from all of these trump ideas, even after the market had been rallying. >> first, actually, if you read minutes going way back, they wanted fiscal policy for many, many years. they don't want to do it all as 0% interest rates. that was because there wasn't cohesion in government where they could do a large -- whether it's a tax cut or fiscal spend. there wasn't enough going on in the fiscal side, they had to make up for it in the monetary side. so broadly speaking there is a trump policy. as far as my other point, you don't want to be federal reserve person forever. if you get fired, it's great after. you want to have trump fire you and then go on 18 boards and write books.

that's how you make a lot of money. >> on the backs of middle class. dagen: yeah, exactly, lee. but speak to that. final word to you, lee. the impact of what the federal reserve does on the psyche of the american people. how much do they watch? or as jonas pointed out, the federal reserve seems to be onboard with president trump. >> look, i think it can go two ways. there's also this idea that this has been propping up the economy and once they're able to raise rates, means the economy is able to go on its own. i think that's what a lot of people believe. so if they see rates coming up, they might actually believe, like, hey, we're actually in good shape, so i think it could be a good message. dagen: and just one more thing, they'll get off and go buy the home they're wanting. thanks, guys. cavuto on business about 20 minutes from now. neil, what have you got? >> hey, dagen. first it was cabinet holdups. now are leaks holding up the president's agenda on tax cuts and health care?

plus his new mandate for immigrants coming in that could help taxpayers out. we'll see you soon. dagen: thanks, neil. we can't wait but up here first, house republicans busy working on their bill to repeal and replace obamacare. but there's just one little problem. the public hasn't seen it. leaving some lawmakers like senator rand paul banging on doors to find it. someone here asking if we're about to hear this again. >> we have to pass the bill so the future of business in new york state is already in motion. companies across the state are growing the economy, with the help of the lowest taxes in decades, a talented workforce, and world-class innovations. like in plattsburgh, where the most advanced transportation is already en route. and in corning, where the future is materializing. let us help grow your company's tomorrow - today at esd.ny.gov

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dagen: democrats and at least one republican searching for the gop obamacare replacement bill this week and slamming republicans for not making it public. sound familiar? back in 2009, republicans accused democrats of doing the exact same thing while drafting the affordable care act behind closed doors. gary b, the health care sector makes up about one sixth of

the entire u.s. economy, so it is important to know what is in this bill. >> well, exactly. look, you know, you alluded to the hypocrisy. this is why approval ratings are in what? the single digits at best? i mean, it's just horrible. look, the republicans on their side. i can understand the hypocrisy from the democrats. they didn't reveal the bill until it was voted upon. but on the flip side, the gop has had a day years to get together a bill, for crying out loud. in fact, i'm not even sure -- in fact, i am sure government should be involved with health care for crying can out loud. it should be a free market thing just like you can buy plastic surgery on free market or auto market. there's many models out there. whether you like the swedish model, the hong kong model, obamacare for all of its faults. but the fact is they did have something ready to go and honestly it's making the gop

look silly. i think in this case rand paul is probably right. dagen: although rand paul, what's he going to do? fax the health care bill to everybody with that copier he was pulling wagon? >> you could say yes, but i would argue no. there's nobody voting on the bill yet. we don't need to see the sausage making happen. but we should see the sausage before we're going to eat it. so i think the whole thing is a little premature. now, i totally agree they've had eight years to figure this out. the fact that we do not have an alternative to obamacare in place already is ridiculous, but it doesn't make them hypocritical for not showing it at this point when they're still hashing it out. dagen: and the republicans, john, promised that they will reveal it once it is written, and it's still in the process. >> yeah, look, i agree with gary b. i'm not sure this makes them hypocritical. i think it makes them awful.

when we elected the leprechaun to the polls, you may disagree one side ideally one party or the other, you're still electing a position and these guys are horrible. the democrats read a bill they haven't even read. why does do the republicans not have a corporate tax bill on the president's desk right now? why do they not have that health care bill on the president's desk right now? it's because they're politicians. they're waiving their balloons in the air taking polls. it's what politicians do. it's why they have a low approval generating and their only goal in life is to get reelected because they couldn't make it in the free world. dagen: and i should correct gary b. i don't think it's in the single digits. i think it's in the double digits. >> i was being, quote, unquote, liberal with my numbers. dagen: but, jonas, the republicans have no choice. donald trump, president trump promised repeal and replace and that's what they've got to get done. >> do i have to stand up to the republican congressman? dagen: yes, you do.

>> first of all, to run off the sausage example, you don't want to see how a hot dog is made. you just want it to taste good, and they make a lot of hot dogs in washington d.c. and there's no bigger one than health care. and believe me, this is going to scare people. they didn't have a bill because they didn't think they were going to win and have the power and do anything. it was all a game until now. the problem with this plan is the obamacare plan makes the healthy, wealthy, and wise pay for high income people. that deliverable has to change or you can't fix it in a republican, conservative environment. the deliverable needs to be lower health care costs and healthier people. you have to take that obamacare deliverable out because that is only achievable through tax increases if you don't have healthy and wealthy people pay for it. and that's what they're doing. they can't let us see what's going on. and you shouldn't want to see it because it's going to make you nauseous. dagen: and one of the things that has headwinds amongst conservatives, the tax benefit you get if you get insurance

through your employer. that impacts about 180 million people, potentially. >> yeah. listen, i was a single pair advocate, still am. dagen: of course you are because medicare isn't going broke in 11 years. >> this is about putting your resources in the right place. maybe putting $54 billion into the defense budget, which is already the largest ever, we should put into the american people to make sure they're healthy. but i digress. i think this is a political thing. the problem is republicans don't agree with each other because republicans coming from states like kentucky, states like arkansas happen to have the highest enrollment for obamacare. and they're showing up at their town halls seeing hundreds of people in the resistance fighting back. many of come voted for these republicans and that's what they have to look out for. they're not actually looking at those polls that gary says as politicians can be. dagen: i can't believe i'm going to say this, but i agree with you, naomi. the resistance among republicans, they want that medicaid expansion. they accepted it, and they want to keep it. so, again, another stumbling

block. thanks, everybody. coming up next president trumping down on his push for school choice and school vouchers. teachers unions say don't do it. someone here says we can't afford not to do it. we debate it. next.

dagen: president trump visiting a catholic school in florida yesterday promoting school choice and school vouchers. gary b, you think that the president has the right idea. >> absolutely. it's really a case of free market versus government response response -- sponsored education. the government just spent $7 billion on their school mandate. the results back? no improvement in schools. even the education department admitted $7 million wasted. look when parents have a choice. look at saint benedict's school in newark, new jersey. one of the worst parts. 98% of kids go to college there. no government funding at all. it's all charitable and tuition. working in dc, for crying out loud. why can't we give parents their choice? dagen: john, yes to school choice? >> absolutely.

there are great schools out there and great teachers. but spending on schools has soared over the last 20 years and our ranking worldwide has plummeted. i spend a lot of time working with kids in inner cities specifically. they don't have a choice. they don't have a vote and for the most part, they have awful schools. there are exceptions. unify got to give them at least a choice and at least vouchers do that. dagen: jonas. >> i don't see how taking some students out of a bad school and leaving some there is going to help the kid still stuck there. it might help the kids who move to the private school with a subsidy but let's talk about the financial part of it. if you subsidize it, it's going to create demand for it with government money, not your money. and it's going to boost the tuition for private schools and they're going to go up as fast as colleges. this is just another -- look what the mortgage credit did to home prices. you can't have the government putting the money into this system. dagen: you say yes to school

choice but yes to the teachers union. >> absolutely. i'm big fan of the american federation for teachers, and i think they're not he didn't the respect. the problem here is not the national federal amount of money. it's the states. the states where you have the worst performing schools. the not receiving the money. two gets the benefits? taxpayers are subsidizing wealthy families who don't want to pay for private schools but now have tax incentives. >> i have to say this. donald trump gave his speech to joint session this week and the line of the night was when he said education is a civil rights issue of our time. his lines on choice resonated across the board. republicans, democrats, and independents all responded well to it. so i think that speaks a lot. dagen: yeah, because many teachers aren't he didn't respect because they haven't earned respect because our students are failing. and they're failing the american people. thanks, everybody.

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take over. amazon told us that a key punch error caused much of the internet to crash, fortunately ibm works on human error stuff, up in a year. >> john help us. >> can we get imc blue to figure out jonas, please? >> as president donald trump sets up an aggressive agenda, his critics are stepping up attacks and now his attorney general is, well, just stepping back. welcome, everybody, i'm neil cavuto. from tax cuts to health care, charles payne says these distractions could be the real killer and also here, charlie gasperino, gerri willis, gary and adam. ben stein, i regret to tell you is off this week. charles payne, you're listening and seeing this and all you can sigh is whenever you think about the other matters, they're getting in the way of dealing with the matters that matter, right? >> absolutely. >> and tax cuts and the rest. >> absolutely.