captioned by the national captioning institute -- www.ncicap.org -- [captioning made possible by fox news channel] david: the fix for america's money fix is cutting welfare spending. that's a forbes flip side sure to get you fired up. hi, everybody. i'm david asman. welcome to "forbes on fox." california is slashing welfare to save money. and, jack, you say all of america should do the same? >> absolutely. california is going to emerge from this budget crisis stronger in a couple of years' time because they've been forced to make hard decisions. one of those is cutting welfare. its welfare budge set $10 billion for 2010. they're going to have to trim that to become solvent. we can all take an example of that.

yes, you need some short-term solution for unemployment benefits when people lose their jobs. but after that, encourage them to get back at work. at least have contingency that encourage looking for a job. david: so we should follow you in california? >> this is not born out by the fact. california kicked the can down the street. they borrowed from municipalities, cut $15 billion from education. at the last minute headlines by cutting against welfare. but what did he cut? he cut $180 million to kids. he cut $105 million to the elderly. he cut $65 million in aids prevention. so the sick, the young and the inferm are going to learn a lesson and go back to work? this is heartless. this is a political reality because special interests wouldn't give ground. the prison system in this state rules. education gets very little relative to what the prison guards get. but they have the political power so they get the money. it's the unions dominating. david: so, john, is it heartless or make sense for all of us?

>> i agree that $100,000 prison guards make no sense whatsoever. but, look, you've got to pay your bill. these states have got to cut and cut more and cut again until they can pay their bills. welfare has simply been crowded out by the stimulus programs. $2 trillion worth of money going from one guy to another is really a massive welfare program run by the political establishment. politics are in the way, but stimulus welfare is crowded out to little kids and the old people. it's a shame this happened. david: so, evelyn, do we follow california's model? >> we know california is in a crisis situation. they need to make cuts to balance their budget. but they have to confront their reality that by doing so, they will have long-term consequences. we will see more uninsured children, programs disabled. and children hurt are cut as well. and the h.i.v. prevention program so because of all of these cuts, that's going to

cause long-term consequence and hurt these vulnerable segments of the population. david: so steve, even ronald reagan believed in the safety net. are we cutting that safety net? >> no. what they do in california cal is they want to make sure that the people who are hurt are the people who are supposed to be benefit from these programs instead of cutting out bureaucratic bloat. you have a lot of room there. and take medycal. there's a lot of -- david: the california version of medicaid. >> what that would do, could you deliver better services for things like vouchers. give more power to the people you're supposed to benefit. so use this as an opportunity not to win headlines of tears, make real reform. david: jack gates, you're not a heartless son of a gun. you're a good guy. but according to a lot of people here, it is heart whals california is doing. >> it's not heartless. some would have you believe this is taking food out of the mouths of hungry children. that's not the case. we saw stimulus money -- john rutledge is right, with stimulus

displacing some of the government programs. saw $150 million go to the wr m and wca's of greater los angeles to fund after school programs, mentoring programs for children, after school when their pashts are -- parents run able to take care of them. california is being smart in trying to fill some of of these programs while cutting its budget costs. david: go ahead. >> they cut $80 million from child welfare, $50 million from child health, $65 million frerly development. how is that not taking money from children? david: they're adding it in other places according to jack. no? >> the deeper problem is structure. you want to talk about california's problems, let's go. it's the fact that we continually have these referendum systems where people say, yes, i want that but they never decide how they're going to pay for it. it's a problem in ourselves. the other problem is the state representatives have a ratio of one representative to $600,000 people. they have no accountability.

ideally, california should be cut into three states and each one of them should actually be responsible for paying for what they want. david: the fact is steve, practically every state in the union will be having to make these very tough decisions. it's going to face us all. >> that's right. and having more politicians in california is not the solution to their problems there. but fact of the matter is, there are structural changes that can be made. let's take wisconsin back in the 1980's. they put in welfare reform. they slashed welfare roles and did not throw people on the streets and having them starve. became the model for the nation and was a substantial welfare reform. why can't we do that in medicaid? david: john, doesn't that make sense? >> it does. when politicians cut spending, they like to cut the most painful kinds so that they can generate more tax revenues later. the fact is, budget deficits today are just obscene. at the federal level alone you're talking about 200% of g.d.p. in the foreseeable

future. we've got to find a way to get this under control. the dollar's dropping. inflation numbers are going up. the interest rates are going up. at the state level you've got to cut spending. at the federal level, the same. david: there's a bottom line here. all of these states like california are facing the bottom line and they've got to cut somewhere. if not here, where else? >> steve's point is to restructure the welfare programs. on top of this, these are crucial services. i think it's illogical that time when unemployment is rising above 9% when you're cutting these services to the poor and people who are becoming unemployed, they really do use it as a bridge to their next job. david: the problem is, what it eventually becomes, a service that you can't cut, started out as something that was supposed to be temporary. but people rely on it. they become dependent on it. >> that's right. if it becomes engrained in the culture of the state, too. steve talked about wisconsin in the 1980's. look at minnesota in the 21st century where the governor gives the power to wipe out some of

the waste in things that weren't necessary in a time when the state is trying to correct this massive budget deficit. now they have a balanced budget. we could all take a lesson from that. david: next, the u.s. post office loses tens of millions of dollars every day. so why is some brave soul here saying your tax dollars should reward post office execs with six-figure bonuses? perhaps the most outrageous flip side in history on the other side of this break. your tap i'm pretty much the same as i am in a plastic bottle? well, that's not entirely true. see, at home, i'm 10 times cheaper. other than that, though, i'm pretty similar. oh, wait, there's no expiration date. and i don't have to get shipped all around the country. but other than the costing, the expiring thing, and the shipping thing, we're pretty much the same. pur. good, clean water.

healthy hair is softsisilky. and you can get it. fabulou. all you need is pantene. salon names and fancy packaging are nice, but you dot t need it. even experts agree. it's damage protection results leading salon brands can't beat. trust me on this, the blow dryer, the curling iron, and thflflat iron, and my hair's still shiny. pantene moisture renewal. healthy makes is happen.

>> from "america's news head quarters," there are dueling messages between the white house and the republican leadership. in its weekly radio and web address, president obama talked about the economy saying success will depend on building a stronger foundation and recapturing the spirit of innovation. meanwhile, republican senator john thune hammered reform in a response saying the democrats' plan will not improve health care because millions of americans would shift from job-related donc coverage to a government-run system. the military reporting three u.s. troops and a french soldier died in two explosions today. the blast in southern afghanistan where thousands of marines are fighting the taliban. your next news break in about 30

minutes. "forbes on fox" returns now only on fox. keep it right here. david: no bonus for you. this week a senate committee denying post office executives their six-figure bonuses. and the mail service loses about $20 million a day by some estimates and is predicting to be a whopping $7 billion in the red for the year. jack gates says let the good times roll for these p.o. executives. what are you saying, they should get these bonuses? >> i don't care if it's wall street or a government agency. if there's a contractual agreement, we have to stop these compensation cramdowns. this is ridiculous in rewriting history. david: this is a beaurocracy. >> of course. that doesn't change the rules of contract law. they signed it with their employer. it doesn't matter whether it's dick grasso or someone in the post service.

david: john? >> i believe in contracts, like jack, and that boards not politicians should set bonuses. listen, i have a bonus plan in companies where i am on the board where, first of all, you have to achieve the company goal, second of all, you have an individual goal. if you don't get the first one, i don't care if you can fly like superman, you're not going to get a bonus. if somebody doesn't hit his targets, you don't get paid. david: they haven't hit their targets. >> that's true. but i agree with jack, i think lawful contracts are still very important if we start tearing up all contracts where does it end? pretty soon they're going to come after my contract! i don't want them to do that. david: but, again, is it different in the public sector than private? >> absolutely. we should revise some of these contracts. but what it comes down to, the post official service agency essentially is a government agency. and when the government says you're not performing well, racking up about $7 billion in losses per year and about $10 billion in debt over

time, that's a problem and perhaps bonuses aren't warranted. david: steve, bonus? >> anyone that events a per petal stamp so you can have price increase anytime you want, people are not going to raise about it, has something going for him. david: pretty clever marketing. >> i'd increase their bonuses a thousand fold if they privatized as other countries have done like britain. why not privatize it. then you can give bonuses and options for performance. david: particularly since we had fedex and other private carriers. >> a minute ago you were cutting money to poor children and old people. now you're about rewarding top executives. this is a one-hour show. you'd be burning witches at the stake, man. calm down. i have a radical idea. character over contract. ok? you're telling unions that times are tough and they've got to cut their pay and dot right thing, open up that contract and do it. i can support that: a lot of

people are taking pay cuts, working harder than ever. but at the top, the leadership, has to show an example as well. i don't care what the contract says. i care what the character of these people is. david: and it's already happened. we already have this pay czar. if he's going to set pay for citibank and other people taking tarp money, the least he can do is the same for the post office. >> right. i don't agree with that, but i think the same rules should be fairly applied across everyone. especially government agencies. they should be held accountable for their performance. david: you're bending a little. >> it should be written into their contract. think the contracts going forward should be rewritten so that as steve said, these plans and these achievement targets should be in place before the contract is signed. david: so we have the pay czar. he's doing his business with regard to citi and the banks. why shouldn't he do the same with the post office? >> no. we must put a halt to this. quinton is wrong. jack was right earlier.

>> unions should get everything in their contract. >> we can't allow the government to arbitrarily go along and start saying this contract is good, this contract will not be good. >> it's not arbitrary. the poafs is failing. their failing innovate when e-mail is up and mail is down. they have been in the red since 2007, borrowing from the treasury, mind you so they're take among from the government. david: so we should maybe really tie their contracts into performance. surprise, surprise. what a novel notion. huh? >> well, maybe, as quinton says, we should allow the post office to go bankrupt so they can renegotiate all of those contracts voluntarily between the parties. >> i'm with that. david: should i be worried when you two agree or is this the sign of a real solution? >> you should be very, very worried. >> it's crazy time, david. you're basically saying the union contracts should get changed, but this contract is sacrosanct so contract matters

depending on the quality of the suit you wear. >> maybe we should pay their bonuses in the old three-cent stamps to see what a real productive service would do. david: jack? >> i agree. you've got to look at the way they're paid up front. you have to look at the achievement targets that are set and whether or not they're doing their job correctly. david: but they're not! evelyn just pointed out they haven't been doing their job since 2007. >> the problem with the way the contracts were written. that's the problem. david: bureaucrats will always write contracts like this. >> absolutely. but that's also why the post office keeps losing market share to u.p.s. and fedex. eventually the post office is going to be obsolete. >> it's got to be privatized. if the europeans can do it, why can't we? david: do we agree on privatization? >> no! i think the post office actually does a magnificent job. you consider how few letters get lost. it's not about fedex wiping them out. the internet's wiping them out. the junk mail moved over there. david: i still think fedex and u.p.s. does a better job.

we have to leave it at that. here a saturday. there a saturday. everywhere a saturday, czar. forget the white house. now states are appointing their own czars. wait until you see what we're paying them. that's on "cashin' in." but first, right here, barney frank telling your bank not to do something. did he just guarantee we will not see a housing recovery this year? we debate. you decide. that's next. this woman was limited by

her lack of mobility. a month ago this man wasn't even able to get around his house. these are people who chose mobility. and they chose the scooter store. if you're living with limited mobility, call the scooter store today. i guarantee, no other company will work harder to make you mobile. if we pre-qualify you for a new scooter or power chair and medicare denies your claim, the scooter store allows you to keep your scooter or power chair at no cost. that's the scooter store guarantee. i expected they'd help me file some paperwork with medicare and my insurance. i never expected them to be so nice ...or work so hard to get me a power chair at no cost to me. you don't qualify for medicare? no problem. we'll work with your insurance company, even help with financing. if there's a way, we'll find it. call the scooter store for free information today.

david: congressman barney frank this week telling banks to stop

foreclosures or else. he is the chair of the house financial services committee. he says the foreclosures are hurting the housing market. but this week we also got word that new home sales improved by the most in nearly nine years, and home values increase the for the first time in three years. so if the congressman gets his way, we can kiss a housing recovery goodbye? >> barney frank wants to create a second housing bubble. first housing bubble was closed by cheap money from the fed that allowed people to refinance their mortgages, kept them in homes they couldn't afford. barney frank wants to do the same here. we have to stop, allow foreclosures to happen. that will allow supply to meet demand and stabilize home prices. what he wants to do is a recipe for disaster. david: so let the market take its course? >> no, no, no. michael, that's ridiculous. we got to start helping homeowners. we have to go out and give homeowners some money to be able to make their payments and stem the tide of foreclosures. that's the only way this economy

is going to recover. right now all the tarp money is going to the fat cats. it's going to the investment bankers, the banks who are paying big bonuses with it. and the mortgage companies. they're getting all kinds of service revenue when they get a foreclosure. it's a rick dislus -- ridiculous prospect. david: a lot of these homeowners are in over their heads. >> of course. the governments are washing money every which direction. we don't need more money thrown at this problem. barney, this is a dumb idea. dumb. dumb. dumb. we need foreclosures to clear the market so prices can begin to trade again. stopping foreclosures is like taping over a thermometer because you don't like to have a fever. you have to let this thing get finished. if you delay the recovery, you'll push housing prices lower. and barney, tuck in your shirt.

>> it's basically a welfare check to the mortgage company. david: we'll give you a chance to come back. hold on a second, mark. quentin what do you say on this? >> barney has his shirt tucked out and talked like he's just finishing his sandwich. i don't care. he's got a radical idea. it's called accountability. these guys got a big government handout. they said they would try to stall 500,000 foreclosures by november. he's saying if i don't get near that targ eliminate, here's what's going -- target, here's what's going to happen. i am so glad someone in the government is saying you get the handout, big company, but you also have to perform against what you promised. i'm ok with that. david: bottom line is, the point that mike was making, the market's got to clear in order for housing to correct itself. doesn't it, steve? >> then he shouldn't have made the promise. david: hold on. steve? >> you got to let the markets clear. but what they should do is give banks the latitude to renegotiate some of these things. like having short sales so a guy gets out of the house, the bank gets more than a foreclosure.

they give the money to represent a house. david: isn't that happening already? >> they got to change the law to give them the latitude for that. a lot of cases, equity in home, lenders stand in the way. let the markets work instead of gumming them up even more. david: foreclosure though, as nasty and awful as foreclosure can be, mike, very often it is the only way that markets clear. >> absolutely. if barney frank was truly interested in reforming the housing market, he'd start with fannie mae and freddie mac which need to be broken into separate companies. instead, because of his corruption, those companies insisted that banks and mortgage companies lend money to people who could not afford homes. and he's been the culprit here. he's not about to fix this problem. david: and john, it wasn't just him. it was also the companies like countrywide that were selling a lot of their subprimes to fannie and freddie. >> of course, we were all drunk at that party and it's a big

mess. but, look. after two years the capital markets are beginning to come back. that's why we're starting to see the stock market come back. the bond market is open for business again. barney, don't close the bond market again. we need it in order to get the economy back on its feet again. david: mark, go ahead. >> what michael said is totally wrong. this is not a situation where barney frank has created the problem. and, steve, i think you've got a good point. what's happening is the mortgage companies and the banks are milking this system dry. they're taking the fees out of this thing and prolonging the crisis. they're not solving the crisis. give some money to the homeowners to allow them to hang on to their homes. allow and restructure the law to allow the renegotiation of these loans. david: last word. mark, thank you very much. no matter what happens in the home market, our informers tell you how housing can help you clean house in the stock market. that's next.

its revolutionary s allows multiple applications to run at the same time. - ( thunder and rain ) - millions are using the simply everything plan. - each is saving $1200 over an at&t iphone plan. - ( cash register dings ) together that's billions of dollars. enough to open a dunkin' donuts in space. from america's most dependable 3g network. bringing you the first and only wireless 4g network. get the palm pre. only from sprint. only on the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.

david: it's time to make a profit from housing without selling your house. our informers are here with stocks that will pop whether the home market rebounds or not. we were just talking about countrywide that was bought by tbarchg of america. bank of america. >> ben bernanke's lended them money at no cost. they've owned a lot of mortgages tied to housing. so i say play the home recovery through bank of america. david: so even though the bailout might not be good, you

got to play what it is. >> aside from the fact i think the housing recovery is some time off yet. think bank of america doesn't have the -- does have the up side potential because they've reduce the their risk. they've unloaded $10 billion of unguaranteed mortgage-backed securities and replaced them with treasuries. david: you're going with a real estate firm from maryland. >> yeah. i like this company. if you ever wanted to buy a big box department store this company's for you, kimco. they have a nice stable dividend i think the commercial real estate market is on its way back. david: i've always wanted a strip mall. >> it's not bad if you want to play in that sector. but i think the commercial real estate market is in the first innings of its crisis. i would rather go for the residential. david: like toll brothers. >> yeah. they haven't perform as well as its peers but i think it's due to pop. >> i'm going with wall street, charging this company 8%, 9% to