see how they pan out. david asman, "forbes on fox" is next on the network for business news. fox. whether you look at fox news or especially if you get fox or especially if you get fox business. captioned by closed captioning services, inc >> david: half a million government workers losing their jobs to help save the economy in cuba. that's right. communist cuba. if cuba gets it, why don't we? should we also cut down the size of our bloated government? hi, everybody. i'm david asman. welcome to "forbes on fox." let's go in focus with publisher rich karlgaard, victoria barret, stephane fitch, elizabeth macdonald. >> the problem that cuba has is the problem that u.s. has. the government is smothering the private sector. some government says the

federal government isn't the problem. there is only 2 million government employees. if you look at it, 153,000 new civilian employees in the last year at a time when unemployment in the private sector is going up. $1.2 trillion deficit for the first 11 months of the year. somewhere, somehow we have to cut government or we'll strangle ourselves. >> david: i should make a point. cubans are offering the government workers another government job if they leave the one they're in now. but doesn't neil make sense? >> he does. he has got some things right. let's stop and think about this for a second. we have only 2 million federal employees. that's if you subtract out the third that are citizen soldier, department of defense, you are left with one in 230 americans have a government job. healthcare workers, 1 in 3,000. chance to get healthcare job is lower than catching a rare disease. if you copy something from cuba, get the 7-hour fiery presidential speech and good

cigars. >> david: i'll go for the cigars but i could do without the speeches. rish, what do you think -- rich, what do you think? >> we could freeze jobs right away to start. then we have to look department by department to see where we can cut. most people don't realize the federal reserve has 18,000 employees. if you had a gold standard or taylor rule for interest rates, maybe you'd need 2,000 or 5,000 federal reserve employees. >> david: clinton, don't we need to pare down the size of government? >> we need to pare down the size of government but we're talking about the federal government. what neil is doing with that new workers versus absolute workers isn't a very good comparison. there is no information there. the problem is not that the federal government, the problem is state and local. federal government is 15% of total government. not talking about abstract bureaucrats, you are talking about laying off maybes, state representative and local people. that's where the bloat is. >> david: emac, it's always tough to fire people. never easy. but we have to do it. we just have a bloated

government. we got to pare it down. >> we have a bloated government. then to quinton's point on local level, buffalo just paid health insurance for 2 million dead city workers and they're not even alive and they're getting health insurance. that's what happens when you have bloated government. we have been on a supersize me government track. 30,000 government work for congress. why do we need 30,000? why do we need 18,000 at the e.t.a.? why do we have four workers at the japanese usa friendship agency. they don't they facebook each other? >> good question. >> david: vicky, you are laughing but it's true. incredible absurdies to take care of. >> i agree with liz. but you're talking about laying off quarter of the workforce. they won't get job elsewhere. end up back on the government -- >> david: let me interrupt. why do you think they're not able to get jobs elsewhere? if they have talents, if the economy does improve, why couldn't they work elsewhere? >> well, you're assuming the economy improves.

>> it's very hard to get a job right now. we're not going to do what cuba is doing an say you lose this job and we'll give you another one. plenty of government. i spent time this week looking at certain times of jobs in the government sector versus the private sector. the government sector has twice as many managers compared to the private sector. now these people a lot of them are probably just pushing paper around. technology can get rid of the jobs. we can look at how to streamline government but doing a blanket cut like this in a time like this doesn't make sense. >> david: i grew up in washington, d.c. and i used to walk through the bureaucracy. department of agriculture and just to see what everybody is doing. doing just what you think, pushing papers around, not doing a heck of a lot. >> pushing papers and if you look at something like the department of education under pressure and president obama it's gotten bigger and bigger. these are rounding errors.

a lot of this is state employees. a lot of them manage to keep their jobs. >> it's government on all level, emac. >> right. to the initial point, you can shoot an arrow down a government hallway and not hit anybody on any given day but the issue is the benefit the workers are getting, 8 to 9%, 8%, 9%, 10% expected return on the state and local pension plan. bernie maddoff couldn't get away with it and he's in jail. >> david: speaking of maddoff, what about the s.e.c.? we thought they were going to guard crooks on wall street. they were spending their time at work looking at porn on their computers. >> yes and those people should be fired clearly. >> david: how many others do we not know about? how many other thousands or perhaps hundreds of thousand of government workers are doing the same thing? >> i think that exists in the private sector, too. i hate to tell you. >> david: not as much. it's easier to -- >> unless you know something we don't know, maybe you should fess up.

>> well, i think that might be universal. but there is plenty of ways that we should look at in a smart way. right now, it's more important for the administration to do a pro-business message. the anti-business rhetoric getting in the way of american growth. that takes precedent over these cuts. >> david: stephane, back to the main point. it is true that there are a lot of, there is so much government waste and it's a lot easier to avoid the scrutiny and the public sector than in the private sector, where there is a bottom line attribution for each worker. >> you're right. i think rich has the answer here. the way to do this is not go at this with an ax. come up with new way to do things. i don't know if i agree with the gold standard. if you have a new idea how to run things and the new ideas leads to we can do this with fewer people, go for it. i don't know why we have to have garbage men on government payroll. maybe we should outsource

that. >> david: good idea. quinton? >> i think it's a good idea. i think the tea party movement has been interesting against the federal government. i think they could probably do more interesting work looking at their own town and their own counties and their own state. looking closely at what the payrolls are like there. that would make a bigger impact than any statement you could make about the federal government. >> i don't think rich or neil would have problems with that. >> i wouldn't have problems with it. if you want to get to the crux of the financial problems with the government, it's the entitlement. under president obama they have gone up 2.5 times to $260 billion a year. if you really want to get the government down to size, you can't just cut government employees. >> they went up in a big way with the medicare drug benefit under president bush, too. the issue is, david, when the companies fail they get smaller. supposed to be separate from the bail-out culture we're in. when governments fail they tend to get bigger. that is the issue. why is that? why does it happen time and again? >> david: that's true. a reverse relationship

between efficiency and whether or not you keep your job in the government, rich. >> yeah. yeah. the big picture is the government spends $3.6 trillion and takes in $2.4 trillion. so a third overbudget. now all of us in our own lives had to deal with a one-third loss in our portfolio. many of us had to deal with one-third loss in home value. many of us had to lay off one-third of the colleagues in the work places. why does the federal government exempt from all of this? >> david: tragically many of us have neighbors that lost their job. and when we come back, president obama saying again we can't afford to extend all the tax cuts to all americans. but the "cashin' in" gang says hey, it's not the government's money. what is not to afford? plus, remember this? >> time to give all americans a complete and competitive education from cradle up through the classroom, cradle

up to career. >> is the craid to career plan the reason why more and more americans are tossing the student loan bills in the trash? we debate. you decide. hi. you know, if we had let fedex office pri our presentation, they could have shipped it too. saved ourselves the hassle. i'm not too sure about this. look at this. [ security agent ] right. you never kick off with sales figures. kicking off with sales figures! i'm yawning. i'm yawning some more.

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hi, everyone. live from america's news headquarters, i'm jamie colby. bermuda is bracing right now for hurricane igor. there are hurricane warnings in effect for the island. the storm is a category two,

but it could strengthen during the day. and hurricane carl washing ashore in mexico gulf coast, causing flooding there and killing two people in landslide. today, b.p. could declare the blown-out oil well in the gulf of mexico dead. crews pumping cement in the well to permanent seal it off and that's for good. socialite paris hilton pleaded guilty to two misdemeanors. she was arrested after vegas police say a bag of cocaine fell out of her purse. she will serve year of probation, pay a fine and complete drug abuse program and do community service. i'm jamie colby. now back to "forbes on fox." ♪ ♪ >> david: a new report out this week showing more and more americans are walking away from their college loans. this is alarming news

especially now that taxpayers fund all college loans so we're all on the hook. but bill, you say the white house is encouraging defaults with its new loans plan. explain your flipside. >> listen, we have america the deadbeat. no question that federal policy favors debtors and defalters over frugal and conservative people. we're bail out homeowners and g.m. -- >> david: and millionaire backers, by the way. >> now we're looking at $9 billion a year in default on federally guaranteed student loans. there is a simple solution. why don't you let the colleges lend their money instead of my money? if they are so sure that their degrees are worth something in the marketplace. >> david: emack, what do you think of that? >> i'm sick and tired of fat cat academics but i don't think the white house is doing orchestrated push to stake over the student -- take over the student loan program in the country. the terrible situation now is that student loan debt is surpassing credit card debt in this country. many parents say look, it's not worth it anymore to saddle our children this way.

send our children off to a two-year community college and then for the final two years send them to ivy league school to try to pay to get that more important so-called important college degree. isn't worth it anymore. >> david: emac pointed this out, the fact is right now the student loan debt is $850 billion. that is more than the $828 billion in consumer debt through credit card. this is a crisis that's growing. >> it is growing. it will continue to grow. what obama did this spring was say if you have a student loan your balance will be forgiven in 20 years, versus what it used to be at 25. if you go work for the government it will be forgiven in ten years. that isn't a loan. that's a grant. we shouldn't call these loans, because they simply aren't. they're operating in a very different way. you are encouraging the problem. you're encouraging people to take out these loans. you are encouraging colleges to increase their tuitions. so it's a vicious cycle. taxpayers will be on the hook eventually. >> david: if you do what the president did, say in 20

years your loan will be forgiven, doesn't that encourage you and incidencize you to wait 20 years and forget about it? >> fox news, cranking grandpa on the sagging porch. the kids don't think in terms of 20-year horizon. they're defaulting on their loans because there is a bad recession on. people are defaulting on their mortgages. businesses are defaults on their loan. why are students different? >> i don't think the parents are cranky for no reason and i don't think the students are cranky for no reason. they're saddled with the six-figure loans. professors aren't even teaching anymore. >> david: and the fact is that -- >> they're treating the kids like different species -- >> david: forgetting the fact that the incentives matter. people are incentivized to do good things or bad things. if we forget about that, we get in all kind of debt problems. >> exactly. >> look what happened to housing, david. we made people less responsible for their

mortgages we created the housing bubble. the same thing is happening with education. as president obama has increased the amount of housing debt that fannie mae and freddie mac and therefore taxpayers have to pay, guess what? the fall rates have -- default rates have gone up. default rates in mortgages are at an all-time high. default rate of student loans of guaranteed government loans at 6.9%. that's the highest in 12 years. >> david: stephane, you know, ultimately -- >> we're in a recession. >> david: taxpayers ultimately will pay for defaults, right? >> i'm not sure i heard the question but we could start going after the government loans made for education at for-profit schools. the for-profit schools are a problem. administrators are urged to chase profits or urged to chase kids. that's not a healthy conflict. i don't have a problem with the for-profit education. i have a problem with government subsidiaries for it. as far as the conspiracy theory, is the white house

hoping there will be more default, anyone thinking that is mixing up the dinesh and desusa. >> david: i have to agree with stephane, if you are a for-profit entity, you shouldn't get taxpayer bail-out, correct? >> if devry or corinthian is so sure their degree is going to be worth money, let them lend their dollars, shareholder equity, not my money. >> david: emac you said that you look at the endowment at the college and universities have, in the billions of dollars. they're not spending that enough on student tuition. >> yeah, no kidding. this is an issue of supply and demand. in other words, the parents and students realize it just is not worth it. when these fat cat academics are sitting on these honey pots of endowment and not doing anything to lower tuition cost in this country, that is the worst thing. the president is going at it upside down. do a supply and demand analysis of what colleges deliver in the country. >> david: last word from emac. up next, unions accusing

corporations of committing economic treason. yes, i said, "treason." they said it with a straight face, if you can believe that. wait until you hear what the forbes team has to say about that coming up. yellowbook has always been good for business. but these days you need more than the book. you need website develoent, 1-on-1 marketing advice, search-engine marketing,

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>> david: unions on the attack, accusing job creators of committing economic treason. treason! you have to hear this one. this primary season all about the tea party

>> david: fighting words from a union boss. afl-cio president this week claiming american job creators have given up on america and committing, "economic treason" for sitting on more than $1 trillion. rich, any issues that you have with what trumpka said? >> yeah. this is just wildly

irresponsible. treason is a crime punishable by the death penalty. it's equal to murder. to toss a word like "treason" around to describe why companies are rationally saving money and banks are constrained in their loan making is just outrageous. you know, it echoes back to the bad days of the '60s and '70s, the hoffa years when the unions were thugs. i thought we got beyond that. apparently not. >> david: so what do you think about the language, first of all? s>> i have a slightly more benign view of freedom of speech than rich does. it's a throw-away line. it's not call to arms. you can blow that out of proportion. i see his point, too. bush told people to spend after 9/11. he was kind of right. it adds acceleration to the economy. the banks aren't lending to small business. they're trading on a really great interest rate. they are making money in a way a dog could make money. it would be nice if they lent to small businesses.

well, they're not doing it because they have other alternatives. is that treasonous? probably not but i'm not running a union. >> david: the companies are doing the same thing. banks might be making out but a lot of companies are holding their cash because they worry about taxes go up. >> if this guy wasn't such a hypocrite, he would point to his boss, i call president obama the de facto ceo of g.m. g.m. has $29 billion of cash. why did he go after president obama and say president, you're committing treason, spend some of g.m.'s cash? >> david: good point. bill, put remarks in context. we have the full remarks. he said, "too many companies are not investing in the future or in the country that made them great. all they want to do is scrape every ounce of flesh from our hides for their profit. well, i say that is economic treason." that is tough stuff. >> it's a little bit

overrhetorical, but let's get -- >> david: a little bit? >> i'm going to simplify what the union -- [ overtalk ] the corporations have overdone their downsizing and slinking and it's -- shrinking and it's time for them to reinvest trillions in human capital. a way to inspire them. what do you say we have a two-year holiday on payroll taxes and labor laws for net jobs added? if you have 4,000 employees now, and you can get 100 free passes. no payroll taxes. no employment blog. minimal -- none of that. [ overtalk ] wait a minute. >> david: let's go to neil now. i get your point but i want to go to something that quentin hardy talked about, a lot of companies have foreign profits. foreign profits overseas. microsoft said it's actually cheaper for them to borrow money here and pay the interest of that rather than repatriate the profits and

pay taxes on it. so taxes are a bigger concern than borrowing more money, neil? >> you're right. he is right about one thing as well, businesses in this country are run by a bunch of greedy, self-interested s.o.b.s. the truth, i believe, is if they see a chance to make a profit they will go after the chance. the problem we have now is businesses are scared. they see no opportunity. they see the taxes going up. they see more regulation. obviously with healthcare, they don't know what is going on. mr. trumpka is completely wrong about this being treason. what it is, is self-interest. that's how capitalism works. >> i'm sure rich karlgaard you want to say the union are run by self-interested greedy people as well, correct? >> and people who incite others to violence. it witnessed violence from union members long ago. this is what really disturbs me, this kind of language echoes back to that time. so, yeah, it's protected by free speech.

but it's terribly irresponsible. i think the guy should step down. >> david: all right. last word from rich karlgaard. more tea party candidates with victories this week. tea party stocks to help you score big money victory this election season. ooo [ manager ] you know...

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primary season. informers say buy the stocks now and win big before they're elected in november. first, medical education company? >> they do private education here. it's something that has been beaten down by the crusade, by the democrats against for-profit education. it's only at 11 times earnings, david. >> david: bill, you like it? >> devry owns a sketchy operation. >> david: pfizer, you like it? >> if you want to play medicine, make a bet on a big drug company which will be relieved when the democrats lose power. >> david: stephane? >> i have problems with this drug pipeline. not the growth stock it used to be. >> david: what is grab tech international? >> the tea party recycles old ideas to create heat and they recycle petroleum to melt enormous steel in giant furnaces. good company. >> i don't like it. wild swing in the tax rate