Washington, DC -- (ReleaseWire) -- 05/21/2015 --DAWN BENNETT: Liz Peek is a reporter and columnist for Fox News and the Financial Times. She's a Wellesley College graduate in Economics and a former partner at Wertheim & Company, where she became a top ranked analyst covering oil field service companies. Liz was the first woman to head the National Association of Petroleum Investment Analysts, which is a national organization of several hundred energy investors, and during that time, she was a frequent contributor to the Wall Street Journal, Oil and Gas Journal, Wall Street Transcript and other industry periodicals. A few weeks ago, Peek wrote an article on a different topic, where she talked about how to stop the next urban race riot. "Ask a Republican" is the title, and she pointed out that young black men are typically untethered to their own future, which is why they are so quick to take to the streets, rioting and looting their own neighborhood. And that's where I want to start today. Liz, welcome to Financial Myth Busting.
LIZ PEEK: Good morning. Thank you for having me.
BENNETT: You write that many of those prone to rioting and looting are untethered from their futures. That's a great turn of phrase—kids lack stable homes and support networks, things that the government can't provide. So, is it a mistake when everyone views Baltimore as the result of 'too little' government support?
PEEK: I think all of these sound bites are not really worth very much. We all know, because everyone has sort of weighed in on this now, that actually Maryland, but more specifically Baltimore, has actually been a recipient of enormous government largess. The schools spend more per student than almost any other city in the country, except for New York, of course. Government programs, and particularly specifically in the neighborhoods that we're talking about here, have been gigantic. It's not about the money, and sadly also, a lot of the money as we all know gets sort of somehow squirrelled away in various personal interests and so forth. There's a lot of corruption when there's that much money floating about. It's really about what these kids respond to. They don't have role models in their lives. Their future, their excitement in life is that they want to be the next Jay Z, or they want to be the next big time basketball player, and it's a real failing not only in terms of family structure that's obviously catastrophic, but also our schools are not doing much to give them any sense of what they can do to provide for themselves. This kind of gets to an old controversy about what should we be teaching kids in school. In the old days there were two tracks in a lot of schools. A lot of schools provided what was then called vocational training. It allowed kids to grow up acquiring skills that might actually earn them a living. That became something that was sort of derided by liberals. They thought it was discriminatory because in fact a lot of the black kids in the mixed area would end up on the non-college track. And I can see how that happened, but the answer is, it removed from our school really valuable teaching. And now—the head of schools in New York City, Carmen Fariña, is actually looking at this because she understands, everybody understands: kids have to be able to support themselves. If not, what is their future? They end up in jail basically, or on welfare, which is not productive for them and not productive for society. So, I think it's actually remarkable. I spent some time talking to people who are very active in inner city schools, and they say these kids have no understanding of how to balance a check book, how to pay bills, but they also just don't really get it, that you can go to work as a refrigerator repair man and buy a house eventually, or put your kids in school.
BENNETT: And earn a good living.
PEEK: Exactly, and you know isn't that kind of an important message that we should be teaching our kids? I think it is.
BENNETT: Do you think Baltimore is becoming the next Detroit? You spoke the ineptitude of city leaders and the way they are kowtowing to corruption.
PEEK: Well unfortunately, I think yes. The answer is yes because they have pretty profound fiscal problems, which clearly have not been solved by a pretty big tsunami of federal money coming in and they don't really have a very realistic approach to how they're going to solve them. By the way, it's not just Detroit, look at Chicago. I mean Chicago has got very serious issues, a lot of that which stems from the diversion of more and more money into public employee benefits programs. And this is a very sad story to me because it hurts a city's vibrancy in so many ways. There's so much money now that is going into paying off the debts created by earlier political leaders, if that's an appropriate word, who basically made bargains with their own employees to basically keep themselves in office. In other words, "Come out and vote for me and I will make sure that you're well taken care of." Who cares about the rest of the taxpayers? Who cares about our city schools, etcetera. That's what happening, and if you look at one city after another—obviously Detroit finally declared bankruptcy because there was no way out, and you know Chicago is headed down the same road. Baltimore is headed down the same road. If you look at the amount of money left over for all kinds of other public programs, it gets smaller and smaller because this diversion of money into these public liabilities, pension liabilities, health liabilities, etc. for retirees and for their public employee unions, it's really a damaging thing.
BENNETT: President Obama has said in his weekly radio address that it's a sense of unfairness that's driven the unrest in Baltimore, Ferguson, and New York. But in your piece, you wrote about how it's not income inequality that's the problem. It's the growing opportunity inequality. How can that be addressed?
PEEK: Well, again, I think what we have found, if you read a lot of this stuff about income inequality and mobility, which I'll come back to in a moment, you find that there are pockets of basically entrenched poverty—people not being able to get out from under the shadow of poverty. What's interesting is some of those people, if they are moved to a more affluent neighborhood, the kids basically begin to buy into a different life model, and in fact, a lot of those people do progress, and in fact the mobility increases as you kind of get away from this pits of stagnation. So yes, I think there are certain neighborhoods, certain towns, areas, whatever, where there is just no movement. We all know over the last 50 years, the war on poverty, we have spent, is it 2 trillion dollars trying to eradicate poverty? It's a gigantic sum and it has yielded pretty poor results and especially in these sort of stagnant pools where it's just sort of a dead spiral. I mean kids end up with no life ambitions, the girls get pregnant at 13 or 15 and they become single parents, and they're all on welfare, and the kids grew up sort of unruly. It's just a tragedy. And yes, I think in the schools we need to address this and find some sort of realistic aspirations for the young people in these communities.
BENNETT: Representative Joe Crowley, Democrat from New York, he said in the press conference that it's up to Congress to fix Baltimore by passing more job bills. I want you to listen to what he said, Liz. Take a listen.
CROWLEY: If we don't do a jobs bill in this country, we are going to have more unrest. What these people are looking for is an opportunity to make it in America. They can't make it in Baltimore and they can't make it in America if they don't have opportunity. That's what we should be focusing on as a Congress, providing opportunity for jobs and to give people a standard of living that they expect as Americans that they are not reaching today, for a myriad of visions that need to be addressed.
BENNETT: So, your article was "Ask a Republican." Why not a Democrat? Is it because this is the common Democrat response, we need to give them jobs as opposed to them actually earning jobs?
PEEK: Well, I think one of the great ironies of President Obama's term in office is that almost everything he has done has hurt the poorest people in the country and that's actually just a fact. From day one we actually did need pro-job legislation, and by the way, some of that comes through tax reform. It's not just the government handing out infrastructure contracts and so forth. But you know, the reality is if you're a leftist like Paul Krugman, Paul Krugman has been yelling for six years about how we didn't have enough stimulus money spent. The problem is we spent a lot of money on stimulus. It went to the wrong places. Had we actually spent it on infrastructure and creating jobs and so forth that might have been a useful thing. The truth is President Obama took his initial political capital and also his Democratic advantage in Congress and spent it on ObamaCare. ObamaCare as we now know actually hurt employment in two ways. Face it, you go to work for various reasons, one of them is to get health benefits. Now you don't have to do that. Secondly, there was this whole thing about regulating part-time workers and companies were basically discouraged from taking on full-time employees because they didn't know what the terms of those contracts would be. But just sort of more writ large, Obama has never put jobs first and I think as we look, reading a lot of economic data yesterday and today, it is just sorrowful.
BENNETT: It's awful.
PEEK: I mean, this economy cannot get out of first gear despite all his happy talk. The number one thing he could have done for poor people and middle class workers is to create jobs, because guess what? Tighter labor markets are what leads to higher wages. Higher wages aren't going to fall from heaven. It's a supply and demand phenomenon. If you have to pay out for workers and you want to hire, you will pay out for workers. But in Obamaland, basically what happens is the government says "Okay, you have to raise wages for people." What's the response on that? You're not going to hire anybody. It's so stupid and you've really got me wound up here..
BENNETT: This Tuesday, President Obama is traveling to Camden, New Jersey to talk about the solution for broken inner cities. And of course you have to assume he is probably just going to say that the federal government needs to invest more in programs for at-risk youths. Do you think he really cares about real results more than politics? And if you had the opportunity, what would you tell him to say?
PEEK: Oh my gosh, I'm sorry. That's a Pandora's box. I think he is now so into creating his legacy. Actually, he was into creating his legacy from the moment he took office. I mean, seriously, and I tell people that who voted for him. They look at me askance, and I say go back and read about how he was comparing himself to Abraham Lincoln. He invited all those presidential historians to the White House to tell him how to become an important president. I mean, good grief: do the job, the legacy will take care of itself. But right now, what is he focused on? An Iran deal that nearly everybody with a vested interest in it thinks it is a terrible deal. But why? Because he needs a diplomatic win. You know, come December, we're going to be looking at full court press to get an environmental agreement in place, a global environmental deal, and he wants to lead that charge because again, it is good for his legacy. None of these things helps job creation. If he really wants to solve the inner-city problems, let's get job creation on the top of the agenda, not the bottom, and how do you do that. Okay, some of the things he has actually proposed in the past make some sense, like these economic zones, where you lower taxes and you invite investors and stuff. Guess what? In Detroit where you have Republican governor overseeing the process, some of those programs have actually taken hold. It starts by the way with law and order. Detroit did a very smart thing about four or five years ago and brought in some of the people involved in creating the broken windows policing program. OK, that's not going to be top of the list for President Obama, but no one is going to invest or sink any kind of roots into a community where there is lawlessness and where is violence. In Detroit, I'm sure you've heard these things. It just horrifying, not just the incidence of violent crime, but the fact that it would take more than an hour for the police to respond. You can't have people building homes or sinking down roots in terms of starting a company in such a climate. So that's where it starts but that's not very popular politically.
BENNETT: Which means he is not going to do it.
BENNETT: You were the first woman to head the National Association of Petroleum Investment Analysts, and you also wrote a great piece about Obama's climate plan, entitled, "U.S. Will Pay Dearly for Obama's Anti-Carbon Crusade." You talked about how he's basically selling out America's current position of energy security. Does he not understand how much the energy boom has boosted the economic numbers he's often touting? It's almost like he wants to kill the goose laying all his golden eggs.
PEEK: Well, where to begin? Does he understand it? I don't think he is a stupid man, I'm sure he understands it. Does he want to acknowledge it? Absolutely not. The oil industry of course is top on the hit list for the environmental lobby. Obama came into office, if you recall, sort of singling out the oil industry as one where he should be raising taxes. He has never credited the oil industry with giving the United States an extraordinary gift during Obama's administration. You would think perhaps he might have some recognition or appreciation for the fact that as you look at the United States two things are very clear obviously. One is that after decades of declining oil production and gas production, we are now the single biggest source of incremental oil production that is impacting world prices. That is to say if you look at global supply, the increment, the addition over the last several years has come from the United States, the biggest addition. It is a stunning turnaround. Most Americans, because Obama never talks about it, aren't even aware that we are now the number one oil producer in the world nor are they aware that we have probably literally a hundred year supply of natural gas that is now economic because of fracking.
Fracking of course is a dirty word. The environmentalists hate the idea that this has happened because they want to see a carbon-free world. They want to basically push the United States into adopting the kinds of measures that Western Europe has been imposing on their citizens for a decade or so, mandating the use of solar and wind and backing out other kinds of carbon-based fuels. The upshot of this is the United States is now one of the most attractive places to operate any kind of manufacturing industrial business, petrochemical businesses obviously, because the cost of energy is so much lower here than it is anywhere else. And it's not just Western Europe that is at disadvantage vis-a-vis the United States, it's also many Asian countries. Yes, our labor rates are high but the reason that German companies, for example, are buying up facilities here, expanding operations in the United States is because all electricity is one quarter what Germans pay and they know that—they're not stupid, they're looking at our energy profile and they know this is a lasting advantage that the United States has. Sadly and tragically really, Obama would like to spend this advantage appeasing the environmental lobby. And here is the thing. My view is that conservatives, Republicans, they got to stop arguing about global warming because we've lost that argument. I don't know and you don't know and by the way, I don't think anyone really knows what the impact from man-made activity is on the climate whatsoever. Stop talking about that and let's instead focus laser-like on these policies which are going to ramp-up electricity costs across our country and as I say throw away the advantage we have for, by the way, what would be a mere rounding error in global emission growth over the next 10 years because China and India basically squash any improvement we can come up with. But rattling our economy is going to be overwhelmed by the growth in emissions from countries like China. It's truly self-destructive. It is truly all about Obama's legacy and Americans have got to put a stop to this.
BENNETT: I want to switch gears. The Democrats' 2016 frontrunner, Hillary Clinton, is running a campaign that actually looks a little bit more left wing that her husband's and some may be looking back her husband's term and thinking, "Hey you reduced capital gain taxes, balanced budgets. Maybe another Clinton term wouldn't be so bad." What are we missing?
PEEK: We're missing the fact that Hillary is an ideologue, unlike her husband. Bill kind of got along to get along, Hillary does not. She believes in a very strict left wing agenda. I went to school with her. It was evident even then. She did her senior thesis on Saul Alinsky, and she got her first job offer from Alinsky. She didn't go to work for him because of various things, but the answer is—people are talking about how the progressive wing of the party is pushing her left. Don't believe it. It is Hillary all the way and I think it doesn't come across as natural or believable because the woman has untold amounts of money, but the truth is, it's where her heart lies.
BENNETT: Liz Peek, thank you very much.
All data sourced through Bloomberg
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About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
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