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tv   The Kudlow Report  CNBC  January 31, 2013 7:00pm-8:00pm EST

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look, if you can get zoetis, that pfizer spinoff, please do. i think it's going to be terrific. and i think it's going to be one of those deals that you'll just own for a long time and i'm going to be following it here. i like to say there is always a bull market somewhere, and i promise to try to find it just for you right here on "mad money." i'm jim cramer. and i will see you tomorrow. on money." i'm jim cramer and i will see you tomorrow! good evening, everyone. i'm larry kudlow. this is "the kudlow report." all right, yesterday gdp fell slightly. today jobless claims jumped by 38,000. so is the obama economy really slumping? and how stupid is it for the president to dissolve his jobs
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council, which by the way was nothing more than business window dressing anyway. at least today congress did pass a debt ceiling extension so we won't go bankrupt immediately. joining me now, cnbc chief international correspondent michelle caruso cabrera and laffer. i want to ask you about this whole business. government spending on defense really collapsed and helped bring down yesterday's gdp. >> yes, it did. >> so all the liberals are saying see, we told you so, if you cut spending, you're going to ruin the economy. do you believe that? >> no, not at all. government spending is taxation. milton always said it. the government redistributes resources. you can see it really clearly. two-person world, farmer a and farmer b, if farmer b gets unemployment benefits, who do you think pays for them, farmer a? you know, government spending is
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taxation. the reason we have the great recession is because of the government spending, not in spite of it. >> follow-up. it would be bullish for economic growth. >> yes, it would. >> but this is the argument i get. it shows up as a negative in the gdp accounts. at least some of it. >> you're right. >> so what do you do? do you just go on ahead and cut government spending? and let the gdp accounts do what they're going to do? >> the gdp accounts will grow better doing that. that's just the direct effect of spending there. but imagine if we had 100% of gdp on government spending. so that everyone who didn't work and didn't produce received everything. and all those who did work and did produce received nothing. what do you think would happen to gdp? it would go right down. the problem here is government spending is effectively taxation, larry, and you can't tax an economy in the prosperity period. >> look, ideally you would say okay, we're going to freeze government spending at this
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level and that would mean over time it is going to fall as a percentage of the economy, but you can't ever get congress to do that, right? so it always ends up being something very harsh to get things done. and so this is the consequence that you have to face. at least in the short term. that you're going to have a short-term hit to gdp. but in the long run, the numbers are going to be better for the united states. >> most of that stuff is transfer payments. >> agreed. >> it will not even affect gdp. defense purchases do affect gdp. but to america since nobody ever wants to cut spending -- >> you got to cut somewhere. >> and i would do it right now. >> and it will only happen during bad times, larry. it will never happen during good times. we see that over and over again, when the economy is going gang busters, the government just chooses to spend more. it's in its nature. you have to do it when it's tough. >> lower spending means a stronger economy. that's your point of view? >> that's it. i think if you look at it, it's very clear. you can see it happening. but yeah, that's great. i think if we can do that how
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it's done matters as well politically, at least. i think lower spending is the right wi ay to go. >> the spending sequester is going to go through. there's no question, march 1st. everybody i talk to. will we have a recession? we had a little contraction in gdp yesterday in the fourth quarter. will that continue into the first quarter? is there a recession out there? >> i do believe it will continue into the first quarter and the second quarter. i mean, i think what we've done with the tax rates surely doesn't make things better. what you've had in the economy overall, i don't think makes things better. >> all right. hold that thought. hold that thought. we're going to add something right here. hang on one second. today president obama announced that he is dissolving his so called jobs council and it hasn't even met once in the past year. yesterday's gdp decline and today's jump of 38,000 in new jobless claims really makes this an untimely end for the jobs
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council. here now to talk to us about it is senator moran. you were working with the jobs council, were you not? >> absolutely. and i think they have a collection of very valuable members of the business community with expertise that members of congress both republicans and democrats found valuable. they relied upon it. they had credibility. and while they haven't met for a year and while i'm always interested in getting rid of unnecessary government bureaucra bureaucracies, commissions and committees, this is one that i think could be very helpful, has been very helpful and i am disappointed the see it come to an end. >> but i thought this really was just kind of show horse stuff. window dressing stuff. trying to say to the public hey, i really don't think they're all fat cat bankers, some of these are good businessmen. i mean, i never saw some major substance come out of this. >> well, i would say that this is evidence one more time of the president appointing a
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commission, appointing a committee, and then not even utilizing it for the value that it could provide. bowl-simpson is the major example of that in which many people thought there was an opportunity to come together with a proposal that made sense and the recommendations that the president's jobs council made have been ones that we used in our creation of legislation called start-up 2.0, designed to create jobs, to grow the economy, to improve entrepreneurship and innovation, but also the jobs bill that congress actually passed was a result of some of the recommendations of the president's jobs council, and again, perhaps this demonstrates that while it had value, maybe it was just a showcase for the president to pretend that something was happening and now that election is over, no longer necessary to pretend. >> there's some very big picture items in this jobs council. big picture stuff that i really like. for example, full pledged corporate business tax reform and reduction. i think that would have been
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fabulous. you mentioned deregulation a few moments ago, which is in your 2.0. the council also said let's create some fiscal certainty. let's cut spending. let's reform entitlements. let's get the deficit down. big picture stuff that never really surfaced in the obama administration. >> it absolutely didn't. and again, perhaps that's a reason the council is going away. the recommendations that -- the big picture items that the council recommended were never really adopted by the obama administration, never pursued, despite the fact that these are people the president appointed and had significant business experience. and somebody again that would lend credibility to us as republicans and democrats in congress as a way to come together to get this country's economy moving. in my view, the situation has not changed. in fact, as we saw by the numbers you just reported, the lack of jobs, the slowing of the economy are still here, perhaps getting more evidence that
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things are going in the wrong direction, not the right direction. and all the more reason to have something to coalesce around the darn partisanship of washington, d.c. and the differences between congress. and i could say every time i say to my democratic colleagues that the proposals we have stirred up 2.0 are things that have been supported by the president's jobs townsjob s council. >> one last thing. are you going to be in favor of the sequester? >> well, i'm in favor of the $1.2 trillion being spent, that's being spent that should not be spent. we have to find the cuts. today the senate agreed with the house and passed an extension of the debt ceiling, raised the debt ceiling for the future. and i didn't vote for that. there were no cuts included in that bill. the only cut that we have ever come up with is this 1.2
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trillion, because the committee, the special select committee couldn't come up with a spending reductions, were now going to have as part as sequestration. i don't really believe in across the board cuts. i think that's irresponsible. but in the absence of cutting spending someplace to replace those 1.2 -- >> got to take it where you get it. >> it's not the only way we're going to get it. >> it's never a good time to cut spending. it's one of the things i've learned. i guess i saw it years ago when i worked down there. but reporting on this thing night after night, one of the things i learned, senator moran, is it's never a good time to cut spending. so march 1st is an interesting deadline. >> i'm not voting to set the sequester aside unless we cut the 1.2 trillion someplace else. >> good luck on that. senator jerry moran of kansas, thank you very much, sir. we appreciate it. >> thank you, larry.
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now let's get some reaction and bring in the assistant managing editor with "time" magazine. we also bring in andy cross, chief investment officer of the motley full. first of all, i'm in favor of the sequester, across the board cuts. i'd go across the board so much, i'd go commerce, labor, education, interior, energy. are you kidding me? i would slash everything. i would take out at least a quarter. at least a quarter. i don't care, sequester, i don't even know what it means. what i know is let's get rid of these goofy departments that are bankrupting america. what's your take on that? >> well, got to disagree with you. >> oh. [ laughter ] >> i think that there's certainly a time and place for cuts. as you say earlier, it's usually when the economy is working a little bit better than it is now. i think if you look back historically, the best time for cuts is back to trend growth,
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which is 3%, not the 2% economy that we're in now. i'll tell you, i just came last week from the world economic forum, one of the big conversation threads there was that we don't want to be europe. europe has gone too far with austerity. and you might say well that's a liberal point of view. but i'll tell you, the american enterprise institute came out with a report this week saying we should take lessons from overseas. we should not do austerity too early. >> the trouble with europe is they're not cutting much, but they're raising taxes. i saw you nod your head. >> yeah, we don't want to be europe. we don't want to be a welfare state. we don't want to be in a position where we have overpromised way too many benefits so when people get to the age of 85 like they've done in greece and thought you were going to have 1,500 euros per month but now you're an elderly person, you're going to 1,750. that's the europe we don't want to be. >> that's the point you're describing. you're always writing that we are paying people not to work.
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and that that problem is getting bigger, not smaller. and guess with a, they don't work. >> if you tax people who work and pay people who don't work, don't be surprised if you have a lot of people not working. we've got to cut spending. i do agree with the senator very much that i'd love to do it in special programs, special areas. 99 weeks unemployment is ridiculous. you've got all of these means tests and income tests. if you look at the single woman in two children with philadelphia, i forget the numbers, but 20,000. she literally is worse off with welfare programs. we've taken away all the incentives for people to go back to work and as a result that participation rate has just dropped dramatically in the u.s. and it's because we pay people not to work and we tax them if they do work. >> and one more. i don't want to pile on. i'm so pleased that you're on the show. >> it's okay, i can take it. >> i know you can. i want to note that i think the president killing this jobs
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council, whatever, really window dressing, floor flushing -- he never used the thing. they had a lot of good ideas on corporate tax reform and regulations and things. he never used that. i think it's kind of embarrassing. after you get a bad gdp number. lousy unemployment claims. now he kills it. that's got to be stupid politically and economically. >> well, look, i think we need to have a much deeper conversation between government and business. i think that we need to remember that each recovery has been weaker since the early 1990s. this is not something that's just been happening over the last few years. a couple of decades of growth. it's about globalization. we need to come to grips with this and we need to have a deeper conversation. do we need tax reform? yes. we probably need an overall lowering of business tax rates but we also need to close loopholes, get rid of ways that companies can move money to heaven knows where and not pay taxes. you cannot have a system that
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works that way. >> go ahead. >> the question is it's not republican, it's not democrat. w was just as bad in this as is obama. it's been the whole culture since the clinton administration. >> w lowered marginal -- >> he did a little bit. at the time he did it, that's when the economy collapsed. but what i think she's missing here, if i can, is the reason they're all over there in ireland and all these others is because we have a double taxation system, we're the only major country in the world -- >> and obama loves it. >> we have the highest single tax rate, corporate tax rate in the world. >> it's one of the things he rejected. that was one of the biggest things he rejected. hang on, we're going to do a little stock market work, but you're all going to stay with me. first, i want you to listen to this bullish piece from my pal professor jeremy segal of penn. >> we're going to see earnings
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per share, i think 5% to 8% higher and i think we're going to get expanding multiples, which is going to send us well above dow 15,000. >> well above dow 15,000. i kind of like that. however, however, byron wean, a smart guy, today he said he's looking for a major correction. so andy, which is it going to be? are we going to have 15,000 dow or major correction? is byron wean going to be right or is jeremy segal going to be right? >> we've had professor segal at our office and we're big fans of his, and i'm an optimist in america. i think whether we go through some short-term fluctuation here with the sequester later on this quarter, i'm long-term optimistic and i think corporations are in a better position now to deliver for shareholders over the long term. whether that is going to be a year or three or four or five years, i think america is in a pretty good spot right now to do well for shareholders and i'm
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glad to see that investors are getting into the stocks again. >> so how much -- you had this mixed gdp. i know gdp fell, but private gdp was actually up 3.45%. however, if you get a lousy jobs number, and i'm no good at predicting this stuff, but if it's a lousy jobs number, is this going to generate major stock league numbers? >> perhaps in the short run, i'm equally bad at predicting the jobs numbers. i don't even try to do it. and certainly what the stocks will do in one day. but like i said, when you think about investing, you look over the next three five years, i think stocks are reasonably priced. i think growth expectations are healthy. i think we now have some fiscal challenges behind us. we still have some fiscal challenges ahead of us. when you look at what american corporations are doing, how they're investing back in their business, i'm just bullish that they will get -- >> we don't have fiscal
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challenges. we just go down the roster of labor, commerce. you're looking for a two quarter contraction. you're saying fourth quarter and this could happen again in the first quarter. you must be bearish as all get out on the stock market. >> i'm not really bearish on the stock market but i am very bearish on the economy. we've had the worst recovery in the history of the united states. it's been five years. and we raised taxes this year. and then we're going to have the problems of the spending this year. you've got all of these policies that have not worked for a lot of years and you expect them now to work? isn't that the definition of being crazy, to keep doing the same thing over and over? >> irrational. >> exactly. >> thanks very much. we want art and michelle to stick around. we've got more work to do with them, including a stunningly bad performance by chuck hagel in his senate confirmation hearing today. just listen to what he said about iran.
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>> we have never ever designated a part of a legitimate government, a state. when i say legitimate, it doesn't mean that we agree with iran, but it is a member of the united nations. almost all of our allies have embassies in iran. so that's why i note an elected legitimate government, whether we agree or not. >> chuck hagel, frequent guest on this show, while he was the u.s. senator. but i've got to disagree. legitimate and elected government? is he kidding me? there were millions of people protesting on the street and we should have helped the green movement stop that election because it was all a fraud. anyway, i think he's nuts on that point. and unfortunately, chuck hagel said a lot of other goofy stuff, too. so we're going to have to get to that soon coming right up. next up, however, how many people are moving out of high-tech states to low-tech states? that's an easy one.
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should be 100%. the answer is a lot. robert frank and art laffer, probably the world's top experts on this issue, they're going to explain it all. michelle is going to be with us. don't forget, free market capitalism is still the best path to prosperity. commerce, energy, education, health and human services. i could really do some cutting. you want sequester, i'll show you sequester. i'm larry kudlow. we'll be right back. ♪ (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities. ♪
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did you know that over the past ten years, 62% of the three million net new jobs in this country have been created in the nine states without an income tax? they only have 20% of the population, and i learned that from a study by arthur laffer. so, let's talk about state migration and how taxes play a big role. we bring in cnbc wealth editor robert frank, joins us now. good evening, robert. what's this, the irs not going to put out the numbers but then i read this afternoon they were going to put out the numbers. what's up with that? >> i'm not sure. i was looking today at a study from the institution of taxation and economic policy and they were looking at the states were the 1% that pay the most when you add up local state and sales
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taxes, california ranked number one. not a big surprise there. number two was hawaii. maryland, vermont. all the high-tax states. and those numbers are going up. and it's not surprising that you're seeing in these very high-tax states, we're seeing money and jobs coming out of those states. >> another arthur laffer fact, since 1990, california has lost 3.4 million people. that's a lot of people. >> they were at risk of losing a seat in the house because they have had a reduction in the number of people in the state. >> first decade they didn't pick up a seat. >> exactly. >> so you're practicing what you're preaching. >> i did it. i left san diego. i moved to nashville, tennessee. there's no income tax in nashville. isn't that neat? it's delicious. >> to me the biggest story that is not being told and mr. laffer is a big part of it are the states looking to cut and
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eliminate income taxes. this is a huge silent revolution that's going on. >> i just have a little list here. nebraska. louisiana. that's governor jindal. oklahoma, kansas, indiana, and new mexico. >> and north carolina. >> i was just up there. these guys are all great. and then you have all the lefties going the other way. we have the best experiment ever. >> new hampshire, because my parents were tired of living in tax-massachusetts. it was great to live in a state with no income tax. >> can they hold it up in new hampshire? >> the problem is all the people moved from massachusetts and they realized that -- orb they think that they can have all the services that they used to have and all the stuff that they used to have for free, but it has to be paid for, so you have to beat them back. they move there for a reason. >> on this point, are you okay with raising sales taxes in order to finance the abolition or reduction of income taxes?
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>> sure. i would do it gradually because i don't know how much you really have to do, but when we did it with cutting the income tax dramatically in arizona, back in the '90s there, we got the surplus every year and use that revenue to cut it further, further, further. unfortunately, i left office under unpleasant circumstances so we didn't get to finish the job. but we were going to finish the job in arizona. >> did you know, robert, this is an important piece of trivia, jerry brown, governor of california, 13.3% top income tax rate, was tutored on the flat tax by one arthur laffer. brown ran for president, whenever that was, 1992. what happened? >> he was thinking about it? >> oh, he did it. he proposed it. he was the best articulate defender. >> what? >> he was the first serious presidential candidate in recent times since 1913 to run on abolishing the progressive income tax. without him, prop 13 would never have been passed like it was.
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>> how come he doesn't do it now? >> i have no idea. maybe he's getting older. i am, too. >> civility? you're saying civility? >> i've still got blood flow through the brain. >> the interesting thing about what's happening on the state level is going to be whether you want revenue or whether you want stability, and the question of fairness, right? because all these states are going to have to make it up for sales taxes and that by nature is regressive. so there's going to be a big conversation about whether you want revenue or whether you want fairness and that balance. >> you're going to have the best reform of welfare as a high paying job. >> robert frank, thank you very much. now, big story in washington today. chuck hagel's performance at the senate confirmation hearing contains some seriously eye-opening statements and heated moments and dumb comments. is the hagel nomination in trouble? he wants to be secretary of
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defense. he may not get it. let's watch this one to find out. >> you said that the surge would be the most dangerous foreign policy blunder in this country since vietnam. were you correct or incorrect? yes or no? >> my reference to -- >> are you going to answer the question, senator hagel? the question is were you right or wrong? that's a pretty straight forward question. >> i'm not going to give you a yes or no answer on a lot of things. >> well, you refuse to answer that question.
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chuck hagel's performance at today's senate confirmation hearing was fill with so many awkward moments and gaffes, the question has to be asked is his nomination now in total jeopardy? let's talk to jennifer ruben, she's closely following this story today. jennifer, look, i just had a thought. i was reading your blogs and other stuff, that actually hagel may be exactly what obama wants. ambiguous on iran, jennifer. okay, no commitments on iran one way or another. totally downsize the pentagon. and really ambiguity on israel, too. is that possible that's why he was picked? >> well, actually, i think even more revealing when he said it doesn't matter what i think, i'm not in a policy role. in other words, obama has chosen a stooge who has no independent
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thoughts, who is not going to be in the way, who is simply going to be there as a plug so that he can continue to slash the pentagon budget. this was a five-car pile-up, larry. this was a fiasco, a debacle, whatever you want to call it. what happened in the hearing today is this shifted from an issue of ideology to an issue of competence. would we be willing to trust this man if he went in to go talk to the russians, if he went in to the middle east. i don't think anyone in good conscience looking at him can say he's prepared, he's sober, he has a grasp of these issues. it was an embarrassing performance. the worst in my lifetime, larry, and i'm not alone. a lot of mainstream reporters saying this was really bad. >> aw shucks, jennifer, i can think of many in your lifetime. >> oh, not as bad as this. >> i want to ask you one thing. you reported this, i believe. senator lindsey graham asked hagel to name one senator, one senator who was intimidated by
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the jewish lobby, and hagel couldn't. >> right. and he also asked name one stupid thing that we supposedly did because of that pressure, which was another one of his allegations. and what that exchange did -- and lindsey was extremely skilled in doing this -- was put out the idea that this guy simply flaps his guns. he says a bunch of stuff, he doesn't have support, he won't be able to support it later on. this is the guy you want for secretary of defense? it was really a rather devastating moment. >> and what's amazing, larry, is he had to know this question wuss cowas coming, right? didn't you sit down with your pepper and come up with some kind of stock answer about what you were going to say but supposedly don't believe anymore? >> michelle, what was telling is the white house immediately let it be known, we did prep him. which is a telltale sign that we're not taking the blame for this. >> i think when he says that he's not a policymaker of defense, that's the obama style. look, hillary clinton did a lot of traveling.
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she's a bright woman. she was not a policymaker. she operated under obama. leon panetta spoke out against the budget cuts in defense and that's one of the reasons he's gone. that's one of the reasons he's gone. in other words, obama wants people who are just going to take his marching orders. that's the way i look at it. >> the dangerous thing, though, is that unlike hillary, this guy can't even stick to the script. so how could obama send him out to people? how could he remember his lines? i mean, it's really sort of an epic moment that i don't think the country would be safe or well served by. >> she is at least articulate. >> i think he's going to be confirmed anyway, as awful as that sounds. democrats are going to confirm him. that's the life we live in. that's the country we live in, jennifer ruben. thank you very much for your reporting. also thanks to art laffer and michelle caruso-cabrera for being with us this evening. i appreciate it. now we're going to stick with national security.
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we have reports today that the chinese government has hacked into both "the new york times" and "the wall street journal." it all looks like a planned move by the chinese military to terrorize journalists who uncover embarrassing truths about beijing. we have the latest on this story and what it all means next up.
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a startling story today says the chinese hackers successfully broke into e-mail accounts of several reporters from "the new york times" and "the wall street journal." the attacks were coordinated during a "new york times" investigation on the wealth accumulated by relatives of china's prime minister. this is chinese military intimidation, just like the piracy and counterfeiting of american property that goes on in china all the time. i'm now joined by gordon chang, he's the author of the coming collapse of china, and anne lee is the author of what the u.s. can learn from china. professor at nyu and was also a
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visiting professor at beijing university. why would the chinese military or otherwise pick on "the new york times"? "the new york times" is only slight tloi tly to the right of. i think china is probably more capitalist that "the new york times" editorial page. so why did they go after the "times"? >> well, when they published the article, it really inflamed a lot of folks. and even though we allege it's the chinese military, we don't really know for sure because there are lots of chinese hackers in china. so it could very well be just rogue nationalist folks who decided to take matters into their own hands. you have to remember he is a very popular leader in china. so with the nationalist sentiment that's been growing in china, it's very possible other folks got involved too and it doesn't necessarily have to be states --
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>> you may be right, but i just figure the military of the red army would be the enforcer. because his relatives became billionaires. isn't that some coincidental thing. i'm sure they're just brilliant businessmen. i just figured the chinese military would be the enforcer and they did get inside. i read "the new york times" article. they did get inside. and then they were pushed out. >> yeah, this clearly is the chinese government, whether it's the military security services or hackers who were affiliated with the government, because this is the regime trying to protect itself. he was a guy who called for democracy, who visited the downtrodden and now we know he's just another crook. so the communist party felt that it really had to crack down to preserve itself. >> you're kind of easy on them. i'm just trying to think why that is. and i'll tell you why. i'm not a china scholar, but i do know from reporting on the china story many times, you
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know, they counterfeit our goods, they pirate our intellectual property, they steal stuff, they love to take our technology. why should this be any different? they're kind of rogues out there. they're rogues, at least in leadership, the upper echelons of the party. they're a bunch of rogues. >> well, i could think of many other examples of rogues around the world that are much more serious in terms of various threats to the u.s., but in terms of, you know, where we should see this threat, i would say that in the whole scheme of things -- because hacking can be categorized in three major areas. you have the ones where they're stealing information like in this case. and mostly the chinese are engaging in this kind of hacking. then you also have the hacking that is very much terrorist oriented and you have very isolated instances of people trying to do this to prove
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themselves to, try to get into like a gang and this way they can get hired to do more serious things. but this is not necessarily sponsored. >> like a russian mafioso. >> it could be. and the final groups would be the ones trying to attack our infrastructure. and we've had reports of that where a lot of our largest banks have been under attack, this thing called distributed denial -- >> this is going to continue. >> yes. so i'm basically saying in terms of the threat level, this would seem to be on the lower level frankly. >> in the "times"' story on their profront page, basically hack went into these two reporters, one guy in shanghai, the other guy used to be running the beijing bureau. they were putting together the story about the billionaire relatives. they got into 53, i think the number was, e-mails. the only two they were really interested in was to stop this story.
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that to me is awfully directed at official china. that's why i figured it was the military. but i also figure if they can do that, they can do anything. they can hack away at our corporations. they got through the universities. our national security. they can do anything. they are rogues. they are absolute rogues. >> you're absolutely right, because the group that did this attacking has attacked about 100 other western organization. i don't think this is a low level threat because they're trying to change the narrative and the discussion and political discourse in the united states, so they're attacking free institutions and free societies. on your point about rogues, there is no rogue in the world that is not supported by china. north korea, iran, zimbabwe, all of them. >> a great group, i'd love to go to dinner with all of them. thanks to gordon chang and ann lee. i appreciate it. remember how much the unions came out in support of obama care? remember that? now a lot of those same unions
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are reading the fine print and they don't like what they see. they're having buyers remorse and now they want even more money to pay for obama care. that's up next on "kudlow." this is america. we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day...
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so remember when president obama's union croonies publicly supported obama care package? that was then. now that big labor has actually had a chance to read the bill, they see they're getting less and paying more and all of a sudden they're losing their enthusiasm for obama care. let's talk. we have grace marie turner, phillip dine. grace marie, i begin with you. caps on benefits are being removed. kids can live at home until they're 26 years old. the whole thing is going to be more expensive than they thought. what are the unions going to do about this? >> they're asking for another waiver, larry. they were among the first ones to step up and ask for waivers from some early provisions of obama care. now they've realized when they read this fine print that 20 million current union employees are not going to be able to qualify for their share of the $1 trillion of new subsidies for
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health insurance. so they're saying we want ad waiver. we want some of that money to come to our workers who have jobs that provide health insurance. well, that's not part of the deal with this monstrously complex law. so now they're saying we want another amendment. the problem with this law is that people looked at their specific provision that they were being given in order to support this law. in asylum. they didn't look at the other 2,700 pages of legislation and how that might affect them as businesses. buyers remorse is exactly right. >> phil, i think the unions might want to put these employees right into the health insurance pool. either the state once or the fall run federal ones, but if they do that, there's no reason to join a union. so the unions are kind of boxed in here. >> well, i think that's a fair point and i think grace-marie has a fair point, too. it is a very complex law.
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i don't know if it's buyers remorse as much as it is once we get to the actual implementation stage, there is some uncertainty and there are a lot of unknowns and i think labor is negotiating with the administration to try to see how this works out, because you're right, especially with the multi-employer union employer plans during the run, they made the price out of the market and the employers may not offer those anymore, which is indeed one of the reasons that unions -- but it's also reasons workers get good health care plans. >> i have no doubt the health care plans are great and they don't want to pay for it. they want the federal government to pay for it. i don't think that's going to happen as long as republicans have the house. but grace-marie, there's another issue that may be even worse than this. you heard the other day rahm emanuel said basically the chicago city workers, the chicago public unions are all going to be put into the health insurance exchanges. that is the way chicago is going
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to get out of whatever it is, its $8 billion unfunded liability. if he does it, then cities and states all across the country are going to dump their union employees right into the health insurance exchange and that is going to break the bank completely. >> that's exactly right. and that's exactly what they're asking in this provision now with these jointly run employer union plans. we want to be able to send our employees to these exchanges. the law is already costing 2.6 trillion over ten years. what would that do? and then who's to say that it's -- of course you couldn't just limit it to union employees. anybody who has a job should then be able to get coverage. >> but the idea of putting these government union workers into the exchange was not -- as far as i know, was not ever really
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expected. i mean, phil, this is a new twist. for rahm emanuel -- maybe it's very clever. get out from under his unfunded liability. maybe the u.s. government should do that. let's take medicare and medicaid and put them all into the state exchanges. the problem is you can't pay that. >> you can't. can't afford it. >> i'll give you last word on this, phil. >> it looks like this is turning into an effort to blame unions for the health care mess that we have been in for a long time. we spend more money in health care than any country with mediocre outcomes. it would have been nice if the republicans, when they were in charge of the white house for many years, tackle this problem. >> i agree with you on that. in that sense, i'm not going to be partisan. now that the labor union democratic supporters of obama read the fine print, and we all get a taste of the cost overruns and the potential tax hikes, people are going to go nuts over this. they're not going to buy into it. i got to get out of here. grace-marie, phil, appreciate it.
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we're just about an hour away from a program here on cnbc that people are just dying the see. it's all about the big bucks and big ticket items in the federal industry, aka the business of death. you've got to see this stuff to believe it and we have an eye-popping preview just ahead. ♪ ♪ [ male announcer ] something powerful is coming. ♪ see it on february 3rd. ♪
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very interesting new special airing on cnbc tonight. it's called "death: it's a living." tyler matheson has popped out of his coffin, he hosts the show and he is going to join us now and give us a preview. congrats. >> thank you very much. it's an interesting story. it is one of those few industries where at one point or another, everybody is going to be a customer. one way or another. we're all going to be a couple of death care service at some point. right now, $17 billion a year of economic output in the death care business, and that is likely to grow because this is absolutely a growth business, particularly as we baby boomers begin to age and pass from the scene. that is why among other reasons the big private equity firm run by coleberg recently bought a casket manufacturing company. it is why so many public companies are now in the business. sci corporation.
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there's one of the casket companies. one of the features is that our caskets are getting wider just like we are. >> beautiful. >> that was a beautiful one. that was one of the higher priced ones, aurora caskets. >> what's that cost? >> out to a customer, somewhere about $15,000 or $20,000, and customized in that case for a chinese consumer. >> can you charge that off to obama care? can you get subsidy? >> i think you have to pay for that. we haven't gotten that one covered just yet. >> what's the profit margins on this stuff? must be pretty good. >> they're pretty good. the mark-up on caskets is probably in many cases 100% or so. aurora caskets pointed to one that they send out the door at about $1,500. we saw it in a funeral home for about $3,500. so that's where a lot of the funeral directors make profits, on mark-ups on those products. now, there's a lot more competition coming into the space. people like costco and walmart are now selling caskets. >> really? >> and you can buy them online if you'd like. >> on the cheap?
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>> on the cheap. you can have them delivered. same day or next day delivery. i'm not kidding you, man. the funeral homes like to sell you their caskets, but a funeral home by federal trade commission regulation has to let you use a casket you bought elsewhere. >> how does it work with the funeral parlors, the funeral homes. they have these reception areas, so forth and so on. is that more money? they charge extra for that? >> oh, absolutely. they will show you -- again, by ftc rule, a price list of all the services they offer, from the basic charges for the funeral service, the funeral coaches and limousines and so on and so forth. and if you add a reception, as many do, at the funeral home, they're going to up charge you for that. some funeral homes, they'll cater a big event for you. the owner of one out in colorado said i'm going to put a bar in here, because that will be a profit center for me. >> wow. >> fascinating business. >> all over the country, or
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where is it predominant? population centers, or is it everywhere? >> well, people are dying all over. >> that's what i figured. i've been to so many depressing funerals the last few years. really, some of my best pals. >> we're getting sad tloi ly toe where more of our contemporaries are succumbing. >> families have to save for. this. >> you absolutely do. the average cost nationally, the funeral is about $6,500. but that does not include the cost of a burial vault, the cost of a burial plot. >> the business of death. good luck tonight. that's it for "the kudlow report." thanks for watching, as always. we will be back tomorrow to do more battle with the anti-free market crowd. i'm larry kudlow. we'll see you then.
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