tv The Kudlow Report CNBC June 19, 2013 7:00pm-8:01pm EDT
all right. bad day. rates going higher. mortgage rates going higher. let the dust settle. there's always a bull market somewhere. i promise to find it for you right here on "mad money." i'm jim cramer. i will see you tomorrow! well, ben's speech and the market weeps. stocks sold off sharply today after the fomc policy director and chairman bernanke's own news conference and bond yields took a big jump higher. but i say don't panic and i'm going to explain why in just a moment coming up. also tonight, is america going down europe's failed path? well, harvard professor niall ferguson's new book says the u.s. is becoming planet government. but not in texas. because joining us live on the set tonight, special guest host, governor rick perry. he's here to talk about his unprecedented tour across the country to personally lure businesses to the lone state. listen up. blue states, you're in trouble. rick perry and free market
capitalism are coming to town. all those stories and more coming up on "the kudlow report," starting right now. let's start. lead story tonight. here's my take on the fed announcement and the market move today. stocks as you know down over 2 houn points. first, please, don't panic. second, yes, the fed is going to slow down its bond purchases. but nobody knows when, including them. and it might not be until december or early next year. third point, the u.s. economy's still only growing sluggishly, only 2% growth. just about 1% inflation. modest profits. falling gold. and a steady king dollar. interest rates in my view are not going to skyrocket. there's more money to be made in stocks. the second half is going to be a slower slog than the first half. okay? that's my take on the story. here now we bring in former
federal reserve governor frederick mishkin, currently an economics professor at columbia university. welcome back, rick. i just want to ask you, this is a very complicated news conference and a lot of people are saying many different things. first of all, let me ask you if i have the story right. i heard the news conference. the fed will slow down bond purchases toward the end of the year. is that what bernanke said? >> i think what they're trying to do, they've been very concerned, i'm sure, about all the volatility in the markets. and they want to make sure that people understand that in fact they are going to get out of this purchase program, which raises a lot of complications for the federal reserve. this huge balance sheet is a danger for the organization. it could lead to a problem where they don't want to sell off assets because they don't want to incur losses and incur the wrath of congress. so in that sense they basically do have to get out of this program and they've actually indicated that's what they're going to do. i think from their viewpoint the more important tool, by the way,
is the commitment to keep interest rates low for a long period of time. it really is i think actually more important. >> but let me stay with the bond purchase because that's got the stock market and the bond market all hung up. okay. what i think i heard today, and i think this affected stocks and bonds adversely, what i heard today is roughly by the middle of next year, 2014, that's about a year from now, more or less, as the fed thinks the unemployment rate moves to 7% or thereabouts, they will end the bond purchases. end them in the next 12 months. that's new information. is it correct in your judgment? >> yeah, i think that none of this surprised me. that it was clear to me that the fed wants to get out of this bad bond purchase program because it is a more complicated tool for them in terms of monetary policy and actually has a lot of risks. and particularly as long as the economy is actually doing reasonably well, that's what they've actually been indicating and now ben bernanke just made
it a little bit clearer, particularly because the markets were so skittish in terms of not thinking they were getting enough clarity from the feds. you got more clarity from the fed here. >> i think so. >> i think that's actually a big plus. and i think you're right. people should not panic. that the fact that the fed stops purchasing bonds, that's actually a good thing. it's telling you the economy is going to be getting back on track. if in fact the economy starts to tank, the fed will keep on purchasing them. i think that's very important for people to realize, that -- >> all right. good. >> the fed's not saying we're not going to do anything if we're in trouble. >> but rick, let me ask you. the third piece of this. first of all, i think the stock market was hurt by the fact that all the bond purchases will end roughly a year from now. that was kind of new information. but here also came up, the fed funds rate is likely to start going up around early 2015. that assumes the unemployment rate will be around 6 1/2%. that i think added clarity to it is my assumption right? did i hear that right?
>> well, but there's another factor here. if in fact inflation stays very low, i mean, one of the things that's happened is inflation is actually substantially now below the fed's target. if that keeps on going on, the fed actually would be perfectly happy to have unemployment fall below 6 1/2% and not tighten -- not start to tighten. so i think that the key is it's not just this threshold of unemployment, that as long as the economy can actually move forward and lower unemployment that's a good thing from the fed's viewpoint. this is something again the fed has tried to clarify but i don't think the markets have completely gotten that yet. >> i agree. that's why i'm having you clarify it on behalf of mr. -- i listened to his news conference. but you know, there's a lot of questions. there's a lot of to-ing and fro-ing. last one, rick in michigan. is the fed irrationally exuberant about the economy? i mean, they're raising their economic forecast. i'm not nearly as optimistic as
they are. do you think they're on track? do you think the unemployment rate's going to fall that much? >> yeah, i think actually one of the things that's very important is what's happening in the housing market, which is the housing market is not only bouncing back but the danger of having housing prices fall has really dissipated tremendously. and that's a big thing for households. it really is going to give them much more confidence in terms of their financial situation in the sense that's really what's been holding us back for a very long time. you know, the only thing that's sort of mucking us up at all is our wonderful politicians not dealing with the issues of long-run fiscal responsibility. but if they actually got their act together in that, i think the economy would do extremely well. but i do think actually that -- >> or obama care. or regulations. i mean, there's a whole group of these fiscal and regulatory actions. we're going to talk about it later in the show with niall ferguson. but all right. i'm encouraged. i basically got the story right. and you're reconfirming that. and we will see. rick in michigan, you're the best. thanks for giving us your time. we appreciate it very much.
>> actually, my pleasure. >> as always. governor perry, i'm not going to ask you you detailed questions, but i want to know this. sensibly, as common sense. okay. really, to do this whole operation right and pull back, the fed's got to pull about 100 rabbits out of the hat. do you think these guys know what they're doing? do you think these guys can pull it off? >> no, i don't. i'm greatly concerned that the fed is going to continue to tinker. and you got it right, though, larry, when you talk about the real issue is not the fed tinkering with the rates out there, with the bonds and what have you. the real issue is having the courage in congress to have long-term fixes on spending, on issues like obama care, on the regulatory side of things, the epa mucking up the energy industry across this country, which we're going to talk about a little later in the show. but i don't think the fed should be and is involved in this monetary policy as they have been in the past. >> monetary tinkering.
you blasted them during the campaign. as did most republicans. we're going to jump off and do something else. but i just want to say this. obama care itself, my humble opinion, with its taxes and its mandates and its regulation and its cronyism and its sucking up to the department of health and human services and former governor sebelius, all that stuff, is the biggest obstacle to job creation and lower unemployment. i'm not sure that bernanke gets that. you know, because the washington crowd doesn't see it. i don't know. i think it's an obstacle. anyway, we're going to move on. let's see. how do you actually trade the taper talk? we're going to do some investment strategy. let's bring in our pal don luskin, trend macro chief investment officer. hello, don. let me ask you this. first point. how scared is the market of the end of the bond purchases? which really, two things today. you heard rick in michigan. the purchases are going to slow down in the middle of the year and by the middle of next year
they're going to be over. is that what knocked the market down 200 points? is that what's worrying the market? >> i guess so, larry. stocks are 2% or 3% off all-time highs. i think this is a bit of a tempest in a teapot. i strongly disagree with something you said when you were talking to rick. nothing here is a surprise. in the december 2012 fomc meeting when they announced the evans rule for the first time, in that same paragraph they said that the evans rule threshold of 6 1/2% would become relevant, a quote unquote considerable period after asset purchases have stopped. all you have to do is draw a line on the unemployment rate and you will see that you hit 6 1/2% in november of 2014. i've said this on the show before. you just have to listen to what they say. they've been saying this now for six months. nothing here is new. >> i was making a different point. i beg to differ. not on what you just said. i agree with that point completely. i think the idea that the asset purchases will cease in a year
was new information. >> you mis -- no, you didn't hear me, larry. >> they've never been that specific. >> yes, they have. yes, they have. go back to the december fomc statement. they say that the 6 1/2% threshold kicks in a considerable period after asset purchases have stopped, quote unquote. >> i understand that. but the timing of the purchases and the use of the 7% unemployment rate as a guide to the timing of the purchases is new information. i don't want to get hung up on that. >> the 7% is. but that's just -- you have to go through -- you have to go through 7 on the way to 6 1/2. >> i understand that. but people -- i don't think the fed knows what the exact purchase timing is going to be, much less the rest of the market. how high in your opinion, how high will long-term interest rates go, competing with stocks? how high? >> this is something that nobody seems to understand. the ten-year treasury bottomed about a year ago, it bottomed in
july of last yeah, two whole months before qe infinity even started. rates have been going up before qe-3, during qe-3, after qe-3, and you know why? it's because gradually the world is becoming a less risky place. we got through the fiscal cliff, the sequester. there's no euro crisis. china isn't having a hard landing. face, it the fed panicked in september, they spread foam all over the runway, and in today's statement they said that the global economy is facing less stability risks than they thought it was in september. they admitted it. they panicked. so they can now start withdrawing some of that foam off the runway. it's never been about jobs. it's never been about inflation. it's about financial stability. and that's not as much of a risk in 2013. so of course you expect to see treasury yields go higher when there's less risk in the world because people don't need safe havens. >> how high? >> i about the end of the year 3 1/4 on the ten-year, 3 1/2 on the 30-year, and i'm going to quote ben bernanke. that's a good thing. he said that three times. >> let me ask you this. good. good for you. very brave, very bold.
let's look at 3 1/2% on the 10-year. what will stocks do if the 10-year bond rate goes to 3 1/2%? it is presently -- we're at 2.22, 2 1/4. >> i think 2013's going to be a great year for stocks but we've already had it. i think stocks finish the year where they are. i think the forward p/e ratio at 14 1/2 is fully valued. it's already anticipating a normalization of interest rates. believe me, we only get to 3 1/4, 3 1/2 on the 10-year if the economy doesn't fall into a ditch again. >> all right. >> stocks aren't going higher, but i don't think they're going a lot -- >> stocks boomed in the '90s when the 10-year averaged 5% or 6%. people shouldn't forget that. this really is a return to normalcy. >> yes, larry, and they boomed off the bottom in 2009 and 2010 when the 10-year was between 3% and 4%. >> all right. >> this whole 2%, 1% thing, we've just gotten used to that. that's only been the last year and a half. >> we'll leave it there.
don luskin, thank you very, very much. very brave forecasting. now, our guest host governor rick perry has been barnstorming the country. personally visiting some business unfriendly states and trying to lure private companies to texas. it's a free market message. he's delivering that free market message face to face. and we're going to ask him all about it. later in the show niall ferguson's going to join us to talk about the problem rick perry is trying to fix, that is. america is becoming too reliant lient on government. the bureaucracy's getting bigger and we're just starting to look like europe. niall will explain what he calls planet government. don't worry, you don't have to be from texas to understand that free market capitalism is always the best plan to prosperity. i'm kudlow. we'll be right back with the governor. out there owning it. the ones getting involved and staying engaged.
. republican governor rick perry has a very simple message for businesses in blue states. come on down to texas. he's already made his pro-growth pitch in california, illinois, connecticut. today he's in new york. take a listen. >> why have more jobs and businesses moved to texas than any other state?
our state is number one for business because we have no state income tax. texas is ranked number one for business for the ninth straight year by "chief executive" magazine, and it's added more jobs than any state in the nation in the last five years. if you're tired of the same old recipe, of overtaxation, overregulation, and frivolous litigation, get out before you go broke. texas is calling. your opportunity awaits. >> we're back here with texas republican governor rick perry. first of all, that was run in the new york city tv market, right? >> yes, sir. >> and in the other places, correct me if i'm wrong, california, illinois, when you went in there, you ran radio ads? >> radio ads in california when we first went in there in february. we had some little more expanded media type, some print media, some radio going into illinois. this was the first market -- because number one, new york is a harder sell. new york's a harder sell. but it's also a major media market as we know. so to go in there with a
substantial media buy, a visual tv buy, was a bold step, but i think a right step to help do two things. number one, i'm not bashful about telling the story of texas and the businessmen and women could keep more of what they work for with a state like texas that has a relatively low tax burden, a regulatory climate that's fair yet predictable. that legal system in place that doesn't allow for oversuing, and then a skilled workforce. then get out of the way and let the private sector do what it does best, which is create those jobs which create the wealth. >> all right. so those are your basic message points. i just wanted to ask you about the media blitz because it's unusual. it's unusual. i don't think anybody can remember a governor of another state coming into a state. the other governors were very peeved from what i gathered. jerry brown was very peeved. quinn was very peeved in illinois. i take it malloy in connecticut was a little more civil but very unhappy with it. and i hear cuomo's gone ballistic with this whole story. you're trying to shake them up
and you're trying to say here's how we're doing it. "the new york post" accused you of poaching new york companies. that was the word they used, "poach." >> i know. poaching is -- if you look it up in the dictionary, it says an illegal taking of something. this isn't illegal. this is competition. i don't think the new york jets call it poaching when they come to dallas to play the cowboys. it's called competition. and that's what we're all about. and i hope people will civilly take a look at that and have a discourse about our red state policies the right policies for your state or do the blue state policies work better for you? this isn't bashing any state. this is bringing up the clear differences in tax, regulatory, legal policies and the skilled workforce in these states and compromise -- or i should say comparing them to each other. >> so you're not saying -- when you hang with these -- i guess you haven't met with all the grofrn governors. >> no. governor malloy came by very graciously, welcomed me to the state. >> connecticut. >> i appreciated him doing that. >> but when you meet with
businessmen, you're not saying to them, get out of this goofy dumb state. you're saying here are our advantages, here's the better way to do it. you want to be more profitable, you want to help shareholders? we can do that down in texas for a, b, c, d, and e. it's a positive message about -- >> it is. and the reason we did it this way is because the fact is we have found over the course of the last six, seven years that if we just wait on the mainstream media or the business journals to let that message distill out across the country, you're not going to penetrate. we penetrated with this media buy. people are talking about this. businessmen and women came to hill country barbecue there on west 26th today to meet to talk -- you know, to test drive. let's go talk to this governor and his businessmen and women that came to new york with him and find out what are some of the options out there. and listen, rick scott from florida, bobby jindal from louisiana, governor martinez
from new mexico and mary fallin from oklahoma, i can promise you they're looking at tax, regulatory, and legal policies that they can go talk to businesses in texas and -- >> sam brownback from kansas. >> you betcha. >> scott walker from wisconsin. >> yes, sir. hicken looper in colorado. >> you're a right to work state. >> we are. how about let's keep zpecompete? i don't have a problem with those governors coming to texas and trying to lure our businesses away because it will make me go back and do something like we did back in 2011, which was pass lose or pay to make texas be even more competitive on the legal side. >> what do you did with the criticism that people know texas is outperforming, creating a lot of jobs, but it's all about oil? it's all about the oil and gas is now particularly the shale revolution. what's your reaction? >> i wouldn't trade the oil and gas industry for anything. but it is a smaller percentage today of our gross state product than it was in 1984. texas's economy is very, very
diversified. it's medical technology. it is manufacturing. it is across the spectrum growth in job creation. we not only those -- in every sector of the market when you talk about wages we lead the nation in that. 30% of all the new jobs created in the last decade were created in texas, larry. >> when you were running, that was an amazing stat. but people also say they're low-paid jobs, that they're lousy wages in texas because it's not a union state. how do you respond to that? >> that's not correct. when you look at -- we lead the nation in all sectors. every spectrum of the wage area we lead the nation in that. so it's high-paying jobs. it's middle-paying jobs. yes, we've got some low-paying jobs. but i'll tell you what, individuals that are working realize that they're not going to start out as the ceo of a business and they've got entry-level jobs and those are growing as well.
>> so let me get this right. i'm a simple-minded guy. i want to get this right. you're up here in new york. you're saying middle-class people get about the same wages as new york and texas but texas doesn't have an income tax, who's the winner. is that the point? it's not a hard point. i just want to say, is that the right point? >> that is a point. well, not only. you don't have the cost of living is incredibly different. when you take what somebody in new york would say is a low-wage job but what that can buy in the state of texas is substantially more in housing and other ways to spend it. >> all right. so you're ready to welcome in -- before we quit this segment, you're coming back in the next segment. have you actually recruited -- in this whole trip, california, illinois, et cetera, here in new york, connecticut, have you actually recruited, quote unquote? have you poached any businesses to come down to texas? >> i don't think we poached any but we certainly convinced some people to expand and to relocate to the state of texas.
>> they're going to come down and visit with you down there? >> well, they already are. the california companies are already starting to make that move. we're in contact with the companies out of illinois now. and i'm sure -- i'm not going to pack up some businesses while i'm here and help them load up their u-haul and head to texas. >> unless they want you to. >> well, my instinct is they will continue to go through a thoughtful process of where is the best place for us in this country. you know, the weapons manufacturers is a great example of it. they are looking at a very unfriendly climate over in connecticut and new york in some cases. and they're going through a thoughtful process of where do we relocate if that is our decision? >> all right. let me jump out. we're going to come right back with another segment on this. we want to remind everybody, by the way, that according to cnbc's ranking texas was the top state for business in 2012. new rankings are coming out soon. go to topstates.cnbc.com to see if texas keeps the top spot in
the next ranking. governor perry is staying with us for a couple more minutes. i've got a penetrating ultra surprise question for him. stay with us. you're going to love it. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room.
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new york state. you spent some time in the city and so forth. this is a state that despite three epa studies that endorsed the fracking, oil and gas fracking, pennsylvania's been doing it, the marcellus shale, this state won't do it. this governor andrew cuomo won't do it. and most people believe that the reason cuomo won't do it is because robert f. kennedy jr. ho has a coalition of left-wing greenies and they're running millions of dollars of advertisements in upstate new york to stop the governor from endorsing the fracking, which would get new york out of a depression. what do you think about that? i mean, this to me is an act of cowardice, not courage. >> well, certainly if you have the opportunity to put your people in your state to work in a safe and thoughtful way, why wouldn't you do that? >> epa has given them three passes at this thing and said it's okay. >> hydraulic fracturing has been proven certainly in my state -- let me just run some numbers by
what it could mean. i mean, it's $11.6 billion in gross state product. that's just the eagleford shale down in south texas. there is another shale formation that has been found over in catanar central tx text that may have three times more oil in it than what the eagleford has. we're talk multiple tens of billions of dollars of gross state product. putting families to work in areas of new york state -- >> which have been in a virtual depression for -- >> for 50 years. >> for decades. it's incredible. >> since world war ii. >> it's unbelievable. >> so the opportunity to do that is beyond me -- >> they've done it in pennsylvania. i've had governor ed rendell, a democrat, former head of the national democratic committee. rendell's been on this show several times, strongly endorsing the shale decisions that he made while he was governor. and by the way, the state gets its take on this also. people get rich -- oh, my gosh. one last question. you're all over the country. you're running these ads.
radio, television. got your free market message. so the deep, penetrating question is will you run for president? >> i'll make a decision sometime later in the year. i've got to make a decision on whether or not i'm going to run for re-election to the governorship of texas. >> and will you? >> by the end of the month i'll most likely give that -- >> by the end of june you're going to make a decision. >> yes. by the 1st of july. >> if you decide not to run again for zbronks you've been governor a while. you're the longest-serving governor in texas. >> yeah, moving on 13 years. >> if you don't go and run for governor, might you still run for president? >> certainly it's an option. but again, no decisions are made. i'm really interested in continuing to have this conversation with the country about red state versus blue state policies and recruiting businesses to the state of texas. that's how america gets stronger, larry. the fact is this is straight up about competition. if we force states to change their tax or regulatory
policies, if governor scott or governor jindal or one of those other governors come in and change policies in their state, if sam brownback goes and gets rid of his income taxes -- >> kansas. >> -- then that's the type of pressure that is good for -- >> but i don't know of any other governor who's actually gone to the other states to carry the message. that's what makes this particularly interesting. >> and particularly effective. >> well, i hope so. >> that's the bottom line. >> it happens to be the message of this program. free market capitalism is the best path to prosperity. >> and it works. >> governor rick perry, nice to see you again. best to your wife. i enjoyed visiting with her at lunch yesterday also. all right, folks. we have much more coming up on this show because it was an active day in washington. thousands of tea partiers demonstrated. and controversy is rising over president obama's trip to africa. get this. it could cost as much as $100 million alone. mostly for a vacation. we're going to get you updated
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reports that president obama's trip to africa could cost between 60 and 100 million dollars. the trip purportedly includes 14 limos, three bulletproof trucks, and 24-hour fighter jet coverage. but my big problem is, a, everybody should have belt tightening during the budget-tightening sequester period. and b, the president really is taking a vacation. this is not a working trip. here now is former obama deputy white house press secretary bill burton. he's now vice president and managing director of
global strategy group. and we welcome ace political reporter and cnbc contributor robert costa of the "national review queechlt bill burton, are we being unfair here during the sequester period for a $100 million vacation? >> good evening, larry. first of all, i don't think this is a $100 million vacation. i think those numbers are probably pretty inflated. but second, it's interesting that rick perry was the person you had on before this segment because when rick perry came into your studio i assume that he was surrounded by texas state troopers. he came on a texas plane.
this is a trip that's funded by the texas state government. and that's fine because what he's doing is trying to go and get jobs for his state. but what the president is doing is a couple things. one, he's trying to make our case in emerging democracies that american investment is the right way to go. and two, he's showing our american leadership in the world. it's something that only the president can do. only the first lady can do what she's doing. it's something that all presidents have done before them. and the costs associated with it
are standard, as the bush adviser said in that "washington post" story you cited. >> robert costa you heard mr. burton on that. what's your reaction? >> bill burton brings up texas. but there's a big difference between texas and a continent, africa. just look at this "washington post" story. they're the ones who are citing $100 million for this trip. fighter jets and aircraft carrier, massive entourages in the hotel and on the ground as he goes to tanzania, senegal, and south africa. this is a major undertaking and the white house doesn't even disguise it as a vacation. they call it a working vacation. the question is for the white house, as they create so much politics and drama about the
sequester and they're canceling white house tours suddenly they want to spend $100 million on a vacation, it just doesn't seem to -- there seems to be a big disconnect there. >> somebody said 1,350 weeks of white house tours if he doesn't go on this trip. i want to move on. i've got a couple other points. we've running a little short of time. shift gears. two massive rallies today on capitol hill. the tea party made a comeback on the hill. blasting recent irs scandal and a rally they called an audit of the irs. and many others showed up for an anti-immigration rally where representative keith king launched a six-hour event in opposition to the immigration reform legislation. all right. bill burton, let me start with the irs event. what is your take on this? this really could mobilize the tea party, the way they were mobilized in 2010. >> well, i don't know that it's that animating for the tea party. it's certainly something that has the far right all riled up. but i think if you watch how the story has unfolded,
unfortunately chairman issa has embarrassed himself. and he's done something worse than just make a fool of himself because what he's done is he's made accusations on national television that he has known to be not true based on information he was keeping secret. and thank goodness congressman cummings released that information in the form of transcripts that -- >> what are you saying here? let's be specific. are you saying to me that this was not a top-down operation in the irs? are you really saying that? >> well, what chairman issa went on tv and said was that this was something that he had proof went all the way up to the white house. but at the very moment that he said that he had in his hands, he had the sworn testimony of folks who said in fact no, that was not the case. and so what i'm saying is that chairman issa has undergone an investigation that he himself has known -- >> go ahead, robert costa. >> -- has dried up. >> the white house, democrats like to say that the tea party's dead. but i was on capitol hill today, larry, and it seems the tea party is very much alive and
they're waving signs. the first one i saw was "internal rotten scoundrels." they're animated by this irs scandal. they think this is going to help the republicans in 2014 win back in seats perhaps in the house. and they still are railing against the white house for maybe blessing this along the way. >> i don't think the tea party's dead for what it's worth. i think they're alive and thriving inside the house of representatives. and that's why there's so much gridlock in washington. >> i want to hit the last one because wroi a column several months ago about this. immigration reform is pro growth, robert costa. more people joining the labor force, whether it's the lower skilled or whether it's the brainiacs. according to the congressional budget office, will increase growth by 3% and lower the budget deficits by hundreds of billions of dollars. okay? the senate immigration bill will save hundreds of billions of dollars and grow the economy, robert costa. why are all those republicans there against the immigration reform? >> because republicans, i think bill burton probably agrees,
within the house republican converts are not looking at this as a growth argument. they still term it amnesty. and i think john boehner has a real headache on his hands in the house because republicans are not eager to buy that argument about growth. >> but we should buy the argument of growth. i say we meaning the whole country should buy growth. bill burton, i'm probably closer to you on this one. >> i think that's right. but at the end of the day my prediction is that the house will pass something that will pass largely along partisan lines. the senate will pass something. it will get to conference. both bodies will pass it. the president will sign it into law. i think what boehner is doing is just trying to play his tea party politics to make sure he doesn't get ousted before this debate is over. >> i think it's pro growth. i think it gives people opportunity. i think it puts america back as the city on a hill. >> well, immigration is part of the reason the economy's is strong in texas. >> that is correct, by the way. and that's a good test case. i like that. well said. anyway, thank you very much. bill burton, i appreciate it. robert cost o., i appreciate it. up next on "kudlow," the brilliant niall ferguson is
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as has america lost its way and finally given in to the power of big government over free enterprise? earlier this afternoon i had the opportunity to sit down with harvard historian niall ferguson. he's the author of the new book "the great degeneration: how institutions decay and economies die." we started off on the hot topic of ben bernanke's fed policy. here's what he had to say. >> i think he boxed himself in. i don't know that it was a good idea to have an unemployment target. as soon as they said they had one on top of the inflation target i think they boxed themselves in. and now it implies the closer we get to that 6.5% unemployment rate the sooner we taper. and the taper means less bond
purchases and that has to mean higher yields and that has to mean a headache for the market. so we have volatility to come. >> is there some kind of deflationary puncturing of the balloon that has to happen once the fed starts, a, buying fewer bonds? b, selling bonds. and c, raising the interest rate? in other words, is there a bubble there that has to be deflated, a fed bubble? >> i don't think it's a bubble. any big inflection point in monetary policy like this there's going to be volatility as people readjust and we're going to have to readjust to real interest rates and those are going to go up especially if we get yields going up nominally but actually inflation is low at 1%. that is a real tightening. you know, we are having a tightening just because ben bernanke -- >> it's a de facto tightening. >> it's begun. and that's interesting because his words now are more powerful than any actual policy lever which i think illustrates that we are attaching way too much importance to macro policy. it's as if the central banks are the only game in town. but i don't think that's true.
>> that's true. your book, your recent op-ed pieces all make the point that it's massive overregulation, government dependency, things are changing the wrong way in american institutions. you call it planet government. that's responsible for the decline of the american economy. tell us more about that, please. >> well, i think one reason we're not seeing more rapid job creation and more rapid growth is nothing to do with monetary policy, much less fiscal policy. it's because small businesses find themselves confronted by a jungle of regulation. and maybe because we bought the story that the financial crisis was caused by deregulation, which by the way it wasn't, we have fallen into the trap of thinking that regulation is the answer. and all around you if you're a small business you see challenges. obama care is just coming but that's only part of it. you know there are 63 federal government departments and agencies churning out 3,000 or 4,000 regulations a year. is it any wonder that small business is discouraged? >> i love this. you've got a couple of great
numbers if here. the federal register of regulations. 78,961 pages. that's unbelievable. that's worth $1.8 trillion according to some sources. however, the last time we had fewer regulations was when my former boss, ronald reagan, was president. i was stunned and very happy to read that this morning. >> this made my week when i figured it out. but there's only one president who's reduced the size of the federal register and that was ronald reagan. he reduced it in numbers of pages by an amazing 30%. and guess what? in real terms in that presidency the economy grew by 30%. >> but the regulatory state is damaging the economy. that's the spirit of entrepreneurship. >> you know, that cost that you mentioned works out like a surcharge, an invisible surcharge on every federal tax of 65%. it's like 12% of gdp. and it hits small business hardest. you know, it's 40% more expensive per employee to comply with regulation if you're employing 20 or fewer people. >> and one of the points you make is it's harder to start a new business in the united
states, much harder than it used to be and harder than it is in the united kingdom. >> the u.s. is one of the few countries in the world where ease of doing business is getting worse. it's getting harder. these are measures in terms of numbers of days it takes to do stuff. most countries in the world are improving in that way. but the u.s. is one of 21 countries where it's take longer to do stuff. and i was really shocked. i'm a professor. but professors who talk about the economy should try running businesses. maybe just as a sideline. i've started a couple of businesses in my time, one in the uk, one in the u.s. it was harder to do here. so that's shocking. i was amazed. >> that's a shocking stat. >> i thought it was the land of enterprise they sold me and what do i find? >> but i still believe as an optimist that it is the land of enterprise. i want to ask you because a lot of these are very solvable problems and there are some good things going on and you cite them. for example, the whole enjai revolution. the oil and gas fracking is a tremendous development. and you also mention how a lot of states around the country are actually doing the right thing with lower regulations and lower
taxes. tell me, can we -- can the united states get out of this or are we mired in a declinist mode? >> i am not a declinist. i'm an optimist about the united states. we can solve these problems. we can change the way we account for public finances. we can hack away at the regulatory jungle the way ronald reagan did. we can deal with the problem of tort reform, which is a major issue for small businesses, the aggressive litigation that sometimes disrupts business life here. and hey, we need to address the problem of failing public schools to improve our human capital. we're producing a generation of semi-literates through failing public schools in the poorer zip codes. these are all fixable problems. and the great thing is as winston churchill said, the united states always does the right thing when all the alternatives have been exhausted. >> i like that. i still think there's a lost innovation. i just made a quick list. the human genome and sxhns biotech is very good. advanced education online is a lot cheaper than it used to be. that's a good plus. and then you've got the computing and the web tech and the industrial robotics. we haven't really fallen behind,
have we? we're just making it more difficult. >> well, my friend peter thiel would say compared with the 19 1k340z '50s our technological innovations are less impressive and cover in a sense -- move the dial somewhat less. i don't think we should get carried away with, i don't know, the tesla or for that matter facebook. i think we have to recognize the limits of some of the innovations we're making. but you're right, there are huge possibilities still here. the stej is undoubtedly unfolding in a dramatic way, but we have to get the institutions right because if you let the institutions deteriorate the growth will simply not come. >> i want to finish on that point. you also talk about the decline of voluntary institutions in the united states. whether they're religious institutions or business institutions or professional institutions. that is something that it's very difficult for me to understand. >> it is an amazing thing. when top fuel came to the u.s. in the 19th century the thing that most amaze him was civil society, voluntary associations, americans fixed their problems themselves.
they didn't rely on government. that's no longer true. >> chambers of commerce, for example. they're still out there. i'm just saying there are fewer of them. >> the fact advise m, the active membership has fallen and it's fallen really quite dramatically to the point we're kind of like europeans in our tensdy to assume that if there's a problem the government will fix it. >> i was going to say this is a reliance on government which in the long run cannot a good thing. >> it's a deeply unhealthy thing. and we have to change that direction and get back to the things that made this country great. >> is this what troubles you the most? right here the voluntary institutions losing and the government growing? that's essentially the seesaw? >> and it's what topfield warns against in "democracy in america." he says this could be your undoing, you let the government grow and civil society decline, you'll end up like france. it's happening. we have to stop it zplp i don't want to do that because i don't think there's a word for capitalism in france. i don't think there ever has been. we'll leave it there. niall ferguson, harvard university. and again, he's got his new book out. please go and get it. up next on "kudlow," a shocking development at menace wearhouse. get this. george zimmer, the founder of
the company, the ceo and the guy in all those ads, he was fired by the board and escorted out of the building. we're going to explain what happened next up on "kudlow." .. it's time to go. no. honey, it's too perfect. over a quarter million properties... you'll never want to leave. booking.com booking.yeah to accept less and less in the name of style and sophistication. but to us, less isn't more. more is more. abundant space, available leading-edge technology, impeccable design, and more than you've come to expect from a luxury vehicle. the lexus es350 and epa-estimated 40 mpg es hybrid. this is the pursuit of perfection.
we have some breaking news now. actor james gandolfini, who became famous with his portrayal of fictional mob boss tony soprano, has died in italy of an apparent heart attack. gandolfini was the star of the groundbreaking hbo show "the sopranos." he was just 51 years old. all right. here's a nasty business story. george zimmer, he was the founder and ceo of the
successful men's wearhouse chain. he ipoed his company back in '92, successfully, by the way, even saw higher than expected profits in the most recent quarter. he's also the face of the company. he's the guy who appeared in all those ads. so how's he rewarded? the board not only fired him, they kicked him out of the building. the board isn't talking, not giving a reason for getting rid of him. but zimmer is not going quietly. bertha coombs joins us now with zimmer's side of the story. good evening, bertha. >> good evening, larry. that's right. the company has postponed tomorrow's scheduled shareholder meeting in the wake of the ouster. and george zimmer is making it clear he and the board are splitting on bad terms. in a statement to cnbc, you've got to imagine that famous deep basso profoundo voice saying this -- "over the last 40 years i have built men's wearhouse into a multibillion-dollar company with amazing employees and loyal customers," he says. "but over the past several months," he says, "i have expressed my concerns to the board about the direction the company is currently heading in. instead of fostering the kind of
dialogue in the boardroom that has in part contributed to our success, the board," he says, "has inappropriately chosen to silence my concerns through termination as an executive officer." the stock today fell more than 1%. i guess they didn't like the way that looked on wall street. but year to date the stock is up 19%, outperforming the overall market and retail apparel makers. and zimmer joins groupon's andrew mason, best buy's richard schultz, the co-founders of research in motion, among the recent founders who've been pushed out over the last 18 months. >> so what's the speculation? last 30 seconds. why did they get rid of him? he's a good guy. he did all these great things. why did they get rid of him? >> it seems like it may be a case of founderitis. he didn't want to let go of control of the reins, and the new ceo needs to have -- >> why don't they give some kind of honorary position or -- they threw him out of the building, for god's sakes. that is grim. out of the building. i mean, come on.
>> break-ups aren't always pretty, larry. >> they wouldn't have a building if it weren't for him. i bet he chose most of those board guys also over a period of time. i don't know. bertha coombs, thank you very much. what a grim story. gee, i hope it doesn't end like that for all of us. tomorrow, by the way, on cnbc, speaker boehner, exclusive with maria bartiromo. that's on "closing bell" at 4:00 p.m. tomorrow night i'll be joined on set by my pal steve forbes for the entire hour. i'm larry kudlow. thanks for watching. (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. voted "best investment services company."
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>> quintanilla: from shoes to watches, purses to perfumes, the business of counterfeit goods is booming. >> if you can think about it, they counterfeit it. it's just amazing. everything out there is counterfeited. >> it's not just about a company losing money or an individual losing money. it creates health and safety risks, risks to critical infrastructure, risks to national security. >> quintanilla: this criminal underworld puts our economy and our lives in peril and nets billions in the process. >> counterfeiters are unethical. they're dangerous. they kill people. >> what is the root of counterfeiting? it's the money.