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tonight on "the kudlow report," stocks stocks stocks, an amazing rally. we're all over it. i still like banks and financials and techs from china, they were today's leaders. we'll show you why the very subprime economy is actually helping profits in turn rallying stocks. the democrat tax and nationalized health care bill is so bad it's actually bullish because it will never pass. senator kate bailey hutchison gives tonight's republican response. fasten your seat belts, "the kudlow report" begins right now. good evening, everyone.

i'm larry kudlow.w. welcome back to "the kudlow report" where we believe free market capitalism is the best path to prosperity. stocks are roaring this week, up 6%, being fueled by better than expected earnings. that's what makes capitalism go. profits are the mother's milk of stock. business and the economy. it may be a dirty word in washington these days but it is the golden rule on wall street. here's an unconventional capitalist thought. businesses are slashing jobs and hours worked and production and inventories big time. unfortunately, this is driving up unemployment and creating skepticism about a real economic recovery. but at the same time, these cost cutting measures are contributing to better earnings and profit margins, in turn, drive up stocks after a while, like now. i call this the profit paradox. bad economic news can be good prof fits news for a while, as

businesses take corrective measures. from this business discipline, is coming a big surge in productivity which ultimately drives us into recovery.. this is all part of the self correcting nature of free market capitalism. the second point this evening, perhaps i'm right one time in a row about this big bank rally. i'm still there.. financials have soared this week. borrowing at near zero interest rate and lending higher, even bankers can get it right. and the best bailout for banks, they are earning their way out of all of their toxic problems. so, on tonight's show, we are loaded up with investment gurus and informative discussions about this dramatic stock market rally and what it means for you investors and how to play it from here. we will also scope out the big earnings report that will come hot and heavy in the next

couple of days, we will have big numbers on tech and big numbers on banks. speaking of earning central, let's head over there, where cnbc's brian shachtman has the full rundown on today's profits rally. >> you know what kind of day it is when even newspapers and airlines can game. look at amr, beat estimates, had a nice run. still losing a lot of money right now but someone made something on it today. out of context, not a pretty sight for the "usa today" publisher, in light of the advertising outlook, they beat expectations and gained 28%. a huge jump for them to. health care, a lot of providers struggled. a defensive play.. somebody rotates out with risk appetite. there's also a report today out of reuters, some senate democrats on the finance committee want a $100 billion in

fees from insurers to help pay for the health care overall. we know of the billions that the hospital and drug makers are going to or supposedly sacrificing, now we know the hmo stocks underperformed and underperformed by a lot. look at a few examples, aetna, cigna, united health all on a downside on a huge upward day. let's go from laggers to le leaders. financials, right at the front of the pack with that bull baton. look at the whole week. you have citi, amx and others. and jpmorgan is up 13%. analyst dick says it could beat this week. look at the whole group. look what kind of day they might have. people thought goldman might sell on all the news but held

up. i don't know if i have the week 29th look at, to show where the buildup was leading into their earnings, right here when they led top it. they consolidated and they popped today. you know what that makes, larry? i've been practicing. >> great, how did you do that? >> practice makes perfect. we get ibm and google as well a. lot of ways, put goldman sachs aside, bank of america and jpmorgan, estimates are losses to gains and what they do might be a better indicator where we are in the banking sector. >> i think the most amazing thing almost out of left field, the profits driver of the stock market. economic news today, industrial production was down, economic news quite moediocre and quite subprime. not even a spin master like myself can turn that into lemonade. the point i'm making tonight and

will make it othver and over, business cost cutting made the economy look louse sin ty in th run, is leading to profits and led by banks and financial. >> you cut costs, lower estimates, you will get a lot of beef. >> coming up. >> you can't get that bounce in the stock market too many quarters. >> you have top line. margins have to have improved sales. you cover the tech beat a lot. china and tech, so much stuff coming out of china. we heard this regarding intel. what do you hear? asia, material stocks are up, china has $2 trillion worth of reserves in the latest report, will diversify, buying gold, copper, commodity, i don't know what, spurring tech because of the sale. >> it's a great story and obviously china handled their stimulus package probably better than the united states and borne

itself out. at some point the domestic level in china needs to grow where it can sustain something. they need a better domestic economy. not nearly the scale -- >> i will repeat what i said, i believe the china tail could be wagging the u.s. stock market dog. >> you think so. >> i think so. i have to think about that. tail and dogs. let's see that again, look at that smiling face. we fortunately have big bad news coming out of obama, washington ready to legislate a crackdown on hedge funds. rebecca joins us with the full story. >> hello. under the proposal every fund with assets under management will be obligated to register. funds will be required to establish compliance programs, report assets, leverage, off balance exposure to the sec as well as investors and

counterparties. the sec will share this with the fed and financial oversight council. they're regulating fund for systemic risk, funds deemed to be too big would face peer owner rouse financial holding requirement and not willing to say what "too big" actually means. speaking of "too big," it appears they don't see cit group too big. announcing tonight, discussions with government agencies have ceased, there is no appreciable likelihood of additional government support being provided over the near term. the stock had been halted over today's trading session and speculation looming they would try to work out some deal. maria reporting we would have a resolution by this evening. we have that resolution, no government money for cit. they say management directors, advisors evaluating alternatives, looks like

bankruptcy. >> this is a little tricky.. i am 100% for bankruptcy because they're not too big to fail. but but but are we suggesting there's no government backstop even in the short run and glide them into bankruptcy and then sell it out? no government money in short run? >> the fdic -- interesting, the fdic have government backed loans but we're hearing they've been hesitant to make that kind of loan because they don't want to set a precedent giving these loans out to companies they don't deem to be healthy, the loans are meant for healthy companies. >> no fed discount in the short window. there is a run on the bank part of cit, they can't raise any funding. >> exactly. >> i don't know, this is a little bit of wet blanket. i will process that. if you get any new information, thanks so much for your report. >> i will. >> we will turn back to the profits rally. our gurus standing by. several segments with new gurus

to make sure your report is rallying along with the markets. the bank play, even i get it right one time in a row once in a while. i still think banks are a big buy. the democratic nationalized health care bill, it is so bad i'm now scoring it as bullish because it will never pass. senator kay bailey hutchison of texas has the republican response to today's democratic announcement. we are "the kudlow report." we are coming back. let's leave you with this nice pretty picture as we go to break. taking its rightful place

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look at that. a lot of green arrows. that's banks including general electric, bank driven. the other side, tech, look at that tech, intel, powershares, cisco, dell, microsoft, all hot tamales today. we have hot tamales on our investment panel. author of "a bull for all seasons" and where where check

exis existses on the west coast. let me start with my friend, quentin. i want to ask you, regarding the tech story, intel was a blowout, whether that's because of the better china news or cost cutting or profit margins, maybe you can in form us, there's other stuff this week, we have microsoft, dell, ibm. give me your pencil sketch here. >> you have pent-up demand because they were doing without. so many quarters they were slow or lax, pent-up demand. fall, back to school, business revives, all that's now setting in place and that's kicking in. you have intel, just a fearsome machine, crushing all its suppliers as best it can to get those margins up. margins were good at intel surprising, those are all very favorable factors. they don't have to depend on the financial sector as much as a lot of the american business and that helps a lot because the banks are still cheap.

>> quentin, what do you think? ibm, microsoft, i think del is coming out this week, i may be wrong about dell. cisco up 6%, another chip-maker, altara up 5% and microsoft, up 7%, advanced micro up 9%. these are big gains. tech has been a breakout story all year, quentin, is it sustainable and what do you think about the rest of the earnings report. >> i think cisco is a legendary story and i'm not shy about saying it. you can't call it monopoly share but it is big and they grow into other areas and now in vate. microsoft have really big share and try and innovate strong. dell looks a lot like a one trick pony. hell of a supply chain, got it right, everybody learned how to do that and they don't innovate the way the others do.

>> i think their hardware is subprime, we use it in the newsroom, i'm so down on dell. >> cheap, what else can you say. >> i'm not an expert and if the dell people criticize me, i stand corrected. i am spin inning my kudloan vest it's a hayakian point of vuchlt you want to bash me, fine, i don't see the top line revenues or top line economy. i think if we get a recovery in the second half of the year, it will be barely noticeable, if at all. but all the bad economic news from cost cutting, job cutting, inventory cutting has actually slashed business costs so much, they're turning more profitable. what do you make of this argument? is it spin or do i have any content at all? >> oh, no, it's spot on, no spin about it. this is the three es of

investing. investors have to focus on this, the first thing that row covers is earnings, then the economy recovers and then employment will recover. we shouldn't worry about anything. keep a focus on these companies. they're doing a great job. we're seeing an earnings recovery now. once that happens, they'll start spending money. once the economy recovers and then the final thing is employment. stop worrying about the fed saying we will see 10% unemployment, that's old news, focus on 3 es, watch earnings, then the economy and employment, i think we're in for a great second half of the year. >> that's an interesting paradigm, earnings economy, i think you mean gdp, which could show positiveness in q3 or k 4. earnings, economy, jobs, jerry boyer, take it from there. i have to be honest with you, in the key indicator, you'll not

get a key recovery in this country unless we are creating jobs, not shrinking them at a slower pace, creating them like in the '80s and '90s. i'm not seeing bounceback in production. i'm not seeing the incomes here. do you agree with dr. bob earnings and we don't have nothing to worry about. >> earnings, economy, employment, 2 out of 3 ain't bad. i think the political environment is the most hostile to employment i've seen in my lifetime. the same thing happened on a smaller scale in 1993 when clinton was talking about nationalizing health care and automatic the small business people held their breath for a year until the idea was discarded. now, it's happening on a grand scale. the stimulus plan has a number of anti-employer provisions in it, talking about funding health care with surcharge on businesses that don't pay health care or don't pay the minimum government level of health care, all this says to small business

people, don't hire. i'd give the same advice, i'd hate to. right now the best thing for small business is do not hire, i think we can grow with productivity. >> it's threatening. they're doing it internally, old-fashioned way, slamming down costs. >> and buying computers. >> i think this spending and borrowing is pulling the vitality and morale out of the private enterprise. the failure to cut tax rates across the board is a big mistake. what happens, there will be a recovery, because i'm taking the cautious view. when i looked at those job figures two weeks ago, i said, wait just a minute, i'm taking a very cautious view, i want to get your view. go ahead. >> my view is a weak recovery because it's a jobless recovery. what we have to do, we're asking the work force in america with 90% employment to create more

goods and services two years ago with 95% employment. i think they can do it, have a lot of entrepreneurial skill. that's why i like tech because it's your productivity play in jobless recovery but it won't be a boom. >> i'm trying to create a balanced view of this stock market rally. i don't think this is risk-free. someone whose expertise is ri risk-free is our great reporter, charlie. cit, charlie, is uncle sam going to let them fall hard or fall soft? we know they're falling? >> i don't want to throw any -- this is just my reporting, you know, i don't have all the facts. i guess we'll get more during the course of the night. looks like sheila bair came in there and this is what i'm hearing from my sources in washington, this is her, do she said, these guys do not pose a systemic risk, if we allow them to do the bailout as envisioned,

the fdic would be -- cit would be merging its bank with its holding companies a swap of assets. the bank was covered by the fdic, she didn't like the fact she would have extra liabilities because that's how you would do this bailout, liabilities of the holding company funnel down to the bank, the bank funnels up deposits and good assets, protects the holding company and they don't go out of business, in addition there, was talk about a line of credit from the treasury. she 96ed that for obvious reason, doesn't want to be holding the bad assets. also she made the point, this is key, larry, about systemic risk, that the t.a.r.p. and all these programs should not be open to companies, banks -- >> i agree. i agree with her, charlesly. you have to draw the line. >> you have to draw the line. >> the line in the sand is cit is what she's saying they do not

represent systemic risk, why should we do this. >> i want cit to go into bankrupt, however, charlie, sometimes in a bankruptcy with a little tricky situation, they do have a lot of loans out to small and medium businesses in this current environment, which ain't great. no fed discount window. in other words, why doesn't the fed open the discount window and that very same day we initiate a bankruptcy proceeding in an orderly way? >> that may happen. i think this will still play out over the night. what's fascinating is the politics and how sheila bair.. she ruffled a lot of feathers with citi grurngs rigoup, right wanted it banded out. >> she was going to clear it out and stomp all over tim geithner. >> here's what's interesting, i'm writing a book about the

financial collapse, as i write the latest stuff, interesting, i'm reading hank paulson's testimony right, to go through the stuff on ken lewis and whether he was threatened or not and why hank paulson believed they must go through the deal with ken lewis and hank paulson wanted to back out of the deal. >> was he right. >> he put the wood to lewis. at that moment he was right. >> he did not at the time have any firm agreement with the government. his decision was reached against a backdrop of public commitment undertaken by chairman bernanke and me dating back to at least october 14th, 2008, that the government would act to prevent the failure of any systemically important financial institution. i believe that they have come to the conclusion, prodded by sheila bair cit is not a systemically important financial institution. >> i agree with it but would

like to let them down a little easier. we appreciate the point. if you have anything new coming up, give us a yell, our phone wires always open. when we come back, i'll explore the rally some more and get reaction to this cit story, is that 99 the ointment, i want to look at tech stock out look and bank symptom outlook. i want to talk about china that may be the in visible hand in this stock market rally driving up commodities like crazy today. later on, this tax and nationalized health care bill is so big it's off the wall a bridge to the far left over the cliff, it is so big, i believe it may never pass and president obama may break his pitch on that. this is t"the kudlow report"." citi -- not citi, c irit, they'

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we have this cit thing on the table as well as my own market rally. sometimes a bad economy can generate good profits then supposed to generate good economy in a stock market rally. we have bob frolick, clinton

hardy and jerry boyer. i want to get your very quick reaction, quentin, you first, what's your take as you heard gary and other reports. >> if it goes down, at least they're declaring something small enough to fail, excuse me. goldman sachs, yeah them, they did privatize their losses, socialize their losses and privatize all their gains and speculated like crazy once again. i'm not happy to see that going on. they registered as a commercial bank. i'd like to see banks act like banks again and not fevered speculation, i'm interest in banks earning more than goldman and accountability. if cit goes down without disturbing the broader economy, that's fine with me. >> jerry boyer, i am all for letting them go under, absolutely, 100%, they should never be too big to fail, they do not have systemic risk, i am

a supporter of sheila bair's analysis. >> you want them to have access to the discount window. >> in the short run, i'd like to see a backstop to ease them into the federal reserve ask discount, keep them afloat so we don't go into risk and then go at the same time into bankruptcy court. >> it's supposed to be the last resort, they should use it. if cit goes into bankruptcy, that would be extremely bullish. it puts some of that rule of law premium back into equity markets. >> people will snap up their good assets. >> you're exactly right. bob, let us move on. are you sure, you're an optimist, you think a recovery is coming, i will be cautious and balanced here, there's no job creation, no income creation, no production going on and sales continue to slump.

those are the four main coincident indicators of the national economic research. are you sure? i was a lot more bullish a month or six weeks ago, i look at that jobs report, i'm going cautious, are you sure, bob, and does your stock market optimism count on a rel recovery, i don't mean a statistical crip toe supseud pseudorecovery a real read blooded job creating capitalism recovery. folks have to work in this country, bob, middle america's got to work, main street has to wor work. >> let me tell you what i do see happening. look at the july auto production, it is up. one little snapshot a very bullish indicator. more important to me, this great drawdown in inventories over the first six months. we know there will be an inventory rebuild the second half of the year and i think that will help set the stage for

this economic recovery. a lot due to cost cutting. you put that all together, i think the recession's over. i think it ended in the second quarter of this year. >> okay. wh quentin doesn't buy into it. for investors watching this rally probably with some amazement, it came out of left field, so did better profit numbers. >> it's financials or consumer stocks. those two. >> consumer stock? >> i would also think of going to tax-free municipal bonds. if you make any money in this world, you'll be paying more in taxes. i'd hedge the bet. >> i like the financial play. quentin hardy, you're next door to china and asia and can basically do some swimming and get there in a couple hours. what's the take? is china wagging the u.s. stock

market dog now. >> if it is, it is short term and hope we use it for short term and long term growth. china is a house of cards and have an aging population that will creep up and kill them. >> you're not show sure about this whole story. >> no. counting on the financials to me is counting on the casino. they still act like speculators, i like big tech companies because they hold a lot of cash and margin. >> i got to get out of here. i just came back from las vegas, i didn't hit one single slot machine or 21 machine. that's not my bag. do we have an update? did someone whisper that in my ear? no charlie update. we have more investment gurudom, the short profits may be driving this surprising stock market

rally and later on, the democratic tax nationalized health care bill, it is front page, president obama basically endorsed what's going on. that bill with its taxes and government insurance and nationalization is so bad, it is so bad, it is crossing the bridge to nowhere on the left so bad, i now believe it will never pass and therefore, i think it is bullish. it show assetback for all of this big government regulation taxation and control.. senator kay bailey hutchison of the great state of texas will give tonight's republican response but firstup, i will stand by for my call for the stock market investment right now, upward sloping yield curve. stay with us, fresh market recruits. oh, my gosh, one after another tonight. events warrant it. this is an unbelievable stock market rally. is it a turning point?

stay with us, we are "the kudlow report." look at all these green arrows on the way out.

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stocks soaring again today,

253 points, across the board and one of the big leaders was bank stocks along with tech. big news. i still think banks are the best place to be in the stock market. let's get some more big guru opinion. vince sparrow and vince and ken, macro, portfolio advisors. jim lecamp, you're the crankiest, on a big rally day like this, let's start with you. what do you think first of all, positive,stein curves, even a banker can make money. i'm staying with my bank shots. hit me right here, slam me in the chin. >> we finally saw some things i've been looking for, volume and leadership. leadership really came out of tech because it looked significantly better and earnings driven. you can throw goldman out of the banking group because they don't behave like other banks a

different business model. i look at the rest of the banks, i don't like what i see. we have deteriorating credit quality on commercial real estate loans and we're running at four times the pace. >> what about credit card companies. you have big names today, amex says you know what the credit story is not so bad from consumers. we heard from a couple of these. vince will fill us in. my pal, jimmy cramer talked about that today, you're too pessimistic, mr. lecamp. >> even if i bought into that whole drink the juice, bought into the whole story, i still wouldn't put my money there because there are better places to put your money. i want to buy countries that have growth, i want to buy companies that have earning growth, positive business models, i don'ts want to buy junk off the bottom. new bull market leaders are rarely driven by ex-bull market leaders.

i don't think it will happen this time either. >> vince farrell, what about this story? let's dive right in. american express, bank one did well, not cit. >> several reported. master bank, master trust reported credit card deficiencies lessened. while this is more that it's less bad, it's significant news in that you have a consumer saving more, being very prudent. it turns out this is all working, the bad debt on the credits card side is starting to lessen. i find that very very positive.. the last couple of months, consumer credit outstanding has declined and savings rate gown. we're finding a reliquified consumer and lo and behold, they're able to repay your debts. t to my friend, jim lecamp, everything you said is true and known that for some time. the banks are trading at tangible discounts to book value

more than compensates for real estate portfolios that will deteriorate. it's in the price of the asset and these assets are priced very very cheaply. >> i have to get stefan abe branls. you've been a big bull on hard goods and commodity. to your credit. suddenly out of the blue, the banks are leading the way along with techs with a little assist from china. how do you see this? what happens from here? what do investors do? >> i happen to believe you're right. the banks are good play because the steep yield curve is allowing them to salt away all the extra loan losses provision they need to get through this crisis. the fed will maintain that until the last bad loan is funded. i think you're going to be right, banks are piling up vast amounts of deferred income that will ultimate ly flow through.

the biggest story of our lives is still the industrialization of the emerging world. for that on long term basis, you cannot beat industrials, materials and transports. >> you think people should revisit the industrials, materials and transports, is that your advice this evening? >> serious investors have never left them and there's still plenty of time for those vast number of underinvested investors to climb aboard. this is a theme that will run for years. >> you kcan diversify here. we've seen the bank play, you agree with me or at least partly so on the bank play, i'm staying with that. the tech play comes in part from the emerging countries china and asia recovery which looks to be better than ours. now, you're saying we can spread our wings as investors and go back to material and industrial stocks, is that what i'm hearing. >> materials, industrial,

transports and some tech. >> vince farrell, real quick, any chance we'll be disappointed with jpmorgan. >> no, sir. jamie diamond is someone you put your money in the bank with. bankers can make money when they borrow at zero percent and jamie will not disappoint you. >> that's the kudlow mantra. jim lecamp, you're the skeptic, where do you go. >> the emerging market in natural resources is the best play, not the trickle up poverty we have. >> trickle up poverty, do you buy my spin? in all seriousness in a free market capitalist sense, the strict cost cutting of business drives down unemployment, drives down gdp is ultimately great for prof fits and great for growth, that's all i'm saying. >> i do. ultimately we need to see some top line improvement that may be

six, nine months off the road. aaye agree with you. >> i agree with you, six, nine months away. >> coming up, the president out and about, pushing his health care plan today. here's my take, more spin, i'll acknowledge it, i think this plan is so bad, with huge taxes across the board, nationalizing insurance, it's not going to be well accepted by the voters, it's so bad, it will never pass, because it will never pass, that becomes very bullish. think about that. later on this evening, my friend, melissa lee looks at the business of porn, business of pleasure. that's my promo, i'm kind of not there but melissa is a friend of mine so i wish her all the best. let's check in with dennis kneale who will gives you great stuff. >> we have a great stuff. market rally, does it say the recession is real as i say it

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deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com. president obama out in full force pushing the democrats prosperity killing health care plan. pardon pardonen my editorial but that's true. >> we saw president obama throw out the first pitch at the all-star game. what he did today was closer to his first love, basketball, putting on a full-court press urging the american people to pressure congress to pass health care reform. today, we got the first draft of the senate version of the makeover of the 2$2.5 trillion industry party line 13-10 vote, they approved a plan to put up a government run program to compete with private insurers, require most americans to get insurance and require employers with 25 or more workers to offer coverage or face a penalty.

at the white house this afternoon, president obama flanked by senate and house democrats leading the health care fast break said it's time for congress to take the game changing shot. >> progress should make us hopeful but shouldn't make us complacent. the urgency for the house and senate to finish their critical work on health care reform before the august recess. >> how to come up with at least a trillion to pay for it remains a major road blochlkt even senate democrats are cool to the house idea of taxing the rich. ken conrad said today, it won't be part of the senate finance committee proposal and dick durbin said the senate will not follow the house lead on taxes. >> the whole pan no ply of charlie rangel taxes, payroll tax, high in income tax, capital gains, you're saying that senate, off the board.

>> we're waiting for max baucus to come up with the senate version and they've shown aversion to raising taxes to pay for health care. >> daily hutchison has the republican response to this house tax health care bill. what's the senate bill? we'll hear from miss hutchison in a moment. i think this whole plan is totally anti-growth, that's just my take.ll ion with the world's leading companies. together, we're helping to shape the exchanging world. nyse euronext. powering the exchanging world. we have ever created. a car that can help awaken its driver if he begins to doze... keep him in his lane if he starts to wander... even stop itself if he becomes distracted. if you want to see the future of the automobile, just look at the new e-class... today.

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the subject is the big tax and nationalization health care bill put up by the democrats in the house and senate. here to respond for the republican side is texas kay bailey hutchison. as always, miss hutchison, we welcome you back to "the kudlow report." >> thank you. >> you wrote a hard hitting piece in the houston chronicle. let me ask you breaking news, our own pearson says this big tax health care is dead in the water. can you confirm that. >> i will confirm that. democrats are balking ate. it is a terrible idea. i hope that it is dead in the senate. >> what's your biggest beef with what's coming out of the senate on health care? >> it's a big government takeover. we are looking at huge tax increases, even cutting medicare and medicaid to providers. hospitals and doctors will be cut in order to pay for this big

one payer system health care plan that is going to take over all the private insurance choice in our country, that's for starters. >> does the government insurance plan, which is the center piece of what mr. obama seems to want, do you think that will pass or fai fail? >> larry, i think that -- i think it will fail, but i don't know. they have 60 democrats and they are really putting a lot of pressure on the democrats, but the one whose are thinking are balking, they're saying, wait a minute, you're talking about another trillion to the deficit, you're talking about a huge tax increase on individuals, you're talking about cutting medicare and medicaid providers and what are you going to get for that? fewer choices and lower quality health care. >> we're going to put up on the full screen, this incredible bureaucratic central planning

plumbing chart. look at this thing from mr. kevin brady of the house republicans, i guess on the joint economic committee. that is an unbelievable chart. nobody, incomprehensible. let me ask you this, senator coburn, your distinguished colleague from oklahoma said, okay, if we pass a government insurance plan, shouldn't every senate and house member have to sign onto it? that becomes their plan. do you think they would do such a thing. >> he put the amendment on committee. 45 amendments were put up in committee by republicans.s. two passed, that was one of them. he was making a point. saying, okay, if you think this is so good, let's put everybody under it, put the congress under it and let's just see how everyone likes it. the committee adopted the amendment, but if you think that has any chance to stay in this bill, of course, i have a road to sell you in alaska, come on. of course, no one is going to want to be in a plan that has no

choice of doctors, that starts to become the canadian system because if you have the public government plan, you're going to start crowding out the private plans and you will take out of medicare and medicaid and lower the quality of those as well. your hospitals are now going to start getting in trouble, rural hospitals and the hospitals your urban hospitals that teach medical students are going to be cut. what are we thinking? it's incomprehensible to most of us. >> just in the last few moments, you're basically saying in your editorial in the texas paper, i believe you said this before, people go into this government insurance plan, they will lose their own insurance plan and lose their choice officitions, is that true. >> it is. also, you will raise the cost of any private health insurance that would be left and they're even talking about taxing that. >> why don't we change and save

medicare from bankruptcy? wouldn't that have been a more intelligent place to start? >> you know, larry there, are so many reforms we need. we need more access to health care but we could do it by offering health care plans by small business, by offering small business incentives to cover people, not taxes, that's what we ought to be doing more free enterprise in this whole equation. >> senator kay bailey hutchison. thank you ever so much. we're a little short of time because of the fast breaking news on cit. you may have to grapple with that tomorrow. thanks for coming on t"the kudlw report." >> thank you. kevin grady's right. that chart is wonderful. >> what a bureaucratic soviet style mess. coming up, i will give you a little bit of caution about the stock market rally and the economy on the other side of the break. catch me tomorrow morning on "the call" at 11:00 with trish and melissa.