cash for clunkers bringing in buyers? >> well, we had a solid month underway, another market share increase, phil, but we felt like we were probably going to fall short of last year's sales levels. retail we thought we might have a chance as you can see from our release, our retail sales were up 9%. i heard you make the point that fleet sales were down and that kind of reduced the overall increase. but cash for clunkers put us over the top. lots of traffic and lots of sales at ford and lincoln mercury stores in that last week. >> so george -- >> reporter: george, the big question is whether or not this is sustainable. is this a sugar high, a one time bring in the buyers, you're stealing from the future, or are we looking at something here where we see a turning of the market where consumers are going to come back into showrooms? >> well, i do think there's some la late demand, phil. demand for new cars and trucks is well below just replacement

demand. and so what we think happened is that people that were driving, for example, ford explorers that they had purchased in the '90s took this opportunity, took out some insurance on higher fuel prices and our estimate, phil is that in addition to the $4,500 that they might have saved on the new vehicle purchase trading an explorer for a focus or a fusion that the annual gasoline savings to these consumers is in the $1,500 range on an annual basis. so this is not going to have only a first-time, you know, catalyst effect on the economy, but also it ought to be the gift that keeps on giving, not only in terms of lower fuel consumption but lower emissions. frankly, i can't think of a program ever that has been so positive in so many ways across the board. >> well, can i just jump in here, george?

look. i want to see sales rising in the economic recovery. but the "wall street journal" editorial today called this crack pot economics, giving free money away. let me ask you, a lot of people are skeptical.. let me ask you, is this cash for clunkers surge borrowing from next year? so we're going to have like a double dip in car sales because of the one-time effect of this cash for clunkers business. >> well, larry, i think that's a good point and i'm certainly willing to acknowledge that not all of the sales from the cash for clunkers program is incremental. after all, nobody thought that this would just add 200,000 sales to the bottom line. we were fully expecting that some of the sales in this period were sales that could've happened in the last nine months or might have happened in the next nine months. but actually, i mean, i think the economy needs this lift right now.

there's nothing wrong with borrowing from the future when you need to kick start the economy. it's still pretty fragile out there, as you know, i do think this, larry, and i've heard you say this on air several times. stimulus program works best if you put the money in the hands of the consumer. and i think that's what we saw. >> but george, this is melissa francis. i want to keep everyone honest on the numbers here because we're talking about 250,000 transactions was or sales was the number that was quoted. but that includes the car that was clunked and the new car. so really it's only somewhere between j.d. powers 110,000 new cars sold to maybe if you took that other number and split it in half, it's 125,000, that's not a huge number based on, you know, total sales in the economy or what you really need. what does that mean to you in terms of ford sales and how many jobs could be saved? >> i'm trying to get my arms around what real quantity we're talking about here. it seems tiny even though we're

so excited. >> well, that's totally right. i mean, even if 250,000, if you take the high-end kind of a number, that's what? 2% of a 10 million sales year. so if i did the math right, i never was very good at math, that's why i'm a sales analyst. but in any case, it wasn't all that long ago that we had several $17 million sales years year after year from 1999 until 2006. i think what the economy needs is a little spark, is a little match on this dry tinderbox that we've got and see if we can't get things started. i don't think it's the see all end all. >> let me ask you this, are production schedules going to be wrapped up? that's an important gdp indicator. >> you know, i would have been disappointed if you guys had not

asked that question. i will say this. as you know, over the last several months, you've been monitoring it, phil. we've increased production several times in the second quarter and in the third quarter. our third quarter production is up over a year ago 16%. you know, the questions you asked, we're going to try to take a pencil to the paper this month. in fact, in this coming week, we'll begin that process tomorrow. and we're going to try to figure out how much of the program is incremental, how much of it would've happened anyway, and think about our production schedules in that context. one of the big open questions is, whether they're going to go ahead and release funding for phase two. you know, cash for clunkers 2.0. that's going to have an important bearing on what we do. >> george -- >> between now and the end of the year. >> george, give me your best estimate real quick. george, give me your best estimate real quick. i know you're looking at production schedules. your best estimate, how much of

this is incremental, how much of this is sales that would've automatically have happened? >> our feeling is roughly 30% to 40% of the business was going to be incremental to the 2009 calendar year. so that's as good as i can give you right now, phil.. i will say this, i think the light vehicle probably approached the 12 million range in july. and as you've known, we've been trolling along in the 9 million range for the first six months of this year. you made the point earlier, that's right, sales were down 35% for the industry in the first half of this year compared with a year ago. at 2% increase, while it's not much, it's a whole lot better than a 35% decline. >> and george, you'll take it. ford sales chief george pipas from the ford headquarters in dearborn, there you have it, larry. his belief that, yeah, there's incremental effective for cash for clunkers, but they believe

there's a churning of the market going on. >> i'm all for the forward churn. i'm just not for sprinkle helicopter money on everybody to buy cash for clunkers. the strong sales numbers at ford helping to push stocks higher, not hurting sentiments, some better than expected manufacturing data. the ism was a mini blowout, highest level in a year, showing contraction slowing in july, but look at the real story with this is underneath the headline number, which is almost 49, new orders up -- new orders at 55, up from 49, well above expectations. production rising by six or seven points by 52 1/2 to almost 58, that is a surprisingly strong manufacturing number. and that is one reason why the indexes are up nicely.y. now the dow is up 85 and change, almost at 1% gain, the s&p is up 10, now it's up 10 points and the nasdaq was up 16. let's see, the naz is up, 15.6

points. this ism number, trish, is a huge number on top of a very big construction spending number. more evidence of what i'm calling the new bull market and an impending economic recovery. >> and a lot of people would agree with you. this comes on the heels of friday's gdp number coming in. down 1%, the expectation is we will start to see this economy recover as we get into the second half of this year here. third and fourth quarter. i do want to throw a little bit of cold water on things, though. s&p, the s&p has rallied 50% since its low of 666 on march 6th. you can't forget a number like that. and in an e-mail this morning was pointing out that this is somewhat similar to the five-month rally back between november 1929 and april 1930. in other words we saw that same kind of dramatic move up about 48% after having fallen so

significantly in the month previous, september through november of 1929. now he's not suggesting anything there, but it is something that, you know, you need to consider when you're getting into a market like this, people are looking at this recovery trade, but there's still a lot of concerns. >> very interesting this morning, on worldwide exchange, talked to a couple of strategist who say the recovery trade is on, one of them declaring the bear market dead. he says it doesn't mean we're not going to retrace a bit and be volatile, but bear market is dead, which makes me a little worried. you get the s&p topping 1,000, we're still 20% below that lehman brothers level that we saw. so, you know, we're coming on the one-year anniversary of the lehman brothers fall, i don't know if we're going to make it there. a lot of folks are looking.g. but commodities today are running rampant with the lower dollar, with that strong pmi number, and then confirms by ours moving much better. you take a look at some of the

energy names.s. they're also moving higher. but interesting with the energy, up stream, downstream, up stream a little stronger because they do better with the stronger oil prices, downstream as we saw with earnings last week from chevron and exxon is a little bit harder. the other thing i wanted to take a look at is the auto zone. >> it's moved really high? >> i guess. >> they are dragging down the s&p today because while they beat on the bottom line by cost savings, they're just not gliding on the top line. >> that's a concern, as we look at this recovery, we've got a consumer that's still in the last three months, consumer spending saw 1.2%. so the question at what point does the consumer start to -- maybe some of the funding the businesses do as they rebuild inventory. >> maybe that's what everyone is worried, whether this recovery will be sustainable or really take off. >> okay, cash for clunkers here, who wins? who loses? >> we've got to go, but the

winners are the auto parts makers. if people are trading in their clunkers, they might not be repairing them. >> thanks so much. great to see you. >> all right, everyone, when we come back, big news here in the technology world. google's ceo eric schmitt resigning from apple's board has competition between the two companies starts to heat up. experts are going to weigh in what it means for google, what it means for apple, what it means for you, the investor. it's coming up only on the call on cnbc. we are back in two minutes. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity.

all right. crude oil rising higher today in concert with equities, also on that higher gdp number from friday. also opec saying that oil supply rose for a third month in july as higher output from saudi arabia offset less output from elsewhere. crude oil trading up $2 on the day. we've got a rally there, trish? google ceo, eric schmitt has resigned from the board of directors. more of apple's core businesses. here's how they're currently trading. both of them moving higher right now. both better than 1%. jim goldman live from san jose with more on this story.y. good morning, jim. >> good morning, trish. yeah, his position has been tenuous for months with analysts calling for his resignation as the two companies competed more directly with one another.

but all along schmidt has been dismissing the criticism, telling the mercury news just this past saturday that the pros far outweighed the cons for him to keep his seat. he saw nothing wrong with any of this. apple released a statement quoting steve jobs this morning saying unfortunately as google enters more of the core businesses of apple, eric's effectiveness as a board member will be significantly diminished since he'll have to reaccuse himself from even larger portions of our meetings due to potential conflicts of interest. for some apple investors, the question today might be what took so long with some telling me this morning that friday's fcc inquiry into apple's decision to ban google voice from the apple app store was the likely tipping point for his departure over the weekend. apple and google faced scrutiny since they shared two board members. arthur levinson, al gore sits on

apple's board and serves as an adviser to schmidt. now the question becomes, who replaces him? and is this the opening they will use to invite tim cook to the party after the fine job he did filling in for steve jobs while he was away on medical leave. bottom line, his position was becoming more a liability than benefit in the competitive landscape has changed so quickly now, trish, that his days on apple's board has been numbered for sometime. >> jim goldman, stay with us, we want to bring in brian. i've got to agree with what a lot of investors saying this morning as jim goldman pointed out, what on earth took so long? >> yeah, that's a good question. we're not surprised that he's stepping down. we're surprised that it took three years. you know, clearly the two companies are headed down increasingly similar competitive paths from web browsing to smart phone os, to application software for computing. we're not surprised at all. >> was he ever an asset to the

company? >> yeah, eric's actually widely credited as being one of the smartest individuals in the valley. and so we do think he did add a lot of value to the board, but having said that, we do think apple has a very deep management bench and we think the board's going to do just fine without him going forward. >> brian, just for argument's s sake, how much of this was driven by the threat of an anti-trust lawsuit either from the justice department or the federal trade commission? >> i actually don't think too much, larry, my opinion is that, you know, at every intersection of their competitive positioning, they kept seeing one another, and so i think that just from that alone, it didn't make sense for eric to be on the board anymore. >> tim cook is being talked about, i want to bring jim goldman back in as a potential replacement. tim cook certainly being having been praised as his work for coo. realistically, do you think that's a real possibility? jim? >> yeah, i absolutely do. i think tim has an incredible track record at this company. he did remarkable work while

steve was away on medical leave. and i think this is the entree apple can use. there doesn't seem to be anything in the bylaws that eric schmidt needs to be replaced by an outside number. >> all right. we'll leave it there. >> brian, you still have a 210 price target on apple and reiterating -- >> absolutely. remains our favorite pick today. >> favorite pick. >> okay. thanks so much, guys. >> thanks, we're going to leave it there. shares of health insurance, humana rising on news of the bigger than expected jump in quarterly profit. but there's a lot at stake for the company as the battle over health care reform rages on in washington. michael mcalister joins us live to discuss it all next only right here on the call. 35 years. most people try to get rid of algae, and we're trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels... that we could someday run our cars on. in using algae to form biofuels,

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then we'll prepare your legal documents and deliver them directly to you. so start your business, protect your family, launch your dreams. at legalzoom.com we put the law on your side. humana posting a 34% rise in second quarter profits to $1.67 a share beating street estimates by 3 cents. this on greater membership in its medicare advantage plans for seniors and lower drug costs. right now, humana trading up. joining us to discuss in a cnbc interview, michael mcalister. how did you manage to grow revenue despite the fact that

the economy's down and i see dropping enrollment, as well? >> well, the commercial market's been really competitive and reflected in some of our numbers this morning. but our medicare business remains strong and robust and seniors continue to find huge value in medicare advantage and continue to adopt the program. it's going quite well. >> mr. mcalister, if the medicare business is helping you, what's going to happen with health reform? these reimbursements will be slashed and a lot of people worry that hospitals will have to deal with below market cost structures, which is terrible for profits. >> well, larry, you follow this closely. we're still relatively early in determining the final outcome. but there's no question payments to medicare advantage companies including humana are going to start trending down. we've been preparing for that. at the end of the day, we look at it as if it's our obligation to be more productive and better at this than our government can. and so we've been working on what we call the 15% solution. we target trying to get medicare

spending and value proposition for seniors at about 15% lower than the traditional medicare costs. that takes time, there's a lot of transition involved in all of that. as we talk about in reforming medicare and reforming the system, it's all about the details, frankly, and we can really help our government deal with the insolvency of the medicare program because we are organized and we are getting people into case management and disease management and frankly just driving higher productivity. >> what does that mean, exactly? it sounds like what you're saying is what a lot of people have said is that to control costs we're going to have to limit what people are getting, especially older people. >> absolutely not. we don't have to limit anything. we have to get good value for money. it's the same things that drive the rest of the economy.y. in the rest of the economy, lower prices and higher quality over time. we've never seen that in health care. it's really because we don't have a system. i've been out and on your show many times talking about health care that it's frankly broke. and we all admit we have huge problems here with it, but the solution that has to be done properly here. >> how do you do that, though??

better value and lower costs, these are things we've been told can't be done. how are you going to effectively do that? >> 1 in 5 traditional medicare patients get readmitted inside of 30 days within being discharged. why would that occur? what does medicare advantage do? we step in and we've learned there's simple things that cause that to happen. either the person doesn't understand the doctor's orders, can't afford to take their drugs, has a bad social setting they go back to, any number of real basic things, and we intervene in that process, so when someone is discharged, we reach out to that individual and we work with them over a couple of weeks to get them through that period of time, to make sure they get back to their doctor visit, they take their drugs and understand doctors orders. we've been able to take it down from 11% to 12% in our business but with the same type of business. we're driving higher productivity. >> what about the flip side of that. what kind of flow are you seeing of uninsured people into your

hospitals? and what kind of reimbursements do you get? and what might you anticipate under health care reform? because as i understand it, all those federal payments are going to be really slashed.d. so the uninsured flow into your hospitals. >> we don't have any direct involvement with the hospitals at this point in time.. we're strictly an insurer, but i will tell you that the uninsured population is continuing to grow. we can see it in our membership. we can take some of our business lines in the commercial space and show you where we have -- we have all of the companies we had before, but the number of people inside of those companies is dropping. >> but how do you pay out that? you're going to get requests from your health care providers, how do you compensate for that? and how much are you dependent on how uncle sam compensates for that? >> well, now you're getting into one of the problems, there's a huge cost ship, it's estimated this year alone, probably $90 billion in that range where federal programs are not paying their full share of the costs and the hospitals and other providers are forced to get that money from somewhere else, and they get it from the private

sector. the uninsured is in the same situation. as they seek out services and the hospitals and doctors are not paid for that, those costs are transferred to the private sector, therefore driving up the health insurance costs for everyone else. so that's part of why this reform is important. we have cross subsidizization. they're not helping us. >> all right, we have to leave it there, thanks so much for joining us today. we appreciate it. trish? after last week's better than expected second quarter gdp report, how upbeat are economists about the third quarter? steve liesman on deck with the results of an exclusive survey. also ahead on today's call, the wild, will president obama raise taxes on the middle class? well, in the sunday talk show circuit, mr. geithner and mr. summers refused to rule out such a hike. so our tax debate is coming up here on the call. rs? rs? let's ask. when i trade, i want a straightforward price. they lure you in with a $5.99 trade, then charge you 15 bucks.

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welcome back, everyone, to the call. i'm trish regan. we want to get you caught up on the markets because we are up 74 points right now on the dow. a lot of optimism right now about the economic future.. s&p clocked through that 1,000 level, up 50% from its march 6th low of 666, it's just barely under that right now. meanwhile over the nasdaq, we are up about .5%, a little better than that, at 1,991. economists are more optimistic these days about the growth of the second half of this year and that could mean a quicker turn around in the job market.

steve liesman joins us with an exclusive cnbc survey. finally a little bit of good news. >> we were on the phone this weekend and did a survey to see if they were changing their forecast. we've become more upbeat about second half growth and a bit more upbeat about job growth. economists in our survey increased their forecast of gross domestic product by nearly a percentage point to 2.65 from 1.75, and by about .25 point to 2.5% in the fourth quarter. they hit the 2.5% rate, which is seen as economic potential just barely fast enough to keep the unemployment rate stable or even to help it fall slightly.. these numbers would follow the 6.4% decline of the first quarter and a 1% falloff in the second quarter. inventory clearing and a slight increase in home building and maybe a surge in auto production as growth drivers for the third quarter. for the second half of the year, 2.6% growth on average versus a 3.7% average in the first half.

that's a very big swing. here are the numbers economists expect for friday. minus 275,000, a big improvement, but still a very large negative number, unemployment rates seen kicking up to 9.6%, perhaps barely eke out a rise in average hourly earnings. economists say it's possible to cap the unemployment rate at just, i say just 10% instead of the 11% to 12% as some has feared. mr. kudlow. >> hang on a second, let's bring in chief economist for t.d. bank. mike, looking at all of these numbers and upwardly revised estimates, today's ism report a great top line number, but inside it, new orders rising nicely, a lot of leading indicators here, i think this is a new bull market. period, end of sentence. i want to get you to reaction.. i think it's a whole totally different agenda right now. >> yeah, larry, i tend to agree with you, i think we just explained to our clients in a weekly update what we've seen

since march is really just a snap back to the real collapse we saw at the end of last year.. in fact, this is sort of the zero line base and data is improving much more rapidly than most assumed it would, which would imply in a very strong sense, this is the beginning of something very positive, much more positive than most people assumed and it's going to last for quite a long time. >> joel, even an optimistic me, i accept those -- >> you are. you're still worried about those? >> i'm still concerned. and by the way, i think we're recovering in spite of washington policies not because of them. but joel, what's your read on today's ism report, both the top line and the inside components? >> well, i think it was a good report, i don't think there's any question about it, but what really worries me about the second half of this year is that it could turn out to be a really major head fake. i think with the huge inventory draw down that we saw it's really going to be very easy to get some really big numbers.. we could have a 4% or 5% growth

rate in one of those two quarters without any question of a doubt. but if you're going to have growth be strong as we go through 2010, you're going to have to have the financial sector providing the funds. that's been the case in all of the recoveries and i don't see where we're going to get an awful lot of credit made available. so i think we'll have growth in 2010, but i think it's going to be an awful lot less than most people think. >> okay, mike, i want to pick up on what larry was just saying, that's a concern of mine, as well. okay, fine, looks like we're getting the recovery, but at what point does that translate into a recovery for your average american? at what point do we see the 9.5% unemployment rate start going back down? >> well, trish, you're bringing up an excellent point. but i think we have to study the past and understand that as corporate profits stabilize, as ceos get more confident, which they're not, they're getting better, but those are the issues that have to start first, then you see inventory reinvestment, capital reinvestment, and then you see jobs expand and then the

consumer will get better. >> how long does that all take? >> another quarter or two, much like my other guests just described. this could be a process that has to prove itself out for another 4 months to 6 months, which quite honestly after the collapse of last year is not a lengthy period of time. >> steve, bringing you back in. let me just ask this question, are some people over obsessing about the deleveraging issue? some economists who were very optimistic about growth in the second half of next year are saying, look, in the first year or two, business, since the whole economy generates funds internally that borrowing and loans have never been a big part of the first year or two of recovery. you have a thought on that?? >> even more broadly, i'm indebted to a gentleman who is convinced of this over time that the banking sector never reserves. and i disagree a little bit with my good friend joel there. i don't think an expansion will be cut off by credit availability. if there's a need for it, wall street, the banking sector will

make credit available. that's in the first thing, the second thing, i think a lot of people -- we did a piece back in march, larry, after the stimulus was passed. the economists did not change their forecast at all to account for any piece of stimulus. what i am fascinated by is how good a job the market has done at doing the economist's job. and due respect to joel, the economist catching up with wall street. >> this is a late pitch for stimulus, joel. >> now, now, wait a second. steve, i -- >> if you spend money and take the savings out of the private sector. >> steve, i had the second quarter positive and i had the second quarter -- >> the economists in general is what i'm saying. >> i had the second quarter positive back at the end of last year because i expected the stimulus to kick in. and indeed, i wouldn't be surprised if we wind up getting it pretty close to positive. so i think some people were looking for the stimulus to work. the question is how fast and the timing of it.. and i'm still saying that, yes, they're going to internalize,

take the profits internally, but the question is how much can they really get out? >> in a way, did we really need it? mike, look at the recovery in this economy thus far and only 20% of the stimulus has gotten to the people. >> i think what we're going to find, just on the board you guys just posted, i think what we're going to find at the end of the year is we have a good second half, an absolutely terrible first half, but when you average the two out, we're going to find out that the american economy and capitalism itself could have very well found itself through this mess without all of the details -- >> can i bring some data to this argument which is that -- let me get an investment strategy first. we've got mike here. >> i just want to point out, larry, government spending provided 1 percentage point positive to gdp in the second quarter. >> defense spending. >> i don't care how you got it, you got it. >> it was not non-defense spending. i draw your attention to excellent blog on the "wall street journal." but let me go back to mike williams. you mentioned capitalism.

where do you invest? i think this is business driven. where do you invest?? >> i think what you're going the find, larry, is the first thing business is going to do is redo their technology platform, that's why the nasdaq has outperformed. i think you're going to continue to see that because they're going to really go for productivity gains, they went through a real shock, they're going to go for rebuilding the back end. you're going to see a lot of hardware, software upgrades, you're going to see a dramatic improvement in the profits and margins, then you're going to see a real confidence factor in bringing jobs back on board. >> all right. we'll leave it there. >> thanks, guys. we'll have the economic heavy weights, treasury secretary -- i was so excited about this next segment. >> this is shocking, i understand it. treasury secretary geithner and chief white house economic adviser larry summers refused to roll out a middle tax class hike. will the president follow through with one? and abandon his campaign pledge. we must debate, it is our moral

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welcome back, everyone. tyson foods and lowe's out with earnings. tyson a much higher earnings report of 35 cents a share due

to lower feed costs but warns of weak demand ahead. the stock down 7.5% right now. as for lowe's, posting a 22% drop in earnings from a year ago hurt by higher losses in the investment in cna financial corp., up 5.5% there on lows, melissa. taxes the hot topic on all the sunday morning news shows, tim geithner and larry summers not ruling out a tax on the middle class. in our call -- >> when we have recovery established, led by the private sector, then we have to bring these down -- deficits down very dramatically, we have to bring them down to a level where the amount we're borrowing from the world is stable at a reasonable level. and that's going to require very hard choices. >> in our call of the wild, will president obama have to raise taxes on the middle class? let's bring in cnbc contributor and former vermont governor

dean. gentlemen, thank you so much for joining us. ryan, i guess we're talking about income tax, i mean, we're already raises taxes on the middle class with tap and trade, cash for clunkers even, because who is paying for that every other taxpayer, right? >> well, absolutely.y. if you take a look another what's happened on this issue in the last year or year and a half, president obama made a very firm commitment when he was candidate obama saying no taxes whatsoever, no taxes at all, not your capital gains taxes, not your payroll taxes, not your income taxes, no taxes would go up on families making less than $250,000 a year. ever since he'd made that promise, he and his people have been trying to soften us up for what would be an inevitable tax increase under an actual obama administration. you can go to our website, you'll find the whole chronology of this ever since last year. >> governor dean, i am shocked, shocked to see his leading economic advisers would not take

the no new middle class tax hike. >> we hear lots of republican talking points about this. i don't think that cap and trade is a tax increase, most people who have taken advantage of the clunkers would not consider it a tax increase. >> they didn't pay for it. >> i don't think for one moment president obama's going to raise income taxes on the middle class. >> how about payroll taxes and the surtaxes and if you don't buy into the health care plan, individual tax mandates? >> i think you're getting things a little bit mixed up. the health care stuff stands on its own, he's not raising health care taxes for the middle class, certainly -- >> to help share taxes, does not that not equate to an actual tax. >> it's only a health care tax if you don't buy health insurance, and we need to get people in the system, they can pay something. >> it's still a tax. >> but if i just could finish my thought. >> please, please. >> the truth is that the president certainly doesn't want

to raise payroll taxes, that's the most regressive form there is. there will be increase on people who makes lots and lots of money. >> why do you think on the weekend shows the opposite impression was given? it sounds like you're pretty clear it's not going to happen. >> yeah, i don't think the question was clear and i don't think they, you know, nobody in their right mind ever answers a question by saysaying, oh, yeah we're not going to do this or that, you don't know what's going to happen.. i don't think they even hinted there was going to be a middle tax increase and i don't think there is. >> ryan, he is working his magic here, but i'm still in a state of shock, ryan. you're going to have to help me out. i don't know why these guys chose this moment. not just guys, romer, as well. but geithner and summers. why now, ryan, why did they hedge about this? and do you believe there's a middle class tax hike coming this year? >> absolutely i do. the moment, why? because health care's on the

ropes, that's why. cbo is not been willing to play ball with the democrats over with president obama, cbo has consistently said that despite all of the massive tax increases on small businesses and on companies trying to do business overseas, these plans are still going to increase the deficit and the debt by hundreds of billions of dollars over ten years. they are out of money. the only way that they are going to quote unquote pay for these massive expansions of government health care is by raising the taxes on the middle class and they know it. >> governor dean, let me ask you a follow-up to that, it is easy to sell things as saying if we tax the rich -- >> i'm going to take your question. in all due respect, that's right out of the talking points. if you can't scare them, then tell them you're going to raise their taxes. this is nonsense. the august republican talking point. this is nonsense. >> governor dean, this is the problem, though, if you took all of the money from all the billionaires in the united states, there's 1,000 of them or something like that, took all of their money away, it hadn't pay

the debt for next year, taxing just the rich won't work, there isn't enough money to pay for it. how else are we going to pay these bills? >> well, one of the ways is by savings and health care, the president has shown the way to that, i thought the blue dog compromise was a good thing, that knocked $100 billion off the cost right away. we can do this even without any republican support at all. >> howard, they all three had a chance to knock this down and none of them would knock it down. help me read this thing -- >> we're having fun, but we've got to go. >> help me read the tea leaves. >> i don't believe there will be a middle class tax. i don't believe there'll be a middle class tax increase. not the income tax. >> any tax. >> thanks for joining us. good to be here. as the cbo pointed out, there is no savings in that health care plan. we're moving on here. "power lunch" is coming up at the top of the hour. bill griffith, change the subject for us. >> all right, trish, something completely different. we're going to talk to our

favorite market psychologist and sort of take the temperature of the market right now. is hope beating fear at the moment? but for how long? can we have the kind of august we had in july? also, very interesting now, the battle lines between apple and google now that eric schmidt is stepping down from apple. where does this go from here? and "fortune" magazine out with the top business hotels around the world for business travelers. how many of them are in the u.s., you ask, we'll answer that in "power lunch." >> thank you, bill griffith coming up next, courtroom showdown over michael jackson's estate. jane wells is hot on the case. what you got? >> hey, well, larry, by the way, it's a great fiscal stimulus package for the local media, but talking about money and control, both dispute in the hearing today, and a new player weighs in, who and why after the break. i've been growing algae for 35 years.

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take a look at shares right now, down 25% almost. the company announcing that the fda has not approved its drug. they will readmit the application to the fda early next year. trish. a hearing over michael jackson's estate, having an estimated value of more than 500 million is taking place in a los angeles courthouse right now. and happens to be at that los angeles courthouse, los angeles superior court, joining us right now with the very latest. jane? >> reporter: yeah, supposed to

get underway right now, i ran into one of the executors, at least temporarily of the estate. and today the judge may decide if branca and another man named in the will by michael jackson will go from temporary to permanent administrators of an estate i'm told is only worth about $100 million, not that previous estimate of $500 million. we are told perhaps a few of michael's siblings are coming. she wants to challenge who has that control without challenging the will itself if katherine jackson is the largest single beneficiary of that will. the two executors must keep her in the loop on any new deals they enter into, she claims they are apparently intent on keeping her in the dark for as much and as long as possible. she asked the judge to allow her to impose and enforce them to turn over documents before today's hearing. they tell the court that

katherine jackson's demands have been invasive and they've been keeping her apprised daily of the developments. the estate says there's only been one new deal to talk about, the rerelease of the autobiography and any deal with aeg is subject to confidential agreement. it only wants to allow katherine jackson's team to see any contract that has with its estate if she and her her attorneys agree to confidentiality and other agreements. katherine jackson refused to make such terms, they've made new filings this morning. also today the judge may allow the estate to start giving money to jackson and the kids to live on. they've gotten the proceeds of his life insurance and also recovered $5.5 million recovered by a former financial adviser and would like to give that money to the heirs of the estate. and it may be confirmed today that katherine jackson will get custody of michael jackson's three children and debbie rowe

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all right.. it's time for last call.. a new bull market, larry? what do you mean by that? >> we're up 50% from the march lows, i think it's really significant. i think it's a triumph of business, cost correcting, we are more resilient on the business side than people realize. it's inspite of what's happening in washington, and yeah, there's going to be an economic recovery, it ain't going to be the greatest one, but it was a huge plus and i think this is the new bull market. pullbacks and all. >> you say it's despite what's happening in washington, though. at what point does what's happening in washington start to catch up with the real economy? i mean they're talking about tax rates if health care goes through going to 57% in some states. >> i agree with all of that, trish, and it's a pleasure to hear you talk about it. but i want to focus business and

free markets are more is -- durable and resilient than the detractors would have us believe and right now i've focussed on the recovery of business because everyone has written the consumer off and i'm saying it's businesses that lead consumers. that manufacturing report was terrific. i'm going to stay with the business cycle story. >> that's it. all right. that's it for "the call," i'll see you on the "closing bell" later today. >> and i'm larry kudlow, i'll see you tonight in "the kudlow report," 7:00 p.m. eastern.n. and now "power lunch" is is up next. ford is reporting a 2.3% increase on july u.s. sales, its first year-over-year increase in almost two years.. general motors will report within the hour. chrysler will also report later, but it's already saying it will report a single-digit decrease over last year, any double-digit increase month to month.h. the sec wants ex-kmart ceo to

pay more than $20 million for misleading finances. that's cnbc.com news now, i'm courtney reagan. oh, i see a two-hour special in our future. >> oh, boy. >> the s&p 1,000, what do you think? >> get out the hats. >> the s&p did cross the 1,000 mark briefly, we're very close again right now, it's the first time since the president was elected, first time actually since we've seen this last november, the summer rally alive and well. larry kudlow said it was, therefore it must be so on this first trading day of august. >> indeed, you are right.t. i'm sue herrera, cash for clunkers, major success, and chrysler says some are operating on overtime.. ford sales for july up 2%, gm's numbers straight ahead. and then we'll chew on this idea that the clunker mania may be helping to boost our mood,

making us feel better about the economy. >> and i'm michelle carusa-cabrera. after over the weekend both geithner and summers refused to rule out tax hikes.s. we're going to fire up the power grid and debate that and here's what else is on the menu. >> reporter: i'm jim goldman in the silicon valley bureau. schmidt resigns from the board of directors of apple. and this might be the event apple's been waiting for to offer a board seat to tim cook. i'm steve liesman, the economists getting more optimistic about the third quarter and the fourth quarter. but is it at the expense of growth next year? >> i'm john harwood in washington, lawmakers are finding out it's going to be a very hot august on health care and john mccain may try to cool off that cash for clunkers program. it's an uphill fight, but who knows, sue, he may try to sour that mood you