i promise to try too find it right here for you. see you monday. what's up tonight? >> stocks are down. gdp very mediocre and mitt romney on the a role. sizzle story number one this evening. a mitt romney knockout in last evening's debate. i think he is going to cruise through the primary. we're going to debate whether newt is still alive. joining me is john mccain. he is in the sunshine state, and i hear he likes senator marco rubio. sizzle number two, one of the weakest economic recoveries on record. you would think president obama would be searching for ways to promote growth. instead he is raising taxes on successful earners. go figure. and another sizzle tonight. who is responsible for america becoming a social welfare entitlement state. did you know half of american households get government benefits now? that cannot be good. any way, let's go to our top

story. what could prove to be romney's knockout punch after he took command at last night's debate in florida. take a look at this sound from last night where romney strongly defends his success and his wealth. >> let's put behind this idea of attacking me because of my investments or my money and let's get republicans to say you know what? what you've accomplished in your life shouldn't be seen as a detriment, it should be seen as an asset to help america. [ applause ] >> all right. big crowd pleaser. a lot of applause on that one. so let's talk. here for a "kudlow" rematch. both sides of this two-horse race, gingrich campaign consultant kellyanne conway, the president of the company and romney support erich lazio. kellyanne, was mitt in a knockout mode last night? seriously, mitt knocked out newt. >> mitt, whatever he paid his new debate coach is worth every penny. it took 19 debates and finally he said something that you all think is worthy of a nominee. he can't run on inevitability

anymore. he did have some good comeback lines. he stacked the audience with romney supporters. that's a smart tactic. you know what we like, larry? we like that all the florida media who are there are reporting are in the thousands in the thousands, romney and santorums are in the hundreds and hundreds. those people are not just there waiting 90 mints in a line because they're curious. they're going to show up on tuesday. >> rick lazio, on the other hand, a whole bunch of polls before last night's debate show mitt taking an eight or nine-point lead. my guess is after the debate he is going to be a 12 to 15% lead. let me ask you as the season's political professional, which you are, if mitt wins florida, is the nomination his? >> i think he'll have huge momentum coming out of florida when he wins it. and i do believe he'll win it. he had an outstanding debate performance last night. strong, confident, took it to the speaker, newt gingrich. made the case for capitalism and free enterprise, which a lot of

people have been waiting for, for the investor community, for why people who are investors are good for america in creating jobs, expanding factories, creating growth. that's the mitt romney story. here is a guy with experience who has done it before. he'll be an entrepreneur taking to it a career politician and barack obama. and you've got to believe in the end that's going to be a very strong matchup. >> let me play another clip from last night's debate, because this was another mortal body blow to newt gingrich. this is regarding investment portfolios, completely deflating gingrich's attack. can we play that? do we have that sound? >> we discovered to our shock governor romney owns shares of both fannie mae and freddie mac. governor romney made a million dollars off of selling some of that. governor romney has an investment in goldman sachs, which is today foreclosing on floridians. >> you checked your own investments? you also have investments from mutual funds that also invest in fannie mae and freddie mac. >> whoa! that was deflationary.

kellyanne conway, how could newt gingrich have walked into that hay maker punch? that shows me the gingrich campaign is simply unprepared. >> that's not a nice thing to say to one of his senior strategists. >> i love you. but you walked in. that was a hay maker. >> the standard for newt, even here, larry. we know that. we have our big girl pant tis and underraos on every day in the newt world. believe me. let me give the audience the context of the freddie mac debate. mitt romney has paid millions of dollars in advertising in florida saying what? newt gingrich got consulting money from freddie mac and freddie mac is foreclosing all over florida. so therefore he connects, he connects newt gingrich to the foreclosure crisis in florida. >> do you not think, in all seriousness -- >> we have a right to defend ourselves. >> but that tactical mistake was unbelievable. do you not think that newt has got to be held responsible? whatever his position was with freddie mac, he was defending

freddie mac. and freddie mac was one of the culprits of the housing crisis, and florida has been badly hit with the housing crisis. >> there is no question. but newt repeated something last night which is indubely true. the one time that newt gave advice to the congress on freddie mac, it was reported in "the new york times" in july of 2008, he said don't give them any more money. they need to be reformed. he also said last night he would break up fannie and freddie into five different entities. the reason mitt romney didn't have this is nobody asked him what he thought. the congress never asked that guy to come in. nobody asked him for his advice. >> there is a bigger question here, and this is where i want to go. newt has been essentially trying to hammer mitt romney's success. that's what the first clip showed. you referred to it. mitt finally stood up. in the prior speech, newt talks about mitt's world of swiss bank accounts and cayman island bank accounts and automatic $20 million income he didn't earn for no work. now to me, this is the problem with newt gingrich.

he is pounding capitalist success. he is pounding romney's success. he is using the language of the left, rick. how the hell can newt gingrich run against barack obama because barack obama is just going to say well, newt, you have already done the work for me? >> i think it's very damaging to the republican image and brand. when we're trying to persuade people that the obama philosophy of taxing successful investors, of driving investors away, of punishing success and hard work and businesses that that argument has got support and cover by newt gingrich is a bad place for the former speaker to be. >> and what about you're doing to him, rick? excuse me, what if newt is a nominee and what are you all doing to him? >> there is nothing wrong, and that is what mitt romney is saying. when you are a patient saver and investor, when you're not spending every dime that you have and you decide to take a chance on somebody else's dream, and you're helping to expand

economic growth, that's not something to be criticized or condemned. that's something to be celebrated for the good of the country. that's why i think in the end newt's arguments are going to fail and they're going to be rejected. and you see a lot of important republicans. i'm not just talking about people like bob dole. i'm talking about marco rubio, and many others who are saying that this damaging, destructive commentary. we've got to stand with the capitalists, with people who are free enterprisers, the entrepreneurs, with people that are about growth and expanding opportunities and creating jobs. and that's the side of mitt romney. >> do you me who the real capitalist in the race is? the one who has a 15% flat tax, not mitt romney. the one who has zero capital gains for everyone, not mitt romney. he makes an artificial $200,000 threshold that would kick out 894,000 small business owners. i'm probably one of them because he is not a small business owner. he is not an entrepreneur. mitt romney didn't start some hardware store with his dad after the crops didn't sow one year. he is successful. a big business guy.

god bless him for it. i think that's terrific. but you know what, rick? you and some of your former colleagues in congress, the wear you're picking on newt, he is a radical, he is undisciplined, what doesn't this work both ways? >> kellyanne, here is the problem. i ran in 2000 against hillary clinton. so i have lived through this. i know when hillary clinton went up in the air, the most common ad that came out, and i'm not blaming newt for the loss, but they were trying to compare me with every mistake, every reckless statement, everything that newt did that alienated the swing voters. and that's the problem here. the chances of losing the house and the senate to the democrats and losing down ballot people is incredibly stronger i think if newt is a candidate. not because he is not a good republican or not because he is not a conservative. i'm not making that case. i'm just saying his record is so flawed as a national candidate that he is going to hurt people downstream.

>> that is -- excuse me, excuse me, the republican congress has a 12% approval rating, and they got there without newt gingrich, didn't they? >> he doesn't have credibility when he talks about a flat tax if he is attacking people who are savers and investors and entrepreneurs. >> rick, who was the keynote speaker last night? who was the keynote speaker last year when the republicans came to congress? who was the keynote speaker? newt gingrich. mitt romney wasn't at the conference. i was one of the speakers. newt was the keynote. they were breaking their arms down. >> kellyanne, listen. you have probably plenty of areas toy attack mitt romney. >> yes, like not telling the truth last night. >> from being an entrepreneur and being successful and being an investor. >> he is not an entrepreneur. >> that's where you're telling the conservatives -- >> i got to leave it. all right. >> i'm not attacking him for that. >> successful entrepreneur. >> hang on. please stop. no, no, please stop. we're not going to settle this tonight. my only wish, these are two great friends of mine, kellyanne conway, rick lazio, they're both

great friends. they love each other. we just have a little disagreement. all said, kellyanne, i wish newt would stop attacking various aspects of capitalism. >> i wish mitt would tell the truth. >> okay. we'll leave it there. now, we're going to continue the discussion. joining us now exclusively fresh from the florida campaign trail, an old friend, arizona republican senator, 2008 presidential nominee, mr. john mccain. senator mccain, i am always honored when you come back on the "kudlow report." it is great to see you, sir. i know that you're for mitt. all right. i get that. i know you have said today newt should go to the moon and mitt romney should go to the white house. >> it was joke. >> i understand. >> but i want to ask you a serious question. i who have the most regard for mitt romney, i have huge respect and regard for mitt romney, i want to ask you about a businessman in the white house. bear with me. the last four businessmen in the

white house, george w. bush, george h.w. bush, jimmy carter and herbert hoover. it didn't turn out so great when a businessman ran the white house. this is a serious question. in your judgment, your experience, do you think now is the time to put a businessman in the white house with our troubles? >> of course i do, larry. you know that, because one of our biggest problems over the last three years nearly is that we've had leadership from someone who doesn't have the slightest concept about what business does and what entrepreneurs need and why businesses are holding back, as you talk almost every night of a trillion and a half dollars, not investing them, who eves, fundamentally believes that government creates jobs. mitt romney knows that business creates jobs. and by the way, one other part of this debate, if i could just mention it, leadership. and mitt romney showed that when he saved the 2002 olympics. you recall the olympics were on the verge of collapse, and we were on the verge of losing them

from salt lake city. he came in. he fired the people that he had to fire. he got the people and the job done and ended up one of the most successful olympics in history. so he not only has business experience and government experience, but he has leadership experience. and i think the combination of those three are beginning to show through. and could i just also say, i listen to the back and forth there. we need to stop debates. we need to stop debates. they're driving up everybody's disapproval ratings. the obama people and their campaign are sitting back just joyful that all of this is going on. and this mud wrestling ought to stop, and we ought to get back to traditional campaigning. we've had enough. >> all right. we've had enough debates. let me go to another topic. you have said on the campaign trail that you would like to see marco rubio as mitt romney's running mate. tell me why. >> and i say i think he is at the top of the list. i wouldn't presume to tell someone who they should take. but marco rubio has experience in the legislature. he is a superstar in the united

states senate. he has -- as you've had him on on your program, he has a lot of charisma. he is very articulate. and i think he is the kind of young next generation of leadership that the republican party needs. i'm not saying against old geezers like you and me. >> all right. let me ask you something. this is more senate business. >> yep. >> but i'd like to hear our candidates talk about this. as you know, there are some huge issues coming up in this congress. for example, a gigantic tax hike is going to take place year from now. all the bush tax cuts are going to be rolled back. the capital gains tax is going to go up to 24%. that includes the obamacare taxes. that is horrible for the economy. and second, senator mccain, we are facing a trillion defense spending cut all in, including the work of the super committee. i want to know. tax hikes and defense cuts do not sound like the right path to prosperity for the united states. your thoughts. >> i think it's a looming

disaster. i think that the cuts in defense spending will be incredibly damaging, even panetta, the secretary of defense has said that. and by the way, after every war we've said hey, we're not going to need a lot of boots on the ground anymore. we've got bombers. we have drones. look at history. every time we have cut back on the one factor that wins, that decides conflicts, and that's boots on the ground. and that cutback of 100,000 marines and army personnel i think is-be disastrous. but also, again, larry, you're more of an expert than i am. what is the business community thinking when they see those massive tax hikes staring them in the face. >> they think it's nuts. they think it's nuts, senator. and what they're all calling for is business corporate tax reform and secondly, from the simpson-bowles commission, they're calling for base broadening. get rid of the deductions in the loopholes and lower the personal

rates. in other words, senator, we've got a mediocre gdp number out today. and the first ten quarters of this economic recovery are among the worst in history, way below the post for average. why would we be raising taxes? obama wants class warfare. nobody else in the world does. that's the part i don't get. and i would like to see our candidates talk more than. >> and simple and comprehensive tax reform would be the most popular move that we could make. second is repatriate that $1.5 trillion that is sitting overseas. and that would create more jobs and investment, absolutely, which this administration rejects that proposal as well because they want to tax them at 35%, as you know. so there is a lot of things that we can do. but also, the biggest problem overall that i think we're facing, and i talk to business people large and small, is the uncertainty of the future. you've got to give them a certain future, even if it's not everything that they want. and finally, it was the housing

crisis that started this incredible recession we're in. and when home prices stabilize is when we will begin to come out of it. >> and your major point, senator, just to return. we're at the end here, now is the time for a businessman to take the reins. that is your belief? >> that is my belief. and i believe he has the experience in both public and private sector that he can governor this nation and bring us out of it. because you and i and he both believe that america's best days are still ahead of us. >> all right. i do, sir. thank you, john mccain. you're wonderful. thanks for helping us tonight. >> thank you, larry. looking past the win, place, show of last night's debate nevada comes up soon after. mitt romney's romney care did get slammed by rick santorum. how big a problem is romney care going to be for the massachusetts governor? and once again, i say free market capitalism is the best path to prosperity on the campaign trail and in the government and around the country and in the communities and in small businesses.

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welcome back to "the kudlow report." if you ask me, after romney's knockout performance in last night's debate, it does look

like mitt is going to sail through florida, all the way to the gop nomination. but i want to check in with our a plus political panel on the road ahead for the race beyond florida, and also some other issues that cropped up in the debate. now we have cnbc contributor robert costa, the national review. he is just back from florida. and two of the best political strategists, phil musser and ed rogers. gentlemen, before we dive in, i want to play this romney care slamdown from rick santorum last evening. please take a listen. >> the government-run top-down medicine is working pretty well in massachusetts, and he supports it. now think about what that means going up against barack obama, who you're going to claim well top-down government-run medicine at the federal level doesn't work. wait a minute, governor, you just said top-down medicine in massachusetts works well. >> all right. that's a very interesting tough debate. rick santorum had an excellent debate last night. ed rogers, i want to go to you,

your political acumen, please. how big a vulnerability is romney care going to be to governor romney in an obama matchup? and what about rick santorum continuing to take this theme in future debits and square-offs? >> whatever vulnerability romney has is a result of the massachusetts health care plan is already factored into the voting marketplace. it's well established. it's well-known. romney has explained it over and over. when you're explaining, you're losing. it's not flattering. but on the other hand, i think rick santorum has squandered some of the momentum he had in some of the good will that he had by becoming the angry man in the race. and this is an example of that. it didn't really help. there is nothing he said was flattering for rick santorum, and everything he said is already well-known and ground well travelled by romney. it doesn't really matter at this point. it's not driving any votes. >> but ed, let me just follow through, though.

>> please. >> there is a new study out by health care experts. we've all talked about it. and that's what santorum was quoting from. and in this study it basically said, look, the free rider problem in massachusetts has gotten worse, and the costs have exploded in massachusetts, despite the mandate system, which is the heart of obamacare. in other words, there is new information and a new study. does that trouble you? and will mitt romney have to make more, have to say more and defend more on this issue? >> yes, he will be more on the defense. i'm sure if he had it to do over again, he would have done some things radically different. but again, it's established in the voting marketplace. there is not a voter out there that doesn't know romney has some sort of obama-like health care plan in massachusetts that he may or may not be proud of, that he may or may not regret some parts of. it's already hurt romney as much as it's going to. and again, i think that santorum has squandered some of his good

will and the momentum he had by beating this dead horse. >> all right. let me switch gears. i want to pull up another sound from last night's debate, mitt romney trashing newt gingrich's promises. please take a listen. >> look, this idea of going state to state and promising what people want to hear, promising billions, hundreds of billions of dollars to make people happy, that's what got us into the trouble we're in now. we've got to say no to this kind of spending. >> you know, phil musser, the first time i can remember anybody saying we've got to say no. now he is referring, of course, to newt gingrich's lunar, lunar colony, or whatever he wants to build on the moon. and romney said hundreds of billions of dollars, if an executive of mine came to me with that kind of proposal, i would fire him. but this is a tea party thing, mr. musser. is this going to emphasize more on spending cuts and deficits? >> absolutely. mitt romney showed a moment of strength here. i think that's what a lot of republicans have been waiting to see from mitt. it was a critical interchange

where he was able i think in the debate on monday to essentially use a boxing an a analogy, work the body within the very early moments of this debate. he had several kind of knockout blows on gingrich. this being one of them. and frankly, i was looking at some private data just before i got on your show tonight, larry. and one of the interesting things is the people who watch this debate, republicans who watch this debate, about 56% of republicans in florida, in this survey say they watch the debate. and frankly, the undecided number of those voters is small, small, small. down by about 8% or 9%. that means people are making up their mind. and the people who watched this debate last night thought mitt romney won it by almost a two to one margin over rick santorum and followed by newt gingrich. it was a big moment for mitt. >> bob costa, if mitt romney takes florida by something like two to one could be a blowout. race over? game, set, romney? >> no, not at all, larry. we should be very careful to count newt gingrich out.

this is someone whose campaign collapsed in the summer. he came back. his campaign faded in december. he came back. on phil's point, look, we can make fun of gingrich talking about the moon, but it says two things to me. he is trying to appeal to the vision part of the gop, the tea party aspirations. and he is also saying to the states i'm investing in you. i'm looking at your details and your history and what is important to you. he did that in south carolina. it paid off. it pay not pay off in florida. but it shows he is going to go state to state. he is going to make similar claims with a similar argument. >> let me can you about nevada. nevada is a caucus state, the next on the list. what has gingrich got going in nevada? >> gingrich has a great game. nevada is even more complicated because ron paul is more organized there. he has been spending months on the ground. gingrich has a pretty good operation. what you're seeing is very interesting. tea party groups are coalescing around gingrich with all of his flaws. and they're saying he is the anti-establishment candidate. that's really going to help him.

remember, what put gingrich over the top in south carolina? tea party groups. in florida? tea party groups. in nevada an interesting coalition. keep an eye on it. >> ed rogers, you wanted to say something? >> well, nevada is going to be a footnote. florida is a headline. and if romney wins by a big number, it's going to be hard to see how the trick birthday candle of newt gingrich's candidacy flickers back to life. he is going to stay in the race there is no reason to get out. but a big win in florida, that person is going to be our nominee. a big win. if it's a marginal win -- >> it's about delegates. it's about delegates, not just momentum. >> no, it's not. it's not about delegates yet. it's still a momentum race. >> in a crowd field. >> bob, on this point, just on nevada, nevada is on the 4th, on saturday the 4th. then there is a break, a lull in the action for a while there is no question that is going to be a regrouping time for our party. but mitt romney is extraordinarily well organized in nevada too. and you to remember, frankly, there is a large lds community

in nevada there is a lot of built-in advantage in a closed caucus system for a caucus that is only in its infancy. this isn't a well established tradition in nevada. and. >> but that's not the name of the game. super tuesday is the real story. santorum and gingrich could hang around until early march. they have enough money to hang around in the super pack to pay for their ads. >> the results in nevada won't last but one-half of a news cycle. >> i got to leave it there, gentlemen. thanks, robert costa, phil musser, ed rogers, thank you very much. coming up on "kudlow," a talk of a facebook ipo. but which rock star could end up a millionaire by the deal? the answer and another break in business news when "the kudlow report" continues. [ male announcer ] at scottrade,

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if you have afib not caused by a heart valve problem, ask your doctor if you can reduce your risk of stroke with pradaxa. reports tonight that facebook could file for an ipo as a early as wednesday. and that beautiful day could turn one rock star into a billionaire. scott budman joins us now with that and the other headlines coming into the cnbc newsroom. good evening, scott. >> good evening, larry. it is the big story everyone here in silicon valley is talking about tonight. morgan stanley appears to be the lead underwriter for the facebook ipo. if it happens, the company could be valued between 75 and $100 billion. elevation partners run by u2 frontman bono could make as much as $1.5 billion on the deal. a new york jury has just awarded businessman donald

drapkin. in his lawsuit against ron perelman. they had a bitter falling out and he sued perelman for unpaid composition. amr got court permission to walk away from nine aircraft leases, seven of the boeing 757s as well as one md-80, one airbus a-300 as well as their engines. amr is still trying to get itself out of bankruptcy. meanwhile, "the wall street journal" is reporting delta is taking a look at amr and us airways as possible takeover targets. u.s. steel is selling a plant it bought nine years ago it paid $33 million. it sold the plant for $1. you want to buy it? it's not in pittsburgh. it's just outside of belgrade, serb serbia. more regulations in california. sweeping new auto emissions were passed that includes a mandate to have 1.4 million electric and hybrid cars on the road by 2025. that's one in every seven cars. and finally, did you try to buy tickets to see the bruce

springsteen tour? thousands tried but had problems with ticketmaster's application. now a new jersey congressman bill pascrell, a hometown fan of the boss, is getting involved. he says scalpers were able to get the best seats, and he is calling for more government oversight of the ticket-telling business. even more regulations, larry, than in the music business. >> not music to my ears. but many thanks to kntv's scott budman. we appreciate it. up next, very sub-par report and wall street promptly sold off on the news. we're ten quarters, ten quarters into the so-called obama recovery. and it is lackluster, way below the post war average. and i ask if deep recessions are supposed to breed strong snapbacks, where is it? i don't see it. our guest will weigh in on the stock market.

welcome back to "the kudlow report." i'm larry kudlow. all right. q-4 gdp came in light. stocks wound up selling off on the news. and interestingly, one of our panelists actually sees a serious recession risk ahead. so let's talk. we have lee munson, chief

investment officer at portfolio. cnbc contributor don luskin is chief investment officer at trend macro. and on the cnbc newsline, we have jim lacamp, portfolio manager at macro portfolio advisers. don luskin, i was terribly interested to read in the notes you see a serious recession risk ahead. tell me about that, and what does that mean for stocks? >> oh, this isn't new, larry. i've been saying this for quite some time. the macro data that we see doesn't show any signs of recession. but over 30 years of being in this business, have i found one indicator that is flawless in forecasting business cycles. and that is s&p 500 forward earnings. when year-ahead earnings start moving down, in other words, when they're being downgraded on average, not upgraded on average, that means that a recession is anywhere from three to nine months in the future. and the peak in forward earnings in this cycle was last august. so we are getting there. >> let me just cross-examine quickly, how big is the downgrade, don? >> the downgrade is only about

2% so far in the u.s. in other countries, it's massive. we're looking at 17, 18% downgrade in italy. 10% in germany. obviously, europe is already in recession. so in the u.s., it's small, but in certain key sectors, it's gigantic. so forward earnings in the financial sector are already down 10%. that doesn't mean you're going to get a big recession. it doesn't mean that you're going to notice you're in a recession. i'm not saying that. >> it's got to be really bearish for stocks. >> no larry, it doesn't. because whether there is a bear market or a bad one associated with the recession is a question of valuation, not a question of business cycles. there was no bear market associated with the 1990-'91 recession. stocks were up during the whole thing. where as in the 2001 recession, which is a very mild recession, there is a 50% bear market because stocks came in so overvalued. stocks are so cheap right now, don't worry about the business side. >> i'm paid to worry. lee munson, in your notes, you say you don't see a recession threat. in fact, you see 4.5% growth. >> yeah, i do.

you have to remember, 4.5 is just trend-line growth. we're still not going to get maybe 5.5 or 6 that we would really need to jump-start the growth that i know, larry, you like to see. but i don't see a recession. now i will agree with don on some side that i don't expect any more than say zero to 5% increase in earnings on the s&p 500. and i do think it's a matter of multiple expansion. but, you know, we also saw last quarter we did take in, you know, a 1% haircut because of government spending, getting taken out of nominal gdp. but we also saw residential construction up 10%. so we are seeing signs of life in housing. and we've had four quarters where the residential side has really made a positive impact on gdp. so i don't think we're quite in the recession territory. i think we're going to grow just fine. i think we're going to be okay this year. >> there is one thing in this morning's numbers, lee, you really have to acknowledge. so much of the real growth report today, 2/3 of it was in changing inventories. and when that happens, that

means you're just going to have to give it back in the next quarter. because inventory changes have to sum to zero. a big one in one quarter, a negative one in the next quarter. that's just history. this coming quarter isn't going to be great. >> i agree that we could have some spillover from last quarter. and i did think that it was pretty shocking that the right year inventories and the numbers you're talking about. but i still think in the second half of this year, we're going to go back to trend nominal gdp approximately 4.5%. i don't think this is going to last more than three a months. and we might slide by without it, especially if the government starts buy:00 up more debt. >> but lee, the trend since 1973 is actually 2.9%, which is what we've got right now. >> i'm looking at nominal gdp. >> hallelujah, i only pray that happens. >> hey, listen, i always hassled you as being too rosy on the market. now i think i'm going to hassle you about being too bearish. i'm going to take your side last year. i think igthe market goes higher here. i don't think we should be

worried about the numbers that came out today. >> jim lacamp, are you out there on the telephone? >> i'm watching and listening. >> all right. which side are you on? are we going to have 4.5% growth or worry about the risk of recession? >> i don't see how you can possibly have 4.5% growth with oil prices where they are and consumers having little down to losing their savings rates again. thing is a lot of issues with the economy. i tend to agree with don here. the market wants to go higher here. we've seen treasury yields go back up a little bit. that suggests some money is coming out of bonds into stocks. we've seen emerging markets start to improve. copper prices have started to come back up along with precious metals. and leadership in the market has morphed from the defensive type names that we saw in the fourth quarter like utilities and health care into technology stocks. and much broader beyond, that biotech names. we're seeing a lot more leadership than we've seen over the last six months. so the market is telling us for now it wants to move higher. the global issues are still there. europe is still there. it's not going away. we're going to have to deal with

these things. it's going to be a traders market. but the market does look like it wants to go higher. >> i will say this, gentlemen. even though the market was off slightly for the week, 60 points off on the dow, some of the cyclical growers like materials tech, industrials and consumers, they had positive weeks. all of them were a half percent to over a percent. >> and larry, the advance and decline numbers really look pretty good. they look better than they've looked in a while. >> yeah. that's all pretty bullish. >> if you look at today's market, the dow was down, but the s&p and the broad market all did pretty well. >> all right. i got to leave it there, thank you very much. jim lacamp, lee munson and don luskin. moving ahead, one of the weakest economic recoveries on record. does that mean obama can kiss a second term goodbye? does that mean he should quit raising taxes on successful earners and investors? what does it mean? jimmy p. and i will talk right after the brake. [ male announcer ] let's level the playing field.

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welcome back to "the kudlow report." while obama is out peddling his soak the rich tax hike plan, this is one of the worst post war economic recoveries in history some what is the election impact going to be? let's talk to cnbc contributor jim pethokoukis, american

enterprise institute. jimmy, before we start, we're going to put it up on the full screen. ten quarters into recovery, okay. ten quarters. world war ii, post war average covering what, 11 recessions, it's about 4.5%. ronald reagan at this stage ten quarters later, 6%. barack obama at this stage, 2.4%. now jimmy, does that doom obama or might the economy spring back and people won't care about these historical figures? >> well, of course, reagan won by a landslide. barack obama doesn't need to win by a landslide. he just needs to win by one electoral vote or, you know, 0.1 percentage points. he doesn't have to have a reagan-like recovery. we just had a year of stagnation. gdp a little under 2%. income growth kind of flattish. look what happened to barack obama's approval ratings. they went from 50% a year ago to about 43% today. you get another year like that

of about 2% give or take/income growth, he is already up 43% approval ratings. generally presidents with that kind of approval rating, they don't win. they lose 2/3 of the time. >> it is so interesting to me. the obama keynesian policies, $800 billion stimulus package, cash for clunkers and all the add-ones he had, the federal reserve, $2 trillion money supply pump priming, zero interest rates, a bunch of little teensy tiny temporary tax cuts, none of this keynesian magical bag, you know, the bag of tricks, none of this has worked, jimmy. and now he is talking about raising taxes on those most likely to invest, the so-called millionaires. this is the part i don't get. don't people intuitively know we need to try a different course? >> the unintended consequence of the entire obama stimulus plan is people got to see like a pure experiment, keynesian experiment, and to see what would happen. and we saw what would happen.

it's the worst recovery in modern economic history. and we're to be have another year of that. there is no appetite for more spending. so apparently he is going to go the other route and go with higher taxes. >> what is the outcome real quick? what do you think is going to happen to the 30% minimum tax for millionaires, jimmy? is it going any place? >> it's going absolutely nowhere fast and it shouldn't. it's wrong. >> even keynesian are supposed to believe that weak economies don't deserve tax hikes. >> he should go back, embrace bowles-simpson, cut tax rates, get rid of the tax breaks. call it the obama rule, forget about the buff tet rule. >> ronald reagan lower tax rates, limited spending, deregulation, strong dollar. 6% growth after ten quarters compared to president obama's 2.4. james pethokoukis, thank you very much. coming up on "kudlow," here is another one. is president obama creating an entitlement nation of dependents?

now get this. half of u.s. households now get government benefits. half. and by the way, i'm going to ask, is that the same half who don't pay any income taxes? our dynamic duo, robert reich and steve moore will opine. t... while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prescription celebrex can help relieve arthritis pain so your body can stay in motion. because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation. plus, in clinical studies, celebrex is proven to improve daily physical function so moving is easier. and celebrex is not a narcotic. when it comes to relieving your arthritis pain, you and your doctor need to balance the benefits with the risks. all prescription nsaids, like celebrex, ibuprofen, naproxen, and meloxicam have the same cardiovascular warning.

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if you follow the president, we're going to be more like europe, more like a social european social welfare state. >> i would argue the president

is the most effective food stamp president in american history. >> all right. after taking it on the chin from the gop presidential candidates for turning america into a food stamp nation, president obama attempted to fight back today. please take a listen. >> first of all, i don't put people on food stamps. people become eligible for food stamps. second of all, the initial expansion of food stamp eligibility happened under my republican predecessor, not under me. >> all right. but take a look at these charts. from investors business daily, look at that. the share of people on food stamps or getting a government check has really soared under obama. in his first three years, direct payments shot up by almost $600 billion. that's a 32% increase. so might mitt romney be right? is america becoming a social welfare entitlement nation? let's talk from california. dynamic duo cnbc contributor robert reich, former labor secretary and author of "aftershock" and steve moore,

author of "return to prosperity." robert reich, this explosion of entitlement programs and social welfare programs and the safety net is accompanying a decline in economic well-being. the economy stinks, and government benefits are soaring. so you, robert reich, see a relationship between the two? >> i do see a relationship between the two. first let me say, though, i don't know how steve moore got into california. he is supposed to have a visa to get here. and steve, they told me they would never let you in. but let me just say, larry, there is a relationship. and the relationship is exactly the backwards of what you are suggesting. the relationship is this. i mean, the economy has plunged. it plunged in 2008 to the worst we've seen and the most prolonged recession we've seen since the great depression. so obviously there are going to be a lot of people who need unemployment insurance and food stamps and a lot of help. i mean the reason that we have so many people who need so much help is because the economy got so bad and the reason the economy got so bad is that wall

street went berserk and there wasn't enough regulation. and we've been through this. we know what needs to be done. >> please don't forget to blame george bush. it wouldn't be any good if you didn't blame george bush. >> i thank you very much for the invitation. i will go one step further. >> blame me! >> what we saw under george bush is not only the beginning of a huge dollop -- talk about corporate welfare. talk about bailing people out. >> right. >> wall street got the biggest bailout in history. but before that, larry, one more point -- >> i'm sorry i offered. >> you invited me. >> this is supposed to be equal time. >> but steve moore, i want to ask you now, we are ten quarters into a so-called recovery. and a lot of people are saying under obama, the eligibility has expanded for food stamps in all these programs. and the benefits themselves have expanded. and i want to ask you, is that crowding out incentives and economic growth? >> well, first of all, i want to tell my friend robert reich that i was actually flying to athens, greece, and i ended up in los angeles. i don't know how that happened. but being here on the left

coast, it's unbelievable. this is a bit of a welfare state too. look, i think you really hit it, larry. that it's not just that more people are on these programs because of the recession. bob, as you know, the president vastly expanded the eligibility of these programs through the stimulus program. and by the way, he is not just president food stamps, he is president medicaid, president unemployment insurance. he is president handout. and i think this is a big problem because it destroys incentive for work and for stronger economic growth. and you don't make the economy stronger. >> hold it, hold it. the poverty rate went up there. are more people in poverty today. and there are four people trying to get every single job. how can you say that they don't need this help? i mean, they're not getting enough help as it is. >> because, bob, you were the one who said the stimulus bill was going to create all these millions of jobs. and it didn't. and a big component of the stimulus bill was these handout

programs. look, larry, i think we ought to convert all of these promise, medicaid, the unemployment insurance program, food stamps, i think one way we could really deal with it is to require people to work, bob. this is actually kind of your idea, and i'm coming around to this. if people are going to get a hand out from the government, i think they should work for it. >> it would be a good idea, steve, if there were jobs for them to work at. if there are no jobs, if you have 25 million people who are unemployed or too discouraged to look for work, how can you say the only way they can get any kind of help at all is if they get a job. >> because they, robert reich, they follow your policies. this is the worst ten-quarter recovery, throwing all that spending stimulus, and these little teensy tax credits, temporary tax credits. and all the fed pump priming has gotten us the worst economic recovery since world war ii. >> larry, you can not -- wait a minute. >> or nearly. so and at the same time, your president has a vision. he calls it shared responsibility. mitt romney calls it the

entitlement nation. so the two are working hand in hand. you really have this on your own plate, robert reich. you can't blame anybody. >> i can not believe that you both sit there and will not admit that the biggest entitlements, the biggest handouts, the biggest bailouts have gone to big agriculture, military contractors, wall street. i mean, you name the industry that has not benefitted over the past ten years, big pharmaceutical companies got a huge handout from the bush, you know, the drug benefit, the bush administration. >> all right. there is some truth to what you're saying. >> some truth. >> i wrote an editorial several months ago on this corporate welfare program. it's a problem. but you can't defy the fact we've seen the biggest expansion in the social welfare state in terms of these handouts. >> but steve, you can't deny the fact we've had the worst people need help. they're not getting help. >> you know, i talk to a lot of employers who hire workers. >> real fast. >> when you talk to them, they say a big problem is the uninsurance program. >> that's baloney. >> it's not baloney.

it is not baloney. >> before you end this segment. >> thank you, gentlemen. i appreciate it. our dynamic duo from california, bob reich and steve moore, both coming from the left coast. i'm still here on the right coast. that's it for tonight's show. i'm larry kudlow. we'll see you monday. with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.

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