tv The Kudlow Report CNBC February 8, 2012 7:00pm-8:00pm EST
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scheme, watch it tonight. i'm jim cramer and i'll see you tomorrow. hey larry, what is coming up on the show? all right a stunning santorum sweep, rescrambles race and the stunning stock market really continues at pace. good evening everyone this is "the kudlow report," sizzle story one, rick santorum launched stunning trifecta win and may be rescrambling the republican race, it's sticlear me that gop not ready to embrace mitt romney. now listen to a winning rick santorum. >> i do not claim to be the conservative alternative to mitt romney, i stand here to be the conservative alternative to barack obama. >> there you have it and should
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the stock market thank the fed for the really. the stock really continued today inching closer to 13,000 but not just the fed, hint, students, what is the mother's milk of stocks? we will get to all of that in a few minutes. first up the top sizzle, santorum sweep puts rick back in the race and yet another sign that republicans are not ready to let romney role. here is what giuliani told me last night on the show. >> frankly people are still looking for an alternative to mitt. i would like to see how santorum develops. i have not understood why he has not done better in many of the polls and some of the early primaries. >> all right, that was rudy before the voting returns were in. so he was right. now, let's get the latest to republican race rescrambled, cnbc contributor, robert acosta, what is the team romney saying
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and thinking today, their knees knocking? what is up? >> team romney is very nervous, larry, they are going hard at santorum, they are picking out two things. they are going after his congressional earmarks and pork barrel spending from his years on capitol hill, and they are looking at his beltway insider. they went hard after gingrich and no backlash, but republicans love santorum of course so if they go too hard on santorum, they will risk a backlash. >> santorum has a record in this race so far of not really going negative. yes, he disa fwrgrees on the is but he has been a gentlemen here. so, if romney world slams down santorum, with these super pacs, will it backfire? >> i think so.
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you are right, santorum has been a gentlemen, but he has been a gentlemen and a prosecutor during the debates. spoke to santorum aides today, they raised the question, okay, romney comes after him on earmarks and experience in washington, but santorum can go after romney for romney care. >> and what about team gingrich. there's the talk that santorum is replacing gingrich as the alternative. >> they are worried but they have pledged to stay in the race, and he sees optimism on super tuesday, march six, georgia, and tennessee and alabama later in march. it a tough month, he thinks he can block santorum in the south. >> how tough for romney in those very same southern states? >> it will be very tough for romney in the southern states. gingrich bite him in south carolina, now santorum is doing
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well in the midwest. the evangelical appeal, they are appealing to conservative voters. romney has a tough road ahead. he did not do well in the florida panhandle. he may have done well in florida but not in the northern parts of the state. that is trouble ahead. it may not be decided on super tuesday, could go deep into the spring. >> thank you so much. let go to our panel, steve schmidt and tony fratto, and richard land, public policy chief for the southern baptist convention. steve i need direction here, because this was the stunning victory, three races for santorum. okay, we know that. right now, how would you handicap the chances that santorum could win the republican nomination? >> i still think that mitt romney is the odds on favorite to be the nominee of the party if for no other reason, larry, because rick santorum and newt gingrich, both of them in the
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race divide the conservative vote. and that plays to mitt romney's benefit. he has the organization and resources to run a national campaign and run a 50-state campaign. that being said, i think it tough to make this inevitablity argument when you have lost more races than you won in the first eight contests in the republican primary. >> i get the money and organization, tony, but i get something else called message, message, which is still governor romney's weakness, nobody knows his message. >> they don't, he has to come out with a stronger positive message. there was talk earlier with bob costa, if they ought to go hard after santorum. there are voters out there today that cannot tell you what the mitt romney economic plan is. he has the organizations to go out there with the message and would rather see him go out with the message. >> he needs a very clear
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message, slash spending, get the debt down and reform the tax code and destroy obama care does it come through? >> it doesn't. it not a clear message on tax policy and spending, but the pro growth message, how do we create more jobs in hthis economy. >> that is key. i want to ask you, how important this whole war between obama care and the catholic church and that goes to religious freedom and that goes to the culture war with evangelicals, how big a topic was that in rick santorum's victory last night? >> i think it was a big factor. i think that people who thinks this is a battle between catholics and the obama administration have it wrong. people of religious faith across the board see it as a violation of the first amendment's free expression of religion cause and they are upset about it and also, remember three weeks ago, there was a meet engine tk where social conservatives came up with a strong consense us for
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santorum, and they said it did not make a difference in south carolina or florida, you wait, these are national groups, they will go back and they will have the grass grow. you saw the grass growing last night. >> i agree, it's not just catholic, and evangelicals, but santorum is the guy when it comes to the social issues and the culture wars. is he not? and how far can that carry him, he has been that way his whole career. >> he has been the roman catholic that evangelicals trust completely. he has their heart and soul because he fought their fights in the congress when no one would. >> steve schmidt, i want to get your take on that, how important is the evangelical nomination, the evangelical support, how important is this catholic war against obama care and hhs? how important do you see that? is there spill over or in this couple weeks, does it go away? >> i think it a big event and it
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united the republican party, all wings of it. the libertarian and and social conserve itative side, on over h of government and all republicans support that. rick santorum has the ability to unite the social conservative wing of the party. the national security wing of the party and the pro growth economic wing of the party. and approximate if he is able te will have room ahead. as you look at the road though, it a tough road for santorum so long as gingrich is in the race. you saw what happens when gingrich is off the ballot. almost all of the support goes to santorum. so if this is a two-person race between santorum and romney. there's a lot of running room for santorum, but it's tough with three in the race. >> you say the odds are still very long for santorum. is that what you are suggesting?
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>> i think they are long, because i do think that money, i do think that organization and staying power matter. i think a that there's a lot of weaknesses in romney's candidacy and i think you touched on some of the message weaknesses with tony. that being said, i do think that the money and the organization should not be easily discounted. one of the things in your report earlier that you talked about which i think is key. romney has someone coming up in the race and they have gone negative on them and disqualified them with attack ads. i think they may have difficulty doing that with santorum, that they could invite a significant backlash. >> tony, what about rick santorum as own message. we talked about the social conservism and culture wars, he gets an a-plus for that. he is trying to reach out to blue collar workers. he was called a blue collar supply side.
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he is a tax cutter. he is a spending cutter and he is a pro growth guy. what about santorum's message? >> it a solid message for a lot of republicans, i could not like the picking winners and manufacturing that rick has gone o but it's an appealing message for a lot of of voters in this eelection, under the economic conditions we are in right now. vy i have to tell you this, he is consistent with this message and he delivers it well. >> what about the other issue regarding santorum's message, that he basically was against mandates, that he said, you mitt romney were if favor of the mandate and you newt gingrich were in favor of the mandate. i'm clean. obama care is the problem and in fact with the religious and cultural over tones, obama care becomes a bigger problem. tea party hates obama care, and santorum connecting with the tea party and running through super
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tuesday. i see a connection that governor romney has a problem with. >> they have to get the message right, santorum has an appealing message. but the states that he won last night, steve lost those same races, right, steve? >> as john mccain's campaign manager. >> and still went on to win the nomination convincingly, right? so that is where santorum is now. >> you were a top strategist, the top dog, the big guy, you lost a bunch of races but won the nomination, romney quoted that and will it work for him too? >> it doesn't work for him. the campaign was $2 million in the red there were 35 people that worked in the campaign. we stipulated to the fact that we lacked money and organization to be able to do it, we competed
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in the primary states, and we waived the caucus states. now, mitt romney, he is the candidate with the organization, and the money and that is not why he lost last night. he lost because he has a message problem with republican primary voters and that is what the difference is. so, it going to be very interesting to see over the next week as they deal with rick santorum, is it going to be all negative all the time? or are they going to fry to squash them like a fly. will there be a backlash on iter or is this a moment where we see a pro growth economic message. >> that is . you are so smart. i want to give you the last word. is there a path to victory for santorum? >> i think so. i think his economy plans will have enormous appeal.
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he will do well with independents. and there are two polls going on. one is a poll inside the party and the other is the general election polls and one of the things you have not talked about that helped santorum, that poll that was done, that showed that among hike ikely voters he was leading obama by a point. i have to leave it there. >> appreciate your contributions, coming up on "the kudlow report" should investors be bowing to ben bernanke for the stocks rally? i have a little disagreement and don't forget, free market capitalism is the best path to prosperity, the question is which republican candidate can make that case prescriptively. we will be back. you can take care of virtually
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stocks and i want to debate this proposition or at least round it out. let's go to michael farr, and author of "the arrogane cycle" okay, i don't disagree jeff that the fed is important and the fed has of course been a tail wind for stocks, but i want to note if you go all the way back to the bottom of the the market which was in march of 2009. the s&p 500 is up 99.5%, call it 100%, call it a doubling. now, it's more than coincidence that earning are up 103%, almost the identical number and by the way that does not even include the most recent numbers, but the stock market is up 103%, i ask you who is more important, the fed or profits?
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>> clearlily, they have a 1-1 relationship, between the profits and what we have seen in the stock market. valuations you would have thought, you would have seen pe's rise, but this is all about profits. and if you take a look at what the fed has done, they may have helped to avoid a disaster or back stop some of the financial system, but it's not like the money that they pumped into the system has resulted in huge growth in the money supply that is stimulating the economy. so there's a break in the link there from going to what the fed has done going directly into corporate profits, so that the pinning far too much on the fed to suggest the rally is directlily in any way related to them. >> i love it. you laid that out beautifully. michael, if earnings rise
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another 8% to 10%, which is inside the consensus, no double dip, and the stock market has another 10% to go. profits are the mother's milk of stock, we should stop obsessing against the fed. >> are you setting me up to argue against the mother's milk. >> right here. right here. hit me right here. slam me. go ahead. slam me. i love to set it up. >> you know, and would i tell kudlow he is wrong, i want to come back. >> you have and you will, you have and you will again. in all seriousness, really, you have is so give profits and business recovery a lot of credit for stocks. >> yes okay, and there's no better predictor than earning's growth, but we saw at the summer of 2010 when the fed was backing away, we saw stock prices plum et and based on the economic
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fundamentals and bernanke came in with qe2 and it fell through the summer and all of a sudden we got, we had a horrible third quarter after the qe2 ended and now he comes out and said we will extend the low interest rates to the end of 2014, they are desperate larry, we argue besides this before, i think they are desperate to do another qe3, i do not think they should, and share prices love all this government money. >> what is your out look for stocks in the near material and the rest of the year? >> in the near term, i'm worried they pull back a bit, given the gains we have seen, next week we have a budget bombshell coming out of the white house and a budget next year that will look austier, in terms of tax hikes and spending cuts and we have
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the issues going on in europe right now with the greek discussions and all that. i'm worried that we will get a bit of a pull-back. s&p companies will have strong earnings though. we will continue to hear that story, that is a big plus to help drive stocks higher and above where they are now. >> jeff, excuse me, larry, what do you think about the peak profit margins, the profit margins are high and that is a mean reverting number, does that concern you as you look ahead? >> the profit margins are high, but look, there's other drivers leverage is low and corporations could borrow again, and that will help to increase earnings per share, asset turnover and getting those assets to generate more sales is credital here. i think we are finally starting to see it. businesses over the last year have invested more in cap-x,
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investing back into what they do, driving productivity that is the key there. >> and the interesting thing, i have to conclude on this, it's the cyclical froe growth sectors that are leading the 20% move. financials, industrials and consumer sick cyclicals, and th a good thing for the economy. i think michael farr, give you the last word, if you have profits left this year, i think the stock market is a good bet, last word. >> i hate to do this, i agree with you. >> brilliantly put. >> 8% to 10% by the end of the year. we get 2.5% in dividends. >> that will whack that s&p 500 up, maybe even 1500. >> amen, brother. >> quick programming note, on tomorrow's show i'll be joined by two investment guests.
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platter. cnbc brian shackman joins us with the details. good evening brian. >> thanks for letting me come on the show tonight, first to the breaking news, in the multi-state mortgage settlement talkser sources saying that california has agreed to sign on to the deal and we will have more tomorrow. diamond foods, an investigation showed problems with payments to walnut categories, the company will have on restate earnings for 2010 and 2011, because of that the cceo and cfo is out. and news of this caused the shares to fall a third, and it now down almost 43%. shares of cisco were up and then slipped. profit surged and revenues beat
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expectations. but there were keconcerns over growth in the third quarter. six flags has gone to 60 a share, looks like a lot of roller coasters were full. and shares were down 15%, for groupon, revenue was pretty strong actually. cesar's entertainment saw a lot of action, shares opened at soared -- a small growth. finally someone did the math. if you are brewing more of your money with k-cups or pods, you are paying for convenience, how about that, that single serve cup of joe will run $50 a pound. tip, go to the commesary at cnbc and it free.
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welcome back, to "the kudlow report" i'm larry kudlow, are ben bernanke's critic wrong about inflation? they have been saying that all the pump rhyming will breed inflation and bernanke defenders, especially in a big article today, say no, there's no inflation, i'll ask at the top, what about millton freedman's theory. too much moneying chasing too many goods. we bring in dan, chief global strategist, btig. okay, dan, the 12 month cpi is 10%. let's go over the six-year term for bernanke, the inflation rate is 2.4, the long run looks good,
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the short run not so good. are you worried? >> there's clearly developments that suggest that there's things to be aware of. the economy appears to be improving. certainly on that front, those of us who were defenders of the federal reserve have to be careful, but let's be clear, the reserve has printed a trillion dollars as you have talked about and as you noted the cpi is 3%. >> that is not chopped liver, and that's the thing. 3% is the overall cpi. the energy component is plus 6.6% and the food component is plus 4.7%, so if you do not drive and you do not need fuel, and you do not eat, there's no inflation. >> food on the home is up 6%, and imports are up 9% and gas is
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up 11% and up 30% in the last 24 months. mr. bernanke is crushing the middle class. that is the truth. all in an effort to bail out banks. >> do you think that reported inflation, let's call it the cpi for the moment. >> core cp seme is what he is looking at? >> no. >> his defenders say he is correct. >> it's a prediction that will bite him in the butt. like home prices will not effect the overall economy >> michael, first of all, how are you. >> good, here comes punch. >> this is the same conversation we have been having for four years and it the same story. the federal reserve is creating inflation, so on and so forth. i do not disagree that there are reasons to be concerned. strike all that. where do you think we would be
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if the federal reserve had cdon nothing? >> i think we would have been well to way to a free market economy with real gdp growth not the 3.2% nominal growth and real growth that they reported. which means they are telling you, that we had a .4% annualized increased in inflation. 3.2 nominal means we are in a recession. >> we are not in a recession. >> let me make my point. we had 1% interest rates for a couple of que couple of years. we will have 0% interest rates for what will amount to six years. we are blowing up the biggest bubble in the history of planet earth. it's the u.s. debt market. we are fin for a massive interet
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rate stop. >> i want to bring this back. mark gertler, he said the criticism about the fed being inflationary is not fact based. i want to raise a point, the dollar is not backed by gold and i believe the dollar is cheap. number two, the n two money supply is growing at 10% which is faster than the volume of goods we are creating, which is growing at 3%, is there too much money chasing too few goods and the cheap dollar potentially an inflationary impact. that is why i want to center the debate. >> the dollars not backed by gold, we can blame nixon and not bernanke. and weakness in the dollar, we
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can blame reagan. >> no, he is a strong dollar guy. reagan and clinton had a strong dollar policy that brought down the gold price down to $300 an ounce, what bothers me is that under george bush and now barack obama we have $1700 gold. those are my worries. >> i agree with you there. this is not entirelily barack obama's fault, the eight years under bush were poorly run from a fiscal standpoint i can say and let's not forget the rise in gold began in 2009 and not in -- >> it began in 1971. actually. i had -- he is an american hero. we have >> inflation or not? you think there is? >> yes. >> doesn't sound like you are convinced there's no inflation.
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>> i said there are things that are turning now that we have to be careful of and one of which is the money supply. >> you are both great. we will do this debate for the 300th time, i love having you both on. get you back soon. now, let's switch to an entirely different discussion. i know there's a lot of optimism about stocks, jobs and the economy. our next guest however is going to rain on this parade. joining me is my great friend gary shilling of gary shilling and company. okay. you still are in the recession catch. >> yeah. >> and let me say before answering that the reason the money supply is going up is because people are switching their money into forms that count as m-2 and out of other forms and they are doing it for safety. they want fdic insurance. >> it's deflationary, it not
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money that is waiting to be spent to be invested. it quite the opposite. >> i do not necessarily disagree with this. cni loans are rising. >> if you look at total bank loans and leases, they continue to be flat. you can pick and choose, but if you look at what banks are doing, it literally is flat, it's going nowhere and banks r this is the age of deleveraging, look at what banks are doing, they are selling off assets and closing offices and cutting down. they need to improve their equity, reduce their leverage, the stocks are so low, they do not want to dilute shareholders, so they are trimming assets. >> and despite the better jobs performance, you are worried about consumer spending and income? >> i am, because if you look at the jobs a lot of them were low paying jobs, medical.
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you and i say physicians, look what they get paid, but most jobs are people changing bed pans in nursing homes and things like that. you look at the hospitally industry, those are waiters and bus boys and people flipping hamburgers in mcdonald's, look at what consumers did in december. their after tax income was up half a percent and they saved it all. people bought their christmas presents starting in over-the-counter and -- in octo and retailers pulled the sales forward going into january, it will be weak. >> you make strong cases, i'm not in your camp, but you make a strong case, as you always do. lastly what are your investment indications? >> last year we had 19 investment recommendations and
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15 of 19 worked. we carried over a lot. i like long treasureries, i think we are headed for 2.5% on a 30 year bond, that is gives you 12% appreciation. >> no stocks? >> i do like stocks, pipeline stocks gas prices are going down but they will drill them. they lose their leases if they don't. so they have to build the pipelines to get the stuff out. >> somebody. >> i like utilities, in other words, people want income here and now, they do not want capital gains out in the nowhere. stocks have gone nowhere. they are saying, hey, i want the money now. that is another area. i think that consumer staples, people need to eat. >> bonds, dividend pairs and consumer staples. >> i have others but we are running out of time. >> gary, shilling, thank you for being here.
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that was realism, he has a great track record. next up on kudlow, the bill to stop insider trading by members of congress, that will be voted on the house floor tomorrow, but will it really stop insider trading? my guest says no way. i love that my daughter's part fish. but when she got asthma, all i could do was worry ! specialists, lots of doctors, lots of advice... and my hands were full. i couldn't sort through it all. with unitedhealthcare, it's different. we have access to great specialists, and our pediatrician gets all the information. everyone works as a team. and i only need to talk to one person about her care. we're more than 78,000 people looking out for 70 million americans.
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♪ the bill to stopndertrade -- stop insider trading is coming to a vote. it called the stop act, will it stop insider trading? good evening. >> good evening, it really a tale of two bill up on capitol hill, here is what is in the bill that the senate already passed and you get a sense of what the objectives are here, the senate passed a bill that prohibits members of congress from using inside information for personal gain and it covers the executive branch and blocks freddie and fanny executives from receiving bonuses as long as those firms are still in
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conservership. they have a couple of items they will vote on tomorrow. members of congress that have been convicted of things cannot collect taxpayer pensions and members of congress, the administration and their staffs are blocked from special ipo access. that is so-called pelosi provision, and they request a study of political intelligence if i we firms, and on the senate side they require those political intelligence firms to register, like the lobbying firms do. they disclose their internal activities on the house side they will punt on that and request a study, as you know, when you do not want something to happen, you request a study on it, that kills it. that is one thing that reformers are mumbling about.
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but the house vsupporters say their bill is tougher. >> thank you, this book sparked this storm, it's called throw them out. accuses members of congress of insider trading. what is your biggest beef, you do not think the bill goes far enough as i understand it. what is your beef? >> it not going to be enforced and the history of law enforcement, whether it the fbi or justice department, when they try to enforce laws with the congress, they get angry and threat tonight cen to cut the b. it's a question of transparence, transparence, transparence and we need more of it. >> is there an issue, i read, earmarks and i believe in an interview that you had, nancy pelosi's husband, apparently made a lot of money off of earmark that was put in her
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district, is that true and are earmarks left out of the bill? >> they are, couple paths to health, one of them is insider trading and another is land deals, they own a piece of commercial real estate and put an earmark to expand the highway right in front of their property, increasing the values and flip it and turn around and sell it for a markup. that is not dealt with at all in this. also by the way, the stock act only deals with publically traded companies. if you and i highlight some in the book, if you invest in a private equity, well timed, it's not in the act. we should pass the stock act and make it illegal, but we need the restrict act that has been introduced by sean duffy from wiscons wisconsin, and mandatory blind trust, if you do not want to do the blind trust, you have to
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release and disclose in your website, stock and financial transactions as they take place. that gives us real time information and access. >> all right, we will leave it there. thank you for the up can date. we may want to update you again before it over. next up this evening, on kudlow, catholics in a holy war against obama care, the question tonight, is the president's mandate just another example of the government trying to control our hoo our lives and our choices. when . for 80 years, we've been inspired by you. and we've been honored to walk with you to help you get where you want to be. ♪ because your moment is now. let nothing stand in your way. learn more at keller.edu.
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big government gone wild, that is what we have here, the new obama care mandate requiring religious organizations to provide birth control coverage in their health plans, another example of the federal government trying to control our lives. and take a listen to house speaker john boehner from a rare floor speech that he made earlier today. >> the federal government has drifted beyond their constitutional boundaries and encroaching on religious freedoms and harms some of our most vital institutions. this attack on religious freedom in our country must not stand and will not stand. >> all right, there's mr. boehner weighing in. we will talk about this iigor, and we bring back betsy.
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betsy, let me begin with you, i want to ask, what i guess is a really dumb question since everyone is revolting against the bill. mcdonald's can get a waiver and 1470 states and corporation and unions can get waivers how in the world did the obama care not give the catholic church a waiver for a matter of conscious. >> no one should have to go to the white house to get a waiver in order to practice religion. it should not depend on the discretion at the executive branch, it should be in black in white that all religious institutions are exempt from this kind of interference. the framers of the conconstitution but it in the bill of rights. the government cannot enter fear with the practice of religion. >> this is what happens when
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individual free people, citizens and consumers lose their choice. for example, igor, i know you disagree. for example, let's take a catholic hospital and say the hospital doesn't want to offer health insurance that has the morning after drug and other contraceptions, people inside the hospital should have the choice and the freedom to buy their own health care package with a government tax credit or some such thing. that is what is missing from this crazy top down government control bill. >> well, larry, the regulations specifically says that churches or nonprofits that specifically deal with religion or have a lot of people in the same religion are exempt. so that is your waiver right there and i've spoken to a lot of catholic group, i spoke in george town, they said they are providing already this kind of, they are already providing birth control to their employees, why? because a lot of catholics use
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it. 98% use it. this is not controversial, it's controversial for republicans who are ping up the base. when you talk to these institutions like i have. they will tell you that most of them are already offering this coverage. >> you must be talking to these people, the catholic conference of bishops, for example. betsy weigh in. >> ig tor constitution said tha the mandate is to serve all. jesus christ himself could not get a waiver. >> he could because he is a church. >> let her talk -- >> catholic nursing homes and others all reach out to serve a broader audience. that's the mission. >> as i understand it, the law says, the mandate from hhs says, igor, i'll go to you on this. they must buy, these catholic
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institutions the hospitals, the schools, the charities, must buy the health insurance, one size fits all by the government which offers the contraception, which offers the morning after pill which offers sterilization and they do not want to buy that and that is the issue. i ask you, that is the issue, why couldn't hhs at least give the church the same waiver they gave mcdonald's, why couldn't they get a mcdonald's waiver? >> they have a year to comply with this, and the administration said they will work with the institutions and the key here is that we are treating catholic hospitals and colleges like employers. we tell them that as employers they cannot discriminate when people and in the coverage they provide, they cannot discriminate what they offer. that is typical employer
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obligations. an employee has rights and those rights have to be respected. >> this is not a right. this is not a right. >> that is what this is about. >> by the way, larry, let me point out, this is critically important to our rights. that the corporation should sno have had to come like supplecants to go to the white house for their waivers. it should be spelled out in the statute. >> but until obama care is overturned, okay, i'm just saying they have given the waivers away to their friends, why not give it to the church? n i believe in choice and every individual that works in these institutions should be able to purchase their own health insurance package with by you the way the same tax treatment as business es this is what is missing. once you have government controlled and government dominated programs, then a million of these problems cop
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in. i'll give you the last word. >> in 2001, you had six republicans in the senate introduce this very kind of requirement, without the religion protection. >> it's about choice. >> members of congress had -- >> i know. betsy and igor, that is all, i'm for choice, not government control, we will see you tomorrow night.
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