bilked investors out of 3.6 billion. you don't want to miss it. and hewlett-packard, "squawk on the street," and i'm jim cramer, i'll see you tomorrow. hey, larry, what do you have for us? >> jimmy, is president obama to blame for $4 a gallon gasoline? or is it 5 or 6? i'm larry kudlow. this is "the kudlow report" sizzle story number one, is obama to blame for rising gasoline prices? did you know that retail gas price has gone up 93% since the president took office. that's right. down in florida, prices approaching $6 a gallon. we'll debate obama culpability. story number two, the tale of two tax cuts. president obama unveils corporate tax reform, taking the rate from 35% to 28%. by the way, the first marginal tax rate cut in his presidency,

but it slams corporate profits earned overseas. meanwhile, mitt romney unveils his 20% solution. take a listen. >> i'm going to lower rates across the board for all americans by 20%. all right? >> all right. the big question. can romney sell it in tonight's debate and win in michigan? in a moment, an exclusive interview with the architect of the plan. mitt romney's senior economic adviser, glen hubbard, dean of the columbia business school. we begin with the president's own corporate tax reform plan, and we go to cnbc's amon javers. >> the obama administration would like to bring the corporate tax rate down from 35% to 28% for most companies and a low 25% for manufacturing firms. not a lot of details on exactly

had y how they would do it. they would like to close loopholes without naming the loopholes they would close. we get a sense of exactly who the winners and losers are here in the tax debate, based on which sectors paying above 28% and which are paying below. who benefits? construction, a sector where they are paying now about 31% effective rate. they would benefit. the wholesale and retail trade sector, 31%, would benefit, and the officers industry. 29% now as an effective rate. the losers, sector by sector. utilities 14% effective rate. up to 28%. a problem for them. mining, leasing, transportation, and warehousing, 19%. also in the losers clumps sector by sector. we should caution folks, this is likely not to be anything that passes this year. mostly we're getting election year fodder from the obama

administration, putting out talking points about what they would do, if anything. this is debate for next year. voters will have a say very much so on who is driving that debate next year after the election in november, larry. >> eamon javers, thank you very much. is it real tax reform, good tax reform or not? jared bernstein, former chief economist to joe biden and art lau laffert, chairman of laffert investments. this is the first tax on posal from the obama administration. what is the take on this plan? >> bringing the rate down has got to be wonderful. i would love to see it come down a lot further. the 12.5% that newt gingrich is proposing, i would be ecstatic. but your guy finally came through with something i like. lowered the rate. we haven't seen the broadening

of the base yet and haven't seen what taxes are going to be on foreign profits which say killer there. but just dropping the rate is a good one. i like it. >> jared bernstein, it's marred. you're right. the lower tax rate is good. lower, lower tax rate would be even better. what's up with the foreign minimum tax business? this sounds like an attack against internationalism, and multinationalists and the business community. they hate this, the international community. >> kudos to art and a little less to you, larry. a little to you for recognizing that this is something you guys have been asking for for a long time. the president for years has said that he wants to make this type of proposal. here it is. and i think eamon is right. a lot of details to come later, particularly vis-a-vie, the base broad broadeners. one of the things we have to talk about is deferral. overseas corporations can just keep their taxes, shelter them from the americans forever

through deferral. >> but jared -- jared. >> art, larry, i want to ask you guys a question. i think we may have a fundamental difference here. where would you rather see an american firm build a factory? in detroit or shanghai? answer my question. >> no question, you're right on that, jared. much rather see it in detroit. >> then we have to change the incentives. >> but by penalizing those who are abroad, by attracting them back. not by penalizing them for staying there. this is one of attraction, not whacking them on the head with a stick. >> i don't disagree with you, art. but here is the thing. the way the thing is set up now, we have incentives that absolutely, unequivocally, make it cheaper for to set that factory up in china than in ohio. >> but don't raise taxes on them over there. make them lower here. i had give you a 5% tax rate if you bring your business back here. >> so level the playing field. >> leveling it by hurting our

guys? >> bringing the good guys down, should be territorial. and don't forget, not a zero-sum ga game. it is -- you build the plant in shanghai or more to the point, open up sales and distribution operation where your customers are, in europe or asia or latin america that builds up jobs in the united states also. >> we've gone that route. >> jared, it's not zero. the trade is not zero sum. >> we should -- >> we've gone that route. guys, guys, listen. we've gone that route. it has not worked. you have to admit, our manufacturing sector has been decimated. >> because of detroit, michigan, and ohio. the unions are just ruining everything. >> but they are starting to come back. starting to come back and this is a plan that incent vises factories to come back. >> the right to work law. i mean, that's wonderful. bring them back. but we shouldn't be taxing

profits, and you know we shouldn't. we should be taxing total production, not profits, because we don't want to discourage the good companies, we want to penalize the bad ones. >> this is a very important point. why do we need a corporate tax at all? why not have a sales tax on corporate revenues? >> please, please, please. >> don't go -- >> people pay taxes. >> don't go there, larry. please don't go there. >> you have to go there. >> come back to me here. i'll tell you why. for literally for years you have been asking for a corporate tax code that lowers the rate and broadens the base. >> i was pleased -- i said it, did i not, jared? >> yes, you did. >> the fifth line i don't have to praise you, you're wrong on that. the first line, you're right on. >> then don't go to the place of let's throw the whole thing out and start from scratch. >> you agree with me, don't you, jared? >> comprehensive tax reform,

that's a goal. that's always a goal. >> and we shouldn't tax profits. we should tax sales. larry's right. >> let's build off what we have. >> it's a good move, jared. >> lowering the rate is. except penalizing foreigners not. >> that's right, a pretty good move except penalizing foreigners. i'm impressed that the obama administration in year four, has found a marginal tax rate in year four. >> why did it happen after jared left? you didn't tell us what influence had you on biden and stuff? >> a lot of good stuff happened after i left. not sure what to make of that. >> one other things that bothers me, art laffer. why should manufacturing get subsidized. >> it should not. it's not being subsidized. it should be dropped from 35% to 28% for everything. get down to 12.5% broad-based

tax and make it -- best would be a sales, if do you that, low rate, just like ireland and you will see a boom. i mean a boom. bring the money back. >> final comment here. so here is what i want to see from larry and art. i want to see the two of you standing up straight, tall, and firm, when it comes to accepting the base broadeners. if it's interest ductibility, accelerated depreciation. >> who can disagree. >> maybe not you guys. i don't want to see conservatives -- when we said broaden the base, we didn't mean this. >> jared -- >> first of all -- >> jared, i can't stand tall, i'm really short. >> the canadian rate is 15% federal, 10% pro vial. 25%. we're too high. the ocd average rate is 25%. for those kinds of base broadeners, i would recommend 20% corporate tax rate. >> if you guys want to buy -- >> i would go that low, larry.

>> if you want to buy more points off the base for a broader base, i'm listening. that's what we're talking about. >> anyway, we got to get out of here. i'm saying i give them something. they are -- >> good work, jared. >> that is break through stuff, they are usually raising taxes in this white house. thank you very much. coming up, folks, mitt romney's new 20% solution. we'll talk exclusively with the man who helped put it together. mitt romney's senior economic adviser being glen glenn hubbard, dean of columbia business school to talk about the 20% solution. free market capitalism, always the best path of prosperity on the supply side with low marginal tax rates, and i'm talking low. we'll be right back. forty years ago, he wasn't looking for financial advice. back then he had something more important to do.

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> gop presidential candidate mitt romney reveals his bolder across the board supply side tax plan. i'm calling it the 20% solution. here so break down the details is dean of columbia university business school. glenn hubbard, welcome back. >> thank you.

>> every new man, you need a catchy new phrase. >> the 20% solution sounds good. >> highlight it for us. the main points for everybody. >> the real plan, it gets america back on its feet away from high debt, high-def sit, high spending, high taxes. what governor romney proposed, cutting corporate tax to 25%. eliminating the added tax burden to bring overseas profits home. eliminating the corporate a & t and making the amd credit permanent. 20% cut across the board in marginal tax rates. a very big pro growth move. eliminated alternative minimum tax as well this is a very, very big plan for small business, for big business, and for jobs. >> just as an aside. small business, llc, subchapter

s, pay the lower tax rate from 35% to 28%? >> that's correct. and that's important. there's a lot of discussion of cutting the corporate tax, and we should and we must. more than half of private sector workers work in non-c corporate businesses. we have to make these changes on the nonbusiness side. president obama is proposing to raise those taxes. >> governor romney said he would limit deductions for upper end earners, which would be limited in return for lower tax rate? >> governor romney said is very important. if you want to cut rates, we have to broaden the base at the same time, otherwise we can't raise the revenue we need. and what the governor intend to do, is to limit deductions and exclusions that people have. home mortgage interest,

charitable corporations and others, but in such a way that puts most of the burden on upper income households, so middle income families shouldn't see a hit from this. >> the ones you just mentioned are on the table, is that correct? the most specific i've heard. >> all tax preferences are on the table. the point is to make sure that this is revenue neutral, but also that it's fair. so most of the burden borne by upper income families. middle income families shouldn't see a hit. >> you were quoted in this afternoon's "wall street journal" website, you called rick santorum's plan a job destroyer new york city a job creator. santorum has the same top rate. his corporate rate is lower why is santorum a job destroyer? >> two things, larry. first of all, while we all want corporate taxes to be very low, all businesses in america need to pay tax at essentially the same rate. we should not be in the business of picking winners and losers.

that's how we got into the housing crisis. a big problem, governor -- or senator santorum's plan would misallocate capital. it runs very large deficits. he doesn't have any way to pay for his tax cuts. >> you're talking to the zero corporate tax on manufacturing. >> very bad idea. >> bad idea. and you think that would actually destroy jobs? >> it misal indicates capital and the economy. that's a job killer. second, his plan associated with very big deficits. >> and you think his plan is not paid for in addition. >> definitely not paid for. >> tell me about your pay fors. talked about limiting deductions, what are the other pay fors for the 20% across the board cut in tax rates? >> two-ways you pay for this one is growth itself. one of the ways that tax cuts are financed are by higher levels of economic activity.

more entrepreneurship, higher taxable incomes. there will have to be base broadening, that governor romney talked about. this plan is revenue neutral. the governor also cutting spending significantly, so that spending is a share of gdp falls back to 20% by 2016. that's how the plantain together really reduces the deficit. >> glenn, ballpark me on the spending cuts. various numbers out there. 500 billion from the baseline, by 2015, 2016. i don't know if that's right or wrong. you are the guy. what will the spending cut look like? >> that's about right. about $500 billion. when people say we can't cut government spending like that. yes, we can. we're going back to a spending share of gdp that prevailed before the financial crisis and before the real buildup in government. the president's budget by contrast wants to continue to elevate government spending and let's be clear. that means higher taxes. >> the 20% solution,

coauthorized by glenn hubbard of the columbia business school, governor romney's new position. we'll hear about it in tonight's debate. thank you very much. >> my pleasure, thanks. all right. next up on "the kudlow report," a developing story out of washington. senators threatened. we'll get you the latest when we check the news headlines, next up. [ technician ] are you busy? management just sent over these new technical manuals.

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on december 21st, polar shifts will reverse the earth's gravitational pull and hurtle us all into space, which would render retirement planning unnecessary. but say the sun rises on december 22nd and you still need to retire, td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? a dangerous situation developing in washington.

senators being threatened. eamon jaife e eamonj javers has the latest. >> three members of congress have received threatening mail containing a suspicious powder. news organizations also received letters with anti wall street rhetoric, demanding an end to corporate lobbying. officials say the sender threatened to mail letters to all 100 senators and that ten of them would contain a deadly pathogen. so far, police say the powder in the three letters received today was not dangerous. meanwhile, trading in vivus briefly halted after an fda panel said it was backing the weight loss drug qnexa and a permanent injunction for a same-sex spouse that allows a

spouse to enroll in a health plan. and michelle caruso-cabrera has news from jerusalem. >> some of the most dangerous missiles of iran have many small ships, practiced swarming techniques. the goal, to overwhelm the u.s. army with speed and numbers. israel has some of the most advanced form of missile defense in the world and had success shooting down short-range missiles, the kind fired from gaza that's a whole other area of concern. back to you. >> shares of hewlett-packard down more than 1%, after it announced first quarter earnings fell 44%. pc sales continue to fall. 36 attorneys general signed on to a letter to google ceo larry page expressing concern over

privacy settings. users who want out have to exit google completely. and we're getting word into cnbc, reuter's reporting that steve wynn will convene an emergency meeting of the directors of wynn macau on friday. the goal? kicking his former friend and partner off the board. and dateline western australia, a 13 care rare argyle pink jubilee diamond was unearthed. experts put a price tag at $13 million. $1 million per car at. the hope diamond is 44.4 carats. >> eamon, i love it when you talk diamonds like that. coming up on "kudlow," is president obama responsible for the high oil and retail gas prices. did you know, retail gas has gone up 9 % during the obama

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welcome back to "the kudlow report" stocks retreat after a three-day winning streak.

since early october, the s & p 1200 global stock index, up 21%. in the u.s., the s & p up 24%. so i want to know if these rallies are going to continue, let's do some stock market work. we've got opiniopipa malgren an have black rock igroup. a bunch of months, a global stock market boom. i want to know if it can continue and if it's signaling a global economic improvement. >> well, bottom line, if you throw this much cash around, if you have all of the major industrialized economies in the world, plus china printing money at this rate, yeah, it goes into asset prices and we're seeing asset prices rise really fast. it's important, not only are stocks going up, but oil price is going up and the price of diamonds is going up.

these are all assets that reflect there is a lot of money in the system, and that's precisely what the policymakers wanted. when central banks print money, the signal is go speculate. >> all right. go speculate. wes, your take. the very same question. and i want to add to pippa's pump priming and cash into the system, profits rising. profits are the mother's milk of stocks. profits have performed better than gdps. can this global rally continue? >> i think it can. and i agree with everything that was just said. not so much all of the world's problems have been solved, but have you discounts and stocks, back in october. globally, stocks trading ten times earnings, an environment where interest rates are 2%. a very cheap discount for stocks, and what you have seen, to the extent the world has not fallen off a cliff, investors react. if you are going to print money and open monetary spigots this

will help risky assets and particularly effective this time. also a back door form of quantitative he'sing which the european central bank has removed central pressures, the fear of a banking crisis and sovereign debt crisis in europe. a lot lower today than it was back in october. >> and more is coming, next week. the ecb will have more short-term emergency loans, more pump priming. pippa, let me ask you this. inflation or excess money or whether it's iran in the straits of hormuz, is energy the place to be? is the game changing? get out of consumer discretionary, get out of technology, maybe out of utilities. energy now and a little commodity action on the side? >> you have to be really careful about the directional play, because there is so much vo tillitil volatility. the chinese economy is clearly

weakening and a lot of people in the market expect the decline and demand should make the oil price fall. they are also looking at weakening numbers out of germany and out of europe in general and a lot of people don't have faith in the recovery story in the united states, because it's still so nacent. on the other hand, i think we're seeing, for example, the saudis are saying if we're going to maintain a stable population, we have to buy the peace, write checks for $5,000 a person, they have an incentive to keep it high. and add the noise out of iran, which is loud. and nigeria is starting to implode, that 10 percent of america's oil supply. i think it will be really volatile, but i expect the price over time to remain high or go higher from here. but i also expect to see a lot of downside risk in that view.

>> how much downside is there to the energy story? do you think we'll wake up and oil will drop 10 or 15 bucks? or we'll wake up and oil will go up 10 or 15 bucks? >> i think it's more likely the latter. it's hard to predict what will happen in iran. but if you remove the near-term risk, the important thing to remember about the energy market, it's not just rise in demand from developing emerging markets, what's happening, more and more of the world's marginal supply is coming from unconventional hydrocarbons, expensive to produce. get a barrel of oil out of 35,000 feet in brazil or the tar sands in canada, what it means that barrel is very expensive to produce, not economical at 60 or 70 a barrel and this will keep some floor underneath energy pricesory the long term. >> pippa, i'll leave it to you. if energy prices are a lot

likelier to go up than down. if the ecp, federal reserve and bank of china are a lot more likely to pump and prim, don't you want a little commodities action, silver action, gold action, coppers action. i have to like the commodities play? >> i have to agree with that. and i even like diamonds as an alternative to gold. everybody in the middle east and asia is buying diamonds like crazy. that's why they are reaching record prices at every auction, i also think we should not forget about manufacturing, traditionally a really strong inflation hedge throughout history. and, in fact, i think we're seeing a revival of manufacturing in the west. moving from china west. and manufacturing is coming home, partly because of the wage rise in china. 70% annualized. and 30% for unskilled.

the whole wage differential is narrowing and changing the location of production, so i think, yeah, personally, i think inflation is a real issue. i'm not saying there is no deoperation arouplagoperation d but i'm seeing ways which one could capture inflation risks. >> and whether it's gold, silver, commodities, or energy, there's a strategy right there. coming up, is president obama responsible for the high oil and retail gas prices? 93% up in gas since elected. we'll have a heated debate. when we come back. heartbeat,

and that it put me at 5-times greater risk of a stroke. i was worried. i worried about my wife, and my family. bill has the most common type of atrial fibrillation, or afib. it's not caused by a heart valve problem. he was taking warfarin, but i've put him on pradaxa instead. in a clinical trial, pradaxa 150 mgs reduced stroke risk 35% more than warfarin without the need for regular blood tests. i sure was glad to hear that. pradaxa can cause serious, sometimes fatal, bleeding. don't take pradaxa if you have abnormal bleeding, and seek immediate medical care for unexpected signs of bleeding, like unusual bruising. pradaxa may increase your bleeding risk if you're 75 or older, have a bleeding condition like stomach ulcers, or take aspirin, nsaids, or bloodthinners, or if you have kidney problems,

especially if you take certain medicines. tell your doctor about all medicines you take, any planned medical or dental procedures, and don't stop taking pradaxa without your doctor's approval, as stopping may increase your stroke risk. other side effects include indigestion, stomach pain, upset, or burning. pradaxa is progress. if you have afib not caused by a heart valve problem, ask your doctor if you can reduce your risk of stroke with pradaxa. welcome back to "the kudlow report" romney has a fairly comfortable lead in arizona, and in michigan it's close, and michigan is a must win for romney. basically a dead heat in michigan. for the latest, ahead of

tonight's potentially game changing debate, here is cnbc contributor robert kosta of "the national review." with mitt romney announcing his 20% solution, a supply side tax cut, does this make him more reagan, more conservative? and will it matter at tonight's debate? >>ith a positive statement mitt romney, a reaganesque, and he's documenting his vision and providing details, important for conservative voters. >> and he was talking about spending cuts today and entitlement reform on the eve of the debate. more to come in the economic speech. is this a calculated move by romney to reach out to very conservative primary voters and tea partiers? >> it's strategic and working. as senator santorum continues to be involved in complicated social debates, mitt romney said to michigan voters, i will make

a unique argument on the economy and come out way bold plan. that will be in my closing argument in the tough race, and santorum is coming back, coming back in the polls, sustaining his economic message. and romney is clear and risk. >> why is he having trouble? blue collar thing not connecting or satan not connecting, what is it? what is santorum's problems? >> i think those are all problems for santorum and taking the bait for the mainstream media and going after social conservative issues, and evangelical issues, arguing with the press, instead of going back to blue-collar message. look for him to try to return and pivot back to the economy. >> thank you very much. tonight's debate and romney's 20% tax plan solution, in fact, could be a game changer. let's go to cnbc contributor tony franna, and jason matera,

author of "obama zombies," and washington examiner online opinion editor. the romney tax plan, game changer or not? >> it's a number he can talk about, 20% tax cut and talking about pro growth policies and individual tax rates. and you heard glen hubbard say earlier today, something the president isn't talking about except for raising them. it helps him a lot going into the debate tonight. >> and david, can't romney convince conservatives that he's more conservative? can he convince him he's more regan, a supply cider? >> agree this is a plus for him. something simpler to show people. but as far as the people who are really still concerned about mitt romney, the ones who worry, yeah, he can put anything in a plan, but look what he did in massachusetts, i don't know that there is anything he can really do at this point to get them to his side. so he has to win without them by

convincing people who are, you know, sort of lessen the right end of the party. >> all right. jason, i want to switch gears. jason, i want to talk fire and brimstone in the puritan call, biblical sense. this is interesting me more and more. maybe satan has come to america in terms of undermining our values. i'm being serious here. you have the obama administration in a war against conservative churches, the front page story in "the new york times" a couple days ago about the massive percentage of out of wedlock births, you know, no such thing as almost as a two-parent family, especially if you didn't go to college. lousy teaching, they don't teach history or constitution in high school. let me ask you this, jason. suppose the cnn moderator, i think it's going to be john king, suppose he goes after the satan quote or other culture war quotes. might santorum who absolutely

believes in what he believes, might turn this around and steal the debate on those subjects? >> i think he should. he can take a line from newt gingrich and turn it back on the moderates, the media. santorum, an interesting scenario heads i win, tails you lose. he is asked about his theological beliefs. the satan quote taken from four years ago, a 2008 speech, not even running for president. and he's not going to back away, because these are his core beliefs and that's fine. the fact that he's talking about a spiritual -- a spiritual realm, good versus evil, this is christian doctrine, going back 2,000 years. nothing really controversial and barack obama talks about redistribution of wealth in terms of that's what jesus would do. nancy pelosi, talking about obama care, that's what jesus would do. if the left can use jesus to promote their policies, why can't rick santorum or other gop

candidate talk about their christian beliefs and world view? >> and there was another out there is aing that jesus would raise tax rates on the rich. mitt romney wants to cut them. jesus would raise them. >> i don't know who is speaking for jesus. a lot of people speaking for jesus. look, they can talk about these issues and for a republican running in a republican primary, a core of gop voters, primary voters in particular that care about those issues and given rick santorum that strong support. i'm telling you this, the next president of the united states will be talking about kitchen table issues, not bedroom issues, not personal issues like choices in religion. better be talking about the kitchen table issues and whether that's president obama or rick santorum, mitt romney, newt gingrich. whoever the next president is. those are the issues that will make a difference for voters. >> and what about obama? i'm sorry.

what about romney trashing santorum's economic plan? we got a little advanced notice of this tonight. glenn hubbard, romney's economic adviser, trashed santorum's economic plan. said it would destroy jobs, cause overspending, raise deficits. do you expect to see that? >> do i expect to see the plan do that or -- >> no, do you expect to see romney trashing santorum? >> he's going to tear into him tonight. that's exactly right. that's what romney has to do. the thing he has to accomplish personally in this debate is to tear into santorum, show this guy -- people say i'm not conservative. but like newt gingrich this guy no better than i am, if you want the guy that can win, you vote for me. this is the successful strategy that romney used against gingrich. he showed, this guy is feeding at the trough as a historian lobbyist. you might think i'm bad, but this guy is certainly no better. i think that that's a good point that romney can make against

santorum, certainly. >> listen, jason, i just heard dave talk about newt gingrich. first time i've heard gingrich's name in about a month whatever happened to newt gingrich? >> his campaign has been declared dead twice. i don't think we should do it again. the calendar now favors newt gingrich. if he brawls back in this debate, steals the show, which he's very capable of doing, the best debater on stage. we move into the southern states where he will have a leg up and an advantage. if he does mediocre in the debate and gets destroyed in arizona and michigan, it will be hard for him to move toward. that could hang, if newt gingrich has his away. >> but tony, newt will lose in michigan and in arizona. >> he is. >> where is this comeback? >> it's tough. look, if he has a chance, it's in a debate format. back in his comfort zone where

he has performed very well in prior debates, been -- we haven't seen him in a month, haven't had debates in a month. >> i don't remember what he looks like. i can't even remember what he looks like. >> jason is right, though. if he can pull well out of his home state of georgia and southern states, he becomes maybe relevant again. but it's a long shot. >> to be honest, is he running ads, tv ads. somebody told me 30-minute ads. maybe he has another shelf life. i appreciate it. up next on "kudlow," retail gas. up 93% since president obama took office. prices closing in on $6 a gallon in florida. who is to blame? is obama to blame? we'll debate. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online.

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welcome back to "the kudlow report." i'm larry kudlow. here is a shock number. florida retail gas approaching $6 a gallon. florida. so far during president obama's term, retail gasoline prices up 93%. average price of a gallon of regular gas climbed more than 23 cent to 3.59 in just the past month. are president obama's policies responsible for the rising gas price and pain at the pump? a question that apparently has the white house on edge. take a listen to press secretary jay carney today.

>> the president's approach has been to responsibly increase domestic oil and gas production, what he has never said and what i attempted i thought to appropriately mock yesterday was the idea that there are magic solutions that you can put forward a proposal to cut the price at the pump in half, you know, on a piece of paper with a couple of magic beans, not realistic. >> all right. scissors and paper. rocks and scissors and paper. dean baker, codirector of economic policy center and research, and james of the american enterprise institute. dean baker, a lot of people feel obama is living off of george bush's original permits. "investor's business daily" blames obama for killing keystone, stopping oil drilling from federal lands, nothing going on in alaska, nothing in the arctic, and its his fault.

what's your response? >> i really love this one. republicans make this their big issue, i want a presidential race here. you know, whatever. but, you know, look at this. $4 per barrel oil in 2008. you remember that. not as though this is the first time we've seen it the other thing to remember, increased oil production under president obama in this administration, furthermore, you know this is the world price of oil. so let's drain it all. that will barely impact the world price of oil. you know that larry. if we had $2 a gallon gas and $4 every where else, what happens? they export it. you believe in the free market. that's what happens. >> i'm sympathetic to the world market rule of law of one. i want to ask about oil production under obama. most of the permits started when george w. bush ended the ban on offshore drilling and other things. should obama get credit for production he didn't start or obama get blamed for killing

keystone and not going to alaska and the arctic and slow walking permits? tell me who is right and who is wrong? >> you have to give the president a bit of credit. if not for his policies, the economic recovery would be a lot stronger. demand for gas would be more and prices for gas would be higher. as far as the production issue, listen, go down the gulf coast. try getting a permit, about deep water offshore. almost impossible to forget. anwr, you can't do anwar either. ten years ago, liberals were saying we can't get gas off anwar for a decade. we're still not getting gas and oil off of anwar if anybody deserves credit here, it's the good lord for putting oil and gas in the shale in the ground. that's who deserbs the credit. >> dean baker, the department of agriculture stopped the shale

drilling at the utica field in ohio. it seems like the epa has been a boundary. >> the free market says that you can pollute my drinking water? people are trying to make their living as fishermen, tourism, and beaches covered with oil. >> that's an excuse to stop drilling? >> you have to make sure you have good controls in place so you don't have another one. what will you tell the people in louisiana the next time that happens? >> let's not imagine for a second. this president wants lower oil and gas prices. you know, maybe just for the election. and he came in, said he wanted higher fossil fuel prices to it to combat global warming. would would have a cap and trade system. >> we have a mild winter in d.c.

>> he's not for cheap energy. >> he's for sound environmental policies that will do something about global warming. and wish it away. i'm sorry, we have a really warm winter in d.c. which i kind of like, but on the other hand, it has a lot of really bad implications for us down the road. >> you're the holdout. >> jimmy p., texaco and sumarco had to close down oil operations because they couldn't get oil in from oklahoma and texas. another example where the keystone attitude, the anti keystone attitude is driving up futures markets which is translating to higher cash markets. and isn't that another factor? let's get serious. we can blame global warming as much as we want. no piping and no drilling. >> listen, the president and jay carney say one thing, but the president regulator say another thing. this is giving the president's goal of raising the price of

fossil fuel to another level. it's for preventing pipe linelilines from built. >> the strait of hormuz. i'm willing to admit that's not necessarily of obama's making. though some conservative diplomats might not agree. but i just feel, dean, you are using this global warming argument, an argument being disproved daily. i don't know how obama has been a drill, drill, drill, guy, and the chickens are coming home to roost. >> being drill, drill, drill, would make no difference. 100 million barrels produced each day. if we gave your do you guys, drill, drill, drill. >> i think supply matters. >> 1%, james. 1%. that's what maybe we could get, drill, drill, drill everywhere. >> shale drilling would change that equation. we need 10 million barrels per

day. we're at 6 million. can we get to 10 million. >> the president's new tax reform. he wants to take away. raise taxes on drillers, and apparently he thinks we can get there from biofuels. >> thank you. dean baker and jimmy p. it for this evening's show. very lively debate and as oil prices climb, we'll have it again. thank you for watching. i'm larry kudlow. i say drill, drill, drill, and pipeline, pipeline, pipeline. ♪

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