>> three letters, crm. they're back, it's big. right here at "mad money". i'm jim cramer. see you tomorrow. zeerchlg has the oil spike turned barack obama into an energy policy republican? good evening. i'm larry kudlow. this is "the kudlow report." sizzle story number one tonight, and it's a fwood one. have high energy prices turned mr. obama into a republican? now, as prices climb past $108, president obama fought back today against his critics. here he is mocking republicans on drill, drill, drill. take a listen to this cut from the president today. >> they're already dusting off their three-point claim for $2 gas. i'll save you the suspense. step one is to drill and step two is to drill, and then step three is to keep drilling. >> all right.

very clever. very cute. wait a minute. i read the speech carefully, and the very next line tells me that oil spikes last year and now have actually taken the president into republican territory. that's right. you heard me. listen to this cut. >> in we're going to avoid being at the mercy of these world events, we've fwot to have a sustained, all of the above strategy that envelopes every available source of american energy. yes, oil and gas, but also wind and solar and nuclear and biofuels and more. >> all right, folks. that there is a republican policy. all of the above. you hear republicans talk about all of the above. i want to talk with our guest bz all of the above and who is to blame for the oil crisis and what the heck are we going to do about it?

welcome back to the show. michael brunh, executive director at the sierra club, and we welcome bruce vincent, the president of swift energy and chairman of the independent petroleum association of america. bruce, let me begin with you. when you hear mr. obama say all the above, he says all of it, oil, gas, wind, solar, nuclear, biofuels and more. i know he is nott doing it as fast and as clear. isn't he in effect operating now a republican policy? >> oh, not at all. he says the words, but we need to see words turned into actions. if you look at the actual actions over the last three plus years of administration, they've been anything but all of the above. they've been the most detrimental and harmful to the oil and natural gas industry in this country that we've seen for decades. this industry has been able to grow production and this country that he now wants to take credit for, but we've been able to to that on private lands and state lands. whereas, production in federal

lands has declined. >> all right. let's stay with this, though. michael brunh, welcome back, bud country. here's the key paragraph from the speech. he says a record number of oil rigs are pretty right now. more oil and gas rigs than the rest of the world combined. then he says over the past three years, we've approved dozens of new pipelines, including canada. i'm not sure what he is talking about. he sure didn't approve the keystone pipeline. then he goes on to say we've oepdz millions of acres for oil and gas exploration. that sounds pretty republican as to me and all of the above. i know it's not going to be perfect. i get what bruce is saying. michael, from your lights, from your standpoint, has obama shifted from his early days as a pro-green clean energy guy now towards more of an oil and gas producer guy? >> no. i think what you see is the president pursuing a variety of different strategies focussing on both the short-term, midterm and long-term. from the sierra club's perspective, we like most of the above of the all of the above strategies. you know what, the president has done, if bruce wants to see

results, what the president has done in the last few months in proposing a car standard, that would save more oil than we could pump through the keystone pipeline over 45 years. that's results that will pay off for the long-term for the american public. what we also want to see is a true doubling down on clean energy so that we don't come into this situation again and again and again and again where we're held hostage because of our dependence on oil. there's a lot that we like about the president's plan. we hope the president has a long and aggressive plan to get us off of oil. >> i understand the slow walking permits and the slow lease. i understand the federal thing is not going near as fast. i accept all that. let me ask you. if we had even more aggressive drilling and production and leasing and permitting and all of the things that you want, would that have any different impact on today's $108 oil price

and today's $3.60 whatever gasoline price? in other words, near-term would any of this change, or is there another factor developing? >> no. short run that's not going to make a difference, but long run it will. for some time now we've heard politicians talk about well it takes ten years to do that so why start? they were saying that ten years ago. if you don't ever start a process, you never get there. you know, our industry has been supportive of an all of the above strategy for a long time. we appreciate the president articulating that. we need to now see his words, though, turned into actions. the behavior that actually gets us there. >> you know, larry, i want to take a moment here just to half agree with what bras is saying. the best way to tell the future is to look at what investments we're making in infrastructure today. if we want a future a decade from now where we are as dependent on oil as we are today and the economy is held hostage by our dependence on oil, then we should do exactly what bruce

is saying, and we should drill and drill and keep on drilling. if we want to -- if we want -- >> that's my point, michael brunh, that is what president obama is saying. this guy has changed his tune. now, i want to get to iran in a minute, but he is a different guy than he was back in 2009. maybe even 2001. i know the public lands, the federal lands have not moved as fast, but we're in the midst of an oil boom, and i guess what i would say, bruce vincent, isn't the president reacting to the politics of this? he doesn't want motorists and consumers to blame him for $4 gasoline at the pump or $5 gasoline? therefore, aren't our drilling policies more liberal, if you will, than they once were? >> well, he is sure reacting to the mrekz, and pole tigs often do, but if that's what helps get this country in the right direction to open up federal lands, give the industry access to develop both the natural gas resources and move independence, we're vulnerable on it because

of the dpind ens on liquid petroleum. 99% of our transportation comes from liquid petroleum. we support electric cars, but you're going to need natural gas to create the electricity to power those cars as well. >> that's a different situation. >> well, okay. we'll see. you know, we're not open in alaska. we're not open yet in the arctic, but, of course, the shale boom is the biggest news. michael brunh, isn't the real culprit here iran? that the trainers are taking large net long positions, okay. we went through the numbers today. back in october, according to the cftc. traders were 181,000 contracts long. now they're 281,000. everybody is taking about the saber rattling for the strait of hormuz. that's what's driving energy prices right now. we have a lot of supply, but

there's worries about a supply shortage. isn't that the case? nothing would change that in the short run, michael. that's -- we're just stuck with this iranian problem until our government does something about iran. >> that's why drilling won't make an impact on gas prices. it won't make an impact for this week, this month, or even this year, or the next couple of years. we operate on a global market. like it or not, we cannot drill our way out of this gas crisis. we can't drill our way out of the next gas crisis. the only way to avoid this situation from repeating itself again and again in the future is to have a more aggressive prudent plausible plan to reduce our dependence on oil. >> bruce vincent, i'll give you the last word. if we built the keystone pipeline, if we had drill, drill, drill every before, if we got rid of the epa nuisance, don't wref a real chance, the united states and canada, to develop north american energy independence, bruce? isn't that actually in the cards? let's put the iran thing aside for the moment. basically aren't we within sighting activision now of independence because of this miracle and energy relevant use

for shale fracking? >> you'll always have the political risk premium, but the united states can do a lot about it for its own sake and national security. there are several firms, goldman saks, projects that 2017 the united states could be the largest producer of oil in the world surpassing saudi arabia, surpassing russia, and the reason for that is the shale boom in the united states, allowing the industry to get access, allowing the industry to move forward under appropriate regulation. not burdensome regulation. as we grow production -- >> larry and bruce, what's the cost of that? how many -- what's the risk to our climate? what's the risk to our water shed for doing that? >> i can't go down that road tonight. i want to establish -- we almost had common ground on mr. obama marching towards republican energy policy. we're almost good on there. thank you, gentlemen. the next question on this whole theme is whether high oil and gasoline prices are going to sink the economy because, as we just learned, it's iran, and

it's the traders iffing long on the supply shortages from the gulf -- from the strait of hormuz. there's nothing we can do about this in the short run. i actually agree with president obama on that. let's talk to cnbc contributor joel of deutsche bank and michael pento president of pento portfolio strategies. is this going to sink the economy? we're $108 today. we may be riding higher. we're heading towards $4 gasoline. what do you think? >> i don't think it's going to sink the economy. not right now. if oil were to spike and stay elevated, let's say it were to go to $4 a gallon in the next four weeks and stay there, we would lose probably a half to a point on gdp. i don't expect that to happen, but even under that scenario, the economy would not wither on a vine. it would not die. it would grow at a slower pace. >> $4 a gallon could be a few weeks away. we're over $3.60 today. >> $3.65. are you a sanguin.

i am as joe. joe, let's not ignore history. okay. back in the summer of 2008 oil prices went to $147 a barrel. the price of a gallon of gasoline went to $4.16, an all-time record high, and that helped bring us to the great recession/depression. and then in the spring of 2011 gdp went to .4%. plummeted because why? oil prices went to $114 a barrel, and -- >> yeah, but, michael -- >> gasoline went to $4.05. now we're back $108 a barrel. we're about 35 cents away from $4 a gallon. why is this time different, my dear friend, mr. joe? >> my dear friend, michael pento, i would say three things. number one, lehman brothers. that was the big catalyst. we were already in recession at the time. we didn't know it. three, the job market was lousy. we were losing employment back in 2008. now we're actually -- we've seen an acceleration in employment.

jobless claims are at a four plus year low. the economy is much healthier. it could with stand those higher prices. >> joe, let me ask you something else. i know some of the arguments. what about the role of ultra cheap natural gas and what about the role of the very mild winter which has cut utility bills? in other words, is there an offset? one part of the energy portfolio, gasoline is rising a lot on the heels of crude, but the other part of the energy portfolio for home heating and local utility bills is actually falling. is that a wash? is that what you are betting on? >> larry. >> is that a hope, a prayer? is that a triumph of hope over experience? >> you read my note. you led me into it perfectly. thank you. the lower malgas costs combined with the fact that people aren't using as much utilities to heat their house when it's 60 degrees, that's, we think at this point offset about one-third of the gas runoff. >> isn't that a winter phenomenon. a warm spring might lead to a

warm winter and we'll be running our air conditioners full bore. >> gas tends -- two things. gas tends to peak in may and then come down. that's number one. number two, when we got to $4 a gallon, both in 2008 and also last year, we got there very briefly and we came down. the second half of last year, despite those four plus prices pr gallon, the economy strengthened in the second half of the we're. >> aren't you ignoring the reason, the main reason, besides the events and maybe an israeli attack on iran, why we have $108 a barrel for oil? isn't it the same reason we have import prices of 7% year-over-year? isn't it the same reason why food prices are soaring? >> let me get a -- >> isn't it the reason -- >> the federal reserve -- >> absolutely. negative interest rates until the end of our natural lives. >> on this i agree with you. i think the dollar certainly has been an issue, and this is partly the fed's fault. >> is that going to change? >> i don't -- >> when bernanke was raising interest rates in 2007, the

unemployment rate was 4.5%. now it's 8.3%. he doesn't have the political cover to attack these ever-escalating oil prices. >> no, he doesn't, but i think you made a good point, though, when you talked about geopolitics. if the situation in the middle east deteriorates and oil goes up to $150, $200, we'll have a technical recession. the thing is i think a lot of the oil premium is built in. the market already. absent a shock, i think we don't go up much more. >> i have to get out of this, but i want to ask both of you real quick, michael pento, we are going to see a higher consumer price index as a result of the energy price increases, particularly gasoline. that's coming. now, is there an inflation tax that's going to dampen the economy? on top of the issues of substituting income to pay for home heating and automobiles, is there an inflation tax that could sink the economy? >> absolutely yes. undoubtedly yes. money supply growth is measured by m2 growing north of 10%. that's way above productivity plus labor force growth.

>> the fed may be monotizing this. >> larry, they're easing -- >> you get the last word, joe. >> i just got excited. the fed is effectively easing into a possible energy shock, but they're also easing into a grossly improved labor market. to me this is long-term bad for bond holders and definitely means higher inflation. >> we'll have you back in a few weeks when we have a new round of stats. i know the jobless claims holding around 350,000. the jobs market looks pretty good. we'll get you both back, and we'll continue the debate. by that time gasoline will probably be $4 a gallon. joe, thank you. michael, we appreciate it, as always. you're both great. coming up, folks, this time we're going to go to the stock market. we're going to try to figure out how to play the oil risk. what is the market impact going to be? don't forget, free market capitalism, alleges the best path to prosperity. that tells me mr. obama is only part of the way there. i say yes, drill, drill, drill, pipeline, pipeline, pipeline. the problem with this story is

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let's do stock market work on the risk of high oil prize and gasoline. here is the former head of fixed mcresearch at the bank of america. that being david goldman. he is currently running macrostrategy. we have our pal michael of forbes media, and special added noted energy analyst chris edmunds of nerk cap partners. is that right? whatever. chris, whatever, what is $108 meaning? what is $3.65 mean for the stock market investment strategy? what should people do? how to hedge or maybe you think prices are coming down? you tell me. >> well, i think it's all about iran. auz said. i think if we get a sustainable conflict or signs of a conflict in the middle east, we could go higher, and if we do, that's going to have a big impact, and if that happens, i think it's going to be very, very difficult for the stock market to work its way a whole lot higher until we have some sort of resolution or clarity on that end. >> which we may not have. dave goldman, what about oil

risk or energy or gasoline risk? what about iran-israel risk? >> even without iran, larry, the numbers tell you that marginal demand from asia is going to keep oil and raw materials prices boyant for quite some time? >> how boyant? >> $110 to $120. >> you see this as a demand shot from better economic growth. >> it's a demand shock which also has a monetary component and has a strategic component. we can live with $110 to $120. that's the demand side, but if we get a monetary strategic component, that pushes us to $150, we're in serious trouble. >> i want to get to -- why is it, therefore, that non-oil commodities have not moved during this oil move. oil whoed if is up to 37%. not all moderateties use a crb or journal of commerce. 0, 1%, 2%. >> the industrial metals have

done very well oil and miners are two of the best performing sectors in the s&p, and you want to stay concentrateed in that because we have a lot of inflation risk out there, and the classical inflation hedges of the market are going to out-perform, and that's -- >> miners. gold miners. >> all raw materials, including oil, across the board. that's where you want to concentrate. >> now, would do you that, michael, or would you just sill and get the hell out because we're going to $120 a barrel? what's your -- >> i think no doubt you're going to -- forget about what's happening in the middle east. how about the weak dollar? >> i would go right to the commodities themselves. i would buy gold and oil futures. have i no doubt even if nothing happens in the middle east. there's no war which we were all hoping for. oil is going to go to at least $120 a barrel. >> we have such a rosy scenario before we intot into the oil mess and the saber rattling and all the geopolitic, including

israel. we had a rosy scenario. are you telling me that rosy scenario didn't have legs? that her skirt was too short and she had to be pulled off on to the bench? what's happened since then, larry, we had keystone block, and we have canada that would sell it to china. we also have the president come out for the budget where he is picking winners and losers. he is favorable to renewable energy companies. i guess he likes -- this is, i think, another head wind that's facing the economy and it's going to help push oil prices higher. >> chris, we had a 25% stock market rally. we are still in that rally. the supreme court was up 46 poins today. we're back to, what, may of 2008. weave had a rosy scenario on stocks. are you throwing in with who thinks this whole thing is coming crashing down? >> i don't know if it's coming crashing down, about the i am a lot for cautious today than i was, and it's not because i don't think we can go higher. it's because i think the head wibdz have gotten greater, and we have to be very careful about

managing equity risk in a market where oil prices -- if we go to 120 or 150, the perception will be so strong and the head winds will be so strong that we're going to slow that equity rally down. that's my only concern. i think we're -- i think there's some agreement here that we can live with $110 oil, but can we live with $120, $125 oil, and we certainly can't live at least in the short-term with a spike, and all the rep can youings of some sort of conflict in the middle east. i think that's what we really need to focus on. >> part of this is the good news. remember, last year chicken little told us there was going to be another lehman style financial crisis. you and i said it was complete nonsense. >> we got that right one time in a row. >> that was nonsense. china would have a hard landing. now a hard landing with 7% growth as opposed to 9% growth. asia is still growing. there is demand, which is pushing all the raw materials prices up and in a sog soggy monetary environment. >> now, can stocks rise as oil

rises? >> yes. absolutely. the raw materials will take a bigger chunk of the rise, and the most exposed sector, which is gone too far, is consumer discretionary. >> for the obvious reasons. here's where the oil -- >> that's where you want to get out. >> the thing we're missing here with the stock market is that last year productivity growth in this country was 0.7%. if you look at that, it's one-third of what it was from 2000 to 2010. productivity growth is key to a rising economy. in the 1980s stock market to 1990s. >> we're talking valuations. >> 2% di denned yields. sdro profits are not growing the way they were, but the risk of an extreme disaster is what is departed from this. >> that's the big change. they're going to have a 45% tax rate if your friend obama gets elected. i know he is not really your friend. >> two companies, gentlemen. apple and aig accounted for almost all of the s&p 500's earnings. >> are you going get the last word. on the way out.

give me something. no hedges. >> i think you got to look at the shale oil companies. continental resources. petroleum both reported fwraet numbers, great productivity growth. i think you stick with oil. if oil goes to 30 regardless of what happens to the market, those names will outperform. >> all right. i have to leave it there. david, mike, and chris, thanks very much. coming up on "kudlow" breaking news. many more senators receive suspicious threatening letters. much more on that when we come back. [ male announcer ] let's level the playing field.

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>> breaking news coming into cnbc. more senators have received suspicious threatening letters. we go to washington for cnbc's amman javers. >> good evening. scary moments today for some members of congress and members of the media who received suspicious packages with a powdery substance that law enforcement officials are saying so far has proved not to be dangerous, but law enforcement is also warning that the sender of these packages has said that up to ten united states senators will be receiving a deadly pathogen. so far no evidence of that. take a look at the list of members of congress that we know of. at least so far who have received these packages. senator patrick leahy, patrick toomey, joe lieberman, an independent from connecticut, and house speaker john boehner all receiving these suspicious packages. either in their washington or

home district and state offices. also in the media, fox news headquarters receiving a suspicious package. john stewart and steven colbert receiving packages as well, and what we know about this, at least as of reason, larry, is that some of these packages have been postmarked in the pacific morgan stanley, but other than that, not a whole lot of detail forthcoming from law enforcement about who this sender might be and what the objective here might ultimately be, larry. >> all right. many thanks. c northbound's amman javers. coming up on kudlow, the five-day countdown to michigan. did mitt romney score big-time in last night's presidential debate? our political power panel up next, including our great friend steve forbes. we'll be right back. does any mother ever feel like their kids are adults? i have twins, 21 years old.

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welcome back to the kudlow report. did mitt romney core score a big win last night in the key arizona debate that's leading up to tuesday's primaries in arizona and then michigan? santorum, i thought, had a rough night, so let's talk about who won the debate. let's begin with our favorite

cnbc contributor robert costa of the national review. you know, robert costa, between romney on the one side and ron paul on the other, i thought rick santorum was completely hogg tied about spending and minuta in washington d.c. as an insider. >> romney played a tactical game last night. he baited santorum, and he made santorum talk about his report, having focused on his record instead of santorum's message. for romney that's a win. he blocks santorum from surging ahead. >> let me ask you a second one that maybe a little bit of a sleeper. i thought mute gingrich had a very good night, bob, and i want to see if you concur and before we get to our panel, what's that mean? super tuesday has two big southern states. tennessee and georgia. newt has been part of the conversation -- hasn't been part of the conversation since he slipped in the polls. he reinforced his image as the ideas man in this primary, and i think committee sneak into super tuesday with the money from

sheldon adelson and survive and still number the hunt. good night for newt. >> do you think romney carries michigan? do you think he carries arizona? two good questions. they're both coming bang, bang. is he going to win? >> i think he is. he only mentioned his economic plan once last night. where was the big economic speech that was coming up on friday? i didn't hear it. it was defensive gain, pushing back santorum. i still think romney is in a strong position and playing well at his home state, and santorum just isn't catching on in this final 11th hour. >> santorum is in a lot of trouble. romney wasn't asked. that's the problem is john king didn't ask a lot of key economic questions last night. he was much more interested in contraception and you know what. anyway, robert costa, thanks, as always. let's continue this discussion. let's bring in our distinguished political panel. ari joins, you krbt for "the nation." jim of the american enterprise institute and cnbc contributor and steve forbes, chairman and editor in chief of forbes media. he is the former presidential candidate himself. steve forbes, i want to ask you

about this phrase that i don't think we have a tape of it, but rick santorum at one point makes this statement. he says politics is a team sport. sometimes you have to take one for the team. meaning, steve, he voted for no child left behind. he voted for planned parenthood funding. he also voted for medicare part d drugs. now, if politics is a team sport, what happened to principle? what happened to conservative principles, steve forbes? >> well, this is where he hurt himself with the tea party people, activists in the republican party by saying, hey, when it comes down to it, he will play the washington game. he allowed his opponents last night to dominate the debate, to set the agenda instead of him going on attack. remember when he started to hit romney on health care? romney threw it right back at him about pat toomey, and santorum fell into the trap. santorum did not set the agenda. romney did not follow through as was indicated on his economic plan, but by golly, santorum

hurt himself by being -- appearing weak and defensive. >> do you agree with that analysis and critique of santorum? i want to just read this one more. i'm paraphrasing. santorum is under attack from romney and also from ron paul about overspending, and earmarks. also voting for no child left behind which turned into a big spending federal education bill. so santorum, look, tongue-tied. he said politics is a team sport. sometimes he has to take one for the time, which means he was defending george bush's policies as a member of the republican leadership. how bad did that hurt him? >> it hurt him with conservative voters that are up for grabs. the bush leg as where i has evolved and particularly among the deficit crowd, there is an awareness that medicare part d and the iraq war were a big part of this deficit, that the bush era was not limited government by any means, and so if your team is, as you said, larry, that agenda or your team is washington, you are slipping. having said that, though, i

disagree slightly. i think this was fundamentally a boring debate without fireworks and so while rick santorum didn't do great, he didn't self-destruct, mitt romney has not been able to close the deal in the 19 past debates, and i think there's still a lot of room for santorum here if he comes close at all in michigan. >> what about mitt romney's 20% solution? he mentioned a couple of times newt gingrich actually said something nice about it. this is an across the board tax cut that romney used. john king were the cnn moderator didn't really graze it. that's too bad. jim, is romney going to push it? he has a big speech tomorrow, detroit economics club. can he push it and communicate it and sell it as a 20% solution and make a difference, jimmy? >> no, i think he can't. listen, i think the only reason it didn't come up was the crazy structure of these debates where they want to talk about earmarks in 2004 and couldn't are a acceptings. this should have been -- all these debates should just be a hammering home of economic points. i think romney is going on push. i think he is going to push it hard, andure going to hear a lot

more about that. i think we might get a few more details on some of the spending cuts, and we begin to put it all together. premium support plan, social security reform, spending cuts. now a nice supply side tax package. overall, those are four very strong points to run on. >> steve forbes, i think this 20% tax cut is a classic reaganesque supply side tax cut. it's not the steve forbes flat tax, but does it give him, mitt romney, a leg up in your view? did he make progress on this, steve? >> he made progress in the sense that he really had weak tea on the table before. now he has some real whiskey there. it's not as radical as saying newt gingrich would do or even some parts of santorum, but he has something that's out there. something that is a pro growth, and if he hammers it, like he really means it, and that's going to be critical in the weeks ahead, then he is going to win this nomination because last night, for example, santorum or even newt even though he hit the economic message a little bit, none of them really hammered on it. they let king define the temz of

the debate instead of pivoting and making their own points about their own agendas. >> i know it's going to drag on, steve, but if mitt romney wins michigan, after tonight's debate, most people think he won the debate. >> if he carries it through to michigan and arizona, if he comes off a good detroit economics club speech and sells the 20% cut and the other budget components that jim was referring to, steve forbes, does that effectively sew it up? i mean, i know the process is elongated, but doesn't that effectively end it? >> that makes him the formidable frontrunner, and we'll see if he flows it again. i think he will win ohio on super tuesday. if he wins michigan, arizona, and then ohio, going to be very, very hard to stop. he stopped himself once before. i don't think he is going to allow it to happen again, which is why he finally put something on the table on the tax side. larry, if he really wants to seal the deal, he would steal ron paul's monetary stability, stable dollar message, and then there's no way to attack him. >> i agree with that.

it's an interesting point. he wants to replace bernanke, but he is not willing to go for king dollar yet or certainly a gold link. let me ask you one of your favorite subjects, i'm sure. that being one newt gingrich. newt had a pretty good night. he described himself as cheerful. he was calm. he was getting out a lot of very, you know, good ps on policy. he didn't get excited. he didn't have that harsh, severe attack dog, hang dog face, or whatever dog it mayen. what do you think? does newt gingrich have a shelf life left, or is he finished? >> i don't think so he has much of a shelf life left. i will give you a superficial take on why he did better last night. it was a seated debate. newt gingrich, when he gets too excited, he gets bloefr blown. when he is seated or calmer, he comes off a little bit more serious, even though i think the things he said were not that tha serious? he described himself as cheerful, but this is the most dangerous time in american history ever.

he is the historian, not me. i haut his message was muddled, although he had the optics of looking steadier. i don't think to just finish the point -- i don't think in a race where you have romney with 100 delegates and santorum with 70 and gingrich down with 30, i don't think gingrich is the one to watch here. if anyone stops romney, it's santorum. he is closer on delegates. he is closer to the conservatives. >> stop romney. wron about the sitting down or standing up theory, but as far as stopping -- listen now. ron paul and newt gingrich, they're part of the save romney brigade. you know, adelson will give gingrich all this money. that keeps another conservative in the rates. that's what romney wants. >> james. is mitt romney underrated? maybe that's a dumb question. it's conventional wisdom. pick on him, he doesn't do this or that. he can't excite the base. he can't excite the tea party. he keeps coming back. he called himself resolute last night. i thought that was a very interesting word, and i thought it struck well. i thought romney is rather

resolute. he has supply side. you talked about the budget entitlement cut. is he underrated not just as the republican candidate, but as the next president? >> listen, he has shown himself to be a guy knock them down. he can get back up. he has shown himself to be a tenacious debater. as much as we've criticized his agenda isn't bold, you look at that agenda. i mean, 28% where it was during the 1980 unheard of medicare, social security. that is a great agenda. if it was any other messenger, if it was -- if that was the marco rubio agenda, people would be going crazy, but since it's mitt romney, they've been poo-pooing it. he has been much better on policy than he was three months ago. >> we'll leave it there. we appreciate your input. here's a programming note. republican presidential candidate ron paul is going to join me on tomorrow's program. we're going to talk free market austrian economics and sound money. up next on tonight's show, oil companies. one of the highest tax industries in the country.

how is obama's so-called tax reform going to affect their bottom line. we'll be right back. more on the high oil theme.

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president obama's proposal to overhaul the u.s. tax code gets an icy cold reception from trade group leaders. they say the plank can do more harm than good. these are business groups. if all these groups oppose obama, isn't that a sign something has got to be wrong? let's talk to jack gerrard, president and ceo of the american petroleum institute. jack, welcome back. i'm just reading this wall street journal story. technology counsels against it. they have microsoft and cisco. the foreign trade group is against it. they got cat and pfizer and proctor & gamble and boeing. you all at the american petroleum group is against it. the manufacturers are against it. okay. so there's some majorly wrong with it. what is it? what's the big beef? >> fundamentally, what is he doing in an effort to reform the tax code, which is something we support, he has pecked winners and losers wrrz instead of saying we've got a uniform tax system that doesn't benefit one industry over another, let's make the provisions am cable to all, he is picking winners and losers, and in this case he has chosen the oil and gas industry for severe punishment.

we think it's a nonstarter. it's not a serious proposal. it's unlikely to be acted on, and it just further exacerbates the problem of getting back to serious policy development. >> jack, one of the big problems here, as i parse through all the news accounts and listen to the industry leaders talk about this thing, if you operate overseas, you are going to get hosed. there's going to be a penalty tax on foreign corporate earnings from american companies. does it divide down roughly that way like a lot of your members, most of your members, operate overseas as well as in the usa? is that a big problem? this minimum tax for foreign earnings? >> well, absolutely. that's one of the big problems. when you look at the oil and gas provisions, he selected a number of provisions to repeal that relate directly to our cost recovery mechanisms. typical standard deductions that many other industries get, he selected out the oil and gas industry to say we can't make cost recovery provisions amable to our industry. that's the real problem with the

oil gas provisions. he has devised a system to punish us, not reform the tax code in a fair way. >> i was amazed. manufacturers get a prrchs. they get a bit of a subsidy. they get a 25% effective rate instead of a stat other rate, and yet, i read that my friend jay timons, the ceo of the national association of manufacturers, even he is against it. why do you reckon? >> well, i think it's the same thing. when you look at the oil and natural gas industry, our refining sector, there's nothing more american manufacturing than refining and creating fuels for this country. yet, once again well, lose our standard deductions, our ability to operate, so when you get the lower tax rate, it's of no real value. it really doesn't help you become more competitive if significantly increased your cost elsewhere by denying you standard deductions, standard business operations. that's why you see business generally come out opposed to this. i frankly don't think it's a

serious proposal. otherwise, the president would have put something on the table that was more uniform and more consistent striving to really make us more competitive in a global environment. >> yeah. probably should have just rounded you all off and tried to work something out ahead of time, but this may just be a show horse, not a work horse. jack gerrard, american petroleum institute, thank you very much for coming on. >> thank you, larry. >> always good to see you. >> next up, my pal robert rooish says we don't need corporate tax cuts at all. therefore, he asks, why is president obama proposing one? well, i got a few ideas. he is going to join us next, and we're going to have a wee bit of a debate.

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>> well, here's a headline that grabbed my attention today. corporations don't need a tax cut. so why is obama proposing one? huh? well, of course, it was wherein by our friend robert rooish. s a former labor secretary and author of "aftershock." just to have a mix-up here on a debate, we bring in our other freend phil kirkman, vice president and policy at americans for prosperity. he is the author of dempsey denied. for heavens sakes, we have the highest corporate tax rate in the world. how can we not cut it? >> when you say we have the highest corporate tax rate in the world, i don't think you're looking at effective tax rates. effectively a tax rate right now, according to the cbo, right now the eftive rate is about

12.5% of corporate profits. the lowest it's been in 40 years. on top of that you have corporatings sitting on $2 trillion worth of cash. they don't even know what to do with, and, you know, your friend ronald reagan, great president ronald reagan, in 1986, he signed into law corporate tax reform, tax reform generally that included a corporate tax increase in today's dollars that would have generated about $1 trillion of the next ten years. the economy did not suffer. you love the 80s. >> i still do. 1990s weren't bad either. he didn't change the statutory rate. this is the key part. phil kirkman, i want to bring you in. effective rates, they vary from year to year based on the taxes and carry forwards and profits and so forth. isn't it the statutory rate in the long run what matters, phil? isn't that where we have fallen so far behind competitively? >> yeah. i think that robert has it exactly backwards. we do need a corporate tax cut, and obama is not proposing one.

he is probowsing a net tax increase. the stat other rate is extremely important because that is what you have to make your long-term investment decisions based on. unless you qualify for some kich special carve-out or what have you. we want to end that social engineer, and that's why we need the tax reform and broaden the base. it should be revenue neutral or a quarter trillion dollar tax increase, which is what obama has proposed. you're right. this is a competitive imperative. as of april 1st when japan's rate takes effect, we'll have the highest rate in the world. when you add in state and local, we need to be competitive with just 25%. the oecb average. it's a step in the right direction. >> bob reich, all these years, i've tried to get you to think on the margin, particularly regarding tax rates, and you are not thinking on the average. you must move to the margin. >> not only am i thinking on the margin, but i'm also thinking context rally and historically. we have a very large budget deficit.

it is getting larger. you know, back in the 1950s and i'll go back even that far, 1953, under dwight eisenhower, corporations were providing revenue to the federal government that equaled about 32% of total federal revenues. right now corporate tax revenues are down to 10% of total federal revenues. now, you know, if we didn't have this huge budget deficit, i would be much more sympathetic with you. i would say, well, even though corporations are doing very well resign, even though corporate profits are very, very healthy, yes, why not worry about competitiveness? again, i'm not sure what you mean about that term, but let's worry about it. given the budget deficits, gin where we are, given average americans cannot pay more in taxes, given we have to deal with budget deficits, why not ask corporations to pay a little bit more? >> does anyone really believe for a second that if we said more tax money to washington, it will be used to pay down the deficit instead of for more wasteful spend sng the truth is

politicians are going to spend every dollar that they can get their hands on in taxes. plus, every dollar they can get away with borrowing. we have to cut spending if we want to get the fiscal problem under control. we've got to have robust economic growth to grow the denominator. >> i'm completely sympathetic to the idea that we need to do both. tax increases and also spending cuts. i mean, if you take the view that we can't raise anybody's taxes, well, this conversation is not going to go very, very far. >> robert, i would pause it. if you allow corporations to keep more of what they earn, it's really their shareholders who get to keep more of what theyern on the extra dollar earned. i believe this thing would pay for itself if you had steep reduction. heck, would i take the corporate rate to 20%. then i would go after the deductions you are talking about to make it revenue-neutral. i think it would actually pay for itself, bob reich. that's how confident i am. corporate taxes are a powerful weapon. >> i am not surprised in your confidence. you are a confident man, and you are supply sider who believes

that tax cuts do pay for themselves over time. history doesn't exactly vindicate your position, although i wish it would. i admire your confidence. >> larry, let's also remember we've got to get the base right here as well as getting the rate down, and that means we should be ending double taxation of def dendz, not worsening it like obama. >> thank you, gentlemen. we didn't solve it tonight, but we're going to work on it some more. that's it for this evening's show. as always, thanks for watching. ron paul on tomorrow night. talk presidential politics and policy. [ male announcer ] there's been a lot of talk about the chevy volt lately.

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