from a gallon of gas right now. that's "the kudlow report," seconds away. all right. didn't mention apple today, but i've got to tell you, people are breaking down what they hear is in the ipad 3. they hear it's got cirrus in it. crus. a lot of skyworks. swks. maybe not as much texas instruments. hence why that stock could be coming in. and i've got to tell you i'm going to reiterate that broadcom and qualcomm are the best ways to play apple other than the apple, which is to invest in apple. like i always say, there's always a bull market somewhere. i promise to try to find it for you right here on "mad money." i'm jim cramer, and i'll see you monday. hey, larry, how are you closing out the week? >> all right, jimmy. solid job creation is great. but 13 million still unemployed, that is bad. good evening, everyone. i'm larry kudlow. this is "the kudlow report." sizzle story number one tonight, the unemployment rate stubbornly stays at 8.3%. there were 227,000 new jobs

created. that's a solid number. the problem is unemployment too high. you're going to need over 300,000 jobs a month to really cut down. how is that going to happen? and sizzle number two. guess what? i'm going to show you how to take at least half a buck, 50 cents, off the price of gasoline. how? knock down state taxes. knock down regulations. stay tuned for that. and is there a southern surprise for mitt romney? can he take alabama and mississippi on tuesday? whoa. first up tonight, story of the day. the jobs report. now once again, here's the good news. non-farm payrolls, they did rise 227,000. that's the third straight month above 200. job creation is picking up. that's good. but the bad news is the unemployment rate is stuck at 8.3% and if it were adjusted for normal participation rate it would probably be over 10%. and there are still nearly 13 million people out of work. so let's talk about this whole story. we bring back cnbc contributor

robert reisch, who is a former labor secretary and the author of "aftershock." cnbc contributor jim pethakukas of the american enterprise institute. jimmy p, what is the real unemployment rate? okay, i'm glad we're creating more jobs. i think that's great. but what is the real unemployment rate now? >> well, listen, a lot of it has to do with this labor force participation right. if it's back where it was when obama took office, the unemployment rate would be about 10.8. if you use various demographic changes because of labor forces aging, it's probably about 10.4%. the other thing i'm really sure about, it ain't 8.3%. that is a ridiculously low number. and if you count the underemployed, it's more like 15%. we have a terrible, simply terrible unemployment problem in this country right now. >> robert reich, you heard jimmy p.'s analysis of the unemployment rate. look, i celebrate the speedier job creation. i think that's great. it's great for america. we'll get into the politics later.

but what about the stubborn unemployment problem? what to do about it, robert reich? >> well, it is a stubborn unemployment problem. and i wish i had an easy solution. mainly the problem is that consumers just don't have enough purchasing power, as was said. the total population in terms of the percentage of people who are actually employed right now is very, very low. median wages continue to decline. housing values continue to drop. until people have more money in their pockets and are more confident about the future -- although consumer confidence is up, you actually have to have money in order to do the purchasing in order to keep the economy going. and there is the rub. you know, you hate to end my little preoration here by suggesting government spending has to fill in, but i'm afraid government does have to give the economy a little bit more of a boost. >> bob makes two points. one is a good point, is that wages and income are going nowhere, we're creating jobs. a lot of these are part-time

jobs in retailing, leisure, hospitality. over 40% of new jobs are in those sectors, which is a lot. but the other point he's making, which i think is wrong, is his argument about consumer spending. and spending power. it's bob's theory that we have this sort of long-term aggregate demand problem because of income inequality and wage stagnation. i don't think that's the problem. i think what we have in this country is a long-term aggregate innovation problem because we've spent years with a crony capitalist system devoting resources and picking winners and losers. well, guess what? we picked the wrong companies. now we have all these jobs being created and we don't have workers to fill them. what we need is to have more entrepreneur, more innovation, and that will create the jobs of the future. >> i'll tell you, i'm all in favor of innovation and obviously productivity, innovation, and economic growth. the problem in a nutshell, though, is that a lot of american workers have become redundant. their wages really aren't going down. the 1/3 drop in housing values

over the last four years is really a huge deal. the negative wealth effect is playing a very dominant role with regard to consumers' willingness to go out and spend. the only thing they basically spend on is replacements. that is, cars and appliances that had to be replaced. but what's going to keep them buying right now? i don't know what is. >> you're not going to have -- look, more government spending, robert, i mean, we have this discussion all the time, but once again. more government spending is not going to improve asset values. what jimmy pathakoukis is saying, release the private sector so it can be as entrepreneurial as possible. robert, i think businesses are still worried. you've got huge tax hikes coming next year. you've got obama care regulations and mandates coming next year. i think business is responding to some improvement in the economy. but i think business is still holding back. and if business holds back, we're not going anyplace. >> larry, the reason i don't think that's true is that almost all of the spending in the

economy, the real driver of the economy the last three months has been businesses rebuilding inventories. it hasn't been consumer spending. so businesses are not holding back. businesses are not going to continue to rebuild inventories unless and until consumers show some action. >> jimmy, can i just ask you? i want to round out the coverage of this thing. manufacturing remains pretty darn strong. and manufacturing hours worked have gone up substantially. that's one point. second point, jimmy, to react. household employment survey, which is the small business, family-owned business survey. that thing is booming. that's up close to 500,000 monthly jobs per month in each of the last three months. 500,000. that is really sort of double the payrolls. now, what's that telling us? the small business survey is telling us that things are in fact a lot stronger than we think? is that possible? >> we might be getting a lot of good small business creation. the manufacturing, it's amazing

we're having these manufacturing jobs, and we haven't even passed the president's manufacturing agenda. how can we be generating all these manufacturing jobs? but i think the real proof in the pudding is that we're creating jobs but incomes aren't going anywhere, which tells me that the jobs we're creating for the most part aren't particularly good ones. >> and bob reich, what about energy jobs? why is your man president obama continuing to pose the keystone pipeline? and why doesn't he unlock as much energy -- manufacturing, high wage jobs. we've got great opportunities in this country. i've got to believe that unlocking energy would create all the consumer demand you want. to your heart's content. >> larry, when you talk about unlocking energy, it's like unlocking productivity and unlocking entrepreneurs. it sounds great. the question is exactly how you do it and what your methodologies are. the president has talked about and has actually pushed for a lot of new energy-creating jobs, just not the kind you want. and after all, oil markets are global. i mean, if you increase energy,

that's good. but the it's not going to help much on the price side. >> i know how to do all that stuff. i'm raising my hand here in the back row. i know how to do all that tough. you build pipelines. you deregulate. you lower corporate taxes. you lower capital gains taxes. that would be an excellent start. >> well, how about building roads and bridges and repairing our infrastructure and doing all the things that we really have to do as a nation if we're going to have any prayer of being more productive in the future? >> i don't mind doing that stuff. i just don't want washington to do it. >> how about making that a priority? if there are negative xernlts, negative environmental effects, why not do the stuff you have to do or know you have to do -- >> i'm not willing to concede those negative externalities you're talking about from the pipeline. >> how about just stopping the governmental threats of regulation and taxation? how about some free market capitalism? how about leave businesses alone? you know, it's amazing to me the jobs reports are as good as they have been in the last couple, three or four months. that's the amazing thing. robert reich, i don't think it's because of government spending. i think it's because of the resiliency of the free

enterprise private sector. in spite of all of its shackles it is still performing at least somewhat, even though there are still 13 million unemployed. >> you know, it doesn't matter what happens, larry. if there were no job creation, you'd say it's because the government is too big. if there's a lot of job creation, you say it's the free enterprise system despite the government. but let me just say something. if we did not have regulation, we've seen huge problems in this economy from wall street through mine disasters through bp oil spills, through reactor -- nuclear reactors in japan. you don't want to get rid of regulation. that's ridiculous. you need smarter regulation. >> larry, it's been said it would take a genius to screw up the american economy. we have a lost geniuses in the white house. they haven't been able to quite do it yet. >> i just want regulation light and taxation light. that's all i'm asking. but we're going to have more of that later in the program. thank you, gentlemen. robert reich, we appreciate it. jimmy pathakoukis, thank you. ex-up on "kudlow," a credit

default event is coming out of the greek bond swap. the question is can europe handle it? free market capitalism, that's the best bet to prosperity. that's the best way to solve 13 million unemployed. we can get unemployment down to 5% if we just lighten government's load. americans are always ready to work hard for a better future. since ameriprise financial was founded back in 1894, they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪

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late-breaking news today. of a credit default event coming out of the otherwise successful greek bond swap. most folks think it's going to be okay and orderly. cnbc chief international correspondent michelle caruso-cabrera has all the details. hello, michelle. >> reporter: the largest debt restructuring in history is now official, and greece is the first advanced economy in more than 60 years to tell the world it cannot pay its debts. and as expected, the restructuring in this country has triggered a credit event. in other words, credit default swaps will be paid. european union had wanted to avoid this, but it eventually became inevitable in order to secure enough debt forgiveness for greece. and what is testimony to how important certainty versus uncertainty is to the markets, this triggering of credit default swaps was so expected it

caused barely a ripple effect in the markets, just the opposite of what we saw after lehman brothers when it was so unexpected. >> all right. thank you, michelle. appreciate that. no lehman event. that's key. so we have a solid jobs report. that sparked some modest gains in the market. let's turn to our investors, see where we do some stock market work on this whole story. we've got lee munson. he's chief investment officer at portfolio. and jim le kant. senior vp of investments. just real quick on this greek default, you're going to trigger some credit default payments. is this a big deal? should people worry about this? it all seems orderly, fine, discounted, no lehman event. just break it down for me real fast. >> i think this is the event we can finally say we put the nail in the coffin of having to cover greece every single day. so let's move on and go to the next fire. >> next fire. i appreciate that. jim lacamp, i know you like to look for the worst. so i want to make the same question to you. and i want to flip to you also

the issues of potential debt swaps and credit default events in, what, spain, italy, portugal. just give me a quk wrapdown on that. >> 17% is where gray khor's paper was yielding right after this event this afternoon. we're not even done with greece yet, they've got elections coming up in a month, now portugal and ireland and all these other countries, the private sector is going to say, you know what? maybe i'm not going to accept the deal because i am going to get paid on a credit default swap. 3.2 billion, no big deal. these other countries, very big deal. >> we'll wait to see from the other countries. thank you for that. lee, the other thing i think is important is china. and china's soft landing of 7.5% may not be that soft. you know these numbers. they reported out manufacturing, up 11 1/2%. retail sales up close to 15%. that suggests china is still alive and well and instead of growing at 7.5% maybe they grow at 8% or even 9%.

is that bull snsh it sounds bullish. is it bullish? >> well, i think it is. what people have to remember in america is that china's main purchaser of th their exports is eurozone. it's not america. if europe is going to survive and muddle through this withoa recession that's deep and awful and depression-like, you're naturally going to start revising numbers up in china. i think if the eurozone looks good you'll have a multiplier on all the current numbers in china. a very good second half for china and the u.s. and the eurozone. >> jim lacamp, on the other hand, energy and commodity materials and industrials were at the bottom of the ladder this week on the s&p major sectors. why is that? if china's doing better and the u.s. is doing better and we're creating more jobs here, why are these cyclical growth industries not doing better? >> well, hold on, china's not doing better. they're doing okay. they might be doing better than expectations. but they're not doing better.

they revised the numbers downward, and we're seeing numbers -- revised downward across the globe. brazil is easing. the ecb is easing. the bank of england is easing. u.s. we're still easing. if things are so hot and really improving so much, why is everybody in the world easing? >> that sounds great. if they're all easing, isn't that good? >> it is. it's good for stocks. >> in the long run it's probably terrible, but in the short run it's probably good. yes? >> i agree. but this notion that growth is better than expectations, it's actually coming in below expectations in both china and europe. so i think we have to be very careful here. >> i think china's coming in the -- >> we're coming in from a bottom. we revised so downward in the q4, this is just still the lag effect. we are coming off a very low base. the market price is at the margin. i think the margin's going to get popped up. >> lee muns ann -- >> i -- >> hang on. what's your strategy, lee? let's come home to the u.s. china is doing okay. it's not going to crash.

it may be better than we think. europe problem's not going to implode either. no lehman event. okay. so the u.s. jobs are doing better than we thought. not employment but at least jobs. what's your take here in the u.s.? you've got easy money from the fed, right? you've got modest rise in profits. what's your strategy? >> you know, my strategy first of all is look at what people don't like. you're right. we've got small businesses hiring. we have actual real income increasing because people are working more hours and underemployment's going down, and we also have sales like in autos up 12% year over year. retail sales up almost 7% year over year. the only real bogey man out there is oil. the price of oil being high. so what i've done with my clients, we have 20%, 30% exposure, strictly in energy. so if you don't like the high price of oil, larry, and you're not going to get the tax cuts you that want, then start investing alongside of it. and i think that's the number one thing you can do. also look at the transports. we like csx. we're adding to it this week because coal got killed and the price csx was down a lot. so i think you have to look at

those mitigating factors. we're doing well in this country. and all that happens -- there's no gas tax. it just means somebody's going to put off buying an ipad 3 to stuff into the coffers of exxon moenl. >> jim lacamp, what is your strategy? you heard brother munson. do you agree with him? do you have your own strategy? give us some hints. >> i don't have any problem with the areas he likes. i like them quite a bit. but i like technology. i like companies that are able to grow despite what the economy's doing. that's why i like apple and i like technology. but i also like the metals because of the massive amount of quantitative easing and now it's competitive quantitative easing going on around the world. finally, i think you can put some dividend achievers in to scratch out returns. especially large cap names that do business on a global basis. >> jim lacamp, quickly, is this election playing a role in your thinking? romney, obama, et cetera. is that playing a role in your portfolio? >> yes. the election is very unclear. if you look at the history of election years in this country, when you go into the summer and the election's unclear, then stocks suffer a little bit.

and seasonally an unly time for stocks anyway. so i think we have to be very careful moving in until we get some clarity about the elections. >> lee munson, is the rally coming to an end because we don't have election clarity? i'll give you the last word. >> finally, there's something for me and jim to have a border war between texas and new mexico. i don't think the election has to do with anything. why? because we have a republican congress. so i don't think there's anything that's going to happen. so i love jim's idea about the energy. i like that we agree. but boy, election, i've got to draw the line right there. don't think it makes a difference. >> are they not voting in new mexico? at some point they have to vote there. >> before the election as well. a budget ceiling debate could -- >> we might have a budget war but we have a lot of natural resources. so -- >> there's a big tax hike coming if you don't get a change of our parliament. there's a big tax hike coming. >> fiscal drag. i agree. >> in nine months. >> i don't think it's going to happen. >> well, that's good. we'll have you back and we'll

assess. lee munson, jim lacamp. next a video you have to see. an american airlines flight attendant over the intercom says the plane was about to crash and mentions 9/11. passengers had to restrain her. it's all caught on tape. it's incredible. you'll see it in the news headlines up next. ♪

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a developing story coming out of ottawa. there's been a leak at a refinery that has shut down production indefinitely. kntv's scott budman joins us with more on that and all the latest breaking headlines coming into the cnbc newsroom. good evening, scott. >> well, good evening, larry. there has been an oil leak at imperial oil's sarnia refinery in ottawa, canada. 121,000 barrels per day pass through the refinery. the refinery has been shut down while they plug the leak. no fire, no injuries have been reported. william jennings, morgan stanley's co-head of fixed income and capital markets, appeared in a connecticut court today, pleading not guilty to a hate crime charge. jennings was charged in a december altercation with a cab driver. here's the video we were telling you about. an american airlines flight attendant disrupting a flight

this morning as it was about to take off from dallas-fort worth. the attendant reportedly said the plane was about to crash, made mention of 9/11. passengers eventually restrained the flight attendant until police came. apple is building a new campus in austin. it will spend more than $300 million to add 3,600 jobs over the next decade in texas, more than doubling the apple workforce already there. united syndicate says it will offer newspapers an alternate version of "doonesbury," one that does not make fun of a texas law that requires women to have ultrasounds before getting an abortion. some newspapers are moving the comic to the opinion pages. symantec, the computer anti-virus company, says hackers have posted online the computer code to its norton anti-virus software. but symantec says the code is so old it poses no risk to users. ceremonies were held today in japan to mark the one-year anniversary of the earthquake

and tsunami. 19,000 people perished in the disaster. and finally tonight, a plane carrying peyton manning has landed in denver, fueling speculation the quarterback will sign with the denver broncos. of course, the next question, what happens to tim tebow? larry. >> right. i want to know the answer to all that. anyway, kntv's scott budman. appreciate it very much. so now the president will tout the unemployment number on the campaign trail. that's his right. the question is can mitt romney spin the numbers for his benefit? and get this. there could be a surprise in the south coming for mitt on tuesday. he could blow everybody away. we'll cover it with our distinguished panel right after this.

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welcome back to "the kudlow report." i'm larry kudlow. at the top of this half hour, with the economy issue number one for voters, today's jobs report a good sign for president obama. no question. but will mitt romney and the gop be able to spin the news to their benefit? now, take a listen to governor romney on the campaign trail in

mississippi today. >> this is a president who's not kept his promises. and he he has not created more jobs, not established less debt, and not given us smaller government. so he's out of ideas. he's out of excuses. and in 2012 we'll make sure he's out of office. >> all right. so is mitt going to launch a southern surprise also? that was down in mississippi where he made those statements. we're going to talk about it all. we've got cnbc contributor keith boykin. he is former clinton white house aide. we bring in jennifer rubin, first time, author of the "washington post's" "right turn" blog. and our pal david webb is back, syndicate the talk show host, co-founder of teaparty365. david webb-d mitt get the right argument out? i didn't hear the tax cut thing. i was waiting for the 20% tax cut. >> we'll all waiting for the tax cut. >> i kind of missed that. >> he's playing on the jobs especially down in the south with a lot of right to work states. he's going to play toward that. this is good, but non-farm payrolls, those aren't up as much as they should be. so he's going to kind of tailor

his message down there. but all of america is waiting on a tax -- it's taxes. what's coming up next year with the expiration of the bush tax rates? what's coming up with potential obama care tax effect and cost factors on businesses on main street? >> i get that. but jennifer, you heard that clip. the clip's not the whole story. we're not in mississippi. so we don't get the whole speech. but did it sound like he was punching away as he must, or did it sound like he was just giving a rote line? >> i think he's going to have to embellish that a little bit. there's a big argument going on. is the economy getting better because of what obama is doing or in spite of what he's doing? obviously, romney's going to make the latter argument and he's going to say listen, if we got rid of some of these regulations, if we put in place my tax cuts which he rolled out just like you wanted in michigan, if we got rid of obama care this economy would take off. we're still stuck at 8.3 unemployment and five years ago if you said 8.3 unemployment you'd say no president can get elected with --

>> keith, is the economy doing better? and i'll acknowledge job creation is doing better. that's great for america. is it because off bama or in spite of obama? >> is that a softball question? when he started we were losing 839,000 jobs in january 2009. we added 27,000 jobs last month. we've had 23 consecutive months of private sector job growth. and the job growth started after president obama signed the stimulus act, after he signed the small business act, after he cut taxes for middle income americans, after his policies started to have an impact. >> 13 million people still unemployed. if you measure the unemployment rate correctly as jimmy p. suggested it would actually be closer to 11%. you don't deny -- >> of course. >> -- there's many, too many people unemployed. >> exactly. >> in the third year of an economic recovery, this remains the slowest jobs recovery and the slowest overall recovery. >> however -- >> doesn't that give an opening to mitt romney? >> of course it does.

it's a great opening for mitt romney. but obama's response is look what i inherited. we inherited the worst financial crisis since the great depression. look where ronald reagan was at this point in his presidency. unemployment was 7.8%. >> right. pretty darn good. >> 7.8% is not pretty darn good. >> and he inherited 11% -- >> but he didn't inherit the worst financial crisis since the great depression. >> yes, he did. he inherited the worst deflation and worst interest rate crisis -- >> not the lehman brothers collapse and the financial collapse. >> the over 5 million people that have left the workforce. no matter what obama does, he can't tell them they're not employed. high unemployment in black and hispanic quarters. and the heartland, where we've really taken a hit in manufacturing, and those jobs are not coming back. they're not coming back at a good pay rate. that all accepts consumer confidence, consumer spending and the -- >> but the big question -- i appreciate the economic lecture. it's very valuable. but the -- >> i like to do the numbers. >> -- big question i'm trying to get out of all of you is is mitt

romney making the right response -- look, president obama, as per keith, has every right in the world to crow about an improvement in jobs. he's waited a long time for that. any president would dot same thing. the question is is mitt romney, i'll go to you, jennifer, is he makinging the right response? because it has to be upbeat and optimistic. he can't trash the economy. too many conservatives are denying that the jobs are getting better. they are getting better. i'm a conservative. jobs are getting better. but we still have an unemployment problem and we still have an economic problem. is romney making the sale? >> well, occasionally he does. and he's got to make that more consistently. his argument has to be that we can do better, that if you look at the recovery under reagan it was faster, it was more robust. this is anemic. >> why doesn't he use reagan? that's a great point. why doesn't he cite the reagan recovery as a goal, as a target? >> well, he should listen to us more often. and his campaign would be going better. >> candidates play unfortunately to where they are and where they need to run. primaries are coming up.

this is why he's using this tact. i'd like to hear more about taxes. but right now he's going to play in the southern states -- >> southerners love tax cuts. it's the most conservative region in the country. >> the problem, larry-s that he's not ronald reagan. only one democratic president has been defeated for re-election in the past 120 years. that was jimmy carter. and the person who did it was ronald reagan. ronald reagan was an exceptional political figure. mitt romney is not ronald reagan. >> i will say this. having just interviewed him this week, he may be a very underrated politician. >> i agree. >> he's doing very well. these southern primaries, all right? alabama and mississippi. coming up on tuesday. supposed to be newt gingrich territory. and if not, rick santorum because of the cultural conservatism. so in mississippi romney is ahead, according to rasmussen. 35, 27, 27. in alabama it's essentially a tie among the three of them. jennifer, is mitt about to have

a big southern surprise that nobody's expecting? >> including his own campaign. i was talking to them and i don't think they believe these numbers. they were not expecting this. i don't think this is a case where they're trying to lower expectations. i don't think they had any expectations. they've been talking about guam and virgin islands, these other island primaries that are going on simultaneously. i think if he could pick off one of them that would be a huge shot in the arm. i think it would quell a lot of this talk that he's just building delegates, he doesn't really sell to the base. i think it would be huge. >> he's getting momentum. >> he's getting -- >> from ohio and super tuesday. and his tax cuts and his economic growth plan. i guess i want to know if he can win one out of two of these southern states does that wrap the whole thing up? in some sense that would be even more powerful than what happened on tuesday. >> it strengthens his case. it makes the so-called inevitability factor look a little bigger for him. but here's -- >> you don't like romney, do you? >> no, i do -- >> in your heart do you like romney? >> yes, i do. he's a fixer.

>> are you going to endorse romney? >> i'm not going to endorse anybody right now. i'll tell you who i won't endorse. it's obama. but romney the fixer, people start looking at him as voters and independents who go he's the kind v i go that can go against obama. he's got the structure. so the voters are deciding who's the best candidate to beat obama -- >> they're making a tactical decision. what romney has in his favor is electability and money. that's what people in the southern states are looking at and that's why i think he's starting to do well. but he doesn't have likability. they don't like him. there's overwhelming dislike or dissatisfaction -- >> no. absolutely wrong. >> every poll says that. >> he's gotten 3 million votes. his closest competitor has gotten less than two. he's won in every region -- >> and he's outspent them three to one. >> your guy knows all about

spending. >> money isn't the argument. votes is. in the recent round of primaries he got more votes than awful his competitors combined. that means that the voters are starting to make their decision based on practicality. santorum is not going to be a good candidate against obama. gingrich keeps attacking everything from free market to wall street -- >> i didn't know you were -- >> i'm a realist. >> most tea party people are not. mitt's had to earn the tea party support. >> all of them want the support. the tea party looks at the pragmatism of getting obama out of office. and we want to look for the best candidate to do that. >> is mid the most underrated politician in america today? underrated mitt romney. >> yes. people point to this or that little gaffe. look at the difference between 2008 and 2012. he's much more fluid. ease a smart guy. he has more meat on his policies than i remember any politician

in the last 10, 15 years doing. he's running with a pro growth, low tax cut, low regulation policy that -- >> or i'll leave it to you. is barack obama the most underrated politician -- that's a serious question. >> i don't think obama's underrated or overrated. i think he's properly rated. people understand his strjts and his weaknesses. you i don't think mitt romney is underrated or overrated. i think people understand who it is. it's going to be a close race. >> you're so honest. analytically honest. fantastic. you favor obama but you're saying it's going to be a close race. that's fantastic. really something. the seventh wonder of the world. keith boykin. the total honesty award tonight. jennifer rubin. david webb. coming up on kudlow we'll show you five ways government could knock at least 50 cents off the price of sky-high gasoline. it could happen right away. i'll talk about it with shell

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$4 gas is just about here nationwide. but let me tell you, there are ways to knock off at least 50

cents from the price right now. two big ones. taxation and regulation. let me to talk my friend john hoffmeister. he's former president and ceo for u.s. operations for shell oil. founder of citizens for affordable energy. welcome back, john. one of the quickies here is all the state taxation. in some cases state and local taxation on the gas pump. if you had a little bit of relief, that would knock many pennies off the price of gasoline. >> but it's not a permanent fix, larry. just knocking a few pennies off now doesn't help us in the next several years. when this problem is going to be compounded by the lack of any kind of an energy plan in this country. so we could do that, yes. it would be a temporary advantage. but it's not a long-term solution. >> i don't know. if you tax something less, you might get more. refiners might be cheaper. the gas stations might be cheaper. but let me move on. what about all these boutique blends? i mean, you've got, what, 18 different kinds of gasoline, i

was reading in the paper. you've got summer. you've got winter. you've got high heels, low heels. what's up with these boutique blends? why do we have to have that? because that ups the cost of gasoline. >> these are long-standing environmental protection agency requirements to meet air quality circumstances in different geographic zones of the country. whether it's high altitude, whether it's hot summer, cold winter. all of these different blends are intended to improve the air quality. >> and have they intended them to have $4 or $5 gasoline? i mean, it all adds to the cost structure. where's the trade-off, john? >> it does add to the cost structure. and back in 2007 and 8 when i was still in the industry we worked very hard to try to get the previous administration to do exactly what you're proposing, take it back to three different blends for the country. you take all kinds of cost out of the cost of manufacturing. but nobody did it then. i don't think anybody's going to do it now, larry.

>> you're probably right. but you're very pragmatic. i agree with you. why do we need 18? why don't we just had three? heck, if you had five it would be cheaper. ethanol mandates have driven up the price of gasoline everywhere. isn't there anything that could be done there? >> well, i'm a big fan of getting natural gas into the act. let's get natural gas into the act in two ways. compressed natural gas for over the road trekking. and let's turn natural gas into methanol for everyday use in pickup trucks and family cars. that would add to the ethanol -- the ethanol supply. we are never going to produce enough ethanol to meet the specifications in the 2007 energy act -- or 2005. what we need to do is look at all the alternative fuels that we could use. and my goodness, at the price of natural gas today, larry, we'd be down to the equivalent of $2 a gallon for methanol if we were to go off and produce it from natural gas. >> technologically, john, how

close are we to that? >> we've been making methanol for 100 years, and we know how to do it. we would need to ramp up the facilities. we don't have enough facilities to do it. but you know who uses methanol every week? nascar. nascar use methanol. so we know how to do it. and it's a good-quality product. >> john, last one real quick. i'm running out of time. a new study from the joint economic committee, which echoes something i've said for years. if we had a stronger dollar, if the greenback were stronger, 20%, you would see lower prices of energy because it's a dollar price commodity. so why doesn't the fed help us all by lifting the dollar instead of always beating down the dollar? >> well, remember, the administration wants an export policy. an export policy is facilitated by a lighter dollar. and that's where we're headed. what nobody thought about is the consequence on the oil price of a weak dollar. >> that is the key point. they ought to think about that. two sides of the ledger.

two sides of the balance sheet. anyway, john hofmeister, as always, thanks very much. i'm not sure we cut the price of gasoline, but i think we could in the future. now, folks, some sad news about a long-time friend of cnbc and mine. oil analyst peter butel has passed away at the age of 56. my goodness. he's the founder and president of the energy risk management firm cameron hanover. he appeared on cnbc and "the kudlow report" often over the past 15 years. he would share his expertise on oil prices and trends in the broader energy sector. our condolences to his family, his colleagues, his friends for their loss. may he rest in peace. next up on "kudlow" this evening, cries from around the world. iran cannot be allowed to arm itself with nuclear weapons. should america take the lead to stop iran's nuclear program? we've got two distinguished experts. former u.s. assistant secretary of state p.j. crowley and former assistant secretary of defense frank gaffney on iran.

is iran trying to whitewash evidence of nukes from one of its military complexes? the u.n.'s nuclear watchdog says it's not out of the realm of possibility. this comes as three distinguished senators put out an op-ed in this morning's "wall street journal." they say the u.s. cannot allow iran to arm itself with nukes. so let's talk. p.j. crowley, we welcome him back. he's former u.s. secretary of

state for public affairs. and frank gaffney, center for security policy, former assistant secretary of defense under president reagan. frank, i'll start with you. i mean, you've got three distinguished senators here. senator casey of pennsylvania, who's the democrat. senator lindsay graham, south carolina, republican. senator joe lieberman, former democrat, now independent. frank, they say we can't have a policy of iranian containment. but they really don't tell me what to do next. and i want to ask you for your thought. what is the next step in this iranian problem? >> well, just very quickly, to recap why you can't contain these guys, is because unlike the soviet union, which we contained for a long time until, happily, my old boss ronald reagan helped roll them up, these guys believe that the ideal state is to be in the next world and the faster they can get to it the better. specifically, they hope to bring about the golden age of islam by

bringing back the mehdi, a messianic figure, the 12th imam, and the way to do that is to precipitate the apocalypse. so this is not the kind of thing that you're likely to contain. their ambitions are to use i believe these nuclear weapons and probably not just against israel but against us. so what do we do about it? i think we ought to be in the business of trying to protect ourselves against these kinds of threats. and sadly, p.j. crowley's old boss, president obama, has been dismantling missile defenses, which we desperately need not only for ourselves and our israeli friends but others as well. and beyond that i think we've got to be in -- now unfortunately we're going to have to use military force to stop these guys from getting the bomb. >> now i've got to give equal time to my friend p.j. crowley. p.j., you heard frank. what's your response? >> first of all, what the three senators said in the op-ed is exactly what the policy of the president obama is following. he made clear in his meetings this week with prime minister netanyahu that the united states will not let iran get a nuclear

weapon. so we're applying pressure. there are sanctions that are going to be coming on in the next three months. there's going to be another conversation with iran next month. i expect that conversation to fail. but we will continue to build the case, you know, for military action against iran should that be necessary. but as the president, i think prime minister netanyahu agreed this week, we still have time to see if other options can bear fruit before we get to that point. >> that's a very interesting point. frank, can you react? what i just heard p.j. say is we're building a case, we the united states is building a case for military options. now, frank, is that to your liking? is that essentially where you want to go? because it sounds like p.j. crowley and you are closer than one might think. >> god forbid. >> well, p.j.'s an eminently reasonable man. the more he sounds like me, the more reasonable. i'll just say that at the outset. the point of this is, you know, we've built a case. we've been through the

negotiating rounds endlessly. we've witnessed now even the international atomic energy agency acknowledging what it wouldn't for years under its previous management, that this is a nuclear weapons program. and i have to tell you, and i hope p.j. would agree with this since he is such a reasonable man. we don't really know how far out this is. i'm hearing reports that the iranians may have tested a nuclear weapon i north korea a year or so ago. if they haven't, they are certainly very close. and to try to calibrate this to such a level of precision i think is folly at this point given the stakes. >> i don't agree with frank's apocalyptic view here. you know -- >> it's not mine, p.j. it's the iranians', unfortunately. >> frank, look, the recently retired head of mossad, a guy who's in shrinking violet and should know, in an interview that will be broadcast this weekend, he says we still have time to see what other tools can

be used short of a war. because as a military person i understand that, you know, can we take out iran's nuclear program? we can deter it. i don't know that we can stop it technologically. but we have to play out here what happens after the first shot is fired. larry, when i was with you last week, we were talking about an inevitable major spike in gas prices. we have to play this out to make sure that if we are forced to apply military force we have a very solid idea of what's going to happen after the first shot is fired. this week marty dempsey and leon panetta, they indicated that we'd begun preliminary military planning on what could be done. so there's a process under way. we have time to see how this unfolds. >> frank gaffney -- >> shame on us, larry, if we're only starting to plan on this now. this is something that -- michelle fluor and i, one of p.j.'s ole colleagues at the pentagon have been doing. i hope it's in place now because we may need to pull the trigger. >> but you have an unfolding

situation here. i mean, heck, we're sitting in washington, d.c., where you have frank gaffney leading the bomb iran caucus. we have john mccain leading the bomb syria caucus. i mean, there's a limit to what we can do before we see something that starts as potentially being a limited operation and expands to something that we should not -- we could not foresee. >> let's me just be clear about this. i come to this revery reluctantly, larry. >> cautiously and patiently. >> i'm not in the business of bombing anybody. and i personally wouldn't get into the business of bombing syria. but i will say this. there's a war coming. the question is who is going to pre-empt whom? my fear is if we keep playing as we are now that we've got time and we can do more planning and we can build more cases and we can persuade more people, i'm afraid that the pre-emption is going to come from the iranians. as i say, they've got the apocalyptic vision. they're the ones who feel this

is necessary to the golden age of islam. >> when you say the iranians are going to pre-empt. what do you mean? because they're going attack israel? they're going to attack our fleet in the persian gulf? just please clarify that. >> i can't tell you for sure. but there are two things that president ahmadinejad -- >> 20 seconds. >> wiping israel off the map and a world without america is two. >> all right. we'll leave it there. >> that's what worries me. it may be us, not just israel. >> p.j. crowley, thank you very much for participating. frank gaffney, great to see you as always. that's it for this evening's show. thanks for watching. i'm larry kudlow. see you on monday. [ tom ] we invented the turbine business right here in schenectady. without the stuff that we make here, you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world. they go into power plants which take some form of energy, harness it, and turn it into more efficient electricity.

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