>> here's something that ben bernanke will not do. he will not ring a bill telling to you sell your bonds and get into the bank stocks, and that's what i'm doing. enough with the bonds already. they are now finally rolling over. you should be thinking about stocks. take your cue from jp morgan. wow. what a dividend boost. wow. what a buy-back. i like to say there's always a bull market somewhere. i promise to try to find it right here. i'm jim cramer, and i will see you tomorrow. zirjs good consumer, good economy. looks like good bank health and stocks soar. good evening. i'm larry kudlow. this is the kudlow report. sizzle story number one tonight. the dow climbs 218 points and finishes at 13,178. the nasdaq up a whopping 56 points to break through 3,000. that for the first time since the year 2000. we got you covered because cnbc is the world leader in business news. sizzle number two, in less than

an hour two key southern primaries close. alabama and mississippi. to see if mitt romney's electability passes its southern stress test. the mississippi governor is going to join us. one more story we're covering tonight. president obama tells china to play fair on key commodities. he is going to haul them off to the world trade organization and, you know what, folks, i am going to agree with the president on this one. we begin with the markets. it was a terrific day. dow up 218 points. s&p jumping 25 points. nasdaq up 56 points to get past 3,000. for the first time ever the dow is over 13,000, while at the same time the nasdaq over 3,000. now, cnbc's own bob pasani live at his host at the new york stock exchange. >> good evening. it's time for some excitement down here, don't you think so? i think we had three separate events here today that helped move stocks. sort of a perfect storm for the stock market today. look what we had, number one here.

we had global growth issues. china, maybe in for a soft landing. maybe not in for a hand laddering. the u.s. economy is slowly improving. we had retail sales better than expected. number two, the fed came out modestly upgrading the economy, but not a hint of qe3. that didn't move the stock market bushgt it caused a big move in the bond market. that may be the biggest story of the day. finally, towards the end of the day, a big surprise supposed to happen this thursday, but we had dividend raises and buybacks from many of the major banks. the good news? it's returning excess capital owl out there to the shareholders. i know you want to talk about what's going on with the buybacks, but put up the ten-year yield because that's the big story. you know, there are oceans of money sitting in bond funds that are dying to get out. they've been waiting for moments here like today where you see the yield moving up to the highest levels since back to october. we're not seeing any big move out yet, but people are waiting and watching these kinds of levels, larry. it's a big story. >> bob, can i just ask you quickly. on the bond interest rate story, wouldn't the higher bond rate be

i will lust raifsh, be emblem attic of a stronger economy? >> yes. >> that it could be very bullish store stocks, and it's something a lot of economic bulls have been looking for? >> it's about time something like this hapz happened. there have been people all over wall street, all over america waiting for ways to get out of these low yielding treasury funds and a better economy is a better -- is an excellent place to start. >> all right. bob, thank you ever so much for helping us this evening. we're going to bring in our market panel in just a moment, but first, a quick take from me. growth, profits, rock bottom interest rates continue to propel stocks higher, and let me add this. we're even getting a stronger dollar and a weaker gold price, which i like a lot. now, nothing is ever perfect. there are always risks here and around the world, but i'm going stay with my short-term optimistic view. at least until the tax threat for next year is clarified or fixed. now, let's bring in our market guest. we have hank smith, chief investment officer at havorford

investments and david goalman at bank of america. currently he is president of macrostrategy, and cnbc's own kelly evans here. kelly, let's start with you. thank you for helping us. retail sales stronger. let me add this. x gasoline retail sales stronger. small business sentiment, the nfib sentiment up to six straight months. business inventory is better. german business confidence. >> did you just throw the zew in there? >> that's very important. finally, china's growth is being revised up. in other words, gloem globally china, germany, usa, we've got some good news. >> i have three words for you. no, i guess this is four. welcome to the recovery. larry, you remember when that was written? it was about this time last year when, guess what, there was a very similar attitude about global growth, about u.s. growth, and let's go back the last couple of years, remember where we were. february, i think, of 2011 we saw the ten-year peak at 3.7%. the previous year 2010, the ten-year peaked at 4%. where are we now? we're at 2.1.

do you really want to buy into this market now, or do you want to have bought in? >> which market? >> stock market. least let me switch gears. do you really want to buy into risks? do you want to get exposure here to risks, to stocks now or do people who basically wish they had exposure during this entire run-up risk getting burned if they get into it? >> hank smith, welcome back to the show. hank, kelly evans, a little faint of heart. you heard her. don't buy in now. weave had the big rally. we've had a big rally for three years and then some. hank, can profits and economic growth and even a better world outlook keep this melt-up melting up? >> yeah. simple answer is yes, larry, and the fact is over the past three years fundamentals have outpaced returns, so the stock market is still very attractive, and there's plenty of fuel -- all the cash on the side looirns, all the money and bond funds. there's plenty of fuel to drive this market higher. >> david goldman, welcome back. let me just ask -- i don't want to bet into the weeds, but on this stress test business, okay,

most banks passed it. four baurnks didn't. we don't even know what that means. means they were a little short of capital after very depression-like standards. what is the stress test mean to you because i want to ask you if banks are going to have a leadership position now in the stock market? >> you and i have been saying buy the banks for months, larry, and i have been, and i agree with that. the stress test is an academic bureaucratic exercise of itself it's not that important, but because investors are suspicious of the banks after the 2008 crash and all the chicken littles last year told them to stay away, the fed is saying mother may i? that makes a big difference for them, as does the european central bank taking the idea of a banking crisis off the table. it's safe to go back in the water. >> kelly evans, pleased to see banks paying out for def dendz. pleased see jp morgan paying out for dividends. that's why it had to be released today. on the other hand, the dividend

tax could be tripled. we don't know who is going to be in the election. is that one of your cautionary tales? >> it fits into the broader picture here. we have to remember what's happening at the end of the year, and we have to remember markets april what's coming. potentially is an increase in tax rates across the board. income tax. it's more fiscal tightening. the sequestration that was the result of the debt ceiling talks. maybe they kick that can down the road again, but until that uncertainty is removed, we can't be sure. we are in this bizarre situation that japan probably knows a lot about, and almost as the u.s. can't afford a recovery because here's what happens. every time it looks as though the outlook is improving, bond yields start to rise. what happens? mortgage borrowing costs increase. we worry about interest payments on the federal debt, et cetera. there are automatic destabilizers almost. it knocks us right back down. >> where i disagree with my great friend kelly evans tonight, i think higher bond rates is illustrative of a stronger economy. in other words, would i regard higher bond rates as bullish,

and i want to get your thought on that. >> there's no question. it's reflective of confidence. these exceptionally low almost emergency low interest rates is reflected with fear and anxiety, and so absolutely higher rates and we've got a long ways to go before we should be worried about higher rates. higher rates is a good thing near-term. >> larry, larry -- >> hang on a second. hank, what's your best investment play right now? i know you are playing this as an optimist, and i know you think the melt-up continues. what's your favorite spot right now? >> look, for all the money that's on the sideline that has missed this move, there is still an opportunity in big dividend paying stocks, high quality stocks where you can get better than bond returns with equities, equities whose dividend yield is greater than the yield on their own ten-year debt, let alone the ten-year treasury. >> dave goldman, what were you going to say? >> i was going to say that the only reason that you own bonds at less than the real rate of interest -- negative real rate of interest, less the inflation

rate, is a hedge gnks against deflation and collapse. the only way to get real returns is to buy stocks. you should be cautious, though, about some dividend payers. the utilities trade like bonds. if bond yields go up, they will suffer because they're bond equivalent. >> we'll leave it there. many thanks. we appreciate it. now, let's drill down on today's fed decision. let's not forget the fed. slightly more upbeat on the economy. i think that's the key message. joining us now for a cnbc exclusive, former fed governor mark olson. mark, welcome back to the program. we appreciate it. i tea from the announcement no change in policy, but a little better outlook on the economy which won't -- which will mitigate against any qe3. is that your reading, or do you have a different one? >> i think that's exactly the message, and i think that it was a deliberate message to communicate that they're marginally improved. whether we're talking about moderate growth as opposed to moderate growth, interestingly, as you pointed out earlier, there was no mention this time

about the risks globally. there was some concern about what might happen with oil prices. the impact of increased gas prices, but i think it was a deliberate effort to make at the statement modestly more optimistic. >> just on that inflation thing, gasoline prices may or may not be temporary. i mean, we've had a bad couple of years run of gasoline prices in energy, but what about unit labor costs, which i know better than eriky looks like. productivity is slumping. compensation is rising. unit labor costs are hitting 3% now. is that an inflation problem? >> it is potentially an inflation problem, larry, and i think that is one that will be looked at very carefully. i think there is a certain offset, though, if we get some improved productivity numbers, as i think will happen once the economy starts generating a little bit more steam. >> mark, do you think that operation twist will, in fact, end in june with no replacement, selling short, buying the lorening-term bonds? they've got, i don't know, maybe $200 billion left to do.

june is the deadline. do you think it ends there, or are they going to have something else to fall on? >> i think rather than say it ends there, you'll have to say that it is completed there, because they will have completed the restructuring of the balance sheet, as intended. i do not -- it will be hearted to tell because it depends on what else is happening in the economy, but i don't see anything like a qe3. >> all right. are there other members of the federal reserve board? i mean, you've got janet yellin in there, bull dudley, the new york fed. they're pretty outspoken dovz. where do you think ben bernanke comes out in this fed debate? is he a hawk? is he a moderate? is he a dove? how do you read mr. bernanke? >> i would -- i would call him a realist, larry. i don't think he falls on either side of it. i think he pays very careful attention to the markets and what the markets are telling him and responds accordingly. >> all right. >> i think he has been very much in favor. his principle goal, i think, is

transparency. >> all right. we're going to leave it there. mark olson, former member of the federal reserve board. appreciate it very much. thanks for helping us. we've got another stress to talk about. next up, a political stress test. question, will mitt romney show the south he is the most electable republican on the ballot? folks, don't forget, free market capitalism still the best path to prosperity. the kudlow report will be right back. in america, we believe in a future that is better than today. since 1894, ameriprise financial has been working hard for their clients' futures. never taking a bailout. helping generations achieve dreams. buy homes. put their kids through college. retire how they want to. ameriprise. the strength of america's largest financial planning company. the heart of 10,000 advisors working with you, one-to-one. together, for your future. ♪ are you still sleeping?

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welcome back to "the kudlow report." republican primary is about to close in alabama and mississippi. it's a hot race heating up the south. in just a moment we'll be joined by mississippi governor phil bryant, but first up to explain what's at stake in all this, cnbc's amman javers joins us. >> sometimes with all the hooplah, sometimes we think this race is all about delegates, so let me bring up to speed, as to exactly where we are right now. so far in this campaign, mitt romney has 377 delegates. rick santorum, 146. newt gingrich, 112. ron paul bringing up the rear with just 31 delegates. at stake tonight we've got two big states and a couple of small things. the delegates in play this

evening, as we watch throughout the night, alabama, 47, mississippi, 37 delegates at stake. we got hawaii with 17, and american samoa, which i think is too small to fit on our map over here has just nine delegates at stake tonight. so what does this mean going forward? well, it means that the math gets much trickier for some of the lower tier candidates than it does for mitt romney. take a look at the percentages that each of these men neat in order to win this nomination going forward. mitt romney only needs to win about 47.3% of the remaining delegates in order to win this thing. remember, they've got 1,618 delegates remaining here. rick santorum, it's a little bit of a steeper climb. 61.6%. newt gingrich, steeper still. 63.7%. for ron fall he would have to win to clinch this thing. 68.7% of all the delegates remaining from here on out. so, larry, you can tell that this thing gets trickier and

trickier as each one of these big election nights ticks forward throughout the season. >> many thanks. appreciate it. now, here's my quick take on this story. primary victories in delegates aside. what's really at stake for the gop is winning back the white house. so for what it's worth, my advice quit picking on each other with phony charges. instead, stay on message. it's the economy. it's energy. it's gas prices. that's where president obama is most vulnerable, according to the poelsz. message matters. let's bring in our guest to help us out. joining us now two distinguished former republican presidential hopefuls, former minnesota governor tim pawlenty. he is with mitt romney. gary bower, president of american values and a santorum story. you don't need me to lecture, but i want to start with you, gary, because i don't understand why your guy rick santorum making false charges with national health care mandates regarding obama care and romney

care, which has been proven false, where is the economic growth message? where is the tax cut message? where is the energy and gasoline prices message? you are wasting variable -- valuable time, gary. >> well, look, larry. i think that senator santorum has a pretty good tax plan. in fact, i would argue it's better and more reagan-like than the one that governor romney has, but in all of these candidates they have gone after each other during this process. i would have felt a lot better just like you just like they run their negative ads attacking barack obama since there's so much to talk about. i certainly wouldn't pin it on santorum as being the guy that started out negative. we'll see what governor pawlenty says about that. while i agree with you that we ought to be taking on president obama, certainly the economic issues are key, but i wouldn't leave any chips on the table. he is vulnerable on foreign policy. he doesn't believe in american exceptionalism. he is vulnerable on values. this attack on the religious

liberty of the catholic church. i think our nominee has to be -- has to be willing to walk and chew gum at the same time. take him on all these issues because it's going to be one tough campaign. >> all right. tim pawlenty, what's your man romney's message been down the homestretch? southern primary, it's very important. he has to show he has some roots among the base of the gop in the south. what's the message been, tim? >> well, the message has been a number of things, larry. first of all, good evening to you. good evening to gary. we saw in michigan, larry, he had that bold economic growth plan. he was behind in the polls. he surged ahead and won in michigan, a state that was kind of ground zero for the troubled economy with a lot of swing voters. mitt romney did very well there. we saw him come from behind in florida. the message is this. we have a lot of challenges facing the country. you can't be one-dimensional. one of the plain issues is the economy. we have a pro growth, pro jobs, pro aunt parenure president who understands it, respects it, and has got the strength and the courage, the knowledge, and the boldness to put it on the table.

mitt romney has done that, and the country is responding. he is beating barack obama head-to-head in the polls nationally. he has more than twice as many delegates as his competitors in the republican nomination. we don't take anything for grant, but he is likely to be the nominee, in part, because of his bold economic pro-growth message. >> what is rick santorum's message on high gasoline prices. >> senator santorum has been clear, as i think all the republican no, ma'am mees have been. that we need to do more drilling. we need to build that pipeline. this president's energy policies are a disaster, and it's just one of many reasons that this guy should not get an extra four years. larry, i would argue that governor romney's issue is actually bigger than the delegate count. he certainly is the frontrunner right now. he has some major problems. i would point to one of the items in the "new york times" poll this morning. when it asks -- they ask the american people do these candidates understand people

like you, and, unfortunately, fairly or not, governor romney has a gap on that that is huge. only 25% of the public thinks he understands them. 57% says he doesn't. the last guy that had ratings like that was john mccain and we saw what happened. >> that's an important point. tim pawlenty, how do you respond to what gary bower is saying, which is in the "new york times" poll. >> well, the ultimate measure is whether mitt romney is connecting with people. it's how is he doing against obama and how is he doing generally? he is beating president obama in a recent gallop poll, in a recent rasmussen poll. with all due respect to gary and to rick, rick doesn't even come close on those measures. when you poll amongst republicans across the span. mitt does the best there as well. we can all spin various subsections of this, but the bottom line is if you want the candidate who is most likely to beat barack obama and who is, indeed, ahead of him now in the polls and runs strongest nationally, his name is mitt

romney. >> in the polls this morning the two candidates, both santorum and romney, are running virtually identical, governor, and senator santorum has a lot higher percentage of the american people that can identify with him. look, here's my fear. we've done this before. we nominate a candidate that the base of our party isn't very enthusiastic about. it happened with bob dole. it happened with john mccain. i think that is a huge problem. this country cannot afford another four years of this president. >> i got to leave it there. we will see what the election results come out tonight. thank you, tim pawlenty. thank you, gary bower. we appreciate it. the polls close many mississippi at the top of the hour. primary polls suggests it is still a toss-up, but could it lead to a southern surprise for mitt romney? joining us now is mississippi's republican governor phil bryant. governor bryant, thank you ever so much. the stakes are very high. >> thank you, larry. glad to be here. the stakes are high for mitt romney because many people believe the south, particularly

mississippi and alabama, this is the base of the republican base. a lot at stake for mitt romney tonight. what's your forecast? can you win one of the two? can he win miss mus? >> you know, i think it's going to be close. now, two weeks ago when we got into this campaign, when i officially endorsed him last thursday, as a matter of fact, we were looking at a third place finish. people were saying mitt romney was going to be down in the teens, and now if you look at it, we have drawn close. i think we're in striking distance. that just goes to show you mitt romney came to mississippi last thursday. he was a blue collar pascagoula port. we had him at the aing cultural commissioner office there in front of a john deere with a budget of our farmers and friends that were there. he was at a catfish house with me the other night enjoying that good cuisine. he is connecting with the people in mississippi, because of not only who he is, but the message that he has about strong jobs and protecting our borders and carrying out, i think, his plan to defeat barack obama in

november. >> can he connect with the evangelicals? could be a big portion of it. people are asking that question. that's why i'm asking it of you. how is he going to do there? zoo know, larry, i'm probably the most conservative social governor in the state -- in the nation. if you look at the base that voted for me, a lot of the social conservatives in the state of mississippi, some 62%, said we want to elect phil bryant governor. they understand that i'm a prosecute-life, pro-god governor of the state of mississippi that believes in those social issues, but they also understand this. 50% of the people voting in november will be women, and they are going to support mitt romney in large numbers, and i think that's what's going to carry us to victory. it's going to be close here in mississippi. if we do pull out a victory tonight, i think you're going to see a changing dynamic in this entire election. mitt romney will soon begin positioning hills to take on barack obama in november, and that's what we really all want to be. >> thanks, miss governor, phil

bryant. we appreciate it, sir, very much. >> thank you, larry. glad to be with you. >> next up on "kudlow" veterans bilked by the banks. how two veterans blew the whistle on hidden fees they were charged by banks. the kudlow report will be right back to cover this story. please stay with us. how did we do it last time?

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welcome back. veterans groups are cheering a win in a beg battle against jp

morgan over hidden fees. it took a whistle blower to break the whole thing wide open, but the banks allegedly did something pretty outrageous. our own cnbc's amman javers is back with this story. >> thanks for having me. i wanted to bring you the details of this story. it's astonishing, and i think we're going to be following it over the next couple of weeks. jp morgan agreeing to pay $45 million to session this wichl blower suit, which alleges that a number of major banks were defrauding the u.s. military veterans who went to the va to get home loans. take a look at the allegations here in this case, and you'll see exactly what the specifics are. according to the lawsuit, lenders overcharged veterans charging unallowable fees. they deliberately consealed those facts to obtain taxpayer-backed guarantees and falsely certified they are not charging unallowable fees. the announcement coming out today. who could be next? this is where this gets interesting.

a whole list of big banks are also maimed in this suit. wells fargo, bank of america, citi morgan, sun trust, washington mutual, mnc, countrywide mortgage, tennessee bank. all named here, and those are people who have not yet settled. i spoke to jp morgan today. they had no comment on this. however, i should noted in a the sellingsment contained no acknowledgment of responsibility here by jp morgan chase. larry, i also talked to the whistle blower's lawyer here. he said in terms of these remaining banks that haven't settled yet, he would love to bring this case before a jury because the alleged victims here with are u.s. military victims and the taxpayers. he says he thinks he has a winning case going in front of a jury. >> did these banks know that these were veterans? >> well, the allegation here is yes. they would have had to have known they were veterans. this was in the v.a. program. they knew that's the universe they were dealing with. they also are being alleged that they falsely certified they were not charging unallowable feeses.

you can't charge attorney's fees. the allegation is they kept a zero on the attorney's fees line of the documents, and doubled up on some of the other lines to make up the difference. that's what's being alleged here. jp morgan settling. the attorney here thinks he has a multibillion dollar potential case here. he has an snebtive to want to get as much as he can in damages. >> put down veterans, that is the worst part of the story. thank you very much. let's get all the latest breaking headlines coming up in the cnbc muse room. former news rebecca brooks and her husband were arrested in connection with the phone hacking scandal that rocked britain last summer. this is brooks' second arrest in the ongoing -- they and four others were arrested on suspicion of conspiracy through the court of justice. barclays and rbs have both bought customers claims. customers with u.s. accounts, 0% with foreign accounts, 65% of

entire original claims. rbs upping the offer by 1%. discount airline direct air suspending all flights for two months. the carrier, which services 17 cities has left spring break travellers stranded. the airline failed to pay a fuel bill. the s.e.c. is charging a philadelphia group of five with insider trading on tips they received in an alcoholics anonymous meeting. they reportedly meted $1.8 million. last month's federal budget deficit was $232 billion. the rate of the budgeted balance is running slightly behind last year's, but we'll still top $1 trillion for the fourth year in a row. shares of boston based zol medical corp. soared after it was being acquired by a japanese company for $2.2 billion. overwhelming demand for its ipad 3 means that people that preordered their tablets may have to wait as much as three weeks for tlifry. finally, an ohio state senator

has introduced a bill restricting men's access to viagra. males would be required to undergo sex therapy, receive a cardiac stress test, and provide a notarized affidavit affirming impotency in order to get a prescription. whoa. i'm not even going to go there any further. anyway, coming up on "kudlow" president obama taking china to the wood shed for restricting exports of key strategic rare minerals. i think mr. obama is right. i'm going to tell you why after the break. choose control.

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welcome back to the kudlow report. i'm larry kudlow. so president obama taking china to the wood shed. in a rose garden event the president today announced the filing of a complaint with the

world trade organization that's escalating the administration's china trade offensive. cnbc's chief washington correspondent john harwood joins us now with the details. good evening, john. >> good evening, larry. you know, one of the consistent themes in discussions of politics and the economy over the last couple of years in both parties has been the conviction of many ordinary workers and elected officials that china is taking advantage of us economically simply because they're not playing fair. mitt romney, who hopes it take a step towards the republican nomination tonight, has talked about labelling china a currency manipulator on day one of his term. the guy who works in this building behind me right now will go that far, but today went out in the rose garden publicized that complaint about china over the export, the restrictions and places on the export of rare earth, minerals, which are critical in high-tech, and in advanced manufacturing. both areas critical to the president's economic strategy. here's how he justified it. >> if china would let the market work on its own, we auto would

have no objections, but their policies currently are preventing that from happening, and they go against the very rules that china agreed to follow. being able to manufacturer advanced battalionries and hybrid cars in america is too important for us to stand by and do nothing. >> larry, this is part of a series of points of tension in the u.s.-china trade relationship. there's a value of the currency. there's cars and auto parts. there's also concerns about china subsidies for solar panels and other issues important to president obama, and given that trade enforcement center, the president has established, can you expect to hear about these issues all throughout the election. >> john harwood, thank you fwor theup. appreciate it. >> i have to say, please brace yourself for this one. i happen to agree with president obama on this. china has to play by the rules. they have to play fair. i think working through the wto, the world trade organization, is the right way to go. that's what it's there for. there's a process, and it's orderly. it's not a trade war.

just defends american interests. let's see if the other guests agree. here now we have former president reagan economic advisor john rut lij and we bring on peter teernan, author of a provocatively titled new best selling book on china, and steven finienwick. let me go to you first. what's wrong on this? these are strategic minerals. china subsidyizes their businesses, and they restrict exports, drive up the price for those that get their hands on it. why shouldn't we use the world trade organization as a court for fair trade? >> no, i think the right thing do now is -- once upon a time, the u.s. was a leader in rare earth. now about 7% of that is housed in china. if you want to get access, you basically have to move your manufacturing to the chinese. you have to be in chinese

territory in order to get access. we need to play fair kind of dialogue. i don't think trade war is the right way to go at all. i think going to court and working through the w.t.o. -- >> no, no. i'm saying there's not a trade war. that was an absolute key part of my xooent comment. let me be clear about this. i'm opposed a trade war. let me bring in steechb fenwick. what i'm suggesting is the w.t.o., word trade organization, is a trade court. it's a process. if we have a complaint, let's take it there. we had a system lar complaint a couple of years ago along with europe on chinese industrial commodities. we won that complaint. it's not a trade war, steven. i think it's an orderly process, and i think we should stand up for ourselves. >> absolutely. i totally agree with you, and i think the right course is to go to the w.t.o. we don't want 2r5id wars because it does nobody any good. not just the united states and china, but also the rest of the surrounding countries.

trade is critical. it's vital to our business, but we just can't get into these sort of tit for tat attacks on each other, and that's what the w.t.o. is there for. let's use it. i totally agree. >> john rut ledge, i reckon you don't agree with this, but i would like to know why? why shouldn't america stand up for its own trading rights? >> i believe in due process, and i like the idea that this thing is going to be heard m w.t.o. this is less than 24 hours after the w.f.o. yesterday upheld a ruling against the u.s. it works both directions, and that's just fine. let's get serious. what this is really about. we have an election in november. the u.s. is growing. europe and japan are not growing. people are frightened after the financial crisis for their jobs. there's not enough growth. this is a growth problem, and what we have in the press conference today along with romney remarks recently is tribal chest thumping, competitive china bashing for the election. this is not about the rare

earth. the rare earth problem is real, but let's face it. what do you think they call it rare? it's valuable. there's not much of it. >> it's in our military construction. missiles use this stuff. peter, let me go to the romney story. get your take on this. mr. romney is running, he is very tough on china. he is being backed by donald trump who is the toughest china basher in all of america, peter, but romney says the first day he is in office he will label china a currency manipulator. now, that is something that obama has not said, and i myself have a problem with that. that's not w.t.o. that's just an american assault on china. peter, what is your take on the rom my program? does he go too far? is obama the moderate here? >> oh, i think the trade saber rattling of calling somebody a currency manipulator on your first day in office feels to me like overreaching. the thing about the w.t.o. is it

indicates that we have been thinking about these issues more carefully. rare earth says it was something -- we had our own capacity for a long time and decided not to do it. there are other issues that we have basically let china take. china makes 80% of the world's vitamin c. you know, weave had issues with tires. i agree with whom err said let's try and air brush the politics out of this and focus on it as an economic matter. our working together with xhooin in an embrace, in a tango is the way to solve our trade problems. >> larry -- >> yes, please, sir. >> the important thing about the trade both ways, right? sn we are -- you know, we trade daily across the pacific, and a key thing out of china into the americas is also drawing growth out of the americas back out to az wra and over to europe through the trade with china, so you can't look at it just in one trade line aspect. you have to look at it on a much broader aspect, and that's what we do every day in dhl. i'm really concerned about that.

>> let me ask you about the currency. do you think the yuan is too low? do you think it should be revalued? do you think that should be part and parcel of a new china trade strategy? steven, i hate the intellectual property rights they steal. i hate the counterfeiting. all that should go to the world trade organization. in your direct operations with chooirn, do you need a more expensive china yuan to make sense for your business? >> no. they've allowed it to appreciate over the last year, i guess. i lived out in asia before. they've let that happen. it's going to continue to happen, i guess, naturally. no, we don't need that. what we need is clear decision on trade, and really go to the w.t.o. let's not get into this political toing and froing that causes more damage to people as we go through it. jobs, manufacturing in the u.s. is starting so grow, and we're drawing out of the states quicker faster than we've taking out of china, which is not uncommon, admittedly, but that's

what's happening. >> generally -- >> i just want to ask you, john. do you think president obama, serious question, because i'm with obama on this rare earth mineral thing. do you think it has better china trade policy than mitt romney? >> i think that we're dealing with a d and an f at the moment. to support steven, the trade balance is just released from china. it was minus $31 billion. reserves have not increased since last summer. the r & b is not going up because the market is not pushing it up anymore. it's done for now. >> exactly. >> leave it will. gentlemen, tough discussion. john rutledge, thank you. peter, and steven. coming up on "kudlow" another case of obama overreach. this is different than the trade story. the irs is demanding a fee, a tax for what they call licensed tax preparers. it's nothing more than an irs shakedown. it can hurt businesses, especially small ones. it also hurts the economy.

this one is not a good obama story. i'm can youed loy. we'll be right back. 3q we always hear about jobs leaving america. here's a chance to create jobs in america. oil sands projects, like kearl, and the keystone pipeline will provide secure and reliable energy to the united states. over the coming years, projects like these could create more than half a million jobs in the us alone. from the canadian border, through the mid west, to the gulf coast. benefiting hundreds of thousands of families throughout the country. this is just what our economy needs right now.

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and we've been honored to walk with you to help you get where you want to be. ♪ because your moment is now. let nothing stand in your way. learn more at keller.edu. i have to be a tree in the school play. good. you like trees. well, i like climbing them, but i've never been one. good point. ( captain ) this is your captain speaking. annie gets to be the princess. oh... but she has to kiss a boy. and he's dressed up like a big green frog ! ewww. ( announcer ) fly without putting your life on pause. be yourself nonstop. american airlines. welcome fwook the kudlow report. program note, i'm iffing to skwuk box tomorrow beginning at 8:00 a.m. to talk about the outcome of the alabama and

mississippi primaries. that's not all. i'll be on squawk on the street in the 11:00 hour. join me then. thanks. another case, however, of obama overreach. this is not as good as the trade story. the irs, being sued for an alleged unlawful poul power grab over tax preparers. it's monthing more than an irs shakedown. it may well hurt businesses and the economy. a lawsuit filed today by the institute for justice and dan, an attorney for the institute to justice talk about it. dan, what are the issues here? the irs not only wants the tax preparers to register and take an exam, but they want him to pay a fee. now, that's a tax. what empowers the irs to start taxing people? >> well, that's exactly the problem, larry. the irs doesn't have any authority to act here. congress has to give the irs the authority to license all tax return preparers and congress haz hasn't done that. the irs can't simply give itself

the authority to do this. that's why we filed this lawsuit in federal court this morning. >> where is this in congress? which congressional bill stipulates this? >> there is nothing stipulating this right now. that's precisely the problem. the irs decided on its own that it was going to go ahead and start licensing all tax return preparers, and they just broadly interpreted a statute from 1884 that has absolutely nothing to do with tax return preparation. >> no attacks, no legislation. what's the down side? what's -- who is going to get hurt and why, real quickly? >> well, this is a sweeping new licensing scheme that affects 350,000 tax preparers nationwide as well as the tinz of millions of their customers, who are going to face fewer choices and higher prices as a result of this scheme putting many of these independent preparers out of business. >> this is the thriving small business area. you're saying 350,000. that's a big number in this day

and age. >> that's right. and that's why it's particularly troubling that the irs would take this action now when people are struggling to find employment when the economy is sort of teetering on the brink. it makes no sense at all that the irs would take action like this that puts so many people out of work. stoo all right. thank you very much, dan. another irs traversy. next up, activist labor unions endorse president obama. no shocker there. they're iffing to spend $400 million and send out 400,000 foot soldiers. what kind of anti-business, aept growth, anti-job miss chef will labor unions pois poise on the american people? 400,000 foot soldiers. that cannot be good. we will talk about it. ttd# 1-800-345-2550

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surprise, surprise. a publicly backed president obama's re-election effort today. they promised more than 400,000 foot soldiers to support the campaign. is sd this make president obama their de facto union boss? here now is economist john watt, the co-author with grover norquist of "debackle, obama's war on jobs and growth." the unions complain that the supreme court decision for super pacs gives the advantage to corporations and fat cats, but as i understand it, the union is putting up $400 million and will have 400,000 foot soldiers. i don't understand how the foot

soldiers can qualify. >> well, they've been giving foot soldiers for years really. it's never really counted towards the donation limits that have existed there. the supreme court decision benefitted unions as much as it did corporations. i'm not concerned about the amount of money that's going to be put in there. i think it's good that people become informed and when you think about the fact that we're itting to spb spending $4 billion to try to help determine how $4 trillion is being spent by the federal government, it doesn't seem like spending one-tenth of 1% of what we're spending at the federal government to figure out where it should be spent is outrageous. >> let me ask. are these union guys -- okay. what are they? they want to make another run at car card check. they want to raise taxes on rich people. they want to raise tax on businesses. okay? that's part of their agenda. as you read it. >> well, i mean, they've already been getting huge transfers. i mean, it's hard to think of a

president who has given larger wealth transfers to unions than obama has done. i mean, you look at the stimulus. basically a lot of the money could only be spent on union jobs. you had public sector workers beyond the stimulus, you had the public employees jobs bill that was there. i mean, it's hard. massive wealth transfers have gone on there. you look at the regulations. the national labor relations board. a lot of judges that have been put in by the president. you look at what he has done for the teachers unions and places like washington d.c. where the obama administration struck down with a lot of effort the voucher rules that were there and republicans were able to get that back in when they took control of the house. you know, teachers unions have imopposed any competition. they've lined up right down the line. >> let me ask you. two other things. we're talking about tax. they're iffing to favor the government union. the keystone, i don't understand. all these private sector blue collar union workers who would be there in favor of keystone. they want to drill for the

pipeline even while the union leadership is opposed to keystone. this is something -- why would they want to do that? keystone is in their interest. they have blue collar jobs. keystone pipeline. >> most of the unionized workers in the united states now work for the government. i think, you know, they see kind of a lot of left wing groups as being in sync that, they work together arm and arm in with a lot of other issues, and i think they see where the future is. private unionizations kept on declining over time. you haven't seen that decline in the public sector. it's basically grown. it's already majority public, and it's going to get even more that way. >> finally, john. other issue that bugs me real quick, the issues of collective bargaining and reforming pensions and benefits, right? that is key. the public unions do not want any reforms, is that correct? >> you're exactly right. i mean, why not negotiate with the democrat across the table for determining what the salaries for public employees

are going to be? or when you have teachers unions control the school boards in different places, why not, you know -- >> i got it, jim. >> john, thank you very much for running it down. the labor movement, not going to help the economy growth grow. that's it for this evening's show. i'm larry kudlow. back tomorrow might to cover the primaries, and this red hot melt-up stock market. when bp made a commitment to the gulf, we were determined to see it through. here's an update on the progress. we're paying for all spill related clean-up costs. bp findings supports independent scientists studying the gulf's environment. thousands of environmental samples have been tested and all beaches and waters are open. and the tourists are back. i was born here,

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