kudlow's up next. let's understand apple took a breather. i heard a lot of people say, jim, apple. that is showing the the whole market is going to over. they said oil is going to roll over. tonight is devoted to the notion that the bear arguments get refuted so let's not get misdirected. i'm jim cramer and i will see you tomorrow! hey, larry, you got a great show lined up. tell us about it. thanks, jimmy. the president is still mocking oil and gas companies. that burns me up. you're going to be on my show in just a moment. tonight we're covering the biggest issues from the market and politics in one word -- energy. it politics at the pump. it hasn't been this critical for a sitting president this close to election time since the carter administration. now in a desperate attempt to

fight sagging poll numbers, president obama admits he and british prime minister cameron talked about releasing the strategic petroleum reserves. this case of government interference in the pfree markes always back fires. the president continues to mock republicans. take a listen. >> if some of these folks were around when columbus sell sail, they must have been founding members of the flat earth society. they would not have believed that the world was round. >> threw go. eight cheap shot applause line. meanwhile, folks, investors are still buying stocks. the dow was up another 59 points. the s&p passed 1,400 for the first time in four years. today's economic news pretty good. in a moment you'll hear from billionaire fracking tycoon harold hamm.

he joins us live. first we begin with the pre president's defense. good evening, john. >> good evening, larry. we had proof again today that the energy issue and oil prices are going to reverberate through this entire election year. as long as prices stay high and the overall economy is recovering and provides fewer targets. the president went to a maryland community college to defend his own energy policy and attack republicans as you just alluded to, saying their policy goals are too narrow and simply unrealistic. >> we will not fully be in control of our energy future if our strategy is only to drill for the 2% but we still have to buy the 20%. so we can't have an energy strategy for the last century that traps us in the past. we need an energy strategy for the future, an all of the above strategy for the 21st century

that develops every source of american-made energy. >> what happened after that was a wild ride in oil prices and that reuters report that the president and prime minister david cameron from great britain agreed on a release of strategic petroleum reserves. the president quickly said that was no true. said the report was off base. >> it was inaccurate, as was reported today, that any kind of agreement was reached on a course of action or that any kind of timetable associated with a course of action was agreed to. those reports are wrong. they're false. >> so as a result, by the end of the day the drop in oil prices that had occurred midday on that report recovered and the price of oil was basically flat for the day. but, larry, as you know this issue is not going away for the entire rest of the year and

republicans out on the campaign trail are going after him hard. >> i heard jay carney. he said there's no agreement on spro and no timetable. but that left the door open. >> i agree with you. i wouldn't say the white house was on the verge of doing that. i wouldn't expect them do that soon. that's an option, however, i think they're not taking off the table. of course we've seen administrations have tried that in the past. as you say, it's of dubious value long term. >> thank you, john harwood. appreciate it. here's my two cents on the president's energy policy in his speech today. mr. obama is still on the wrong side of the energy issue and folks know it. folks want to drill, drill, drill and they want the keystone pipeline but the president won't give it to us. that's why his polls on the economy have slumped so much during this gasoline runup. and by the way, new estimates

show the u.s. has 1.4 trillion barrels of recoverable oil, that's not even including natural gas. you could be talking 200 years worth of fossil fuel. as for the short term, heck, listen the epa manned days on boutique and ethanol gas blends. and if the dollar were higher, that could take out another 50 cents. in order, more free market, less regulation, consumers, families, motorists would all benefit that's my two cents. let me bring in my pal jared bernstein. thank you for doing this. >> of course. >> here's what really bothers me the most. mr. obama, i know his roots are in the environmental movement. when he keeps saying we have only 2% of the world oil but consume 20%, that is patently

untrue. new estimates given to new technology show we have 60 times the volume he's talking about. he knows that, his experts tell him that and he won't acknowledge it. >> i think there's a fine debate to be had about known reserves. but regardless i think that any research could you cite on this would show that most of the oil isn't under the u.s. and even in the case were different, larry, even if your upper estimate are correct, what we're really talking about here i think is near-term relief at the pump and there's nothing that you introduced in your earlier wrap, you called it your two cents. i was thinking if we did all that, we might take half of that off the price at the pump. >> i'm not making this stuff up. there have been reports out there. all these boutique mandates and ethanol mandates the u.s. dollar, oil is priced in dollars. if the fed cooperated with the

epa, could you provide relief at the gas pump almost immediately. polls are showing that people are saying the president should and could do something. >> there's politics and economics. on the economic side, it's widely agreed upon if you tried to change the mix and messing around with the value of the dollar, which by the way, there's another thing here which i find discordant. you're always very consistent in keeping the governor out of the economy. >> right. >> but things get a little funky at the gas pump and all of a sudden everybody wants a bunch of government intervention, build this priceline, release the spro. it's a price hike because of supply and demand in a global economy. there's one thing an administration can do to help and that's to raise the after-tax income of people. >> i want to deregulate. i'm talking about epa

deregulation of all these mandates. by the way, do i want the fed to protect the dollar. i think that's one of the primary causes. jared, here's my basic problem. when people hear the president, they hear an attitude. he talked about taxing oil and gas companies, he talked about the flatter of society. he attitude is anti-fossil fuel. as you know, the green revolution, and i'm not opposed to green, i'm not opposed to clean that, is a tiny 1% to 2% fraction of our overall energy needs will be ever thus for at least the next 50 years or more. you know that. why is the president always bashing oil and gas to get us through this? >> first of all, i agreed with you until you got to the 50-year projections. we really can't know if that's correct. but, look, in the president's speech today, i take your point about the criticism of the oil companies. but part of that is because of the subsidies they keep getting, which frankly they don't really need anymore.

they've been getting them for a hundred years. they're hugely profitable. that came in a speech after all of the drilling and fracking that's gone on under this president's watch. it remarkable. i think you have to admit that. >> i don't think he's been helpful for drilling in a lot of these places, offshore, and war, alaska. i think private lands and drilling, yes. public land, absolutely not. jared, i'm sorry, buddy, we're out of time. we'll talk about this more. we're talking about solving problems. i'm a drill, drill, drill guy. one of the most, sighting energy plains along that line is north dakota, the second largest u.s. oil producing state. just passed california, if i'm not mistaken. much of the growth is due to the development of the region's oil rich bakken shale formation continental resources, now the largest land holder there. we have a kudlow exclusive

continental east chairman and ceo harold hamm is with us live. welcome to the show. in today's energy speech president obama called oil and gas drilling and that including fracking, he called it the flat earth society. what's your reaction to that? >> well, i can't believe, first of all, that he said that. thanks, larry. it's good to be back with you. i appreciate the invitation to be back on your show. the technology that's out there today, what we're doing with horizontal drilling, unlocking a virtual renaissance of new development oil and gas in this country, i can't believe that the president would say anything like that. you know, we've obviously brought drilling into another realm, a whole new paradigm. >> we've got a technological revolution with the hydraulic fracking. you're an industry leader in that. it's almost like we have a new energy growth model, that what's coming here is like a miracle

and it's spreading all over the country. but how much did you increase your recoverable, you know, accessible reserves. when you started in the bakken and north dakota and wyoming? in order, didn in other words, didn't the technology tollly raise what you thousand was available and why doesn't president obama recognize it's a national theme? >> certainly. it went up bay factor of ten. i think everybody sees that and certainly will across the country. we've got a tremendous renaissance going on today, basically for this new technology that's gone on. the entire bakken could not have been developed with vertical wells and without basically horizontal drilling that's turned it on and all the demolition work that goes with it. >> how many people have you made rich? how many people have you got i don't know jobs, good salaries, opened up hotels, had secondary and tertiary economic effects?

how many people do you reckon you've made rich with this? >> the number's too gate. i don't know. >> lastly, you're advising governor romney on these issues. can you give as you quick pencil sketch, what's mr. romney saying? >> just like spro, that's a strategic reserve, therefore a national emergency, not a political emergency, because romney is up some 8 points ahead in recent polls. that's not what it's for. what we need to be doing is developing our own resources and becomes will dependent on foreign oil. we have the ability to do that today. you talk about the reserve. 2%? who are we kidding in we've been producing 10% of the world's production and doing this for

the last 10, 12 years. >> and that number's gone up now. the new discovery from the technology, that number's gone up from 10% on up, is it not? >> it is. it is up. so obviously we're above 10% of the world's reserves. but we have some antiquated ways, you know, of putting prove i don't know reserves on the books. that needs reworked. it just doesn't cover the technology we have out there today. >> unfortunately i think the white house knows that. they just doesn't want to acknowledge it. harold hamm, thank you, sir, continental resources. great stuff. >> for example, last piece. where are gas loon prices headed? i want to welcome in lacy plot kin. where the gasoline prices going? >> they are going north of $4 a gallon on average nationwide. we're jurs under there now and i think within the month we'll see passing the $4 threshold.

>> east and west coast, there's a lot of places well into the 4s, some are into the 5s. is it going to be distributed unevenly? how much are these outliars going to be? >> absolutely. there it's different across the country. the shock for a lot of people when we pass the $4.11 for regular gasoline average. that's our record high so far. it's likely we'll pass that point. >> why? just tell me why. what's driving this whole story? >> so in a word fear. people are worried about supply shortages. there are some actual disruptions to supply at the moment. people worry there will be more. that's the bottom line. as long as people do not believe there's enough supply to cover demand for gasoline, we'll see prices continue to go up. >> lacy plache, thank you very much for the update on gasoline prices. we're heading into the 4.50

zone. that's what i'm hearing. next up, jimmy cramer continues the conversation on how the lack of energy policy could throw a curveball in the whole stock market rally. i'm going to walk over to jim's studio. and regarding informing and everything else, free market capitalism is the best path to posterity. let us deregulate our way to prosperity. we'll be right back. brad needs car insurance, but, uh, brad doesn't want to spend too much. who's brad? this is brad. ahh! well, progressive has lots of discounts for a guy like brad. brad's intrigued. paid in full, safe driver, multi-car, going paperless -- all can help brad save a bunch. sign brad up. cool! jamie will ring you up. show brad the way. who's brad?

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welcome back, everyone. i'm here with my old friend jim cramer. jimmy, thank you for visiting with us. the president gives an energy speech today. tonight we have your friend and mine harold hamm. what are you thinking on energy? what are you thinking on fracking and companies that do it? >> first of all, fracking is so important, we can't leave it to the politicians any longer. the reason is very clear. we have a chance at energy independence. nobody believes it because we've been fooled. presidents say we can do it from coal, from solar. no, we can do it because of technology. and harold hamm knows this. when i visited continental resource, we're going down to two miles and wide two miles.

the president needs to spend time on rigs and needs to know fossil fuel is better to get from ourselves. >> you have people say we go have a couple hundred years worth of fossil fuel. that's an economic growth model. >> 15% of growth in the oil and gas industry. the president wants to kur trail the drilling. my friend aubrey mcclinton is saying the president doesn't want to do the right thing. the president is letting the market forces do their thing. i think the problem there is it's not enough. i think you need to have a natural gas act that was just turned down. it wouldn't cost people money. we needed to have the truckers literally embrace natural gas the way they embraced diesel. that's how we get all these years of natural gas fossil fuels -- >> get it into the trucks -- >> cleaner, abundant, cheaper.

i'm talking about breaking opec. how many times does the president say there's nothing we can do short term about oil and gas? you can say the post office, we're going to buy natural gas, the military will buy natural gas, we'll give you an incentive to do it but you'll pay it back. >> are you buying these companies? >> it difficult. if they're all like couldn't nntal, like mr. hamm, that's a good play. if they're shifting quickly toward oil like anadarko, that's okay. unless you're doing clean energy fuel, clne and westport innovations, owned by cummings, they make natural gas engines that volvo is embracing and they save fortunes for companies. you and i both like the free market. if you can get natural gas down to where it can work as a

regular fuel, you're going to be paying a fraction of what you pay for diesel fuel. >> absolutely. everyone will save money on this. what about the big daddy exxon mobile? >> i'm troubled because frankly they paid a fortune for xto. bob simpson, a fantastic manager, helped bring that company public when i was at goldman sachs. not ashamed to say i was at goldman sachs by the way. what i think that exxon thought they would do is put it to utilities and take that share away from coal, which i think is good but also put natural gas fuel pumps in their gas stations. the reason why we can't have rapid adoption of natural gas is there are not enough fueling stations. exxon has to step up and say rather than the interviews they've been giving in local papers, they have to step up and say we're going to embrace the natural gas fuel and put tanks in our gas stations. then we have cross country natural gas and you and i are going to be buying four 250

natural gas pickups. >> all right, folks. up next, we'll have more. is president obama becoming the regulator in chief? we have a very hot debate on that very subject on kudlow. we'll be right back. hey, did you ever finish last month's invoices?

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♪ because your moment is now. let nothing stand in your way. learn more at keller.edu. some market milestones. today the dow closed above 13,000, the s&p above 1,400, the nasdaq above 3,000 for the first time in history.

we have all the details on today's trading. good evening, kelly. >> the dow closed up 58. oil was extremely volatile on all of that reserve release talk. gold, silver, copper, all trading higher. its arrival day for the ipad. already in australia the ipad is on sale. the lines are long. global supply is not expected to meet global demand. apple shares are strong on this news. they crossed the $600 mark before pulling back to the 58 5 range. the stock market is up 70% in the last year. that's pretty impressive. that's how the market's doing, larry. >> that's it. a good day. >> it's surprising because all the had had lines came from the levels and not necessarily the changes. it's almost as if we're hitting all these milestones and people are looking around saying who's buying? >> i think people are still surprised at the strength of

stocks. >> until they're not, it means the rally still may have some legs. i was skeptical but we'll see. >> let's turn to our market expert. we bring back joe grano. cmbc contributor jack borjian joins us. i just want to add top of kelly's report, we have another drop in jobless claims, good report on regional federal reserve banks on manufacturing. why are you a pessimist? >> i wouldn't call myself a pessimist. i'm encouraged by economic indicators that have improved but i don't believe it's going to be that sustainable from here. if i had to make a single bet will the s&p go from 1,400 to

1,600 or will it go to 12? there will the dow go from 13 to 15 or to 11? i'd have to vote on the latter. the reason is con sem shun, regulation, real estate and the deficit. >> what about the stress test that came out pretty good? i don't know if that's a perfect measure. it did say can you take some more risk, the banking system is not going to fall apart. joe, you have such great experience from your days on wall street and today. there's no armageddon story, no massive deflation story, profits and businesses are in pretty good shape. aren't those factors the behind the stock market rally? >> i think the bounce from the trough absolutely have been a result of what we've seen in the improvement in these indicators. but europe's going into a recession, no question. even germany industrial output is slowing. china's going from 10, to 9, to 8, to 7, down 20% year over year in terms of gdp growth.

we're going to realize 2% to 3%. all i'm suggesting is that if you have profits and you've recovered, take some chips off the table and doesn't lose sigh. >> are you worried about a european recession jack? are you worried about taking profits off the table? >> i think we've entered a period where we're in a cyclical bull market for stocks. we're going to be looking at large asset allocations with all of that scared money sitting in the ten-year and in the 30. it's going to work its way in. you have people who have portfolio manager written on their doors, not hooarder of capital. there are still a lot of nonbelieves. look at what's happening. do i believe there's going to be

a recession in europe? no. i think the numbers coming out of germany already prove that. china, i think 7.5% growth is much more sustainable than 10% growth. they've hit their inflation targets, loose i don't knowing reserve requirements. everything that i am talking about is bullish for equities. if we get a multiple expansion a 15 or 16 on a $400 s&p, now you're looking at a 1,600 s&p. >> joe, i'll give you the last thoughts. >> as long as this president continues to divide the country and attack everything from the insurance to the energy industry, we're not going to get the confidence we need to get people off the sidelines in my opinion. >> i think that's a good point. on the other hand there may be political regime change out there. joe, thank you very much. jack, as always. all right. the op-ed heard around the world and it cost goldman sachs at

least $2 billion at one point at its cap. now goldman is firing back and trying to stop the bleeding. we're tacking damage control. we bring back "vanity fair" contributor bethany claims. on the damage control front, is goldman reacting properly in your judgment or are they creating more questions than they're answering? >> look, there's some segment of people who are going to think goldman is evil no matter what goldman does. there's another segment of people who think goldman as doing god's work and then you've got the clients in between. goldman's trying to court those people. i get some people are making fun of goldman's attempts at damage control. hard to say how well it's working. >> greg smith said goldman is a toxic environment, it's

destructive and it hates its clients. is there a risk regulators will come swooping in to check out these charges by greg smith? is that possible? >> well, regulators are already swooping in. there's lots of rumor about impending settlements with goldman and other firms about their behavior. i don't think greg smith is alleging any illegalities. he's allege agriculture rahal shift at the firm but one that isn't necessarily illegal. >> you talk about how regulators are already in there looking at goldman. you remember when this paulsen mortgage package deal was settled, cost goldman i think $500 million. do you recall the s.e.c. and others said part of the settlement goldman had to change its california and its management. what mr. smith is saying to this letter to the "new york times" is that neither has happened. >> yeah, he certainly is. goldman did this famous internal review and promised to look more carefully at its supposed first

business principle of putting its first and that may not have mattered much. >> so there may be some heads rolling, beth ani. >> too soon to tell. i don't know who you have taking lloyd blankfein's play. larry cohn is a continuation of the same. i think that's a real challenge for goldman sachs. >> thank you, bethany. next up on "kudlow," the obama overreach continues. 32 major regulations, a cost of $50 billion. can it be stopped? americans believe they should be in charge of their own future.

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welcome back to "the kudlow report." i'm larry kudlow. the u.s. chamber of commerce filed a motion to have president obama's nlrb appointments nullified. it was another california of obama overreach. that's not all for the regulator in chief. the obama administration has enacted 32 new major regulations, rules that carry an estimated price tag of over $50 billion in total. let's talk to senator ron johnson, a wisconsin republican and our friend bob luts, former vice chair of gm. mr. lutz, it's want to start with you. one of the regulatory issues is the battery driven chevy volt. you were the father of the volt. the thing's become a political football. criticism left and right. why is that? is the government preferences unjustified for your volt? >> well, no. the volt was started as a program in '06.

it was shown at the detroit auto show in '07. the best i know obama was elected in '08. so the obama administration has nothing to do with the volt but that keeps getting for got i don't know by the right-wing pundits. >> i don't know whether i'm a right-wing pundit. i'll concede the point. i noknow you're right. i would blame george w. bush. i don't see why this specialty car should be given a $7,500 tax credit. i get battery driven cars. they're going to need natural gas. why not let the free market do it? it government overreach, is it not? >> well, let face it. the $7,500 apply to any electric vehicle. it was not created for the volt. the physical car karma gets it, the nissan leaf, the electric ford focus gets it. any car that's eelectified gets it. and that $75 t ,500 tax credit,

which the industry didn't ask for, was instituted under the bush administration. i like to blame president obama for a lot of stuff but you can't blame him for this one. >> no, i'm blame bush, too, but obama wants to continue it. >> what's your take on the vote? >> government is not particularly good at allocating capit capital. we should let the free market system operate. i'm against subsidies against anything the government wants to try and basically dictate economic activity. just doesn't work. >> see, mr. lutz, this is the real reason it's become a political football. whether the tests for the volt were good tests or bad tests, i know you object to some of the things written about that, it really is a question of more government subsidies. >> we didn't ask for the

subsidy. they were put in because presumably the bush administration at the time wand to foster the electrification of the automobile to reduce dependence on foreign oil. the first generation of these car are expensive so the government decided to put in subsidies. we also have farm subsidy, a corn subsidy for production of ethanol, $5 billion of subsidy for bowing to build the dreamliner. you can't just focus on the chevrolet volt and other electric cars receiving subsidies. the government supplies countless industries and including large parts of agriculture with subsidies. >> senator johnson, is that part of the problem or the solution? >> that's exactly the problem. we shouldn't be subsidizing anything of this. we can't afford to do these things. i'm not blaming bob here for

liking subsidies for his particular industry, but that's the problem. all these people are looking for special -- crony capitalism doesn't work for anybody, i don't care who does it. it's all wrong. we need to stop it. >> are we subsidizing unsafe cars by the way? reports that some of of the cars caught fire, safety issues, bad crash test results. were we subsidizing an unsafe car? >> listen, i'm glad you brought that up. bill o'riley and lou dobbs have repeated this fiction that volts catch fire. i will tell you not one single volt in service running or in an accident has ever shown as much as a whiff of smoke. the only one that caught fire was totally destroyed in a crash test and three weeks later because the battery wasn't discharged, it caught fire. and then two more bat riff packs caught fire under experimental conditions when they were trying to replicate what happened to

the one that was crashed. >> $41,000 car -- >> i heard the average income level of the person buying it is bd 170,000. we're subsidizing people that don't need the subsidy. the free market system should determine what products people want to buy. and, hey, if the electric car is wanted in the marketplace and you can sell them at an affordable price without government subsidies, i'm all for them. it would be a great thing. that's just not the case right now. maybe in a few years, it will be okay. we have to end the government subsidies. you can't afford it. >> mr. lutz, do you want the last word? >> the whole issue about the vote is ridiculous. it has the highest owner satisfaction of any car general motors has produced. it is quite expensive but because of sales are suffering now, it's about 70% of americans

who watch fox news and other bias media actually believe the cars catch fire. >> senator johnson, what's your response to that? >> it's too expensive. that's the problem. the average price of a vehicle is over $30,000 and this is $21. and the government is subsidizing a rich man's car. you know i have the greatest respect but i don't see why we can't do all this through the free market without government overreach and regulation. gentlemen, i appreciate it. we're out of time. next up, it's clear we are no longer welcome in afghanistan. the question is is it high time to get out. one of the most respected retired generals in the usa, mr. barry mccaffrey up next. we'll ask him if he thinks it's time to pull out of afghanistan or stick it out. it doesn't appear we're welcome. i'm kudlow.

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choose control. introducing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz. why is it that poll numbers indicate that people are interested in ending the war in afghanistan? it because we've been there for ten years.

and people get weary and they know friends and neighbors who have lost loved ones as a consequence of war. no one wants war. >> poll numbers show americans do want out of afghanistan. today afghan president hamid karzai called on international forces, aka us, to leave all villages and head back to their bases ahead of the planned 2014 exit. is it time for the usa to say mission accomplished and move on? military analyst barry mccaffrey. what do you think, should we go or should we say? >> we got a real mess on our hands. i think we'd have to rethink the strategy and the timetable. we've got some fundamental issues. one of it is president karzai has turned into an enormous liability. he's a loose cannon issuing

edicts are impossible to carry out. the notion that the troops would go back to combat bases and sit there denies the strategy can achieve. and finally the reaction of the afghan population to the continued presence of nato troops has denied you us our negotiating leverage with the taliban. if the president is coming out in 2014, secretary panetta said 2013. karzai is saying wrap it up in 2012. am some point you say why continue at $10 billion a month, 3, 4, 600 wounded a month, why continue if it's not going to achieve its purpose? >> i'll follow up. if they don't want us and karzai doesn't want us, why continue?

>> i think now the strategy is up for rethinking. there's a good argument we've lost about two third of the american people believing this is a viable strategy going forward. but i don't know if the american people are weary over ten years of war and the costs. i think they're convinced possibly correctly that we don't know what we're doing, that we don't have a policy that's going to work in pakistan where our logistics lines have been severed by the pakistanis, that our allies are leaving us. the first three months of the year we had more u.s. troops killed by afghan army and police than we did by the taliban. so the notion that we'd stay with mentoring and coaching for another decade with thousands of u.s. advisers in the lands also is in question. >> do you have any sense there is a real rethinking of the strategy? is that a pending announcement?

>> i think internally vice president biden and others have from the start by skeptics. congress, republican candidates are now distancing themselves from it. i think we're in a very challenging situation. no one wants to see the disaster that will ensue if we come out precipitously. but conversely, the notion that we'd stay there for 10, 15 years at the current rate of effort isn't going to fly politically. >> general mccaffrey, thank you very much, sir. next up, something is rotten in the paradise called san diego. i used to live there. they have sun, surf and some serious labor problems. the former mayor, we'll join him and his audience right after the break. this is $100,000.

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don't miss "squawk on the street" tomorrow morning. watch beginning at 9 a.m. let's turn to tonight's discussion. cash strapped san diego is the

newest front line in the fight against blacksector union. the city is preparing for a june vote on public employee pension reform. roger hedgecock is on the air right now. thank you for taking the time to simulcast with us. i used lo live in north county san diego. like wisconsin, like ohio, like detroit right now and elsewhere, is this a battle between the government unions and the taxpayers? >> it absolutely is, larry. thanks for having me on. the fact is here and throughout the country the battle is between those who believe in the government of, by and for the people and the unions who believe in a government of, by and for the unions. the idea that the unions elect the city councils and boards and commissioners and they get in there and negotiate with themselves and their puppets on

these board and come up with wild, incredible health care, free health care in retirement. we have a head librarian in san diego earning $170,000 a year, worked and earned it but gets $270,000 in retirement. we can't do it. >> how much work on the pensions -- are the pensions for the city of san diego better, stronger, richer than the private sector counterparts? >> absolutely across the board they are. i'll give you a couple of examples. the formula that is used at the city is you get 3% a year. if you're there 30 years you're supposed to get 90% for example of whatever your pay was at that time. what they do is they add all the sick pays and other benefits and bonuses and so forth that in the last year it's all computed on the last year, not the last three or five but the last one. you pad it up so that 90% becomes much more than you ever

earned in that last year when you were working. >> how close to bankruptcy is the city of san diego as a result of this? >> not very close because the city council has cut services after services closed libraries, closed rec centers, closed the pools, not fixed the potholes. they've done everything they can to make sure the primary purpose of city government as it stands now and the biggest expenditure in a given year is to pay the pension account to keep up with these payments to retired employees. >> instead of overly generous defined benefits, why don't you go to a defined contribution plan, plenty of co-pay and that would certainly solve the problem over time. >> this is the reform. councilman carl demayo is the principal architect of reform. it's on the ballot because the people got together to put it on the ballot. all new hires go to 401(k) programs, all of the computation for existing employees is based on what you actually earn and

not padding that last year as i just described and a number of other reforms, including contribution rates obviously, which are going to bring this thing within a manageable amount. the contribution in 2005 by the city to the pension was about $35 million, last year it was $275 million. we can't go on like this or the city will simply exist to pay pensioners. >> let me guess, the leaders of the public unions, government unions would rather raise taxes on the citizens of san diego. >> no question about it. their obvious response to all these problems as described is, well, you just aren't paying enough. it's the same problem in wisconsin and all across the country, as you said. it's the same showdown and it's going to occur here in june. >> you're not going to get bailed out by sacramento because they don't have any money, do they? >> they have less money than we do. jerry brown wants to come to california voters in november, maybe even in june to put on the ballot an increase -- get this -- to the highest income tax rate in the country at 14%.

>> unbelievable. sink the state, sink the city, sink everything. i used to live out there. it's a beautiful place. i hope you all can get your act together. thank you very much for helping us on this simulcast broadcast. there's a little example of it in san diego, a little deregulation of pensions. that's all for tonight. we'll see you tomorrow evening. an airline has planes... and people. and the planes can seem the same so, it comes down to the people. because, bad weather the price of oil those are every airlines reality. and solutions won't come from 500 tons of metal and a paint job. they'll come from people. delta people. who made us one of the biggest airlines in the world.

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