still something missing that's big, my take on that is coming up next, talking to my buddy lawrence about it in the "kudlow report." all week we're profiling growth stocks. why? because we think the market's a little bit troubled here and we've got to give you something we think you should buy on the way down because they don't seem to be levered to the current earnings reports or to perhaps the downturn in the economy. that's what great growth investing's about and i'm on a mission to teach you how to do it yourself. i always like to say there's always a bull market somewhere, i promise to try to find it for you here on "mad money." i'm jim cramer. see you tomorrow. hey, larry, what do you have for us? >> all right, jimmy. neither stocks, nor jobs, nor the economy is going to fall off a cliff. this is the "kudlow report." stocks took 131-point payroll dip today. you know that. but when you look at the economic data points, it's clear to me we are not dropping off a

cliff, there's no double-dip. there's no catastrophic stock plunge coming. a healthy correction? maybe, but not a plunge. >> jack up energy and really damage the economy just the way the fed did a year ago. ben bernanke is moments away from speaking his first comment since the bad jobs number on friday. we will take you there live and talk about outrageous fleecing of american taxpayers. the general services administration spending almost $1 million on a lavish las vegas conference all on tape. now congress is calling for an investigation. i say let's shut down the worthless gsa altogether, the private sector can do it much better. first up this evening, the jobs report on good friday, made for a bad monday. all major averages closed off 1%. bertha coombs with the day's market rundown. good evening, bertha. >> good evening, larry. the one silver lining, the stocks closed off the day's

lows, we were led down by financials and materials. a very light volume. the first trading day as you mentioned for investors to react to the march disappointing jobs numbers following the holiday. a surprise move, ohio announcing that it's switching medicaid plan providers with a big loss from molina, off 15%. aetna and united health along with three nonprofits. meantime, you've got $1 billion in patents. that seems to be the theme of the day. aol surging to 40% after selling 800 patents to microsoft for that much while facebook snapped up instagram ahead of the ipo. and apple shares yet another new record adding over $40 billion in market value over the last 14 sessions. it is poised to become the second company ever to reach that $600 billion market cap milestone any day now. and super value shares bounce

back after catching a better than expected low. and we hear from alcoa, and you know what that means, larry, it's earnings season. >> all right. very good. earnings season. thanks, bertha. now let's tend to our market watchers and take a closer look. joining me is zain brown at lord abbott, david malpass, a former reagan assistant deputy of the treasury. chief economist with john thomas financial. michael, let me ask you. i say there's no collapse going off a cliff, not even a stock market plunge. you tell me, you're the expert. >> i don't see how anyone could call this a collapse. i mean, less than a 1% decline in the dow. look, it's the same as what we've seen for the last three years. the economy's growing, it's not growing very rapidly, there's still a big output gap. it's too large to really generate a lot of job growth. but job growth is positive, the stock market has been reacting

to basically positive conditions for equities. we have low interest rates, we have low inflation. and we have low labor costs. so i think it's a lot of the same. look, the correction today i think was long overdue. we saw some of the data diverge from the expectations. >> four days. this is the fourth day. means it started before the jobs report. i don't know. all right. let me ask dave malpass. these job reports, there was good news in it, bad news in it. i know the economy's not fabulous, i'm not making that point. i'm saying it's not falling off a cliff. >> yeah, i don't think it should change the direction of the market. for one, the way the government gets the data is through surveys. and they're small surveys and there's a lot of noise in the individual numbers. i think there are two fundamental problems going on. one is europe is deteriorating pretty rapidly. i'm concerned about that -- >> how badly? just dwell on that for one moment, the european story, it was a very bearish, negative piece on "60 minutes" last night. how bad is europe?

>> they're running out of cash in the periphery. and the deal so far has been germany gives them money when they want it, when they need it. and that's not going to last very long. there's just too much at stake. and that's the problem. they need a new strategy. >> is that behind this correction? i know the jobs thing might have layered on to it, but was that behind it? >> yes, for example, european banks peaked at the end of february and they've been going down. that was one of the drivers for the rally was the good news out of europe in december, january, and february. and it looks to me like that's fading. >> zain brown, instantly today in the selloff, it was the pro-growth cyclical sectors. industrials, materials, energy, banks, tech, and so forth. is the stock market downgrading the growth outlook? or is the stock market simply undergoing a mild correction? >> i think it's just undergoing a mild correction. i'm not sure why we feel obligated to overreact to one number that just doesn't happen

to fall in sequence with the previous three. but even the jobs number was not corroborated by the adp number that was issued last week, nor was it corroborated by the initial claims number. that was 357, that was the four-week moving average. the lowest its been since 2008. >> interesting on that point. i don't know why it is, but maybe this is part of network broadcasting, maybe this is what investors have to do, maybe this is what hedge fund managers have to do. make a big deal out of something. the surveys, you said the adp, jobless claims, car sales pretty good. chain store sales were published in the month of march. they actually beat expectations. there is a lot of numbers that say we're okay. we're not fabulous, but we're okay. why is it people don't create

context? >> i'm not sure why that's not the case, but we've had two key indications that things might not be as good, and one previous to this was qe-3 and lack of qe-3. >> do we need qe-3? >> absolutely not. and that's the important part, we don't need it, it's not necessary because the economy's strong enough as it is. >> here's another -- broadcast secession is bernanke and the fed and qe-3. >> we don't need qe-3, and qe if you look at it, it functions like a tax. it removes income from the economy, interest income. if you look at the last four years since the fed really started to engage in these monetary operations, you've removed $400 billion in interest income from the economy. that's functionally like a tax. and that is not an insignificant amount of income. that's very large. so we don't need it. i wouldn't agree with you. i hear you a lot talking about its affect on the dollar. >> right. >> i would argue against that.

the index has been stable. >> i get that -- >> but the interest -- >> the interest -- >> qe-2 buried the dollar. that happened roughly a year ago. and commodity prices, particularly energy and gasoline and food, which created a tax on the economy, people forget a year ago we were close to a recession, there were some external factors, but the fed didn't help that. >> i think oil went from $80 to $100. that has to do with the fed really going to keep buying things. let's talk about why people are so interested in it. remember what they've done. the fed has bought over $2 trillion worth of stuff. this is the agency inside washington with a building there. with a few staff, and somehow they've acquired $2 trillion worth of stuff. that's why everybody's interested in it. if you're in investment bank, all you care about is that giant elephant buyer going to come in who is indifferent to price.

they buy the most expensive things in the world and bid them even higher. >> that's how they set interest rates. that's the mechanism by chi they set interest rates. because they -- yeah, because we've been in, we're in unusual circumstances. that's why they call -- >> i want to raise another problem -- >> this is what troubles me. and i would be so much happier if we had lower marginal tax rates, if we had some de-regulation, if we took obama care off the table. >> careful, businesses will start hiring -- >> right, businesses will hire. the fed, you know what? if the fed was so powerful, they've had qe-1, qe-2, operation twist and lord knows what. how come this is the worst economic recovery on record? if the fed is so good, how come it hasn't worked? >> well, lately they've been the only game in town trying to provide some stimulation for economic growth because fiscal policy really hasn't done a whole lot in the last nine months. so it's really the only game in town. they have succeeded in keeping short rates low, long rates low,

and certainly we've seen refinancing by all corporations in america capable of refinancing and they've locked in low -- >> the front page of the "wall street journal" story today said it is the recovery of business and business profits and business balance sheet that is the single largest factor behind the three-year stock market i'm going to call it the bull. and what little economic recovery we have. and i want to add to this. if the dollar -- if the fed quits messing around and creating more dollars, you know what? take a look at the charts. crude oil prices are slipping. the commodity for retail gas is slipping. if the dollar is instead, the energy tax will start coming down. this would be the best possible thing -- >> larry -- >> and let private business drive the stock market higher. >> you add $900 million in reserves in the banking system in '08.

oil was $150, you have $3 trillion in reserves now. >> i'll give you the last word then we have to go. >> new problem, as long as the fed is doing this, it distorts the market and you don't know what the true value of equities are. we've been running on momentum on the idea that there's a bernanke -- >> i've got to go. >> i hate the -- you buying stocks? >> absolutely. stocks and high-yield bonds all the way. >> thank you, we appreciate it. on a day when stocks sold off big time, our next guest says the dow is going to 17,000. he's going to tell us why. plus, for ben bernanke is about to speak, investors looking for any clue on what the fed is thinking about the economy. we're going to listen and we'll take you there. folks, don't forget, free market capitalism is always the best path to prosperity. lower tax rates and de-regulate, that'll do so much more than fed

priming.

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welcome to the world leader in derivatives. welcome to superderivatives. all right. welcome back to the "kudlow report." fed head ben bernanke is moments away from taking the podium at the atlanta fed conference in

stone mountain, georgia. investors are looking for any guidance from the fed. steve liesman joins us now with all the breaking details. all right, steve, what can we expect from bernanke? >> fed chairman ben bernanke will make only modest comments on the economy. he says the heavy human and economic costs shows they need to take further steps to avoid a repeat and he's talking about financial regulation. i would call this speech the beyond dodd/frank speech talking about a need for regulation in the shadow banking system saying it creates potential for seasonal shocks and spillover to traditional banking. efforts are still at an early stage the fed chairman says and there's a risk of runs in money market funds, that remains a concern. and he says the tools used to bail out the money market funds in the crisis no longer exist. that of course because of dodd/frank. bernanke mentions but does not

criticize a rem proposal to require money market funds to maintain a capital buffer against losses. he also mentions a similar sec proposal to allow money market funds to potentially trade at below the dollar or to break the buck. bernanke's also concerned about risks from the repo market and warns that capital will flow from more regulated to less regulated areas, something he says the fed has to monitor. gathering financial data on hedge funds and private equity funds and is also gathering data on leverage in the non-financial sector and actively monitoring u.s. banks, direct to indirect european exposure, larry. not what we want to hear about, jobs, but it is an interesting sort of balloon speech about the next steps beyond dodd/frank. >> i think the money market fund issues are very important. but steve, may i ask you calmly -- i'm going to do this as calmly as i can. calmly, there is no mention of qe-3, therefore the fed will not launch new money creation, they will not destroy the dollar,

they will not cause commodity inflation and they will not damage the economy as they did a year ago. am i fair in making those assumptions? >> and you were remarkably calm in all of that, larry. >> i tried to be calm. >> no, i would not take that from the speech, larry. and i think you asked that question in jest. i think the story here is this is a story about financial stability. it is not a speech about monetary policy and the economy. and he wanted to send that message, he would've done so. my read, larry, i would wait for the speech on wednesday to hear how the fed is thinking about the friday number. and i think we know how we're thinking about it. bernanke already told us he expected the strength in jobs in february to weaken. the question is -- that explanation was used to justify to keeping policy the way it was. we don't know if it means doing more. and then we have bernanke again on friday. >> all right. all right. thank you, steve liesman. great update, we appreciate it very much. so, folks, on a day when stocks sold off in a big way as you

know, our next guest says, guess what? the dow is going to 17,000. well, here now to tell us why, where for, and how quickly, jeremy siegel, university of pennsylvania's warton school and author of the very famous "stocks for the long run" updated. welcome back to the show. you've got half the investing world scared to death about a little jobs number, which is probably a statistical error. but i want to ask you, how do we get to dow 17,000 which is what i heard you say last i heard you. >> well, 17,000 is 50/50 by the end of next year. it was actually dow 15,000 is like 3/4 very, very probably by the end of next year. so i think -- on the basis of valuation. valuation is really bottom line. and stocks are -- they're fairly cheap on an absolute basis.

they're extraordinarily cheap on a relative basis. about the most relative cheapness i've seen stocks probably since the 1950s. >> let me ask you, jeremy, on this point. what do i do with the growing list of pessimists who are telling me and everybody else that corporate profits, the mother's milk of stocks and valuation to a large extent profits are stalling or will halt or will not be good? >> okay. there's a very good answer for that. we don't need corporate profits to grow to make stocks great buys. on a valuation basis alone, have it unchanged in 2012 versus '11, you're still at 13.5% to 14 earnings. this is so much better than bonds. we don't need that growth in earnings. any growth in earnings is an extra bonus to the stock investment. >> i always say profits are the mother's milk of stocks. i want to ask you this.

you're an optimist, god bless. and by the way, my heart is with you, no question. what do you say to investors out there. you know, stocks have gone nowhere in 10 or 12 years, you've had the tech bubble crash, the financial bubble crash. it hasn't been a great, rewarding exercise, jeremy. >> right. >> you're saying it will become so once again and that history will repeat? what do you say to those investors skeptics? >> well, you hit the important things, you know. in 2000, we were starting at a 30 price earnings ratio. that was the most the stock market has ever been in the world. it's not surprising the next decade is going to be bad. when you started a 13 price ratio back in history, the future is much, much brighter. we've never had bad stock returns when you start with a 13 p/e ratio. and that's the world of

difference. >> all right. i'll leave it there. thank you, professor siegel, dow 17,000. folks, we're still monitoring what ben bernanke may or may not say and steve liesman is going to bring you any news as it happens. we appreciate that next up on kudlow. the problem is, it wasn't really the attorney general. why was i.d. check voter fraud exposed on tape. next up. nice morning, scott?

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attorney general eric holder voted in the d.c. primary. or did he? cnbc's bertha coombs joins us with more on that and the latest break in headlines coming to the cnbc newsroom. good evening, bertha. >> this is the latest video showing a young man pretending to be u.s. attorney general eric holder and asking for his ballot to vote at a washington, d.c. polling place. the poll worker offers it prom promptly without question. ahead of its $100 billion ipo, facebook announcing it's acquiring instagram for $51 billion. the company says it will remain its own brand. the direct competitor shutterfly fell 8%. and american express and other gift card sellers say they will pull their products from new jersey if a new law takes effect there. that law would require the

company to collect zip codes of buyers of cards in new jersey so the state can refund unused balances of dormant balances. and american apparel, the stock plummeted, workers were let go and faced allegations of sexual harassment. he tells jane wells, he's the right guy to lead the company back. >> any day over the last 1,000 days whether we were going to go bankrupt, i would tell you never, it's not going to happen. our business is too strong. >> you've had so many headlines, why are you the guy to lead this company forward? >> because i know what i'm doing. and in my generation, i'm one of only people that know this industry right now. >> more with charney tomorrow on why he thinks it'll be cheaper to make clothing in the u.s. rather than china. >> thank you very much. bertha coombs. next up on "kudlow," a new video just released shows out of

control federal workers wasting close to $1 million in an over the top las vegas conference. at the conference, mind readers, a comedian, and a clown. what was needed was some common sense and frugality. now, congress is up in arms, we're going to show you the video of our tax dollars hard at work next up on "kudlow." this at&t 4g network is fast.

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all right. a new video has surfaced from the famous or infamous over the top general services administers meeting in las vegas. looks like an outtake from a cheap imitation of "the office," but it's not a fake, it's true. they're fooling around on your taxpayer's dime. eamon javers with the details.

good evening, eamon. >> reporter: good evening, larry. more bad news for the gsa today, already under fire for that lavish conference in las vegas that we learned about last week at which they spent more than $800,000 on things including a clown and a mind reader. well, today we got to see this video of gsa employees singing about their job. ♪ oh yeah ♪ ♪ i'm ready >> that comes just after last week where we saw another video. this time of a gsa employee rapping about spending government money. take a look at last week's video. ♪ every time he sees me rolling -- ♪ >> larry, today republicans on

capitol hill say they'll hold a hearing about all this and they're going to invite the head of the gsa who lost her job over all of this just last week. she's going to have to answer some tough questions, larry. back to you. >> eamon, just quickly, i want to clarify, these videos you're filming are not at the vegas convention, these were at the headquarters? >> made by gsa employees and shown at the conference. it was part of sort of a prank-filled annual conference in which they all submitted these videos -- >> but it was made -- >> the guy in the last video, larry, actually won an award for the video that you just saw and he was made commissioner for a day of the gsa in celebration of that video. >> all right. i guess they could've gone to work instead of doing these videos. now, both house and senate committees have scheduled hearings for next week to investigate this apparent taxpayer money boondoggle. chair of the subcommittee, which

is going to hold one of those hearings. thank you very much for coming on. look, this is clearly not just a taxpayer fleece, this is a rogue agency, is it not? >> oh, it absolutely is. this is a slush fund using for whatever purposes they would like to. we've been asking for an audit for over a year and a half, now we're going to force their hand. but this is -- this is government waste at its worst. you'll never think they would have this lavish party in vegas as well as spend over $500,000 on trinkets, toys, ipods, and all of the other things they gave away. >> yeah, some of these reports in addition to the $850,000, there was another $400,000 as you say in ipads and, you know, digital cameras and so forth. these were performance awards, even though they're not on the jobs. so let me ask you, this thing which i'm going to keep calling a rogue agency started under bush, not the agency, but this spending. my numbers show that under bush

they went from $93,000 per conference all the way up to $655,000 and under obama, moved that number to $850,000 if by throwing the performance, then i'd guess well over $1 million. this has been going on bipartisan for a long time. >> under any administration. it's the wrong thing to do. we can't have agencies that have their own private slush fund they can go out there and spend money. under the bush administration, though, there was a 50,000 from this program that has ballooned up to $450,000, when the president was cutting back, no raises, no bonuses, yet this agency went out there and did far worse than they did under the bush administration. both administrations were wrong for doing it and it's got to stop. >> okay. both administrations were wrong. why didn't congress exercise oversight? i don't know how long you've been a house member, jeff. but i'm just saying, with a republican house and senate for a good many years until yeently,

and they could have had oversight. where was congress? >> i'm a first-term freshman, right when i was sworn in, i picked up this committee chairmanship and this is information we've been asking for since day one. we wanted to make sure that not only did we have enough money to sell and liquidate these properties that were supposed to be liquidating across the nation that aren't being used but redevelop, create jobs. they've always hid this number from us. we've never been able to get an exact number or how much was in there because it's a private slush fund. >> let me ask you this -- again, i use the term rogue agency. why don't you get rid of the agency? you know, their main purpose is to manage these public buildings and government properties, but they're supposed to sell them, they don't sell them, they're supposed to privatize it, they don't do that. why p don't you put them out of business and let a private real estate firm replace the gsa? >> well, and i think that's the right thing to do. we have put a bill over to the

senate now revealing -- and that'll eliminate what we need gsa for. we ought to be putting this out to the private sector, allowing the private sector in every state and every big city be able to bid on these properties. >> california republican, thank you, sir, we appreciate it 679 now, much better news. let's go to rick santelli's conversion experience. switching from gas to nat gas. this is in edmund, oklahoma. we'll have rick turn the engine on. before we do, let's watch this conversion and elapse time. first, put a nat gas tank in the back and install the high pressure lines of the valve on the tank, then step three, bring the high pressure line under the hood. step four, mount and attach the pressure regulator. five, mount low pressure components, six, do the electrical wiring and seven, fill it up, elapse time, four

hours. and presto, a truck that runs on natural gas. so crank it up, rick. >> all right. here we go, larry. purrs like a kitten. >> so, rick, let me ask you. what's it cost? how hard is it to do? and how many people want to do it? tell me what it costs, first of all. >> the conversion we did on this truck, you're talking about $8,000 to $9,000. i think it's great. here's the issue, we all heard from phil lebeau, the infrastructure, oklahoma's not every state. there's a lot of stations here. it ranges anywhere from $1.20 to $1.80 a gallon. we have ways to put the apparatus in about 60 million homes and that apparatus is anywhere from $5,000 to $7,000, but these prices are coming down. and if you do it from home, 66

cents a gallon by dollar adjust it for 15 miles per gallon car running on gas that sells for $3.89 a gallon, you get effectually 80 miles per gallon. >> i love this story. i'm a big natural gas fan, a big fr fracking fan. how many people are doing this, rick santelli? that's what i want to know. >> if you go the internet, a lot of people are doing it. if you buy the apparatus, buy high-quality conversion kits and have certified mechanics installing they will. and we can't stress this enough, larry, it runs on gas and natural gas after the conversion. and you can switch back and forth while you're driving like a two by four on a two by four vehicle. >> reporter: is it safe for ordinary people to do this? >> now, this question, craig wright's going to answer. how save is it? the at rpparatus, everything.

imagine instead of natural gas going to your water heater, your dishwasher, your dryer or your furnace, liquid gasoline. does that sound safer? >> these tanks manufactured go through such strict testing, they strap dynamite to them, they put them in bonfires, they drop them from 5, 6 feet on the domes. these tanks are safer than the polymer tanks on the gasoline tank. >> that's great to hear. >> what do you think, larry? >> i think i like the whole idea. >> an suv that might have -- we'll convert yours next. i'll bring all the parts over. >> let's do it. i love this story. thank you very much, rick santelli. i appreciate it. >> thanks, larry. let's go from fracking to converting for liquid fuel in cars and trucks to massive job creation to international competitiveness to energy independence. this natural gas story is a tremendous unbelievable economic

revolution for america. let's talk to jeff ventura. president and ceo of range resources, one of the pioneers of this revolution, including the development of the marcellus shale region in pennsylvania. mr. ventura, welcome to the show. let's get a quick comment if you saw the rick santelli piece. is this converting into combination, at least, of nat gas and gas, along with liquid in the truck replacing diesel u.p.s., you name it, how do you assess the potential for all of this? >> well, i think there's tremendous potential. with the new technology and the revolution to natural gas, we've gone from a reserve life of about ten years in the late '70s to over 100 years today. like you just mentioned on your show, the cost of running vehicles off natural gas is somewhere between 1/4 to 1/2 what it is for gasoline. there's a tremendous economic incentive, a tremendous resource, and not only is it cheaper, it's a cleaner fuel, it's abundant, it keeps jobs in

the u.s., helps reduce whole imports. it's a great opportunity for america. >> all right. you've won a couple of rounds with the epa. before i get to price and production and so forth, you won a couple of rounds at the epa, they are going to let you do some oil and natural gas shale fracking in texas. is the epa going to back off now, jeff? is that going to help get the american energy revolution on its way toward perfect? >> well, i think it's good news that the epa in terms of our case in particular once they went to very back-founded analysis and at the highest levels in washington came to the right conclusion. and withdrew their case against range. so we're very encolonuraged by that. >> how many jobs do you create roughly? >> well, in the marcellus shale alone, as you mentioned earlier was a range of discovery, so far in this state it's created

230,000 jobs and they're good jobs and high-paying jobs, as well. so we're -- couldn't be more excited. i grew up in pennsylvania. i'm excited to see that opportunity come back home to my home state. >> is this the greatest revolution in industry you've seen in your lifetime? >> yeah, it's the phenomenal change. and, you know, we talked about the job creation and the tremendous resource. the united states, i don't know if a lot of people know now it's the number one gas producer in the world. we passed up russia, the united states is number one. and if you look at what it's done because we have such a tremendous volume of gas in the united states, the price today in the united states for natural gas is on the order of $2 or a little more than that per million btus. in europe or asia, the price is $10 to $15 per million btus. it's created a tremendous advantage to bring that down to the average american, you know, that's resulted according to some studies estimating the average american this year and for the next several years through lower heating and lower

energy will save about $900 per household and if you translate that annually it's over $100 billion a year of an economic benefit. >> making us more competitive. making industry more exceptti competitive. i've got to ask you this before i let you go, jeff. appreciate your time very much. 2,000 per cubic feet, and they're skeptical that the volume of demand is enough to take the glut off the market. how do you assess that? where's the price of nat gas going? and will you have oversupply for as far as the eye can see? >> i don't think so. because of the warm winter we had last year, there is a glut right now. and it'll take a while to work that off. i think the more optimistic people are saying it'll be off this time next year, others saying it may take longer, a year or two or three, but medium's a long-term, i think natural gas will be a great place to be. i think the price will go up. in the meantime, range is

well-positioned in some of the most economic fields out there led by the marcellus, particularly the part that's liquid rich. and we'll drive up production per share and reserves per share for years to come. and i think in the interim natural gas prices will recover a little bit. >> thank you very much. we appreciate it. next up on "kudlow," amazing raid caught on tape. criminals defrauding taxpayers and medicare. the health care hustle is costing billions and with obama care it costs even more. come along with investigations inc. team.

according to the signs, ford is having some sort of big tire event. i just want to confirm a few things with fiona. how would you describe the event? it's big. no,i mean in terms of savings how would you sum it up? big in your own words, with respect to selection,

what would you say? big okay, let's talk rebates mike, they're big they're big get $100 rebate, plus the low price tire guarantee during the big tire event. so, in other words, we can agree that ford's tire event is a good size? big big medicare and medicaid cost taxpayers about $800 billion a year. it is ripe with fraud, criminals are taking advantage of this with more rules, regulations, possibly opening the door to more fraud. cnbc's scott cohen went along for the ride. good evening, scott. >> good evening to you, larry. the administration is making big strides in fighting health care fraud, $4 billion plus recovered last year, some of that, a direct result of new tools under obama care. trouble is, it is that drop in the bucket. because as the feds get smart,

the crooks get smarter. as we found with six months in the front lines with federal agents. >> the suspect lives in a quiet residential neighborhood. it's about to get a whole lot less quiet. >> we've been watching this guy for how long? >> i've been working on this case for months. right before an actual arrest, you do a little more surveillance, to see where he's going. >> but there's a hitch, the suspect's wife tells the agents she and her husband have separated and he's moved out. all that planning and now the agents are going on the fly. >> the wife has been told to call her husband and get back here because it's an emergency. he doesn't know what's going to be awaiting him when he gets there. >> you will see what happens on our new documentary are premiering 9:00 tonight. one of the toughest frauds to endorse is when providers try to

fudge the billing codes. there's one for every procedure. here's the administration's answer, larry. more codes. this is the new list 1,600 pages long, supposedly going into effect next year. three different codes just for sticking yourself with a sewing needle. some say it's ridiculous. it'll never beat the fraudsters at their own game. we will get into that debate tonight. >> how many pages did you say? >> 1,600 pages, about 140,000 different -- >> this doesn't include obama care? >> this is -- >> medicare and medicaid. >> medicare and medicaid and their effort to try to rein in the upcoding. they want to be specific. >> they're going to rein in everybody involved in this thing -- you're right the crooks will probably be the only beneficiary of this. >> that's one of the problems. we have fee for service system and that may be at the root of the problem. everything is billed to a fee

for a particular service and some say, look, we've got to try something new. we've got to -- >> how about stopping all this crazy regulation? how about little pro-market competition? how about letting businesses flourish? this is why there's no jobs, one of the reasons why -- the fraud's bad enough. anyway, great work. i get too excited about this stuff. scott cohn, thank you very much. you can see scott's documentary called "health care hustle" tonight at 9:00 p.m. here on cnbc. up next on "kudlow," simon johnson's controversial new book called "white house burning." he says america is headed off a fiscal cliff. to prevent it, he says we should repeal all the bush-era tax cuts. all right. we will ask how to grow the economy when we come back. impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u.s.? at t. rowe price,

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welcome back to the "kudlow report." so, when the bush tax cuts expire at the end of this year, my next guest simon johnson will be the first in line to wave them good-bye. there's a new controversial book called "white house burning" and here now is simon johnson who is a professor. also dan mitchell, senior fellow with the cato institute. thank you for coming on. i wish you good luck on the book. what i want to ask, and you know this is coming. people are worried about the economy and jobs. you're talking about letting the bush-era tax cuts expire. that would raise marginal rates

and probably absorb $4 trillion or more out of the economy. how is that going to help growth? >> i think, larry, what you need, fiscal consolidation, we've been talking about deficits and increase in debt for a long time. we haven't done anything about it. when you look at feasible actions that will actually put us on a better fiscal path, the only thing on the horizon is the expiration of the bush tax cuts. and if you're really worried about the economy hitting an air pocket, then replace them with a temporary payroll tax cut linked to employment relative to population. so as employment goes up, the economy recovers, that will fade away. we can deal with your $4 trillion problem, that's not an issue, larry. are you ready for fiscal consolidation over the next decade or two? >> well, i want to bring in dan for a second. he's going to disagree. you're not just saying raise taxes on rich people, you're saying just let the whole thing expire. and i admire that consistency. i want to ask a second question. i know your imf expert or

executive director. aren't you worried what you're doing, you're raising tax rates substantially, you're going to finance bigger and bigger government in effect. and that is the european disease, the stagnating european disease. >> well, you're absolutely right. the europeans went on a crazy spending spree. and you're right the government's expanded much more than us. 200 years and this is a big feature of the book. 200 years of history of containing government spending and pushing for better oversight. i think that's something we do well in this country and i'm in favor of continuing to do that. at the same time, frankly, the society is aging. social security is there as a basic safety net. $13,000 a year. you're not going to get rich on that. i don't advise anyone to rely on that solely. if you outlive your assets and your family and the ability to support you, it's there just in case. there are basic things we need for older americans. what are we going to do about that? those things cost money or are you going to just sell debt to the chinese?

>> dan mitchell, if simon johnson got his way and all of the bush tax cuts expire, all the bush tax cuts, what happens to the economy? >> it can't be good news because you're tripling dividend taxes between 2012 and 2013. big increases in capital gains tax, marginal tax rates on investors, entrepreneurs, workers. but i think really the fundamental disagreement i would have with simon, is we don't have a problem with government debt, we have a problem with government spending. we had a big explosion, the burden during the bush/obama years. and if we let all the tax cuts expire, we'd be telling the big spenders in washington that's a permanent victory. we're now going to raise revenues so you can then finance your next new spending binge. >> from the bill clinton/newt gingrich space, i believe spending got down to about 18% of gdp, it's drifting up towards 24%, 25% of gdp, put another ten points on for state and local government, if i'm not mistaken.

where does that leave the economy? >> well, if you look at the oecd numbers, they say we're close to 40% of gdp, they're a little bit higher than the u.s. government figures or about 37%. that's obviously not that far from say germany, which is in the low 40s and then, of course, the next stage up is countries like germany, france, and greece. >> simon, i want to reform the tax code. i want to flatten the rates and get rid of the unnecessary deductions and loopholes. i don't want to support higher spending because i want us to outgrow europe. >> look, larry, i think you're absolutely right to push for a tax reform and tax expenditures are a big problem. and with regard to spending is out of control, i think i heard dan just criticize medicare part "d" which is unfunded mandate created by the bush administration. he's right, that's unconscionable additional entitlement. but here's the point about

spending. here's the point about spending, larry. hold on one second. aging society, you've got to factor that into your projections. >> all right. >> the high-end reforms on -- >> i want flat tax rates and eliminate spending big time. simon johnson, great to see you, thank you. and that'll be all for tonight's show, thanks for watching, i'm "kudlow," free market economics, limit government please. this at&t 4g network is fast. hey, heard any updates on the game? i think it's final seconds, ohh, down by two, shoots a three, game over. so two seconds ago... hey mr. and mrs. harris, where's kevin? say hi kevin. hi. mom, put me down. put...the phone...down. hey guys. did you hear... the choys had their baby? so 29 seconds ago. well we should get them a gift. [ choys ] thanks for the gift! [ amy and rob ] you're welcome! you're welcome!

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