weak and stock so strong? answers from noted economist ed lazear. and president obama, the $5 trillion man. $5 trillion in new debt in just 39 months. never been done before. "the kudlow report" moments away. remember, it is earnings season, and there are a lot of mistakes being made. they threw away the banks immediately. they threw away ibm today. don't throw it away. do the homework. you might actually like what you're throwing away. the spanish bond auction tonight. it's going to be very important. probably will determine tomorrow's action. i know. isn't that terrible? i always like to say there is a bull market somewhere. i promise to try to find it for right here on "mad money." i'm jim cramer. see you tomorrow. hey larry, what are you looking at tonight? >> all right, jimmy, the keystone pipeline is back but the president stubbornly talks veto. good evening. i'm larry kudlow the president promises to veto two house bills. number one is a bipartisan bill to build the keystone oil pipeline that would take the

edge off gasoline prices. number two, a bill that slashes tax rates for 22 million small businesses, slashes them by 20%. i can not understand the president's motives, unless he just wants to stubbornly oppose measures brought by the republican house. otherwise, his economic logic is unfathomable. also this evening, house speaker john boehner says president obama, quote, checked out as far back as labor day. the president now at his 192nd fundraiser. that's a record for any president. this as a debt bomb and a spending bomb and tax bomb, and even a democratic senate bomb in action, all set to go off. and finally, the market closes down. we talk with noted economist ed lazear about why the economy is weak and the stock market has been strong. but we begin tonight with breaking news. a transportation bill that would mandate construction of the keystone pipeline has been passed by the house. big surprise. the president threatens to veto

it. transcanada, meanwhile, has just submitted a new route for the pipeline away from controversial areas of nebraska. so joining us now we have two distinguished house members, bill pascrell, democrat from new jersey and peter roskum. you voted in favor of mandating the keystone pipeline. i guess i want to know why, because this thing is going to go to house senate conference, and the pipeline could pass there too, could it not? >> it could. the president was never against keystone. what he wanted to do is to listen very carefully to nebraska's complaints about where the pipeline was going. and i think they were legitimate. i think the president had the right to question. i voted for this several months ago, as you remember it came up. ui thought that this transit bill, which only goes for several months up to september is something that i would have preferred to have a two or three-year plan.

but i guess they'll work that out in conference. i did vote for the bill today. i think that transit money is necessary for new jersey and a lot of other states. >> all right, peter roskum, let me go back to the first point. you could get this keystone pipeline. now the transcanada people have rerouted this thing. so that's an important step in the right direction. if it goes to the house senate conference, as it will, could it pass? and could it pass the floor of the senate? it only lost by a couple of votes the last time. peter, this is big news. >> i think the dynamic is changing, and i think the momentum is behind keystone because it's a big bipartisan win. democrats and republicans came together in overwhelming numbers today. so it's not perceived as a partisan issue. to your point earlier, the senate seems to be moving on this. and look, here is what is driving this. gas within a half mile of my house in suburban chicago is $4.25 a gallon. and what we've seen up until now is an administration that has

largely been making an energy policy based on a narrow fringe of the base of the democratic party, and it's my hope that the president recognizes that that's a failure, reject it, and embrace keystone and move on. it would be terribly disappointing to people who are crushed under this if the president vetoes it. >> this is all very promising. i'm hearing almost bipartisanship from you gentlemen. thank you for that. we will see as it goes to conference. bill pascrell, on the other hand, president obama has also threatened to veto the -- i'm going to call it the eric cantor, the republican small business tax cuts. 20% business tax cut. it's a sure job creator. it's been priced out to create 100,000 new jobs a year. what is wrong with kantor's small business tax cut? >> because the congressional budget office says it's not going to create any jobs, really marginal. i don't believe it. i'm going to vote no tomorrow. i think the president is right on course saying he will veto this particular legislation. look, today in the ways and

means committee, we wrote up the bill which is going to cut meals on wheels. it's going to cut money for tax credits for children. it's $47 billion -- $53 billion. and what mr. kantor's proposing tomorrow isn't even paid for. so in one day you're cutting. in the next day you're adding to the deficit. it makes no sense, larry. you remember what you've been saying about the deficit. this makes no sense whatsoever. >> well, all right, peter roskam, is there a growth component in the tax bill? the white house says they're going to oppose it because it helps rich people. that was basically their veto message. i understand what bill pascrell is saying about the $46 billion deficit estimate. how much of an obstacle is that deficit estimate going to be in so far as the house vote? >> i think this bill is going to move out of the house. we believe it's a growth agenda, and we're going to be able to move it forward in a very dynamic way. look -- >> peter, you know -- >> hang on, bill. let me finish making my point,

my friend. >> sure. >> but i think ultimately what we're trying to do is give relief to small businesses. and i've got manufacturers. bill's got manufacturers in his district that are begging for mercy right now. they want to have a sense of predictability. they want to know where things are going. and they're getting no tax relief from the administration. and what we're saying is let's move forward and let's give small businesses the universally recognized job creator in this economy. let's give them a break and move forward. i think it makes all the sense in the world. and it's my hope that we have another bipartisan moment. it's up to the democrats in the house whether they choose to join us. but i think we're going to pass it with some very strong numbers tomorrow. >> you know, i just don't understand, bill. the buffett bill to tax rich people failed. now you have a bill to cut taxes on small business. that's a major contrast coming into the election year. if the house bill promises to raise 100,000 new jobs a year, that's not going to cost

revenues. that's going to make money for the treasury. >> larry, larry, this is what we saw between 2001 and 2008. you put legislation, it sounds wonderful, and you don't pay for it. well, this has to end. the other side said that it should end, peter. you know that. and apparently they don't want to end it. they want things to be happening and we're not going to pay for it. and the bill comes later. we're going to kick the can down the street. this does not help the middle class. it does not help the working poor. and it helps those people make more than a million dollars who have small businesses who are going to gain most of this money, 84% of it. i know the numbers. this is not going to be job growth, i can assure you, larry. >> maybe we'll continue this. the vote is tomorrow. maybe you'll both come back tomorrow evening. i understand the debate rages on. congressman bill pascrell, thank you very much. peter roskam, thank you very much. >> thank you, larry. the veto threat is one of several ways the obama has been bad for business. we've got a checklist coming up

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call it obama's war on business. it's bad to the bone, and let's

count some of the ways. first up, obamacare's tax and regulatory mandates on business have discouraged hiring. sect, the buffett rule. nothing more than a tax attack on investors. soaking the rich by taxing success. it's another way of taking capital off the table instead of putting it to work. fourth, tax war against american oil and gas companies. a complete disincentive to produce and drill. lastly, taxing the foreign earnings of u.s. companies that keep capital overseas there are other issues, but that's quite a list right there. so the question is have the president's policies contributed to what our next guest calls the worst recovery in history. here now is distinguished stanford economics university ed lazear. he is former president council. the worst economic recovery in history. is it because of the tax and revenue issues, or is there other stuff at work? >> well, that's a tough question. i think there are people who think this was obviously a very bad recession.

when you have a very bad recession, the question is do you come out of it more quickly or less quickly. you remember the reagan recession in the early '80s. we rocketed out of that one. and the evidence that we have in economics suggests that the deeper the recession, the quicker the recovery. so in some sense, this should have been a strong recovery. the problem is it's not a recovery at all. so if you look at where we are right now, what we've done is we've reverted at best to long-term growth. but we haven't made up for the lost ground. and that's a big problem. and it's really unprecedented. >> let me ask you this. okay. you have this big downturn and you're supposed to have this big recovery. >> right. >> i totally get that. now, i did see it in the stock market. that's where i wanted to go with you. there is a like a disconnect. >> right. >> the stock market plunged but had a huge comeback. >> right. >> it started in 2009 and actually it is still going on. the market has doubled. we've been up 25% the last six months alone. why have stocks done so much better than the economy? >> well, but actually stocks are a good case in point.

if you think of it, where are we today? where is the dow jones today. it's at 13,000. >> right. >> where was the dow jones when we started the recession? it was at 14,000. so what we have done is we have come almost back to where we were, almost back to where we were, but not gone above that. if you think hey, it's four years later. where we should be is approximately 12% better than where we are right now, and we're not. so what we've done is we've gotten back to where we were, but we haven't made up for the lost ground. >> but i always thought stocks were a leading indicator of the economy. so the question right now, particularly this last 25% rally in stocks. >> right. >> which i think is still going strong. maybe a little correction, whatever. >> right. >> is that predicting that the lousy recovery is going to get better? is stocks a forward-looking indicator? >> i would say what it's predicting is the lousy state we were in two years ago has passed. things are better than they were two years ago. no doubt about it. if you look at the labor market, if you look at all the

statistics, we do look better than we did then. that doesn't mean we're good. what it means is we've reverted to where we were at the time where this started. that's a problem. because, again, if you look back to the reagan period, even if you look back to 2004, 2005, we had a couple of pretty good growth years there. >> and the stock market predicted that. >> that's right. >> i'm saying for investors. >> right. >> for investors, the stock market could be a leading indicator. i'm just guessing maybe we're all too bloody pessimistic, and the message of the stock market not only for three years, not only with record profits. you know profits the mother milk of stocks. profits as a share of the economy, record high going back 50 years. >> right. >> now let me cut to this chase. why don't those profits translate into much more hiring, much better jobs, and by the way, more growth? >> yeah, another good question. i think the current thinking on that is that firms have learned to make do with less. and that happens in every recession, by the way.

not every recession historically, but the recent three recessions, that's what has happened. productivity has gone up during the recession, rather than down dur recession. that's associated with the fact that firms have cut output, but cut workers by a lot more, and they figured out they can do that. as the economy grows, i think that will change. we'll see labor picking up. but it's very slow. and if you think about where we need to be to get back to where we are, we're talking 2015. >> i want to put an or in there. i need to put an or in there. >> go ahead. >> or, are these profitable companies large and small in fact worried about anti-business policies? obamacare has myriad taxes and regulations. nobody know what's the heck it's going to be, but it looks costly, and they don't want to hire. and when you have gigantic deficits like, this trillion deficits, what do you think about as a businessman? my taxes are going up. so they don't want to hire. and mr. obama has not been friendly to business. >> i agree with that. >> am i being unfair?

businesses react to this stuff, don't they? >> i definitely think that as i look to the future, i see trade policy hasn't been conducive to business growth. tax policy surely has not been conducive to business growth. regulatory policy has not been conducive to business growth. and the fact that we have this enormous growth in government and a very serious budget crisis coming in the future is also not conducive to business growth. so i would say all of those things are consistent with your views. it's certainly the view that i've had. i think we have not gone down the right path. we shouldn't have focused on the short run. we should have focused on these long-term positive factors that affect long-term economic growth. that's what we know. >> maybe investors in the stock market are telling us there is going to be some policy changes coming. that's a possibility. i have to leave there it. ed lazear, thank you very much. great to see you. >> thank you. next up on "kudlow," we look at the life and career of television business mogul dick clark. he died today at age $82, and the billion industry he created

from the ground up. "kudlow report" will be right back. let's be market friendly and pro-business. that's what we need. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve.

a news alert. three secret service agents are out. the latest in the colombia prosecution scandal. one supervisor retired. another faces termination proceedings, and a third

employee resigned. investigation continues. now at the business headlines, cnbc's kayla tausche in the cnbc newsroom with much more. good evening. >> good evening, larry. a number of beats after the bell today. yum! brands up 73% on strong growth in china and improvements in u.s. businesses. american express beat estimates on higher card use but increased its bad loan. that stock down slightly after hours. qualcomm also beat on earnings and revenue, but shares fell on the company's outlook. gsa employees are coming forward. inspector general brian miller told senators today. miller said he is getting new reports of wrongdoing from workers following the uproar over the gsa spending scandal in las vegas. and dick clark, he showed boomer teens how to dance on his after school program american bandstand, and helped ring in at love new years in times square. he passed away this morning. he was 82. larry, back to you. >> kayla, i watched a lot of

american bandstand. i really did. in fact right around the corner from this studio. we will miss him. kayla tausche, thank you very much. next up on "kudlow," the president walk away from governing to run a campaign? economic bombs set to go off everywhere. question, is rome burning? and is president obama fiddling while rome burns? i'm larry kudlow. we'll explore it next up. [ horn honks ] hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better

for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. so they can focus on keeping the world moving. 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

he lost his courage. the president checked out last labor day. all he has done is campaign full time for the last six months. he has not been engaged in the legislative process at all. there have been no effort at trying to work with democrats and republicans to address this issue at all. and it's shameful. >> all right that was house speaker john boehner talking with charlie rose on cbs this morning. the white house says the president has not checked out. but there are four bloomingdale's out there ready to go off. the president may be nowhere to be found. first, the president's $5 trillion federal debt bomb increase. just 39 months. no president has even come close to that. tied to a spending bomb. the failed obama stimulus

package, obamacare, plenty else. third, the tax bomb. $5.3 trillion of expiring tax cuts. they're going to come due january 1st. could do enormous damage to the economy. and finally, yeah, the senate's no budget bomb. everything goes to the senate and just dies. entitlement, tax reform, deficits and debt. the emperor is fiddling while rome burns. that's the worry that could also be the election. if w these bombs ticking, where is the president to diffuse them? where is he to settle them, to lead us? let's get some insight from robert costa of the national review. keith boykin. you know, keith boykin, the big headline today, the $5 trillion debt increase, 39 months. no president has ever come close. and i dare say, this is something that goes to the gut of american people. they're furious over it. >> i don't think the american people are furious over it. look at the polls. people don't really care about the debt and deficit.

i don't think republicans even care about the debt and deficit. they only care about it when democrats are in the white house. other times they do absolutely everything contradictory to cutting the deficit. >> keith, i'm oa reporter. i'm on the campaign trail all the time. i hear constantly about the debt and deficit. to say they don't care about it. they do care about it. >> look who is in the white house. look at some of the recent presidents. in the reagan administration and the bush administration, you had enormous -- >> we're not -- this is not history class. >> it is. >> a case about with the obama administration is doing on the debt and deficit, not about reagan. >> let me just finish this. in order to understand what is going on today, you have to look at it in historical context. >> agreed. >> what happened in the reagan administration, you had a $70 billion budget deficit when he came in. suspended $207 billion. >> reagan's not up for reelection in 2012. president obama. >> exactly. help us out, larry. >> you're a growth guy. i'm a growth guy, you're a growth guy. the trouble is president obama doesn't have the growth goods to overcome the debt and deficits. i mean from this terry jeffrey's

article today, you're up to $15.6 trillion total debt that is actually the same size as the economy. you're at 100% of gdp. 5 trillion new debt in 39 months is a big number. 16,000 per person after 313 million people. we're at 16. i know by itself that may not be so important. but i think there is a big case to be made, especially because nothing seems to be done about it. >> well, i partly agree there isn't a lot being done about it in washington. but i think in order to do that, you have to have a balanced approach. you have one side of the party that is unwilling to compromise. when asked, all the republicans already let me finish this before you jump in -- all the republicans were asked in debate last year if they would accept $10 in spending cuts for every $1 in tax increase, they all said no. >> boehner was willing to do a deal, right, over the summer. boehner is the one that is calling you out. bainer is the deal maker in washington. if he is not willing to work

with the president because he says the president is absent. >> boehner does not have control over his own tea party caucus with the freshmen republicans. >> no, i think the problem, this may not be the sexiest thing, but i think people -- the senate run by democrats will not do anything. >> a thousand days. >> right. it is a graveyard there is no tax reform there is no entitlement reform. they may be forced the take up keystone again, they've done that before and the darn thing may past. other than that, this senate and harry reid is a do nothing senate. i think that undercuts the attacks on john boehner. i think the public gets that. >> i don't think the public separates the senate from the house. congress's approval rating is 19% or is it 9%? i can't remember what. >> one republican. >> it's a pox on both their houses. the senate doesn't get anything accomplished, in part because of the rules of the senate. you to have 60 votes before you can accomplish anything. >> they're avoiding budgeting. >> that's the thing. the budget includes taxes. the budget includes

entitlements. the budget includes spending. the budget includes debt. they won't even take it up. aren't they a target, bob costas? >> you know what is really bigger target, if people say they don't care about the budget, they do care about the scandal like the gsa scandal. when they see government out of control, that's a real tangible example people can say we want to get government, rein it in and pass some better budgets. that's what people really pay attention to. >> this is one of the most tenuous connections i've ever heard before. the fact that there is a scandal -- >> there is a concern about big government. >> in every administration you're going to find some examples of scandal. one department does something they shouldn't do. that's no reflection -- >> it's about the broader concern people have about out of control government. >> what people really want, larry, is jobs. they want the economy to grow. we all want that. but they want jobs. >> you're right about jobs. and you're right about growth. and you and i have always agreed. i tell you, the middle ground, the independent voters, they want some relief on debt and deficits for their grandkids. i think it's a huge