two wooden nickels. >> let's be clear about something. marc benioff from salesforce is right when he says facebook is a great company. but it's all about price, people. in the declining market like we have with europe in trouble, i want to get facebook at my price, not the price they give you. that's a price i want to sell at. let me get it at my price, that's how i work. if i don't get it at my price you know what i say? hey, i missed that one, there's always another train right behind it. please remember that because i'm a seller, not a buyer of facebook. there's always a bull market. my job is trying to find it for you. i'm jim cramer. i'll see you tomorrow. hey, larry, what do you have for us? >> facebook or not, i'm fearful of a deflationary stock market. i'm larry kudlow. this is "the kudlow report." our top story today is like

seinfeld, it's about nothing. nothing happened in the white house about the impending fiscal cliff. just as a worried, stocks got slammed. one guy trying to save the market and the economy right now, that being house speaker john boehner. please take a listen. >> we should not wait until the 11th hour to address these issues. the only ones talking about drama or breeinksmanship are th democrats across the aisle. >> investors are very nervous about this. the market plunged today, 156 points on the heaviest volume in two years, the s&p down more than 2%. look at the ten-year bond rate, record lows, 1.70. it was above 3% last july. gold in a bear market plunge still down nearly 20%.

these are worrisome deflationary signals and we're going to have a powerhouse market panel to go through it. instead of dealing with the impending crisis on tax reform, senate democrats concoct a ridiculous act to chase down americans living abroad for the past ten years. we will tell you more about this unbelievably childish game. but first up this evening, all quiet on the western front in the budget war between president obama and house speaker john boehner, very quiet. however, john harwood joins us live with all the details. john, you're not quiet. good evening. >> good evening, larry. you know, both sides of the atlantic have been dealing with the twin challenges of economic recovery and debt reduction for several years now. the obama administration is adopting the same approach as g-8 leaders come to town for meetings tomorrow that they've approached with republicans in congress, that is they're seeking a balanced approach that matches the needs for growth and

also for austerity. here's jay carney, the white house press secretary. >> facilitating growth and job creation in the near term can be jond with efforts to deal with medium and long-term fiscal issues in i an way that i think serves the overall interest very well and that's the approach the president has taken, that's the -- i think the view that he'll take into his meetings this weekend. >> of course the united states is having just as much difficulty acting on that prescription as europe is because of the political divisions that can't be overcome in washington. but that doesn't relieve the president from pressure as he seeks reelection from republican challenger mitt romney who ripped him on the stump today on the issue of debt. >> if we stay on the road we're on and if we were to reelect barack obama as president, we will find ourselves becoming greece somewhere down the road with debts larger and large earn and larger. >> so, larry, we don't know if

we're actually going to become greece. i still expect that there will be a deal on taxes and also on deficit reduction after the election but it's not going to come before and there are some investors who are going to be impatient clearly. >> some investors are getting very worried. john harwood, we appreciate it. looks to me speaker boehner and mitt romney are beginning to box president obama into a corner on this. the president can't get a deal done in time. let bring in joy reid, manager editor and a miami columnist and bob terrell, founder and editor of the "american spectator" and author of "the death of liberalism." tony, you have romney on the campaign trail making really good sharp edged speeches about debt, spending and damage to the economy. you have boehner almost heroic in washington saying let's get these tax cuts extended sooner rather than later.

what's obama going to do? they're boxing obama in, are they not? >> first of all, any time you mention a pinscher maneuver, three chairs to you. you have romney finding his voice, especially a couple weeks ago when he started talking about a government censored society. with boehner, we saw what he did last time around. we don't mind that he forces the democrats, hard core leftists in the conversation, oh, they're trying to scare everybody again, it a rational conversation you have -- the problem is the party doesn't trust john boehner. >> he's out front. heap said any dollar increase in ceiling has to have at least a dollar reduction in spending and he wants the bush tax cuts extended so we don't go into another double dip recession. obama wants to raise taxes and

does not want to cut spending. he's going to lose that battle politically, can he not? >> you can't say your hero is winning and president bushing the presidential corner when he has no leverage. the truth of the matter that the debt ceiling cliff that happens after november. so democrats could simply do nothing, the bush tax cuts expire that, would help to solve the deficit problem because that would introduce revenues into the system over the objections, wouldn't matter what republicans want to do. those tax cuts are going to expire at the end of the year if nothing is done. they can wait them out. >> business is scared to death across the board they're going to see tax rates not only on them but on their customers and you can see the stock market is already showing signs of it, the gold market is already showing signs of it, the bond market. in order, markets look six months in advance. they're saying to your man president obama you better let these republicans work with them, compromise with them, do something to help people. >> have they been and you rock for the last year, republicans including john boehner signed on to a deal that had these

triggers in them that said we'll have defense cuts, tax increa s increases. this has been happening for over a year. i don't know why there would be uncertainty when the business world has known this reality for a year. >> do you think that president obama actually wants deal. do you think he actually wants this kind of dear bob terrell? >> i think he's a deer stuck in the headlights. i don't think he knows what to do. he's a community activist, isn't he? i don't think he know what is to do. i don't think he's known what to do since he got to be president of the united states. he's been in kind of overdrive and he keeps doing the same thing that the liberals always do, raise taxes and attack the rich. >> you know what else? he took bush's deficit -- >> raise taxes, tax the rich. while he's been doing this, democrats -- liberals have been going down, conservatives have been going up. there are moe nudists in america, there are more bird watchers in america, there are

more nude bird watchers in america. >> in the audience of this channel obviously. the stimulus package and what liberals didn't like about the stimulus is it included tons of tax cuts. tax increases have not happened. that is factually inaccurate what you just said. number two, if barack obama doesn't know what he's doing, how did he manage to turn and the economy that bush basically pushed off a cliff. >> the growth is 2% and raonald reagan had a growth of 6%. >> i want to pursue this angle. if the growth in the economy was so good, the stock market would be much better, the unemployment rate would be a whole lot lower but i'm watching given -- we're a financial channel. the stock market right now is voting against the deal. and that means it voting for higher taxes, not that it wants higher taxes but that it fears higher taxes. now, isn't this a leadership test? with romney out there on the campaign trail and his polls going up on a daily basis, isn't

the verdict here that we need a mitt romney to make a deal like this to increase the debt ceiling, to cut spending, to reform lower tax rates and that barack obama can't do it, isn't that the bottom line? >> it's not even a leadership test, eight common sense test. america accepts one basic theory that cannot be true, you cannot spend your way into prosperity, they do not buy the keynesian mess -- >> polls show the opposite of that, they'll that support a mix of -- >> no, they do not. you can look the world over where you have the greeks who have elected neonazis who actually think they're a rich country -- >> what are you talking about? >> they elect people they think are a rich country so they can go after the rich people. you have francois -- >> hold on a second.

>> that the people in france are looking for someplace to go and move their money to because that's not something -- >> let me ask bob tyrrell. does barack obama have any in common with francois hollande? >> yes, he's a socialist. they have one thing in common. they have no idea how to get an economy growing again. as a result this economy will stagnate until mitt romney becomes president, as he will become president in the fall. >> it just seems so clear to me. i know you disagree but it seems clear to me mitt romney is showing leadership on the campaign trail and barack obama is showing no leadership in washington. i think there's a contrast. to some, tent speaker john boehner set this up beautifully and obama walked right into this poorly baited trap saying no, no we won't get the tax extensions

done, no, we won't get the debt limit down, no, we won't get the spending. it just seems like boehner set a poorly baited trap and obama walked right into it. >> in 2010 the independents swung toward the conservatives. they're swinging toward the conservatives now. this race -- this is going to be a waste of money to have an election in the fall. it's going to easily be mitt romney and president obama will be on his way back to blue island, illinois to work on his museum. >> i think this is a fine example of living in one's own reality. the reality is this has been tested by social scientists who do polls and most persons, vast majority, including independents, believe you should have a mix of revenues and tax -- deficit. real quick, if you have a household that is in debt, one thing do you is cut your spending, fewer movies, fewer nights out but dount quit your job and take the revenues out of your household.

you might add a job. republicans say run america like america runs their household. >> the government creates job. the obama tax has bacon up, ground beef up, gas up, your kids' pajamas are up. >> are you saying police officer, nurse, those are not jobs? are you serious? >> those are state level things. >> we have the whole nation -- >> no, it's not government. we're talking about federal government workers. >> why are we talking about george w. bush? we're talking about now. you can't get over the past and i'm trying to look to the future. >> have i to look towards the future. it's a very interesting discussion. i still believe obama is being boxed in. i'm not sure he gets it but i think he's in a heap of trouble. joy reid, tony katz, bob tryyell, thank you. last year's debt crisis resulted

in a credit down grade. is congress going to take the u.s. economy back to the brink again? and ahead on the show, markets are plnging. fear of a european bank run, the dow's 11th down day out of 12, first time that's happened since 2002. what in the world is next? and later, vindictive democrats plan an ex-patriot attack to punish successful americans to choose to live abroad. it is insane. you know what, if it moves, even if it moves across oceans, the democrats want to tax it. the free market capitalism is the best path to prosperity. i'm larry kud lolow, we'll be rt back. back. this is the first car that i've been totally in love with

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welcome back "the kudlow report," everyone. it was the worst day for the market in two weeks. i'm worried about signals for a deflationary market and deflationary economy. several disappointing economic reports, a fitch down grade of greece send stocks spirally

downward. the dow dropped triple digits. the s&p dropped 20 points, the treasury yield closed an all-time low of 170%. the vix fear index closed down and the dollar continues to rally its record 14th straight day. very interesting. let's bring in ken hedner and david goldman, he's currently president of macro strategy. gentlemen, i don't want to get foo this much but i just need a quick take on the facebook deal. ken, just quickly, what's your quick take on the facebook deal today? >> i don't understand why this company is worth 60 times earnings when google and an app worth a lot less. >> thank you for that. >> and jim la camp, what's your

quick take on facebook? >> i would agree with what ken said. half of their users only use it on their cell phone. i think you get a little boost on the offering and pretty sunday soon you'll run into serious valuation issues. >> david goldman, i am worried about deflation. i'm worried about this collapse of treasury bond rates, i'm worried about the collapse in gold prices. i know gold went up a little bit today. i think the dollar run, i usually like the strong dollar but i'm just wondering, are we seeing a wave of deflation? europe's banking crisis, everybody wants dollars, is the fed supplying enough dollars? is deflation a problem? >> it's an enormous danger, larry. remember that the european central bank between late last year and the present put out $800 billion into the european banking system and that was the meanquidity push that was booing all the markets, commodities, bonds and stocks at the point where the banking system crashes and we're

beginning to see the dangers of that in greece and spain where you simply can't keep the blood in the system, they're hemorrhaging too quickly, you may have massive asset divestment and real deflation. that's why there's a lot of speculation about the federal reserve doing qe3. gold popped this morning for the first time in about two weeks, the moment the leading indicators came out weak because the market is speculating we'll go back to qe3. the fed may have to do it if the europeans are unable to keep their banking system afloat. >> ken heebner, you're very optimist being aboic about the . in view of what's going on out there, i'm surprised you're not more cautious. >> i understand that europe's problems are getting worse. our economy is very strong. our banking system is extremely well capitalized. loans are growing in this country, consumer spending is increasing gradually. we've had major stimulus from

increased automobile sales. we are about to get a major stimulus from a big increase in housing construction activity and retail spending continues to move up. what's happening in europe is slowing global growth, it's having a negative impact on oil prices and declining oil prices are higher disposable personal income in the united states. so, in fact, our banks compete with these european banks. i'm not saying europe doesn't have real problems and i'm not saying mediterranean europe might not have a deepening recession and greece may well exit the eurozone. >> ken, jamie dimon has been subpoenaed before a congressional committee on the whole business of the jpmorgan derivative bond loss. are you worried about another wave of regulatory governmental interference in the banking system? does that trouble you? >> well, that is a negative and they're going to try and do it and if the banks are stopped

from doing proprietary trading, i don't think it going to change the fact that they're selling at like five and a half times what they're going to earn next year and there are great bargains. but it could change the earnings growth a little bit but i don't think it material. >> let he go to you on the deflation story. you've got a run on the banks, or a potential run on the bank, they're in europe, they want to own dollars, a lot of people around the world want to own dollars but they're not putting the dollars to work. deflation could be a problem. this could be more like the 19 3 30s than the 1970s, whether it's monetary qe or tax cuts don't understand how important stimulus is going to be. >> i think you're absolutely right, larry. i don't see hough can you say we don't have inflationary forces.

commodities are breaking down, treasuries are rahalingy at the same time stocks are selling off they're going to delever in europe first but we have to delever here, too. we have way too much debt in our system. and granted consumer spending is hanging in there but the fact of the matter is it coming at the expense of savings. consumers are already going to be leveraging up before too long and they're going to have to delever again. we have a lot of pressures here. i would not discount what's going on in europe. everybody discounts it. i would not discount it at all. it's going to create interbank lending that is way too difficult and it going to spread around the globe. >> we've never had it -- let say you're greece. how do you convert from a euro to a drachma without doing massive damage to your banking system, to the value of savings, to your citizenry. how do you go through this. >> well, what happens is you do do massive damage.

between 2000 and the president, union labor calls in greece are up 40%, up zero in germany. you reach dues union labor cost by devaluing more than 40%. it's a brutal and stupid way to do it which casss massive inreceives. the ent bainterbank problem coua problem. >> the fed will have to increase the swaps arrangement, they're going to have to loan more dollars to the european central bank. >> if the european banking system massively deleverages, divests assets, the european banking system may be on a string and the federal reserve may have to come in. there's another deflationary aspect, which is purely regulatory rate of terror, reaction to the government, which is that u.s. corporations are putting $2 trillion into the bank as opposed to investing. we've never had a recovery where capital investment actually fell

in deflated terms as it did in the -- >> as well as tax hike threats. that's equally stupid. we got a lot of stupid things going on here. >> we need fiscal stimulus to get people taking risks. >> i'm doing my best. david goldman, thank you, ken heebner. i'm raising the deflationary market alarm and later, welcome to america. please be successful oh, oh, wait, wait. you want to leave for a while? then you have to pay as you lot on the way out. it like a reverse monopoly game. the whole thing is outrageous. only democrats want to tax you coming and going. i'm kudlow. we'll be right back.

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are now powering some of america's biggest cities. siemens. answers. welcome back to "the kudlow report." i'm brian shactman with a news update. two sides of silicon valley for y you. trading in facebook begins at 11 a.m. also cnbc reporting hewlett packard planning significant layoffs, as many as 25,000 employees. tim johnson inviting jpmorgan ceo jamie dimon to testify next month on the bank's derivative trading that has cost it at

least 2 billion. and new french president francois hollande and its minister have taken a pay cut.

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour chief financial officers marching on washington to protest the tripling of the dividend tax, the doubling of capital gains, all of which will harm our american competitiveness, investment, job creation. how stupid. also this evening, here's another stupid one. senate democrats like chuck schumer think they're going to hound down americans living abroad to tax them, just like democrats. if it moves, tax it. if it moves overseas, tax it. we'll delve into this political nonsense tied to the facebook ipo. first up, while there is a stalemate on the fiscal cliff talks, i want to call your attention to something. let go back to last summer,

negotiations over the debt limit, the deficit and the budget deal were at a grinding halt. this chart shows the period around july 31st when house speaker john boehner and president obama struck a deal to extend the debt limit and force $1.2 trillion in budget cuts. the s&p credit downgrade happened days later. take a look, the dow lost 5.6% in one 11% since before the debt deal. treasuries dropped 21% in that time. so almost a year later, where are we? not much better. and that's what's bothers me. here we have two distinguished budget committee members, marcy captor, democrat from ohio, jason, republican from utah. welcome to both of you. i have a simple idea, why not extend the bush tax cuts now, why not raise the debt ceiling

now, why not make the budget cuts now and avoid the economic catastrophe that our stock market is increasingly worried about? why not do it now, ma'am? >> you know, you raise some very important points, larry. we have to keep the economy growing. we can't do that without consumer spender. we are creating jobs over the last 26 months, 4 million private sector jobs but, for instance, we can't get a transportation bill out of this congress because there are some people that believe that no spending is the answer to recovery. can you imagine the contracts we could let across in country in transportation, highway systems, airports, ports, if those dollars were already in the economy? this is a great nation. what's wrong with a congress, the leadership of this republican house that cannot even clear a transportation bill? >> but they've already passed a transportation bill, they've already passed keystone. >> no, no, no, they have not.

there's no transportation bill out of this house. >> let me go to jason first. i want to just focus on the pressing matter at hand that everybody in the stock market, businessmen are saying, look, we are facing this tax cliff. if we don't extend the bush era tax cuts which have already been signed by president obama at least once, if we don't do that, an already anemic recovery is going to look worse. if we can't pass a debt extension bill, a debt limit bill that has spending cut if you're going to raise the debt, then we're going to go through the same exercise of getting slammed in the economy in stocks as we did last year. jason, can't we avoid this? why can't this be done this summer or fall? why does it have to be the last minute? >> well, look, what the democrats fail to understand is that all this uncertainty in the marketplace puts a resistance on capital to make the investments necessary to grow the economy.

every time you hear the democrats talk their only solution is let just raise taxes. we're not just one good tax increase away from prosperity in this country and we're not just one transportation bill away from prosperity in this country. we have to get rid of that debt. the democrats have to plan. they see a lack of leadership from president obama. his budget was defeated 97-0. this year it was defeated 99-0. there wasn't even a single democrat that could dare support the president's budget. so we've got to get this certainty in there, that's why i'm a huge supporter and voting for mitt romney. >> you know, marcy kaptur, you have this white house lunch meeting, i didn't make the cut but i heard about it, and john boehner basically says he wants to extend the bush tax cuts sooner, he wants a dollar-for-dollar increase, spending cuts for any increase in the debt limit.

why can't the president sign on to that? in other words, where's the leadership? why can't the president say, okay, we're going to have to negotiate a few things but i, president obama, agree with you, speaker boehner, that we should get this done earlier this time so we don't have the kind of catastrophic market consequences? why doesn't he just say that and open the door? >> i think because the president, like myself, wants to put everything on the table, larry. and if you look at the top 1%, to give them more tax benefits when the middle class still hasn't gone back to work, we've got millions of people unemployed simply isn't fair. why should those who have so much not also be part of the solution? you need a balanced package with tax cut -- >> go ahead, jason. i'm sorry, finish your thought. >> i was saying we need a balanced program where you have both revenues and spending cuts.

i think it's because mr. boehner doesn't want to have a balanced plan. >> but here's the challenge, here's the frustration. never have the democrats or the president put forward a balanced budget. soap can you talk about a balanced plan all you want -- >> that's not true. it was the republicans that got us into this mess. we were hemorrhaging 700,000 jobs a month when bush left office. when clinton left office we shall had a balanced budget. i was a member of the budget committee back then. it was democrats that mopped up the mess. president bush didn't pay for the wars that we're undertaking in had country and it was on his watch that wall street collapsed. >> let me just try to get one at a time. look, i want to ask both of you this question. you're going to call me naive and you're probably right. here's what i'm saying. as a matter of presidential leadership, why not say publicly that you all will seek a compromise, that the president will try to identify a

compromise process this summer before the election and before the deadlines. in other words, why can't someone at least seek a compromise from -- instead of saying no, marcy kaptur, whatever the details are why doesn't president obama say to john boehner, john, i agree with you, we need to do this sooner rather than later? that's the point -- >> because maybe mr. boehner doesn't agree with president obama. you know it takes two to tango. i didn't hear mr. boehner being willing to put revenues as well as spending cuts on the table. so his plan is not a balanced plan. >> jason, i'll give you the last word on my kudlow proposal for at least a discussion. that's all i'm asking for, a discussion this summer. >> absolutely. i'm totally in favor of that. remember the democrats had the house, the senate and the presidency. they're out of excuses. we've always said come to the table. >> and when we did, we balanced the budget. >> democrats want to broaden the

base and raise taxes. that's not going to grow the economy. >> president bush never balanced a budget in his eight years. >> you can't get through a conversation without mentions president bush. >> that's where we got the debt. i want to say hi to my brother steve in toledo. >> steve in toledo -- >> i can be bipartisan. hey, steven toledo. see? >> congressman jason chaffetz, thank you, congresswoman marcy kaptur, thank you so much. up next, democratic senators, they ought to know better. they're trying to penalize one guy's success. why is it that if it moves democrats always seem to want to tax it? and still ahead, chief financial officers are marching on washington, demanding that congress not penalize their companies' successes by raising taxes on capital gains and dividends. here's another example of why we should extend the bush tax cuts

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senate democrats bob casey and chuck schumer want facebook co-founder eduardo saverin to pay for his success by punishing him for moving to singapore and renouncing his american citizenship. tell me about this eamon. >> his proposal would impose an after-the-fact capital gains tax on 30% for rich folks who renounce their u.s. citizenship and move overseas. he would work in provisions that would make it more difficult for them to return to the united states, even in terms of getting a visa to come back into the country. as for eduardo saverin, his stake in facebook could be worth billions and his move tosong a pore to save his tens of millions in taxes.

he said my decision to expatriot was based solely on my interest in working and living in sending a pore where i have been since 2009. i am obligated to and will pay hundreds of millions in taxes to the united states government. so, larry, the question here with the schumer proposal is it all comes down to the intent of the wealthy person. the irs would have to make a determination of whether that person expatrioted in order to mack tax savings and not for some other family, personal or career reason. it could be very tricky to enforce, even if it were to pass on capitol hill. this is an election year so there's not a whole lot likely to move up on the hit. >> thank you for running through that. appreciate it very much. is this expatriot act patriotic or just plain idiotic? shouldn't be we trying to reform our tax code to keep successful people here instead of punishing them? joining to us hash this out,

julian epstein. i don't have any skin in this game. he wants to live in singapore. i have pals that live there, maybe it's a nice place. but what i gather is he is fulfilling his tax obligations and therefore senators shchumer and casey are just grand standing. >> he's full stilling some of of the obligations. schumer's argument is here's a guy who took advantage of the immigration laws, our education, economic and legal system and then when it came time for the big pay day, namely when the ipo goes through and he gets a huge chunk of change, he's slip ougt the back door because he doesn't want to pay or the capital gains. >> is he slipping out the back door? and what should we do here? isn't this really a question of tax reform? don't you find it interesting

that singapore has a zero capital gains tax, no double tax on that and we're trying to raise it? >> listen, we need to have a better, more efficient more pro-growth tax system. but i think remember what we're talking about here. this isn't a capital gains tax really. it is a 30% wealth tax on u.s. investments of people who leave the country for who know what is reason. we have to determine why they left? this is a country born of a tax revolt so people don't like the tax system. we're going to put this wealth tax on the u.s. investments. this is like a third world banana republic capital control kind of move that's not befitting an advanced economy. >> now there you go, i like that. >> i love the colorful language. >> what about the free throw of movement. why should we be penalizing people coming in and out of our

country? don't we need the brain power anyway? >> i do. i hate to suggest to put out an olive branch to you and jimmy. we have a corporate rate that needs reformed, the effective rate is probably 15% because of loopholes, the territory rools, financing debt versus equity. i think we ought to bring the corporate tax rate down but getting rid of the loopholes and incentivizing the brain drain ti come to the united states and incentivizing productivity here. it a bigger discussion. i think the -- what schumer has done is he's opened up that discussion to say let's lower the rates but also close the loopholes. >> if i a millionaire or billionaire and they tried slapping me with 30% wealth tax i think it vie lights human

rights accords, i would take them to the international court at the hague and file suit there. >> it's a great idea. i'm not sure it would pass muster in a law school but it's a fanciful idea. very few people believe saverin is moving to sending pore because he likes the food over there. >> who knows. >> what do we care where this guy lives? >> why do we care about tax dodgers? >> where do we get off penalizing him? >> i want to make the united states the most pro growth, pro business, pro entrepreneurial coolest place to live on the planet so people want to come here, not put up a wall around the country and form tax toes keep him here. i want to use the carrot, not the stick. >> i'll leave it there. i don't know -- >> go ahead, julian, final

point. >> the nt national average of corporate taxes is 25%, the effect of rate inside the united states is 15%. >> that's not true. >> no, no, you were doing good until you went there, julian. >> i don't care where this guy lives. i think he's a dummy if he wants to move out of the united states. but this idea of taxing him wherever he goes, that doesn't work for me. julian, jimmy, thank you. businesses fly to watch to demand congress stop, you guessed it, the tax train barrelling down on them. here we go again. is washington going to listen? with a fragile economy, a high unemployment rate, all kinds of things not working for us, why is it we have to spend of night fighting tax hikes coming from washington? what does that tell you about what's gone wrong? i'm larry kudlow. we'll be right back. nd still sm, while it built up in my system. [ male announcer ] along with support, chantix is proven to help people quit smoking.

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. all right. cfos, that is corporate chief financial officers from across the nation descended on capitol hill today with one common goal -- to demand that congress not raise taxes on capital gains and dividends. the dividend tax increase set to take effect at year's end if congress fails to act. ditto for capital gains. these type of tax hikes out of washington punish the very people who are producing the jobs and grows the economy. is there any chance washington is going to listen to our business leaders? let go to dean backe ebacker, a

kerpin. dean, i appeal to your senses on liquidity ground and incentive grounds. with this weak, anemic economy, how in the world can we be raising corporate taxes or capital taxes. >> larry, did i hear you talking about fiscal stimulus earlier? >> yes. >> that's what we need. >> we're growing 3 million jobs, those are the tax rates we're talking about now. >> no, we're not. we're talking about significantly higher tax rates on dividends going up to 43.4 because the new obamacare sur tax hits at the same time as the expiration of the bush cuts. >> 39.6. >> it's 43.4. >> i'm just saying you said significantly higher. i'm just trying to point out what the numbers are to people. >> but what's the point? if you're going to triple it, what matter here, phil, is

tripling it and what matter here is that the cost of capital goes up, the investment return goes down and, phil, is there any point, even my good friend dean baker, people on the other side of the aisle, the left of center, okay, do we ever listen to corporations? if they want something, is it necessarily a bad thing, phil? i'm coming to dean with the same question. >> they're absolutely right in this circumstance. we're hearing how terrible leverage buyouts are, how awful it is romly loaded up these companies with debt. one of the reasons we see leverage buyouts is we put a double tax on equity finances that we don't put on debts. allowing the dividend rate to nearly triple will greatly worsen that problem. we should be eliminating the double taxation of capital, encourage capital formation and economic directions. this goes in the wrong directions the cfos are right.

they need to extend the current rates. >> ernst and young is capitalizing it could be as highs 50%, capital gains. i think you and i agree this is an anemic recovery and it needs more stimulus. >> absolutely. >> therefore i say to you if you want more spending stimulus, i might say to you as a deal, as a compromise for common ground, fine but just don't jack up these important investment job creating tax rate. don't do it, dean. that gain's not worth -- >> no one wants to create jobs. you're too young to remember we had much higher tax rates in the clinton era, we created tons of job. president bush lowered the race, we had -- >> clinton lowered -- >> we have a lot of evidence on this -- low tax rates -- i'm not saying the high tax rates cause the strong growth but they

obviously did not prevent it. >> phil, what happened to cap gains in clinton's second term? >> he took the rate from 28 to 20. that triggered a long bull market in stocks. if we raise the capital gains rate now, i think we'll see the reverse happen. the clinton example, at least with respect to the tax on capital, i think is one of tax cuts being very successful. >> we had a higher tax rate on dividends, though. >> yes, we did. >> that was the point you were get being at earlier. >> and that doesn't make it right. >> i'm just saying it didn't prevent the economy from growing. >> this is almost a matter of common sense. if you have these chief financial as you, the cfos, they're the money guys, they come from big corporations, they're making a pitch. why is it that we have to did -- why don't we just say, fine, let leave it the way it is because this is no time to be raising taxes. >> everyone who sends lobbyists to washington, we should give them their way? i'll go down there and lobby that people who run think tanks shouldn't have to pay any taxes.

that sounds good to me, i'll get my guys to go down there and they'll give it to me. >> phil, is everyone a terrible lobbyist? >> we have a perception if businesses are asking for something, it's automatically bad and not good for the economy. in this case it good for everyone. >> that's for tonight's show. i can't win it but i'm going to still fight. i'm larry kudlow. premarket capitalism. let's not tax capital, let create enough capital. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor,

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