fed head richard fisher if qe-3 is inevitable. "the kudlow report" is moments away. look, i hate the market as much as everybody else. i hate coming in every day and seeing our determining by what happened to spain, italy. i hate it. that doesn't mean i want you to sell it. i don't like some of the stocks, but get out now? i can't get you back in. that doesn't make sense to me. high yielders, little less tech, little less oil, little less finance. more defense. utilities, real estate investment trusts, food stocks like i feature. that will get us through it. there's always a bull market somewhere. i promise to find it for you. i'm jim cramer. see you tomorrow. hey, larry, good to see you back. hope you're feeling well. what are you looking at tonight? >> jimmy, i am feeling better. if only the economy would do likewise. good evening. i'm larry kudlow. this is "the kudlow report." our top story tonight, two stinging defeats for the

president by the supreme court. in a 5-3 ruling the court backed a section of arizona law that allows police to check the immigration status of the people they stop. tonight you will hear exclusively from florida's senator marco rubio. the court reaif you remembered the citizen united decision to allow unlimited political action donations. and the big one, obamacare comes thursday. also this evening, cypress want as bailout, spain wants mucho dineiro. here's what i think caused the market downturn. a new york times story over the weekend. chinese data masks the depth of the slow down. brian shactman, what do you make of it? >> welcome back, larry. china, europe, everyone wondering to what degree things slowed here. all of these factors pushing the market down. the dow had its second triple digit loss in three sessions. the s&p back to 1300.

the nasdaq down almost 2%. larry, more details on the sell-off coming later in the show. >> many thanks. tonight we'll hear from pimco's neel kashkari and with an anemic economy and deflating prices i will ask dallas fed head richard fisher if qe-3 is inevitable. we begin with the supreme court's decision on the arizona immigration law. cnbc's john harwood joins us with the details. good evening. >> good evening, larry. the supreme court decision was the most important thing that happened in the presidential campaign today. a mixed blessing. the court struck down parts of the arizona law, upheld the most controversial part. that's the one that allows police to check the immigration status of people they stop. you could see it in the reaction of the candidates. mitt romney said today he thought the court should have allowed more latitude for states but he trade gingerly on the

arizona law. focused on the president for lack of leadership. he didn't want to offend hispanics. president obama's statement emphasized the part of the law allowed to stand. he said no one should have to live under a cloud of suspicion because of who they are and how they look. he's hoping to maximize his advantage among hispanics. in an appearance in new hampshire he hit mitt romney on a weekend report about bain capital's record of outsourcing and made fun of the romney adviser's distinction they attempted to draw between offshoring and outsourcing. >> what governor romney's advisers don't understand is this -- if you're a worker whose job went overseas you don't need somebody trying to explain the difference between outsourcing and offshoring. you need someone who's going to wake up every single day and fight for american jobs. [ applause ] >> of course this is just the beginning of what could be a difficult week for president obama.

later in the week midweek wednesday as early as wednesday the house could vote on the contempt citation against eric holder that a house committee passed earlier. on thursday we get the supreme court decision on obamacare which could strike down a major part of the president's legacy. on the other hand, as with the arizona case, if it's struck down that could provide juice politically for president obama. >> we'll see. john, thank you very much for the update. appreciate it. florida republican senator marco rubio, son of cuban immigrants told me during a wide ranging interview today he thinks arizona's controversial immigration law is not necessarily the right solution for the entire country. take a listen to what he told me. >> i have always believed the arizona immigration law is constitutional. the heart of the law was a constitutional measure. there are two difference things between whethering something is a good idea for the country or a specific state. i understand why arizona did it

and why the people of arizona are frustrated. i believe they have a 10th amendment right to pass a bill like this. that said, i don't think that's the best way to move forward for the country. i think the best and appropriate scenario is for the federal government to do its job finally. secure the border. have an electronic verification system in place and modernize the legal immigration system. >> we'll hear more from him later in the program. right now as john mentioned earlier this week appeared to be a critical one for the president. let's call a presidential perfect storm. there is today's immigration ruling, the upcoming contempt vote for eric holder over the fast and furious documents and the landmark health care decision due out thursday from the supremes. none of this bodes well for obama. can the president weather this tempest? here now is ari melber from the nation magazine, steve forbes,

the editor in chief at forbes. and we'll have vin weber when he gets strapped in. steve forbes, the key immigration, police now can search and ask for immigration papers. that was the key issue. obama lost that. citizens united, i don't want to let it go away. the unlimited pac money from the citizens united decision also went against obama. steve, i think most americans think this fast and furious executive decision to withhold information, whether there is contempt or not, there's something fishy about this. there's something that suggests obama is hiding. this is 0 for 3. what's your thinking? >> it is # 0 for 3. i think the montana thing was amazing montana would try to go against that law or supreme court ruling only a year or two after the supremes made it.

that's no surprise. on the eric holder thing, fast and furious, that just reeks that they are hiding something. eventually it will come out. probably not before the election. people have rightly, very real suspicions of it. concerning what's going to happen with the supreme court, but this all under scores it's for romney to lose. how he reacts is critical. will he criticize what obama did? fine. will he respond with reaganesque positive proposals to show he's not just a critic but a leader with vision. >> i want to get back to the reagan proposals. let me go to ari for a counter rebuttal. it seems like everything is going against the president. yes, this week, but also in prior weeks. i don't think many people particularly like the way he sprung the immigration business. it may be true that the young kids should be able to stay in school with their parents being illegal, but not without congressional support. he lost on the key issue in arizona. he's losing on fast and furious.

all this distracts from everything. they are constantly on the defensive and team obama. >> i would say on the immigration history with the president here he had a majority in the senate. 55 votes for the entire dream act. it was filibustered by republicans so he moved to use his constitutional power on how he basically enforces some laws. i think for him that was a very strong move. i think mitt romney trails among latino voters in the united states now. about 61-37. last week and this week at least with those voting blocks which are big in arizona in the midwest and other places that's a problem for romney. on the constitutional analysis, look, as a lawyer i can tell you today was a big loss on immigration. it might not be the case in health care. it was a big loss for the republicans who have been pushing this law. there were three provisions that were ruled out of bounds, clearly the federal power preempts the states and there was one question about papers. which was said to be -- to

finish the point -- it was said to be -- >> it revolved around if police could ask for immigration papers if they asked somebody. the federal issues regarding employment were secondary. >> larry, i've got to tell you, all they said on the constitutional question about papers was to a facial challenge it could be done right. they didn't give carte blanche on that either. >> that was the point. i want to go to my friend vin weber for what governor romney's response will be to immigration. i talked to senator rubio and we'll play more of the tape later on. mr. romney has not yet responded to whether the kids of illegal immigrants if you're in high school, or college or served in the military can stay in the usa. he hasn't responded yet. is team romney going to pull back, soften and have a more enlightened immigration policy? i think that marco rubio and

others would like romney to do that. what's your reaction going to be with team romney? >> first of all, larry, i think you have to look at governor romney's initial reaction to the president's decision which a lot of people questioned in terms of constitutionality. but still his reaction was pretty soft. he didn't denounce it. didn't oppose it. he's reacted very softly to the notion that the -- of what the president has done. he shows a sensitivity to that issue. secondly, i think his speech in florida to the latino elected officials was pretty strong, pretty positive. showed movement on the notion of making legal immigration acceptable. marco rubio has emphasized what a good policy it was, what a good speech it was. i think governor romney will lay out a policy that says, yeah, we need to enforce the borders. clearly that's in everybody's interests. we need a sensible, comprehensive immigration

policy. he's also going to point out this president didn't do anything about it when he had a 75% approval rating and a democratic congress. >> we're all interested in the future. the question is going to be will mitt romney follow marco rubio, particularly on the issue of letting the sons and daughters of the undocumented, whether he will allow them to stay in the country. is self-deportation gone? is harsh language gone? that's what i want to know, vin weber. >> i think you will see it more clearly laid out as we goat into the fall campaign. he and rubio are in close contact on this. to be sympathetic to what senator rubio is going to do, hasn't gotten to fully embrace it yet but that's the direction

he's headed. >> as everyone waits for the supreme court decisions regarding obamacare. steve, what's your level of confidence -- let's do it on a scale of one to ten. ten means tremendous confidence that mitt romney will come out with a free market consumer oriented patient oriented plan to totally replace obamacare. will he do it, steve? one means he's not going to do it at all. ten means he's going to do it. how would you handicap it? >> five to six, larry. he will lay out some principles but in terms of a substantive proposal i don't think he's there yet which is too bad. now he'll have a platform to show he's got something positive. lay the groundwork for conventions coming in august. i hope he's firmer than he was on immigration. he punted on immigration. >> will the republicans make hay if the supreme court at least

lows out the mandate? if they don't, that blunts the impact of the decision and will set back the romney campaign. >> yes, it will. relying on people in congress to take the lead, paul ryan will do what he can. he has fantastic proposals. it's got to come from governor romney. he's the leader of the party. he's got to set the pace. >> can i make a point? larry, you and i have talked about this before. i agree with you. i love steve forbes, one of my heroes of all time. you want the whole platform, the whole campaign to be laid out there now. larry, you wanted it a couple months ago. >> i want market competition, clarity, free market competition which is the best path to health care prosperity. i'm not giving up, vin weber and neither is steve forbes. >> governor romney has the most detailed economic program any candidate for president has put out at that stage. he'll put out more as we get closer. you're going to like it and he'll get elected. >> what i want to know from your

side of the aisle is will president obama just start bashing the supreme court? in other words he has the nixon enemies list. is the supreme court going to stay on that list? negativism? bash the supremes? system i don't think there is an enemies list. i think mitt romney's biggest enemy is mitt romney's health care plan which was the foundation for the obama health care plan. >> oh, geez. >> what's going to happen with that? interesting point. i was waiting for you to raise that. >> i waited my turn, larry. >> i will give you the last word, vin weber. >> governor romney had a plan that kept massachusetts health care in private hands. he's always said it's not a plan for the nation. he's always said his first act as president will be to repeal obamacare. the country agrees with him almost 2 to 1. >> it was a government individual mandate, as we all

know. >> steve forbes, you and i are going to adopt a policy of tough love. tough free market love, steve forbes. >> this would have been the perfect opportunity, larry, to seize the issue. >> we're going to wait and see. we'll have you all back. thank you very much. tough free market love coming up later in the show my full interview with rising republican star supply side senator marco rubio of florida. up next, europe sinks stocks, pessimism of the euro leaders this week. we'll ask the famous nee neel kashkari. folks, do not forget. free market capitalism is the best path to prosperity. it also works for health care markets as well. i'm larry kudlow. it's great to be back. ♪

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all right. market volatility is high this week. europe, obamacare, economic numbers, all of it's on the docket. turns out china's economy may be worse than we all think. let's bring in our distinguished market expert to guide investors

trying to play these markets. neel kashkari, pimco. you are smarter than i am. you get around more than i do. i'm worried about global recession. i'm worried about global deflation. i'm worried about imploding european banks and i'm worried that china is a lot worse than we all think it is. you take it from there, my friend. >> look, all of those issues, larry, you're spot on. ker concerned about each of the factors. while we are investing globally we don't know with certainty which will come true and which we'll escape. we are focused on being diversified globally and going up the quality curve. higher quality countries, higher quality companies to protect against the down side stocks. >> let's talk about the diversification. where is your biggest weighting right now? can you share that with us? i mean on a country basis for starters. >> on a country basis, we're probably mixed somewhere between the u.s. we have a handful of european

names and a lot of emerging market names. all of the equity strategies are global by nature. we don't care where it is headquartered. we care where it is selling, producer. we like exposure to higher growth markets. with global multinational companies where we have more certainty about their accounting and numbers. >> one of the things that troubled me was that new york times keith bradshaw article on saturday, front page. think it was the left lead. so coal production is way down. coal inventories are way up. electricity production may be as little as 3%. if i'm not mistaken copper production or copper inventories. is it possible that rather than a soft landing of 7% or 8% china's economy may be down 2% or 3%. i don't mean down. but the growth rate would be only 2% or 3% which is lower than most wall street experts are telling us. >> i don't want to say it's impossible. that would be extreme. our best case scenario is in

between there. call it 5%, 7%. if they can engineer a softer landing. that's not impossible. the scenario you gave is not impossible. we all have to preblgt against the down side. we should be willing to give up a little bit of the upside in a bull market in exchange for protecting against the down side. there are many risks out there. >> my pal david goldman is reminding me bank balance sheets are collapsing all over europe. that's an issue. i did a little bit of homework. i'm sure you know that. since february, the crb commodity futures index is down 17%. the price of oil is down 28%. i'd like to rejoice about the price of oil coming down. but i have a feeling it reflects the global economy coming down. >> it definitely reflects the global economy coming down. there is no question. it also reflects increased supply. that's a good thing. increased supply in saudi arabia, in america.

interestingly, america's oil supply growth is double the rate of chinese oil consumption growth. that's a good fact that bodes well for the long-term global economy. you're right. reduced demand is a big part of the story as well. >> one last one. you have been helpful. i also have friends whispering in my ear that american banks are an interesting place to invest. even though moody's downgraded them that was already in market. american banks have excess capital. excess liquidity. they are making good money. is such a thing possible even with the european banking problem that american banks might be investable assets? >> i would be cautious. we have questions about the long-term business model in light of the volker rule and dodd frank. maybe a short term trade. there are big unknowns long term still. >> those are known unknowns. neel kashkari, thank you. we hope you will join us again before long.

>> thank you, larry. >> up next, tropical storm debbie stalls off the florida coast affecting oil production and oil prices. we'll get the latest next up on kudlow. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start.

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intense. it's huge, absolutely ginormous. let's update you on the storm. florida governor rick scott has declared a statewide emergency now. 35,000 are without power. it's now stalled in the gulf of mexico and could disrupt oil production and natural oil production. a terrifying incident at mexico city's airport, suspected drug gang members in police uniforms opened fire in a food court, killing three federal policemen on an anti-drug mission. panicked witnesses dove for cover. a frightening scene in the airport. lockheed martin reached a tentative deal with the striking machinist union which will vote on the deal this week. thousands of workers have been on strike for two months. microsoft confirming it is buying yammer which helps companies develop their own in-house social networks. speaking of social networks,

facebook named sheryl sandberg to the board. also making @facebook.com e-mail accounts for all users ruffling some feathers. finally tonight an upset at wimbledon as venus williams lost her first round match 6-1, 6-3. she took six months off after saying she had contracted an illness. some say she'll be done. that would be sad. she's had a heck of a career. >> as a long-time competitive one, even a competitive one i want to say how beautiful those long tennis courts are at wimbledon. in my day there was a lot of lawn tennis. i miss it. >> wait for week two. it will be a mess. >> thanks to brian who's wrong

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour it's all about israel. president obama and mitt romney will now have to deal with a new egyptian president, an islamist who says he wants to rethink peace with israel. this could wreak havoc in the middle east. my pal john batchelor will join us to talk about it. and more from my interview with marco rubio. he advocates free market health care and supply side tax reform. did the president call rubio on his immigration plan? i'll ask him. first up, rough monday for stocks. brian shactman is back with details. >> as i said earlier, is% or 2% losses across the board. technology and financials leading it to the down side. broadcom, advanced micro the worst while google and apple

losing more than $10 a share each. financials, nothing went unscathed. regionals like hudson city hit hard. heavy weights like morgan stanley and bank of america under performing. bac now under $8 a share. metals got a bid today, particularly gold and silver. gold, more than 1.3% to the upside. and walmart, the only dow stock in the green. up 1.3. generally speaking most defenses even finished in the red today. q-2 ends in a week. then we'll talk earnings and find out ho just how much we have slowed down in the u.s. back to you. >> all right. let's talk earnings. we go go to mike. the u.s. is looking poorly. numbers out of china. you know about china. looks like the numbers out there

will be less than we thought. question, will there be enough profits to get us some kind of stock market rally? i'm talking u.s. profits and worldwide profits, mike holland. >> first of all, glad to see you're back, my friend. glad you're healthy, number one. number two, the answer is, yes, we'll have enough profit. that's a great way to describe it, larry. what we have is a situation where the slowing in the second quarter, beginning with china, europe is europe. it's a mess. the u.s. will have grudging growth. but companies have done reasonably well. i think we'll have continued negative announcements -- preannouncements coming out. we've got more this time than we had last quarter. i think this is probably later in terms of economic activity in china. probably the u.s. as well. i think we'll have slow grudging growth going through the end of the year with the companies able to make a reasonable amount of money. one final point. the valuation of the earnings in

the stock market is so low any positive surprises, the risk is to the upside, not the down side. >> jeff, i wish i could be as confident as mike that we are getting a bottom in the economic story. i don't see it yet. putting that aeyde if you have enough profits at that time low interest rates, not just ten-year treasuries but baa investment corporate bond rates, discounted earnings or capitalized profits are cheap. you could conceivably have a rally. i'm skeptical about that rally, jeff. set me straight. >> well, you know, gdp is not s&p. that's the key here. there is a lot of pessimism around economic growth. that's probably justified. it is slowing here and abroad. remember, profits are coming from manufacturing which makes up a much bigger part of the s&p than gdp. it also comes from trade, a lot of things that aren't as big an impact on gdp. we sell three times as much to

the emerging markets as we do to europe. europe can be in a recession if china and other countries are consuming. u.s. businesses can do okay. we expect to see optimism here as it relates to corporate profits, better than the really bad preannouncement season is predicting. that means upside surprises. we have been defensive. this might be a good opportunity if you're thinking of buying stocks to pick up shares. >> at the same time, mike, the mighty prices are falling including oil. there is a lot of deflation. we'll talk to richard fisher of the fed in a moment or two about that. i want to ask, can you make a sale? i couldn't sell neel kashkari of pimco, ruu.s. banks have capita plenty of liquidity and cni loans are rising. is there a bank play here? >> absolutely. once again, back to valuations. jeff was talking about if

profits are just okay which i think they will be. i'm not talking about economic rebound. just grudging movement upwards slightly through the end of the year. banks are trading. start with jpmorgan, the 3.4% yield and the 5 multiple. these are crazy numbers. as you said, they are heavily capitalized. they are in stronger shape than they have been in our lifetime. richard fisher can weigh in to that. i believe this market will be led to the upside over the next couple of years by the financial stocks. >> you have two optimists there. i don't feel that optimistic, but i appreciate what you're saying. >> we're an endangered species, larry. >> both great friends of the show. folks, last week the federal reserve announced it was exte extending operation twist to counter the weak economy. here is dallas fed head richard fisher who has spoken out

against twist and quantitative easing. thank you for coming on. let me get your take regarding an extension of operation twist. is it worthwhile, meritorious, will it help the economy? >> larry, i argued about the cost of this. i wasn't in support of it. but it is a committee. there are 19 people now on the committee. i was alone in arguing against it. i can only speak for myself. i'm not sure it has much efficacy. i put my arguments on the table. ben bernanke is fair, listens to everybody. and the majority of the committee felt it was worth extending operation twist. that's the course that was taken. >> all right. let me follow up. there is so much speculation, as you know, that quantitative easing 3, qe-3 is out there, not far away. you have always opposed that. want to ask if you have 1.5

trillion of bank reserves what good is it to pour in another 5 billion or 6 billion? if 1.5 trillion hasn't stimulated the economy why go through it again and disrupt markets? >> we have over $2 trillion on the sidelines in publically traded companies. we have additional money on the sidelines in financial institutions. that's a good question, an argument i make. that's not being put to work.. the question is why add to it? an answer an economist would give you is you might move expectations. if you move inflationary expectations upward you ince incentpeople to put money in their pocket. we have so much uncertainty because of regulatory and fiscal policy adding that to the mix makes things worse. i am on your wavelength. we have liquidity on the

sidelines and in a way are in a big trap. should we add more? we'll see what the committee decides. >> you said in the past there are fiscal obstacles more important than monetary. i want to ask you this. >> understatement. >> there may be a different scenario brewing. it may be that we are experiencing deflationary forces. commodity prices are coming down, oil prices are coming down. we may be on the front end of a new recession. you know any time you get less than 2% gdp growth that's an inventory correction. my question is maybe your models at that time dallas fed aren't picking up the threat of deflation and recession. is that possible? >> well, we calculate inflation according to a true mean on the personal consumption expenditure. it's a market basket of real things people use. i have been saying for some time despite my hawkish reputation and instinct that i didn't think

we had an inflationary problem. we were going to trend back to and below 2%. our trim mean now is running at a rate of 1.6% indicating that's where things seem to be going. doesn't make me feel uncomfortable. i'm happier there than i would be with high inflation. i don't see deflation immediately. you may be precipitous. we have to watch the data as we go through time. right now, we are running, particularly if you strip out the most volatile things and recently, oil has been extremely volatile. you look at the underlying entrails. the run rate is about -- a little bit less than 2%. i'm not uncomfortable with that. we'll have to keep monitoring it. >> almost every economic number. the dallas fed reported a better than expected manufacturing index today. okay. good on you. almost every other number whether it's a slow down in jobs, industrial production, manufacturing nationwide falling two of the last three months. factory orders falling.

so many of the numbers are declining. it makes you wonder whether there is a force out there driving us toward a double dip. i'm not there. i worry about it and i wonder how much you worry about a double dip recession. >> we had exceptional performance number in june in texas. i wouldn't read too much into that. it might be a single month's number. i worry about things slowing down. we have positive growth under way. we are the shining star in the united states. your other guests just talked about that. i see positive momentum. we have to be careful not to talk ourselves into a double dip recession. >> richard fisher, thank you very much. up next on kudlow, egypt's new president declares he will rethink egypt's peace pact with with israel. now he's talking about changing forces with iran.

alarm bells in tel aviv. we'll talk to john batchelor. still ahead my interview with gop rising star marco rubio. he sounds off on obama bypassing congress on immigration and the gop's plan to fix health care if there is one. stay with us. the president from interview: i talk to folks on rope lines and in coffee shops. people who have been out of work. you can tell it wears on them. narrator: he's fought to pull us out of economic crisis for three years. and he still is. president obama's plan keeps taxes down for the middle class, invests in education and asks the wealthy to pay their fair share. mitt romney and his billionaire allies can spend milions to distort the president's words. but they're not interested in rebuilding the middle class. he is. i'm barack obama and i

i don't spend money on gasoline. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car.

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significance here is significance here is that we're looking at a new triangulation. note from geography that surrounds israel. >> john, that brings up two other points. what is the reaction of israel? >> right now israel is watchful because of syria and with the syrians shooting down a turkish war plane and with reason to believe the russians knew or had reason to know that syria was going to conduct that prove vags israel is watchful to its north. i'm told following information a week ago the russians received information to egypt to pass

warships through the sue skrks as part of the larger exercise we have been watching for some time. most immediately gaza because of the rockets fired out of there. gaza is completely supported and hamas is part of the muslim brothers. >> i need 20 seconds. it's very unfair. what about the egyptian military? are they going to stand idly by while islamists move against israel? >> they miscalculated. i'm told they have lost control. the muslim brothers will name a cabinet. they are in charge. >> we have a real problem. thank you, john. appreciate it very much. hope to see you tomorrow on radio. up next on kudlow, a revealing interview with senator marco rubio. some sharp words for the president on immigration. plus the gop's plan to really fix health care.

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welcome back to welcome back to "the kudlow report." i'm larry kudlow. earlier today i sat down for a

wide ranging interview with marco rubio. he's the author of the new book "an american son." he talked about the future of obamacare. today's supreme court ruling and the fate of federal immigration reform. please take a listen. >> question, if president obama had not used this political ploy of bypassing congress, if he hadn't done that, nonetheless, don't you or haven't you in the past basically agreed with him that the kids who came here, the parents brought them here illegally, especially the ones in high school, college or served in the military really have the right to stay here, get work permits, not be deported. haven't you always held that position just as president obama has. >> you used a critical word. they don't have a right to be here. they are not appealing to our laws or the rights. they are appealing to humanitarianism and compassion. as a nation we have found a way to help people who find themselves in a difficult circumstance through no fault of their own.

the perfect example are refugees or exiles like my grandfather, for example. they didn't have a right to be in the united states but america welcomed them. they made tremendous contributions. the same with these kids. so many are undocumented. it's not their fault. they came at 5. some don't know they are undocumented until they apply for school. i have always helped including during my campaign and i talk about it in the book. i talked about how the kids, we have to figure out a way to accommodate them in a way that doesn't encourage illegal immigration in the future. that's a difficult balance. >> i understand. it's a tricky subject. some people are saying that because of the heat of the election campaign with governor romney and so forth you're backing off your original view that the kids should not be deported. are you backing off? >> no. i think there is a solution but it has to be in legislation. the only thing i have said is given what the president has done by injecting election year politics into the issue will make it harder to find the long-term solution most

americans want to see for the plight specifically of the kids. you know, this issue is not going to get solved as long as it is political ping-pong. >> did the president call you, talk to you? >> we haven't had conversations. >> at first blush you and he are on the same page. i understand he injects the bypassing congress issue and that's a difficult thing. has he talked to you about it? >> the answer is no. when i proposed the idea i was universally criticized by everyone on the left. senator reid attacked me in the miami herald. some said it was the dream act without a dream. the new york times said i should be dismissed offhand. now the president has a similar idea and they all think it's a great idea. the same people on the left. >> big week for the supreme court. pe expect thursday they will rule on obama care. the consensus view, nobody knows for sure, is that the mandate is going to be rolled back, deemed

unconstitutional. let me ask you, first of all, republican party, what will it do if the mandate is reversed. where is it going to go? will it have its own policy? >> absolutely. i think we should. governor romney has discussed, for example, what he would do if he were president. many members of congress discussed that as well. during my campaign i have been clear i'm not the repeal person. i'm repeal and replace. we have a health insurance problem in america. the right way to solve it is once again to put the power in the hand of the consumer. as there is in every other product out there now. when individuals get health insurance they are getting it from the government or their employer. with very little choice. your employer tells you this is our insurance policy. the only thing you pick is a doctor out of a book. imagine a scenario where individuals could buy their own health insurance from any company in america that would sell it to you. >> in any state. >> with the same tax treatment as an employer gets as they buy it for you. >> you get the tax deduction. the individual does. >> and the small business would

be able to pool together with other small businesses to create buying pools for employees. employers could offer insurance as well. once there is more choice, once the consumer is in charge of health care dollars the market will meet the demand. now companies will try to figure out how to make themselves more attractive so you will choose them over somebody else. >> how are the insurance companies going to pay for the pre-existing condition which is popular and of course if the mandate is reversed and they will be out of money. how does that work? >> the bigger question is what you do with chronically ill people you can't ensure. they are sure to get sick. government can play a role at the state level through high risk pools. i think those folks find insurance and the rest of us are more insurable. >> so we'll try to keep that. the government would chip in. there would be a subsidy. >> i don't think we would have to keep it. from the point of view of the marketplace insurance companies, if they want my business. if i control my health care dollars and i get to choose from

any insurance company i want i can say, i would love to buy your insurance. i have a kid who's sick. this other guy will cover them. i will go with with them. now the consumer is empowered to make the argument. i also think that's where there is a role to play at the state government level for a high risk pool. for folks are a chronically ill who can't be insured. they are sure to get sick so it's impossible to find coverage in the private mark. that's a focused narrow place where a state government can be helpful to folks. >> we'll leave it there. senator marco rubio, thank you very much. the name of the book is "an american son." it's a story of rags to the american dream. i hope you will all read it. thank you. we appreciate your time. >> some great free market health care reform from senator marco rubio. great stuff. tomorrow on "kudlow," the next 48 hours could decide the economy and the election.

is obama preparing an enemies list? is he going