report," treasury secretary tim geithner tells me we need more government spending to save the economy. respectfully, mr. secretary, i completely disagree. folks, you will see that. also this evening, housing starts to the upside. so are stocks but will it continue? neil kashkari joins us. and chris christie gets the keynote at the gop convention. he's out of the veep race though. "the kudlow report" is moments away. just when everybody hates tech you have melanox, skywork solutions, ibm. there's always a bull market somewhere and i promise to find it for you right here at "mad money." i'm jim cramer. see you tomorrow. hey, larry, what do you have for us? hey, jimmy. i had a good interview today with treasury man tim geithner. do you know what? we agreed to disagree cordially. good evening, folks. uh i'm larry kudlow. this is "the kudlow report."

the top story my interview with tim geithner that made headlines all day. he acknowledged the economy is faltering but says it is because there is not enough government spending. respectfully, i disagree. the interview touched on the economy, and politics and the market. you will see it in a moment. also, are you surprised the market is doing as well as it is? housing starts surprised on the upside and the dow was up 103 points. the nasdaq up 33. the s&p, up 9. neil kashkari is here. finally, chris christie gets the keynote speech at the gop convention next month in tampa. he's off the veepstakes list, but as history shows, center stage at the conventions has led many to a future presidential bid. is there chris christie in 2020? we'll discuss.

plus, do entrepreneurs depend on government for their success? president obama says yes. i say absolutely not. we begin with my interview with tim geithner. it was wide-ranging on everything from tax hikes to libor to the strengthening of the euro. we agreed to disagree on just about everything, but not contentiously, cordially. i began by asking him about the looming recession threat and why we are experiencing this faltering economy again. take a listen to what he told me. >> why is uh it slower? slower mostly because of the trauma from europe, the after effects of the rise in oil prices earlier this year, and because government spending is falling now quite significantly. those three things are a pretty significant drag on a recovery. i think if you listen to most business economists or people in the markets, most people still think the economy is growing,

still gradually getting stronger. likely to strengthen modestly over the course of the next six months to next 18 months. we have two big risks still. we talked about it in the last year. one is the trauma, the crisis in europe. the second is this deep sense of political dysfunction, part of which is is looming effect of the tax increase and spending cuts. >> criticisms, you hear this all the time. first of all, that the government spending program, the stimulus program has not worked. short term, even the short-term tax credits have not worked. people are worried that the whole center of gravity of the economy, record food stamps, for example, social security disability payments, for example, actually running ahead of employment. for the first time in our history, 50% of the american households are getting some form of federal assistance. people are saying that the obama administration's plan has not

worked and that's why we have these fits and starts. the economy runs up for a few months and then peters out and we are going through the same issue now. how do you react to that? >> i don't think there is any basis or merit to that view. just remember -- >> to the social statistics view? >> all of it. [ laughter ] >> let me explain. the economy end of 2008 falling off the cliff, shrinking at an annual rate of 9%. within six months, because of the force of what congress authorized we did to the financial system the fed did, we were growing again as a country. remarkably quick. successful effort to pull the economy back from the edge of the abyss. now growth has been slower than anyone would likewise have been slower. it's been slower because we were digging out of a huge challenging mix of imbalances. people have been increasing

savings, reducing debt. we have been taking leverage out of the system, working through a huge imbalance in housing. that process of deleveraging was essential, unavoidable. we are very far along through that process. but by definition, that's the paradox in this. that makes growth slower than a typical recovery. that's reality. we had europe, oil, japan, pretty big shocks and the trauma around the debt limit and the fiscal drag. >> can i -- >> but the actions we took, the president took, congress authorized on the fiscal side were absolutely essential. they were enormously powerful. as they started to fade, growth started to slow. >> which is what the criticism is, that these temporary efforts don't work. i interviewed greenspan -- >> let me -- >> hang on a second. let me give you what greenspan said. he's smarter than i am. >> definitely smarter than i am.

>> you have heard this. the large scale relentless deficits have created an attitude of uncertainty that future tax rates will have to go up, that the debt to gdp ratio is now approaching 100%. things that critics, carmen ryanhart and so forth have talked about and therefore we are not getting the type of long-term investment from business, particularly there is almost a capital strike. that's the source of the lack of steady hiring. that's the challenge. >> maybe we have more in common than you fear. let me explain what we are for and what we think the economy needs now. what the economy needs now is a very substantial well designed program of support for economic growth. better incentive for private investment. stronger public investment. over time and infrastructure in particular. a sustained program to improve

training and education. significant targeted support for basic scientific research. things that are important to long-term competitiveness. those things need to be tied to and done in a framework in a set of well designed long term fiscal responsibility. our judgment is -- and this is the main thing that stands in the way of a stronger recovery now is that congress should act on those two things -- a strong progrowth, procompetitiveness agenda tied to a balanced mix of long-term fiscal reforms, tax reforms to raise modest revenue tied to broad-based significant reforms to the broader safety net. for retirees and the disabled and, of course, for low income americans. >> a year ago my friend former colleague and partner jim cramer asked you if you believed the euro currency would survive. you said yes. do you still believe that? >> i do. i do.

there is a very strong core group of people that are committed to doing the thing they need to make that union work. they have put in motion long term reports. what is very important is to not leave the continent hanging on the edge of the abyss as a device for getting more leverage for reform because that leaves the rest of the world much more exposed to final pressure and lower growth. >> many thanks to timothy geithner who i respect enormously even though we disagree so much. this was part of the delivering alpha conference sponsored by cnbc. you can watch our entire interview now at kudlow.cnbc.com. for commentary let's bring in the managing director and head of global equities at pimco,

former assistant secretary of the treasury and dave malpas, former reagan deputy secretary of the treasury. neel, you're farthest away. let's get it started. mr. geithner yearns for higher spending. i had to respectfully disagree with that. maybe you disagree with my disagreement. what's your take? >> smart spending can help if it is investment to make our economy more competitive. all of the things secretary geithner said are good, but just spending to boost consumption, consumption got us into this mess. we need to invest to make the economy more competitive. the right kind of spending could help but not just more consumption. >> dave? the right kind of spending? >> good spending would be good, but we don't have that. the way government works is they waste a lot of money. i want to focus on the process. what we have to find is a way that washington can make decisions on what to downsize.

now they have to budget. no intention of cutting anything. it's not a matter of smart spending. they just want more spending. i think we need to rewrite the debt limit so that there is some downward pressure on washington spending. the stock market would love it if they did it. >> neel, the problem i have with the idea of smart spending is we don't see -- with all respect to timothy geithner, he's basically talking about president obama's policy which is geithner's job to defend the president, but they want to spend across the board. they want more infrastructure, more teachers, more state and local government spending. you're not going to tell me that's smart spending. >> of course not. for 30 years our economy borrowed and to beast consumption, boost gdp growth. that illusion is over. we need to transition away from borrowing to consume toward savings and investment. there is smart spending to be had. you know, repairing bridges and roads that are crumbling rather than high speed trains to

nowhere. those are examples of smarter spending. >> hang on. we'll come right back to talk about today's triple digit rally turbo charged by tech stocks. maybe, maybe, maybe comments by fed head ben bernanke. and we take a look at geithner's philosophy as well. later on, the worst drought in decades damaging crops across the nation, likely to put u.s. and global food prices a lot higher. folks, don't forget, free market capitalism is the best path to prosperity. with all respect to my friend secretary geithner, i did my best today and he listened. i know he listened. we'll be right back with much more.

all right. another pretty good ralry on wall street. the dow up 103 led by tech and industrials. let's welcome back neel kashkari and david malpass. i know you're not too bullish about it. the market is having a couple of good days. theorize to me. i'm not bullish either but the market isn't listening to me. what are you thinking? >> the global economy is slowing

and everybody is concerned whether or not the slow down will affect corporate profits which are still high. they are coming in not as bad as people feared. the markets are breathing a sigh of relief. we had big down side risks. the fiscal cliff, number one, and the euro zone. the big upside surprise could be the fed if the fed comes out with qe-3. if it is a big qe-3 it will be good for stocks and the markets. a lot of investors think the fed because the global and u.s. economy are slowing. >> david, what neel said, markets are anticipating qe-3 no matter what bernanke said. i don't think he was forceful on qe-3. i want to ask you about what neel said. do you think qe-3 would be good for the markets and economy? >> i don't. the reason is because stock market performance comes from earnings. it's very hard to tie qe-3 to bigger earns or growth for the

economy. we have been doing this for two, three years. we are almost four years into a zero rate policy. the growth has been terrible. my view is that the 0% interest rate policy from the fed causes a credit rationing that's been hurting small business and is actually contractionary. i have to differ with neel on whether the market is anticipating or is relying so much on the fed. i think what it's looking at is europe hasn't collapsed. earnings are coming in pretty good. so there is more room to run in this pe-multiple environment. >> you heard dave. let me add to that quickly. i thought ben bernanke stuck it to congress and said you guys stopped this huge tax hike from throwing us into recession. don't think it's me. i don't really think that uh plays a big role in the stock market. i think it's profits more than

the fed. >> of course. corporate profits are still strong at record levels. let me make a slight adjustment to your interpretation of what i said. we think qe-3 would be good for the stock market. not necessarily for real economic growth. qes are like morphine. it makes you feel better. makes the headlines look better. pushes up risk asset prices but doesn't translate into real economic growth. >> but the challenge is we think of the markets as forward-looking and smart. we have been raised on that. it's hard for me to see how something that the fed would do that we don't think would help the economy is actually going to be welcomed by the market. i think more likely, the market is just tired of the fed and bernanke did a good job today and yesterday of pointing at congress. >> and they didn't like it one bit. chuck schumer didn't like it and they tried to say, come on, you bail us out. bernanke said no. before i lose you both, i want

to ask you, with this lousy u.s. economy, europe on its back, china, india, brazil, all that stuff is looking sloppy. can profits outperform expectations? i still believe, in my simple way profits are the mother's milk of stocks. >> right. but if we fall into a global recession or a global slow down, profits will have trouble going up. i think we are already seeing companies that are overweight in europe are getting hurt by this. we'll see more confessionals on that. they can't hedge. you can't hedge the european risk out of a u.s. company that's been living on european growth for all these years. i think we're going to find negative surprises. but on the other hand the u.s. economy ends up being a little bit more resilient maybe than you are giving it credit for. china also, their growth in the second quarter was above growth in the first quarter. >> i don't know anything about china, neel.

but i think their numbers lie. if we are growing at 1% gdp how good can our profits be? i will give you the last word. >> i think it is very company specific. i'm cautious about the broad equity market as a whole. we think there are individual companies tied to consumers trying to save. companies like walmart we have talked about before. spirit airlines that can continue to do well in this moderate economic environment. >> do you buy this tech list? these are stocks that have done well. intel, cisco, ibm, hp and microsoft. do you buy the tech play? it's a global growth play, it seems to me. >> it is. some of the names like microsoft, intel we have owned for a long time. we continue to own them because they are good long-term stories globally. >> thank you very much. up next, the midwest drought, the worst in decades. likely to push american and global food prices sharply higher. more on that plus other breaking

news headlines. we'll be right back.

home protector plus, from liberty mutual insurance, where the costs to both repair your home and replace your possessions are covered. and we don't just cut a check for the depreciated value -- we can actually replace your stuff with an exact or near match. plus, if your home is unfit to live in after an incident, we pay for you to stay somewhere else while it's being repaired. home protector plus, from liberty mutual insurance. because you never know what lies around the corner. to get a free quote, call... visit a local office, or go to libertymutual.com today. liberty mutual insurance. responsibility. what's your policy?

[romney singing]: oh beautiful, for spacious skies, i'm barack obama and i approve this message. for amber waves of grain, for purple mountains majesty, above the fruited plain, america, america, god shed his grace on thee, and crowned thy good, with brotherhood... triple digit temperatures in a good part of the u.s. has half the country in drought mode. cnbc's brian shactman joins us with that and the latest headlines in the cnbc newsroom. good evening. >> good evening. mother nature doing damage all over the country. disastrous corn crops seeing

prices soaring since june. paul from the weather channel has more on the drought. good evening. >> good evening. take a look at the map. this shows you the 7-day rainfall ending today. you notice parts of the southeast in a drought are getting rain. areas outlined here is a big chunk of the corn-growing region across the plains and the midwest. they have seen barely any rain over the last three months. that's on the heels of a relatively snowless winter. so our drought numbers unfortunately have been growing across the corn belt. our moderate drought has increased. the severe drought has increased. the extreme drought has increased. not the best for plants. and the dry ground is hitting energy prices as well. trying to keep yourself cool, your current temperatures now are well over 100 degrees. >> thank you, paul. appreciate it. jersey corn is good to eat. the bank of england is asking the heads of the central banks to reform the libor rate.

just when you got used to windows 7 microsoft says it will reduce windows 8 on october 26. finally, what's in your wallet? settlements. the u.s. protection bureau ordered capital one to refund $140 million to customers saying the company used deceptive marketing to push its credit cards. of course capital one known for the medieval thugs and alec baldwin, they paid up more than $200 million. >> that's a lot of money for that company. >> and they traded down. >> thanks. cnbc's brian shactman. up next on "kudlow" why hasn't president obama met with his own jobs council for six months? shouldn't the jobs be number one on his to-do list? the former chief of staff bill daly squares off with veteran republican strategist charlie black. that's up next on "kudlow." this is the first car that i've been totally in love with

in every way, shape, and form. it's my dream vehicle. on a day to day basis, i am not using gas. my round trip is approximately 40 miles to work. head on home, stop at the grocery store, whatever else that i need to do -- still don't have to use gas. i'm never at the gas station unless i want some coffee. it's the best thing ever. as a matter of fact, i'm taking my savings so that i can go to hawaii. ♪

to deposit checks at the nearest citibank branch. ♪ like this one. ♪ or this one. ♪ or, maybe this one. ♪ but when it's this easy to use citibank mobile check deposit

at home...why would he? ♪ woooo! [ male announcer ] citibank mobile check deposit. easier banking. every step of the way. welcome back to "the kudlow

report." i'm larry kudlow. in this half hour, tax cuts held hostage. democratic senator patty murray says if tax breaks on the upper brackets are raised, democrats are prepared to let all the bush obama tax cuts expire at the end of the year. how about that. we'll ask republican senator ron johnson if the gop will go toe to toe over taxes. plus, do entrepreneurs really depend on government for their success? president obama says yes. i say absolutely not. first up, more good news from the housing market. believe it or not the best in four years. is housing a bright spot? let's look at the charts. we are talking about housing starts, construction. all right, folks. it ain't fabulous. if this were hot it would be about 2 million. we are holding at about 750,000 to 800,000 monthly housing

starts. it was an improvement over the prior month. it's not fabulous but it's something to hang your hat on. now home builder confidence actually has been doing well for the past year. it's gradually doing better and better. it's something, okay? it's something. at least housing is not going to detract from the economy. it uh may add a little bit to gdp. someone who adds at the margin to economics, famed economist art laffer, chief investment officer and long time adviser to ronald reagan and heaven forbid myself. hello. do the housing numbers do anything for you? will they keep us out of recession? >> i love your optimism. i can't believe how wonderful you are in this. they are poor numbers but at least aren't going bad. they could be minus for houses but they are not. it's a bad housing market, a bad

construction industry. but they aren't going down any more. i wouldn't look at it as rosy, to be honest. >> you did a great job. >> i don't think gdp will come in more than 1% or so. >> it can be high. >> it's not good. >> it's awful. >> you had a great piece in the wall street journal. the growth killer. i talked to tim geithner today. he wants to spend more and tax the top producers in the highest rates. what's your economic outlook. >> my economic outlook if they don't do the tax cliff, it is a very large number, larry, if you look at the static revenue terms it's $500 billion. that's compared to taxes, maybe $2.5 trillion. this is a 20% increase in all taxes. i mean, that's what it is. there are a lot more than the usual ones we talk about. there is the 100% expensing which expires, the payroll tax. all the others in there that are

huge. that's about 50% larger than ronald reagan's tax cut was in 1983. you can see the boom that led to the u.s. economy. this is a jobs killer, a secular growth killer. >> happens if we think, worry, know -- it's hard to know. let's assume that all these bush tax cuts do, in fact, expire along with the whole boatload, the alternative minimum tax, payroll tax. >> exactly. >> let's assume the worst case. what does an investor now do about that? >> the whole thing about an investor is don't tell me about the return on capital. tell me about the return of my capital. during these types of disastrous times, and they have been disastrous since march of 2000, larry. the real stock market has been down the whole 12 years. just keeping your money, just preserving it is really, really the important thing. there aren't good investments out there. when you have the tips yield as minus 67 basis points and people

are buying them as an investment in their portfolio. it tells you this is really a horrible market with not very many prospects for improvement for quite a while. >> what's it going to take for us to break new ground? it's interesting from october 2007 we still haven't gotten the major indexes back to where we were. >> we haven't. >> as you pointed out you can take the story back 10 or 12 years. >> yes. >> at least excluding dividends the s&p has done virtually nothing. art, what do we need to get new highs. jeremy siegel, guys like that talking about -- >> five things. >> 17,000, 20,000. >> five things. it takes a low rate flat tax. simpson bowles, dominici bill. all of those. lower the rates and broaden the tax base. we need tax reform like in '86. spending restraint. geithner is wrong. spending is taxation. you have to cut the spending,

not increase spending. sound must be. bernanke has done an awful job of expanding the monetary base and the balance sheet of the fed. what happens to the balance sheet if interest rates go up? they will have a huge capital shortfall. >> last one. >> free trade and minimal regulations. that's it. you can get a boom in this economy that will be incredible. >> okay. those are the supply-side boom factors. right now we are sitting in july of 2012 election year. we really can't figure this out, art. to be fair and honest, okay, you're for romney. i prefer romney's policies, but we don't know about this election. >> we don't. >> therefore, i don't see how investors can know. >> they can't. i'm much better at forecasting the past than the future, larry. >> all right. >> i look at romney and i see a fine man with a lot of great proposals, but you never know until he does it. >> i like what he's saying. i don't know. >> i'm with you on it, larry. it's an uncertain world. >> art laffer does a great job.

his supply side analysis has made a lot of people a lot of money in the stock market. i just want to add that. up next on kudlow, the president has not met with his 26-member job council for six months. white house press secretary says the president has a lot on his plate -- like what? raising money. the president's former chief of staff bill daley squares off with veteran republican strategist charlie black on that and other things. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination...

and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. that bringing you better technology helps make you a better investor. with our revolutionary e-trade 360 dashboard you see exactly where your money is and what it's doing live. our e-trade pro platform offers powerful functionality that's still so usable you'll actually use it. and our mobile apps are the ultimate

in wherever whenever investing. no matter what kind of investor you are, you'll find the technology to help you become a better one at e-trade. you'll find the technology to help you become a better one according to ford, the works fuel saver package could literally pay for itself. jim twitchel is this true? yes it's true. how is this possible? proper tire inflation, by using proper grades of oil, your car runs more efficiently, saves gas. you could be doing this right now? yes i could, mike. i'm slowing you down? yes you are. my bad. the works fuel saver package. just $29.95 or less after rebate. only at your ford dealer. so, to sum up, you take care of that, you take care of these, you save a bunch of this. that works.

president obama's attack on private equity continues. today the president went to texas for another fund-raiser and villified business by saying the american economy will only grow by growing big government spending. public investment, that's the code word. new numbers out today say the tactic is backfiring. let's talk quickly with our friend polls ter scott rasmussen. best in the country. are there numbers on this? the romney attack on bain capital and the attack on business. you know, entrepreneurs can't survive unless government backs them up. what do the numbers tell us? >> first, the attacks on bain capital and mitt romney have had

an impact. 41% say romney's business record is raising the vote against him up 7 points from earlier in the year. people trust him more on the economy. people believe businessmen seeking their own profit, trying to grow their own company will do more to create jobs than policy makers. when we asked the specific question who creates more jobs, what's the better way to go, venture capital companies or government programs, by a 57-27 margin people say it's venture capitals that create jobs. >> that should help romney. does he have to make a special connection or what? >> it is helping romney a little bit already. the perception is that president obama wants to raise spending and that would hurt the economy. people don't trust politicians. only 36% think the economy would get better if mitt romney is elected. 32 -- i mean, if mitt romney

wins. 32% think it will get better if the president is re-elected. basically people say asking a politician to fix the economy is like asking a plumber to fix your electrical system. >> scott rasmussen, thank you very much. earlier today white house spokesman jay carney was asked why the president hasn't met with his 26-member jobs council for six months. this was his response. please listen. >> there is no specific reason except the president has a lot on his plate. he continues to solicit and received a vice from numerous folks outside the administration. >> well, the president sure does have a lot on his plate. he had golf in virginia. he's also had over a hundred campaign fund-raisers. i guess he missed the news that the economy isn't doing well. let's bring our distinguished guest, william daley, former obama white house chief of staff

and former u.s. commerce secretary. also with us, charlie black, veteran republican strategist and a former senior adviser to presidents reagan and george h.w. bush. welcome to you both. mr. bill daley, you may have started this business council. you have worked in a lot of big companies, jpmorgan and the phone company down in texas. why doesn't obama meet with his own business council? why does he just have fundraisers all the time? >> he's not doing that. i get what you're trying to do with the way you phrase things. "the president is only doing fund raising." we know he isn't. this is how many times they meet with the president. they had over 50 recommendations that are being implemented and worked through in the government albeit a slow process. it always is with government, any government, any administration. there were real solid recommendations by the job council that were good like speeding up the visa process so more people could come here as

tourists who spend more money. they had specific recommendations being implemented and worked through. the director of omb is doing that. so the idea that he should just sit there with business guys and therefore something will happen is ridiculous. >> i hear you. good support for obama. i want to go to charlie black. he's had over the six-month period he's not met with his business council he had a hundred fundraisers. the economy is in lousy shape. i don't know why he isn't meeting with them. a lot of proposals like corporate tax reform have gone nowhere. many of the guys on the committee aren't even backing him, charlie. what's your take on this? >> it's really too bad he doesn't meet with them. since bill left the white house there is not a single business person in the building. not a single business person with experience in how to create jobs works there. i suspect he can't like what they proposed. i know people on the council.

they wanted corporate tax return to lead to lower corporate tax rates. they wanted to rein in spending, reduce regulations. they proposed more free trade agreements which the president is negotiated none of. >> let me say this. one of the reasons i think any business person -- and it is hard to get senior business people to go into any government agency, much less even at an advisory role like the gentlemen and the women on this advisory committee. the stuff they take from this political system we are in and quite frankly from the media people like yourself who then beat them up for being part of a democratic administration and they are trying -- >> i don't do that. >> yes, you do. just your language, the way you describe these people. >> bill daley when you came to be white house chief of staff, i had so many good things to say. >> i know you did and i appreciate it. >> because of your background and guest appearances here.

what bothers me is, look, the president pours it on, gives speeches, says entrepreneurs depend on government for their success. >> no, no. if you listen -- >> if you didn't build the business seasoned somebody else made it happen. >> no, larry. >> that's the obama i don't like, bill. that's why i criticize him. >> wait a minute. the president doesn't say entrepreneurs succeed because of government. >> sure he did. >> we are in it together. the president said from the beginning that, yes, entrepreneurs succeed. some go to public colleges. universities that are funded by taxpayers. some of the products that great companies sell are a result of research done by the government funded by the taxpayers. okay? and they are successful and that's great. we celebrate that. >> that's great. >> no entrepreneur gets to his success on his own. >> come on. let me go to charlie black. guys like henry ford. obama talks about highways and infrastructure.

when henry ford created ford motor company we didn't hardly have highways. >> but if we didn't build the highway system the ford company wouldn't have been as successful. >> the entrepreneurs pay their share fair of, taxes. >> the idea flowers into a company like bill daley is saying but why does obama want to put entrepreneurs down and boost the government? that's the message coming out. >> there is a clear contrast in this election under president obama's economic philosophy. you get solyndra. half a billion dollar government loan to try to create some kind of green energy actually owned by his political cronies. they go bankrupt and 1800 people are laid off. mitt romney's philosophy is to stay away from the government, use private investment, have risk take rs invest and create a company like staples which employs tens of thousands of people without government help. >> all right. i want to switch gears and get this in. there is big news today. governor chris christie has been

anointed with the honor of being the keynote speaker for the republican national convention. now, two things. one, christie is likely off the veep list. two, we could be looking at a future presidential candidate in the making. you know, a lot of wisdom says a keynote spot gives a major boost to somebody's political career. just think about barack obama and bill clinton and ronald reagan. bill daley, what do you make of chris christie? is this an anointment that gives him a big position in the party? >> it's a tremendous platform not that he needs it. he gets national attention because of what he's doing in new jersey. governor chris christie may be a candidate in 2016 if he has a successful tenure as governor. no matter how good his speech may be if his tenure as governor isn't successful, he can forget his future. but he knows that better than

anyone. it's results. >> charlie, you have been around through many conventions. why do you think they chose chris christie? it's a great honor. >> i can't confirm he's the keynote speaker nor who is on or off the vp list. if he speaks at the convention he'll excite the crowd. he's a terrific speaker. he's tough. he inspires the base. he's a governor who took over a government out of control, got it under control by taking on the unions or anybody else he needed to. that's what needs to be done in washington. that's why he's for mitt romney. >> he's tough in his criticism of president obama, is he not? it's going to be a stem winder if you give christine 45 minutes to do that. >> he doesn't pull punches. he communicates directly with the working people of this country. he'll communicate with those who want to work who aren't working now. the only thing more fun is to watch him do a press conference and berate the press.

we won't let them on the podium. >> bill, do you think governor chris christie -- he has a great record in new jersey as far as i'm concerned. you may disagree. is he too brusque, too brash, too temperamental to go on the ticket as vice president? a lot of people wanted him on the ticket. >> i think it would be entertaining if he was on the ticket, to be frank. as charlie said, he's pretty direct. sometimes to a fault. but the vice president's selection obviously will be done, i assume shortly. but governor chris christie, the real challenges for him are in the future because of the difficulties in that state and so many governors have around america and helping the economy grow. his future isn't about a speech in my opinion. it's about the results he gets. not over the last year and a half or two years, but on the long-term if he's there for a full term or a second term. >> all right. thank you, bill. charlie black, great to see you.

>> thank you, larry. >> up next, taxes held hostage. patty murray has a ransom demand. raise tax cuts on the upper brackets or else. senator ron johnson tells us whether the gop will negotiate with tax kidnappers. we'll be right back.

all right. we're trying to straighten out some technical stuff with senator ron johnson. stay with me. i want to talk about the interview today with mr. timothy geithner who i respect and admire. he has a point of view i don't share. i just want to underscore that. we talked about it earlier in the show. look, i'm a reagan supply sider. that's no surprise to viewers of the show. i want the kind of tax reform, low marginal tax rates. get rid of the exemptions and

deductions. geithner said something nice about me on that point when we were interviewing. now, let me stop and put a zipper on it here. i think we are going to go back to senator johnson interview. stay with us. thank you for your patience. are democrats playing fiscal cliff chicken? washington state senator patty murray says if we can't raise tax rates on the upper brackets, democrats are prepared to let all the bush-obama tax cuts expire at the end of the year. most believe that will lead to a recession. if you listen to senator murray it sounds like democrats aren't prepared to compromise, but is the white house on board? treasury secretary geithner surprised me this morning in our interview. please take a listen to the exchange. when was the last time you met with speaker boehner to talk about possible compromises? >> i think the last time i spoke to him was several weeks ago

when i went to talk to them about europe. i do have to talk to everybody relevant about the decisions. they said, if you listen carefully there is a lot of foundation laying under way in the senate and particular to explore what's going to work. >> i think that's interesting. let's turn to the senate. joining us, wisconsin republican senator ron johnson. he co-authored this op-ed today. welcome back to "the kudlow report." let me get your response to what you heard from secretary geithner in the interview this morning. he said the foundation being laid in the senate. he's talking to john boehner but there is a foundation being laid in the senate to avoid the fiscal cliff. what do you know about that? >> absolutely nothing, larry. what i know in the senate is we haven't passed a budget in three years. senator reid refuse sz to put appropriation bills on the

floor. now senator murray says, hey, we are happy to let the american economy go off the fiscal cliff by refusing to take a look at ex-tepiding the tax rates unless they get their plum. the thing they are about is punishing success. do you know how much that would raise in the first year if we raised taxes on people making over $200,000 individually or $250,000 as a family? $34 billion. compare it to the 1,300 billion deficit we are running. incredibly reckless. i'm not seeing a lot of activity in the senate to forestall that possibility. >> i want to focus down on this. we talked this week. i'm not sure i get it. murray is saying, and i think chuck schumer is behind it. but they are saying, okay, we're going to let the tax cuts all expire -- all of them. and somehow in 2013, the next

year at some point while the taxes have gone and put us into recession they will come around and cut taxes except for the top brackets. is that what they are saying? >> yes. >> that's like saying we are going to force a recession and then later on fix the recession. do i read that right? >> i think you're reading it exactly right. it's just jaw dropping how irresponsible it is. larry, you know. you talk to business people. the level of uncertainty, the lack of confidence in this economy really is what's keeping our economy from growing and from us creating jobs. you have leaders in the senate saying we're not going to try to provide any certainty to this economy. we're going to increase the level of uncertainty. they are willing to let the american economy take almost a $500 billion blow to the body in terms of increasing taxes in 2013 and take a chance on being able to win this political argument which is sheer political demagoguery. >> you and senator demint and lindsey graham are in the

washington examiner today and the title of the piece is the gop must prevent a lame duck looting session. >> mm-hmm. >> i'm for that. i don't like looting sessions. higher taxes and spending. senator johnson, as an old omb guy during the reagan years how do you stop it if that's what they are going to do? how do you stop a lame duck? >> what we are suggesting is we'll compromise. fiscal hawks will compromise by saying we'll agree to the bta spending caps. let's pass a continuing resolution to take us well into next fiscal year. i would agree for the entire year. we know this president refuses to lead on the debt and deficit issue. certainly senator reid doesn't. the senate won't do it. give mitt romney time to get into office and put a plan to stabilize debt and deficit and get the economy growing again. i would be happy to do it and extend the current tax rates for another year to provide some

certainty to this economy so it can get growing again. >> stop the patty murray strategy. at the end of the day, here comes a dumb question. don't you just have to elect a republican senate? >> yes. >> if you don't you are going to get the lame duck. the bush tax cuts will not be extended and we'll have recession. the key to all this, you're right technically, sir, but the key is politics. >> right. so the politics is get the house to pass that continuing resolution that funds the government for a year, extend the tax rates for a year and and put pressure on senator harry reid to say this is a reasonable proposal. we don't want government shut down show down. >> that's it for this evening. thanks for watching. see you tomorrow night. ♪ i want to win [ breathes deeply ] ♪ this is where the dream begins ♪ ♪ i want to grow ♪ i want to try ♪ i can almost touch the sky

[ male announcer ] even the planet has an olympic dream. dow is proud to support that dream by helping provide greener, more sustainable solutions from the olympic village to the stadium. solutionism. the new optimism.™ ♪ this dream would you mind if to be soli go ahead of you?omer.ism.™ instead we had someone go ahead of him and win fifty thousand dollars. congratulations you are our one millionth customer. people don't like to miss out on money that should have been theirs. that's why at ally we have the raise your rate 2-year cd. you can get a one-time rate increase if our two-year rate goes up. if your bank makes you miss out, you need an ally. ally bank. no nonsense. just people sense. the calcium they take because they don't take it with food. switch to citracal maximum plus d. it's the only calcium supplement that can be taken with or without food. that's why my doctor recommends citracal maximum. it's all about absorption. that's why my doctor recommends citracal maximum.

you want to save money on car insurance? no problem. you want to save money on rv insurance? no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico. saving people money on more than just car insurance. i bought the car because of its efficiency. i bought the car because i could eliminate gas from my budget. i don't spend money on gasoline. it's been 4,000 miles since my last trip to the gas station.