opponent taking? i wish i had better anxiouses. all i know is the stock is down enough if you don't eaown start. is apple picture perfect? no. because they cut by a huge amount. but you have a good 2013 being set up. and sometimes we have to look through the valley only in very special situations to see where the promised land is. the promised land is 2013 for apple even though it's not promised right now. i'm jim cramer. see you tomorrow! hey, larry, what do you have? >> caterpillar slamming jobs to keep them in america. i'm larry kudlow. this is "the kudlow report." top story tonight, it worked. that's what president obama told a fund raising crowd late last evening about his economic policies. oakland, california, where the unemployment rate is 13.7%.

in a country where the unemployment rate is stuck at 8.2%. we are at the precipice of a recessionary economy. it worked, the president said. well, we're going to discuss that topic. also this evening the dow takes the third consecutive triple digit dive. brian shactman, break it down for me. >> another late day comeback but in the end another hundred-point loss. at one point we were down 200. then word spread and the market -- if we look at the chart. skipped right over it. how about at&t. the weakest sector. light revenue. a lot of profiting was on lower subsidies which will change when the iphone 5 comes out. fewer people bought them. down 5%. the second miss since 2003. people waiting for the iphone 5 or waiting to assess this global slowdown. >> all right. thank you very much.

now tonight's special guest is jonathan golub of ubs. he's our market expert this evening. we'll talk much more. plus caterpillar taking a stand against big labor being watched all over the country. a six year wage and pension freeze. now, this could put the final nail in union coffins. former general motors boss will weigh in. we begin on the campaign trail where president obama went on a scathing attack of mitt romney's plan. john harwood joins us with some of the details. >> good evening. we've got news in our wall street journal poll about how both sides are playing in the race. obama leads 49% to 43% of mitt romney over registered voters. a that's slightly more than a month ago. i want to break down a bit some of the key headaches that each side faces. first of all, obama' headaches. 60% of the american people think

the country's headed on the wrong track. 53% of the american people disapprove of his handling of the economy. and 55% say it has made them pessimistic about the economy. 46% of the american people dislike romney personally. 52% of the american people say they can't relate to his background and values. obama also does better on that. and 32% of americans say that recent news about mitt romney's tax returns has made them feel more negative about mitt romney. that's the subject of a lot of the obama and democratic attack ads. when you rough it all out, that leaves on issues these three advantages for both sides. barack obama, the incumbent democratic president, has a 16 percentage point edge on who would be better looking out for the middle class. mitt romney's got a seven point edge on who would be better at handling the economy. that's going to be where the

hinge of this election, the competition, the collision of those two strengths and weaknesses through election day. back to you, larry. >> many thanks to our own john harwood. while president obama is busy on the campaign trail trashing republican pro-growth policies especially mitt romney, he made one shocking claim himself. please take a listen. >> just like we've tried their plan, we tried our plan, and it worked. that's the difference. that's the choice in this election. that's why i'm running for a second term. >> really, mr. president? it worked? this is the worst recovery in modern times according to the joint economic committee. half the country has become dependent on the government, unemployment above 8%, now we face a tax cliff that could put us back in the recession. let's talk about this with

distinguished oklahoma senator republican senator tom coburn. senator coburn, welcome back to the show. i want to just ask you about mr. obama's claim his plan worked. let's start there. you heard him say it. >> the final report on the stimulus bill was it had a negative multiplier of .95. what that means is it hurt the economy by half of one percent now we're more in debt from it. that didn't work. number two is we subsidized all the state, city, county local governments with the stimulus plan and just delayed a year of the hard choices they had to make. we're seeing the consequences of that. you can talk about health care if you want, what we've done is raise taxes on 22 different instances on people in american health care purchasers. and the average policy has gone up an additional $500 per year in this country.

i'm not sure it worked. >> seems to me one of the things that doesn't work is trillion dollar deficits. i guess we'll have our fourth in a row. the accumulation of debt and corporations. businesses do not want to make long-term investments because first of all the government is draining capital and second of all, everybody fears humongous tax hikes. is there a thought on greenspan's analysis? >> i think confidence and certainty are certainly one of the things you have to have to get people to invest. capital for a long-term. and we obviously don't have that. i would put that on both sides of the aisle. ask yourself this question. medicare scenario, the hospital

trust funds broke in two years. the ssdi which is the disability insurance program is for sure going to be broke in two years. the obama administration's added on average 74,000 people a month to the disability program and created 62,000 jobs a month since january of 2009. those aren't the ways we want to go. and by the way, discretionary spending is up not down. when we have these deficits and this kind of debt, the one thing americans know is you have to live within a budget. so you have to start cutting. we've not cut one thing. and you're hearing everybody squawking, republicans and democrats alike. i didn't vote for the sequester. se -- >> can i just ask you. i interviewed mitt romney yesterday. of course i asked him, but i

want to get your take on this obama line. you didn't build that. someone else made it happen. in other words, businesses and entrepreneurs can't do it without government. which kind of means that the government's going to tax them in order to grow. what's your quick take on that? where's that place obama in philosophical terms and in this political campaign? >> you know, larry, i was involved in a business start-up from 1969 to 1978. the government was anything but a help to me. actually, they were an impediment as i built that business into a $70 million business. and that was through hard work of a lot of people including my hourly employees who strived every day to make a quality product at a good price and service it well. so i think it just shows the disconnect. it was a slip. he didn't mean to say that. obviously the reverberations of

that was basically what a lot of people feel. it's a government centric rather than a freedom centric. free enterprise capitalistic centric system. the proof of the pudding is the only thing that has really brought masses and thousands and millions of people up and out of poverty is capitalism in the free enterprise system. it's not government-run socialistic systems. and what he was touting was government dominance rather than individual freedom and liberty and rising to the highest level you can. >> let me get your take. you got tax votes tomorrow on extending the bush tax cuts. the democratic proposal would be 250,000 per couple or less. there's a republican proposal for full extension. first of all, will the democratic proposal pass? does it need 60 votes? are they there? >> no, they're not there. this is a political vote. 66% of the job creators in this country fall into that increase

in taxes they're going to put on them. not only do they not have certainty or confidence, now we're trying to say we're going to charge you more, the very guys we want to go out and spend the money, invest the capital to create the jobs. 66% of them. of the small businesses in this country will fall under that. so ask yourself the question, if you really want to stimulate the economy and create jobs, why would you take capital out of the hands of the people who are going to do it? what we're going to find ourselves in is the circle europe is in. you raise taxes and cut spending. austerity without good tax reform isn't going to work in our country either. >> will this vote require 60? >> yes. >> okay. and you're predicting they don't have the votes. >> it's a political vote. we did one last week. we'll do one every week. here again, the question is with the problems facing the country, why hadn't he said let's pass a bill that says by a certain date we will reform the tax code that will broaden the base.

that's what most people want to do. that's a way to increase the revenue of the federal government. why are we not doing that? why are we not reforming medicare? why are not we not fixing medicaid? because those are things that will actually solve our problems, but we don't want to address that because the election and keeping his caucus intact is more important than the long run health of this country. >> is it possible the republican alternative -- i heard senator mcconnell talk about this. full extension for one year then tax reform, will there be even a vote on the republican alternative for full extension of all the tax cuts? >> i don't know if that's been agreed to yet between the majority leader. i didn't get to make our caucus lunch today, so i'm without that information. i didn't vote for it last time. what we need is tax reform. if you extended a year, you haven't done anything. except take the pressure off the fiscal cliff.

but you just kicked the can down the road. what has to happen is fundamental tax reform in this country that creates the long-term certainty you can take that 2.6 trillion that's sitting on the sidelines in the businesses in america and invest it with confidence that you know what your tax rate's going to be if you're successful. >> all right. senator tom coburn, thank you very much sir. >> good to be with you. all right. coming up on "kudlow" stocks slide big time on earnings from u.p.s. and other companies. plus another pullback in manufacturing as markets manage a third triple digit loss in the row. will it be the fed to the rescue? who knows. and mitt romney laid out his five-point plan here on "the kudlow report" last night. did some great work, governor. i have a few ideas of my own to make it even more reaganesque.

don't forget, folks. free market capitalism is the best path to prosperity. that means no tax hike cliff. we'll be right back. so... [ gasps ]

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welcome back to "the kudlow

report." before we do some stock market work with jon than golub, let me give you a few thoughts. stocks in the doldrums because the u.s. economy is faltering badly and we may have a global recession on our hands. that's why prices are falling. in fact, one point, the 1.4% ten year treasury bond. high regard itself as a recessionary indicator. while the dollar is rising, we face a fiscal tax cliff which is not good. in fact, i don't see any supply size growth policies anywhere. not from the usa, not from europe, not from china. now of course the threat of another greek bailout which is an incredible news event. corporate revenues coming in soft, more proof that we have world economic woes. it's not a good story. that is still my point of view. let's turn and do some stock market work. stocks on the slide, the dow

logs its third straight triple digit loss. dropped 104 points. nasdaq down 27. the s&p 500 lost 12. let's go to jonathan golub. i don't like to be bearish like this, but i don't see anything i like. give me some place i might be wrong. tell me where there's positives. >> the big positives is while the revenues have been weak and disappointing on the issues you've attend, the companies have done a good job of managing expenses in the environment. and you see that coming through in better beats in a week-long term environment. i'm also cautious, but there is a bright spot. >> how much can they squeeze out of that rock? that's the big issue. >> that's -- the market keeps questioning it. and while companies keep beating, investors don't want to give companies the benefit of the doubt.

>> i just think that this is the first time in awhile the revenue numbers are more important than thernings numbers. some people would disagree with me. 1 to 2% growth in revenues and saying whoa, this has got global recession written all over it. >> i do not think we're going to be in a recession in the u.s., but i do agree that the ten year is screaming that we have a major growth problem. >> you agree with me on that. it's crazy. >> look at the vix. the vix is telling you the world's not coming to an end, we just don't have growth. >> i'd like to see the ten year treasury be three or four or 5% which would tell me the economy is really humming. that is where it averaged in the 1990s. 1.4%. let's stay with interest rates. this afternoon, my friend john followed a story in the wall street journal. sure it will be front page news

that the fed is mover closer to a stimulus move. he wasn't precise, but it hinted they're moving. let me ask you. it seemed to turn the market around by a hundred points. first question, did it? was it the fed? >> it may have been, but i don't think this is good news. you do not want the fed trying to prop the market up. you want better policy long-term. if you look what happened with the last easing you got higher commodity prices, didn't get higher wages. it was short lived the market probably likes it -- >> nothing. it's a little injection of sun and did nothing and no lasting effect on the economy. which is back in the semi tank. >> it's an adrenaline boost. you'll get something out of it. but it's short lived. >> as we come to the meeting which is at the end of july, next week the fed meets. would you change your advice? would you say to people let's bet on the fed? can you actually do that? pretty risky, but i want to know.

>> i'm not going to bet on the fed here. ultimately more liquidity in this environment debasing the currency further, i don't see that as the solution. i am more cautious than i like to be. we have problems in europe which is not going away. and the other is the fiscal cliff on this. it's going to feel to last summer. >> it's going to go down tomorrow. it's pushed back. >> this is political today. >> $400 billion tax hike, raising rates on investors. that can't be good. and now, did i hear this right? a new bailout for greece today? that was this morning's news that dropped the market 200 points. restructuring of their debt? what's that mean? it's insanity. >> yeah, well -- if you take a look at where the stress points are, if you look at e the european bond yields, the short-term yields were up 45 basis points today. europe is telling you they have

a big problem. that that's going to linger. when we downgraded our market call when the news came out that everything was solved in europe on the last summit, we didn't think it was going to have legs and it proved not to. >> i thought i read on your card you're downgrading your call on the s&p to 1375. you're at 1338 now. are we heading lower? >> you know, my guess -- >> with all respect, when i was in that business, downgrades meant a lot more downgrades coming. >> yeah. >> tell us. >> the day we did this downgrade, we were calling a flat market for the rest of the year. that's a really bearish call for a strategist to make. my read, though, is that really the bad news is going to come in the latter part of the year when we get into fiscal discussions. >> why not get the hell out now? latter part of the year is upon us. unless you think mitt romney is going to win and rescue us. which he might. >> investors don't believe mitt romney is going to win. that would be a surprise to

investors if that were the case. but i agree, if you get a mitt romney win, the market's going to like it. i think it's going to play through not in a short-term boost like the fed. but i think a better pro-growth policy is ultimately what's going to grow the market. he's going to have to prove he can do it. >> thank you ever so much. we appreciate it. coming up on "kudlow," modern family stars band together to play hard ball over salary negotiations only a few days after stars sophia vergara topped forbes' list of tv's highest paid actresses. you won't believe the figure they've turned down per episode. full details when we come back.

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we were just talking europe and now we have a news alert coming into cnbc. moody's making another call on europe. brian shactman joins us with more on that and all the latest, breaking headlines coming in into the newsroom. what's cooking? >> in a move, moody's changing its outlook on the european financial stability facility to negative from stability. the rating is a knockdown effect of moody's yesterday changing the outlook on germany, netherlands, and luxembourg. panera profit up 22% in the quarter and higher guidance

moving forward. but over at buffalo wild wings, a little less savory. blaming higher costs for their signature wings. and "modern family" halting production. shooting was to begin for the new season. the stars want hundreds of thousands of dollars more per episode. this has happened before. i know you were probably a religious friends watcher. >> what this tells me is on this per episode, you and i are in the wrong business, pal. >> well, they were guaranteed 200 grand in the new offer and they want double that. friends did that years ago and they got a million per episode. >> thank you very much brian shactman. up next, turnaround man mitt romney needs to fix his messaging. turn around the failing u.s.

government inc. and save it from bankruptcy then turn our economy back to prosperity. last night on "the kudlow report" he unveiled his five-point plan. i've got a couple of tweaks for the governor. that's up next on "kudlow." 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. ♪

stay in the moment sanya. focus lolo, focus. let's do this. i am from baltimore. south carolina... bloomington, california... austin, texas... we are all here to represent the country we love. this is for everyone back home. it's go time. across america, we're all committed to team usa.

welcome back to "the kudlow report." i'm larry kudlow. in this half hour caterpillar gives up above market wage and benefit levels. this company cat has created 6500 new jobs in the usa. they say they're doing it to create even more. we'll see if that model works. also tonight, mitt romney has been attacked for having a swiss bank account. so what? there's nothing wrong with it as long as it's being discloedsed and the tax is being paid. we'll have to show the political figures who failed on both counts. i've called for mitt romney to simplify his agenda into an easy to understand, reaganesque growth plan. last night on this show, an

exclusive cnbc interview, he did that. he unveiled his five-point plan for economic growth. take a listen. >> there are really five key points. one is to take extraordinary advantage of our energy resources. i have a very different view than the president on oil, coal, natural gas, nuclear, energy number one. number two, trade. opening up trade. particularly in latin america. number three, convincing the world we are on track to have a balanced budget. that's critical. number four, human capital. by that i mean training programs for adults as well as better schools for kids. and number five, restore economic freedom by keeping our tax rates down, get regulators to see themselves as the allies of enterprise, not the enemies. these things, if we do these things you'll see america's economy roaring back. >> a very good start. i'm glad he unfurled it here on "the kudlow report." you know me, i think it can be stronger. here's a thought. mitt romney is a turnaround guy,

right? he's an expert. that's what he did for a living. i think an important message from him would emphasize how he would turn around this failed company called usa government inc. and save it from bankruptcy. that's point number one. and second, since growth and prosperity are the top priorities, here are my ideas to slightly reprioritize the governor's five points. for example, first, strong pro-growth tax and regulatory reform. tops my list. in other words, real supply side growth measures across the board. number two, lower spending and move towards a balanced budget. put that number two. number three, economic energy development. i'm moving that one down a bit. number four. since we all agree on improved education, i would take that out and put in king dollar. sound dollar. this is going to get businesses and consumers more spending fire power. finally number five, trade expansion.

i'm all for it. free trade is a tax cut. all right. this five-point plan emphasizes romney's turnaround credentials and offers a reaganesque investment. and as always i'm trying to be helpful. now, let's bring in our distinguished panel. contributor melber for nation magazine. town hall.com editor guy benson. and former white house aide joe watki watkins. i'm going to give you the first take on the tweaking of the romney message. and in particular his turnaround skills. we need a turnaround. >> well, first of all, we may have the makings of a romney-kudlow ticket here if you have such strong views. he was here last night, maybe he'll come back and talk to you more. the big problem is when you look

at the overall tax plan he's put forward, it cuts $900 billion out of the federal budget. if you're going to be honest with the public about a turnaround and what you're doing, you're not having human capital programs of any scale when you're cutting what amounts to one out of every four dollars in the budget. you can be a big cut ir. but you can't promise everything. that was a problem for mitt romney in massachusetts. you touched on that in your interview last night. he couldn't own up to he did sign a permanent assault weapons ban in 1994. i think it's a good thing. it concerns me on the economic policy and gun policy he can't keep a straight answer. >> i think it's a good thing too. i may be chastised for that. i want to get your take, guy. the thing that bothered me a bit was the idea -- he called it economic freedom. he did say economic freedom meaning keep taxes low and he had this sort of odd phrase

about regulators see themselves as the allies of enterprise. i don't think regulators will ever see themselves as allies of enterprise. that's not what federal regulators do. >> they might say that. >> reagan used to talk at the top about across the board tax cuts and deregulation to help business. that's what i'm getting at with mr. romney. >> he is proposing across the board tax cuts. with respect to ari, i don't think a lot of americans see tax cuts as taking out of the budget. they say it having more money for themselves to spend as they see fit. i want to go back to your point on turnaround. governor romney is going to be at the olympics on friday in london. i think that's an important moment for him not just being abroad for as presidential candidate but calls to mind the massive turnaround at the utah olympics that was tarred by scandal and corruption. he turned it into a giant

american success. >> why doesn't he say that directly. he ought to say on this point, it's a great point. i turned around the olympics, i'm going to turn around this country from bankruptcy. and i'm going to turn it around from the lousy recovery or quasi recession we're in. this is the point. in morning joe this morning, we were talking about this point. why doesn't he hit harder at his natural skill set which is being a turnaround guy? >> i think americans are gaining more and more confidence in mitt romney as a guy who can turn around this mess we're in now. all the polling data shows this. he's beating president obama in all those issues having to do with better handling the economy. he's not a boastful person. he's done great things in the past. he's done great things with private equity, at the olympics, he was great governor of a state.

more importantly -- >> what do you mean? he says it all the time. obama is panning the daylights out of him for bain capital and he's making a defense. i'm saying he ought to do it more. he's got to fight back harder on this. >> well, clearly, the fight is just beginning. this is the time when more americans are paying attention. those who are unemployed are really paying attention. what's important to them is whether or not they get back to work. >> the reason he's not boastful is he's not always sure what he's proud of. that's his biggest problem. he used to boast about health care reform, now he doesn't. you know what americans like about gordon gecko? they like he knew where he stands. >> you're not comparing mitt romney to gordon gecko. >> i wouldn't. >> i'm going to take out my semiautomatic. that is a terrible thing. >> but would deco say to anyone

we did that up to this year but then we didn't do it anymore. i was only ceo part of the time. that's not a leader. >> that's diversion. if all the obama campaign can talk about is when did he leave bain capital. 1999 or 2001 or 2002, that's a bogus argument. talk about the economy. talk about how you're going to put american people back to work, how you're going to reduce the burden on companies so they can hire folks. talk about how to lower taxes. you're going to cut out taxes on capital gains and interest. >> basically i agree with everything you said. but, guy, he kind of says it but doesn't. in other words, last night i gave him ample opportunity, okay? i'm not here to hatchet the guy. i want to get his point of view out. so he wants to keep taxes down. that's good. he doesn't talk in specifics about capital gains and dividends. he did mention his 20% across

the board tax cut which i think is a fine idea. if he can pay for it by getting rid of the upper end deduction. are you one of the conservatives that feel mitt is not aggressive enough? i hear that from a lot of conservatives. are you one of them? >> i think on some level sometimes. but i think you didn't build that controversy. which was not taken out of -- when obama is saying of course people built their businesses. that's not what you spaent minute and a half saying. i think that lit a fire under this mitt romney. i haven't seen him hitting the trail he way he did -- >> i thought that was one of his strongest moments. it touched off. >> here's what i would say also if i'm romney. i'd say the reason i was successful at bain is because i am a turnaround guy. if you don't believe me, ask former obama guy steve ratner. and we can talk about bain all

we want. when i left bain, i shouldn't be held responsible for what happened afterwards. what's your idea, mr. president? it seems president obama's idea -- >> what is his idea? out in oakland, california, where they have a 13.7% unemployment rate. he said my plan is working. what plan is working? what's working? i don't get any of that stuff. if he wants to say that, that's great. it'll cost him the election. >> i think if you go to detroit which is a real proof positive contrast. you have mitt romney saying he's so afraid of government doing things that he didn't want to bail anything out. >> you mean because of the republican governor snyder. >> well, no. i think the republican -- >> because all of the dealers were laid off. >> i think if you look at chrysler and the republican governor himself would say thank goodness the federal government was there. there are big differences between these guys. to go back to another point, i

don't think mitt romney getting excited about obama's gaffe is the leadership thing he needs. he was a liberal governor. he rescued olympics. he's got one left. so far the other two have not worked. >> you've got to give mitt romney credit. he goes to the naacp clearly not the friendly audience, he lays out his plan to put people to work. african-americans are among the highest of unemployed ever. joe biden comes by the next day and the only defense he massachusetts to offer to people of color is they want to make barack obama a one-term president. he doesn't offer a plan how to get people back to work. all he says is they want to make barack obama a one-term president. at the end of the day, the president has to have a plan for putting people who are hurting back to work. >> i just got to say, briefly. >> he wouldn't show up. and romney at the end of the speech got a standing ovation. because of some of his points that that crowd listened to. >> i just have to correct on the

facts. we have a jobs act bill. bloomberg news called it tax cut heavy. it never got a vote in the house. the house found time for 33 votes to re-re-repeal health care. but it never got a vote. saying no plan is not fair. >> i'll give you the last word. >> it's the second stimulus that couldn't even get out of the democratic controlled senate. your shots at romney. he left office with 4.7% unemployment. >> the jobs act got a majority -- >> people respect him on bain. listen, i'm just trying to be helpful and give a few ideas about coordinating a message. it's what i do for a living. we appreciate your time very much. coming up on "kudlow," it's no secret. the rich have put money in swiss bank accounts. there's nothing wrong with that. but a handful of politically

connected americans had secret undisclosed accounts at ubs. more on this dirty pool coming up. next. i'm barack oba

ma and i approve this message. [romney singing]: oh beautiful, for spacious skies, 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...

we're about to reveal new details on politically connected americans with secret swiss bank accounts. now, don't get me wrong. as long as they're declared and the taxes are paid on them, no problem. but some are a bit shady on the wrong side of the law eamon javers joins us. >> you're right. a source familiar with the bank accounts in question tells cnbc that a handful, quote, unquote, of politically connected americans had secret undisclosed accounts in swiss banks at ubs. the names of the account holders was turned over to the u.s. government as part of the settlement with the u.s. government about tax evasion a couple of years ago. now, why would ubs know who its politically connected customers are? they're required to track what are called politically exposed persons or peps in banking

jargon. that's because banks would like to view those people coming from regimes and the like. but they also apply it to american peps. i had a chance to sit down with a former ubs swiss banker named brad birkenfeld in a prison. he told me how he saw ubs handling american peps from the inside. take a listen. >> there was an american pep desk out of zurich. i knew that for a fact because we had people who knew it existed, but it was so cloak and dagger. it was held in secrecy, beyond secrecy. >> in fact, the names are still held in secrecy. we don't know the names of the people who held these accounts. we just know according to this source that the information was turned over to the u.s. government. >> all right, eamon. politically exposed persons, peps. what are the odds that these names will surface? how might that happen? >> well, you know, there's a couple of different

investigations ongoing in washington into some of these banks that have been active in switzerland. at some point these names would become public. it's very hard in today's washington for big explosive news not to leak out at some point. investigators have done a good job of keeping these under wraps. reporters like me would like no know those names. >> me too. thank you very much. up next, a showdown between labor and business. one of america's largest companies demanding a six-year wage and pension freeze. why this could put the final nail in some union coffins coming up right after the break. . we take it on ours. this summer put your family in an exceptionally engineered mercedes-benz now for an exceptional price during the summer event. but hurry, this offer ends july 31st.

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more than a hundred union firefighters from around the country swooped in to scranton, pennsylvania, today to demonstrate against the mayor. cut the police and fire paid a minimum wage for a two-week period. got some support from national public workers union. my humble opinion, he is correct. the guy is a hero. what else is he supposed to do? anyway, let us move on. another topic. a labor battle businesses watching closely. 12-week war of attrition between caterpillar and the union. they're freezing pay which they say is above market rate in order to save american jobs and

create new ones. by the way, cat has added 65000 new american jobs. now, the wall street journal reports tonight more machinists are crossing the picket lines. 10% of them in fact. let's talk about this. here now is bob lutz he's cnbc contributor. okay mr. bob lutz, is caterpillar right? they are saying the union wages are 34% above the market and in order to save the jobs and profits they had to do what they're doing. do you agree with cat? >> i agree with it totally. it's obvious when you look caterpillar overall is profitable which is thrown in their face. i bet if you look at that specific plant, that plant loses money. at 26 bucks the average worker there makes 50,000 a year without overtime. the profitability of caterpillar globally is 35,000. so those are diluting the

average rather than helping it. clearly something's got to be done there. if nothing is done, ultimately if they can't get alternative workers to man that plant, this is how outsourcing happens. there are plenty -- i'm sure there's plenty of machinists who can produce high precision hydraulic parts in china and korea. whenever labor isn't flexible, they have no alternative but that outsource. >> and they're getting people to cross the picket lines. so clearly the demand for labor, there's a -- meets an excess supply of labor in these bad times. and cat is getting what they want. let me ask you a question. if detroit -- if gm and ford and chrysler had been as tough as cat, would things have turned out differently? because cat has a reputation of being just about the toughest in the business and therefore the most profitable, mr. bob lutz. >> yeah. okay. the difference between caterpillar and gm or ford is

that they can produce basically the same equipment at their various plants around the world. the number of workers in this case i think is 800 workers is relatively modest. but they can survive with certain departments or certain areas or even a whole country being on strike. you take ford, gm, or chrysler, any large mobile company. if that goes on strike all over, the cash strain on the company is so huge and there's no way to get replacement workers to man all the assembly lines and machining operations to where the average runs out of money in eight or nine weeks. and the uaw strike fund is like 22 weeks. >> wait a minute. okay. that's a good point. you got me on that point. >> you know you can't win. >> what about -- look. one thing caterpillar is doing ey've got to make a $1900 per

year health contribution to their health plan. now, uaw notoriously made no contributions. general motors and ford, i'm not an expert on detroit, but you never demanded those copays. if you had, i think the bankruptcy wouldn't have happened. >> i will tell you -- first of all, in '07 gm did negotiate a health care package where we paid a one-time fund and from then on the uaw was going to pay their own health care. the trouble is, that didn't become operative until 2010. so it was -- we had done it, but it kicked in too late. >> think how great it would have been if you'd done it years earlier. think how great it would have been. >> yeah. rick wagner pushed that through. we eliminated the greater part of the health care burden and told the uaw to fund it

themselves. now under the bailout, the reason the uaw got stuck was the appreciation of the stock which obviously hasn't happened. appreciation of the stock and the success of selling of the stock was what was going to fund uaw health care. >> with taxpayers still on the hook. >> well -- yeah. >> they're still on the hook. going back to caterpillar, the whole world's going to watch this. looks like the joliet plant, maybe other plants. how important is this cat strike and how important is the cat settlement and i think victory to the rest of american business? caterpillar could save jobs. they've created 6500 new jobs. that ain't peanuts. that ain't nothing. and they're stopping jobs from going overseas if their labor is competitive. >> exactly. and, larry, that's the whole secret. the old time industrial wage that's the high end industrial

era of the extremely highly paid uaw machinist union, that's a thing of the past. we're going to have to get competitive. >> bob lutz, thank you. thank you for being honest. we appreciate it very much. programming note. coming up tomorrow morning on squawk box, don't misdoug oberlman. that's it for our show. i'm larry kudlow.

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