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? big guest, vice presidential candidate paul ryan. looking forward to it. thanks, jimmy. by the way, ryan has a big economic growth message and the republicans may be going back to gold. i i'm larry kudlow. this is "the kudlow report." our top story tonight, my headline making interview with paul ryan just days before he takes the stage in the biggest speech of his life. i asked what his vision for the speech would be. >> a three-point plan. pro growth policies, energy policy, energy reform, tax reform, spending cuts to get the deficit down and reforms that get the debt paid off over the long term. that's how we dodge a debt crisis. >> all right. you will hear more of my interview with mr. ryan just moments away. also tonight, breaking news. the financial times reports that the republican platform expects

to call for a new gold commission that could restore a link between gold and the dollar. this, of course, is my ultimate king dollar wish. you have heard me say it many times. if there ever was a path to prosperity, it is paved with gold. gold rose 33. the dollar fell and the dow was off 115 points. breaking news. minutes ago florida governor rick scott held a status update on tropical storm isaac. there is a growing threat it could turn into a hurricane that might disrupt the gop convention. here now is florida republican rick scott. welcome back to "the kudlow report." so is isaac coming to tampa or will the show go on, sir? >> the show will go on. i'm doing updates twice a day with the rnc, federal officials, local and state officials. we are a state that's used to hurricanes.

we know how to deal with them. we have a great emergency management team here. we are keeping everybody informed so people make good decisions. the storm -- the latest track, the 5:00 p.m. track has it going further west. about 150 miles off the coast of tampa. florida is a state that knows how to deal with hurricanes. we are getting the state prepared in case we have a hurricane. >> i hate to politicize a hurricane, but some people are talking about the democratic mayor of tampa, bob buckhorn. does he have the power to call off the convention? >> the power in the convention makes the decision. local officials decide whether they need to evacuate or not. the convention makes its own decision. bill harris is ceo. i spoke to him today. i spoke to governor romney today and brought him up to speed on where the state is. our state and local emergency management teams, we are ready

if something happens. fortunately now the storm appears to be trending to the west. we'll have a lot more information on sunday as it crosses through hispanola and cuba. it could dissipate over land. we'll see what happens. >> i'm toll joe biden, the vice president will be visiting tampa. is there a way to keep him down there? every time he opens his mouth he loses 50,000 to 100,000 vote. can you keep him there? that would be terrific for the gop. >> look, this election will be about jobs. my race in 2010 was about jobs. i believe governor romney will win because he has a jobs plan. you know, our state has had the biggest drop in unemployment because we reduced taxes, regulation, paid down state debt for the first time in 20 years. we are running the state like you run a business. be patient. get companies bringing jobs here.

we are doing the same things governor romney will do to get our economy going again. >> congratulations. thank you very much. >> thanks a lot. >> we appreciate the update. quick programming note, next week i will be riding the storm coming to you live from the republican national convention in tampa, florida. unemployment, the economy, weak campaign coffers. it is an uphill battle for team obama. now this. economic model predicts romney will beat obama. this is interesting. a study from a pair of university of colorado professors whose past estimates have been on target since 1980. well, they put mitt romney at 320 electoral votes and president obama at only 218. they give romney a 53-47 win in the popular vote. perhaps as the flurry of bad news for obama inspiring what the hill calls, quote, a full scale assault on republicans next week. here is cnbc contributor robert costa of the national review. what's going on here?

democrats are going to come to tampa? they have no class, robert. what's going on here? >> there is a long-time gentleman's agreement in american politics that during the convention the over party stays out of it. you have joe biden, debbie schultz and other democrats coming to tampa to be surrogates. >> if joe biden is coming and debbie wasserman schultz this will benefit democrats. any time either one of them opens his or her mouth huge votes for romney. i'm serious. besides the fact they have no class and nothing to say. what they say is offensive. >> speaking of romney sources they welcome joe biden's appearance in tampa. the more the merrier, they tell me. expect republican delegates going to the biden rallies. that's for sure. >> michelle obama will be onletterman wednesday night but letterman is late. by the time she gets there won't the speech be over?

>> it speaks perhaps to nervousness in the democratic party. usually during a convention the other party stays out of it. they are sending michelle obama to the letterman show. biden to tampa. there is anxiety and unless they have a presence they will somehow miss out on the headlines, voters. republican and romney backers expect it to be over exposure for the obama team. they are okay with biden's presence. >> i think it rub off all wrong on the obama ticket. is democratic desperation leading to chicago thug-style politics in tampa? let's ask our team of topnotch politicos. here is david goodfriend. we have cnbc contributor tony fratto and charlie black. charlie, you have been around a while. what do you make of this stuff? maybe we ought to keep joe biden

in tampa. he can only help the republican ticket. >> well, larry, yes, indeed. i said we are happy to have vice president biden down there. we need the entertainment. who will he insult next week? who will he pander to? if they want somebody to baby sit him, i don't think debbie schultz is the right baby sitter. she makes as many gaffes as he does. listen, it's a desperate campaign. they have been desperate since april when governor romney emerged. they have run the most ruthless, negative, personal campaign in american history, set a record for telling the most lies of any campaign in american history. yes, they are using chicago-style tactics. you know what they have been doing it all summer and governor romney has gone up a little bit. maybe because every time biden goes to a state, romney goes ahead. i don't know. >> let me go to david goodfriend. first of all, uh think folks will dial up the convention to

see chris christie, bobby jindal, all the republican stars. they want to see ryan, romney. they are tired of your friend obama. cardinal dolan. this is a key point i read. cardinal dolan will give the benediction wednesday night. that's a huge plus. no way joe biden will interfere with that. >> listen, larry. this past week has been christmas in august for the democratic party. everything from bringing back an abortion debate from 30 years ago through a whacko congressman in missouri to the kind of medicare debate where president obama's favorability is up to 60% on the question of who do you trust with medicare in swing state like ohio? to the issue of whether the democratic party is fighters, we are fighting fair. to my friend charlie black's comment if there is a lie here it's a lie about welfare reform mitt romney put out there saying when a republican governor asks for a waiver and president obama granted it it was undoing

clinton's reform. bill clinton has been defending the president, saying, look, our policies are better for middle class growth, better for the american economy. that's what people are listening to. >> he's still reversing a statute by executive order. you can't do it. >> on welfare. >> i'm sorry. there is a fact here. >> on welfare. >> when the republican governor asked for a waiver and the president granted it that was then deemed to be undoing clinton's welfare reform and president clinton himself said it's a lie. if there are lies here it's when mitt romney lies about this president's record. >> it's not a lie. read the order hhs put out. it uh allows a state to give welfare without a work requirement. it doesn't matter who asks for it. it's not legal. >> charlie, i love you, but i will take president clinton's word over yours. i'm sorry a. >> even i might win that contest, to tell you the truth. you never know.

>> team obama said this woman died because of cancer, that was romney's fault. they accused him of breaking the law. a pack of lies. i think you can't break the work fair rule without a legislator. what do you make of the uh assault during the convention? this is bad form. it is chicago-style politics. might it really backfire as the public sees this? >> i think it can. whether it's bad form or not, here's the bottom line. the obama campaign is not about running on the record of the first term. it is not about running on what would be the agenda for the second term. out's about bringing down mitt romney and disqualifying him as a candidate in the minds of voters during the campaign. the biggest opportunity mitt romney has to go out with a positive message, this is the first time. you know, if you go back from a year ago today, you have had people standing up, being

critical of mitt romney whether they were republican opponents or the president using his campaign arm or himself and a surrogate. this is the first time you will have successive days of people standing up saying positive things about mitt romney and his background and record. that will have an impact and be the reintroduction of mitt romney to the american people. that's what worries this white house now. if the strategy is to bring down and disqualify mitt romney, three or four days of positive, you know, biography and messaging from the romney campaign bothers them. >> i i think bill clinton who i admire, at least partly as president, the economic side. he will give a good speech about bill clinton. you know that's coming. it will be about him. i think what will happen here, with 40 or 50 million people watching paul ryan and mitt romney, seeing them for the first time, the republicans are going to come out of this with a big bump in the polls. i think the risk for you, my friend david goodfriend is that

the democrats, people already know obama. they already know biden and they are not happy. those guys are at 46, 47%. democrats will come out with a bump down in the polls. >> can i respond? >> of course. >> planned parenthood did polling in states like ohio, wisconsin and florida. they found among women, including independent and republican women, the more they learned about mitt romney and paul ryan, the less popular those gentlemen got. i will take your point that people don't know them well yet and they will learn about them. in key constituencies in key swing states, women, independents, latinos, the more they learn, the less they like. >> charlie black, polls showed today that paul ryan is already helping the ticket in wisconsin and florida. >> he's helping the ticket. he's more popular than joe biden, by the way, though he's only been on the national scene for a ocouple of weeks.

of course you can move people over there with push polling. but the obama campaign has spent 50 million on negative ads this summer. they haven't moved the needle. we don't need all the swing states. we are even just about everywhere. >> i have to leave it there. thank you, david goodfriend, charlie black. coming up, we are monitoring the breaking news that republicans are eyeing a return to some form of link to gold. we are going live to the platform committee vice chair, house member marcia blackburn of tennessee with terrific news. later, my exclusive interview with congressman paul ryan, mitt romney's running mate. free market capitalism is always the best path to prosperity, paved with gold. wait until you hear ryan on free market capitalism. warmed my heart. we'll be right back. -[ taste buds ] donuts, donuts! -who are these guys?

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all right. let's do stock market and economic work. believe it or not there was good news on housing. first of all, new home sales went up. i have combined new and existing

homes. that's the best way to do this. new and existing homes. what you see is a pretty good movement. you are up about 11% year on year. it's coming from a very deep trough way down here when the sales were falling. that was just about a year, year and a half ago. i i'm not saying all is well. i'm saying there is a modest comeback going on in home sales and housing. that is a very good thing indeed. now, the next one, this is very important. home prices are starting to firm up slightly. of course from terrible deep levels. i get it. but the federal housing finance administration which has really the best proxy for home prices, you're running now about 3.7, call it 4% year on year. if you recall, just about a year ago we were way down here at minus 4. you have gone from minus 4 to plus 4%. again, if home prices are rising this is a very good thing. if home sales are picking up, this is a very good thing. there is hope for the american

economy. i don't want to be overly optimistic, but there is hope. let me turn to our friend dan greenhouse, chief strategist at btig. i'm not trying to make a case there is a housing boom but there are good things happening here. >> absolutely. you see out in a number of different data points from the macro side of things whether it's existing home sales cat, new home sales or price measures. you hear it from the home builders themselves. toll brothers admitted kb homes. from the bottom up as well there's been an improvement both in the micro and macro fundamentals for the housing market. >> with all the good news about housing i'm worried about the fiscal cliff recession put out by the congressional budget office yesterday. we have been talking about it for a long time. so have you. is that threat of a fiscal cliff tax hiking recession starting to creep in to share prices? i noticed today prices went

down. yesterday, prices went down after the cbo report. it looks like not even the fed's easy money is helping stocks. is it the recession? >> i don't want to blame any one day on the fiscal cliff. generally, as btig's chief strategist my job is to meet with clients fairly frequently and articulate our view on investments in the economy. i can say confidently that there is virtually no concern about the fiscal cliff. just about everybody thinks it will be kicked into the future anywhere from three to six months or so. no. i don't think it is impacting investor sentiment now. >> why is everybody buying gold? >> gold has more to do with the federal reserve. we get into something you and i can fight about. the last couple of days or weeks you have seen people come to the realization that another program at this point is more likely than not. probably not assured but more likely than not. you are seeing it in the gold price. >> we don't have time to argue

tonight. i think oit will do more harm than good. why do you think oil prices got clobbered today? >> i find it difficult to attribute any particular day's movements to anything else. i would say generally oil like commodities have had a terrific run over the past couple of weeks as growth and inflation expectations turned up. probably had something to do with the data out of china and europe this morning. i wouldn't read much into it yet. >> dan, thank you very much. sorry we're truncated today. we had breaking news. up next, there is a report republicans are looking to return to a gold dollar linkage. we'll get confirmation from republican party platform c co-chair marcia blackburn next up. later on, congressman paul ryan will be here for an exclusive interview. he's got growth, prosperity. if you ask me, he's got the story right. he's already helping the ticket. ryan later in the show. stay with us.

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in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone. breaking news tonight. the gold standard is back in the main stream. there is a report this evening that republicans are eyeing a new gold commission as part of their official party platform at the convention next week. joining us on the news line from the site of the gop convention we have tennessee republican congresswoman and platform committee cochair marsha blackburn. as always, it's great to hear

from uh you. tell me this is true. a gold commission on the party platform? you have no idea how happy this makes me. >> well, larry, what i can tell you is that at 2:00 on monday the platform will be in the seats. the members -- the delegation members for the convention. shortly after that it's going to be up on the internet for people to read. i can tell you this area's language in there deals with auditing the fed. people believe we need to do something about the fed. we need to do something about inflation. there was lots of discussion and a desire from many who were platform committee delegates to do what reagan did. look at what he did with the gold commission. and the reason for that is people have been warn out with what has happened with this

economy over the last three years. the obama economy isn't working for many people. they want -- when you know things you are doing aren't working you start looking at options. just like reagan did. if he was trying to clean up the mess from carter, what he wanted to do was have a commission to look at a metallic standard. there may be -- it may be the time for we as republicans to suggest that our next president do the same thing. >> let me ask because i'm a great proponent of linking the dollar to gold. i think you know that. >> i know you are. >> does team romney support this? most of the platform, i'm told, is coming from the romney people. he's the party leader. does team romney support the gold commission? >> you know, i don't know that. i have not had a discussion with the romney team. but i can tell you this. this platform was built with the

most open process i have ever seen. we had a website, facebook. we had tens of thousands of people that went there or to twitter. they were giving us suggestions. i had hundreds of meetings with people. we talked to lots of different groups and organizations and constituents and had lots of information sent to us. really opened the process to the republican party and to the american people. >> good. >> i would get things from people who would say, i am not a republican. or i am a democrat but this is -- uh i feel at home with the republican party. this is what i i think your platform should reflect. i have to tell you, larry. i have been honored to be the cochair to work with governor mcdonald and senator hogan. i have been just -- there are so many people who have endeared themselves to me with the way they brought forward their hopes and dreams for this country and their best ideas and for getting

this country back on a firm financial footing to serve us for decades to come. >> congresswoman blackburn, good luck on the gold commission vote. up next, america's fiscal cliff fias fiasco. economic wreckage from the ceo. it's affecting stocks. who and what are going to save us and why are we in this position in the first place. robert wright will square off with former cbo director douglas holtz-eakin. and my interview with paul ryan is coming up soon. [ male announcer ] count the number of buttons in your car. now count the number of buttons on your tablet.

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, mitt romney unveils his energy plan. in it he's advocating north american energy independence by 2020. drill, drill, drill. of course democrats wasted no time in blasting him. plus, investors see if america doesn't deal with the fiscal cliff we are headed into a recession. i think stocks are already discounting this bad news. first up, the congressional

budget office predicts another recession next year if congress doesn't act on the looming tax and fiscal cliff. today i spoke with mitt romney's running mate paul ryan and i asked what a romney-ryan administration would do in its first hundred days to avoid the recession threat. take a listen to what he told me. >> well, look. just so you know i authored the legislation and passed it through the house already that prevents these devastating defense cuts, that cuts spending in other areas of government to replace the spending cuts for the pentagon so we don't have these devastating defense cuts the cbo says could be a part of triggering a recession. don't forget that we already also passed in the house an extension of all the tax policies, current law tax rates for another year to buy time for fundamental tax reform. mitt romney supports that. so what we are saying is, what we have already done, we have shown leadership in the house. the president ducked the issue. the senate hasn't even taken it

up. mitt romney says we'll deal with this right away, prevent this cliff, this massive tax increase, devastating defense cuts from taking place. >> right away. >> right away. to prevent this. we'll telegraph it so the markets know. >> before other plans go into place the first thing, first order of business for romney-ryan is to deal with the tax cliff and the threat of recession. >> that's right. we need to get this economy growing. we need to get people back to work. the markets need to know. businesses need to know. employers need to know we are not going to sock it to them with tax increases and spending increases or devastating defense cuts. what we are going to do is fix this right away. and put in place a structural long-term solution to get growth in the economy. get people back to work. >> all right, you will hear more from my headline-making interview with paul ryan in a few minutes. first, labor secretary and cnbc

contributor robert reich, author of "beyond outrage" which will be in stores next week and the former director of the congressional budget office. you heard paul ryan. temporary tax cuts don't work. spending doesn't work. the president doesn't want to deal with this. the senate doesn't want to deal with this. now we are looking at another recession smack in the face that this country cannot afford. >> well, i agree with paul ryan that it would be great that republicans, democrats got together. even a lame duck session. and agreed to revenue enhancers, spending cuts and also agreed to a trigger. i happen to believe that one of the most important aspects of the debate is not just which revenue enhancers and spending cuts but also what's your trigger? when do you begin all of the tax cuts and spending cuts or tax increases or spending cuts. i think the trigger ought to be 3% growth and let's say 6%

unemployment. you don't do anything until the economy is starting to mend. >> i don't know about the triggers. what i know is all of this short-termism is now coming back to haunt us. temporary tax cuts, payroll tax cuts, bush tax cuts. now the clock is running out and we are stharing a recession in the face. >> we are starting to see the effects already. the cbo thought it would slow growth in 2012 by half a percentage point. my estimate is higher. if you are an equity investor looking at the dividend tax rate going from 15 to 45% you will start looking at getting out of the market. that will hurt the economy. the defense and nondefense cuts are scaring contractors and employees. the sensible thing to do is to find a plan to get over the fiscal cliff as mr. ryan said the house has done that and the

president has shown no interest. when the economy was growing faster than now he said it was too slow to risk raising taxes on anyone. looks like the politics have changed and we'll run the risk. i think it is a bad idea. certainly you ought to replace the squeser with longer term cuts in other areas of the budget. no proposals on the white house for that and the senate is missing in action. it's a bad situation. >> wait, wait, wait a minute. doug, you will agree, i hope, that there have to be revenue enhancers as well as spending cuts, right? >> no, no, no. the fiscal cliff isn't about what should be the long-term policies of the country. the house said, we are going to extend the current tax policy for a year and put in fast track legislation so you must do tax reform. that's the place for the debate. what are the rates going to be. we need it. i agree on that. we have to get from here to that debate safely without a recession. that's the issue of the fiscal cliff. >> nobody believes that going back to bill clinton's tax rates will cripple the economy.

is that right? >> the president of the united states believed it in 2010 and said we cannot risk it. i will extend the tax rates for two years. we are growing more slowly than we were at that time. i can name one important person who believes that. >> the president of the united states, as i recall it extended the bush tax cuts under a lot of pressure by republicans. right now does anybody really believe, honestly, that going back to the clinton tax rates would cripple and destroy the american economy? >> cripple and destroy? no. when you're growing at under 2%, 1.5, 1.3 maybe in the third quarter, weak enough that anything that goes round can tip you into recession, that's a bad risk, not a risk you want to take. that's a disservice from the people you are trying to help when you put in a trigger saying we are not getting anything until 6% unemployment. >> it would be great if republicans and democrats could

get together and agree on a plan and a trigger for when the plan goes into effect. that's great. >> i don't agree. i think fundamentally we have to stop having a tax policy that's rented every year. you need a permanent reform people can count on. >> long-term incentives, rules for spending and for taxing. >> all the short termism is killing the economy. >> i want to make it clear with the audience here watching this, do you believe when you have so much under utilized capacity, such high unemployment that you want to cut spending and do anything that's going to reduce demand? >> last answer. >> it's not about cutting but reforms. look at the ryan plans. you fix entitlements so they don't crush the economy. none of it involves short-term cuts. >> thank you. we appreciate it very much. coming up, mitt romney unveils

his energy plan vowing self-sufficiency in north america by 2020. of course i say drill, drill, drill. i will have the full story up next. later, my exclusive interview with vice presidential candidate paul ryan. you won't want to miss it. we'll be right back.

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mitt romney tried to refocus the campaign on the economy today, unveiling a new energy plan promising to make america energy independent by 2020. joining us now with the details, cnbc's chief washington correspondent john harwood. good evening. >> good evening, larry. that was the outstanding event today. president obama kept a low profile. mitt romney went to new mexico to promise something every american president for the last 40 years has tried and failed to do. that's deliver energy independence. >> i will set a national goal of america and north america -- north american energy independence by 2020. north american energy independence by 2020. [ cheers and applause ] >> that means we produce all the energy we use in north america. and there are a number of things i will do to make that happen. it is achievable. this is not some pie in the sky

thing. this is a real achievable objective. >> now, some of the elements of the plan he unveiled in new mexico were familiar like expanded oil drilling. more than the president has agreed to. but parts of it were new. that's giving states control over energy exploration on federal lands within their borders. mitt romney said the economic benefits from those steps would be clear and distinct. >> 3 million jobs come back to this country by taking advantage of something we have right under our feet. that's oil and gas and coal. we are going to make it happen and create the jobs. it adds $500 billion to the size of our economy. that's more good wages. that's an opportunity for more americans to have a bright and prosperous future. >> larry, mitt romney got good news from a new poll out tonight. the fox news poll which, just two weeks ago, had shown barack obama with a 9% lead tonight

shows among likely leaders mitt romney leads 45% to 44%. >> very interesting. is there a paul ryan effect in there, john? >> yeah, i think there is an effect to some degree. we saw it in a poll today in the state of wisconsin where the president's lead over mitt romney had been narrowed somewhat. i don't think it is a large effect. you don't get that much movement with a vice presidential nominee given how polarized the two parties are. but clearly the roll-out of ryan, his appeal, i think, had some effect. not huge but some. >> john harwood, thank you very much. speaking of paul ryan, up next the man of the hour. vice presidential candidate paul ryan joins me next exclusively. stay with us. you'll want to hear the whole story. [ male announcer ] how do you trade?

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i know i was on the short list because i got a call friday night telling me i didn't get

it. >> that was new jersey's chris christie holding a news conference at a jersey shore bar. i shopoke exclusively to the ma who did get the call, paul ryan, who is scheduled to give the biggest political speech of his life next wednesday maybe to 40 million or 50 million americans watching. i asked him what message he hopes to convey. take a listen to what he told me. >> well, first of all, president obama has failed. husband leadership has failed. the economy is failing because of his leadership. in addition to that we have to show the country that we have a pro growth plan to get people back to work to get the economy growing. that we are offering specific solutions to get people back to work, to get the economy growing and giving people a clear choice of two futures from which to choose from. we believe we owe the country an alternative to the path the president has put us on. this is a nation in debt, in doubt, in decline. we need to get back to the

american idea. that opportunity, upper mobility. i want to spell out exactly what that means, what the american idea is and how we plan to retrieve it and get back on the right track. >> people are saying somehow governor romney is not getting the growth message across. what's your reaction to that? what should he do? i mean, we have had the critique of the poor recovery. you made it again yesterday. what about the future? how will the romney program of tax cuts and spending restraints and deregulation and so forth, how does it affect ordinary people? how does it prove to them we can get out of this mess and grow the economy back to its potential? >> mitt romney has been more specific with bold solutions on how to get economic growth turned back on in america than anybody else in this debate including president obama. today he offered a comprehensive energy policy to make north america energy independent by

2020. it is a plan to utilize this great discovery of new technology to get energy produced in north america so we can become independent. he's proposed comprehensive tax reform to lower tax rates by broadening the base and getting rid of special interest loopholes to lower tax rates for economic growth. comprehensive regulatory reform throughout various industries like financial services, health care, nrenergy and the rest to t the regulatory juggernaut stifling small business so they can grow and create jobs. get rid of the tax cliff. end the devastating defense cuts. he's proposed a very comprehensive plan to do this, getting the deficit under control, getting trade agreements that work so we can sell and export more. getting spending under control. tax rate reduction and reform. these are comprehensive plans that mitt romney has offered which will get us back to growth. get us back to opportunity, get higher take home pay, more jobs and get people back to work and put this country on the

trajectory it ought to be on which is a pro growth opportunity society with a safety net that's sustainable that works that people can count on versus the path that president obama put us on which i think will lead us to a welfare state and a debt crisis. more joblessness, fewer solutions. that's why the president is attacking us with all these baseless attacks. >> there is a tough piece in yesterday's wall street journal. i'm sure you saw it. austan goolsbee says the tax plan cannot work. he says if you cut tax rates 20% that will add $4 trillion to deficits other the next ten years on top of extending the bush cuts which will also add. he said for high income earningers you could take away deductions, special exemptions and carve-outs and you still are going to run up the budget deficit by up to $2 trillion. that means there has to be a

middle class tax increase to pay for this. he was quite specific on his numbers, paul. i wonder if you can give a specific rebuttal. >> look, i didn't read the piece. but i know him well. we have debated over the years. they are measuring all of this against this massive tax increase coming in january which the congressional budget office told us yesterday if this happens and president obama gets his wish he'll go back into a recession. they are trying to measure the world against the massive tax increase they want to occur which they think will trigger a recession which hurts revenues. we are saying plug loopholes, lower tax rates. don't forget eight of ten businesses in america file their taxes as individuals. as s corp.s, partnerships, llcs. other countries are lowering tax rates on small business. president obama is promising that in january the tax on small

business goes above 40%. that kills growth, kills jobs by plugging loopholes which are enjoyed by higher income individuals. you are reducing their ability to shelter their income from taxation. therefore more of the income is subject to taxation and that allows us to lower tax rates for everybody in america. families, small businesses, it gets a competitive system, a simple system, one that's wired for economic growth. >> look. i have been a supply sider my whole career. i agree with the economic growth incentives and i know you do, too. in terms of the numbers, you will have this problem. uh worked for reagan and everybody went after his numbers. you have a trillion in tax deductions you could eliminate. that's marty feldstein's number. >> annually, yeah. >> that includes everything. that would include removing tax deductions for the middle class as well. goo goolsbee and others say you will have a $4 trillion hole. you make up some of it from economic growth.

some of it by limiting the deductions to the upper income people. but don't you have to have a spending cut component in there to make the numbers work? >> right. >> specifically what would that spending cut component be? >> yes. that's the other side of the coin. i have been as specific as anybody in congress about spending cuts. what mitt romney is saying is let's get the size of government back down to where it has been 20% of gdp by 2016. that's clearly something we can do through spending cuts, discretionary spending cuts on domestic spending. that's an area of government president obama dramatically increased. comprehensive entitlement reform that's phased in that guarantees benefits for people in or near retirement and phases in reforms for younger generations so there are programs when they retire. it is a three-point plan. pro growth policies, regulatory reform, tax reform, spending cuts to get the deficit down in the near term and reforms to get

the debt paid off over the long term. that's how we dodge a debt cris crisis. >> with respect are we talking $700 billion in spending cuts in the first term? a trillion? what's the ballpark number? >> that's what we have to negotiate with congress in january. mark my words, we have to cut spending. we are serious about it. mitt romney has been clear about that the house has led on cutting spending on passing budgets. president obama has been m.i.a. on this. we have a debt crisis on the horiz horizon. what has the president been doing? four budgets with deficits every year and not a single solution to tackle the problem. what's worse is the senate democrats haven't passed a budget for three years, larry, though we have a budget law that requires congress passes a budget every year. they have ignored that law. we don't have leadership in the white house. we don't have leadership from senate democrats. we have seen leadership from house republicans and clearly

have seen leadership from mitt romney on what it takes to get spending under control, the budget under control and grow the economy. that's what we need. that's what we'll get in 2013 if we win this election. >> my last one, my pal and yours steve forbes was on last night. i mentioned you nd i were going to talk. i asked him to ask you a question. he wants to know what your monetary strategy will be. in particular, two points, paul. should the fed add more stimulus to the economy today and i take it you and governor romney want a fed audit. what does that mean? a, more stimulus from the fed and, b, what would a federal reserve audit mean? >> okay. first thing, two words. sound money. we want to pursue a sound money strategy so we can get back to king dollar, as you say it, larry. number two, i'm not a fan of more stimulus or easing. the benefits are clearly outweighed by the long-term costs of this. it is not working. all this loose money from the

fed is basically bailing out the fact that president obama has failed on fiscal policy. the fed can't keep bailing out bad fiscal policy. we need to get our fiscal policy right. with respect to the audit which i voted for, i believe we need to get in and have more transparency of the fed's balance sheet. that's important to have more transparency and accountability to the federal reserve and the reserve focus on sound money, price stability. but also you have to also make sure we maintain the autonomy of the federal reserve, the independence. i uh put out a statement when the bill passed to this effect. we don't want members of congress meddling with the management of monetary policy. we want to keep that independent central bank authority but we want that central bank authority to be transparent, accountable and focus on sound money policies. >> all right. budget chairman paul ryan. we appreciate your time very much this morning. i personally do. uh wish you the best of luck in your great speech at the convention and on the campaign

trail. >> great to be back, larry. thanks for having me. >> you can see the rest of the interview on cnbc.com. he responds to president obama's criticism and a discussion of medicare. that's it for tonight's show. thanks for watching. programming note, next week i will come to you live from the republican national convention in tampa, florida. rain or not, i will be there. look forward toyot it. see you tomorrow right here. [ male announcer ] when this hotel added aflac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪ ha ha! and sounds vying for your attention. so we invented a warning you can feel.

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