are these unions killing business with it says here their whiney demands? "the kudlow report" is moments away. >> heard a lot of grousing today that the earnings are going to be bad, that there is not enough momentum. did you see this market again today? they're i am, jimmy. releases his 2011 tax return and guess what? he paid more than the average american. good evening, everyone. i'm joe kernen filling in for larry "the legend" kudlow who is a little under the weather. we hope he feels better. this is "the kudlow report."

mitt romney releases his 2011. his rate was 14.1% higher than the 8.2% than the average american household pays. more than he needed to pay, in fact, and the amount given to charity almost $4 million, twice as much as the president. the romney campaign is finally pushing the new cycle instead of following it as some republicans have been charging. romney telling "60 minutes," listen to this. >> it doesn't need a turnaround. we have a campaign which is tied with the incumbent president of the united states, but is that enough 46 days before the election? also tonight, so the president says he has come to learn that you can't change washington from the inside. reminder that he ran in 2008 as an outsider, pitching change against senator john mccain. learn learned, what else has the president learned in his three years in office? the markets closed flat for the day mostly, and flat for the

week. tonight we're getting hard numbers on what falling off the fiscal cliff could mean and what it could cost the markets, 20%, at the very least. so how is congress going about it? earlier today the house went into recess until after the election and the senate wraps up tonight and we'll look at washington at work or not, but first up, after months of resisting and saying he's done what's required, mitt romney put out a friday surprise and released his 2011 tax return and nbc's john harwood joins us. >> reporter: good evening, joe. mitt romney promised when he released preliminary estimates that he would release these returns before the election and now he's done it. he actually reported lesser income than he estimated earlier in the year and he said his 2011 income would be $21 million and he said instead it's a little over $13 million. he said that his effective tax rate would be 15% and it's actually 14%, but as you

mentioned, he kept it at that level only by claiming a little over half of the $4 million that he gave to charity as a deduction. his aid said the reason he did that is because he indicated in august he never paid less than 13% and he kept that true. mitt romney also tried to defuse the attacks from democrats who say why did you release more tax returns going back say ten years. what he did was release a statement over 20 years with an assessment of what he said his effective tax rate over the 20-year period had averaged 20.2% and that he never paid less than 13%. that's not going to satisfy democrats. in fact, harry reid who had been calling mitt romney and accusing mitt romney of not having paid taxes in the past put out a statement saying he manipulated the return by limiting the charitable deductions and he hasn't given us the answers. mitt romney hopes that this release is going put this issue behind him at least a little bit

and he picked an opportune time to do it in the week when the 47% video drew so much attention. it could hardly get worse on that issue and better for mitt romney to move toward next week in advance of the debates and get on to other issues like his economic plans. >> john harwood, as the fourth of state, i would imagine you would be all over harry reid. what he was able to come back with is he manipulated 2011 charitable, and every year he paid a minimum 14%. harry reid said without identifying sources that the years he paid zero taxes. why aren't people saying there were years -- harry reid, i mean, i don't know if i would call it a lie, but that looks to me like that has been totally put to rest and you're keying on that all he can say is thatty hoo manipulated 2011 contributions. that's of the other info? >> that's what he said. >> i know. i think that's just maddening.

>> what he said also was that he hasn't released the actual returns. >> i got it, but if you average 20 in the lowest year ever was 13%, that's a far cry from the years when you paid no taxes and to level that -- >> to level that charge against someone -- >> he also said in that statement, joe that there had never been a year in which he paid no federal taxes. >> right, but the level of distrust between the parties or at least the pretended distrust is such that harry reid and other democrats are going say until you actually show me the returns -- >> and have they released theirs, jim? all right. harry reid? >> who knows? >> i think harry reid releases his disclosures and doesn't release his actual taxes. >> most of them don't. look what we have. look what we found. harry reid file tape. take a look at this. >> people running for president and file their tax returns, let everybody look at them and mitt

romney can't do that because he's not paid taxes in the prior 12 years. the word's out that he hasn't paid any taxes for ten years. let him prove that he has paid taxes because he hasn't. >> we'll run that again and again and again. and perhaps an apology is in order. by the way, thank you, john harwood. we'll move on with the panel. will today's release finally satisfy the dems? here's howard dean, former vermont governor and former presidential candidate and jimmy of the american enterprise institute along with jonathan calegio of american crossroads. they're spelling it all out. you should have seen how they spelled it all out for me. howard dean, and i call him governor and i call him hodie and they get to be called things. my first is you've seen these now and i'll ask this a lot tonight. you've got a gieo guy in society

who paid $2 million in taxes and gave $4 million to charity, should we, a, wish we had more guys like this in society or b, wish we didn't have any guy like this in society? his overall rate on what he gave to charity or taxes is 40%, governor, good or bad? >> that's not the issue. the issue is how truthful is he and the problem is he did go back and manipulate the tax rate list in the past year. nbc ran a clip of the evening news tonight of him saying i don't know, last july or something -- >> is that right? i know where you're going. >> if i paid more taxes than i should have i'm not qualified to be president, well, he did. >> so he paid more -- so you guys are going to now nail him on paying more taxes than he had to when he just stays within the law and pays what he's supposed to pay by law, you don't like that and you accuse him of evasion and paying no taxes and now you'll get him on that?

that's a gotcha moment, howard? >> the issue is his credibility. he should have showed the tax returns. >> how's harry reid's credibility? >> i would say in trouble, but mitt's not out of the woods yet. >> he manipulates his tax rate to pay more taxes and then you have the guys that support the president who say gee, i would love to pay more taxes and as soon as you raise those tax rates i'll pay more taxes. romney is paying more. they got the right to indict him. it's absolutely ridiculous. >> should we want more people -- say we had ten times as many people -- >> oh, no. >> no, listen, no, we don't want taxpayers. we don't want people giving $4 million to charity and value creators. those are the parasites in socie society. we don't want this. >> this is the embodiment of what's wrong with this country is -- is that someone --

>> wealth creators. >> no, here's what we want. we want people like mitt romney who go out over the course of their lives and have created wealth, started companies and turned around companies and paid millions in taxes and give millions to charity. i would think that -- listen, a nation full of mitt romneys would be fantastic. >> howard, going give you one more chance on that. >> look -- >> i think you're being quiet because you really don't have anything to say. i think you're being very quiet tonight? you're a tough combination, you and jim. >> don't back down. >> i'm not backing down. >> wait until i bring in jonathan. wait until i bring in him. >> nobody opposes mitt romney making $20 million or whatever he made. >> wait a second. that is an embodiment of what's wrong with this country with wealth being concentrated at the top where all of the power is and they maintained that wealth by, i guess, bribing or lobbying congress to keep their tax breaks. >> as i said, nobody begrudges mitt romney making $20 million a

year. >> this whole campaign is about begrudging mitt romney for making -- that is the core issue -- >> that is not what the campaign is about. >> the campaign is about different voices for different people. >> john, romney plays by a different set of rules. >> if you argue with howard i'm going to start taking howard's side, john. >> one of the key things, remember, this campaign is not about tax returns this is basically a ruse that the obama campaign invented in order to not talk about the economy. do you remember the first time they brought up the tax rush issue was the monday after the july jobs report and they did it because it was a terrible jobs report and the media bit and they went after romney. remember the next time they did it, it was when jim mesina wrote a letter to the campaign, do you remember when he did that? it was the day of the august jobs number for the states when 44 states saw their unemployment number rise. nobody cares about this. that same washington post poll back in august showed only 20%

of people thought it was relevant. he pays what the law requires and maybe more. he's not breaking laws and this is not an important thing and that's the tragedy of the whole thing and we're talking about something that isn't an issue at all. >> this is what the republicans don't get. the issue is not how much tax he paid unless he paid zero, which is he didn't. so the problem is for him is the credibility and does he play by a different set of rules. -- there's a car in the garage and the problem for the cayman islands and the swiss bank accounts which we haven't heard anything about the swiss bank accounts and the cayman islands. >> the crazy set of rules called the u.s. right. >> change the tax laws. >> most have a swiss bank account or hide their money in the cayman islands. they can't do that. >> he hasn't broken the law and it doesn't appear so and i don't think he has. >> that sounds a lot of

rhetoric. >> and a nonpoint. >> i saw an nbc news program and the $75,000 autoworker paid more than mitt romney. >> anybody that has investment income like dividend or capital gains could pay lower than people with an ordinary income. that's just part of tax code two. >> that doesn't seem fair to ordinary working people and that's the problem. >> raise taxes on investing and saving. >> and heaven help us, we certainly don't need more saving and investing. >> howard, you're a contributor, i can't see another reason why you'd come on here, and if you do go on with rachel or ed, just bring it over about harry reid that you might mention that he said that stuff or was it a bunch of crap? would you mention it to them? maybe they'll look into that. >> i come on here because i get invited because you need a moderate on your show with the

right wingers that you have and these conservative hosts. >> let me play this out one more time for you. i want you to think god father ii in that senator from nevada. let's watch this. >> people running for president filed a tax return and let everybody look at them and mitt romney's can't do that because he's basically paid no taxes in the prior 12 years. >> the word's out that he hasn't paid any taxes for ten years. let him prove that he has paid taxes because he hasn't. >> do you remember his name? anybody? anybody? bueller? anybody? senator pat -- >> the god father, make the whole problem go away, godfather. >> thank you, i wonder if i can get in trouble for bringing that up because he was a nevada senator, too. >> do you remember how to get a license? that would never happen -- >> see you tomorrow. >> oh, god, no, please. thanks, howard, love you. >> always a delight and a

pleasure. we'll see you soon. >> thank you. coming up, the markets are nervous the fiscal cliff is coming. where's congress? they're heading home? is that a good or bad thing? larry is out sick, but don't forget free market capitalism is the best path to prosperity. "the kudlow report" is coming right back. americans believe they should be in charge of their own future.

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>> just how devastating could going over the fiscal cliff be for your portfolio today? citigroup mapped out that, and stocks falling by 20% and that would be the worst case fiscal cliff scenario. gdp growth coming to a halt at minus 1%. it sounds like more than a halt if it's mean us one -- >> a drop in oil prices and some things are not as wad as the other and a 5% depreciation of the dollar which we've seen that vis-a-vis the europe in the last month or two, right? >> but just think about that impact on those treasurys. >> right. and unemployment rising to at least 9.5% through 2014.

let me turn to hillary cramer editor of "game changerstocks.com and author of "little profits for small stocks." how do you figure it out? what's the methodology. >> it's analyzing what the impact could be if you see the hit if these taxes come back and we don't actually have some kind of bipartisany negotiation around the election time. joe, we're going have a hit that is easily 10 to 20% to the stock market, and then unemployment starts to creep up even higher than what city is predicting, right? because we have real unemployment at 16%. >> right. >> if we have unemployment then everything the fed is doing with qe3 which is absurd as is becomes even more ridiculous because unemployment goes up and people stop spending. the stock market continues to fall and we have this downward spiral. we're already seeing concerns and the transports were down 5.9% this week. that's telling us that the

street's worried. >> i saw that and it was fedex and norfolk southern, i think, but that doesn't matter where it's from and we know that about dow theory and we'll find out if it's indicating and is it just that the tax cuts are expiring and there are taxes on the affordable care act and there's also sequestration and spending cuts and all of that put together. >> when you combine the whole package, it's not so much the spending cuts as much as it is the hit from the taxes. when those taxes go with $450 billion. >> and is that that's expiring or also the obama care? >> no. the $450 billion is just the expiration, but that would be over the first half of 2013. >> i see, and then of course, we have these ridiculous obama care legislation and the market's getting worried about that and we have a great s&p run. things have been really good. if we seem to be overextended and we lose steam we're really

talking about literally a 2008-2009 style of recession. we can't take a chance of that happening. >> thank you for the analysis and i hate to say i hope you're wrong, but we'll see. coming up, thanks, hillary. unions holding american airlines and the economy hostage. almost 300 flights came through this week. how many people, i don't even want to think about the people at the airport that work for amr and what they have to listen to. dan cart owe the consequences. that's next. now, that's what i call a test drive.

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if you're watching me from an airport you know pilots for american airlines who are angry about their contracts are doing everything they can to slow down air travel. american airlines has canceled hundreds of flights this week and the airline expects this number to rise as pilots continue to slow down operations. why are these pilot unions holding the economy hostage? here now is don carty, former chairman and ceo of amr corporation and american airlines. how are you? good to see you. >> i'm well, joe. >> is this purely about pay? is it about benefits? what is in this contract that they aren't happy with? >> joe, there's a lot of change in this contract. if you go back ten years ago, american managed to avoid bankruptcy by a consensual restructuring and unfortunately it didn't turn out to be enough.

other airlines subsequently went bankrupt and they have to make a more dramatic change and there is a significant change and you have to be sympathetic. >> compared to their peers. >> i think what american is asking for is a contract competitive with the other major airlines. >> is that what they're seeing or is that not what they're seeing? >> i don't know what the individual employees see it or not, i think they would prefer this not be the outcome. they're unhappy about it and you have to be sympathetic with that, but they had a chance to do this consensually and they had a vote and 60% of them voted not to ak sep the contract that was proposed and now they're into a situation where the judges allowed american to simply impose a new set of rules. >> you know how long the bad feelings -- when i've had a canceled flight and if it's not

a good reason you say -- canceled? i have things i've got to be there and that's why i make this -- this reservation. when it's canceled, the bad blood stays for a while. american already isn't thought of that well because i think they stayed too long from doing the thing they needed to do. this is like cutting off your nose, isn't it? >> it is a little bit. this is damaging, joe. it's not a good thing, joe. customers are upset about it and american is doing the right thing in that they're canceling further outs and they're giving customers a warning. there's nothing worse than a cancellation on the day of and that has happened in the last few days and that being said i had a wonderful flight in american and the flight attendants were terrific and the service was great. it's not every flight and it's certainly not every pilot. >> this is the second story, major story about unions and probably not in a great light

and we haven't heard a lot in recent years. with 7% private unions and i know we had a lot of public union, but was that a coincidence that union stores have come to the fore? what does that say to you? i know what it says to me, but what does it is a to you? >> it is clear that these tactics and these approaches haven't worked for most unionized employees and the consequences is most of industrial americans and private sector is now not unionized and we're simply going to have to find a different way of dhog, but this kind of tactic is not working for the companies and many of them have gotten themselves in financial trouble, but it's also not working for the employees. >> don carty, thanks for your time. on a friday night, i appreciate it. >> not at all, joe. good to talk to you. >> coming up, 17 people dead and dozens wounded as pakistan holds an anti-american national holiday. more american flags were burned. where is president obama on this

distinguished former deputy assistant secretary of state peter brooks sounds off. that's next.

welcome back to "the dud low report kudlow report." i'm joe kernen in for larry. remember when president obama campaigned in 200 8 and four years later he said he can't change washington from the inside. what makesa i president think he'll change washington in the next four years? the president and paul ryan go at it over medicare. the administration will reward hospitals that spend the least per senior. we're going reveal how that plan and obama care medicare cuts could lead to the deaths of thousands of americans. first up, pakistan declared today a day of love for the prophet muhammad, a national day for protests and the american -- anti-american demonstrations turned deadly. at least 17 dead ask nearly 200 others injured.

muslims took to the streets and half a dozen countries and ten days after.s. ambassador chris stevens and three others were murdered at our embassy in libya, american soil. secretary of state clinton finally, publicly admitted today what should have been obvious from the outset. listen to this. >> what happened in benghazi was a terrorist attack and we will not rest until we bring to justice the terrorists who murdered the americans. >> former assistant secretary of defense peter brooks who worked for the bush administration. i want to give the obama administration the benefit of the doubt. it is a little bit strange that maybe a terrorist act that now looked like it had some planning was occurring at the same time that the movie was out and it was the separate demonstrations were occurring in other places

and initially, were they just jumping to conclusions when they didn't know or was it something more devious than that in claiming that it wasn't planned or it was from a demonstration? what do you think? >> i can't channel the obama administration, joe. i'm the wrong guy for that, but my concern is that they did not want to admit that it was a terrorist act. it took ten days for the secretary of state to come out and say it was a terrorist act. all they got was a filibuster and they didn't know anything more than they were hearing in the media. i'm very, very troubled by this and also troubled by where's the president on this. the american embassies and diplomatic missions are under siege. they're burning american flags and there's no presidential leadership for the american people on this. i'm very, very troubled by the response. >> we see the -- we see the press and the media shed light on a lot of things and it's finally starting to happen here. i don't know how much of this is

confirmed about whether there was an al qaeda operative and whether it was someone released from guantanamo. i also heard there were some calls intercepted with the politician somewhere that maybe this was in the works. i don't know how much of that is true, but i don't understand one thing and that's why security wasn't ramped up more around the world on the 11th anniversary. >> sure. >> i would think that the media would be more interested in this. >> they should be. they should be and the american people should be. they should be demanding answers. >> my sense is that what they've done with secretary clinton and ambassador rice, they circled the wagons to protect the president's reputation which is not well deserved on national security. some people think he has a strong record on national security and they're trying to protect that. they don't want to call it a terrorist act, we still don't know how the tragic events that led to the ambassador being

killed. what about security? was there enough security? i mean, this consulate in benghazi had been attacked before. i mean, congress has got to get all over this. not only the issue, joe, of whether our other diplomatic missions around the world are safe, but also, you know, what happened and what lessons learned can we get from this so we can prevent this in the future? i just don't see be -- i'm really worried that ten days later they cannot identify who was responsible for this attack in libya and what was behind -- going on in cairo and i don't know, are they on top of this issue at all? >> secretary, it is a tough -- it's a tough road to hoe when we have rudy giuliani, the mayor on saying here we cut off mubarak and we didn't support assad and we let a cast rarated dictator,

gadhafi because he was kind of on our side, making the case that we could have backed some of these regimes sounded distasteful also. i mean, do we support the freedom fighters? did you know that eventually the hard liners were going to take over? for a while it looked like a pretty good strategy, did it not? that it was the arab spring and we had the protesters -- and we had their back and it turns out that's the benefit of hindsight, don't you think? >> i'm a national security analyst and we tend to be skeptical in general and i was very concerned about this last year. i felt like we were releasing forces and we were going to have a very difficult time dealing with it. there was no guarantee that the forces that had been repressed previously under mubarak and under gadhafi who were not choir boys by any stretch of the imagination that these forces that were going to be released were going to be in america's benefit and we're seeing that today.

in egypt we have the islamist government and libya less so and we have chaos and weapons running around that led to this tragic event in benghazi. we weren't able to influence events enough. we let this thing, the genie out of the bottle and now they can't get it into the bottle and having to deal with the consequences. this is egypt and libya and what's going on in syria? that's part of the arab spring which i call the islamist spring because they're the ones that have blossomed from this. there are problems in all parts of the world. >> when there's a timeline, iran and n and netanyahu, certainly, i wasn't there, but it looks like relationships have chilled with israel at this point. >> policy is more than a drift. >> our policy is adrift, but it's worse than that. we don't have a policy for the middle east. a very important part of the world for the united states and there are, you know, there are american forces out there.

there are american diplomats out there and american businesses and american citizens and so we have real good reason to be concerned and i think the administration is -- >> what do you think the president should do? what do you think he should do? >> i'm not saying he may want to address the american people, tell us what he knows. get to the bottom of this and let us know. i can't say that this may not be a difficult intelligence problem, but the fact of the matter is especially with the congress who have the right to know the american people will eventually know and there may be things that need to be protected and the senate was dissatisfied with the briefings and he needs to tell us what's going on and what he plans to do about it because the middle east is on fire. >> thank you, peter brooks, appreciate it. coming up, medicare showdown between president obama and vice presidential nominee paul ryan. today, the author of "decoding the obama health laws" up next with disturbing facts and

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their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ...fo. [ yawning sound ] >> president obama and vp nominee paul ryan had a showdown over medicare today. look at this. >> just 5% of seniors switched to private plans 40% of doctors

who currently take medicare would stop accepting it. >> the very existence of this plan to save and shrink medicare, a plan that has been supported by democrats and republicans alike is the existence of the fact that we can get things done. this is precisely what we want to do. youio see, the plan is to win this election and work with the democrats to save this critical program. >> next month, under obama care thousands of hospitals face fines for re-admitting sick seniors and there are numbers that show that thousands more americans could die as a consequence. these are tough numbers and the dots aren't connected very often. author of decoding the obama health law and what you need to know and i go back and forth. it's called obama care and he seems okay with that and it's called obama care because i care, and then i think about the other name, the affordable care

act. i wonder, which is more absurd or surreal? >> clearly, seniors cannot afford this because over half of this law is paid for by cuts to medicare and specifically, drastic cuts than what hospitals, hospice care, home care, dialysis centers are paid to care for seniors. the cuts are so enormous that hospitals would have to care for the same number of seniors with only a fraction of the money they would have had had this law not been passed. >> the way -- if you're going to create two new entitlements you will give subsidies to people to buy insurance under 65 and you will expand medicaid and you will supposedly save, what is it? it's trillions of dollars. if we covered china, if we covered everybody in china we could have no deficit, but by covering these people we're saving money and the way we're doing is from the medicare cuts, right? >> that's right.

hospitals would have $274 billion less money. their 247 million less money to care for the same number of seniors. it will mean fewer nurses on the floor, less room cleaners, less physical therapy. all of the sers will be reduced. in fact, the american hospital association and the american association announced last week that the additional cuts that will be made will mean thousands and thousands of fewer nurses and other hospital employees available to care for the sick and you will see an increase in death rates from diseases, illnesses that elderly people can survive and go home again. we know that low spending hospitals will have much higher death rates, for example. >> i guess what we hear is that sooner or later, because of so much money that was spent in the last six months of care, we hear that sooner or later as baby

boomers enter into this period of life that there's just not going to be enough money to go around. >> let me correct this. this is not the issue. hospitals will have a much smart pot of money and it will have an impact, not just on seniors, but on all of the patients in the hospital regardless of your age. when you press that button and need a nurse and nobody comes, it's because hospitals have had such cutbacks as a result of the reductions in revenue for medicare which is the largest payer. >> you're putting numbers on it. >> when everybody has had an economics course, if you add 30 million people in terms of supply and the demand doesn't change, isn't it just sichl, first-year economics that there's going to be less available per person? >> yes. >> and let me give you an example, in california alone, more than 14 thousand elderly patients at low-spending hospitals died from conditions they could have survived at a

higher spending hospital where they got the care they need. that was the death toll over 40 years in one state, california, where t10% of the medicare population. the obama administration in defiance of this evidence of the danger of cutting hospitals is now forcing all 50 states to imitate the low-spending hospitals where the mortality rates and the death rates are the highest. >> when we look at the way the ryan plan is characterized by its opponents and it's a voucher system and those that are truly in need might not be able to afford the care they need once they burned through the vouchers or whatever. this sounds, you know. >> joe, did not be distracted or bamboozled by the ryan plan. >> both sides seem to demagogue the issue. >> no. i'm not demagoguing because i'm referring to scientific evidence

published in respected peer review journals and funded by the national institute of ageing and federal agency. this is not politics. this is science, and based on the data that we have, as many as 35,000 seniors could die each year in low-spending hospitals and they could survive otherwise if they got the care they needed. >> betsy mccoy, thank you. appreciate your time this evening. >> coming up, obama's broken promises, the president admits he can't change washington from inside and he's running for four more years. robert reich and the wall street journal stephen moore face off next. [ man ] not only that,

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>> shift gears a little bit here. we saw the release of governor romney's 2011 tax returns today. we saw $2 million or so in taxes paid, federal income tax paid and $4 million given to charity

and it's 13% or 14% rate overall for federal income tax. if you added the 2 million and 4 million of charity and got 6 million on 14 million in income it's about 42% or so. here now is the dynamic duo robert reich, author of "beyond outrage," and coauthor of return to prosperity and secretary reich, the reason i switched gears a little, i read one of the huntington post pieces, you're very vociferous and welcome, but vociferous about governor romney. me? joe, who are you talking to? i don't know who you think i am. >> you know what? the secretary will be on our show and he'll be different than maybe on "the huffington post" because that's just red meat for your audience. >> you asked steve moore whether i am different. >> then i want to hear this because if -- basically the thrust of the huffington post --

>> he's liberal all of the time. >> governor romney is the embodiment of what's wrong with this country right now and would you really still say that knowing that here's a person that paid $2 million in taxes and $4 million to charity, should we not want ten more, 100 more? do we not want 100 times more people? >> look, i applaud people who give to charity. that's great, but the fact of the matter is that the income tax rates that private equity managers pay is way below what a lot of middle class people pay in this country and why is that? because they have a special loopho loophole. and it's called carry the interest loophole and they get the loophole even though they're not risking much of their money and they are actually getting a capital gains rate because they have political power and republicans and democrats have been trying to get this loophole eliminated for years. >> let's do this, mr. secretary. carried interest is one thing.

>> do you believe in the carried interest? joe, do you believe carried interest is a good loophole? >> steve, i look at it in terms of say it's an engineering firm or there are a lot of different firms --? no, it applies to private equity and it applies to private e quitet and hedge fund. there's no risk -- there's no risk of your own income. >> i wouldn't really care, look, and taxed the carried interest. i'm not all that bent out of shape about it. >> that's an important point. that's a very important point. >> most of his income is not from the incumbent and it's from capital gains and it's promoting the businesses and he's an investor. how can you say what's wrong with america? joe, i agree with you. what a great, great country this would be if we had thousands of -- >> it's a zero sum game. >> that's what i need to ask the secretary. >> he made this --

>> it almost seems that if he made this other people are deprived of it. >> joe, that's because people like my friend robert reich who i have tried to educate for a long time, he knows there is a zero sum gain. somebody else gets a smaller size. >> he makes the pie bigger. >> iel foo like i should just squeeze myself into the conversation here. >> legal me just say it's not a zero-sum gain program the wealthy in the country would do much better with a smaller slice of an increasing pie, than a very large slice of an economy that's almost dead in the water. >> let's do something and let's have the discussion about what are capital gains and dividend ratios because it's just investment income. >> i want to go back to 1986 when capital gains and ordinary income were the same rate. >> robert reich, if we go back

to that. >> you guys agree to that. >> there is a caveat here and what we did in 1986, joe, as you know, we lowered the top income tax rate down to 28%. >> barack obama and robert reich want to lower that. if you want to make a deal we can talk about it. >> would you agree to a 28% capital gains rate and an income tax rate? >> that's a tough one. >> that's a tough one. >> that's what we had in 1986 -- >> wait a minute. >> okay. okay. okay. >> some of the biggest kind of loopholes right now and the whole industry of tax avoidance is grown up out of trying to squeeze ordinary income into capital gains and that's what the loopholes are and that's what mitt romney had -- >> would you agree on the marginal rate of the income being 28% if you get rid of deductions. >> i will seriously consider it. >> i think we'll make it somewhere. >> robert reich, let me explain

one other thing to you and why i think it's bad tax policy to tax the capital gains as ordinary income. the tax is levied at the corporate level. we pay the corporate rate and then it's paid as a dividend or capital gain and you're taxing that same income twice. >> that's why they're a lot higher than 14%. >> how much is sales tax is? >> every tax is going to be essentially a tax on something that has been taxed. >> that's a completely spirited argument. i'm saying let's tax capital gains and ordinary income at the same rate. >> hold on. >> i want you to respond to this, secretary reich. you can write something to the huffington post about this. check this out. >> people running for president and filed their tax returns and let everybody look at them and mitt romney's can't do that because he's basically paid no taxes in the prior 12 years. >> the word's out that he hasn't

paid taxes for ten years. let him prove that he has paid taxes because he hasn't. >> in the release, mr. secretary. he paid an average rate of 27% and never less than 13%. >> wait a minute, wait, joe, joe, joe. >> did he release ten years of taxes today? >> so you think he's lying about -- >> i don't know. >> i have no idea. >> why didn't he release them? [ indiscernible ] >> when is harry reid going to apologize for this statement?ra >> i want you to write something for "the huffington post," the worst thing about embodying -- >> what does senator reid embody. i much rather write something for the washington joupage.

[ indiscernible ] >> i think you made the slur against romney today. this is a guy who is a job creator and we need more of those. >> all right, guys. thank you. consumers are job creators. >> i hope we're buddies again. and stephen moore, thank you. >> all right! that's it for tonight's show! i am joe kernen and larry kudlow will be back on monday. we really appreciate you joining us on a friday night and it's been great being here. have a great weekend. [ male announcer ] the 2013 smart comes with 8 airbags, a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety.