t my life. so i never missed a beat. that's health in numbers. unitedhealthcare. okay, couple vera phone not good. united technology, just okay. i reilike to say there is a bul market somewhere. to try to fint for you right here on "mad money." i'm jim cramer and i will see you tomorrow. good evening, everyone. i'm larry kudlow. this is "the kudlow report." we have late breaking developing stories starting with a surprise obama-boehner white house meeting on the fiscal cliff. we also have big changes in the obama cabinet, and more wild gyrations in the stock market. first, eamon javers is on capitol hill.

good evening. >> good evening, larry. it was a showdown at the white house between the speaker and the president of united states. i'll bring you all the details here on who was inside that room over at the white house today. >> all right, thank you. >> and there was a twist this afternoon from president obama's favorite for secretary of state. ambassador susan rice withdraws her name from the running. i'll tell you coming up what lead her to make the decision. >> and i'm jackie deangeles. ongoing jitters over the fiscal cliff continue to keep the markets on edge. the decline is all across all ten s&p sectors. "the kudlow report" starts right now. first up, we begin with breaking news out of washington tonight with just 18 days until the country's economy falls off the tax and fiscal cliff, turns out president obama and house speaker john boehner have just

wrapped up a surprise meeting at the white house. cnbc's own eamon javers joins us now with the details. again, good evening, eamon. >> good evening, larry. we're told the meeting at the white house was in the oval office. it was about 50 minutes long. boehner and obama were joined by a couple key players, including tim geithner and rob neighbors, the white house's liaison to capitol hill. he's the go-to guy who's been shuttling the paper back and forth throughout this. boehner was also joined by an aide that boehner sources have not named. i don't want to read too much into this larry. but you can get a sense from the amount of people in the room that they're getting into at least some level of detail here. if it was just the two principals, you'd expect a more general conversation. with that number of people in the room, maybe some more details getting hashed out. both sides describing the meeting as a frank one. saying as they have been throughout this that the lines of communication are open, but no major announcement here after the meeting. no news here so far on what was

actually traded in terms of offers and counteroffers here in this meeting tonight. >> i think any meeting is a good meeting. at least the lines of communication are open. treasury man geithner, he was the most hawkish on raising the top marginal tax rates, something that john boehner does not want to do. what do you think that bodes? you ly the geithner was making that case? we've got to raise the top rates? >> everybody who was in that room has said things publicly that they're going to have to walk away from if they're going to get a deal. earlier today we heard speaker boehner say the white house haz hasn't led enough, haven't offered enough specifics on spending cuts side. boehner really going into some tough political rhetoric earlier today, now meeting at the white house tonight. that gives you a sense that there is some progress here in these negotiations. but they have all dug pretty deep trenches here, and the question is whether they can get out of them and meet in the

middle ground here somewhere. >> all right, many thanks, eamon javers. appreciate it. maybe they are getting closer to a deal. maybe we'll carve up our own deal right here on the show. let's go to cnbc contributor keith boykins, and katy pavlich. you know what i heard today? mr. boehner might accept more tax revenues, but he's going to insist for his own caucus to get it through the house republicans much -- and i emphasize much deeper spending cuts and much deeper entitlement cuts. do you think that's what this meeting was all about? >> i think it could have been what the meeting was all about. i think that we're getting down to the wire here. president obama doesn't want to cancel his hawaii vacation, and harry reid's threatening to keep congress in session, again, for the third year, fourth year in a row. that could have been one of the things they talked about. but at this point, i'm not quite sure if boehner can really get a deeper spending cut deal. i think the most he's going to

be able to get is a promise. >> keith boykin, the other thing when i was down in washington yesterday, on the phone with all these guys, is that basically the republicans are going to cave in. basically they're going to cut their losses. basically it's a strategic retreat, that's what i call it, and they will give the president, they will give him his middle class tax cuts, or extended tax cuts and the top rates are going up. now, what the gop gets in return for that i do not know. but i see a cave-in, keith. >> i think you're right. they have no choice, larry. i mean, there's no leverage. the tax rates are going to expire on december 31st, so on january 1st, regardless of whether they do nothing or not, something's going to happen. the president's been very adamant about this. i don't think speaker boehner is actually negotiating in good faith. i think he's really more concerned about protecting his hide and his caucus. so he's more negotiating with his caucus and the clock than he is negotiating with president obama. >> no, i must say i disagree

with that because you know what, i think that nobody wants all the tax cuts to expire. that would be a $500 billion tax hike, which would generate a recession sometime this winter. i don't think, keith, that's what they want. i know there's a game of chicken here, but at the end of day, i don't think any of them, whether it's president obama or john boehner, really wants all those tax cuts to expire. >> you're right, larry, about the game of chicken, especially, because what speaker boehner is essentially saying is mr. president, we want you to go first and lay out all the spending cuts that we're too afraid or too cowardly to put out ourselves. you're the guys that ran on spending cuts. put out your spending cut plan. let us see where they are. that's not what president obama ran on. he ran on raising the tax rates for the top 2%. if the republicans want spending cuts, spell it out. let the american people see it. >> katie, the white house has

never called for spending cuts. >> they haven't. however, president obama did say that he wants a balanced approach. immediately after he was re-elected. so i don't think that president obama is actually negotiating in good faith with the american people considering 75% of the tax hikes in his new deal that we've been given, that the house has been given, goes to new spending. it doesn't go to paying down the deficit. doesn't go to balancing the budget. doesn't go towards spending cuts. it goes towards new spending. >> sure. >> and so for president obama to say he wanted a balanced approach, i would say he's not negotiating in good faith with the american people. >> let me just go to katie for one more republican point, keith, and get your reaction, because thing is very, very, very important. and that is debt ceiling. the limit to borrowing. katie, i am told to a person every republican house member and senator, and i've talked to a lot of them in the last ten, 12 days, they will not give up

what they regard as a constitutional prerogative to raise the debt ceiling. they won't give it up, katie. >> they shouldn't. there's a reason we have a balance of power. there's a reason why the house of representatives is given the power of the purse, so to speak. the idea that president obama is trying to negotiate with john boehner on tax hikes while asking for an unlimited budget, an unlimited amount of funds from the taxpayer, is insane. and so for him to even ask that, the republicans shouldn't be giving in on that ever. it's a necessary balance of power. >> katie, you do understand what the debt ceiling is right? >> excuse me? yes. >> congress is already appropriated to spend this money. the only thing the debt ceiling is giving the authority to pay off the debts that congress ran up. i don't understand why this is some sort of huge power grab. the reagan administration raised the debt ceiling 18 times, i believe. it happens in every administration.

it's never been to lit sipoliti until this term. >> we have never had this much debt. we have $16 trillion in debt. 100 trillion . if i may finish. the $16 trillion is an unprecedented thing in this country. just because numerous administrations have raised the debt ceiling before, numerous congresses does not make it right this time and we're in a place now where that debt ceiling actually does make a difference for the future of the country. >> it never mattered when bush was president. >> i've got to get out. i'll just tell you what i hear. is republicans will give a trillion-dollar increase in the debt ceiling but they will exact a big price for it. but they will not give up that prerogative. they simply will not. >> and they shouldn't. >> and that could be a deal breaker. i don't know. katie, keith, we appreciate it, as always. let's go right to a successful small businessman,

and a successful job creator. he's got plenty of skin in the game and he's going to tell us what happens if tax rates go up. here now is russ reynolds, the president and ceo of batteries plus. russ, thank you for coming on the show. we appreciate it very much. >> thanks for having me. >> your instinct -- you're running a big operation. you're all over the country and in puerto rico. which is the most damaging tax hike that might go up and what it means for your business? >> well, i think certainly since most small businesses or llcs are pass -- they are paying ordinary income on their profits. so their normal filings reflect their tax liability and i think for the first time in our history -- and i should point out we've been very fortunate, larry. our business has more than doubled the last five years. we've opened 50 to 60 stores. existing franchisees over the last four years have opened more than 120 locations and we've invested in some new programs to

expand our assortment. so they've been all in in creating jobs and investing and what's concerning for us is for the first time the uncertainty over taxes, the uncertainty over the sustainability of any changes in taxes since we continuously have our back up against the wall in washington, and finally, the likelihood that they're going to risk their capital and have somebody take more out of their pocketbook once they've made a profit and turned a profit is really concerning. >> so it's basically the hike in the income tax rate. >> correct. >> from 39% to 39.6. also obama care taxes. there's at least a 0.9% payroll tax and maybe the 3.8% investment tax applies to capital gains and sales of these franchises. that's what you're focusing on. it has not been a winning case, russ reynolds. >> yeah, and i think the reality is -- i think most small business people are aware that we're in a tough situation in

america. and i think unfortunately, for small business people who create about 65% of the jobs that get created on an annual basis in this country, including the department of labor, i think what's unfortunate is the delivery has been effectively sort of an insult, which is the guy that gets up every morning and bakes bread because he owns four or five subways or the guy playing his fair share. i think recognizing that most small business people -- most franchisees in our system certainly are local -- they're good citizens in their local community, they're involved in their local community. there are quite a few of them that may stay at a hampton inn, they don't stay in the hamptons. there's a difference between a typical franchisee and some of the folks that get used by example as the uber rich. >> this isn't just fat cats, to coin a bad phrase. this is main street stuff. as i understand it, 530 retail

stores including puerto rico. this is main street stuff. >> it is. our business is head quartered in heartland, wisconsin. you don't get any more heartland than heartland. if we've got to shoulder up and do the right thing for the country, we'll do it. we would wish and hope that we would not have to pay additional taxes so we can reinvest. i think our business is an example of a system that's been all in in reinvesting in additional growth and additional employment and programs we can deliver to our customer. so we'd like to keep doing it and minimize the role washington plays in picking the winners and losers. >> all right, thank you, russ reynolds. we appreciate it very much. >> thank you, sir. also making big news, one name is going in and one name is going out. that is president obama's probable second term cabinet changes. susan rice withdraws her name from consideration for secretary of state. but going in is former republican senator chuck hagel, who was reportedly the

president's choice for secretary of defense. meanwhile, it looks like senator john kerry is headed for the state department himself. it's a three-ring circus and we have it all covered. please don't forget free market capitalism is the best path to prosperity. you heard russ roberts tell us how it works for small successful businesses. don't create tax barriers. help them. don't harm them. i'm larry kudlow. we'll be right back. americans are always ready to work hard for a better future.

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a major obama administration cabinet shuffle for national security is making headlines out of washington tonight. nbc's own danielle leigh joins with us the details. good evening. >> larry, good evening. this is surrounding ambassador susan rice withdrawing her name from the running for secretary of state. there had been growing concern that getting her confirmed in that role was going to be extremely difficult, if not impossible, largely because of pushback from republicans. she had been facing growing criticism over the last several weeks because of the way that she portrayed the u.s. consulate in benghazi. she blamed an angry mob, not a terrorist attack by al qaeda. rice has said that she was working off of information she had at the time, but republicans

largely led by senator john mccain have accused her of misleading the american people and said because of that, they wouldn't support her nomination. it was that pushback that led her to give a letter to the president saying that she did not wish to be considered. she said she believed the confirmation process would be long, lengthy and disruptive and just not worth it to the country at this time. president obama did accept that decision, and then said that he regretted it but also said that it spoke to her character. she will likely continue to work close w closely with the president, either as his u.n. ambassador or as his security adviser. he will likely now nominate senator john kerry. larry? >> many thanks. on top of the susan rice story, we are also learning tonight that retired nebraska republican senator chuck hagel is reportedly on president obama's very short list for secretary of defense. to talk about that now, my great

pal john bachelor. chuck hagel going to the defense department. what does that mean to you? >> chuck hagel represents the republican party. therefore there is plenty of tradition for a president to choose from the other party. franklin de franklin roosevelt did it very successful. the question here is does chuck hagel have anything that could trouble the nomination process? i'm told there is, larry. he's been in private business for some. and participating with deutsche bank could be a problem because of deutsche bank's under suspicion relationship with iran and with money laundering. nothing hard yet, larry, but just those questions came up in the last hours. >> i am also reading that when senator hagel was senator hagel, that he -- let's just say never really supported israel very much. >> i have not been told that today, larry. i think it's significant given who my sources are that that did not come up. let's put it this way. the way i was presented with chuck hagel is it's not certain. that's very strong language for

the people i'm talking to. it's not certain. >> and he had a chance to sign letters of protest to the european union regarding hezbollah, the terrorist group, and he refused to do so. >> i want to go back to the sitting on the deutsche bank americas advisory board. there's the problem, larry. there's something new that will come up. these matters that you point to are consistent and known. what's unknown right now is the justice department's interest in deutsche bank, america's advisory board, and money laundering with iran. that's fresh, and that could be a problem in the weeks ahead. that's why they're saying uncertain at this time. >> and hagel was on that advisory board, john? not just part of the bank, but on that advisory board? >> participating in that advisory board, and that's fresh information. this is all moving very fast, because the senate staffing and the vetting process at the white house are now turning to chuck hagel. that's significant. but it is not -- it also determines that there are questions to be answered.

i talked to washington within this last hour, larry, and again, uncertain is the word that came up several times. >> one last quickie, john. john kerry, secretary of state. what do you make of it? >> that as a senator, it's very attractive to get him nominated. here's the downside. jock is questioned by my iran sources of having too good, too easy access to the leadership in teheran. also there are questions raised about john kerry and how sturdy he is with regard to the middle east right now. his relationship with bashar assad prior to the civil war is going to be re-examined given all of the collapse that we've seen in the middle east and the uncertainty of assad. so again, the word comes back -- and i repeat myself. this surprises me, larry. uncertain about john kerry, too. uncertain. >> that's interesting as a sitting senator. many uncertainties. many thanks to john bachelor for running that down. don't look now, folks, but

suddenly the markets are worried that interest rates just might go up sooner than you might think. we'll get an unvestment outlook next up on kudlow. bob, these projections... they're... optimistic.

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look, it's better that they talk than they don't talk. >> absolutely. if you look at the futures tonight, the market seems to like it. it's up. they're up four handles on the s&p, so it's better. it's progress. that's really all the market wants. if you look at today, what happened, we were down 100 on the dow. all of a sudden there were rumors that these two might get together and the market ripped. that's really all the market cares about. we've had all kinds of europe stuff. all anybody wants is fiscal cliff resolution. >> did the fed spook anybody yesterday? >> no, i don't think so. i really think what sold off yesterday is people were just concerned about the fiscal cliff again. the fed didn't really do anything. they put kindleing on the fire, if we get a fiscal cliff, there's an awful lot of money out there to get this market going. >> it just strikes me that a central bank now $85 billion new dollars per month into the financial system and buying treasuries to hold rates down, they're not going to let rates go up any.

i just intuit that. >> no. there was some talk that perhaps what they signaled was higher rates sooner than 2015 and i think that's absolutely wrong. there's no way. this was an easing policy. they're putting more money into the system. they're not going to let rates go up any sooner than they need to. after most recession, they don't really raise rates until 18 months after. so i think 2017 is probably your number. >> 2017. all right. let me just ask you about some other stuff. japan rising. europe stocks doing very well. china stocks having a bit of a comeback year. in other words, as a global guide, there are options to playing this fiscal cliff game here in new york. >> absolutely. you don't have to just trade the s&p 500. i mean, look at tonight, you're seeing australia up a third of a point. the japanese yen is doing very well. look at hong kong. if you want to take what the

federal reserve did and apply it internationally, look at hong kong. their monetary policy is pegged to what the federal reserve does. but they have an inflation issue and their economy is tied to china. so if you buy something like ewh, the hong kong etf, all those stocks are priced in hong kong dollars. if the hong kong dollar is repegged, the ewh will go up as much as the repegging. >> what does that mean for the u.s. market? where are you on the u.s. market right now? >> you know, i think right now, probably to the end of year, if we can get some kind of movement on this fiscal cliff, you have a real potential for a pop, 3%, 4%, 5%. unfortunately, as i look to 2013, i'm looking at u.s. austerity. so the question is how much is that going to be, and if it's a lot and the rest of the world can't pick up the slack, then we've got problems. if it's just a little, in china and europe, can actually come out of what they've been in, then we might be okay. >> but there's nothing wrong with buying global markets. >> no wrong at all. and it's easy these days.

>> it's fairly inexpensive these days. >> it's inexpensive. europe is very cheap in terms of valuation. there's plenty of etfs to do it. these days it's very easy for anyone to do and there's plenty of places to make some money. >> all right, terrific stuff. brian kelly. we call him bk. poll after poll shows the republican party has an image problem. a branding problem. the question is can it be fixed? we have expert advice from a marketing guru and the young political voice who says the republicans can't get it done. not necessarily this week, but sometime in the future. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time.

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welcome back to "the kudlow report." in this half-hour, conservatives warned and warned that u.s. regulatory tsunami from the obama administration was coming to hit right after the election. and i hope you listen because now even the ap associated press has confirmed those warnings in a key story. and you should be worried about interest rates going higher on mortgages, car loans, everything. the former federal reserve governor has some answer for us a little later on. a new poll, meanwhile, from nbc

news and "the wall street journal" shows that 65% of those surveyed use negative words or phrases to describe the beleaguered republic party. only 17% had positive responses. so how can the gop fix its branding problem? here now we have katie kiefer, columnist and political commentator, and mark stevens, ceo of msco and author of "your marketing sucks." hi both of you. all right, katie, i'm giving you the first whack at the ball. what do republicans have to do to have their big comeback? >> i think that the republicans need to stop running boring moderates like john mccain and mitt romney or hypocritical preachers like rick santorum and newt gingrich, and instead run men and women of principle who are going to cut spending across the board, including military spending, and who are going to explain to independents and young people who tend to be very entrepreneurial and want to pursue the american dream, that by cutting spending and cutting

regulations, they can be part of a party that's going to allow them to become the next steve jobs or the next mark zuckerberg. they can create wealth and they can keep that wealth here in the united states rather than having to move it overseas. and they can create jobs in the united states. >> cutting spending is all good. i'm a reagan free market supply side guy, but economic growth is important. wealth is important. entrepreneurship is important. doesn't the gop have to have something more up beat? >> we're acting sort of like it every product is a business principle. a brand is not a logo. it's a promise. once a great company starts going short on its promise, it starts to deteriorate. >> what did they go short? >> i'm partisan. i'm a conservative.

i'll admit that. it's built on a broken promise. the promise was that it would stick towards low taxation. it favors success, not punish it. it wouldn't make bargains on those key principles. and once you start to do that, you abandon your customers. in other words, your followers and you're left with a party that there's nothing to believe in. i don't relate to the country i live in right now. i want those guys who carry the republican brand to bring it back not broken and lose their jobs. i spent three days in washington with a wife of supreme court judge last summer. i felt like taking a bath after i was there for three days. everybody's got their hand out for shotgun. -- something. >> katie, mr. john boehner, i respect him enormously. but he's in a pickle. if you're trying to rebrand the republican party and john boehner wants a compromise with president obama, that compromise

is going to be very large tax hikes. you may not get the spending cuts you want. you may not get the entitlement reform, but it will have the gop footprints all over it. how do you brand under those circumstances? >> well, i think that as long as you explain the cuts, so if you explain that cutting spending is good and it's going to allow you to create jobs and allow you to keep more money here in the united states, people are going to understand that. but the problem with the republican party is that they often don't explain why cutting spending is a good thing. so when these triggers happen and when spending cuts happen, people just see them as sacrificial and something that's going to hurt them rather than something that's going to be beneficial in the long run. >> the country -- i mean, the latest "wall street journal" poll does say that the country

wants a compromise. 56 56 blame both parties for the lack of a compromise. >> first of all, i have to say, larry, i don't care about that. >> right. >> i don't want to look at every day's poll. >> but you have to care about this. >> but i don't, no. because i'm saying to them, i sat alone with jim demint for an hour and a half. a very respectable guy and all that. but stand up for the principles. >> he's a free market leader. >> i don't want to hear you citing polls. if they all get washed out and the country goes where we think it will go, newton was right. every action has an equal and opposite reaction. but this half game of pausing things this way, it means nothing. we should take a lesson on branding from the democrats because they're great at it. >> katie, i'm an old ronald reagan jack kemp guy. i believe in inclusion and economic growth and empowerment and economic opportunity, and when mitt romney said he wanted self-deportation for latinos, i just kind of turned my stomach.

the gop's got to have a broader, wider message, katie. latins, asians, immigrants. what's wrong with that? they made the country great. it's part of growth story. don't they have to rebrand there also? >> yes, i think that republicans definitely need to talk about immigration in a different way. we want legal immigrants to come into this country, immigrants tend to be very entrepreneurial and they have a lot to add to this country. and so we need to welcome that and we need to create opportunities for smart hard working individuals to fit into this country and talk about that and at the same time, protect our borders from drug cartels, and one way we could do that, i think, would be to legalize drugs, but there's so much going on there and i think that the republican party just takes a very militant approach that turns people off a lot of times.

>> all right. i'm going to leave it there. all i'll say is katie kiefer, thank you, mark stevens, thank you. gop's got to be the party of free enterprise, not the entitlement state. they've got to make that very clear. and welcome everybody into the free enterprise tradition called america. now, if you thought the gao was the only one lavishly spending federal dollars on excessive corporate trips and parties, think again. we've got another one. reporter caroline may of the daily caller shines the spotlight on travel promotion agency brand usa and joins us now for the latest on this outrageous story of more government waste. caroline, welcome to the show. okay, so what is this? is this some sort of tourist board set up by the commerce department and they're just spending our money? what's going on here? >> well, actually, it is a fee -- the money comes from a fee that's levied on visitors to the united states. so technically it's not taxpayer

money, but it is government money. this brand usa was created by a 2009 piece of legislation. and it said basically that for every $1 that this corporation, its mission is to promote travel to the united states from people coming -- for foreigners the come to the united states and participate in, you know, visiting the country. for every $1 they are able to raise, they receive $2 in government cash. >> right. >> and basically, with the subsidy, they're able to throw lavish parties, full of giveaways and also benefit themselves. >> let's look at this. i'm just going to read some stuff. this is from the daily caller coverage posted by one caroline may. brand usa spent close to a million dollars on a posh launch party in london. i love that. posh in london. last year, including $69,300 on freebies for attendees. almost $50,000 went to neck

wallets. i'm not sure i know what that is. and the organization dished out a grand total of $13,101 for umbrellas. you can't even do that. is anybody in the commerce department monitoring this kind of thing? >> yeah, brand usa is required to give all of their spending -- detail all their spending to the comm dep order to access the funds the treasury has collected from foreign visitors to this country. these are visitors from nonvisa waiver country states. so they have to pay a fee, $14 fee when they come here and that money is put away in the treasury and that brand usa can tap into. >> but the government gives $2 for every dollar they take in. so why do they need this? i don't understand. why do we need this? the commerce department has a million offices. look, i served in the government years ago. i tried to close down the commerce department. in fact, came very close to closing down the commerce department in 1981.

mac rode horse back with ronald reagan and whooped us. but they've got all kinds of offices to promote trade and all kinds of offices to promote tourism. the whole place is loaded with bureaucrats that don't do a bloody thing. so i ask you why do we need this goofy thing with these outrageous -- well, it's $13,000 umbrellas. >> i think that some of the senators have been investigating brand usa and its activities would ask the same question. senator jim demint and senator tom coburn launched an investigation in 2011 and released a report in october detailing a little bit of some of the mismanagement, spending, the cronyism going on in this country. all 11 members of the board of brand usa are democratic donors. >> what a shocking surprise. that's the best thing i heard that was not in your article. all the donors were democratic donors. i wish you had told me that. that actually clinches the whole

thing. get rid of it. now, let's go to some more government excess. environmental rules, automotive rules and obama care regulations. nobody knew this was coming. they're all coming now. not just conservatives saying it. but it's all part of the regulatory avalanche. it's a tsunami that some people predicted after the election. the mainstream media is finally recognizing it and we're going to give you a regulatory hawk who tells us why it's going to harm the economy. stay with us, please.

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while the fiscal cliff is the buzz in washington, there's another looming threat that could be just as danimaging to e economy. the ap confirms today what the white house sidetracked prior to november's lek. now a looming regulatory tsunami, obama care, many more, threatening to stall economic recovery. here now is the chairman of the institute for economic growth. great to see you, old friend. i think president obama likes to have these regulatory agencies run the economy. and the one they're particularly focused on right now is the epa. >> well, you're absolutely

right. it's amazing what's coming down the pike, and the trouble is businesses do not have the details. they know things are there, but they do not know what's going to hit them. the administration by law is required each april and october to present a list of all the major regulations. those are regulations having an impact of more than $100 million. yet the obama administration did not publish this list in april, nor in october. they insist everybody else obeys the law, but they in themselves do not obey the law. >> but now those chickens are coming home to roost. i just want to read a couple, get a very quick couple comments. greenhouse gas emissions. this is all over this place. they're going to destroy the coal industry. they're going to go after the oil and gas fracking revolution. they're even going to go aftra additional oil fueled.

the epa could undermine the best part of this recovery, which is the energy miracle. >> that's certainly true. here we have the ability to be self-sufficient in energy, and the same time, the epa is trying to shut it down. they've already declared the war on coal and say they don't want any more coal. 50% of our power comes from coal. it takes a long time to phase that out and we can now do basically clean coal. it's not a major problem. but the worst regulations, those are terrible, but we also have all the regulations coming out of obama care that people do not understand. there's all kinds of n taxes coming in that people will be shocked at when they get to see, and the financial regulations are overwhelming. the financial regulations, we look at dodd-frank. they've only promulgated about a third of those regulations. 1/3 they really haven't started on, and 1/3 they sort of have out there, but they are so vague

and even the regulator agencies admit they're vague, so the people under these regulations really don't know what the law is. and you're going to have massive litigation with obama care, with epa, with the financial regulatory regulations -- >> just in the last minute, i want to go back to obama care. i didn't know this -- i read this yesterday. i think the daily caller. $100 per head fee for coverage of the preexisting conditions. $100 per head fee. this is something nobody knew about. this is certainly a middle class tax increase for everybody who participates in this program. and it's going to come to billions of dollars. now, that's the kind of thing that never saw the light of day. >> yes. there's all kinds of regulations of coming out there, and these taxes that nobody knew about. in fact, they're discovering them, new ones, every day. we have a regulatory staff which follows this stuff very carefully. and they're constantly also surprised at things they continue to find, and businesses

are going to be shocked when they see what they're faced with and also and also individuals with these huge increases. >> all right. hundreds of billions of dollars. hundreds of billions of dollars in regulatory costs. richard, thank you very much. we hope to see you again on this story. now, folks, we're going go back to your money. a simple question, but it comes with a lot of fear. are interest rates going up sooner and could they jump more sharply than anybody thinks? i'm about to ask a former federal reserve governor if you should be worried. ey'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪

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welcome back to welcome back to "the kudlow report." okay, here's a quick review of the kudlow economic report card. we had two key releases today worth looking at. first up, retail sales. let's get it up on the screen. generally came in above expectations, especially core sales that feed into gdp. and the super hurricane sandy had really very little impact. now, i just want to show you, you can see the consumer is not dead. in fact, let me try this one. you're up here at about 4.5%. this is six months smooth basis. look at this move from june to november, consumers are far from dead. it's not fabulous. i'd like to see five or six growth. but it ain't bad. now, the second one we're going to look at is jobless claims. weekly unemployment claims fell almost 30,000 for the week. nowing again, hurricane sandy did play a bit of a role, but

only temporary. you can see in mid november -- there's hurricane sandy at about 450,000. you can also see that it is now falling all the way down to about 340,000. these are weekly jobless claims that are pretty good indicators of what the next employment report is going to look like. so i'm just saying retail sales, jobless claims, pretty darn good, the economy is not collapsing. now, we're going to wait for a business investment, which comes in in a couple weeks. that's been falling badly. and then we're going to see about housing, which has been rising nicely. but for all the pessimism out there, i'll just say this. the economy is holding up. i wish it were 5% or 6%, not the 2% zone, but it is holding up. fiscal cliff or not. okay, now, let's talk to former federal reserve governor randy crosner, an economics professor at the university of chicago's booth school of business. as always, welcome back, and i

wish you happy holiday. right off the top, randy, let me just try to get right to it. yesterday the fed announced some major changes in policy. okay, some folks are worried about rising interest rates and especially consumers may be looking at refinancing their mortgages or a home improvement loans or automobile loans. what's your take, did the fed tell us yesterday that interest rates are going up higher faster? >> that's not what they were trying to say. i think some people may have interpreted it that way. but what they were trying to say is we really want to be -- to use a phrase, perfectly clear about when we think we're going to start to reduce accommodation. that means we're going to wait at least, at least until the unemployment rate gets down to 6.5%, which could be quite some time, probably 2015 or even beyond. >> talk to me about "quite some time." help consumers out. in other words, as i think

what's going to happen with all the newspaper headlines, and we're oversimplifying, as we must. now people are going to be watching that unemployment rate. so if the unemployment rate keeps falling, it's 7.7% now, people are going to think well, we're getting closer to our increase in interest rates. we're getting closer to a hike in my adjustable rate mortgage. maybe i shouldn't take out the car loan. is that the way the world should look at what the fed said? follow unemployment to tell us about interest rates. >> well, it's going to be an indicator, but it isn't going to be the only indicator because it's just a threshold or a guide post. they will keep the accommodation very, very strong, at least as long as the unemployment rate is above that. it doesn't mean that they will take the punch bowl away once it gets to 6.5. they really want to get the economy back, so i think they're going to be talking about how they will be very wary of raising rates too fast, taking the punch bowl away during the party season, and i think they're going to really want to

provide support. >> so what you're saying is people, consumers, main street shouldn't panic, there is no real rate hike coming. >> i think that's right. i think it's going to be a long time before we get anywhere close to 6.5%. even if we do, the fed has made it clear that that's just a threshold or guide post. it doesn't mean that it's on automatic pilot and suddenly the interest rates will go up. it really just means that they're going to start to slow the accommodation. interest rates will probably start going up only long after the unemployment rate goes below 6.5%. >> so really we're looking at next year, 2013, probably the year after that, 2014, and into 2015, at least with the short-term rate about where it is presently. is that how you conclude it? >> i would say so. if you look at the fed's forecast, they don't think the unemployment rate is going to come down under the 6.5% range until 2015. unfortunately, i think we're continuing on this sideways slide where we're not making a lot of progress on the unemployment rate. >> as a former federal reserve governor, do you buy their forecasting results? do you think they know what they're doing?

should we really listen to it? >> well, the crystal ball is always cloudy on where we're look ahead, and in particular in these very turbulent times. by no means has the fed gotten it right all the time, but really nobody has gotten it right. i think it's a reasonable forecast, but it's by no means certain. >> that's great stuff. happy holidays, professor randy crosner. >> happy holidays. >> absolutely terrific stuff. that's it for this evening's show. listen, what he is telling you is the fed does not want to raise rates any time soon. i don't know how long they stay at zero, but the fed's intent is not to drive up rates. me, i want king dollar. just give me a stable dollar, maybe link to commodities and gold, and i'll be a happy camper, but that's in the future. we'll see you tomorrow night. you won't take my life.

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