there is always a bull market somewhere. i will see you tomorrow. >> as we await the state of theion onthe ion use union address.

here is what senate leader mitch mcconnel told me a molt ament a >> what he has been doing doesn't create jobs. >> all right later in the show as we prepare to hear the president's take on the economy. but will he make a compromise deal on the budget cut iting se quester. "the kudlow report" begins right now. >> first up, this evening let's set the scene for tonight. aamon joins us now from the hill. what is the buzz about tonight over there good evening to you. >> reporter: well good evening larry.

if history is any guide, the last 12 to 18 months might represent the opportunity. after that, history shows that second term presidents tend to peter out a bit. the president knows what is at stake here tonight. but especially the economy we have exerts from what the president is going to say. he is going to say it is our generation's task then to ignite the true engine of economic growth. we are going to hear from republican senator marco rubio. he is going to give the official response. he says this opportunity to make it to the middle class or beyond no matter where you start out in life isn't be stowed on us in

washington. sol larry, two different positions tonight. >> all right many thanks. appreciate it. we know the president opposes the see quester. is he willing to make a deal with the republicans? >> is there common ground? >> joining us peter welch and gop conference chair kathy mcmorris rogers. welcome back. let me go to you right now. first up, can you do business with president obama? he is opposed to this and wants to rewrite it and defer it change it? can you do business? >> i think it simimportant to remember that these devastating cuts were his ideas. it was the republicans that have put forward two times now

proposals to replace these cuts with other ways to reduce spending. we passed these six months ago. we need the democrats to put their proposals forward. why is it that spending cuts are bad for the economy but tax increases are somehow not bad for the economy? i don't understand that logic. we need both. we have been having this debate back and forth. that is part of the problem. and we need some spending restraint. the big area where we need it is in health care. the rising health care cost is in growth to the economy. if we can find ways to bring

down the costs of health care we can have a win win. >> the report that came out, which shows a slight decline in the deficit goes back up over $1 trillion in ten years because of social security and yet the president and the democrats don't want to touch entitlements. >> they don't want to cut spending. and that hasn't happened. over the weekend speaker pelosi was saying it is not a spending problem it is a deficit problem. even today, the minority whip was saying it is a pay-for problem. bottom line it is spending and americans recognize that the government has to live within

it's means and it is costing us jobs and people can't make the hiring decisions to get the going again. >> it has to be both. >> there are a lot of places that we are making investments. you have to invest in education that is down. america is a pothole. there are areas where we do have to bring spending down but through structural reform and in the area of health care. you are right about that, and our country can bring the cost curve down. and the health care bill that was signed into law, we are

seeing now, premiums continue to go up across the country and we are hearing that the costs are a problem. i think we have to put that fight behind us. because your point that this is expensive is right. we have to find a way to bring that cost down so it is good for medicare and private employers to their workers. we work together. here is what i don't understand. >> the president does think it is a spending problem. that is what jake carney said. the president has pulled back. he said he would look at eligibility requirements. if you agree we have a spending problem thank you for that.

what are you going to do about it? >> nobody understands that. exactly and time and time again the president is not willing to address the real spending. what is driving these deficits and the spending in government and more taxes but we never get to the point of the equation. we need republicans and democrats to come to the table and get us on a path balance budgets and pay down the debt. people can make those in vefltmentes and we'll see a growth in economy. >> health care needs reform to bring the cost down and improve the economy. >> are you saying obama's healthcare plan isn't working? >> no, i'm saying we had

problems before and after the bill. >> we are going to have both of you back in order to debate obamacare. it is a great debate. many thanks. all right let's go now to two cnbc contributors. washington editor of the national review. is it a spending problem? there seems to be confusion. >> i love when you come to washington. >> there is a spending problem in the sense that the president himself has talked about. in the long run and i thought the congressman was correct about this. it comes down to health care. in the near term, actually cutting spending too much is a drag on the current economy. that doesn't mean that we shouldn't plot a course on the

economy, we should. she pointed out clearly that a big head wind on this economy is that we are doing the fiscal constraint way too soon. look at the politics of this. it is a stalemate here on wap toll hill. republicans think the president is going to come to the hill tonight and talk about spending. they are not ready to give at all on taxes. >> so, listen to me. is he going to move to the senate. you said those two were talking past each other. the question i have is, if president obama knows that the republican house majority will not take another tax increase whatever you call it. then why is he going there?

because it is a confronstatikoc position. >> he is in the beginning of his second term. if he reaches out tonight, this is the key moment of his presidency. if it is more of the wagging of the finger. we can expect almost nothing to happ happen. >> if you care about the economy, you have to work with the other side. the my way or the highway thing won't work. i'm going to live out proposals that are fully paid for. nothing i'm proposing should increase our deficit by a single dime. >> he is talking about tax revenues. >> i don't know if that is true. >> let me ask you a serious question. >> in this state of the union. which is a pivotal speech. >> who is the optimist.

is it mr. obama or the republican party. ip your judgement, who is the reagan kemp clinton optimist. the person to watch on the speaker said is john boehner. he is going to be the player tonight listening slowly. if the president is signaling a willingness to compromise. >> the polls are pretty clear on this. and you mentioned bill clon t clinton. clinton said we don't have an external enemy right now. you said the era of big government is over. >> and that is opt mi miss many. what clinton said is our enemy is ourselves. our enemy is dysfunction al government. the president is going to speak to the american people about the

economic issues that matter most to them and i think that is important. >> if he talks about tax hikes republicans are going to tune out. >> it is possible that he could turnout to be the optimist tonight. i want to wait and see. >> the guy i'm watching tonight is marco rubio. he is optimistic guy and i happen to know he has a great pro growth message. meanwhile jared bernstein and robe robert, i appreciate both. joining us next senator johnson and former democratic governor robert dean. i'm kudlow, we are coming right back.

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welcome back to this special edition of the kudlow report. we are joined by howard dean. former democratic national

committee chair. we welcome back mr. johnson. it is a pleasure. thank you for helping us tonight. i want to ask you off the top. the economy is sluggish as you well know. do you expect any pro growth measures from president obama in tonight's state of the union. >> i sure wish he would talk about growing the economy. that he is just right there diversed. but i'm afraid he won't. i'm afraid he will be talking about increasing taxes and that is not going to take care of this pro growth tax reform. using energy resources. those are the types of proposals that he needs to make. that is what creates a lot of revenue. that would reduce our deficits

but that is not the change of the course unfortunately. >> might obama surprise us tonight? larry summers wrote about this. might he surprise us and be more pro growth? >> he is. he has to have a strong middle class. the middle class has been under attack. and i think what you are boeing to see this president is going to want to put middle class people to work. we want to help the middle class but we have had the obama formula. we have had the spending and the temporary tax rebates and we haven't had the growth. where is the goods on this where is the beef on this? >> when we have had what we had

in 2008, i think we did pretty well from that. it is true. in order to build this country. you have to have a strong middle class. the top 1% makes 225 times as much as the bottom. i don't think we ought to raise taxes but we need to make sure the middle chas gclass gets a break. >> one of the miracle parts of the economy is the surge of energy. the rumor floating around washington that the president is going to come back and back the pipeline. he wants a trade off for a carbon tax for a keystone pipeline. he should have allowed to be

permitted a couple of years ago. ulary, the way you have the middle class do better, is by growing your economy. with the meger economic growth we have had since 2009 revenue if we return to a normal economy, that hadded $435 billion in revenue. it is growing economy and not dem demonising success. >> that doesn't work. >> i don't think we have a disagreement about growing the economy. this is all hokus pokus. >> ron johnson, what is your

response? >> it came up during the elicks that romney didn't focus enough. he didn't do a good job. to have successful businesses that business owners make sure that we don't have on environment that crushes them. that is a number that is crushing our economy. >> it seems to me, you have to grow the pie larger than everybody. you can't say you have a smaller

slice and you have a larger slice. the disagreement that i have with johnson, we do not believe that you grow the pie that you give corporations big tax breaks. >> that is pro growth. no, making sure that middle class people can get a job when they get out of college and we are losing all of those things and we can't afford to do it. >> senator ron johnson thank you, sir. and governor deal, thank you. howard you have more work to do in the program. now, let's talk markets. i want to know if investors are going to be paying attention to the state of the june union. how about the deal for comcast buying up the rest of nbc for $17 million.

please stay with us for the state of the union here on c th nbc. [ male announcer ] how can power consumption in china,

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here now is andy croft. andy, is this comcast is this a big deal? is this going to open the market tomorrow? i think it is interesting for comcast shareholders for which i am one. they want to get more content. they have to do that. netflix has been doing it over the time. they are buying more of nbc universal. >> does the state of the union have any impact on all on your investment strategy thinking? >> i'm interested in what the president has to say. but i'm interested in what the companies are doing. what are the buffalo wildwings

of the world doing? >> and they are doing very well. >> stocks are at a five-year high. i think it will continue as long as companiy ies continue to inv in their business. >> does the drama continue to play the role that they used to. >> does this stuff really matter the way that it used to? >> it is a lot of kabuki theater. media talking heads that we can discuss. but i think from the shareholder perspective doing great things for the world. >> so, i argue profits are the mother's milk of the world. they continue to surprise on the upside. >> it has been a hell of a run.

>> they were talking about how the market has a lot of tail winds behind it. we have great companies there are doing good things. we hav haves seen markets comin back in. >> up next, my interview with senate republican leader mitch mcconnell talks to me about what he is willing to work on with president obama. you do not want to miss it coming up. [ kitt ] you know what's impressive?

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we are about 90 minutes away from the president's state of the union address. i spoke with senate republican leader's mitch mcconnell.

he was of course the republican leader. >> glad to be with you. from what i gather president obama tonight will make a strong case to not have a see quester. well it was his idea by the way which is interesting to see him walk away from it. we made a promise to the american people that we would cut $1.2 trillion in spending. and and here the presented was ready to walk away. but if we walk away from ( y for ( y the amount of spending reduction we promised from a little over a year ago then we have have no credibility at all which

is the spending is out-of-control which is we now have an economy that looks like greece. associated with high def sit and debt countries. we need to go in a different direction. >> i'm the commitment you recorded today assaying there will be no last minute hectic negotiations and tax increases do you stay with that? >> the president signed into law to reduce spending this amount of money. it will go into effect. we are willing to discuss how to achieve this same amount of spending reduction in a different way but we are not going to raise taxes. the president got a cut at the

end of the year because the tax cuts had an expiration date. now we have bush tax cuts which means we won't have another cliff like that. so the issue is over, settled the american people and small businesses know what the tax laws are going to be for quite a while. one of the things i don't understand we read about the state of the union the state is going to pivot because he forgot to mention that in his speech. why is it that spending cuts are bad for the economy but it is not. that doesn't make any sense. >> he has done that and he is pivoting to jobs. it doesn't create jobs. and he will talk tonight about investment.

you mean spending? they don't want to call it spending. >> is there any common ground here? for example a lot of people on wall street would like to see a pro growth message. corporate tax reform everybody has been talking about that for years and nothing seems to happen. it is like free money a couple of trillion dollar is there a chance of common ground that such things might get passed? >> they say they are in favor of tax reform. but we are not going to go along with using that as a way to get more revenue. he got the revenue but we are perfectly willing to do comprehensive tax reform. which was revenue neutral to the government. the whole idea behind tax reform

is you suggest to great a more pro growth economy not to enrich the government. so we are anxious to do tax reform as a guise or hidden way to spend more on government. >> you have said and others have said too that the democrats want your head and you are going to be the number one enemy of the democratic party and you are the leader. you have been a thorn in mr. obama's side is that true and what are you going to do about it? >> there is probably only one senate race and that would be mine. we are open with our head quarters and we are active and up and running already. and this early is an indication of what we know is coming.

they came out me in 2008 with no result. you remember that winston churchhill thing. my favorite was there is nothing quite as exhilarating as being shot at and missed. you have to have, as someone running against this barrage to have your own solutions, you can have your own solutions, if you given that much thought in terms of the state of the union, what would mitch mckconnecticcconnel? >> free up the fry rate sector to do what it does best which is grow and expand and hire people. >> does it pay for your election to do business? >> i'm not opposed to doing

business with the president. i've done it on two occasions and about five or six weeks ago to prevent taxes from going up. it depends on what the president is trying to do. if he is trying to spend more and tax more and regulate more that is not something i'm willing to cooperate more. >> we are going to have to leave it there. could be the man on the hot spot coming up. as always sir, we welcome you coming back to the show. >> big government spending and taxation are still center stage. but it wasn't always these this way. coolidge, and we welcome back steve moore. how many slaves? he was not a big taxer.

>> he was not. he would have said sequester away. they have to when they didn't cut and that policy of coolidge brought us a lot of both. it had three or four% growth. how do you do this? you have spending cuts tax cuts and deficit tut cuts and debt cuts. how did he do it? what is different today than back in the coolidge era. we could do it today. that is what i took away from this book. he did it by saying no and making it cheer that when you are caught and say know you are being father christmas. he got the government out of the

way. we'll acknowledge that and i personally through temperment even though it is hard, coolidge kennedy reagan. the tax revenues by the rich. what is kind of distressing when you read to think that president obama, on the spending right now. will republicans stick to these cuts, they have to get out of the fetal position on cutting spending and they have got to do

the sequester. 5%, they can absorb these cuts and it has to happen. i read your books and you make great detailed mention of how coolidge sat around with his budget director cutting spending because they believed that it was good for economic growth but i don't hear that today. we expect too little of american peoples. americans know that we have to cut. we know if we spend to stimulate our children will have to pay for this. to see the discipline of the people in that period. they too had a strong movement. it wasn't easy then either. they said we want to do this and we'll do it and pay for it. and a very important point the people rewarded them.

coolidge won an absolute majority in 1924. our world is so tiny right now. i'm glad to bring this book into the discussion. >> amity, according to your book he hated debt so much he was a renter. >> he hated debt so much he parted ways with the white house housekeeper. and you know we talked about pork we mean that figuretively. this was a great scene with coolidge and he says he sees a lot of ham on the white house table and soon she was gone and when she cut like larry kudlow, she managed to cut $2,000 out of the white house budget he wrote her a know very fine improvement. >> that is when it was a lot of

money. my favorite quote of his was 90% of people coming to washington want something they shouldn't have. >> it is a great minimalist model of the government. >> thank you for coming by. up next time enough of all of this agreement. time for more debate. about to mix it up in tonight's speech. stay with us please. my mother made the best toffee in the world. it's delicious. so now we've turned her toffee into a business. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom.

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of notches. i think they are going to say they will take food out of the moumgs of babies. it will be the same republicans hate the middle class. >> with a 1.5% economy. what good does it do to get nothing done and have the economy go back to a recession. >> they didn't get as much done as they had wanted to the first time around. in their view they were being too reasonable. now they are saying no more mr. nice guy. we will want them done on our terms. the way we can get these republicans to go along is speak heing in terms in which he sounds reasonable in the way a

mafia don soupd sounds reasonab. >> he doesn't have the votes to put that through. but that is the way he is going to behave. >> if he acts like the god father, i don't see they are going to turn against him and his polls are already down and he might lose the 2014 elections in the house. >> he is turning his campaign organization tomorrow he is hitting the road with the campaign for america and he is going to go out and have these events and try to rally people to oppose boehner. >> that is the only way that he can get something done around

here. >> he will worry about the voters in 2014. he has decided that he can only view the republicans to go along on his next budget deal whatever that is. and to use the outside pressure to gin up the campaign apparatus and go in and now the state of the union with a pretty tpartisn approach. >> besides the budget cutting issue, he has the gun controls on the table and he is going to make a huge pitch for green energy and a bloody waste of money. what you are saying is we are going to be gridlocked and it is going to be partisan and ugly.

he is going to try to blame the republicans and paint them as the average hard working americans in order to pick up seats in the 2014 election. >> i think he was successful on the fiscal cliff. >> he was. >> thank you very much. up next lot of political knowledge. i'm going to ask them what senator marco rub bio is going say and what is the figure all about. stay with us please. what we need are people prepared for the careers of our new economy. by 2025 we could have 20 million jobs without enough college graduates to fill them. that's why at devry university, we're teaming up with companies like cisco to help make sure everyone is ready

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now we are switching gears to look at senator marco rubio. is it wise for him to deliver his speech in both english and spanish? >> okay let me start with you. marco rubio. bright start what theme should he strike. he has to point out the fact that there are two different paths to economic both. we believe in growth.

the president is going to talk about moving a step further down the planned economy. he has to talk about a bright future and higher levels of economic growth. increase increased freedom. >> may i just read this comes from senator rubio speech. presidents and both parties have known that our free enter price economy is our source. >> that is true. actually to be fair to george bush a lot of this started with bill clinton. the problem here, i don't think there is as much difference as you might expect. i don't think it depends on the

strepth of the middle class. in terms of rubio's speech. he speaks spanish and fluent in english. if he does his job, i think he will be a good night. very interesting, yes, he has more of a supply side and free enter price guy. he was looking through some of the stuff. he is looking for tax credits and he is dealing with popular culture and other social media. he is softening the message. kinder gentler republican party. i supported him in a small way in his primary with charlie christ and i supported him and

that was the popular thing. i was sort of dragged to a fundraiser. he was the real thing. casual conversation this guy is the real deal. he is a serious leader and the kind of guy that we should be looking at. if president obama strikes a partisan tone tonight, and we just had two people say he is going to be that way, he could be this guy is a leader. he might outshine obama. >> the president is the president, he has been around now for his f icht fth sate state of the union.

he is going to lay out his agenda. look, the president won and he gets to lay out his ajegenda fo the country. also education and immigration and he is going to a pottive alternative vision. this proz does not have the monopoly on optimism. >> that is it for this evening. don't forget folks tune in at 8:59 eastern. i'm going to be part of the live coverage of the state of the union. we will see you then. [ male announcer ] you are a business pro.

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