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and stop further joint damage. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ there's always a bull market somewhere. i promise to try to find for you right here on "mad money." i'm jim cramer, and i will see you monday! good evening, everyone. i'm larry kudlow. this is "the kudlow report." the sequester scare tactics continue.

today's latest warning came from transportation secretary ray lahood, who says our flights should be delayed by 90 minutes. delayed by 90 minutes. really. if you fly out of newark, you should be so lucky to get out in 90 minutes. but seriously, folks. i still believe lower spending and limited government is very good for economic growth and hence i still favor the sequester. however, the defense department should have much more flexibility so we don't endanger our national security and military readiness. general barry mccav raye will weigh in on that. and speaking of growth, despite some overbaked consumer pessimism, stocks bounced back today as the dow finished up 120 points. no fear. free market friday is here, folks. help is on the way. "the kudlow report" begins right now. okay. first up, get ready. just six days. we are finally going to cut some

spending. and trust me when i say lower spending and limited government is a good free market pro-growth capitalist recipe for prosperity. let's talk. we have our panel for this evening. we welcome back grgry meeks, democratic congressman from new york. mark simone, w.o.r. radio host, and cnbc contributor robert costa of the "national review." okay. mr. gregory meeks, welcome back. thank you, sir. what is your take on the sequester? a, is it going to go through in six days, and b, is it good or bad for the country in your view? >> b, it's bad for the country. >> okay. >> a, it probably will happen. >> why is it bad? let's go to b. >> i think it will slow down the economy. we'll lose millions of jobs. there would be a stoppage of work at a number of places. the economy would get back into a tailspin. and so therefore it's bad. >> this is all for $44 billion. that's all it is, by the way.

$44 billion let me get this right. 1/4 of 1% of gdp. and i just want to add, being a democrat, one of my favorite democrats is bill clinton. what did bill clinton do working with republicans? cut spending. what did the economy do when bill clinton worked with the republicans to cut spending? the economy boomed. that's your model. >> but it's the sequester, which means you that can't cut spending smartly. it's just across-the-board random cuts. i'm for cuts. i'm one that will agree that we do have to cut spending. but we've got to do it in a balanced way. we've got to cut spending. i don't think anyone will argue that. we cut spending before in the budget control act. we cut some spending. but we do believe it's got to be done in a balanced way, that we cut spending because the ultimate goal is to have a balanced budget. cut spending and find more revenue, collect it together. >> i knew the r word was coming. >> absolutely. >> i knew the r word was coming. it was coming up here.

bob costa, let me just ask you. i'm looking at the late posting on the "new york times" website. democrats press gop to start talks to avert budget crisis. this is with six days to go. but in the democratic plan is the r word, revenues. haven't we dismissed that? is there anything in this report at all? >> i think the congressman brings up some great points. the president feels like he's in a great negotiating position. he won on the fiscal cliff. he won the election. he thinks he has republicans in a corner. he'll keep bringing up revenue, which is tax hikes, and he'll keep pressuring them to accept them. the problem for republicans is this. they already let some of the bush tax cuts expire. good luck going to the republican base and conservatives. if you're a republican lawmaker. and saying we're going to have some more revenue. i just don't think it's a tolerable situation right now in the gop to do what you're saying. >> it split the party in pieces. >> internal revolt. the president thinks he can get a balanced approach, but the gop just can't budge right now. >> what does it look like you

to? you're up here, you're on the radio, you're in new york city. what does this thing look like you to? >> well, i hate to disagree with you. and i hate to have to defend the president here. but for you to say that president obama came one a bad program, the sequester thing, is one of the few plans he's ever come up with that i like. and any cabinet member that cannot make a cut of 1.25% should immediately step down. he's not capable of managing if he can't make those cuts in a reasonable and rational way. this is the same game we always play. when you have to make a little cut, you claim we have to cut food safety, we have to cut airline security. you absolutely don't. there's enough waste and bloating you could make reasonable cuts. >> this is obama's plan. and this is a good thing. this is like the drones. i like the drones and i like the sequester. but he's disowning the sequester. >> but they let him get away with it. we've got to make this clear. this is obama's plan. he designed it. he created it. >> republicans also back the sequester. they're both responsible for this mess. and it's a mess. and i think what's going to happen, you're the insider on capitol hill inside of the cloak room. i'm interested in your take.

i think they're going to come one some replacements in the final few days. i think they're so nervous in their home districts, you're probably hearing it from their colleagues, people in the defense industry. they're going to scramble. >> if it happens it will happen from the senate side first. it will be something similar to the fiscal cliff. the senate will come up with something and they will send it over to the house and if it hits the floor there will be enough democrats and republicans to vote for something that is common sense. >> that's going to happen fast, though. you're talking monday, tuesday. >> that's why i said initially i think that sequester will happen. but remember, even with the fiscal cliff it was two or three days after the deadline before we had an agreement. so you still have some time -- >> and there is a continuing resolution to finance the government for the rest of the year. and with that cr they could do a lot of things to the sequester. >> that is correct. and hopefully we could then fix some of the problems with sequester, which i just think is random across the board. let's look at it. can there be cuts in certain areas? absolutely. we need to work on it together. but they do have to use, larry, the r word.

there has to be revenue. and i think what we've done before -- >> i've got to -- i'm going to get an area that is going to be very important which i think will be changed because we saw this recent memo. to all defense department personnel from leon panetta, the secretary of defense. he warned if sequestration occurs the department of defense will be forced to place the vast majority of its civilian workforce on administrative furlough. in fk they'll only work four days out of five and they'll lose the i fifth day's salary. the question is will that bring our national security at risk? let us bring in retired u.s. army general barry mccav raye. he's a military analyst for nbc news. general mccaffrey, welcome back. i just want to ask you this. if the defense department had more flexibility. all right? and let's say they had all the flexibility in the world, which i think is coming, can these cuts be made? can they meet the cuts? it's 500 billion over ten years, but it starts real slow. it's less than $20 billion in

2013. if you have flexibility, barry, can they do it? >> wait. in 2013 it's $46 billion in 22 weeks. >> no, it's not. not cash outlays. >> military pay is exempt and a lot of these contracts can't be affected. so in essence, in a reasonably short period of seven months of the year, you're going to see the department of defense go to fuel expenditures, spare parts, training, furloughing our 800,000 civilian employees, maybe one day a week. who knows? i mean, how do you furlough the people that run dining facilities at fort bragg, north carolina or in afghanistan? by the way, we've got a $6 billion a month war going on. so look, larry, at the end of the day i would argue this is appalling bad management. sure, you can get money out of the defense budget. but do it rationally in two, three, five years. >> all right. that may be. and i speak as a hawk here. but i'm interested in the

budget. a lot of people think, general, that the civilian workforce has just grown too large during these wars and as we wind down the wars we should wind down the civilians. a lot of people think there are too many military bases, too many troops in europe, for example. a lot of people think that the whole pension and health care benefit system in the pentagon needs to be overhauled and that these are where major savings are and that's where we should aim for, that the pentagon cannot be immune from this exercise. >> i wouldn't disagree at all. i think you can debate what kind of military defense strategy you wish, what kind of forces you plan on having, their technology, their training levels, all that should be on the table. but you've got to do it in a rational way. you've got to act like it's a business. the whole notion of cutting billions of dollars out of the defense budget, i just read one of the pundits announcing you can cut the defense budget by 2/3 and it wouldn't affect national security. and that all of this is

political theater. it's anything but political theater. you know, dr. ash carter, the deputy's a very rational, bright fellow. very experienced. the chiefs of the services just testified under oath. they said this is going to be a big problem. and i think it is. >> and i agree with the general. because again, as i said, i'm not saying not to do cuts but let's do it smart. let's not just do them randomly where they're just across the board cuts and we're not looking at where we're cutting and why we're cutting. the issues that you talked about are things that we can look at. and that's not what's happening with sequester. sequester really came about because we thought it was so draftic and so bad that it would force the members of the house and the senate to work to come up with some other kind of alternative. and that's what we should do. >> hawks in the republican party are now as far as i can tell, they may not be happy, but they're going to go along with these defense cuts. >> there are a few scattered hawks squawking about these cuts and saying we need to bridge some revenue in. but when you really talk to

conservatives who have some power on capitol hill, the congressmen and senators, they say let the sequester happen, these are real cuts, they're not perfect cuts, but there's such paralysis in washington right now, if you're a conservative you think there's no chance for any cuts in these kind of budget deals that keep poupg, so might as well let it happen fix it later. >> we've had so many presidents that cut the miller, cut the budget of the defense department. bill clinton, jimmy carter. it wasn't a disaster. and the amount is there but there's flexibility in each department to cut it in a safe and responsible manner. >> let me go back to general mccaffrey because i don't want to lose him. a lot of people say the defense department is being very political on this, for example, saying that the aircraft carriers and all the associated ship movements for the "harry s. truman" and the "abraham lincoln," they could go to the persian gulf and to come out and say they can't go to the persian gulf is what they call -- what is it? gold watching. gold watches? is that the term? that's the military side to shutting down the washington monument. i mean, there are things that can be done. and if you hear some of the

generals who i admire enormously but not necessarily financially, they say nothing can be done. that's not the case. >> larry, look. chief of staff of the army is not running for public office. we can't promote him again. he says he may have to cut up to 80% of the discretionary training budget for the remainder of the year. the navy has to fuel these carrier battle groups. if you want to save money quick you've got to either lay off civilian employees or you've got to stop burning gas and doing spare parts. there actually is no free lunch. >> is it time to write off civilian -- sir, is it time to lay off civilian employees? a lot of people are asking that question. >> first of all, they don't have the discretion to lay them off. except furlough them essentially 20%. they're going to stop new hires across the board. by the way, i might add the continuing resolution is a failure of congress to do their fundamental job for the better

part of five years. crs, continuing resolutions fund all the programs in the last year budget, don't allow new starts, and continue to fund programs that have been terminated. so you give no flexibility to your managers. these bright people, panetta, incoming, hagel, dr. ash carter. there's no flexibility to do this, particularly in 22 weeks. this is bad -- >> i agree there's no -- i agree about the flexibility part. i must say, though, where i might disagree is according to what i've read they didn't start planning for this until december. and i think that put them way behind the 8 ball. so now they're throwing all this stuff out. i mean, let me ask you this, general. just the last question. essentially, doing some math, adjusting for inflation, the military budget would probably come down, department of defense, 054 in the jargon of the budget, would come back to about 2006 levels. that was the height of the iraq

war. is that enough to sustain our national security? >> look, i think once we're out of afghanistan, i think we're going to be almost entirely out in 2014. one of the things that's going to happen is we're going to avoid $6 billion a month burn rate. gas, wounded, et cetera. we came out of iraq. that was another giant delta in the expenditures of d.o.d. there are savings coming. we need to reshape the force. we need to think through base closings and force structure. you can't do it in 22 weeks starting on 1 march. that's a bad way to think through the issue. >> all right. i hear you, sir. many thanks. general barry mccaffrey. as always, thanks for helping us out. now, another piece of the sequester story is what exactly does america want? and are they paying attention to this? we're about to ask all that from pollster scott rasmussen to try to get some answers. and folks, please don't forget, free market capitalism is the best path to prosperity. as i say, help is on the way.

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another angle to this

sequester story is what exactly do people want? and are they focused on the issue? a recent poll, this is usa today/pew poll if i'm not mistaken, shows that 76% want both spending cuts and tax hikes in the final package. that is what congressman meeks wants. but not all polls agree. so let's go right to ace pollster scott rasmussen. he's founder and president of rasmussen report. our panel is here. congressman meeks, mark simone, and robert costa are still with us. scott, welcome back. 76% want spending cuts and tax hik hikes. your polls aren't quite that clear. tell me who's right and who's wrong here. >> we do find the same thing for long-term deficit reduction. and like the pew poll we show that even people who want a mix want it heavily weighted to the spending cuts side. americans are willing to pay a little bit more in taxes to balance the budget if they believe spending cuts are real. however, they have absolutely zero faith that anybody in washington has any interest in

cutting spending. and right now that's what we're seeing in the sequester deal. >> did you hear that, congressman meeks? they have zero faith in congress cutting spending. >> go back. the president offered a big deal that can't get passed. he offered it to the speaker. speaker couldn't get it done. i would love to have a bigger deal. let's snatch off the band-aid instead of taking it off slowly. i think you have a number of individuals who would be willing to do that if you could get there. but we've got to make sure that it's a balanced deal. what 76% of the people say. where there is revenue as well as spending cuts. when you have individuals who say no revenue at all, that's where the impact is. >> larry, one of the key things, though, that question, and the same thing we find in our polling, was about a long-term deficit deal that was not about the sequester. everything your guests were saying before about how bad a way to manage things are, the

sequester is and how stupid is, americans agree. only 29% think the across-the-board cuts are a good way to do things. however, when they look at what congress has done for the last few years and their inability to produce anything better, a large number of people are now saying you know what? this is a stupid way to do it but it's the only way spending will ever be cut. and important to recognize, most americans have caught on and they know this is not really going to reduce spending, it's going to simply slow the rate of growth. that's something else that really hurts this argument that it's going to -- >> they're smart. bob costa -- i want to say, 68% believe cutting government spending is the best thing to do to help the economy. and what you're saying is people polled now, that all you're doing is cutting the rate of growth, you're not actually cutting the level. >> right. >> bob costa, you have a question. >> tell me about the politics of this. we've been hearing a lot about the horror stories if this thing hits, about the long waits at the airports, about the job losses. is that going to force republicans to make a deal or not?

>> well, if there are really long waits at the airports and if there are really disastrous consequences, then there will be some kind of a deal they'll be forced to have happen. however, if you go back to 1995, the alleged shutdown of government there, was the same expectation. and the initials polls show that nobody notice when'd they shut down the government. the reason -- and bill clinton was masterful at putting the republicans into a corner because what he did was he said it's not fair to those employees who are being furloughed. it's not fair to those workers to hold them in limbo, to hold them hostage. so if the dynamics shift, yeah, it could hurt the republicans along the way. but it won't be about the argument about hurting the economy or these types of cuts. >> but the pew poll actually has 56% of republicans who were willing to take a tax hike. it was 56-42 gop willing to take a tax hike. that does surprise me. that gives congressman meeks's position the upper hand, which i don't like because i don't agree with it. >> larry, that's not anything

new. in our polling right after the election 52% of republicans said they would accept that. but it would have to be for substantial spending cuts. in the military, in entitlements, a real deal. what voters see right now is they believe republicans are unwilling to move on revenue and they're unwilling to cut defense spending. they think democrats are unwilling to cut entitlements or social programs -- >> well, we had a tax hike this year already. how many tax hikes can we have in one year? >> we also had spending cuts last year too. >> well, let's do it again. >> it's balanced. we've got to do both. that's what people are asking for. >> i hate balance. i want lower spending. >> the last time government spending in america went down from one year to the next in real terms was two years before i was born. >> okay. that's great. scott rasmussen, thanks very much. now we turn the table just a little bit. the oscars are sunday night. and our own julia boorstein is

already staking out the red carpet. you'll be thrilled to know that i'm going to tell you my picks for best picture and best actor. i have three picks for both. "the kudlow report" goes hollywood with julia next up.

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"lincoln." and "lincoln." those are my three picks for best picture. and i have three picks for best actor. daniel day lewis. daniel day lewis. and daniel day-lewis. do you have a thought on that? >> well, i do think that daniel day-lewis is going to win best actor, and i think that "lincoln" has a good shot. it was nominated for more oscars than any other film. it had 12 nominations. but i actually hear in hollywood that "argo" is going to come away with best picture. i do think spielberg will get best director, though. but i think for the biggest award for best picture is between "argo" and "lincoln." >> but you know, "argo" has won every other award. golden globes, the british academy awards. it's always winning. but i think you've got to give it to "lincoln" on this one. it was larry that actually started me on that film. it is one of the most riveting films ever. another factor. most of the academy voters, most people don't know this, most of them are in their 70s and 80s. it's a much older crowd that does the voting.

>> they like historical movies. there's no doubt. you by think it might go to "argo" not just because of the momentum they have from other awards because that doesn't influence academy voters so much but the sense that spielberg has won a number of times and he is the elder statesman here in hollywood. we'll see if we can go the traditional route and if it's "lincoln" or if it goes to the newcomer ben affleck. >> one of the most fascinating categories is best supporting actors. you've got these old veterans, oscar winners like de niro, like tommy lee jones, like alan arkin. who do you think will win in that? that's a tough category. >> i think that's a tough category. i'm hearing maybe tommy lee jones, but that to me is a real tossup. i think another category that's really complicated is the best actress category because some people are saying it's going to be jessica chastain. other people are saying it's going to be jennifer lawrence for "silver linings playbook." and then we could have the dark horse candidate, emanuel ri vachlt for "amour," which is a movie that is very well reviewed but not very many people saw. >> julia boorstin, great to help us out. i don't know if you realize, this is the great mark simone,

tv, radio star, movie critic. he does it all. i don't know. i like that gal from "zero dark thirty." but everybody tells me that movie can't win. i liked her. julia, you're great. now, one of america's leaders in the fight for lower taxes and the free market, governor sam brownback. he's about to tell us his red state model for republican revival. next up on "the kudlow report." there's this island -- and it's got super-cute kangaroos.

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welcome back to "the kudlow report." governors from around the country are gathering in washington this weekend for the national governors association winter meeting. and top of the agenda,ing with well, how their states are going to deal with the where 1st sequester spending cuts if they kick in. here now first on cnbc is kansas republican governor sam brownback. and our panel is still with us. congressman gregory meeks, mark simone and robert costa waiting in the wings. governor brownback, as always, thank you for coming on. i want to ask you, what is your opinion of the sequester? let's just start there quickly. what do you think of this thing? >> well, i think there's a better route to go. i think congress ought to come up with the cuts themselves. but i do think this is a useful tool to force the conversation on how you get the federal

budget to balance. we needed to have this conversation for a decade, and it's about time we start the conversation. >> who's winning the political battle? president obama or the house republicans? >> frankly, i think we've got all losers on this one so far because it looks like people aren't really talking about it. but the country is ready for us to start doing some stuff. we're seeing at the state level i had to make a lot of tough choices. how you make some cuts at state level to try to create growth and balance your budget. i think they're ready for the conversation to have but i think they want a conversation between both the president and congress and that's what it doesn't feel like or doesn't look like's happening. >> last one before i bring my panelists in who want to talk to you. you are being hailed as one of the red state models, you and a number of republican governors, because of your tax cutting, because of your budget cutting, insofar as reviving the democratic -- the republican party. that this is a model the gop should adopt. are you going to stay with it? are you going to try to spread

the gospel? is it possible the republican party can ever have a growth message again? >> oh, absolutely. i'm going to stay with it. you know, i might remind you too, you picking "lincoln" as the movie. lincoln once said, if i were to move anywhere i think i would move to kansas. so what we're trying to do is create that lincoln revival, too, with it and get our taxes down. i want to take the income tax to zero and attract people in growth, which is what we need to have happen in kansas. but it's also what we need to have happen in america. we can do it. this is going to work. and we're going to stick with it. >> governor, let me just ask. polls recently show that 76% of americans say that we've got to have a balanced way to move forward. there has to be cuts and revenue so we can have a balanced budget and go forward, creating jobs and opportunities for all americans. is don't you think that as we focus on -- in congress as opposed to saying no revenue at all and just cuts we should have a balanced approach moving forward to get this thing done?

>> i agree with a balanced approach. but revenue isn't just raising taxes. revenue is getting more revenue coming in at the federal level. and that to me is more oriented toward growth than it is toward raising your taxes. so if i were still in the congress, i'd be looking at what are those ways i could cut taxes that could increase the revenue at the federal level the most? and you've got a couple of examples in the past where kennedy has cut taxes for creating growth. and i would really look at methods that you could do that because that hits your theme of both of them and really both parties ought to be engaged in that. >> would closing loopholes be part of revenue? >> yeah. if you can do that and lower your rates at the same time. that's what i proposed in kansas, was basically a flat tax with a small business accelerator where we took all taxes off of llc and sub s income. that's primarily how small businesses are organized.

because we want small business to come into kansas and grow. and so far we're already seeing a record number of small business filings in our state. and the tax policy just went into place. >> hey, governor brownback, bob costa here. you've served in the united states senate. now you're a leader in kansas as governor. but you know how mired the republican party has become in these budget fights. talking about austerity, how does the republican party get back to a growth message? how does it get out of this corner and boxed-in situation about austerity? >> yeah. i wish i had an easy answer on that because it's -- it kind of comes up at every corner. whether it's talking about the debt ceiling or it's talking about sequestration. each of those generally have the sort of, okay, how do we hold spending down? we really need to turn that corner. i would urge people to start talking a lot more about a national flat tax or some sort of growth-oriented tax polts. so you throw a big one in here. that's i think really the thing that we need to start inserting into the discussion, is a big deal. not these sort of incremental

how do we cut here and nip here to be able to make things work. >> hey, governor, am i missing something about the sequester? in the smartest corporations in the world when they have to cut back that's how they do it. they pick a tiny percentage and tell each department to cut by that percentage. great corporations have done that. it's very successful. >> yeah, but that's not managing for as far as -- if you're just saying, okay, let's cut everything. for instance, in kansas we increased in some places. we put more money in technical education while at the same time we eliminated some functions within government. i think government has to be smart about this. and i think we have to be willing to take on that level of political fight, saying you know what, we need more technical training in the united states and we clearly do. but we also don't need to do function x, y, and z. and yes, there are people that still want this to be funded, but it's not yielding what we need to do now. i think really we're at a point in time where government needs to start doing that instead of this across-the-board stuff.

>> governor, last one on this. look, in terms of the popular vote for president, the republicans have lost three of the last four elections. bush lost the popular vote in 2000. he won it in '04. and then we have obama and obama. how does the gop get back on track? how does the republican party become a serious presidential party again? >> you know, i think we're discovering it across the states. and i think if you look at a number of different republican governors, what they're doing, it isn't that government is all bad. but government has to do certain functions. it has to manage it better. we've got to get in a growth mode. and i think you're discovering that model in places like ohio or kansas or louisiana, michigan, iowa, texas. i really think we're starting to come up with that. but larry, i don't know that the formula's all there yet. we've got to i think look around for a while and see what that formula comes out to be. but i think you're starting to see it emerge from some of these

republican governors across the country. >> all right. the red state model. governor sam brownback of kansas. thank you, sir. appreciate it. up next, lots of late-breaking news this evening, including a downgrade for great britain and a decision by senate democrats that may surprise you. seema mody has all those headlines for us up next. but first, let's get a little sequester tutorial from jay leno. >> you understand this whole federal government sequestration -- how do you say it? sequestration? i can't even say it. it's so confusing. we put together a video metaphor. maybe this will explain what the sequestration is. take a look. >> and now a video metaphor for the impasse between republicans and democrats over how to avoid $1.2 trillion in across-the-board spending cuts. also known as sequestration. the duck represents sequestration. the cats represent republicans and democrats. when they get into position and

are close to victory, one party bites the other in the ass. the other party disengages. and we're back to square one. this has been a video metaphor for sequestration. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. you know it can be hard to lbreathe, and how that feels.e, copd includes chronic bronchitis and emphysema.

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well now, hedge fund manager david einhorn wins his fight against apple. cnbc's own seema mody's going to explain that and give us all the day's top stories. good evening, seema. >> good evening, larry. you've got it. einhorn and his fund, greenlight capital, suing apple's so-called proposal number two. it would have required a shareholder vote to authorize issuing preferred stock but a judge sides with einhorn. so the vote won't take place. einhorn wants apple to issue preferred stock as a way to share some of its giant cash pile with investors. now, we have the late news just in to cnbc. this is apple's response to the ruling. "we are disappointed with the court's ruling. proposal number 2 is part of our efforts to further enhance corporate governance and serve our shareholders' best interests. unfortunately, due to today's decision, shareholders will not be able to vote on proposal number 2 at our annual meeting next week." larry, in other news yahoo's new ceo, marissa mayer now requiring all remote employees to relocate to company offices. that's according to all things d. the new hr policy would force

anyone working from home to start going to an office. this could especially hurt working mothers. and it's controversial because mayer was an example of the capabilities of working mothers. she got yahoo's top job while pregnant and returned to work right after having the baby. in other news, moody's cuts great britain's credit rating, taking away its perfect aaa rating. moody's says growth will remain sluggish, and it doesn't think britain can reverse its huge debt until 2016 at the earliest. and finally, private jets were a popular punching bag for the president and the campaign trail. but now the senate democrats' spending cuts plan keeps a tax break for owners of private jets. white house press secretary jay carney says the president's position has always been to get rid of the loophole. but it probably wouldn't make a big difference anyway. only about $300 million per year. larry? i'm sure you have some interesting thoughts. >> what? the democrats are going to keep

the private jet depreciation loophole after this attack all these years? mr. gregory meeks, how is such a thing possible? >> well, it's such a small amount of money. we've got serious business that we've got to take care of. you know, we've got this huge gigantic hole that we've got to -- >> the attack on oil and gas doesn't get you much money. in fact, the attack on all these businesses don't get you much money. i'll look at this from the optimistic side. if democrats can back off attacking private jets, then why don't they back off all these other pro-growth businesses also? >> look, democrats are pro business. believe it or not, larry. >> really? you may be pro business. >> the president is pro business. that's why you hear him talking about where you need to invest because in our businesses we can create jobs. that's what the whole state of the union address was about. >> class warfare all throughout 2012. and then the hypocrisy right now to just turn their backs after doing that whole campaign. it just -- >> and let me point out, you

always go after big oil. what about big tech? apple, facebook, google. pay less taxes than these oil companies, make more money than they'll ever make. why don't you go after big tech? >> what we're looking to do and i think the right thing to do is try to close the loopholes for everybody. that's what the president's talking about. >> you're talking about private jet owners. that's 32 people. >> that's good for television and things of that nature. >> that's true. >> it sounds like -- >> it's a handful of people. >> but it's small in comparison to the seriousness that we've got to deal with come just a few days. a week from today with sequestration. continuing resolution. we've got some big things we've got to debate. >> i maintain -- i come back to my original point. even though the process isn't great, across-the-board cuts, so what? the fact is a lot of businesses do that too. cutting spending is pro growth. and i think the republicans are missing an opportunity. they ought to couple these spending cuts with corporate tax reform that would help large and

small businesses. get rid of the loopholes, yes, but lower those tax rates and bring the money that's overseas back home tax-free. they'd better get on that. >> it's called a strategy, larry. >> otherwise, the white house is going to start talking about it. you wait and see. the white house will start talking about it. >> and republicans have to do a better job articulating their position, having a strategy. because if you look at the debt problem in this country, the sequester number is a drop in the bucket. so how do republicans make the case? maybe it has to include tax reform. how do you make the larger case on the debt prorks on the economic and fiscal -- >> together. lower spending, limited government, lower marginal tax rate. get rid of the crony capitalism. get rid of the corporate jet depreciation. i don't care about it. you're right. it's only a couple hundred million dollars. but offset it with lower tax rates. and let smaller businesses play the lower tax rates. i've got to get out of here. robert costa, thank you very much. he's going to miss the stock market segment. seema mody's going to stick around and take his place. you just start aid whole rat's

nest of -- >> i'm ready. >> next up weeg r we're going to look at a big day for the stock market and talk about what it tells us for the economy right now. it was supposed to be a big correction week, but you know what? it really wasn't. is this all there really is? >> i said to myself, is that all there is? ♪ ♪ [ male announcer ] it was designed to escape the ordinary. it feels like it can escape gravity. ♪ the 2013 c-class coupe. ♪ starting at $37,800.

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how about that rally on wall street? cnbc's seema mody back to join

us with all the details. what you got, seema? >> volatile week for wall street this week, larry. on wednesday the fed minutes gave investors an excuse to book profits. the s&p 500, the nasdaq having their worst day of the year on concerns that the fed will scale back its monetary support. then weak european pmi data followed by a surprising decline in the philadelphia index combined to rattle markets on thursday, but today, have no fear, the markets staging a comeback with all ten major s&p sectors trading higher with tech leading the charge. that's thanks to better than expected earnings from hewlett-packard. and even though we saw a 100-point gain on the dow, larry, you still have a lot of traders saying there isn't enough conviction in the market. as you know, a lot of uncertainty still ahead, including that italian election that kicks off on sunday. >> i love that. >> as you've been talking about that sequester -- >> we talked about the italian election last night with mary thompson. berls kony's back in the game. what i want to know is why is

berls ko berlusconi -- he should be in jail on a morals charge, not -- >> people are quick to forgive. >> berlusconi, can he pull this off? after what, teenage girls and this and that. the guy should be up on a morals charge. >> i love italy, but their government, it's a lot like new jersey. it's surprising who can get elected. >> okay. i want to ask you, as cnet reported, everybody thought a couple days ago the federal reserve minutes indicated that they might snuggle up a bit. there's no question today bernanke came out full hog and said he's not worried about any asset bubbles. bullard was on cnbc today, the st. louis fed guy saying no tightening until 2014 at the earliest. the fed bailed the market out today. >> we're right there. i mean, i put that in our note this week, that we're taking the fed at its word. look at the two trigger mechanisms they talked about. you've got inflation, core pce inflation has to be above 2.5%.

we're signature at 1.4 right now. and they want to see the rate of unemployment below 6.5. we're sitting at 7.9 right now. we may even tick up as a result of the sequester. so in terms of the fed's own metrics we're nowhere near the fed taking the -- >> i couldn't figure out what everyone was getting so excited about. easy money and rising profits are going to continue the stock market rally. and the obama administration's going to take credit for it just like they always do. am i wrong about that? >> obama's policies are working. that's what it is. they're creating more jobs. that's why we don't want the sequester to take place. because the policies he's been putting in place have been helping us get out of the big -- >> bernanke is buying your deficits. he's buying all your spending. you spend and then he comes in and sweeps it up and buys all these bonds, sticks all the money into the marketplace and you have a rally. this is a hell of a game. this is like -- what was the robert redford movie? the scam -- >> "the sting." you've got another factor here. break down a lot of the sales of

these corporations, it's overseas. there are more construction cranes in vietnam than in new york right now. >> that's, again, what the pront talked about in the state of the union address about making sure we're building and have cranes in the united states, infrastructure, jobs, bringing manufacturing jobs back here. and i think another good point you that make, we can't just do the european model because we see they're not growing. they're just doing austerity only. you know, the growth is not happening there. there was something that just came out recently talking about how small their growth is. so that tells me we don't want that model. we want this balanced approach that the president's talking about that will bring back and create jobs and move us forward. the president's policies -- >> you've got to have low tax rate reform to get that. that's what you need. what's all this stuff -- i'm going to ask both of you this. the consumer is dead. this was a big theme today. it didn't stop the market because of the easy money message from bernanke. do you really believe the consumer's dead? >> this is a theme that's been playing out over the last seven or eight weeks, larry. i did a piece last week where i looked at christmas. christmas overall, november,

december, january, was mediocre. if you looked at the trajectory, november and december were actually pretty good. january was terrible. and when you dug into the weeds of why january was terrible there were a couple of things. number one, the social security payroll tax holiday came off. that raised the rate by 2%. so that was a significant problem. energy prices over the last two months are up 18%. so that's having a problem. and because the fiscal cliff came together so late -- >> stocks roared through all this. they didn't care at all. >> they were ignoring that. i didn't think they understood the numbers until walmart came out a couple of days ago and talked about the fact their numbers weren't great until january or february. >> the market has been focused on the better than expected earnings this quarter. >> bing ore. >> better than expected economic data you take a look at relatively speaking, the jobs number, the housing recovery that we're seeing. finally, though, i have to say traders that i speak to are

saying that the weaker consumer, that will be a concern for the market going forward. you have retail earnings coming out next week from the likes of home depot to saks. that will be a great barometer to tell us not only the health of the consumer but also where the consumer is spending and how they're allocating capital. >> sequestration is -- that's why we cannot have sequestration, because it's going to affect the average every day shopping and going into retail stores. it will have an effect on it. >> i think sequestration is bullish. the stock market knows all about sequestration. and it's having one of its best runs in an early year in history. they know all about the budget cuts. i think they like the budget cuts. >> they like the budget cuts. i don't know that the market is completely sold on what the budget cuts are. i agree with the congressman. i think we can do a better job, more intelligent job of picking those cuts. i think the republicans aren't going to back off because they're saying a bad cut is better than no cut. and i think for that reason i think you're going to see this go through. >> what about the -- can i just say at one -- i agree, consumers are soft and they're going to stay soft.

>> and the consumer accounts for 70% of gdp. >> i think the gasoline thing may be a bigger problem than the payroll tax buzz i don't think the payroll tax cut really worked. i want to note this. my pal conrad di quatros told me this. red book chain store sales, very good. last week of january 1.8% year on year. first week of february 2.4%. and the second week of february 2.8%. is it possible that the consumer is stronger than you think? and the retail sales are picking up. i don't care what walmart says. walmart says a lot of things. they're not always right. >> i think you've got a bifurcation perhaps between low and end high end. walmart has told us that the low end is going to be pressured. companies like nordstrom are telling us that despite the tax increases the high end's still doing okay. and the the high end is going to continue to drive -- i do think the low end has got some problems right now. >> i agree with that. i think the low and middle class has a lot of problems. the question congressman meeks is what to do about it.

>> that's what the president's state of the union speech was all about. investing in manufacturing more in america so that we can build it here and ship it other places. building in our infrastructure. investing in technology. investing in our housing and making sure the housing market. that's exactly what the president's talking about. what will help our middle class and those aspiring, the poor, making sure we're giving them the opportunities. that is exactly the president's message during the state of the union address. >> let's all respect -- and by the way, i do not question his intention. does he have any areas of the economy he doesn't want to control? it's like he's got something for every area of the economy. i'm a free market guy. i say let the market take a rip at the ball. >> i think what he indicated and what the governor indicated, government is not bad. all government is not bad. >> i've got to get out of here. thank you. thank you to everybody. greg meeks, mark simone, thank you, thank you, thank you. that's it for tonight's show. i'm larry kudlow. we've got about six seconds to go.

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