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skeptical, but we've got to like what we see. there's always a market somewhere. i trycramer, and i will see you monday! good evening, everyone. i'm larry kudlow. this is "the kudlow report." what a difference a week makes. last friday night the news was all gloom and doom. president obama was predicting the worst because of the budget-cutting sequester. republicans, democrats, including the president, were at each other's throat. but fast forward to tonight. they're basking in the glow of a very good jobs report, 236,000 new jobs created and unemployment rate dropped to 7.7%. the economy may not be as good as it could be but it is stronger than many thought. and on wall street the dow set record high after record high this week. closing up another 67 points today and showing gains on all five trading days for a weekly rise of 307 points. corporate profits, dividends and

other payouts to investors are soaring. i am still playing stocks and the economy from the optimistic side. and in washington a new president obama engaged in deficit dinner diplomacy with those very same republican senators he was bashing only a week ago. this is good in my opinion. now we are hearing that former president bill clinton may have put obama up to it by turning the president into the new schmoozer in chief. i'm going to cover it all this evening. "the kudlow report" begins right now. first up tonight, our sizzle story. a better-than-expected jobs report in february. cnbc's courtney reagan joins us now with the details. good evening, courtney. >> good evening to you, larry. and what a beat it was. nice jobs report. the government's latest employment report revealing an addition of 236,000 non-arm jobs. economists were expecting 155,000. the unemployment rate also

ticked down to 7.7% from 7.9% this january. the rate now the lowest level in four years. but still well above that historical average of 5.8%. and the jobs were more broad-based. private sector job growth particularly good. strong auto sales and improving housing markets helping hiring and manufacturing and construction. the problem, though, is the participation rate. in february 130,000 people who are currently unemployed gave up looking for work altogether. so they weren't counted in that unemployment rate. february's participation rate is at a 30-year low. now, february was a good month but there's still a long way to go and a lot of hurdles in the way. 4.8 million americans have been unemployed for longer than six months. that's up 100,000 in february. hourly wages did rise ever so slightly in february. good news is gas prices continue top increase and higher payroll taxes take a bigger bite out of americans' paychecks. lots of good. a little rough spots. >> it ain't perfect. but it is pretty good.

many thanks. court nir reagan's going to stay with us. much more work for her to do this evening. today's jobs report saw the economy better than you think. and you ought to think about the health of business. not just the fed. it's business that creates jobs. let's bring in our experts and talk about this story. steve rechuto, the chief economist for mizuho securities. zach karabell. and michael santelli, senior economist with yahoo finance. michael, it is business that creates jobs. it is not the federal reserve that directly creates jobs. and i just want to ask you this. you have the ism's housing, business investment orders, profits all pretty good. is this other piece, can one say that the economy is in fact doing better than most folks thought? >> it is. and i think the markets kind of got to that conclusion already. they were actually pricing in something like this and it continues today. i do think you always had the sense that in business, in the strength of the balance sheets, in the cash richness and the productivity levels of corporate

america they actually had the potential energy to have this kind of run of data. i do think it's better. the question i have is a year ago at this time the trailing three-month average of job growth was 245,000. we had this good run before and we kind of backslid a little bit. i think that's why it's still a little bit wait and see but it's hard to punch holes in the numbers. >> you're not as convinced this is a good story. tell me about your take. i know you're a contrarian and we need a contrarian. >> my point with regard to the overall payroll employment number is as was already mentioned we are already into a downward trajectory. fourth quarter average gains were 230,000. first quarter average gain about 180. you've got a 50,000 swing there. it's not going in the right direction. i'm not saying this is an economy that is in any way at risk of double dipping or anything of that nature, it's an economy that's just growing at a very slow trajectory and it's probably going to continue that through the rest of the year. >> dach, let me go to you on this. we've had some public policy

decisions in washington -- i know this sequester just started. i miechl think it's going to be healthy for the economy. but taxes were raised january 1st. does not seem to have had any particular effect. maybe, even though i hate to see taxes go up, maybe the real story here certainty. we now know all about that and maybe businesses will take more aggressive action to create jobs. >> i think businesses -- none of these reports, by the way, show massive hiring out of business level. professional and business services are a lot of lower paid clerical -- the housing and the construction numbers, that's more people building -- >> big numbers. >> but that's not -- >> retailing, that's -- >> that's not large businesses hiring. i'm not downplaying. i'm just saying we should be aware of the fact the jobs that are being created are not woo hao, great jobs. they are okay jobs. >> you don't think these construction jobs are woo hao, great jobs? i bet you they're paying a fortune. by the way, you know what's in sneer energy jobs. they play a bloody fortune. >> they do.

but they're only 14,000 -- that's part of the whole boom of natural gas that's been buoying the entire center and to some degree center right of the country. and that's going to keep happening. i'm just saying i think what we're in is largely what we've been in, which is a relatively high-level what will be structural unemployment. not european structural unemployment, not spain structural unemployment but our own version of a transitional economy from this heavy-duty manufacturing due stuff to services and high-tech. >> look, you need really 300,000, 400,000 jobs to get this into a serious recovery. courtney, one thing you mentioned. 130,000 people dropped out of the civilian labor force and actually there's even a worse number. almost 300 -- 296,000 people either dropped out of the labor force entirely or quit looking for work. this continues to plague the numbers. the employment population rate is low. the participation rate is low. why is that? this is the achilles heel of the jobs story. >> and i think it's a really

tough thing to ask. why is that? you've got all these americans that have been out of work for six months. how discouraging is that possibly? it's got to be tough. and then you've got this gap where you know that businesses are looking for qualified individuals but it doesn't seem to match up with the skill set. i'm worried that we're losing a whole sector of american workers, folks that maybe don't have the right skills, that only had a high school degree or maybe just some college but not enough college. i'm worried they're gone altogether as far as jobs that are going to match those skills. that's what i think the problem is. it's not all just the folks that are retiring. it's the people that want to work but they gave up, they're discouraged, they just don't think they fit anymore. and maybe they don't. >> mike santelli, the beige book of the federal reserve came out this week, and they actually mentioned obama care as a job stopper, as a job inhibitor. what's your take on that? >> i do think it's something that businesses are now coming to terms with. right? so you actually are projecting ahead what this is going to

mean. you hear about health insurance bids coming in for companies looking to get new policies, these astronomical numbers, maybe they don't want the business. it's going to be a drag on the areas of the economy that doesn't traditionally provide generous health care. i think it's going to be one of these headwinds. i also think the story here with some of these little quirks in the numbers that you aren't so happy with in terms of the labor force participation, at some point we're going know how much of that's demographic. we're going know how much of that's preretirement, people leaving the workforce. i don't know about that either. the there was another number. the number of people holding multiple jobs was equivalent to the net gain in jobs. >> i think part is this desire, and it's certainly a public one, not just a media one, to say is the economy doing well or is it doing badly, that that kind of binary simplicity given the world we're living in isn't going to maturity story. as you said, corporate profits are great, the economy is relatively stable. for an aflunt system --

>> profits create jobs. but i don't know that it's binary. i think it's singular. in other words, it is fashionable among the else and the media elites and the wall street elites, it is fashionable to be pessimistic. and my take is okay, look, i have my differences with president obama. everybody knows that. i'm a reagan supply sider. but you look at data points. the data points show this is a good number and that in fact jobs are at least rising. it may be slow based but it ain't bad. and i'm glad it ain't bad because i want america to be resilient. >> and i don't disagree with you there. i don't disagree with a lot of the conversation that's going on. but i think you need to keep in mind, companies are trying to grow revenues at double-digit rates. the overall global economy is not growing as fast as it used to grow. the domestic economy's not growing as fast as it used to go. if you have an economy that's growing at 2 1/2%, 3% nominal and you've got an earnings expectation of 10%, there's a fudge factor in the middle of that and that's cost cutting and

that cost cutting fudge factor comes down to holding back employment. that's the problem i have -- >> it's not just cost cutting, though. it's the fact that companies get to off balance sheet a lot of the costs. health care, education, dealing with the elderly. i think you could have a many year cycle as you already have in the future of companies generating that double-digit growth, highly profitable, but you are going to have lower national growth as a result. >> i'll tell you this. the single best thing we could do. maybe it will happen. i believe in miracles. corporate tax reform would be a tremendous booster rocket. take that corporate rate, state and federal, from 40% down to 25%. make the small llc s corp.s eligible for the same 25%, and repaid riate all that money. we'll come back later and talk about stocks. there is so much money overseas, it is unbelievable. and we could use some of it here if you had some tax advantages instead of penalties. anyway, i told you i was a supply sider. there's nothing i can do about it. thanks to awful you. you're going to be coming back later in the show to refocus on

the stock market rally, which is awesome. but next up on "kudlow," this was a big week of change in washington. the old guard of the republican party seems to have lost its authority and maybe its mind. now the young guns in the party are taking center stage. who are these new stars? we're going to fill in the blanks just ahead. please don't forget free market capitalism is the best path to prosperity. it is business, not the government or the federal reserve that ultimately creates those jobs. i'm kudlow. we'll be right back. ♪ than the sun ♪ tonight carfirmation. only hertz gives you a carfirmation. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz.

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so there's a new group of leaders emerging for the republican party. a class of gop young guns are taking the spotlight. that includes senators rand paul, marco rubio, ted cruz, mike leigh, kelly ayotte, pat toomey, and ron johnson. i've probably forgotten a few. let's not forget chris christie, who beat governor andrew cuomo 41% to 28% in a new poll just out and comes the closest in defeating hillary clinton in a head-to-head poll for you know, what the white house. let's talk about that. here now is our panel, blake zeff, salon.com politics editor.

haley heath. and my pal mark simone, w.o.r. radio host. mark simone, i want to go with you. the genesis of this story was the rand paul filibuster about the use of drones overseas and here in america. and john mccain went ballistic. so did his pal lindsey graham. but john mccain starts walling them wacko and wacko birds. the people that were around rand paul around that. mike leigh, ted cruz. is there a change now? is john mccain too far out there and this is the new group that's going to run the senate and the gop? >> i don't know. i like rand paul. he's a very intelligent guy. he made some good points. but he does look -- i hate to say, he can look a little nutty. and anytime anybody talks for 12 hours you're going to look nutty. and it's the old guard who have been ineffective. they've lost the white house. listening to them for the last couple of elections. there's this new guard who i don't think has really

accomplished much of anything. you get the middle guard. the middle guard are guys like chris christie. governors, mcdonnell in virginia. governors who have really accomplished things. and those are who we should be listening to. those should be the models for the gop. >> blake, let me ask you the same question. want to add some important names. around rand paul directly that night was mike leigh and marco rubio and ted cruz. they were right with him. okay. he's asking good questions. i don't know that anything was resolved. a lot of liberals agree he's asking the right questions. but you've got other guys who i think are very -- pat toomey is a fiscal expert. kelly ayotte, fiscal and military expert. ron johnson, a fiscal expert. these guys were at the obama dinner that night, which i approve heartily. and i think they are part of the new leadership. and i think john mccain is way too hard on these guys. >> look, it was not a good moment for john mccain. this is what happens all the time, in fairness to john

mccain. you have senators who have been there for a long time starkts to get a little older, in their 70s and 80s, and you have the younger guard come up. and it's good, healthy for a party -- >> he's a great american. >> sure. >> he's a personal friend. >> of course. >> i just don't think he's in the flow. he's not in the swing of things the way the new crowd operates. >> that's my point. it's not personal or particular to john mccain. it's as you get older and you have this older guard it's tie to make way. he overreacted. he got very upset. it looked like one of those get off my lawn moments. you remember that dana carvey sketch in the '80s? when i was young. he was a grumpy old man. that's what mccain looked like to me. >> these guys, this new crowd is free market, almost libertarian on the economy. strong market defense but very free market. is it going to change the center of gravity in the senate? is it going to change the center of gravity in the whole republican party? >> what i see these candidates doing, well, they're senators now, but when they were candidates, they led with those

economic issues. they also talk about issues where they can unite a majority of the american people. kudos to them for doing that. but this filibuster is a great example of just that. when you're skth white house for 13 hours for a simple clarification, they can't get it, what an embarrassment to the obama white house. >> this is an interesting point. you think the rand paul filibuster did more harm or more good? >> more good for the gop. stand with rand on twitter the hashtag was trending not just in the united states but worldwide. >> and he was asking the right questions. >> it was a principled stand and it united americans -- >> constitutional questions. big government questions. >> i disagree. maybe the twitter world. but if you're going to ask the right yes for most americans it's when are you going to get us back to work, when are you going to get the economy moving? we're not worried about getting hit about a drone in a cafe. >> are you sure? after a 13-hour fill buffetter, man, i'll looking around. rudy giuliani used to say look around carefully when you walk outside. >> republicans have been asking about the economy for a long

time. >> if you're going to do about mr. smith goes to washington it has to be about something more mainstream than drone strikes in america. >> how about your other point i liked better? chris christie. he really clocks andrew cuomo in this poll we read about in today's "new york post." chris christie's a guy -- i think the conservative political action committee is nuts not to have invited him. we've already covered that story here. but clearly, he's the most popular governor in a the country. popular guy in a blue state. he's exactly the kind of guy republicans need. and yet they dis him left and right. i don't get it. >> he doesn't toe the party line all the time. but he toes the public's line. the mood changes in the public. he's a straight talker. cuomo i just don't think people are convinced is a straight talker p the lights went out in new york and long island and we couldn't get them back on. he said that power company better answer to me. it turned out they've been under his control for the last six years. they were answering to him. too much theatrics with cuomo. christie a straight shooter, a tough talker, and that's what

people want. >> he runs closest -- hadly, i'll give you the last word on this. he runs closest to hillary clinton for president in 2016. i know that's a long way away but that's sometimes how you gauge that. he loses to her by eight points, which is frankly half of what the others lose to her by. what do you think of christie? >> i think it's okay for republicans to be a little gun-shy about a popular governor from a blue state because that was what mitt romney was essentially, right? and that didn't work out. >> christie didn't invent christie care, health care. >> that's true. >> and he's a tax cutter. he is a spending cutter. he's pro life. i mean, he's got pretty steady -- >> he's more of a conservative. that's right. so he's a good option. but you're right to point out we're in 2013 right now. 2016's a long way away. >> hang on. we're going to have you all back later on. here's another one. venezuelan anti-american communist hugo chavez had his funeral today. you'll be astonished at the people that actually showed up to honor this horrible -- and his pal iranian dictator mahmoud

ahmadinejad. i mean, who's going to go down there? the nuttiest of the nuts. later on a shocking new report about high school graduates in one major city and how woefully unprepared they are for higher learning. luckily, none of them is as ill prepared as this guy. >> oh, back to school. back to school. to prove to dad that i'm not a fool. i got my lunch packed up, my boots tied tight. i hope i don't get in a fight. oh, back to school. back to school. ♪

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today the vatican announced the schedule for the conclave to choose the new pope. cnbc's courtney reagan joins us again with that and more of the top news. hello, courtney. >> hello, larry. that's right. the conclave will start on tuesday. this is earlier than it had to convene. 115 cardinals will meet in the sistine chapel. they'll lock themselves in there except for eating and sleeping until they've chosen a new pope. when they do, white smoke will come from the chimney. that's the signal to the rest of us. winter storm hitting the northeast today. here in the new york area we got a few inches of snow but not enough to cause a major disruption. but new england was hit harder. 14 inches in some areas of massachusetts. thousands of homes without power. again. and the story i've been following, macy's, jcpennejcpend martha stewart agreeing to go to mediation to solve their dispute. they have until april 8th to make a deal.

in the meantime jcpenney can sell certain martha stewart branded products but others reexclusive to macy's. finally, the funeral for hugo chavez was held in funeral. listen to this list of people attending. sean penn, danny glover and oliver stone. jesse jackson was also there. plus two u.s. congressmen. larry? >> i am speechless. but i have energy to ask my friend mark simone. >> uh-oh. >> who is it? sean penn, danny glover. who's the producer? oliver stone. >> yep. and jesse jackson. >> and jesse jackson. i'm going to take jackson out and stay with the hollywood crowd. are these the nutty nest of the nuts possible? this guy was a communist, he hates america. he pals around with ahmadinejad. what the hell are they doing going down to his funeral? >> what did will rogers say? give the public what they want. you know, i always wondered why does joe kennedy jr. promote that sxhafz that oil? turned out he was getting a million a year, his wife was getting $300,000 a year.

why did he control the country, the army? he paid the generals off like crazy. i bet he was sending a lot of money to hollywood. >> you want to defend hollywood, blake, for going to the chavez funeral? the guy hated america. it's very important to note that. castro guy. he's a communist. i think the venezuelans hated him because he was a total dictator. why go to his funeral? what's the message here? >> i don't know what their message was. i can't speak for them. i do know that there are a couple of sides to this, right? you're quite right to bring up the fact that he's palling around with gadhafi and ahmadinejad. i think that's the strongest point against. in terms of the economic side, there are people who feel that some -- you know, when you look at his efforts to eradicate poverty -- >> to destroy -- he destroyed venezuela. >> that's not true. >> he basically destroyed -- >> no -- >> he expropriated property. there's no question the guy was a communist. that's never been the issue. but this is like sean penn, the guy's a great actor. i've got to get out of here. sean penn, the guy's a great

actor. he shows up in what, the iraqi -- the iraqi parliament? i mean, it's all just as nutty as we can bear. >> i have to disagree. sean penn's a great actor? >>'s a great actor. i like him. i'm sorry. courtney, thank you. that's a rough story. we'll see you back in just a couple minutes with some better stuff. last week president obama and his democrats and the republicans were at each other's throats over budget-cutting sequester. now just a week later obama has become the schmoozer in chief, conducting dinner diplomacy with the gop and maybe bill clinton was behind this shrewd move. it's all coming up on "kudlow." please stay with us. us. it's not what you think. it's a phoenix with 4 wheels. it's a hawk with night vision goggles. it's marching to the beat of a different drum.

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welcome back to "the kudlow report." in this half hour, sequester or not, profitable businesses and savvy investors are driving the dow higher every single day this week. a weekly gain of 307 points, and the dow stands at another all-time high. and i'm going to try to convince our expert panel that corrections or not this rally is far from over. and it may be the most shocking report on public education in a major u.s. city ever. 80% of new york city high school

graduates in local community colleges are not able to read well enough for that work. if not an argument for school choice, i don't know what is. education pioneer and former washington, d.c. schools chief michelle rhee will join to us discuss that. but first up, president obama's deficit dinner diplomacy. that's what i'm calling it. at a posh washington restaurant with a dozen republican senators wednesday night. 180 degree turnaround from his constant blame game republican attacks the week before. but wait a minute. politico broke the news today that the obamas shared a secret supper with the clintons just last week. so my question is did bill clinton persuade president obama to schmooze the gop? let's go to maggie haberman. she's aw senior political reporter for politico. still with us, blake zeff, hadley heath, and mark simone. maggie, thank you very much. so this 180 degree turnaround. bill clinton was a very good

schmoozer. did clinton give the strois obama? you can tell me, maggie. no one will know. you can give me the inside school. no one will hear us. >> it will stay right here? that's good to know. >> absolutely. >> the details are pretty scant as my colleague who broke the story put it. i think it is a pretty likely bet -- we do know he gave some advice about second terms to president obama. i suspect one of his pieces of advice was use a bit of a softer touch. use sort of the schmoozy thing you that have not particularly enjoyed doing. bill clinton as you said was expert at this. this is something he was incredibly good at. he was very good at sort of the dining diplomacy, the supper diplomacy. i don't know how much you'll see president obama completely change on this kind of front but i think this will definitely change his tune. >> look at this week. maggie, if i get your dates right, march 1st, that was last friday. that was the day the sequester was signed. obama gives this news conference that was slashing and insulting and cutting at republicans and john boehner.

you know that. then all of a sudden comes this remarkable dinner diplomacy with these leading senators. and then i guess the next day he sits down with paul ryan, who he has also trashed and so forth. i've never seen a bigger -- this isn't a 180. this is a 360. no, it's a 180. bill clinton, who i think is one of the smartest politicians, must have had something to do with it, maggie. squlif no doubt that bill clinton impressed upon president obama that this was incredibly important. and i think it is a safe bet that it got through to him. i also think there's nothing wrong with giving bill clinton a little credit. so maybe the appearance of the fact of this dinner going public adds to that. but i think it is a safe bet that bill clinton very strongly made the case thaur not going to get your way by using the bully pulpit and blasting republicans all the time and lo and behold we have this change this week. >> you're our resident expert on clinton and obama. did bill clinton help to turn president obama around and make him a schmoozer and a gentleman and app ambassador and maybe they'll do some business?

>> yes. i'm going to tell you. no one else knows this. i was hiding under the table, and i heard the conversation! that's exclusive. >> this is a breaking -- >> this is a school. >> this is better than you did on chavez. this is much better. >> thank you. i appreciate that. >> please continue. >> look, i think president obama, as you guys have said, has reached a realization, where they're just not going to get anywhere. they're at loggerheads. so reaching out to these guys and gals, these senators-s a good idea. do i think it will actually magically solve the problems and it will bring people together? no. they're intractable problems. you have one side that wants tax revenues. you have another side that doesn't at all. and john boehner won't keep his job if he gives on it. >> they have different visions. >> yes. they have different visions. so it makes everyone feel good they're maeth together but i'm not crack opiate champagne just yet. >> we have one of the senators who was in the jefferson hotel dinner. and actually, they're not -- it

was a good discussion by all accounts. entitlement reform and tax reform. they just have different visions of the two. and what i'm going to ask you is can the two meet? is that possible? >> i'm not optimistic. look, clinton's legacy, we think good economy, he was better on free trade, and important compromises like welfare reform. >> that's the key word. you just used that word. compromise. >> i love that we're talking about bill clinton as the great compromiser and conservatives and republicans love him. you guys loved him at the time. you were praising him. you thought he was wonderful. oh, wait, that's right. >> he did a lot of good things at the time. not everything. >> i don't remember all that praise at the time. i'm sorry. continue. >> look where we are now. we have president obama. i would much rather have a president bill clinton than -- >> what's your take? >> bill clinton only wants one thing. that's back in the white house. the only way is get hillary elected in 2016. the democrats riding high now. but he knows that fades. if the economy's bad, people are

out of work, the democratic brand is not going to work in 2016. he's got to prop this guy up. he's going to have to coach this guy -- >> like he did at the democratic convention in charlotte. like he did in the campaign in florida. i mean, bill clinton was really responsible in many ways for obama's re-election. >> but now he's got to get in there and teach this guy to turn this economy around so it's booming at the end so hillary can get elected. >> stay on this track. i think you're hot as a pistol. should obama appoint clinton as his budget negotiator? just let clinton do it. obama can't. this charm offensive will never last. you know that. he's going to go out on the campaign trail and start trashing john boehner again. should they just appoint bill clinton as negotiator in chief? >> of course. you couldn't bring a better guy out of the bullpen. he'd solve it in a week. but there's a lot of ego involved there and i don't know if he'd let him be the victor there. it wouldn't look good for obama. if he he could teach obama to cut government spending as he did, cut tax, capital gains -- >> welfare reform. maggie haberman, i want you to

weigh in. i'm giving you a big scoop here. obama is going to nominate bill clinton for being negotiator in chief for all these complex entitlement reforms, tax sequester, and oh, my gosh -- what do you think of the possibilities of that, maggie? >> i am not feeling it. which is not to say there is not some logic or people don't see some logic in what you're suggesting. but i'm just not seeing that happening. i don't think that president obama wants his second term to turn into bill clinton's third term. and that's essentially what it would be. >> are you interested in it? would you put a little blurb up on the politico about this? >> no, no. not on the spreading the rumor. but i'll tell you what. when you tell me for sure that that's what's happening, that will go up in a heartbeat. when it's confirmed, absolutely. >> remember when reagan wanted ford to be vp and ford said i'll be like a co-president and that killed that? something like that would happen here. >> remember when bill clinton said hillary clinton would be a co-president? that wasn't a good moment either. i don't think people like

co-presidencies. >> maggie haberman, we appreciate you coming on the show. bad story. 80% of school grads in new york city community colleges cannot read at an appropriate level. former washington, d.c. education chief michelle rhee is about to join us with a solution. and luckily, she's got a lot more answers than this guy. >> hi. i'm former male supermodel derek zoolander. and here at the derek zoolander center for kids who can't read good and who want to learn to do other stuff good too, we teach students of all ages everything they need to know to learn to be a professional model and a professional human being. i know what you're thinking...

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talk about shock news of the day. a local new york news report ran this headline. 80% of recent new york city high school graduates cannot read. and while the headline may have been a little misleading because the story focused only on graduating students enrolling in community colleges, it still raises a much larger issue. is our nation's public education system failing our kids? joining us now is an expert. the former chancellor of the washington, d.c. public schools, michelle rhee, author of the new book "radical: fighting to put students first." we are still with blake zeff, mark simone, and hadley heath.

michelle rhee, thank you very much for coming back on. when you saw this news, your first reaction? i mean, i don't want to put down community colleges. but i think that's a lower common denominator than the liberal arts schools. if they can't read for community colleges, that sounds like a pretty awful situation to me. >> well, look, i wasn't surprised at all by this statistic. the bottom line is that in our schools today we are not ensuring that kids have to operate on grade level, do math, you know, read on grade level before they're graduating from high school. in fact, when i was the chancellor in washington, d.c., i remember a young girl who was the salute torian of her high school, went off to college, came back at christmas break, and came into my office and said i don't know what happened, i went to school, and i'd always done great in dcps, i got all as, i was always commended. i went to college, and they told me that i had to take remedial classes, that i didn't know how to write a paragraph or a paper properly. and she said, what did i do wrong? and i said you didn't do anything wrong. it's the system that did you

wrong. we don't have structures in place to ensure that when a kid gets a high school diploma from our public schools that it actually means that they know things and are able to do certain things. >> we're talking about 11,000 kids. 11,000 kids is a very big number. and i guess the question i wanted to ask you is isn't this a walking, talking advertisement for school choice, for charter schools, maybe for home schooling, in other words, let the parents decide where these kids should go to school because the public education is failing them? >> well, there's three things that need to happen. first, we need to make sure that every child is in the classroom of a highly effective teacher every single day because that will make a huge difference. the second is what you referred to, which is we have to have high-quality choices available for all families so no family ever feels like their kid is strapped in a failing school. and then the final thing is we have to make sure that we're putting our taxpayer dollars into the programs that are benefiting our kids the most. we are spending a whole lot of

money in this country right now on programs and on initiatives that absolutely have no return on investment for kids and aren't helping to ensure that we have better academic outcomes. >> mark simone, i want to ask you. i always thought before i read this story this morning, i always thought that michael bloomberg and particularly when joel klein was his educational commissioner, were good education reformers, improving the school system. this study says they're not. >> but you know joel klein. he was great at that. dennis will cott does it now. you couldn't find a better person. it's just the system is broken down. i think you said it. you need school choice. there are too many people in the school system, too many layers in this board of education. you still hear that when you put a dollar into that system 94 cents doesn't get to the classroom. and a lot of great teachers and a lot of smart kids come out of that school but there's too many that fall through the cracks. it's the size of the system. it's just too big. >> and i don't see, blake, with all respect, president obama is always talking about putting more money into education. i don't know what the federal

government is doing in education. but more money toejs is n educa not the answer. better education is the answer. more parenting is the answer. school choice is the answer. it's not a money problem. new york city spends a fortune. all these municipalities spend a fortune. >> i agree that it comes down to methodologies a lot of the time. one of my questions would be, if we still have chancellor rhee, one of the things i didn't hear her mention when she was talking about the three things we should focus on, is having standardized tests and whether we should continue to make that kind of a priority when we're talking about teaching in light of the fact that there were irregularities with a lot of these tests with a high number of erasures and things like that. i'm wonder field goal that has caused her to change her mind a little bit about standardized tests. >> michelle rhee, should we use standardized testing? >> we have to. we have to have a consistent way of measuring whether kids are gra gaining the skills they need or not. whenever you have something like a standardized test, do you need to make sure there's high test security, that everybody is

clear on the fact that if there are any compromises to that security, if people are thinking about cheating on the test, et cetera, that there are going to be specific consequences for that? absolutely. but at the end of the day a couple of people here and there making the wrong decisions to cheat on a test should not make us throw out the concept overall because without it there is no accountability. we for decades in this country have allowed schools to fail kids year in and year out. they don't have the skills and knowledge necessary to be productive members of society. and unless we have a consistent way of measuring that, we can't hold schools accountable. >> but if teachers are just teaching to the test, then students are mission out on so many other potential opportunities to learn. >> sure. that's why we shouldn't teach to the test. in fact, the research is very clear that teachers who teach to the test, their kids don't do as well academically as teachers who are teaching a broad-based curriculum and who are teaching higher order thinking skills. so we need to inform teachers about that. >> hadley, i just come back to this. there is a free market solution to this.

it is called school choice. sometimes it's called charter schools. sometimes it's called home schooling. sometimes it's called religious schooling. sometimes it's called private schools. but you have a choice. if these kids can't get it done, they shouldn't have to go. they should -- but they don't let them. there's a whole administration that's opposed to school choice. >> right. and that would put parents and students in charge of choosing their own opportunities. but when i first heard this story, you mentioned parenting earlier. this to me points to a schooling crisis. it also points to an individual responsibility in parenting crisis. i'm a product of public school, and i had a great experience because my parents were always advocating for me. they were always make sure i had the best opportunities. where are these parents? if your high school senior can't read at the level you need to read, where are you as a parent? >> well, possibly working three jobs. maybe they're in poverty. it's very, very tough. and i agree these are complicated questions. but it's not always so easy for every parent to be there doing homework with the kids every single night. >> michelle, i want to give you the last word on the idea of school choice and charter schools.

i know you worked on that issue in washington, d.c. am i right? is that the way to go? is the performance better? >> well, look, there are some charter schools who are doing absolutely phenomenal work across the country, and there are some that are underperforming. i think we should be focused less on whether it's a charter school or traditional public school and more focused on if it's a high performing school. because we need highly effective schools regardless of whether they're private schools, charter schools or traditional public schools. >> michelle rhee, we appreciate it. the book "radical: fighting to put students"" is available now. many thanks to blake zeff, mark simone, and hadley heath. let's get back to your money. more big gains on the stock market, more record highs. more cash paybacks. we are talking wall street when we come back on "kudlow." please stay with us. tdd#: 1-80 but there is one source with a wealth of etf knowledge tdd#: 1-800-345-2550 all in one place. tdd#: 1-800-345-2550 introducing schwab etf onesource™. tdd#: 1-800-345-2550 it's one source with the most commission-free etfs.

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historic week on wall street. the dow sets another all-time high. up 307 points for the week. the s&p 500 within 14 points from its peak. major averages rally 2% for the week across the board. let's bring back our team, steve ricchiuto, zach karabell, michael santoli and courtney reagan. can you believe that, they didn't have you in the teleprompter. >> i'm glad you remembered my name. >> i just had to do that. what about this issue of massive dividends and buybacks in

stocks? thighs numbe these numbers are huge. $118 billion in buybacks. i'm going to call that $420 billion. now, that's money that was under a mattress or a safe or bank account someplace and is now free and loose in the open market with investors who probably will spend it better than the corporate chieftains will. what do you make of that? >> i think it's a good thing. i think it's a good thing for investors. think it's a good thing for the market. i think we saw it in some of the economic data in january too. anything that helps us move higher that's not so artificial i think is a good thing when we're looking at the market. fundamentals are strong and important. >> it's like a stimulus plan, but it's not a government spending and borrowing stimulus plan. it's a private sector stimulus plan. you're talking about a lot of money here. people could go out and start a new business. they're going to reinvest the money and put it back into the stock market. what's your take on this? >> companies are doing cash out refinancing on themselves. honestly, that's kind of what it is in hanged the money out to

the public. >> what do you mean by cash out? >> they're borrowing at historically low rates. they're being bagged by the credit markets to take on more debt. they're doing it cheaply, not really yet to great excess, i don't think, and they're using it to pay money out to shareholders and buy their own equity. that's one of the dynamics going on right now. and i feel like that's the mechanism by which people say it's all the fed. no, the fed's not really -- >> thank you. >> -- directly the instrument here. but they are creating the environment where the entire risk spectrum is accommodating. >> but there's a lot of good corporate credits out there. they're making money. they have a lot of cash flow. they have been able to cushion themselves with cheap borrowing. the federal reserve has a small piece of this. but my argument with this stock market rally is it's not just the fed. it's about the health of business. and the health of business is pretty darn good. and that's what the stock market's telling us. >> i think it's very little to do with the fed. although granted, if you do get a period, which i don't think we'll actually get, of real fed tightening, i'm sure that would have a short-term negative

effect on the markets. and by the way, that hypothetical is not one i expect to come to pass for several years. >> in our lifetime. >> maybe in our lifetime that we could again be in a very japan scenario of extremely long time with much lower interest rates than anyone expects. and you know, there is all this cash as you talked about earlier in the show that companies are keeping somewhere and people have been talking about a huge m & a boom that's going to happen. a lot of cfos, a lot of companies realize those things are not going to go well and why spend money on acquisitions you don't need to make? better to give it to dividends or buy back your own stock. >> i'd like to throw something else in there if you don't mind. it's not just good here. it's good here relative to every place else. where else are you going to go with your money? look what's going on in europe. look what's going on in japan. look what's going on in china, latin america. >> i know you're on a roll here. but want to stop you here. japan is on a roll. japan's stock market is on a roll. >> if you're a yen-based environmentalist that's great. but the yen is going to clopper

your return. because you're probably going to go to 115 on the yen and we're only 95 now. you're going to lose a lot in the currency translation. on a relative base i. look at the mutual fund flows. what are you seeing? money's coming into the markets in general. bond flows are up. equity fund flows are up. that money's coming from somewhere. >> are you a bull or bear on the stock market? >> i think it has further to go. i think there's a correction. but interest rates are going to stay where go lower. >> let me just ask. today's better jobs number, i'm surprised we didn't see more of this as we went along. does this in your opinion change the federal reserve's interest rate or bond buying program? >> not yet. i actually think we're in this zone right now and good news is good news. and the fed has told you very, very intently that they want to be late. or at least they want to have a high burden of proof that this thing is really a trend and it's got some -- >> and they said 6.5%. >> that's when rates change. >> but i mean that's -- not only

is it 1.2% from where we are now. that's assuming nobody else comes into the workforce to make the unemployment rate go up again. so we are a long way away from the fed's stated change of mind. >> our profits, courtney reagan, this is the mother's milk of stocks. it's my favorite mantra. if you go back this whole rally and look at the rise in profits, the broadest gauge of profits, it's almost identical to the increase in share prices. if profits stay up, which they are, i don't see why the stock market doesn't stay up. i just don't understand. >> i agree. and i think that's what's driving this and that's why we like it so much. it's not just based on some technical movement. there are real fundamentals in the business community that's helping this move higher. profits are good. shareholders are happy. companies are making strong reinvestments in things we need them to make to propel this further forward. >> if the federal reserve were lowering interest rates and profits were falling, it wouldn't help the stock market one bit. right now the fed's not going to change rates. profits are going to continue to rise. profit margins are better off

than people thought. i think the bears have the onus here. they've got to show me that profits are falling. i'm not going to believe the bear case until i see that. i've got to get out of here. steve ricchiuto, zach karabell, michael saptoli, courtney reagan. you're all terrific. we've covered a lot of ground today. i'm larry kudlow. we will see you on monday. and i've got paul ryan's budget on tuesday. arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz. you know it even after all these years. but your erectile dysfunction - you know,that could be a question of blood flow. cialis tadalafil for daily use