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bull market somewhere, i promise to try to find it for you here on "mad money." i'm jim cramer. i will see you tomorrow! good evening, everyone, i'm larry kudlow. this is the kudlow report brought to you in washington, d.c. tonight, a special show. now we have more taxes, more spending, more of the same. it's been more than four years since the senate democrats bothered to put together a budget. and as might be expected, their new budget calls for more than $1 trillion in new taxes over the next decade. what a shock that is. meanwhile, senate liberals spent much of the day challenging president obama on his plans for possible entitlement reform. will they block any chance for a grand deal? so what do senate republicans have to say about all this? well, we are about to speak with one of the new rising stars of the gop. senator ted cruise joins us to talk about the budget fight and his promise to do all he can to

repeal obamacare. and finally the highlight of our show tonight, my exclusive interview with congressman paul ryan as he unveils his budget plan. the headlines are an obamacare repeal, spending cuts, corporate tax reform and a balanced budget within ten years. >> balancing the budget is not an end of itself, it's a means to an end and the means we're trying to get to is a pro-growth economy, helping people out, reviving upward mobility in this economy. >> all right. the entire interview coming up later on, "the kudlow report" begins right now. first up, the fiscal cliff tax hike was not enough for senate democrats. they want more. that is shocking. a lot more. $975 billion more in tax hikes. here now, though, the latest cnbc contributor, robert cost at

that, washington editor for the national review and he's going to do something very rare. he's going to preview and promo and analyze the democrats. hello, robert. >> good to see you, larry. the democrats today unveiled their budget and what's the top -- the lead story here? it's $1 trillion in tax hikes. what's so interesting about this, for four years, democrats have avoided doing a budget. now senate democrats finally have to own up that they're a tax hiking party, this is going to have 2014 implications, interesting to see if democrats can even get 51 votes on this plan. >> what is wrong with that party? i believe my good and dear friend who is so bright, jerryd bernstein, who is joining us tonight, is inconceivable he can be a member of that party, a party which makes no sense at all. i understand disagreements. you don't have to be perfect. there are many gradations, but how can the democrats come back with $1 trillion tax hike, no spending cuts and no entitlement cuts? the whole point of the exercise is to get those cuts. >> because they're not ready to do entitlement reform.

you see that democrats are avoiding a balanced budget in their plan, avoiding entitlement reform. this is all about stimulus spending and tax hikes. they feel like they won in 2012, might continue to be a liberal party. >> one thing that amuses me -- i'm going get to you gentlemen in a minute. it sounds from reading this -- i wasn't in the room, obviously, and i'm not surprised they didn't invite me into the room. >> they could use a little common sense. >> it sounds like they are, to the left of president obama. or let me put it differently. it sounds like president obama, compared to his party, is actually centrist. >> that's exactly right. we heard a lot this week about president obama having lunch with paul ryan, dinner with republicans. you talked about it on the show. when you look at the document the democrats are putting forward, it's their budget. the story of dueling budgets, ryan's budget versus murray's budget. they're not doing anything innovative here. this is the tax and spend budget, what they're putting forward. >> this is something like the 19070s. this reminds me of the 1930s,

the new deal. i was around partly for the new deal. i mean, this party has moved so far to the left. but it is interesting that obama looks centrist. it really does. >> and one thing to watch and how the democrats get a lot of this revenue, how they get these tax hikes, tax reform. the democrats are trying to make the argument, so watch for paul ryan and his interview and campaign this week to talk about his budget. . what's he going to do? win the argument. democrats are going out now and saying we're getting rid of loopholes for corporations, standing up for the common people. >> that's coming out in my interview. he and i talked a bit about tax reform. stick around. joining us now, distinguished senator from oklahoma, republican tom coburn, and also with us right here in studio, cnbc contributor, jerryd bernstein, who used to be a democrat, and jim peth cukis, party i.d., hard to say. mr. coburn, senator coburn, welcome, sir. i understand you are holding up a continuing resolution. what is on your mind, what's

bothering you about the cr? >> well, it's not what's bothering me, larry. we got this bill at 9:45 last night. and they wanted to start offering amendments on it this morning. and they wanted an agreement to do that. and it's almost 600 pages long. it's $1 trillion plus in spending. and, you know, maybe we ought to be given 24 hours to read a bill, to figure out what kind of amendments we want to offer. and whether or not we think that this is the process we want to go forward with. and what about -- are we going to have amendments? you know, this bill -- i can tell you, we're just about finished. we'll be finished late tonight. we'll have some amendments to offer. and we have already told them, we would let the bill go, if they want to work tonight, i'll go down and work tonight. the problem is, what happens in washington, way too often, is you get an agreement to move forward on a bill that you don't know anything about, and it's spending $1 trillion.

and we don't have any idea at the time they asked for the permission to go forward with it, what was in it. >> sounds like obamacare. reminds me of obamacare. we tint know what was in that bill until long after the bill was passed. you're saying with this continuing resolution, to keep the government open, we don't really know what's in there, do we? >> this isn't a continuing resolution. this is an omnibus spending bill. it has five appropriation bills on it, and then a small section for the rest of the government. so it's an omnibus appropriation bill. we should make sure we understand that's what it is. there's all sorts of authorizations in it. and what i would tell -- earmarks in. there is also money stolen from the victims' compensation fund, which aren't tax dollars. so there's a lot of problems with it. we would like to be able to address those with amendments. and now that we've had a chance to go through the bill, we'll be offering those. >> senator coburn, can you give me a quick take on the democratic budget about which we were just speaking?

lots of spending. no -- lots of spending, lots of taxing and no entitlement reform. what are you thinking about this budget? >> well, i think it truly represents the views of most of the democrats in the senate, not all of them. number two, it's probably to stake out a position to the left of obama so that if we can actually reach an agreement on something, he looks central and they look to the left and then they can support it. you know, i think some of it's positioning. but, you know, our problem, if you look -- the government has grown 89% in the last ten years. and family -- median family incomes have declined 5%. i don't think the problem is taxing more. i think it's spending. >> jerryd bernstein, i just think you can say that the democrats make obama look centrist. and i believe that. and i said that tongue in cheek but i actually believe that. on the other hand, they've got a lot of democrats running for election in 2014. i do not believe this left wing budget will get voted in. >> look, i think with respect to

bob, i think the way you described the budget is really very, very misleading, especially with tax increases and i want to get senator coburn's view on this. i learned a lot about spending through the tax code, through reading a document called "back in black" but none other than senator tom coburn. and on the cover of the document, at least on the website, it says we're going to cut $1 trillion in spending by cutting spending through the tax code. the same trillion, the same tax code, the same expenditures the democrats are going after. plus, you completely haven't said one word about all the spending cuts. in fact, you just said spending increases. there are spending cuts. >> nobody can find them. >> wait a second. >> entitlement cuts. >> that's a good question. but the senator should really speak to this. >> let senator coburn -- >> leader on cutting tax expenditures. >> senator coburn, go ahead, please answer jared bernstein. we know there are tax expenditures, but i thought tax reform, senator, was to lower the rates and then get rid of

the loopholes. >> it is. and he's right. we listed $1 trillion worth of tax earmarks. that's what they are. they're earmarks. but we did that in the conjunction of $8 billion in spending cuts. 8 -- i mean, $8 trillion in spending cuts. so, you know, will i agree? i would love to reform the tax code to get us growing. but if the president and the democrats will agree to $8 trillion in spending cuts, i'll happily agree to $1 trillion in earmarks -- >> jared has made a great point, but he has only given us half a loaf when it comes to tax reform. just given us half a loaf. can you help me on this? >> listen. if you go with this plan and you use all this tax expenditure reform, to pay down deficit, forget it. those tax rates are going to be locked -- at those top levels. that tax reform should be used for lowering some of those tax

rates, which have been raised way too much. and never going to get -- answer bob's question. where is the entitlement reform? here's a big secret. democrats don't think we need entitlement -- not very much. >> at all. >> they think the health care problem has been solved basically, and also about medicare reform is just a waste of time. they don't believe in it anymore. jared might but the rest don't. >> i think jared brings up a potent point. democrats are going out in 2013 and 2014 and saying we're going to slam the corporations, not going to touch your entitlements. they think they can win seats in the house and senate by being about taxes -- >> this is left wing populism, basically. not what you're describing. what you're describing, jared, on the tax issues, and you are right, okay. and i used to put those books together. >> senator coburn is a leader on this. >> senator coburn is a leader in this. but, but, but. it's a pot -- they're going to go after the corporations and they're going to go after the upper end loopholes without any offsetting balance on lowering tax rates. >> no, i think that -- look.

people are starting out where they're starting out. but i think if -- in particular, look at the president's corporate tax reform. he buys some lower rates by closing some of the loopholes. but it can't be as -- >> raises taxes on corporations, too. >> well, it's cutting tax expenditures. it's something senator coburn has said -- there's $1 trillion. >> i want to go -- you know what -- >> has to go. >> i so totally want to have the corporate tax reform discussion, because i agree with you, the president does from time to time, even though he wants to penalize companies offshore, which is completely wrong. but to have corporate tax reform, and to get to a 28% rate, would be totally pro growth. the bells and whistles can be taken care. >> he should get to a 25% rate -- always see the average and can't do it because he wants to use -- >> you guys are on board with revenue. >> no self respecting supply side -- no. revenue-neutral. no self representing supply sider disagrees. lower the rates on the one side and get rid of the loopholes on the other. you'll have a clean code.

revenue-neutral. but the lower rates are pro growth incentives. senator -- no, no, revenue-neutral. tom coburn, senator coburn, thank you very much. jared bernstein, jimmy peth cukis and robert cost at that now one of the rising stars of politics. ted cruz is about to join me to talk about the budget battle and his promise to pull out all the stops in the fight against funding obamacare. and later on, please don't forget my exclusive interview with congressman paul ryan as he unveils his grand budget plan today to balance the budget inside ten years. and can you believe it? mr. ryan even happily espoused the kudlow credo. >> i think the president and his party looks at tax reform as a revenue-generating exercise. broader tax base with higher rates. which is just nothing more than a tax increase to fuel spending. we see tax reform differently. i subscribe to the larry kudlow school, which is lower rates, broaden the base, create the

economy. economic growth. >> that was completely unrehearsed, that duet we did. but we may do it again and we may find a record producer. the rest of that interview, by the way, is coming up. and please don't forget, free market capitalism is the best path to prosperity. free markets, limited government and real pro growth tax reform. i'm kudlow. we will be right back! everyone's retirement dream is different; how we get there is not. we're americans. we work. we plan. ameriprise advisors can help you like they've helped millions of others. to help you retire your way, with confidence. ♪ that's what ameriprise financial does. that's what they can do with you. let's get to work. ameriprise financial. more within reach.

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can the new group of republican leaders revitalize the grand old party? meet gop young guns, at least some of them, senator mike lee, marco rubio, rand paul, ted cruz, pat toomey, probably forgetting some. let's go to one of the key prominent rising stars. joining me here onset, freshman republican senator ted cruz. mr. cruz, as always, great to see you. you're really a troublemaker. that's really the bottom line. and one of the troubles you're making is you want to defund obamacare, perish the thought. tell me about it. >> great to be with you, larry, and thanks for everything you do. look, my number-one priority and what i think the number-one priority should be of every elected representative, republican or democrat, is

economic growth. the last four years our economy has grown just 0.8%. we have stagnant growth. and if obamacare is allowed to be implemented right now, we're already seeing people losing their health care coverage, we're seeing employers forcing employees to work fewer hours, we're seeing premiums go up, especially for young people. last quarter, our economy grew 0.1%. and if we allow obamacare to go into effect right now, it could easily push us into a recession. >> it's a job-stopper. >> that's exactly right. >> it's a hiring stopper. not only is it expensive to hire, but if you don't hire the 50th employee -- >> keeping small businesses small. >> right. you won't let anybody work 30 hours or more because you have to pay up, the mandate or the rules. let me ask you now, paul ryan tells me later in the show, he agrees with you, he wants to terminate and defund. what's your defunding strategy? this is an uphill climb in the senate.

>> well, it is. so the strategy -- look, i think we should repeal every word of it. that was the first legislation i introduced. but what we're doing this week is an amendment to the continuing resolution. that i'm calling restore growth first. and it says at a minimum we should defund it. we should delay funding obamacare until economic growth returns to historic levels. since world war ii, growth has averaged 3.3%. and it -- when the economy is gasing for breath, i think it makes no sense at all. >> i don't understand that. suppose -- suppose you held this thing back. and suppose you restored 3.5% growth, which is more or less the average. so then you put obamacare in and it will work its negative ways anyway. i mean, the things -- look. you guys -- you ran to the defense of rand paul. that was much more than just drone policy in the usa. i looked at that, and i read rand's -- i read rand's op-ed piece in the "washington post." you're saying you want to stop

government excess wherever it is. and if any time this was an excessive bill, this obamacare bill is. so why even -- why at 3.3% -- to hell with it. if you're going to stop it, stop it. >> look, you are preaching to the choir. the first bill i introduced was to repeal every word of it. that's what i think we should do. but i also think it's important to make the case that everyone should join together. democrats shouldn't want to send us into a recession. and if they vote against my amendment tomorrow, which i expect they will, what they are saying, effectively is economic growth doesn't matter to them. that they're willing, when the economy is gasping for breath to hit it with massive additional burdens that will kill jobs and kill growth. >> honest question. you got any democrats who might go along with you, such as democrats i'm thinking of begich and prior and some others? they are up for re-election in 2014. it's amazing to me. obamacare, even now, after the supreme court ruling, after obama wins the election, what, we're in the third year of ob a

obamacare. even now it is virtually the most unpopular political policy issue in america. you got any ds who will come around with you? >> we don't have any indication now. we have a dozen co sponsors that are all republicans. we'll see when the vote comes up and there may be a couple who decide to vote for political convenience so they can go to the voters and pretend that they opposed obamacare. but i think at the end of the day harry reed is likely going to hold his democrats. >> he's going to go nuts on this. he hates the fact that tom coburn is stopping it. we just had senator coburn on. can you co sponsor hr-1? i just want to put this out there. this is going to be the tax reform bill. this is dave camp, head of the ways and means committee. paul ryan talked to me about it. particularly -- particularly corporate tax rates, which are off the charts way too high. not just for the big corporations, but for the smaller corporations who play -- pay the personal code, right? 44%. can you co sponsor that? can you get a group of senators,

maybe this group, you and toomey and marco and the others, to get this lower tax rate pro growth bill going in the senate? >> i am passionately in favor of tax reform. and i think we need to dramatically simplify the tax code, reduce the burden, both the corporate tax code and the personal tax code. both cases, you know, every year the cost of tax compliance is over $500 billion. >> yep. >> i mean, that's as much as we spend on the pentagon. >> get rid of the loopholes. if the rate is low enough, you don't need loopholes. the incentive will kick in. >> that's exactly right. i would like for every individual to fill out his taxes on a postcard. and that $500 billion is all dead weight lost. as we say in texas, it doesn't produce a single truck oratortia. >> i thought you were going to say all hat and no cattle. i thought that's what you were going to say -- president bush used to say that. how about we get a lower marginal tax rate, individuals and corporations, tied to a sound dollar? now that is 4 to 5% economic

growth. >> i think you're exactly right. we've seen qe infinity from the fed and not only do they want to keep increasing spending, they want to jack up taxes on individuals, on the middle class and corporations to yet even have more capital flee this country. doesn't make any sense. >> it's a very odd definition of tax reform. these are odd times. senator ted cruz, thank you very much. you're terrific to come around. >> great to be with you. >> all right, folks. a major american snack brand now has a due date for a comeback. that and other headlines just up. and later, my exclusive interview with congressman paul ryan coming up. i challenged him right after the bat on why he's repealing obamacare. because it is the law of the land. it's backed by obama's re-election. now here, listen to what paul ryan told me. >> you think we should just give up our principles when we put out our budget vision? that's what i ask people who say why did you repeal obamacare. first of all, we think it's a terrible law. second of all, this law has yet

to be fully implemented. there's a lot left to go here. and we think as people see the ugly details unfold, we believe this law will collapse under its own weight for lots of reasons. and we believe in a patient-centered health care system, not a government-run health care system. chances are, you're not made of money, so don't overpay for motorcycle insurance.

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the first day of the conclave in the sistine chapel, but no pope yet. cnbc's own seema mody has that story and more. good evening. >> that's right. black smoke coming from the chimney at the sistine chapel. that means that 115 cardinals failed to reach a decision on the first day of the conclave.

they will try it again tomorrow, and when we see white smoke from the chimney, that means a new pope has been chosen. and a strange website posts credit reports of several celebrities including michelle obama, britney spears and beyonce. the financial firm says it was not tracked, it says the perk had personal data about the victims, including social security numbers which allowed them to obtain information. and the twinkie is saved. two firms bidding for hostess. no one tried to beat the $410 million winning bid. the winning bidders say the twinkie will be back on store shelves this summer, which is great news, larry, an american institution with a lot of faithful fans. back to you. >> long live the twinkie. you're absolutely right, seema mody thank you very much for those updates. now, folks, my exclusive interview with congressman paul ryan is next, calling for about $5 trillion in cuts over the next ten years. but i asked him, does he really expect to get there?

>> we may not, you know, get the budget goals we want to achieve. but hopefully we can get a down payment on the problem. we balanced the budget and ultimately paid off the debt in our budget. what we hope and what we think the republican majority is good for, if anything, is to get a down payment on the problem. [ male announcer ] the lexus command performance sales event has begun. featuring the exhilarating is. ♪ engineered to take on the most thrilling curves no matter where they are. the lexus is performance line. real performance demands real precision. get great values on your favorite lexus models during the command performance sales event. this is the pursuit of perfection.

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congressman paul ryan, chairman of the republican budget committee, released his plan to balance the budget in ten years. but that plan does rely heavily on defunding obamacare. in my exclusive interview with congressman ryan, i began by asking him why he included an attack on the president's signature legislative victory that was, after all, passed by the supreme court. especially when that could kill any chance for a big grand design compromise deal. >> you think we should just give up our principles when we put out our budget vision? that's what i ask people who say why did you repeal obamacare. first of all, we think it's a terrible law. second of all, this law has yet to be fully implemented. there's a lot left to go here. and we think as people see the ugly details unfold, we believe

this law will collapse under its own weight for lots of reasons. and we believe in a patient-centered health care symptom, not a government-run health care system. and that's why in this budget we want to replace obamacare with a patient-centered health care system. and by the way, it's about 1. trillion in borrowed money, calls for spending over the next ten years, which is money we don't have. >> is that a plug on your budget, though is this you've got a ten-year balanced budget. how much of that comes from repealing obamacare? what do you make on that? >> some of it clearly does come from repealing obamacare, because it's spending money we haven't spent yet, programs that haven't been one and running yet that we can't afford because they break the budget. and it's obamacare spending that occurs that we propose to get rid. at the same time, we think we can actually meet the mission of health and retirement security for americans without doing all of this. government takeover. >> but in terms of your budget, if you don't get it this year, and the likelihood of getting

repealed this year is very, very, very low, does it blow a hole in your ten-year budget? >> sure it blows a hole in your budget because it calls for continuing the spending. what is a budget? a budget is our vision for how we should fix this country's fiscal problems. and a key part of that vision is we don't take over -- have a government takeover of health care. we also think obamacare is going to do great damage to medicare. this new independent payment advisory board, the ipad, the 16 people who run this panel, we believe support is a far better way to go. give the patient plans that meets their benefit or needs. not this bureaucrat the president is going to appoint. on big issues, we are showing what we think is the best way to fix our fiscal problems. >> it's a policy -- essentially, it's a policy statement, is what you're saying. you're renewing, you're reinvigorating a public policy statement. let me ask you this. and a lot of people have raised this in the last 48 hours since you broke this story.

does this, will this interfere with the possible compromise with the white house? are you kind of putting a schtick in the president's -- you had lunch with him. did you tell him at lunch you were going to call for repeal of obamacare? >> he knows exactly the kind of budget we are going to come up with. i gave him more or less the budget we were coming up up with. and let me ask a person watching the show who is in business. do you start with your last offer first in a negotiation? no, of course not. what we are doing with this budget is articulating what we believe is the best policy forward to grow the economy. balancing the budget is not an end in and of itself. it's a means to an end and the means we're trying to get to is a pro-growth economy, helping people out. is reviving upper mobility and growth and opportunity in this country and this economy. >> coming back to the white house issue, okay, so they -- they issued a kind of broadside against you today. this may you will be -- >> used to that. >> this is a ritual, all pro forma. they said you have tax cuts for the rich, they say you're taking down medicare, they accuse you of using vouchers. but they end, they did say the

president would be willing to work with republicans. we have had this charm offensive by president obama. let me ask you. do you believe a grand design, including spending, en times and tax reform is a good thing, could be achievable and should be done? >> i do think it's a good thing. i do think it's achievable and i do think it should be done. the question from our perspective is, was this so-called charm offensive a one-off event or was it a new posture, a new conversion that's to continue? >> all right. we're going to have much more of my exclusive entire interview with paul ryan in a moment. let's get reaction. we're joined by two distinguished house members, the former chair of the joint economic committee, carolyn maloney, democrat from new york, and larry kudlow's congresswoman. we also have the chair of the republican committee, steve scalise from louisiana. i want to go to my own personal congresswoman. obama charm offensive, and here you have paul ryan, a skeptic,

saying he would go for a compromised grand design. do you think entitlements, taxes and spending, such a large compromised grand design, is in the cards? >> well, i think the president is serious about a grand design. and, of course, everything is in negotiations and in the final version that comes forward. but the ryan budget that was put forward is, in my opinion, not serious. it's symbolic. it includes cutting obamacare, which was passed into law, upheld by the supreme court, upheld in the election, and is really not real. so i find the budget more symbolic than real. it really is the same as his prior two budgets, changed in ways. adds $85 billion additional cuts, counting in the sequestration but slashes the social safety net, and protects the tax breaks. >> all right. steve scalise, ask you the same question about a possible grand

design compromise. with this add-on. suppose we put the obamacare repeal aside for the moment. it ain't going to happen in the near future. however, a lot of ways to reform entitlemen entitlements. even president obama has some ways. the only people that don't want to reform entitlements are senate democrats. is a grand design possible, in your judgment? >> it's definitely possible. and i think if you look at what people are expecting us to do, is to actually put a budget out there that finally does get to balance and i think that's what's so important with this document is that this budget, it's visionary for a lot of reasons. and it focuses on getting the economy moving again, which has to be a component of any -- design. >> if i may. look, he acknowledges -- it's going to come up in the second tape. if you take out the obamacare repeal, which is not going to happen, okay. look, conservatives, including this one, would like it to happen. but -- >> still got to keep pushing for it. one of the reasons -- >> $2 trillion hole in the

balanced budget. but, i'm with you on this. lower spending and pro growth tax reform is totally, totally good for economic growth. and some entitlement reform in the mix could do it. that's what i'm really asking. >> yeah, and you need -- look, medicare goes bankrupt right now if congress does nothing. obama is's medicare actuaries confirm it goes bust. i don't think it's responsible to let that happen. we save medicare from bankruptcy, allows you to help you balance your budget as well. but we do pro growth tax reform which allows us to get people working again, get the economy moving again. and then you ultimately get to a path to balance within the ten-year window. all those things are important for economic growth, for jobs. but it's also important to show that washington is finally willing to live within its means. >> just before we go out and you're going to have another shot, carolyn maloney. what do you and chris van hollen, what do you all want? you've got to want something better than what the senate democrats put out. all they're doing is raising

taxes and they hate it. you've got to have something better than that. what are you going to put out? >> we have always supported president obama's approach of a balanced plan. you can't cut your way to prosperity. and economists say one of the reasons our country is doing better than europe is that we are more balanced, we have continued spending and innovation, and education. we have had some revenues. but you really need a three-step plan. you not only need to cut, you need revenues and you need investments. this was the plan, basically, that president clinton put forward that gave us the best economy in the -- >> you just had a tax hike. another tax hike -- can't have another one. >> the budget is $3.1 trillion. $1.1 trillion of that budget is tax loopholes. many are important such as deducting -- >> you're right. >> i even have some companies calling and saying, hey -- >> but you've got to have lower rates on the other side. >> you've got to use tax reform to lower overall rates -- >> i support president obama's approach to lowering the

corporate tax rate -- corporations say they would support it -- >> including small businesses. now you're cooking. now you sound like -- one of those congress persons. >> you've got to clear out those loopholes. >> more of the exclusive interview with congressman ryan, a discussion going here. we're going to have more from our two distinguished panelists, carolyn maloney and steve scalise, right after this short break. she's always been able to brighten your day.

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which is...pretty much what we've always stood for. with xerox, you're ready for real business. now, back to my exclusive interview with congressman paul ryan. i asked the congressman about his take on the president's tax policy. take a listen. >> i think the president and his party looks at tax reform as a revenue-generating exercise. broader tax base with higher rates which is nothing more than a tax increase to fuel spending. we see tax reform differently. i subscribe to the larry kudlow school which is lower the rates, broaden the base, economic growth. >> i buy that. >> this is what we -- >> this is an austere budget in many respects. >> i would argue against that. >> if you have the tax reform component, it becomes a pro growth budget. >> we're having tax reform on businesses and individuals, knocking those tax rates down to around 25%. >> small business too? >> yes. >> tell me small business.

so they go from 40 or even 44, paying the individual rate, down to 25. >> that is our goal. that's what we're talking about. >> what's the biggest cuts you're going to make right now? what are the largest -- say the three biggest categories of budget reduction in the ryan budget? >> well, let me give you an obamacare example. obamacare expands medicaid eligibility by a third. we think it's wrong to put 20 million additional people on a program that's already failing, already working. doctors -- more and more physicians aren't even taking medicaid patients. they're losing money every time a medicaid patient walks in the door. why throw 20 million more people on a broken system? we don't do that. that saves right there, 810, $815 billion over the decade. that's a pretty big one there. there are lots of other things. keep the spending caps going throughout the decade. that saves us money. we also want to consolidate a lot of our duplicative programs in job training. we also have welfare reform. >> what about this whole explosion of food stamps? we covered it again last night on our show. >> that's right.

>> food stamps are supposed to be counter cyclical assistance in a recession. we're out of recession. presumably, the food stamp population should be going down. it's not. it's going up. the government dependency population should be going down. it's not. it's going up. how do you treat that in your budget? >> so that's exactly what i was going to say next. we see food stamp reform as part of welfare reform. which is we -- we want to have state flexibility by sending the program back to the states, having time limits and work requirements, which were one of the most important reforms that get able-bodied people back on their feet again. those reforms that work so well to reduce child poverty and get women who are single families back on their feet again in the late '90s, we want to apply those lessons to food stamps as well. we see food stamp reform as part of our second wave of welfare reform. and yes, it does save money. we're not cranking up a program that has gone well beyond its limits. it's grown by 270%. >> how much will it come to? how much will the savings --

>> off my head, i don't know. we will spend $600 billion on food stamps over the next ten years. that's lower than the current baseline. but we will still spend $600 billion on food stamps over the next ten years. >> all right. so you've made it very clear that you're going to remain as the budget chairman. and so people who follow you probably see that. you've been the best budget chairman in quite some time. last question. for those -- i'm going to come back. for those who want to see a budget compromise and you yourself indicated you wouldn't mind seeing a grand design. what will you give up? >> well -- >> what would you give up in order to get it? in order to get a compromise, what will you give up, paul ryan? last question. >> i don't think it's wise to negotiate to the media, no offense, even though you and i have long -- time friends. i don't think it's wise to negotiate to the media. here's what we would have to give up. we cut 4.6 trillion spending over the next ten years in the beco budget. my guess, we will not get that much spending cuts. what does that mean? that means we may not -- you

know, get the budget goals we want to achieve, but hopefully get a down payment on the problem. we balance the budget and ultimately pay off the debt in our budget. what we hope and what we think the republican majority is good for, if anything, is to get a down payment on the problem. to delay a debt crisis to push the bond markets out a few years. >> what is the down payment? >> we'll find out. >> is there a revenue entitlement down payment? is there a revenue entitlement tradeoff? would you take a revenue increase? however it works, in order to get the kind of entitlement reforms on medicare, medicaid, that you want? >> well, we think you'll get higher revenues through economic growth. and so if you can measure pro growth tax reform accurately, based on reality, i think that would get you higher revenues. but on what they call a static basis, if you keep chasing static revenue increases, you're killing tax reform. we're not killing tax reform. i also argue if you open up federal lands for more energy exploration, you'll bring in more revenues.

that brings revenue into the federal government. things like that work. >> paul ryan, chairman of the budget committee, thank you very much are fok with us. >> great stuff. many thanks to house budget chairman paul ryan, who is an old friend and i think he is just spot on with that budget document. now we're back with house members carolyn maloney and steven scalise. carolyn maloney, to get a grand budget deal, which i think the country needs, what would you give up? >> i'm not used to negotiating on national television. >> no one is listening. >> no one is listening, right? this is a private -- >> just you and me. we've known each other 30 years. what would you give up? >> i think everything is on the table and it's all open to negotiation. i think $1.1 trillion in tax loopholes and tax breaks for special interests is a first place to start looking. >> but you've got to give something else up that you don't want to give up. >> i would give up $1.1 trillion in tax breaks to special interests. i would give that up. >> steve scalise, what would you give up to compromise? >> i think first of all, if you

look at tax reform, i think many people have said we need comprehensive tax reform recognize that if you use the things you would get from eliminating the loopholes, you have to use that to close -- to lower overall rates. frankly, i think 25% should be the highest end. i don't think anybody should have to pay more than 25% of their income. and then you can even have lower rates for lower income earners. you would get tremendous economic growth out of that job creation out of that. so i think you have to fight for those kind of reforms. >> if you had -- okay. i know those are your beliefs. i appreciate that very much. >> but what is -- >> if you have -- if you have a deal on the table that would reform medicare and medicaid substantially and structurally, okay, capping them both and in effect returning medicaid to the states -- i'm not going through the details. would you, steve scalise -- i'm going to ask you the same thing. would you give up revenues to get that entitlement deal? >> well, first i think the president has got to acknowledge, he got the revenues, the tax increases he wanted in the fiscal cliff deal.

he got $600 billion in new taxes on top of the new taxes obamacare adds on middle class families. let's go to -- i mean, you have to fix the entitlement programs to save from bankruptcy. >> that's it. >> and that helps balance your budget. >> i'll flip it. only a tiny amount of time, carolyn maloney. if you got your tax expenditures, trillion dollars tax expenditures, would you make, give up entitlement reform, structural entitlement reform? >> well, i'm for long-term strength of the medicare program and of social security. and they have been reformed over the years in many ways. it depends on what the negotiations are. everything is on the table. i am willing to look at everything, and i believe the democratic leadership and the president has made it clear that he is willing to -- he wants a grand tedeal and he is willing look at everything. >> those programs go bankrupt -- >> congresswoman carolyn

maloney, steve scalise, thank you very much. the dow made it eight days in a row of gains today and the record highs keep on coming. is the bull run about to take a break? we'll ask two market experts next up on "kudlow." ♪ (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities. (announcer) scottrade knows our and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody.

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president of far, miller in washington. and zack pa reduce. jack pa reduce, are you a bull or bear? >> i'm a bull, larry. you buy every 3 to 5% dip. this is the breakout year, the year we see a 1700 s&p and a lot of it because of what you talked about. the fact that we are now talking fundamentals. everything is now on the table. and more importantly, we're getting a reversion back to the means, and corporate america is making more than they've ever made before. >> actually, michael farr, that's a very interesting point. a couple people have said on this show in recent weeks that wall street stock market investors actually like what's going on in washington. actually like it. we've got some tax certainty, even though we hated the tax hike. >> which is a good thing. >> but we are going to get some spending cuts, it looks like. certainly the government will not be shut down, certainly the debt ceiling will not be approached. so maybe washington is helping the stock market. >> well, you've got a little bit of certainty and a narrow window. and i think more important than

any of that certainty right now, larry is that the federal reserve is still there spending that $85 billion a month. katy barred the door when they stop spending. until then, i think you've got to be short term bullish, the trends you're friends. you don't fight the feds, you don't fight the tape. i think this thing is going higher. when they stop, i worry, because the real organic growth, i don't think, is there. and i love jack pa reduce and he knows it. >> jack, one point i want to make, putting the fed aside, i think profits are the mother's milk of stocks accide, not the reserve. but jack, if the economy grows faster than people expect, medium and long-term interest rates will rise. that's the real interest rate effect. that won't hurt stocks. that actually might help stocks. >> well, eventually we've got to see that rotation, larry. look, we're looking at these low interest rates. they're not going to last forever. i mean, but the rotation is not going to be won that happens right away. we're not going to see bombs

fall after a cliff. we're going to see a slow work into the equity markets with a lot of nonbelievers as this equity market goes up. think of it this way. this market has gone up with king dollar back. imagine what would happen if we saw the dollar actually stable. the fact is, it's gone up 20% against the end, gone up against the british pound, gone up against every currency out there which tells me the quality of this rally is better than people think. >> and if you got 3% growth -- 3 -- i don't know that, but if you got 3% growth, the ten-year treasury will go to 2.5%, it might go to 3% and the stock market might stub its toe for 20 minutes but will rise along with it because the economy is better and profits will be better. >> you've got two problems. when those interest rates go up, that's going to affect the mortgage rates and the housing market recovery. and that's been driving -- >> more income. they'll have more income and better jobs. that's the whole point of the exercise. >> if we have the job growth and that will be a wonderful thing. and if it's real, job growth, i'll take it. but i fear those housing prices

are going up and i think the stock market will more than stub its toe. the other thing that jack mentioned is that reversion to the mean. we still have s&p profit margins at pretty much all-time highs. that's a mean reverting number. so while p/e ratios are kind of normal, that profit area could still come down. >> could take years. jack, i'm running out of time, buddy. what's your favorite investment right now? what are you buying? >> i think you've got to stick with financials, i think they have been underperforming, look for them to start running and the home builders, the other group that's going to really, really show some interest. >> michael farr, favorite investment. >> i'm of course buying stocks and i continue to like the health care sector, i'm leaning into it a little bit of the hit 'em where they ain't, larry. >> like the health care stuff. and you're feeling about washington -- >> i'm not anything about washington. i would like something productive to come out of washington but i'm not holding my breath. >> one more shot. we're out of time. michael farr, jack, thank you. that's it for tonight's show. by the way, see my full

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