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camp weeknights. good evening. i'm michelle cab rousso cabrera in for larry kudlow. public worker pensions will go untouched in the city of stockton. meanwhile, we're also finding out those new taxes in california aren't really just for schools. nope. big chunk of that money now going to pay for, you guessed it, retired teacher pensions. outside of california, though, things look a lot better. strong economic news, especially from the car companies. that helped push the dow back higher today. the rally has resumed. and a funny, snarky but bitter editorial by a high school senior who didn't get accepted to her dream colleges is all the rage on the internet. we're about to talk to a former dean of admissions at one top school who says the young author has hit the nail right on the head.

"the kudlow report" starts right now. first, stockton, california running out of cash. the big question hasn't been answered. can the city get a break on what it owes to the state pension funds. that's the key in the case and matters not just for stockton but every struggling city in california and possibly america as well. here now is mark stan drif, communications consultant for the party and bernard whitman, president and ceo of whitman inside strategies and mark simone, wor radio host. gentlemen, thanks for joining us. mark, let me start with you. mark standrif. my understanding is of stockton is the following. they owe a lot of money, a lot more money than they actually have coming in. yet they refuse to cut pensions dramatically enough, and therefore they keep giving money to the state california pension system, and they're not going to be able to pay it over time. somebody is going to have to lose here. and yet they refuse to cut, and

instead making bond holders taking losses. do i understand that correctly? >> yeah, you pretty much got the nail hit on the head there, although they have to say in the state of california, public pensions are untouchable. at least according to state law. and i think that's ultimately where we're going to go. are we going to decide whether or not bankruptcy code applies toward public pensions. so they try to do some negotiation with cal percent, the public pension fund in california. and california% told the city of stockton they didn't reach -- emergency status. that there was nothing there for them to really worry about, because they still had creditors they could negotiate with. this whole thing is such a mess. >> but now we are going to see bankruptcy for this city, correct, and are we finally going to find out whether or not the pensions are truly untouchable? >> well, i think the city of stockton is going to have to go back to california% and say, listen, one of the reasons we took on the municipally bond debt in the first place, we couldn't afford the yearly payments. the city of stockton owes nearly $1 billion to california%. and it's not just about --

>> calpers is the california pension system, we should tell everybody. the state pension system. >> yeah. and so they owe them $1 billion for past payments. that's not counting the increasing number of payments that they're going to have to make as the years go on. and that's the big problem right now and that's why you mentioned before, so many cities in california, including los angeles, that's the big one to watch, because right now their pension obligations have increased $150,000 over the last -- sorry, 150% over the last ten years and predicted by the year 2017 that menti pensio obligations will swallow up 25% of the annual budget. >> what do you do, bernard, when this happens, we start to see fewer teachers getting hired, fewer police officers on the road. how should this play out? >> i'm to the right of a lot of people in the democrat cannic party. i think the unions have to engage in what obama called for and that is shared sacrifice. at the end of the day, we cannot continue to invest disproportionately in paying pensions if that means cuts in

classroom investment and ultimately the unions have got to come to the table, calpers has to negotiate with stockton and relieve them of this pension debt. >> i thought he was our token liberal. >> surprise, surprise. >> i assume you agree, mr. simone? >> yeah. i've asked a lot of ex mayors, politicians, why didn't you do anything about these pension costs? and they point out you have to grandfather current people in, and the benefits wouldn't show up for 10 years, 20 years. so nobody got around to doing anything about it. what the court has to rule on here, federal bankruptcy law usually trumps state law and that may be the case. >> so that's where you might see a break on the pensions where they can break that contract. >> a very good chance. >> here's what's astounding, the entire state of california actually is bringing in $11 billion more in revenues than they did during the crisis. so they have more revenue, and yet spending on the universities is down. k-12 spending is flat. you know what's higher?

health care benefits for employees and retirees, pension benefits for retirees. i mean, it's crowding out everything. we're starting with stockton, right, mr. standrif? this is going to spread throughout the entire state. what are they going to do? >> they're really going to reach the point of no return on this. and either the system collapses under its own weight or as was mentioned by our democratic friend here today, the unions are going to have to capitulate a little bit. you know, here's the understanding of it. for instance, we talk about prop 30 here which just got passed back in november. under the promise that it was going to help fund education. in fact, that was part of the official title. temporary tax to fund education. >> so bring in $7 million a year, almost $50 billion for the next seven years. >> right. but 60% is to backfill pensions. if you were a corporation and you raised $50 billion in order to -- told your creditors and securities you're going to fund operating expenses and four months later admit that, well, actually, 60% is going to go toward debt obligations and

service, the s.e.c. would put you in jail. it's practically criminal what they decided to do, and unfortunately the kids are the ones who suffer. >> michelle, i'm sorry to be crude but sometimes you have to amputate the foot to save the leg or body. the body is critically secure. and if we don't do something -- >> you're talking about the state of california. >> i mean, unions at large. this is just a symptom in california but it's going to spread all over the country, clearly california being the biggest is going to suffer the most. but we have got to get real, and we have to engage in some shared contribution. >> how do you come to the table? they refuse all of the time. >> ultimately, we have to say look, at the end of the day, education is for children. we have a eliminated amount of money. we want to make sure we invest in education. >> you know what they say. we were promised. there's a woman sitting here last night. those people were already promised. you can't deny them what they were already promised. >> and we have a commitment to educate our future generations of children, and yes, we need to honor our commitments to those who have gone before us. but if that means doing so at the expense of those who are coming after us, that's a real moral problem.

>> also, these pension things started when life expectancy was 72 years old. you've got this 20-year retirement thing, retire at 46, and you're around for another 40 years. nobody can can afford those pension costs. look at gm, 1 million retired workers. basically retirement home that also makes cars on the side. >> right. health insurance company that also has -- car company on the side. guys, good discussion. mr. standrif, thanks so much for joining us. we all agreed. i'm shocked. >> it won't continue. >> no, i can tell. guess which country is becoming a huge magnet for manufacturing? hint, the answer is not china. we'll have the answer for you and the intriguing reason why coming up next. also -- >> you all want to know the secret formula for getting in. ♪ i did owe >> an admissions officer must be on the receiving end of an entire nation's application panic. you didn't challenge yourself academically. >> i'm worth $1 billion. >> the college admissions baths is the premise of a new hollywood movie but the pressure

is all too real for thousands of high school seniors right now. hot new he had coral to recall by one ivy scorned senior is securing the process. we'll take a closer look at her complaints with the former admissions dean of m.i.t. and don't forget, free market capitalism is the best path to prosperity. "the kudlow report" is going to come right back. [ male announcer ] it's the little things. the little details. the little moments that make life truly amazing. that's why southwest worked hard on the little and big things to build a better in-flight experience featuring access to wi-fi, live tv, and updated cabins. getting there just got better. we are southwest. welcome aboard.

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the natural gas boom make the u.s. the world's number-one manufacturer? many european companies are already rushing here to take advantage of cheaper gas. and they're opening plants and factories here in the united states. in fact, the u.s. average natural gas price last month was just about a quarter of the natural gas price in europe, just a fifth of the natural gas price in japan. with more factories switching over to gas power, it's an easy cost-cutting decision to move manufacturing into the united states. when was the last time anyone ever said that? here now is addison armstrong, tradition energy director of market research and cnbc contributor, bernard whitman is still with us, as is mark simone. addison, this is all because of the shale gas revolution that's happening in the united states, right? >> it certainly is. we've got some amazingly low prices on a relatively historic

basis, even for this country. but what's really spurring this is, as you mentioned, the big spread between what gas costs here for manufacturing and what it costs in europe and in asia. >> and how many manufacturing jobs do you think that adds to the united states? >> you know, i think i did -- i looked at the figures today. and i think it's probably somewhere around 200 to 300,000, which is -- which is on the lower end of the spectrum. sort of matches the american chemistry council's numbers, where you've got pricewaterhouse who thinks it's worth 1 million. that said, there is a multiplier affect when you build out big gas to liquids plants or lng export facilities so even if those plants are only hiring 100 or 200 permanent workers, you know, sometimes you get a multiplier effect of 7 or 8 jobs that support those main facilities. so i think 200,000 to 300,000 is a good number. >> mark simone, is this as revolutionary as i think it is? >> it could be.

but not too late for us to screw up here in new york state. our governor has been too slow to act, talking about overregulating the industry. very safe fracking goes on and very dangerous. >> we should highlight that. when we talk about the shale gas revolution, the people very negative about it call it fracking. and very did he ricively, right? this is about fracking. >> it's done in 30 states, obvious done in a very safe manner. it can be done in a dangerous manner, needs to be regulated but not overregulated and i think we have scared some companies out of new york state. i think we ought to be careful not to do that around the country. this is an opportunity for the nation to be finally be energy independent. >> this is a huge endorsement of the obama administration strategy over the last four years. why? every year under obama, natural gas production has gone up. it's reached an all-time high. we are expected to become a net exporter in 2014. he just appointed to u.s. energy secretary and epa proponents of fracking. this doesn't just happen magical magically. we have had leadership under

this administration and it's added a huge number of jobs. >> but you know the increase -- the increase is happening on the nonfederal lands, right? the federal lands -- it's either flat or down. >> no, but we have a guy in the oval office who understands, you can marry sound business practices with good environmental policy that equals natural gas obtained through fracking. so we get clean energy, you add jobs. i mean, there's -- >> do you agree, mark? you're suggesting cuomo in new york is regulating too much. how do you feel about president obama? >> i think one of the problems with president obama, he does a lot more talking than acting and he's great at being a proponent, a speaker. but he's not great at getting it done and making it happen. >> it's gotten done. what do you mean? the jobs are here. >> addison, are we -- are we drilling more oil and natural gas because of president obama or despite president obama? >> i think it's neither one of those. look, this isn't happening on federal lands. this is happening due to private innovation, private entrepreneurship of large and small companies all over the country. and, you know, this -- these are -- hydro fracturing has been

going on for 40 years. yes, it's only taken off in the last eight. but, you know, this is not something that i think you can directly -- attribute to policies coming out of the white house. >> wanted to stop, he could have, couldn't he? >> we have become the great innovators for better ways of fracking. we've got to capitalize on that. also, this gas, it's not really exportable, too expensive and too difficult to export. so that's not going to be -- >> that's why the manufacturing has to come here. >> exactly. >> we finally are becoming a -- an on-shoring of jobs rather than offshore of jobs. people are moving jobs here from asia, from europe, construction on these plants can create 10,000 jobs in one fell swoop. so i think it is a huge boon for the economy, and frankly, leadership from the white house has played i think a significant role. >> this administration has a great technique for getting business here. he has driven down the economy which has driven down prices. >> i think that was george w. bush -- >> we're not going to do that. addison, thanks for joining us tonight. >> sure michelle.

>> addison armstrong. now real proof the s.e.c. is actually moving into the 21st century tonight. plus s your brain worth $100 worth of taxpayer money? those are just two of our news headlines coming up next. don't move. in the world. the bese it's delicious. so now we've turned her toffee into a business. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom. i never really thought i would make money doing what i love. [ robert ] we created legalzoom to help people start their business and launch their dreams. go to legalzoom.com today and make your business dream a reality. at legalzoom.com we put the law on your side. i know what you're thinking...

transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process. so, it's no surprise to you that companies depend on today's xerox for services that simplify how work gets done. which is...pretty much what we've always stood for. with xerox, you're ready for real business. which is...pretty much what we've always stood for. but i wondered what a customer thought? describe the first time you met. you brought the flex in... as soon as i met fiona and i was describing the problem we were having with our rear brakes, she immediately triaged the situation, knew exactly what was wrong with it, the car was diagnosed properly, it was fixed correctly i have confidence knowing that if i take to ford it's going to be done correctly with the right parts and the right people. get a free brake inspection and brake pads installed for just 49.95 after rebates when you use the ford service credit card. did you tell him to say all of that? no, he's right though... i've always kept my eye on her... but with so much health care noise,

i didn't always watch out for myself. with unitedhealthcare, i get personalized information and rewards for addressing my health risks. but she's still going to give me a heart attack. that's health in numbers. unitedhealthcare. a big decision today that will change the way companies communicate with their investors. cnbc's seema mody has that story and more. >> michelle, s.e.c. giving companies permission to announce

key information on social media like facebook and twitter. only a minor catch. the companies first have to tell investors they're going to do it. the push for this came from netflix. last year's ceo, reed hastings posted a bullish statistic on his personal facebook page. the stock went up 6% so now this is fine as long as investors know where to look. president obama wants to spend $100 million on new research of the human brain. the funding will come from his 2014 budget, which will be released next week. the hope is that the research could eventually lead to cures for alzheimer's and other brain disorders. a couple of sports stories now. the coach of florida gulf coast is cashing in on his team's cinderella run in the ncaa tournament, and hissed old salary, $157,000, his new salary reported to be more than $1 million. and yankees' second baseman robinson canoe has a new agent,

jay-z. it will be called rock nation sports. it's an arm of the well-known creative arts agency, which we know in the media world as caa. >> right, building an empire there. never stops. what do you think about this decision by the s.e.c. seems like if somebody is going to post something on facebook, it's good enough that investors know about it? >> i think the s.e.c. woke up and realized it's 2013. to suggest otherwise would make it appear they were all a bunch of lud rights and the fact we get so much information from facebook and twitter means you have to disseminate information that way. >> mark, you agree? >> i don't understand the story. sometimes a guy might disclose something he just learned on cnbc. >> well, when the fda rules came out first -- if you said it on cnbc, it was considered fully disclosed so they have evolved over time. listen, you're talking to somebody who thinks the s.e.c. shouldn't exist. so anything they do is inconsequential. >> so i guess the only way you hide something, you disclose it

on myspace and then you'll never see it again. >> but it's all social media flat forms. >> but if it's on facebook, there are a lot of warren buffettish type guys who won't see it. >> they're going to have to keep up with the times, right? what about jay-z becoming an agent? >> you know, what i want to sign with him. so jay-z, if you're listening, sign me. >> mark? want to sign with j jay-z? >> he's very google-ish. every business. >> at least he attempts it as opposed to buying mansion after mansion after mansion. and -- >> i don't know. that would be enough for me. >> he might be doing that anyway. who knows. >> i enjoy buying every mansion in the world. >> my hope would be robinson cano's reputation is going to fulfill the yankees because the opening day performance disappointed me to say the least. >> and we thought athletes were overpaid. now they turn to singers. >> he's an impressive businessman, in sports, doing it all. >> restaurants, the whole thing. seema, thank you. now we get back into rally mode on wall street today, thanks in part to good news from

the automakers. not everyone is convinced the rally is going to last, though. one of those doubters, gloom boom doom guru mark faber. here here is one reason why he's worried. >> in western democracies, you have more people that vote for a living, than people that work for a living. changing the world is exhausting business. with the innovating and the transforming and the revolutionizing. it's enough to make you forget that you're flying five hundred miles an hour on a chair that just became a bed. you see, we're doing some changing of our own. ah, we can talk about it later. we're putting the wonder back into air travel, one innovation at a time. the new american is arriving. anbe a name and not a number?tor

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welcome back to the kudlow report, i'm michelle caruso-cabrera in tonight for larry kudlow. the rest of the world is reacting. how serious is the situation right now? we'll get a report from korea in a few minutes. also, how hard is it to get into a top college these days? and is the whole admissions process rigged against normal kids? a snarky op-ed piece written by a rejected high school senior has become all the rage on the internet. but does the writer have a point? we're about to ask the former dean of admissions at m.i.t. first, though, another record-breaking day on wall street. seema mody joins us with the details. >> can you believe it? another day for the market. and another strong day, thanks to strong economic data today on the factory orders front. the dow hitting another intraday high, and the s&p 500 inching closer to its all-time intraday

high. now on the currency front, the u.s. dollar rallied against the yen. the street is expecting the bank of japan to announce further monetary easing this week. auto sales for the month of march surged to its highest level in five years, signalling further signs of a recovery in the u.s. auto sector. in terms of stocks that led this market higher, michelle, health insurers topping the s&p 500 after the centers for medicare and medicaid services will increase fee payment rates by 3.3% in 2014. that's a reversal of the 2.3% drop projected last month, and followed intense lobbying from the health insurance industry. in tech land, apple shares eekd out a small gain, although goldman sachs did remove the stock from its conviction buy list, and shares of the nasdaq omx also moving lower today after announcing its acquisition of a fixed income-trading platform, e-speed from bcg partners. some analysts saying that nasdaq spent way too much for this deal.

>> hit the stock really hard. all right. here now is ben steel, director of international economics, the council on foreign relations and also author of the great book, "the battle of breton woods" which we'll get into. and kyle harrington founder of harrington capital market. what do you think, mr. hard of hearingtop? do you believe this rally? >> no, i don't. i think the fed has done a fantastic job, michelle, at being accommodative with their monetary policy. and we've talked about this, you know, for a few months now. but the market still continues to go up. i think that when you look out at the stock market, an intelligent option is to sit back, get diversified in nature, in sectors we like, which are technology, biotechnology, energy, areas we think are going to be growth engines going forward and identify mutual funds, etfs that make sense. we look at the auto sales number, the durable -- >> you're not telling people to abandon stocks. >> no. i'm not telling people to abandon stocks. i'm saying if you have gains in your securities, take some off

the table. and reidentify the large-cap liquid names in the areas that i just mentioned. that i think will benefit even if the marketplace takes a significant dive. i'm waiting for a severe correction in the marketplace. >> before you commit more capital. >> exactly. >> ben, the economic situation right now. does it justify a rally? >> this is really a by polar economic right now, michelle, very much driven by everything the fed is doing. >> which kyle suggested. >> anything the market perceives as liquid right now is booming. cdos are back, structured finance deals are back. >> all those evil things everybody wanted to go -- >> all those things. but if you look at what companies are actually doing, corporate long-term fixed asset investment as a percentage of corporate cash flow is at a post war low. >> they're not building factories. >> they're not building factories so there really is a lack of confidence out there. that's why the market only likes things that are liquid, things

they think they can get out if this rally is not real. >> so things are going well. will the fed then scale back on mondaytory support sooner than expected? and how do you think the market will respond to that? >> well, you know, there's a battle going on within the fed open market committee. but right now the dubs have the upper hand. >> and you don't think so either. >> i think this party continues, driven by the fed. but when it ends, and i agree with you, when it ends, it could -- this could be a severe correction. so be in liquid -- >> they've told you it's going to be years, right? >> i'm not necessarily sure it will be years. but, you know, it could go on for a while. just be in liquid names so you can get out of positions and go to cash. be diversified in sectors that are growth engines and invest where you think there's the intersection between value and growth. here's the key, though, michelle. warren buffett's rule of investing. don't lose money. rule number one. two, refer back to rule number one. so with the clients that we represent, we have got to be protective. >> will all right.

i want to talk about ben's new book because it speaks to this whole issue of the federal reserve. new interesting book depicts the saga of representatives of 44 nations gathered in july of 1944 to restore global economic and political order. larry kudlow thinks, quote, this is a fantastic book. gold and money. two of my favorite topics. also brilliantly insightful and gripping spy killer. he likes to talk about king dollar. your story, your book, is about how the dollar became king dollar, right? >> that's right. after the 2008 financial crisis went global, you had world leaders calling for a new breton woods to find a new monetary and financial architecture for the world. but the real story, the old, original breton woods is a fascinating geopolitical story that people don't know about. >> the consensus thought about breton woods is that everybody came together. the u.s. really wanted to help the u.k. with lend lease, so they could rebuild and fight the war. and, in fact, we wanted to crush

the united kingdom, right? we wanted to kill sterling, we wanted the dollar to be number one all over the world. and we won. >> we did. there were 44 allied nations represented at breton woods, july 1944, a few weeks after the d-day landings at normandy but only two delegations really matter. the american delegation, the americans, the great rising super power and britain, which was facing impending bankruptcy and the american represented bretton woods, white, the most fascinating figure of the 20th century nobody knows anything about was determined to force liquidation of the british empire and throw the u.s. dollar as the unrivalled global currency. but he had another agenda, as well. >> he was -- was he a soviet spy? bizarre. he was a nationalist -- u.s. nationalist. he wanted the dollar to be number one all over the world, which, by the way, why oil is traded in dollars, gold is traded in dollars, but he was spying for the soviets? >> that's right. it's remarkable, michelle.

he comes to washington in 1934 as a bureaucrat, the u.s. treasury, but already starting to plan for this big international conference that can find these writings in his files where he's planning to best the british in 1936 at a conference when it eventually takes place to en throne the u.s. dollar. but as soon as he comes to washington he starts acting as a mole for soviet intelligence. bask in fact, before he went to washington, he had written to his former supervisor at harvard saying he wanted to get a scholarship to go to moscow to study soviet economic planning. it's really a remarkable story. >> so everything we always thought about harvard. >> what i was -- we were talking before the show, and i thought what was really interesting, the book is timely. because we're talking about monetary policy, the imf. what's going on with the fed. but what i thought was really interesting was what you said about how they -- the imf was always going to be led by a european. and why that was. >> and that was decided at bretton woods. >> that was decided after breton woods. the americans always intended that the imf would be run by an

american, january 1946, president truman is going to nominate hear dexter white to be the first managing director. why doesn't he do it? he gets a long memo bum from fbi director jay edgar hoover saying don't think about it, i can prove this is a soviet spy. >> we live with these issues today, right, the issue of gold, whether or not it should be the currency that backs -- or should be the thing that backs our currency instead of having a fee at currency. >> that's right. it had been harry dexter white's determination the u.s. dollar would be backed by gold. he said it was inconceivable there would be a time it wouldn't. but the actual breton system didn't last long. it wasn't until 1961 the first nine european countries made their currency convertible into u.s. dollars. >> are you one of these folks who thinks we should be backed by gold snchlts that's a good question, michelle. i think we have owned recently a lot of gold as a result of a hedge -- just owning hard assets. i think that i believe in gold.

at this time. >> i mean, when the whole world is printing and looks like japan is going to print as well. >> what do you think? so we -- we're long a lot of indices that have really solid gold-oriented situations. >> you must hear that from a lot of market participants, as well. >> definitely. today we saw gold fall to a 2.5 week low pressured by the strengthening dollar. so that continues to be the big story. the pull between gold and the u.s. dollar. >> that's right. you know what's really pulling up gold over the long-term right now, in the 1990s central banks around the world were selling off their gold reserves, thought it was useless, didn't pay interest. now they're rebuilding their gold. >> so their buyers -- >> could be the next major reserve currency. >> thank you, ben. great book. you guys ought to read it. ben steel, kyle harrington. seema, thank you so much. now, north korea. the threat is looking more menacing by the hour. the u.s. is not taking it lightly and has sent two destroyers to the region. we'll get the latest on that volatile situation coming up next. ♪ alright, let's go.

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how? by building custom security solutions that integrate video, access control, fire and intrusion protection. all backed up with world-class monitoring centers, thousands of qualified technicians, and a personal passion to help protect your business. when your business is optimized like that, there's no stopping you. we are tyco integrated security. and we are sharper. more blustery war-time rhetoric from north korea today. the country saying it will start a nuclear reactor that it closed five years ago to its weapons arsenal. this is the u.s. navy position's two destroyers in the western

pacific to respond to any missile threats. sherry kang from cnbc joins us now live from seoul, south korea with the very latest. sherry. >> reporter: hi, michelle. yes, like you said, we're talking about a reactor that was actually shut down back in 2007 that north korea wants to restart this time. the shutdown back in 2007 happened because of this aid for due nuclearization agreement because of the framework for the six-party talks which by the way is pretty much dead now. and south korea called this highly regrettable. and u.s. secretary of state john kerry also called it unacceptable. and also china, which is north korea's main sponsor also said that china has constantly advocated denuclearizing the peninsula and maintaining peace and stability in the region, which is not a new fresh line coming from china, by the way.

but this north korean announcement cannot bode well for china's stance of standing behind the regime. >> what is the perception there in south korea about whether or not china is doing enough? >> reporter: well, in terms of china, china, first of all, hates being in this position of having to explain itself for -- to the international community, why it does not -- why it does not do enough to put north korea in check. but we understand that china needs to be there for north korea, so that the regime does not collapse. but at this point, i think many experts here in south korea, at least, say that this prolonged duration of north korea's harsh rhetoric and threats of violence actually lies in china. it's asking for more concessions, and it's asking for more support from china. >> okay. yeah, we've heard that theory before, that's why kim jong-un

may be doing this, in order to get more out of china. thank you very much chery kang from soul, south core yeah. we may be on the cusp of a nuclear conflict here in the "washington times" today. here now is assistant secretary of defense, under president reagan, frank gaffaney, now the president of the center for security policy. mr. gaffaney, thanks so much for joining us. >> happy to do it. thanks for having me. >> what should we do about this situation? >> well, it's really interesting what the obama administration is doing, you know, without my counsel, and frankly, a little surprising. given its past practice. it is behaving as though it may be actually trying to provoke this crisis with north korea, or at least not yielding in the face. >> why because we are sending carriers, because we are sending stealth fighters, et cetera? >> well, there have been a number of things.

we proceeded with long-plan military exercises in the past. there has been a tendency to cancel them when the north korean s complained. we sent b-2 bombers that dropped dummy bombs in the south korean part of the peninsula. we sent f-22s, our most advanced stealth fighters, as you mentioned, destroyers with missile defense capabilities. and we also signed a pact with the south koreans to back them up. if there is any forceful response by them, to the kinds of provocations that have taken place in the past and have not been met by force in response. so these are all steps that, i don't know, maybe have at their heart the hope that by provoking a crisis, they may actually be achieving something i happen to believe it long overdue. on an effort to bring down this kim dynasty in north korea, but -- >> so you support the administration -- >> over the side. >> you support the

administration being tough on north korea and because in the past it's been let's give them some carrots, they'll stop running the nuclear plan if we give them aid, et cetera, et cetera. you don't support that. this is a better way? >> under successive administrations. it didn't begin with this one. previous administrations have done the same thing of trying to apiece the north koreans. and we're in the state we're in today where we have a north korean regime in the hands of an apparently pretty unstable young man, armed with nuclear weapons, clearly seeing it as a cash crop, as they do all of their weapons, their missiles and so on, to sell to the iranians, to sell to other buyers elsewhere. and this is a formula for conflict, as i say. i'm afraid perhaps nuclear conflict if it is allowed to met as at the size further. so this is a risky business to be sure. and i'm not certain this is what the administration has in mind. but it's the best explanation i can come up with for what is

very different behavior than it's engaged in here to for. >> so let's play this out then. what do you think the chances are this little young petulant regent as i like to talk about him. >> nice turn of phrase. >> could actually fire off a nuclear weapon? i mean -- my thought has always been that the minute he does that, he's lost his leverage. right? that brings on a complete and utter attack. it shuts down the entire country. it destroys part of the country, right? because we will retaliate. south korea will retaliate. the only thing he's got is the threat, the minute he uses it, he loses it. >> yeah. here's the real thrust of my piece in the "washington times," michelle. we are, unfortunately, not as well equipped to deal with this kind of danger as we would like to be. our missile defenses are not what they should be. even with these ships being deployed to the region. we've not been building up our missile defenses as a matter of

policy under the obama administration. it is also pursued a policy of denuclearization of this country that is not only manifested by cuts in our forces, but in allowing them basically to become obsolete, to at row fee. and i'm concerned. this was written up, by the way, in the "wall street journal" front page yesterday. the south koreans are concerned we need to have shows of our nuclear deterrent, which they consider to be a vital part of their defensive posture, because, perhaps, the north koreans do not take those sorts of threats that you've just mentioned credibly. so this is a par perilous situation. i personal hope the administration will continue to put pressure on young kim jong-un. and if it does, there is a distinct possibility oh, it seems to me, the military will dispense with him and his dynasty. but whether that will lead to a new opportunity for north korea, perhaps to become one with south

korea on peaceable terms very much remains to be seen. but it's certainly what we should be striving for. >> frank gaffaney, thanks so much for your insights tonight. we appreciate it. >> my pleasure. thank you. coming up next, thousands of high school seniors and their parents found out this week whether they earn the privilege to fork over hundreds of thousands of dollars to their top college choices. most of them were disappointed. that's because the college admission process has become tougher than ever. now, one rejected high school senior has thumbed her nose at the elite schools with an op-ed piece that's become an internet sensation. the former dean of admissions at m.i.t. and a top media critic are about to join us to get to the bottom of what has become a very heated national debate. don't move, because that's coming up next.

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an admissions officer must be on the receiving end of an entire nation's application panic. you didn't challenge yourself academically. >> i'm worth $1 billion. >> and you're the frustration of all the parents who just realized there isn't room for every organically fed well tutored offspring. >> do you like bundt cake? >> i do not. let go! >> college admissions. perfect for hollywood humor but also ripe with teenage angst generation after generation. now one bitter high school senior has become the talk of the internet for penning this

open letter in the "wall street journal." to all the colleges that rejected me. but is the crux of her letter correct? has college admissions become too cumbersome and cut-throat for the average student? let's ask an expert. joining us now is the former dean of at admissions for m.i.t., a pretty tough school to get into. merrily jones. also, kyra goldberg, associate editor at the columbia journalism review. ladies and gentlemen, this is a pretty funny letter that this woman writes. she says, i should have started a fake charity. if there was any closet, i should have come out of it. i wish i had worn a head treasurer to class. she is making fun of all of the touch stones that are supposedly so important. merrily, is she wright? >> i think she is right. i hate to say it. >> what is she right about? >> she writes very well. >> yeah. >> thank you, susie. made us all laugh. but she is wriright about the f it's no longer an educational subsidies.

it's based on a business model and what she is saying you need to be almost perfect. the master race. and that's what i think is -- there is a corruption happening in the system. >> what do you do when there are so many students applying for so few spaces? you've got to -- make decisions somehow. is there a better way? >> every university was created for a reason. right? it has a genesis somewhere. it was created, it has a purpose in the world, offering in the world. and i think the problem with colleges and universities, they don't do a good enough job explaining to the people what they are actually here for. who they're looking for. they're not going to tell people who they're looking for, because they want to get as many applications as possible. and they want to take as few as possible. >> so they can brag. >> and they want as many of those to come -- and that's the holy trinity of college admissions. college admissions owns 4 of the 16 aspects of the u.s. news and world report algorithm. so there is tremendous responsibility in the admissions office in order to get that number up, move that number up. it's not an educational decision

anymore. i've been in the business long enough to know. back in the day, it used to be. now it isn't anymore. >> kyra, what do you think? do you agree with this assessment? or is this girl just a whiney brat? >> so i don't agree with her assessment. and -- but i was coming at it from a different perspective than our -- it has college admissions become untenable. so i -- we were talking about this before we came on. i was thinking more along the lines of the "wall street journal," which is a conservative-leaning editorial page. i thought it was irresponsible of them to publish this piece. >> because? >> because while -- so i read it, what you read as someone needs to be the perfect, complete package, i read as she was dissing affirmative action. you have the paper there. >> yeah, yeah, when she talked about either being gay or being a minority. >> right. or thanks elizabeth warren, i salute your one 30-second -- so

you may disagree. i think affirmative action is important and necessary and currently pending a decision before the supreme court. and -- >> i have to tell you something. being hispanic, i'm often accused of i got where i am because i'm hispanic, i didn't have the qualities, i got into school or got jobs. it actually be a poisonous thing for minorities. >> but it's so much more complicated than that. it's not just that you weren't qualified because clearly you were and you are. i'm a fellow woman's college person. but it's that if you take the demographics, historically, again, you can't generalize. but historically, the poverty is disproportionately full of minorities. >> i see. so more of a class issue when it comes to admissions process. which i would agree with. i mean, if you've got parents who went to college, you're far more likely to send your kids to college. what do you think? >> it's also picking the college where you belong. i always wanted to be in

broadcasting and still hope to be one day. >> yay! >> and across the river from m.i.t., across the charles river was emerson college, the best in broadca broadcasting, please don't ask me for money. but that's where i belong. and i showed enough talent to get in there. if i had gone to see the nice dean of at ad missions at m.i.t., she would have thrown me out of her office because i could barely spell. it's picking a college and demonstrating talent. i would think to the admissions person. >> how do you do that when you're studying the humanities? >> i have to commiserate to some extent with this come having gone through this twice with my college-age son. but the fact is, this is symptomatic and emblematic of one of the problems with this entitled generation. she feels she didn't get what she wanted, she worked hard for it, and so now she is going to pitch, complain and moan. frankly, this is a marketing game and she needs to do a better job of marketing herself. i would strongly urge her in the future to take the effort that

she put into the "wall street journal" piece, wrap it up into a marketing campaign and resubmit her application. instead of just complaining about it on the pages of "the wall street journal." >> what he she complains about is how other people market themselves which is in a lot of cases a falsehood. >> colleges market themselves as -- >> we're in a hyper competitive marketing here, and you have got to market yourself in the work force, you've got to do it in college and this is an early lesson and failure that probably will go on to make her an extraordinary -- >> and for the rest of your life, always applying for a job with 1,000 other applicants. you've got to distinguish yourself. >> that's exactly why i had such a big problem with this whole thing. people are going to be googling her for the rest of her life. and even if she, you know, grows up and matures and no longer thinks that diversity is stupid, she will still have that attached to her google search results. but she'll end up with a book deal and reality show. >> but we have to ask ourselves, what's the actual reason for education, anyway? is to make people be --

encourage people to be life-long learners. >> productive members of society. >> learning. and you want to just keep growing. the way this system is set up, really the house owns the rules. colleges own the rules now. they know what they're looking for. they are admitting people who are very much like them. they're a family that consider themselves family, picking people like them. but not telling the general population who, in fact, they're looking for. they want to get as many applications as possible. they send out these amazing, seductive recruitment materials. >> and their life will be forever better. >> she mentioned the very beginning they were lied to. and i agree. >> so this is an early lesson in the need to create a clear marketing campaign for yourself, find -- >> education is not the same thing. >> ladies and gentlemen, thank you so much. all right. merrily jones, kyra goldberg, mike whitman and mark simone. before we go, uplifting news for the city of new york. nearly 12 years after terrorists tried to bring the city to its

knees, the port authority today unveiled a preview of the planned three-story observation deck at the new one world trade center. the observation floors won't open until 2015, but today's preview is an uplifting reminder that the city will rebuild, and recover. looks gorgeous, doesn't it? that's it for tonight's show. thanks so much for watching. see you tomorrow night. [ male announcer ] there are people who find their own path. and never back down. who believe the american dream doesn't just happen, it's something you have to work for. ♪ we're for those kinds of people. because we're that kind of airline. and we never stop looking for a better way. it's how we've grown into america's largest domestic airline. we are southwest. welcome aboard.

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