man wrought to j.c. penney, probably the worst i have ever seen of any company that i have followed. maybe not even just retail. yeah, it was that bad. i'm jim cramer. i will see you tomorrow. >> good arry od evening i'm larry islow, this kudlow, this is "kudlow report." one of the greatest champions of free markets died today, margaret thatcher died. tonight, we will look at her great accomplishments and her collaboration with ronald reagan in the fight for freedom, whether britain and the rest of the world have is forgotten all she fought to give us.

there's a big dark cloud on the horizon, how dare team obama cap your retirement funds? how dare they tell us how to live? this is america, that means freedom. the "kudlow report" begins right now. >> up first tonight, the sizzle story, let's remember one of britain's greatest ministers, she stopped socialism in england and promoted free market views. she stopped the british labor unions and she attempted to lower government, and privatized state run companies and put the city of london back on the map

with big bang pfree markets. had he worked together with reagan to bring down the great soviet system is. frankly we need her now more than ever and mr. reagan too. so let's talk. joining us now from florida, former member of the british parliament, john brown, he is now with euro pacific capital and writer and blogger daniel hannan, he is a member of the parliame parliament, and mark samone, john brown, welcome back. john brown, she'd not go wobbly, john, and this is my favorite. trouble with socialism she said is that they run out of other people's money. how important was margaret

thatcher to great britain. >> she she turned it around anda single word for which people died, it was freedom. and from that freedom, against external aggression like the faulkland islands and the first gulf war. freedom from over bearing tax and the freedom from excessive regulation comes enterprise and we had fantastic enterprise, we had a debt repayment schedule in parliament thrilling and britain gained one of the most important things in life. its pride, again, and that's what reagan gave back to the united states. exactly the same. >> now, mr. daniel hannan, welcome to the "kudlow report," sir. i'm a great admirer. we were looking at numbers -- we don't have him yet. we will come back to you, john

brown. if you look at the economic numbers, people like to talk about that. but actually we will put up a full screen chart, there was a thatcher boom. an absolute thatcher economic boom. for the six years, ending in 1988, she ran the economy, the economy grew by 4% per year and you can see from the trough there in 1980, they saw a rising economy. this was something that britain had not experienced. in fact, if i'm mistaken, britain became the fourth largest economy, quite an achievement. >> it felt good, it did. i lived it. i cannot see your chart. and what you said, they lit the spart in people's hearts and they started to risk their money because they felt there would be returns and they were free to do things. free of regulation. free of trade union abuse and

they would keep money after tax because the tax when i first came in was 92% of the top rate. and in one swoop, she reduced it to 40%, foreign exchange controls were reduced to zero. so you could have taken anything you liked out of the country. we were not allowed though own telephones and suddenly we were free to own them. we had to rent them off the state. >> did she privatize british telecom and other state-owned companies? >> yes, not only that, what most important, she created a thing where british telecom was not allowed to bid in the first four rounds of the contracts in order to encourage little companies to come in. to be able to take off with the big brother not allowed to bid. she did more than just privatize, she protected the small companies like an

incubator or glass house until they were grown plants and could take on the big boys. >> are let's go to daniel hannan, welcome, sir. >> thank you. >> one of the things i admire most about margaret thatcher, she not stopped the unions she stopped the union general strike. and that general strike that went under labor governments that crippled the economy until she said no. do i have that right? >> we had strikes tall way through the 1970s. the country was run by trade union barrons and people were reconciled to it. that was the worst with of it. thought that was the only way you could do business and she was alone in saying that i'm not put lg up to it. and she turned it around. a number of strikes fell, the economy grew and it became prosperous and free. >> do you think now, you are a

member of the european parliament, you are a good observer. you have written the book. and i'm going to say, the lessons of freedom and free markets, do you think those lessons are still around, mr. hannan, or do you think we have lost it? i don't mean just europe, i mean in the usa and the whole rest of the rld would. is the thatcher legacy still with us? >> as reagan said, you have to relearn that lesson every generation. in some ways, what you call the theory, it is counter intuitive. it seems surprising that an economy worked out to run itself should be successful instead of an economy that is planned out. the planned economy does not work. the best possible demonstration

of course is so see what happens when you have exhausted that system, that is what happened to us at the end of the '70s. >> the lady did not want to go wobbly. no. not only that, she told george papa bush not to go wobbly in the kuwait war. she collaborated with ronald reagan and a lot of people think she gave george bush the push to get saddam hussein out of kuwait. >> she became like the reagan that he needed to team up with. it's fascinating when the world was in congress. when america and great britain were in sham bells you had regan and thatcher showing up. you could not get a phone put in for six months, they could not keep the lights on.

there were rolling black outs, she straightened that out. not to mention what she did on the world stage. and anybody that ever interviewed you will tell you could ask any question on earth and she'd give you a direct answer. >> i know you will are disagree, but i fear -- >> i'm not going to the disagree with anything you say about this. >> i fear that president obama has forgotten every margaret thatcher lesson. i fear that. >> i don't think that at all. i think he in many ways, they have adopted much of teconomic strategies that she has given us. she was an amazing leader but it would be a mistake to say that everything about her economic pau policies, and all of the purity they espoused a free market

economic theory and some of that works, but that economic theory works in the grey area. she slashed inflation. >> larry. -- >> she inherited -- >> in some ways i have to say that great britain was a bigger mess in the 1970s than the united states. for her to come in and create success, she was growing the pie larger. >> she was a successful political leader because of her personal traits not solely because of the economic policies she pursued. >> you agree with that, john brown? >> no, i don't. most politicians including today talk the talk. regan and thatcher walked the walk. they delivered what they said that they would deliver. that is what shocked parliament. it shocked everyone when she got in. i remember the first budget. people were gasping when taxes

were lowered and foreign exchange controls and all these things. people gasped and when a member of parliament got up and said, would you press the trigger and they thought she'd look around and say that is the responsibility of so and so, she said of course. that was the whole thing. she was committed and she delivered. that is what statesmanship was about. >> he is making my point. she was a great political leader. but she'd be horrify by some of the policies that are being pursued in her name today in the country. when the republicans pursue tax cuts for the rich and cutting all the social programs. >> margaret thatcher slashed tax rates across the board. i don't want to get in to tax cut can s -- cuts for the rich are. from your perch in the european

parliament, is there a -- any movement or any hope for freedom and free markets? all these euro fixes don't look very good. including the most recent one in cyprus, how do you assess it briefly in the remaining moments we have. >> i se assess it badly. she turned around a country that was been out performed. she cut taxes for everyone, not just for the rich and she liberated the latent enterprise for the people. >> i fear -- >> the answer is nigel -- >> i fear we are heading in the same direction here in the usa. i'm an optimist, gentlemen, i believe the spirit of reagan and

thatcher will remerge. we will turn to stocks. did you know that since the anemic jobs report the dow has gained. since the jobs report the dow up 3.6%. we will have a bull/bear debate and i'm on the bull side. free market capitalism, it's a wonder for me to be able to praise margaret thatcher in her remembrance, really one of the great architects in the 20th century. i'm kudlow, we will be right back. >> there's one statistic that i understand is not, however, challenged. and that is that over her let11 years the gap between the richest 10% and the poorest 10% in the country has widened

substantially. how can she say at the end of her chapter of british politics that she can justify many people in a constituentsy such as mine being relatively much more poor off and much less well provided than it was in 1979, surely she accepted, that is not a record that she or any prime minister can be proud of. >> mr. speaker, all levels of income are better off than they were in 1979. but what is the honorable member is saying, is that he would rather the poor were poorer provided the rich were less rich. that way you will never create the wealth for better social services as we have and what a policy! yes, he would rather have the poor poorer provided the rich were less rich. that is a liberal policy, yes, it came out, he did not intend it to. but he did.

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private payrolls have averaged gains of 223,000 per month, construction, manufacturing and energy temps are coming in higher. and key point, inflation, a rock bottom 1.3% year on year. now, it's not a perfect story, we will talk later in the show about the problem linkage of soaring benefits with plunging labor force participation. that is a bad mix for groekt. and i still see, low inflation, multiple expanding bull market. i'm going give a hat tip to my radio show he to jim paulson to wells capital management who made the point and i like it very much. now, let's debate, bring in the pros. joel, and i will start with you don, because i do not think you agree with a thing i just said. >> look, larry.

this is one of the subtlies, you want the bull/bear debates, i believe that to bes are fully valued now, they are not cheap or expensive. we have a forward pe of about 14, that is kind of in the high range of where it's gotten for the last four or five years. you know, we may get a good earnings season, we may not. what counts is whether forward earnings expectations are growing and they are growing now at a rate of 5%. here we are with stocks all the way back to where they were in 2007, which is where they were in 2000, and forward multiples are high to normal, with earnings going to 5% approximate. where do you go from here? another 5% in stocks? where do we get the earnings multiple expansion? i'm not saying that we will go into a bear market or a serious correction. but where is the case for some kind of real inflexion point up side, after we have already had

on the order of a 50% rally. go on forever? come on. >> i want, it's an interesting point, i want to bring on the gym paulson point, we are in a low inflation period. it's interesting, for all of the stu stuff, and i have been a critic of ben bernanke. bernanke has the upper hand. the deflater, 1.3% inflation year on year. that by itself, joe, has driven multiples high with modest growing economies with modest profits. that is what i'm asking. >> i agree. i think the multiple could expand more, the average has been 15.5% and certainly relative to interest rates which i still believe we need to use discount the future earnings, i believe stocks can continue to rise. if you have a 5%, 6% type of

growth, i can see stocks returning 7 or 8%. that is what i expect to see through this year. inflation will stay low and that will put s&ps up to 7500. jim's point of where we are on the investment cycle is accurate. the bull market may be in the latter half of the cycle. it has room to grow, because typically equities don't pick until the next downturn begins. >> larry, larry, larry, hang on. wait, do you realize that joe and i just said the same thing? >> what? >> we just made exactly the same forecast. i said 5%, he said 7%. done. >> his argument is that multiples can expand. the point i'm making here and this is important. we watch the dow fall for a

while, we watched gold prices go up for a while, we watched the f fed expand the balance sheet. and there's reasons for that that go beyond the show. if the inflation rate stay downs and you have a modest rise in the economy. i think there's an expansion. you are saying that multiples can expand and means that price earns and ratios go you up. >> larry, they are at 14, and he said that they could go to 15. we are arguing about tiny, tiny differences. don't forget, it's wonderful to have low inflation when you have in the past had high inflation and you bring in brilliant policies and you slay the inflation dragon. we have a deflation problem right now. this economy cannot get out of this not so great expansion

after the great recession. if we were going to have an inflexion toward higher growth and a real leg up in the bull market, not just 5% to 7%, we would be seeing a little inflation here. i do not take comfort from it. it kind of makes me afraid. >> i do want to add to what don is saying, he is right, it has been a weak expansion. we know household balance sheets are in better shape finally. we are finally starting to see activity,i activeity housing and autos doig well. it may feel more like the first or second year of the economic recover. rather than the fourth year and that would give me confidence as we look ahead to 14. i think that equities can rise and they will be do bergen relative to bonds. >> we may have ay year buy and

and hold market left. i'm in love with japan. they are fighting deflation and the end is dropping toward 100 to the dollar. what is your quick take on the japanese stock market? >> that is where you want to invest, you investors should be looking for turn around situations, things that are bad and where there's a good reason to believe there's an inflexion point toward something radically better. >> well said. >> appreciate, gentlemen, thank you. now, one of the most criticized attacked american ceo's finally out of his top job and what in the world is this this all about? crazed protesters getting right in putin's faces before they could be whisked away. we will talk about what they were so hot about. just ahead.

>> north korea seems to be taking a new action every day. josh has more. >> north korea's latest threatening move taking 51,000 workers out of a factory complex is jointly run with south korea. this cuts ties with other

countries. he told foreign countries he could no longer guarantee the safety of their envoys, as we have been reporting the u.s. seems to be taking his threats seriously and look at this video,le video, topless women running up to putin, they shouted at them saying he was a dictator and he laughed saying he liked the protest. ron johnson was in the top job for a little more than a year at j.c. penney, shares dropped after the new ceo's name was announced. and president obama speaking about what he calls common sense measures to reduce gun violence, meanwhile in washington, support growing for a filibuster to

block a gun control bill, republican senators are trying to force any gun bill to require 60 votes to pass the white house said they are trying to hide behind proceedal maneuvers, larry. >> i want to get to this gun thing in a second. the argument with j.c. penney, they are wrong guys coming in and the old guy is going out, stock fell, bad move by the board. >> since ron johnson came in, they lost money all four quarters. and he is the guy who hand picked ron johnson, what did he say at a conference last week. he said mistakes have been made, and the impact, he said were huge. it's interesting, he had friends like that. maybe the news is not that surprising. >> will we have a gun control bill? filibusters like crazy. the issue seems to be universal investigations and registration, how do you see this? >> i think the president is

committed to getting a bill through and i think it lab tough bill and i think that anybody who tries to stand in the way with the filibuster will get the full force of the white house thrown at them and they will give in. because this country wants a gun control measure now. the president is being very flexible, i think, perhaps too flexible in letting this bill be modified to placate the moderates. >> there's no magazine ban. >> i think he has given up too much already. >> we will fight over what universal investigation? >> as long as they say it's going to prevent a newtown

tragedy. -- let me say one more thing, the violence coming out of hollywood, no president is better equipped to go to hollywood and show leadership. >> i love it when conservatives say the problem is the violence coming out of hollywood not the guns. >> four different points to this solution. >> there are of course a lot of reasons why we have gun violence, on that involves guns in the country. but we have to start somewhere. and reasonable sponl restrictions on the use of americans to bare arms, keeping with the freedoms guaranteed by the second amendment. >> that is not what the bill is about. i don't think the bill goes far enough. there has got to be -- >> universal at gun shows. i'm interested in the filibuster. i know you are saying the full force of the white house. i have to tell you, with

respect, the full force of the obama white house could be a wet noodle. i don't see what the commitment is. >> i think they are looking to break the back of the nra on this, and it -- and if it will -- if it does not happen, there will be a price to pay. >> the nra is not going to get broken on the bill, in fact, they will come out a winner. now, how dare -- this is the worst story, how dare team obama tell us how we should live in retirement? how dare they take our retirement savings, do they forget it's america and it's a free country. we will be back to discuss this real bad story. >> we are not trying to push financial reform because we begrudge success that is fairly earned. i mean, i do think at a certain point you have made enough money.

>> welcome back to the "kudlow report." team obama has some nerve tells free americans how they should live in retirement. he is talking about capping and possibly take your retirement

savings. this is an attack on our freedom. we have our panel. he wrote about this topic this morning, richard and mark simon are with me here on set. all right, ross, let me go to you, i don't get this. let me just -- they are going to put a cap on how much money you can make in retirement because, it's up to them, they say, wait a second, substantially more than is necessary? in other words, if you make more than $200,000 in retirement is substantially more than necessary. who the hell are they to tell americans what they should and should not have in retirement? >> that is exactly what i thought when i heard that. there's so much wrong with the story. first of all, saying that -- they say basically what they are proposing in the budget is that no individual should be able to

have $3 million combined in their personal retirement accounts because it will generate $275,000 of income is enough. the idea that government should be telling us what enough is in retirement -- >> that is what -- enough? i want to know, enough, the idea that the government should tell us enough about anything runs countser to every democratic freedom, we just spent the first half of the show with a fond remembering of margaret thatcher and freedom. this is the exact opposite, who are they to tell us what is enough? retirement, what is enough in life? what is enough if you are a free person or you are a great trader? >> the sound you played going into the break, barack obama said, i think in 2010, at some point i think you have made

enough money. this shows what the guy really, really brooefs. when you say it's not part of a democratic society, it's a small d democratic, large d democratic, this is exactly what they believe. and i think it's a big political mistake for them too. obama talks it about it making, however they would take it, nine billion over a decade, that is nothing in washington money. >> by the way -- >> this is a thing that even moderates will talk about. >> you pay the top tax rate on that, on your ira, do they forget that? you think i'm wrong and obama is right on this i want to hear your thoughts. >> i think you have mischaracterized this pro posal. it's a simple proposal. if you remember the ira, is a retirement device that was intended for lower income and middle income people. as a way that they could have

their own retirement plans because the rich people already had -- because rich people had retirement plans and this is going to return it back to its original intended function listen, you have mitt romney to thank for this. because mitt romney, what did he have in his ira $100 million? was there $100 million in the ira he had? >> who the hell cares? thises america. i have bright guy -- >> hi, kay. >> hello. >> he is now telling me it's okay for the state, for the government to tell us how much we can and can't make in retirement and hand how we are supposed to live. i do not buy any of that. >> i want to add two points to what you are saying. number one, remember that we

used to have pensions that were the majority of the working people in our country had. we don't have pensions anymore. corporations don't give pensions. they give the opportunity for iras. for 401ks. now, you have to save for your retirement security. workers have to save and people who are in the higher levels and the lower levels have to save. and what do we have in america? we have the lowest savings rate of any civilized, industrialized country in the world. >> this is an attack on savings and investment and capital formation. that's what this is. >> this is going to be eevaporated by this president who i am afraid is trying level society. >> you are fighting this. they are going make life easy for you. under the current system, you have to decide, they will tell you what size soda you can drink

and what you will size. >> everybody,s in the mike bloomberg version of savings. >> if we could get the economy back to 4% growth we would have savings. >> this is so anti-growth. >> let's not, i mean, we have sew mischaracterized this proposal to make it comical. >> the only thing that -- the only thing -- no, no, no listen, the only thing -- the only thing the proposal does is it caps the amount of money you can have tax free in an ira. >> who is paying tax on that first dollar? >> you pay the taxes on the first dollar and you pay taxes on the last dollar. >> larry. it's an incentive. >> listen, listen, and it's going to generate -- no, listen -- >> you are such a bright guy. how could you turn on capitalism the way you are. i'm stunned. >> i think it's a great proposal

and i had will return iras to the original intention. >> i would like to where the amount of $3 million came up. >> tell me this is not going to the happen kay bailey hitchison? >> it's not going to happen. we have so little incentive to save in the country. it's not tax free, you pay taxes on it when you take it out. we need to have it more open. i would have no limbs whatsoever and then tax it when you take it out, that's fair. >> how are you talking. ross, great column, we appreciate it very much, we will bird dog this story. coming up, probably the most disturbing trend in the economy, more and more people dropping out of the labor force and here is the big reason why, lots of those folks are findings a living wage while living on social security/disability. i don't want to be a meany here, but i'm just telling you this is

having a bad effect on the size of the labor force and economic growth and the whole story is not good. stay with us,h more on the disability insurance problem.

>> bad factoid, more people are on disability insurance than in the labor force. if the jobs don't grow, the labor cannot grow. that is why government dependency has grown. we have kay bailey hutchison with us, and look, we have talked about the huge increase and the number of people of the expenses on disability insurance. but the key point is this, if you do not have a larger labor force for whatever reason, you cannot grow the economy. the one is defeating the other. the disability insurance generosity is taking down the growth. >> unintended consequences.

the economy is growing because of a smaller labor force. we are making sure the growth will happen by extending benefits. the decline in labor force is because of the expansion in the disability benefits. once you are on, you don't leave. you are on it forever. >> i don't want to be a meany here. i will go to richard here. i do not want to be a meany. i understand you want to help people, i'm all for the safety net. alls i'm saying is, when you look at the disability insurance thing and you add the to that unemployment compensation and food stamps and all of that. what ever the best of motives are, it's keeping the labor force flat. productivity times the growth of the labor force equals gdp, if the jobs don't rise, the economy can't rise.

we need people. we are not getting them. they are going the wrong way. >> the truth is all of the people on disability and unemployment would rather be working. the people on disability are disabled in some way or the other. and the legislature or the congress have decided that they qualify for the benefits. you know, i don't know what you are complaining about. >> half of those people, getting disability, they are suffering from things like back pain or mood disorder, and they could work but we don't know that because we have a program that publishes the benefits. >> i don't want to be a meany. if they are disabled, they are disabled. but you have law firms saying now representing -- they are part of the problem. so, this is all stacked against the taxpayer and even worse the

economy. if the labor force doesn't expand, kay, then we can't grow, it's that simple. >> well, i think you are making the growth point and on the other side, the entitlement side, i was alarmed to learn that the disability trust fund runs out in 2016. so you will have to supplement it with general revenue, it's an entitlement if you do not change the definition of disabled. and the second thing that i thought was alarming is that over 5% of our workforce between the ages of 25 and 65 are now on disability. so, i think you want to, as you said, you want to make sure that the people who are disabled have that safety net. everyone agrees with that. but if people are staying on it permanently, and now more of the younger generation are staying on it permanently, maybe for

causes that are not true disabilities, then you have to look at the requirements. >> kay makes a reasonable point, how do we know that? >> $100 billion -- >> sometimes, look, sometimes with the best intentions, we want to help people who are disabled, but it becomes a poverty trap and it stops the job force from growing. it's not the fact that there are no jobs. the people are not there to take the jobs. they are all on disability. we have to figure it out on a fair and just way. >> i got to go. >> let the companies pay the first year. they will police it better. >> that's a good point, maybe that's the best way to do it. >> very interesting. >> thank you, as always kay, it's great to see you. now we will go back to the top story of the gay. we lost one of the most stead fast defenders of freedom and free market capitalism and the prosperity that it brings,

margaret thatcher transformed the over unionized and over regulated and socialist dominated great britain. the question is, is her free market leadership, it made her one of the people of the time or are people forgetting all about her. we will talk in a moment to one of her closest aids. >> to those waiting for that favorite media catch phrase, the yo u-turn, i have only one thing to say, you turn if you want to. the lady is not for turning.

>> my next guest, true thatcher supporter. he is the author of "the president, the pope and the piem minister." he was the principal author of the conservative manifesto, i should add he was my boss when he was editor of the "national review" and i was a lowly senior economics writer. it's great to see you. two points i want ask you, both as an insider and on outsider. number one, as mark stein wrote

today, did margaret thatcher stop the decline of great britain and did she restore the idea of freedom and free markets in britain? >> they did both, she did defeat it reverse it. ten years after coming into power, and she came into power just after the winter of discontent, where strikes were -- the hospital patients were being turned away by picketts. rubbish was piling up. ten years after that, britain was the forth largest economy in the world and that was the result of her policies. so she did reverse the decline,decline, i have to say, that was a pause, rather than an end, because we seem to be going back into the decli declineism again. >> back to free markets and

freedom. you have heard me say this a million times, it looks to me like the whole world, jon, is somehow returning to big government spending. and that never worked. and thatcher over through that and to a large extent reagan over threw. is big government back and thatcher-ism in decline? >> it's not in decline, but it's in abayance, the leadership of the conservative parties in these countries and in other countries, is timid, they were shocked. amazed. out by what happened in 19 -- sorry, 2007, 2008, by the financial crisis. you were disappointed by it, larry, but you were not surprised, because you understand how that kind of thing can happen. i think they had a naive

understanding of it. they did not recognize or trace the way that the state had helped promote that failure. >> i wish we had more time. all i will say, it's a great time to promote the legacy alive. thank you, we appreciate it. that is it for this evening's show. free markets and freedom. keep it alive, folks. it's monday. a brand new start.

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