yes, this is good, we learn from the charitable trust. i promise to find more money for you right here on "mad money." i'm jim cramer. i'm see you tomorrow. ♪ the big story tonight, president obama is weighing into the irs controversy. he just finished a live address at the white house where he announced the resignation of the acting chief of the irs. it was a something i called for him to do moments before it happened. anyway, ynbc's own ayman javers joins us from capitol hill. what else did the president say and good evening to you? >> good evening, larry. as you say within the past couple of minutes, we got a letter jack lew sent.

he said the inspector general's report yesterday created an urgent need to respore public trust and confidence into the irs by installing new leadership. while i respect your loyal service at the irs, i find it necessary at this time to accept your resignation. it's a response to this situation of the irs agents in cincinnati and elsewhere looking into right wing groups, scrutinizing them in a way they were not scrutinizing left wing groups. the president had a chance to come out before cameras today. he issued a written statement yesterday. just within the past hour or so we saw him in the east room, a formal setting underscoring the seriousness of this, announcing the resignation of miller, raising the emotional level of all of this for the president take a listen. >> the misconduct that it uncovered is inexcusable.

it's inexcusable and americans are right to be angry about i. i am angry about it. i will not tolerate this type of behavior in any agency, especially the irs, given the power it has and the reach it has in all of our lives. and as i said earlier, it should not matter what political stripe you are from. the fact of the matter is, is that the irs has to operate with absolute integrity. >> now, larry, we know a battalion of capitol hill committees will be holding hearings on this issue going into next week, starting later this week, a range of physicals from this scandal are going to be coming up to capitol hill to testify about it. we will learn a lot more details in the coming days here, clearly, this is a scandal that the white house doesn't want to e'right now or at any time really. the irs is an entity that touches every american as you heard the american say there. this is something the white

house has got to be concerned about because of its ability to reach into the living rooms of most americans who say, hey, wait a second, what's going on at the irs, larry. >> all right. not to speak, in fact the irs will allegedly run obamacare. ayman javers, thank you for your reporting. now, folks, who better to ask for this than an irs commissioner, he served in the irs in 2003 to 2007. joining me contributor from the american enterprise institute and we welcome back cnbc's rick santelli. rick santelli, they have to fill a spot now, new acting director or whatever. the argument being made around washington and in the white house is that this was a management problem, not a political problem. is that plausible to you? >> no. it's not plausible to me at all. now, i don't want to get ahead of the facts. of course, we all want it to be

about the facts. i like your notion of how the white house should get those fact, not necessarily by a coordinated effort by the head of the treasury jack lew. in the end, two issues are important to me. who had the motivation and what benefits? some type of mid-management person had no benefits and no motivation in my opinion to defacto defund the political voice. this is a political issue. whether it's goes up higher to the white house, i don't know, but i certainly think that any american who is honest and looks at things objectively, that has to be one of the first issues that pops into their brain. >> in effect, rick santelli, you talk about defunding the tea party, you are essentially saying that what the irs did is they tried to take the tea party out of the 2012 presidential election and in some sense they succeeded. that seems to be the politics here? >> absolutely. by defacto defunding, we simply

mean when you put up the hurdles so people can send you donations so you can get your message out, whatever that message is, in america, nobody should tell you what the message ought to be. it's whatever you want it to be. that voice was never heard and it makes no sense that a mid-level person in cincinnati would make a decision like that. how would they benefit? in life, things are usually simple and common sense usually wins out in the end. >> let me go to mark eaverson, a farmer director. i know you will not pass judgment on anybody. i want to ask you, why isn't the president going further? the irs is our main agency, our most tax collection agency. it will run obamacare. it's a huge thing for this country. doesn't it need a new acting director? the fbi is coming in. doesn't it need some kind of special council to run this investigation? because there is corruption here, that corruption starts at

the very top where the principals lied to congressment they knew about these attacks on the tea party for quite some time. do we feed a special counsel? do we need an acting irs director? >> larry, let me start out by saying how saddened i am by all of this the irs, as you know, i was there fourers 82. i had nothing but the highest respect for the agency. it doesn't get to choose what it works on. in my experience, the people do their level best to qucall it impartially and not cross lines. that having been said, what has been done here is clearly ene enexoowe inexcruise enexcusable. the job has been opened since showman left in november. that's a long time not to have a permanent commissioner. so it needs to do that and that is important. as you say, they need to get a

new acting commissioner in there quickly, but i don't think it's appropriate to say at this time there was a plitization -- po politicization. facts will come out. >> mark with all due respect. i appreciate your institutional loyalty, the fact remains that the people at the highest level lied to congress on any number of occasions. that's all going to come out in these oversight hearings. in other words, you need a tloe thorough going house cleaning of the irs. you have to start at the top, go down bottom. you have to go into the middle. they're now saying 500 applications were delayed because of this. that's the latest counsel . it's not just political people. >> there are two or three things here. there is the processing of the application, themselves. that was done at one level. then there is the question of the communication of congress.

clearly, the i.g. report indicates that that was badly bungled. inexcusably so. larry, you may remember this, it was quite controversial in the 2000 election cycle. we worked with charity, we got criticism for it. the same i.g. went in, took a look and said it was balanced. we had actually more complaints about conservative groups that we were looking at. remember, we were the bush administration, if you will. this can be done correctly. it wasn't done correctly t. second question about how the leaders of the service handled it, yes, that has to be thoroughly aired. obviously, i always fell, any commissioner feels that you've got to communicate candidly with congress. the time lines here are disturbing. >> right. that's the thing. there is a lot of evidence about that. jim, welcome back. look, there is already an argument between the i.g. report and the irs, itself. the irs says the key date was

august 4th, 2011. it was there where department heads, who later denied they knew, denied of the shenanigans going on. the i.g. report says the general counsel of the irs was in that meeting. now the irs says, no, it wasn't. if he were in that meeting, he reports up to the general counsel of the treasury department, which can go into the general counsel of the white house. that's the leaping over the fence that people want to know about. your take. >> listen, this is one of the biggest scandals in american history. into the teeth of a very heated election. we have the government suppressing political dissent. what the president announced today was one guy fired. we need to decapitate that organization. bring in a whole new group of people. what else did he announce? the treasury is going to investigate basically itself? that's with jack lew? you need a special counsel there -- council there to investigate this. i think the president's tone was

better. that's fantastic. sfoors the substance of what he -- as far as the substance of what he said, he did as little as saying, gee, i'm taking this seriously. >> rick santelli, i want to ask you now, will this irsb fiasco, will this rejuvenate the tea party? will this cause a re-awakening? you were one of the founders of the tea party, god bless. do you think we will see more of it now? >> well, i don't know that we need to use the word rejuvenate. if it was that weakened, why would so many people have put their careers on the line to shut them out of the dialogue? i think what this does is, it does give an extra turbo tlus to the tlus thrust. i think it makes it stronger. don't underestimate how strong it has been, otherwise, we wouldn't be here having this discussion about the irs.

>> do you agree with what jimmy said, in effect, having the new treasury jack lew. the irs reports, it's an independent agency, it runs through the treasury, having political appointees, they're all political appointees at the treasury, trying to clean house for guys doing politics at the irs to me doesn't make a lot of sense. i think that's what you are imp implying. that's why i think you have to have a third counsel, otherwise, the house cleaning of the political bad apples will never occur. >> perception, perception, perception, especially considering how difficult and expensive the rollout to obamacare is. you and i are our varies shows talk about they are ten forcer of obamacare. if we don't make this investigation nonpartisan and take all te apointees and all the special cabinet personnel out of this equation, i don't think anything that is arrived at would be conclusive and

convincing to the american public if the white house and close members of the campaign have nothing to hide, they should all throw their hat in at being investigated and being cleared. >> listen, this is like the bureau of standards an measures or something. listen, this is the irs, which as you have been saying, somehow, people haven't quite picked up on it. we are about to immensely magnify the scope and power of an organization, which, frankly, is in complete chaos, really, just months before obamacare kicks in. this needs to move fast. they need to bring in a new team to investigate this and saying, listen, i got jack lew on the case. >> mr. everson, i'll give you the last word as a former irs commissioner, how long do you think they need to clean up the irs? it's supposed to run obamacare, they're not geared up for. that they can't do what they're supposed to do. how long? can this get done,?

let's say 90 days? 120 days? >> yeah, i think it can get done larry. the president needs to move expeditiously to get new leadership, a if you commissioner. the congress and other investigators, including the justice department. you got a criminal probe now hanging over the agency. that's a very serious matter in and of itself. we got to get all the behind us and have a fresh start. as is indicated, the afford ashl care act is a huge heavy lift for the agency. >> all right. 19,000 nor -- more employees. now, folks, this is not a victimless crime. we will ask two tea party leaders what happened to them and what they plan to do about it. later on, you didn't think the stock rally was taking a break? i say fundamental ams are still good, more earning, a good fed, lots of growth policyles coming on. if you details on the if you

record highs. please stay with us. as always, don't forget, free market capitalism is the best path to capitalism. free market capitalism works only with the rule of law and integrity. i'm kudlow, we'll be right back. .

. >> now i've made some jokes about the president this evening, i'm looking forward to my audit. [ laughter ] it's coming. i know, sir, it's coming. >> all right. it was just a joke, but now we know it dock true. that was late night comedienne conan o'brien from the white house correspondent dinner, not much more than a week ago. let's discuss what it was like for the victims in this story. we bring in jennifer ste fa no an bill hennesee. were you a co-founder? >> i worked for americans for prosperity. when this started unfolding, i started with the tea party. >> jennifer, what kind of harassment did they get? i have a lawnedry list of

things. you tell me, what kind of harassment? >> when i was calling other groups to ask how i file with the irs, it was coming back to me they were asking for personal information, personal facebook pages the personal nature of tear relationship with political candidates and politicians, the list of their donor, e-mails, rallys. i went to the irs, it is true, i have to turn this over if i start a tea party group? yes, it was true. if you remember, we had to sign sworn statements if we omitted anything, we could be put if jail. i was a pregnant stay at home mother at the time. i couldn't risk that. >> you heard what jennifer said, i was compiling notes, besides asking for donor list, they want the people participating at events, colmes of speeches, training manuals for the group. they want to know what books you read. is that your experience, too, bill? by the way, what books have you read? just kidding. was that your experience? >> yes, we heard that story, not

from the st. louis tea party. our application has been sitting on someone's desk two years now. we haven't gotten anything from them. we operate as if we are a 501(c)(4). i assume we will be granted that status, but we're getting nothing. that gives us a big problem, larry, because we don't want to go out and do too much fundraising. we raised enough money to get by to run our websites, to run our little events every month. and an occasional ramallys. -- rallys. it's dampened us to form an organization. >> what you are saying is what rick santelli said a few moments ago, the attacks and stalling questions, what did i see, if richmond, virginia, they asked one tea party group 53 questions for a response. so this, in effect, keeps your donors away and defunds the tea party. santelli was right? >> it absolutely does. it absolutely does.

you know what else, it keeps the tea party leaders tied up doing nonsense bureaucratic paper shuffling when they should be out running their organization. we don't have big steps, a cpa, or a team of lawyers. we have two, three, four, five people on a board of directors who have to do all the work. if they're working with the irs in answering what's on their facebook page and what last bach last book they read, they can't be out on our mission, when you have a powerful government, these things happen. >> any time a rule gets in effect, three years the irs did take the tea party groups and conservative groups out of the 2012 election, if you had to wait three years, if you filed at something new fwent 10 or 2011, you were out of the 2012 election. >> they put them in the cooler. >> that's right. >> for that amount of time. what we found out today was that there was a group, same thing

happened, delay. delay. they went out and changed their name to some sort of green solution, some sort of you know climate change. they were approved in three weeks. they fast tracked them. so we have fast tracking groups friendly to the president or the president's causes. the other guys put on ice. >> all right. jennifer, what about threats and penalties? the irs is, after all, the irs. i am reading in some accounts there were threats and there were tax auditing threats. did that occur, too? >> sure, of course this was a carry. the idea that somehow you didn't submit all this information it could be considered perjury. what keeps people like me up at night wasn't that i was shut down. i did find a big group like americans for prosperity. but the thing we were fighting all these years, in the president's healthcare law he empowered the very organization going out against this political opposition over the nation's healthcare. they are doing this for your

political views. imagine what they can do to you on your healthcare. >> or no. stay right there. if they continue to do it. if there is no reform in the agency, if they operate politically against conservative groups, that i will continue to operate politically against obamacare. if people don't want to play or joan up at obamacare, if there are dispute, waivers, the irs becomes a political body all to itself and actually can threaten you, throw you in jail. >> let me give you this little fun fact. what we have to do start income january of 2014, every single american will be required to turn over medical information of themself, of their children to the irst.irs can verify they have qualified insurance. ask the irs where that form is we will have to fill out and turn over to them come january 2014. >> bill hen see, i'm going to guess what jennifer said, not only do you have to give your

physical tax to the irs, you have the turn over your healthcare records, which we learn they have been attacking conservative groups. this could cause an uproar. i ask this of rick santelli. is this going to le mobilize, reener zbiez the -- reenergize the tea party movement? >> yes, i do. it was on the target in 2009, which is obamacare. we were in the streets every night it seemed like if 2009 and in early 2010 fighting this thing. we knew what an intrusion it was going to be. 47 brand-new broad powers for the irs in this thing. as an irs, we used to joke about the incompetency of the irs. we can't joke about. that they are rustlessly efficient in putting down who they consider their political enemies, that is absolutely frightening. >> that is frightening. thank you, jen, you will be back a little bit e later in the show with us. now we have a slew of actually disturbing economic reports today. i'm a bull.

i got to acknowledge the facts. do they mean the recovery is in any trouble? we will get to the bottom of that puzzle next up on "kudlow."

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manufacturing also down, let's talk to joe, the head contributor. look, joe, i'm an optimist like yourself, but the manufacturing numbers were terrible. not only were the manufacturing numbers terrible, but the capital goods part of the manufacturing numbers were terrible after we get a lot of lousy fact i orders. if businesses don't invest in capital goods, joe, we will not sustain the jobts. >> we are not. the do you that were lousy, no question. manufacturing soft. some i believe is related to this sequester. some due to weakness in europe t. economy certainly has not been great. we were treating them more as a soft patch, larry and do believe as we move into the summer months, things will look better. we see claims are low. so i would not get too worried, but there is no question things aren't great. >> well, again, if businesses don't invest, which is the ultimate job creator, you will not get the goose household income. the producer price index plunged

today. part of it was energy. it is basically flat. doesn't this combination of falling manufacturing and a declining producer price inflation rate. doesn't this tell the feds to keep doing, pouring the.in. they will not change their policy. >> not yet, larry. the fed is as you focus really on the labor market. if you look at the core cpi or cleveland fed median cpi, core inflation is right around 2%. if we maintain the 200,000 or so job pace we had so far year-to-date on employment, that continues through the summer and your core rate of inflation is at 2. i believes larry, you will see the feds start to taper sooner tan what's in the market right now. so they're not tightening, but i don't think they're going to continue with this precedent that 85 billion purchases. >> a lot of smart guys on wall street expect the feds to tighten soon. do you realize that? the numbers slow down. >> okay. >> it's not really tightening,

slow down their bond purchases. >> listen, if they're looking at the labor market. you know, i think the labor market is in shambles. we can look at that 6.5% threshold, which we know is a phony number. we know more accurate, it is closer to 9%. we have this huge job gap, which is being really very slowly filled, if at all, by the current job growth. we have that. i think the fed needs to keep on doing what it's doing. the mere fact that inflation have stayed anchored, despite, really, inflation which has been 1.5%, 1.7%. we see the wholesale prices. i think the fed needs to keep doing what it is doing betterment i would not ease off right now. >> joe, what's the big deal? i know you are making a big deal about the fact that the budget deficit's share is coming down, okay. i'll buy that, 10% to 4%. you are still left with what a $640 billion did you get deficit

and the congressional budget office says that's going to go up in the years, why are you so keen in i read your notes and you are jumping for joy about this $640 billion budget deficit. >> i'm not jumping for joy. i would say, larry, that what it will do, before this fiscal year is over, we're going to mod right the sequester a little more. so what little drag we have, we will have even less. in terms of the fed, it makes the qe that much more cumbersome. remember, another thing, too, on the tapering, the fed, there are some issues of financial stability. spreads are getting awfully compressed. the fed is effectively become the entire mortgage market. i don't believe this can continue in perpetuity. to the extent that treasury financing looks a lot better, implicitly, what the fed is doing is even larger now, their relative size is bigger. >> i get that. you know what, the fed in perpetuity are saying, boy, do what you are doing? that's your point to me. i think that's exactly right. joe, thanks very much for the update. now, here's a question.

are all of the scandals facing team obama destroying the president's second term agenda? are deals on deficits, gun, you name it? are they all going to be dead in the water? we will discuss that next up on "the kudlow report." .

i

. >> is it possible for washington to actually make a deal on the bug now or immigration or anything else in the midst of all tease scandals, republicans still have powerful incentive to strike a deal. i don't know. maybe. here now is former chief economist to vice president biden, jimmy p is here with me on the set. i tell you what, jared, whether you agree with anybody or not on so-called scandals, the republicans are going to use oversight and investigation committees to embarrass the president and try to get to the bottom of some of these issues, including the irs and benghazi and the a.p. phone tapping. you know that, i know that. i don't see in that environment going to 2014, how you make deals? >> i kind of agree. i think john was being interesting as usual and very rational as usual and we're not exactly playing in a rational world right now. i think darryl issa was already pumped up. he's one of the lean oversight

regulators. ese going to be even more so with this irs scandal that you guys have been talking about. so i already, by the way, i already was skeptical about whether there was the oxygen in the air for something like a grand bargain, a grand bargain means the democrats swallow entitlement cuts, the republicans accept tax increases. they have been, the republicans have not budged on their position with no tax increases. so i think we were already in a very tough position. now it's even tougher. >> just one point on this, even under the best of circumstances, it would be hard to get a budget deal as jared is pointing out because of the split ween entitlements, but this is going to be a rancorous congress than usual. the gop smells blood on these investigative committees and so forth. they're looking to 2014. >> absolutely. why would you want to make a humongous deal. 2014 would look like 2010. it could be a repeat a. huge

republican landslide. maybe they get the senate back. all of a sudden they go into negotiations with the president, maybe a larger house majority and perhaps a majority in the senate. if you are going to cut a deal, that's when you cut a deal, not now. >> jared, i think the only thing worse out there than taxes and the irs is taxes the irs and the irs running obamacare. now, obamacare becomes public enemy no. 1 and this is a repeat of 2010. >> today the house had their 37th vote to appeal obamacare. that's a colossal way of time. they asked the ceo to score it for them t.ceo said, no thanks, we have work to do. >> the problem is, if you have a corrupt irs running it, that's going to anger everybody. this thing is only going to spread. >> look, i have been with most of what you guys have been saying about the irs scandal throughout the show, most of it, not all of it. this part seems a little over the top to me.

i think one of the problems the irs faces here, everything you said i've agreed with in terms of the targeting, completely unacceptable. i'm with the president 100% on that, by the way, i'm with you on a special counsel. i think you have a great point there. one of the problems here is that the rules gompg 501(c)(4)s are vague. they're much less vague for the affordable care. i'm less worried about that tan you are. >> the problem is the garden is filled with people like themself, honest, forthright, serious people. i wish they were. they're not at all like jared bernstein, do you want a budget deal at this point? do you want one? >> i thought they don't care about the deficit. we've stabilized it for a decade, i hear. >> it's coming down, jerry. it's dropping to 4% gdp. >> spend, spend, spend, hooray, hooray. >> by the way, it's 2.1% in 2014. >> it's never supposed to be that low again. >> so, right, look, as far as

the -- i want a budget in the following sense, sloging through all these continuing resolutions where you kind of do everything by patchwork and you run into cliffs an debt ceilings, it's far from optimal for the real economy. that said, i think you got a good point this is not a group that will put together coherent budget. they can't come together with regular aura and have a smooth trajectory. >> i'm going to make a forecast here. the gop message with these investigations, whether it's the irs or benghazi or the secret wiretapping of the phone records for the a.p., these are the evils of big government and the evils of government overreach. jared, you will hear this term, government overreach, time and time again. >> i don't disagree. >> the republicans have finally found a message. it may not be the greatest. this is what they will use. >> jimmy made point a minute

ago, the reason this scandal is so depressing to people like me is i fully do believe, you probably agree, we need a good, strong functional accountable honest government. and when things like this happen. >> even though it's smaller. >> we can argue. >> i'd be much happier. >> we're not going to agree. we're going to disagree on the size, we do agree on all of those -- >> we should be honest. that's a real problem. >> if we had a million jared bernsteins in the government, we would all be in better shape. >> that's a scary thought. >> thank you. i appreciate it. now, we got to get to this continuing stockmarket rally. i still believe it's raechlt i still believe -- it's real. i believe the fundamental apples are real. i believe the profits are the mother's milk of stocks. we are hitting more on the bull run next up on "kudlow." .

>> another record breaking day for stocks, all time highs for the dow and the s&p t. dow went up 60 points. nasdaq up 9 points, hitting a 12.5 year high. take a look at dow trance ports, an all-time high of 23% year-to-date. here is michael cogino and lee

munson keefe investment officer of portfolio llc, author of "rigged money." what does it mean of transportation, tell the viewers, the transportation index has been hot as a pistol. what does that mean in terms of the broader market? >> good to see you again, larry. i think it's a positive the transports have been doing fantastic, as dow theorists know, you want to see the dow jones moving along with the transports. so it's a positive, given the tail winds of the federal reserve and the easy money, given that corporate earnings have held up through the latest quarter, you pes on the subpoena 500 probably around 14-15, depending on where you cut earning, investors looking for yield in other place besides the bond market, you have a lot of reasons to be in stocks. the question is whether there is too many great reasons to be in

stocks and having investments forgotten about. >> lee munson, are you as optimistic as mycogy as pi-- as cogino. >> what we haveb doing with ve slowly rebalancing towards our normal allocation of stock. so instead of trying to cash out or keep cash on the sidelines as each month goes by, we take that little bit of profit. we put it to the side. the profits are real. so what happens with people is they'll either over leverage, larry, or never over balance, you sit on 30-40% in cash, that quite frankly people thought was happening 10% ago. if you have new money to commit, put some together today.

you might want to add it. it's slow going forward. don't take a big clumpg of your portfolio off the table to try to time i. again, profits are real. >> mike, cogino, if you flip over the price earnings ratio, you get a yield, right? you got a stockmarket, forward looking yield, that yield is, i don't know, something like 6.5%, i'm going to say, depending on your estimate. a 6.5% stockmarket yield is high historically. it's higher than what you will get with investment grade bonds, it's a lot higher than you will get with treasury bills with treasury bonn, so how compeling is that yield case for stocks? >> well, it is. and i think the big issue is corporate earnings. if corporate earnings fall off, i mean, right now, i think the stockmarket is outperforming the u.s. economy. i don't even believe the u.s. economy is growing at 2.r5%. i think it's somewhere we saw before. i think the stockmarket has

gotten ahead of the u.s. department and things other than economic performance. my sphere at some point the two shall meet. when they do, that could be a reason for the stockmarket to pull back. >> when is that? i want to know. give me your joumt u judgment. at some point, the two shall meen meet. when is that going to happen? how big is that pullback going to be? >> i think, larry, it's when you start to see corporate earnings go the other way. i mean, this latest quarter you had corporate earnings generally meeting or beating expectations. you had revenue outlooks and top growth forecasts very mixed. when you mix in the slowing manufacturing numbers, the ppi number today, there is enough negative statistics to ho the underlying economy may not be good enough in the longer term. as lee mentioned as an investor, you want to keep that in the back of your head and maybe take

profits along the way and not get too excited. >> lee munson, i don't think earnings are going to stop rising for several por yeamore . i don't know why the earnings have to go down. in fact the rest of the world may be coming up. asia may be coming up, for example. >> well, i mean, look at japan. japan is already, the promise is already there, they're going to fight inflation, they're fighting liquidity. we are seeing asia has taken the hit in terms of china as far as their valuation. they're starting to slow down. they're starting to produce a lot of profits. look at europe. europe might be slow. i might not want to have a lot in it right now. it is still producing billions if -- in profits. i'm still bullish on the market. profits are still going up, you think two years, there are some

people out there, myself included, that think the cycle could last another three or four years. >> it may. >> i disagree that it's below -- >> this may be a long cycle. all right. i got to get out of here. lee munson, thank you very much. lee, thank you very much. mike cogino, we appreciate it. now, we know the tea party has been attacked and abused by the irs, does that mean it will simply fight harder from now on. i'm talking about obamacare and tax reform and overspending, big government, tea party leader jennifer stefano and jared bernstein, they will rejoin us, they will debate it all. up next is the tea party in renaissance. y how they want. with scottrade's online banking, .

all right. irs scandals, obamacare, they embolden the tea party in 2014 and beyond. we are back now with cnbc contributors. jennifer, let me go to this thing we were talking about before. the government overreach, in other words, you got all these government agencies with scandals. and that's becoming a big them. walk is going to be chalk number of oversight and investigations. so the government ain't working. is that a tea party issue? >> 83, that should be an every american issue. the point i have been making. the point my organization is making is this. if the government grows this big. the individual is limited or diminished. when that happens, corruption

and the things we are seeing happening now, abuse are bound to happen. liberals and left wingers always think they will make new rules an laws and wipe out human nature. you are not changing human nature. so the way to prevent government abuse is not to have committees and oversights in investigation, it is to put government in its proper place to make it small, to find it. and to allow the individual to be the powerful one. >> jared, as much as i'd like to see a couple million jared bernsteins in the government, actually, i'd like to cut you down to a million. that would give me the limited government that i think would stop all tease scandals. >> look, you, were calling for precisely the investigations that jennifer is saying we don't want. i understand the point that we certainly don't want the kind of intrusion and the targeting that we saw. no one, including the president considers that acceptable. but at the end of the day, as i understand it, there are two agency, not all kind of agencies, there is the state department with benefit benghazi, that's two agencies

too many. let keep this in perspective. >> you had scandals at the department of energy, with the subsidys gone bad. you have sad scandals at the national department of labor relations. >> not like this. >> it seems to be fair, jennifer, whether mr. obama is to blame for this i know you are not a support, jared; i am generally not an obama supporter either. the size and scope of government leads to these kind of krungss and malfeasance, that's just the way the game works, there is no discipline on it. >> i appreciate what jared is saying. he forget to mention the department of justice, phone tapping, the department of health, kathleen sebelius, campaigning and raising money from the very industry that she now oversees. the fact of the matter is, when government becomes so big, so power. , so large, there is not any aegs investigation, no law, no rule that can you make to stop i. it is going to continue,

garrett, i'm one of the little guy, i get to speak up here. i know you live in government. i live in my home. this is from the kitchen table. you have to hear me out t. way you, on the left, have built government has infringed on the rights of individuals. i was a pregnant stay at home mother. now i'm in an organization like americans for prosperity where i can help those people. i am telling you, there are many people without a voice. the single reason is the government. it doesn't matter what the american people. that's not why we're here. >> jennifer, if you want to get anywhere with the goals you suggested, 'are venerablet goals, then you have to bring the heat down and listen, listen. we have to have a dialogue here. it can't be one person shouting at another. i take what you are saying. that makes a lot of sense. we also need probably a historian in here. i am not so sure that the larger government is associated with more scandals than a smaller government. the issue is less size and more

about power grabs an overreaching. that's the problem. we've had terrible, terrible scandals throughout our history when the government was far smaller than it is today. >> jared, i admit, we had scandals in the 1920, but it was a lot easier to clean them up and i think the propensity for scandals is a lot smaller with a smaller government. jennifer, i want to go back to you, to the tea party. by the way, you make a good point, governor sebelius, developing her own slush fund, shaking down corporations to fix up the healthcare markets, which are probably unfixable. but, how will the tea party work? in other words, i don't think we heard that much from them in 2012 for whatever lrks they be out in force in 2014 the way it was in twrent 10 in that's a key question. >> i think a lot of people that don't associate with the tea party have joined this movement in limiting the government.

look, people like me, we were on the ground in wisconsin. we were the ones that helped to show the reforms that governor walker did were the right reforms. we were on the ground in michigan when we got right to work path. >> you are mad at the irs. the irs teams e seems to have gone head-on attacking conservative groups. will the irs anger motivate and get the tea party moving again? >> yes. i think it will anger a lot of americans who didn't consider themselves political, didn't like the tea party, now recognize the policies we were fighting for are the very things that would have prevented this abuse in the first place. i think that. it's not motivating one group of individual, how they identify themselves or what their political persuasion is, that all americans fight for the fundamental freedom. >> jared bernstein the cavalry is on the way. the last word. >> look, i think are you probably right. americans hate to see the big guy going after the little guy like this. this should help the tea party. where i think we may differ is jennifer is talking very much in

philosophic am terms. when you get down to the policy, what does the tea party stand for? do you want to cut social security and medicare. if you do, i think you do, the nation is not with you. >> we will have to leave it there. jared bernstein, thank you, my friend. jennifer stefan no, first time in the show, terrific stuff. that's for tonight's show, thanks for watching. we will have much more on this irs scandal tomorrow evening. i'm larry kudlow. please come back tomorrow.

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