that people got fed up, except for recommended last week on delivering alpha. once again, delivering alpha delivered beyond anybody's dreams. qualcomm goes higher and facebook goes higher, if interest rates stay the same tomorrow, we go higher. there's always a bull market somewhere, i promise to try to find it for you here >> president obama puts the economy front and center in what was called a major speech today, but no pro growth tax reform, or or keystone pipeline discussions. federal prosecutors are close to indicting the entire firm sac capital for alleged criminal conspiracy, is the whole firm riddled with criminal

conspiracy. and facebook knocks it out on of the park. it may help tomorrow's opening, all these stories and more on the kudlow report starting right now. first up tonight, more temporary that be permanent job creation, you would think the president would come out with a strong pro growth plan. take a listen, this is not what we wanted to hear. >> even though the businesses are creating more jobs and have broken record profits, nearly all the income gains in the past few years have continued to flow to the top 1%. the average ceo has gotten a raise of nearly 40% since 20020. >> all right, well, i have to ask, where is the growth message

mr. president? where is it, where is the rising tide that is going to lift all boats? let's talk, we have cnbc contributor robert reich, he is the author of after shock and douglas eken, a former congressional budget office director. do you hear a growth message that would lift this economy from less than 2% to something like 3% or better? >> no, larry, frankly i did not, the speech did not have anything that broke new ground, the policies that have been in place for years now are not doing the job. and when he laid out the five visions for things that would help the middle class going forward, the things he is going to talk about on this economic speech tour, those five things are big government in every respect and so, this was more of the same, and i do not think it will change the dialog a bit. >> you know, robert reich, let

me read this, it's an important part of the speech. infrastructure, that's an old hold-over, and more wind and solar spending. manufacturing innovation institutes. i did -- i still don't know what the heck that is. manufacturing, student loans, mortgage refinancing. he did have something in there about requirement accounts but i did not get it. the basic point i'm trying make, i hear a lot of spending, i do not hear any incentives for economic growth, that is what is troubling. >> you may be troubled, larry, and my good friend dog may be troubled thmpt is what obama came to office to do this was the principal or the set of principals under which the clinton a administration did well, you invest in your middle class and grow the economy from the middle. what i heard the president say today, something interestingly that he has not had said as much

as today, when so much of the gains go to the top, the large middle class and all those aspiring to join the middle class, do not have enough purchasing power to keep the economy going. he put it explicitly, and i think it's going to be a theme we hear again. >> that is a very static view. this is an interesting chart, let's put it on the screen. the this whole business about the middle class being damaged by the upper class. i have three lines on the chart. the top line is middle income salaries. $25,000 to $75,000. yes, since 1970, the top line is gradually falling. but guess what, the bottom line which is the lower income, $25,000 and less is flat. so you know what that tells me? the middle line, the green line that is $75,000 and over, is rising. tells me that in fact, middle

class is shrinking because they are moving into a higher bracket rather than a lower bracket. and i think that under mines this whole argument robert reich, yorng that what ails the economy at all. >> larry, you know, we can have a statistical brawl that would bore your audience, i do not went to get into that. but let me say, there's a lot of evidence that the median wage is lower than the year 2000. the president eluded to the it today, and a lot of americans just no longer have the capability, which they could do before 2008, and that is to borrow enough to keep themselves afloat and keep them buying. one of the big problems the economy has had is that you have a middle class with medium wages declining and does not have the where with all, should not borrow as they did before, but that means there's not enough customers. the aggregate demand is still a problem, i mean, we crated, the president has presided over an economy that created new jobs

since the depths of the recession. but the jobs have not been paying enough. >> i think the secretary raises a good point. a lot of people talk about the absence of jobs or too many part time jobs. but the missing element is income growth. we have a lower median income than in 2009. the trouble is the president's policies are not solving that problem. there's no supply side anywhere in his vision except in government spending. the government is the only investor in the economy. there's no vision of how entrepreneurs may bring and generate the new jobs and incomes that we need. i do find it disappointing that the administration now five years in, you know, it's fine to try something, experiment, see if it works or not. it has not worked. it's time to stop the targeted policies. stop picking industries that will be winners. and go back to traditional let

the economy grow kinds of of permanent reforms. >> a rising tide lifts all boats. let me mention something that i would have thought pro growth. let's begin with the keystone pipeline? why not go with the keystone pipeline. let's go with the epa's war on coal. which is a huge part of the economy in many tates. those are middle class, high pay jobs. why is isn't he helping there. tax reform, why not corporate tax reform. that would put torque in it. why not reparticiprepatriating l from otherseas. i did not -- from overseas. >> we need the tax reforms no question, but the missing political realism is the notion that he is not from washington and washington has a problem, it's not him.

the problem is simple, if he wants to do the investments that he favors, that secretary reich favors, he can make a principal case in some circumstances, you have to free up the budget room to do it. the only way to do it is to do mandatory spending reforms and the democrats have have kept it off the table. he will not take on his congressional democrats to make the room so he is frozen. >> let me make a point here, i think, doug, you are correct that we have got to be able to afford all of this. but, there are two things that we need to focus on. number one, the deficit is now about half what it was before as a percentage of gdp and as gdp grows it will do better and number two, the yield on a ten-year treasury is low. and cheap to borrow. if we borrow to investment in infrastructure and get all of that deferred maintenance really up to snuff, we will have a more productive economy. it's not debatabldebatable, it'

obvious. >> let's assume that i was aiming just at the middle class. i do not believe in those economics. but let's do it. you have low borrowing rates. suppose i wanted to borrow a couple of hundred billion dollars in order to really substantially slash middle class income tax rates. say the 28% rate, the 25% rate. the 15% rate. let's say i wanted to do that. to me, you are at least giving the people their money back, rather than having the government taking the money, and spending it's unwisely. that is one of the flaws i see in the president's program. he wants the government to do it and i want to private sector to do it. >> we live in a mixed economy, larry. the fact of the matter is, if we want to talk about infrastructure, this is an issue that republicans used to champion. that national highway act was under dwight eisenhower. infrastructure is so poor now to

what it used to be and what it needs to be for the economy of the future. most businesses understand it. it's not a matter of supply side and demand side, it's more of a supply side issue, than a demand side issue, it's a huge problem and the private sector is not going to do it. >> nobody is against infrastructure spending. >> i'm against just spending more money because we have 1 transportation program and they have no national purpose. let's get reform, so we get the returns you are talking about. >> by the way, i think the slow down in federal spending is positive for the whole economy. let's leave it there. we appreciate it they could not get their man, so now they are going for the whole firm. is it fair? isn't this collective punishment? two former federal prosecutors are about to debate, coming up on "the kudlow report." and do not forget, premarket

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>> federal authorities are about to announce indictment of sac capital. is this government, however, doing the right thing here, or are prosecutors ready to ruin the company to get their white whale? let's ask a pair of former federal prosecutors. mitch, i begin with you, they could not get securities fraud against cohen, now they will have a criminal indictment of the whole company, is this the proper thing to do. it is 100% not the proper thing to do. if you cannot go after a c-level executive in the company, under the u.s. attorney's manual, the bible of what you are supposed

to be doing as a federal prosecutor, you should not be going after them. ms. captain ahab and moby dick. >> why are they doing it? >> they -- >> what you said, if they don't have enough for him, they have enough for the company. that's what you are saying is absolutely wrong. >> but you have a company that is a nest of wrong-doers, they could have charged the company when they indictmented ti eed sg or martom a they have horvath, if they don't have enough, i'm shocked they are not going after the main guy. maybe they are just being responsible. they are saying we do not have the evidence there, but we have enough evidence against wrong-doing, insider trading, it's very serious, it's compelling. >> not the whole company. i understand. yes, they have evidence against

the guys. i agree, no problem with that. that is different than saying the whole company is a criminal enterprise. >> you are 100% right, larry. when you are in this situation, you are talking about collective punishment. you are talking about over 1,000 employees, the vast majority of them who have alleged to not have done anything wrong. and it takes very special circumstances, arthur anderson is shall redding the documents in enron, something at that level to go after the company. the idea of going after the company, not in a deferred prosecution agreement, but to kill it, that is something that you should not be doing if you do not have the goods to go after the people at the top level of the company. >> i have found it hard to believe that the department of justice can be accused of doing the wrong thing when they are going to have their day in court, they are going to go after the company, they have repeated over and over and over again serious misconduct, and that goes to the company. >> top, let me tell you --

>> why defer a prosecution agreement and put in a monitor, some person that you know, is affiliated with the government, or former government person that kills the company slowly, let's have it -- >> let me take what you said, if they successfully prosecute this company and don't just kill it by bringing an indictment against it, if they actually convict the family, i will say they did the wrong thing by not going after steve cohen himself, the only way to convict the company is to show that somebody at the top level had the criminal intent and if they can show that they -- >> between steinberg and martoma, they have charged people at the upper levels of the company with misconduct. they have one person that is beneath them that has plead guilty in horvath, they have repeated over and over problems. they cannot not keep saying oops. >> martoma and the enron

scandals. they had him cold, they had him shredding documents. i do not know steve cohen, i have no skin in the game. i just find it odd that they have been pursuing him like the while whale, and the statute of limitations is about to run out, and they cannot charge him, so they go after the whole company. >> they are not a shy group of people, larry. >> but if they cannot get him, why just go after the entire firm? >> because, look, it's not like something happened once, it's not that it happened twice, it has happened three times now, they have two outstanding indictments, you can be in the mail room and your conduct can be attributed to the company. so the gomp is going to actually be criticized on this one, you want to talk about the sec, i'm

with you. but not on this. >> why is the justice department leaking this before it happens? this is another one of the things that gets under my skin. >> i don't know, they should not be doing it and one possible motive is they have two days left on the statute of limitations. they may be trying to put pressure on matiroma. >> you are assuming that the department of justice have leaked this here. there's plenty of prosecutors that like to talk to the press. >> i figured it had to be the u.s. attorney's office. >> let's give the agents, hopefully, and the u.s. attorney's office for the southern district of new york, a bit of a benefit of the doubt that they are not going to violate the rules. >> i'm not against the u.s. agents or the u.s. attorney, i'm just skeptical about closing an entire firm down if you cannot get the top guy. that is what i want to see happen. let's see how it plays out.

mitch, tom, thank you. now, sticking with the legal matters. we have a live report where the unions are not happy. that is coming up on the kudlow report. (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help.

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bankruptcy filing. what does it mean? >> it means the battle will be fought here in federal bankruptcy court. the city of the detroit was founded 312 years ago today, for those that believed what the city needs is a quick restructuring, this is quite the birthday present. the public in the case is allowing the restructuring to go forward. he put on hold all of the challenges that were being mounted by the unions and the pension funds in state court that this bankruptcy filing was illegal in the first place. a spokesman for kevin orr the bankruptcy expert put in place by rick snyder to oversee the bankruptcy said this is a good first step. >> in allows us to move forward. what we cannot have are weeks and weeks and weeks of delays. that is what runs up the cost. everyone in the room was being paid. it runs up the cost the longer we are in court, the longer it's unresolved. >> but the unions say they are going to continue the fight.

they see the bankruptcy filing as an attempt to end run around the city of detroit, and the citizens here as well as around that state constitutional provision protecting employee pensions. >> we have a governor, we have lieutenant governor and a party that said, we do not kir about folks. we care about our agenda. that is not what we are about, in america, we are about people's rights and that is what we are fighting for. >> they will be able to continue that fight in the federal bankruptcy court, including arguing that the filing was illegal in the first place, that will come, another hearing in the case here is scheduled for next week. larry? >> but, scott, if the federal bankruptcy court is ruled what it's ruled that means all these contracts, the union contracts for example, and also the bond investment contracts are rendered null and void, and are liable therefore to be completely restructured, isn't that the way it will work?

>> not quite. the subject still has to decide whether the city was eligible to file bankruptcy in the first place, under federal law, and he also presume ably will look at the state constitutional provision. this is a step, it concentrates everything right here in the federal bankruptcy court, the city can't go ahead and break contracts just yet and not go ahead with the restructuring, what it's done is focus all the battles here. >> thank you very much. now, president obama, again, disparraged the sequester. the evidence is mounting that the sequester and new spending caps are helping the economy. will austin agree? they join us next up on "the kudlow report." when we made our commitment to the gulf, bp had two big goals: help the gulf recover and learn from what happened

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>> welcome back to "the kudlow report." in this half hour, stocks went mostly sideways today, but 66% of earnings report so far have come in above estimates, and even 53% of companies have beaten on revenues. and by the way, facebook beat big and soared in after hours trading. we will get to that in a while.

and conrad black is no longer a major newspaper mogul, but he is a wonderful historian and his new book talks about how america became great, question, does he think america is still on an upward path? he will join us later in the show. >> rather than reduce the deficits with a scalpel, taking out ones that we do not need, and making government more efficient, instead of doing that, we have folks that insisted on leaving in place a meat cleaver called the sequester that has cost jobs, harmed growth and hurt our military it's gutted investments. >> that was president obama bashing the sequester in his economic address today. here is the reality that i have been saying all along. the sequester is like a tax cut, reducing the government burden on the economy.

it is pro growth. in fact, washington's budget caps and spending cuts have in fact put an end to the big government policies that mr. obama loves. so, can we finally agoodbye and good riddence to obama-nomics, we welcome back our panel. arthur, your latest epistle said goodbye and good riddence. why do you say that spending cuts are good for the economy? >> government spending is taxation, we do need taxation, for sure and we need government services, with the spend boom that occurred over the last five or six years it was way out-of-sight and bringing spending down to 23% of gdp, we have a long way to go.

but frankly, it's very good and it's a big tax cut for america and it will lead to increased economic activity. and we can do a lot more, we can cut tax rates too. this is very helpful to the economy. >> big tax cut for the economy, austin? i think you guys are getting the order mixed up. growth leads to less spending because we have the stabilizers that will allow tax revenues to go up. you have to operate out the improvement of government spending as a share of the economy that is coming from growth. i don't think it's causing it, most of the private forecasters are saying that the fiscal drag is more than a full percentage point off of gdp growth this year. and that is where i basically think it is. >> austin, you have got just -- before i go to art. you have two trillion plus in spending cuts. the caps that were put in place in 2011 and the sequester, about which president obama had nothing good to say today in his

speech, in fact he criticized it repeatedly. i will agree with you part of the way, austin, but the cyclical recovery, even though it's slow has reduced spending and increased revenues and deficits. >> true. >> i have to say to you, policy measures are as tight today, in some sense, you will go back to the korean war or world war ii to find this kind of spending reduction. >> i think you are right about that. and what i don't want to happen is, we are in an environment where government pending is, and the austerity is greater than at any time, as art said in his letter, since the he demobilization of world war ii, in an environment like that, when i hear the people in congress saying, we will, they will demand more immediate spending cuts or else they will threaten default or what have you, i think it's crazy. i think, look, with the deficits coming down faster than they have come down, great. let's not go overboard with it,

and for some of these things like in the sequester, they did this in the goofiest least thought through way possible, if we can fix that. i think it's worth fixing. >> let me ask you about next year's economy, a although of economists believe that the economy will pick up in the second half of this year and next year. in fact, ben bernanke thinks that. that is probably why he is going to slow down bond purchases. and austin does not agree wit and the president agrees with him. what is your take, if the spending cuts stay in place, in the sequester stays in place. if they have more spending cuts because of the debt ceiling, will that grow next year's economy faster? >> yes, it will, but let me say, i do agree with austin. the sequester is a meat axe approach, it did not mean we should not cut spending, we should cut it in the least useful programs. that i agree with.

anyone that said, that increase in government spending at this stage will stimulate the economy is crazy. when the republicans try to get better, bigger and more pro growth spending cut, that is perfectly correct of them to do. if they deny it and go through with the debt ceiling, that could be too much. >> that would be too much. >> that would be real dumb. threatening and talking and negotiating about it and doing quid pro quo is great and i think they should. >> your man still has, we are facing tax hikes, we had one tax hike this year and a lot of obama tax hike coming in and regulatory burdens, i want to hear you defend the war against coal and carbon emissions. these things will slow down growth. these things are -- >> i have to cut you off, and i

have to put 5 more things in there, i do not have time to do all of those. >> you are so smart, i have to load them up. >> they were starting, your viewers were starting to shutter, because art and i started the agree on everything, they could not figure out what was going on. >> i had to put a stop to that. >> in this circumstance, i think there's some forms of government spending that don't make sense, and that need to be reformed and cut. but i think there are some kinds of investments that do make sense and investing in the skill base of the workforce and financial aid is deferently one area and the economic infrastructure of the country is another of the areas and you saw on the speech today, the president outlining a contrast visions, one that said, not that the government should lead the recovery, but we should be making the focus the middle class growing the economy not cut taxes and aim it at the high

end to grow the economy. >> all right, art? >> i don't think that is the way i read that speech carefully, austin. i do think he was releasing a government solution. i did not hear him talk about cutting the corporate tax rate to make it the second or tenth highest in the world. or getting rid of the global reach for the corporate tax. or doing the reforms that we both agree on should be done. simpson-bowles would be a wonderful thing to do. there's a lot of immigration reform, better than the senate bill has been that would be spectacular. and that, none of that stuff, none of the pro growth -- >> he did not say anything of that. he did not say anything about tax reform. austin, he did not say anything about immigration. austin, i think properly done, immigration reform, particularly the expansion of visas for the brainiacs and so forth, would be so pro growth, it would be

fabulous. he never mentioned it today, he never mentioned it today. he said it once. that is why i do not think it was a pro-growth speech. and i go back to art laugher. better to go back and cut the size of government. >> that is right. if he is not going to be the instrument of doing it in the right ways, austin as you and i and larry would do it, he is not one of us. and he is not going to do it in a growth fashion, therefore you have to use a meat cleaver every now and then, and stopping spending will force him to make it a more pro growth country. >> austin, i will give you the last word. i like meat cleavers. >> okay, my last word is i think the president's program is pro growth, if you take it as a whole and what he did today was lay down a market that when we come to a debate about the ceiling, he will say, you cannot do what these guys want to do. >> i think the boehner rule will

continue, every nickel you raise the debt, you are going to have to cut spending, more spending cuts, more tax cuts, more economic growth. we can get growth if we stay wit. i got a smile from austin. i don't think that he agrees. >> i think he does agree. >> i'm for growth like lew gyou. >> thank you for coming on the show. we will look at the money next up on "the kudlow report." [ male announcer ] this is the age of knowing what you're made of. why let erectile dysfunction get in your way? talk to your doctor about viagra. ask if your heart is healthy enough for sex. do not take viagra if you take nitrates for chest pain;

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blow-out numbers from facebook, which beat big on earnings and revenues, stocks surged in after hours trading. let's turn to the ace investors. thank you very much, pk, tart with you. facebook was something. what does it mean to you, in terms of facebook but the whole market? >> it's hard for me to take the whole facebook and apply it to the rest of the market. you mentioned other teches and caterpillar, so you see the separation going on. where you see cloud and mobile, that is the new tech. and the old tech, that is mining china based. that is now dieing. i don't know if mobile will have the power to propel the economy forward, like mining did, when we had the super cycle in commodities, that is what the market is interested in right now. one more point on facebook. can they continue to monatize

their tremendous following? >> the idea of the cloud and the mobility factor is uj, there's very little security on the devices we use. i can't understand why people do mobile banking. but it will continue to be good. it will be more applications and security, and we will need more infrastructure and support, everything that we are trying move around and we are going to move productive efficiency. so it's fairly large, is it as big as the pc explosion? probably not. >> all right. brian, let's look at the earnings. 66% of earnings overall have beaten the estimates. >> yep. >> 53% of revenues. not nearly as good. at this point, with a third of the companies reporting, what does it tell you? >> what you said was the revenues are not beating that well and we are continuing to be

in the buy-back bubble if you will. j.p. morgan and toe bias has done well on buy-backs. about 60% of the earnings growth has been by reduced share counts. and that is fine and the market will continue to go that way. we are starting to bump up against the levels where the companies do not have cash flow, 71% of the catch flow in the s&p 500 is going toward buy-backs. exxon mobile is going to 100% of their cash flow to buy-backs. >> that why you are a bear? >> you cannot leverage up the buy-backs nip, rates go higher and you lose the earnings. >> you agree with that? >> i think you see the companies raise dividends, capital spending and the buy-back program. you have seen it across a wide spectrum and i agree that in the sense, cheap money has given them the ability to do all these things and relatively robust

profits. so they are generating cash internally as well. you know, i think, we have to be a little carol and say, that is what is happening on the revenue side is you are getting currency hurting you and some of the international markets that people had much higher hopes for in emerging economies in europe. the u.s. is showing, a much better trend, and people talk about defense of cyclicals, we talk about domestics as a feature. >> i want to raise another point. a note today was put out, ridesing long-term interest rates and a steepening yield curve is bullish for markets. people are saying it will crush the recover. he is saying take a look at the history, rising rates are a good signal. >> i generally agree if it a good signal when you are talking about an economy that is gaining traction. we can look through it, through

credit conditions, we can look at it in terms of hiring intentions, across the board. i will buy into that, that we will get the earnings. the question that we focused on was the evaluation component of it. will the higher rates hurt the pes in the market. >> we are at 15 times earnings. and if you use a treasury or a b-double b-double-a, you feel it's hurting the recovery. >> bull or bear? >> longer term bull right now, we are in a correction mode. >> you are a bear right now, how bearish are you? >> i have not shorted the market, so that tells you once i decide to short the market, then i'm fully bear. i'm skeptical that we have more left here, we could get a blow off top, another 2% hire. today, i think it was a really interesting day in the markets because rates went up for the right reasons today and the

stock market fell off. we had great news out of europe, we had good economic news in the u.s., newhousing. the pmi that came out today, excellent news for the economy. rates rose and stocks sold off. >> just a smidgey, with the facebook thing you could drive up the market tomorrow. >> i don't think that facebook is the whole economy. >> the fed is tapering. it's in the market. >> it's backed off the market a bit. over the last couple of weeks. >> one of the things we watch is the market and if you look at the companies topping the s&p 500, two weeks ago, 65, 66%, somewhere around this, you are down to 27%, people have forgotten about macro. >> earnings are very important. >> they always have been.

>> that is it. >> you agree with that too? >> i do. >> we will leave it there. two experts. appreciate it. up next, the former media mogul, conrad black he will will talk about his book. ♪ norfolk southern what's your function? ♪ hooking up the country helping business run ♪ ♪ trains! they haul everything, safely and on time. ♪ tracks! they connect the factories built along the lines. and that means jobs, lots of people, making lots and lots of things. let's get your business rolling now, everybody sing.

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>> optimism is a valuable trait i learned from my former boss, ronald reagan and yes, we have a lot of problems in the country.

but the power of free market economics and our democracy will stand the test of time. let's talk optimism. here now, we have conrad black, his newest book, "flight of the eagle," explores america's rise and influence throughout history. mr. conrad black, thank you very much for coming on the show. i want to just start with today. president obama, okay, gave an important economic speech, by their own billing, you got a lot of warmed over campaign class warfare and no fixes of the entitlement problems and no economic growth from tax reform. when you see that kind of thing, what do you think about in terms of the future of this country? >> first of all, thank you for inviting me on, larry, good to be speaking with you again. we have been friends a long

time. i'm afraid i'm not absolutely uncontain able supporter of president obama, and the speech is not a surprise to me. he has essentially dodged the issue. after 232 years of independence, the united states has accumulated federal debt of $10 trillion 4 and a half years ago and now it's $17 trillion, and no one is facing up to it or addressing the continuing deficit seriously. >> well said, but you are an optimist about the future of america. tell us why? >> it is fundamentally a very strong country. it's a rich country with an extremely talented and productive workforce. it's a very patriotic population, and all it needs in leadership. i do not mean that people will dumbly follow a leader, somebody to use the traditional play book

of outstanding presidents of the past who said, we have a serious crisis is, these are the proportions of the crisis, this is what is going to happen if we do not deal with it and here is our plan of action to deal with it and i ask for your support. people will respond to that, but it's not happening. >> we usually find the right president to take care of it, or the right combination of congress and president. what i want to ask you today with a lot of skepticism, you hear about declinism, and so forth. do you think the united states, with the free market remain the leader? >> yes, free market systems work best. it is the one that most closely conforms to the almost universal human desire for more. the challenge is to shape that

desire for more in a way that is not sociopathic or counter productive. and capitalism can get into difficultiy, i do not mean to be negative. i hope the president of the u.s. does well. i do not see the leadership that is necessary here. and as to the conversation that preceded this one, i cannot challenge, the technical expertise of the people. but i think there's insufficient attention to the fact that the western world is over invested in the service industries. and too many people are very talented and very motivated and work hard, but don't actually add value to anything. and that is a problem. >> all right, let me go, let me go to china, what kind of a threat does china pose to american leadership? >> in the first place, i don't think that china is targeting the united states the way the soviet union did or the way nazi germany did, it's not comparable

tot regimes in the state or nature of the threat. and there's no natural intersection between the two. china historically has not been excessively active outside its own region. and there's no reason for the two countries to have too much difficulty. with that said, of course, it's a rising power, it's a developing country story. it's a brilliant story. it still has 600 million people that live the way they did 3,000 years ago, and has no government or institutional structures that are reliable, you cannot believe one figure they publish on any subject. but the political system they make up as they along. these are elements of fund ptal instability, that do not bedevil the united states. it's political classes to people of our vintage are undistinguished and it has shown

the genius of renewal. >> and china has no such system. that is what you are say something. >> absolutely not. they make it up as you go along, it's an obscure group of capable people. must be or they would not be at the head of such a great country. but nobody knows really, even experts like henry kissinger, knows how they figure things out there. >> i do not have enough time to go into the middle east, i'm glad you came on the show, conrad. i wish you all the best of luck on the book, it's great to see you. and i hope you return. many thanks again, to conrad black, his newest book, flight of the eagle is available now. now, finally, tonight, i want to leave you with this image of president george hw bush. in his lap, he is holding 2-year-old patrick, the son of a member of mr. bush's security detail. patrick has leukemia.

so in solidarity with patrick, president bush shaved his head too. i will close by saying god bless president bush and young patrick. that is it for the show, we will be back tomorrow night. ♪ ♪ ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end july 31st. could lose tens of thousands of dollars on their 401(k)

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