tv The Kudlow Report CNBC July 31, 2013 7:00pm-8:01pm EDT
7:00 pm
with many other verticals. don't forget google. i'm jim cramer and i will see you tomorrow! long. follow @jimcramer on twitter and tweet your questions questions, #madtweets. here at the top of the show, folks, my call is for no fed tapering or bond purchase cutbacks in september, possibly not until year end, and maybe not until early next year. no taper. the economy is too weak, inflation is too low, and there's no reason for a qe tightening at all. and my question to investors tonight is if i might be right about no tapering, how does that change your portfolio strategy between now and year's end? and then switching gears completely, get this, obama care is bad for cancer patients. the doctor who said so in today's "wall street journal" joins us this evening to explain
7:01 pm
why. all those stories and more, coming up on "the kudlow report," beginning right now. good evening, everyone. i'm larry kudlow. this is "the kudlow report." first up tonight, let me repeat, i do not see a fed taper for many, many months, perhaps not even until early next year. why? gdp growth may have topped forecasters' predictions today, but year on year we're looking at 1.4% gdp, 1.5% inflation, less than 3%, 2.9% nominal gdp. these are incredibly slow recovery numbers. that is why i think there's no need for the fed tapering or tightening. they never mention tapering in today's statement. but they did have a slight downgrade of the economy. and they mentioned inflation. i think there's absolutely no way the fed can do anything in september under these weak
7:02 pm
economic conditions. all right? let's talk about this. we have former federal reserve governor frederick mishkin. rick mishkin is currently an economics professor at columbia university. we have joe lavorgna, deutsche bank chief economist and cnbc contributor. he's joining me on the set. no, steve reshuto is joining me on the set, senior economist at mizuho security. and my pal cnbc senior economic reporter steve liesman right here on the set. what say you to my theory there's no tapering coming? >> i believe it partway, larry. if the economy remains this week i don't believe they're going to taper. i just don't think the economy is this weak. and i'm moved by what's on your board there. there's a dissonance there, an important dissonance between job growth and gdp growth. and the investors out there have to make a choice. is the green stuff right or is the red stuff right? and i tend to think the green stuff is right, in part because i like the data a little more. gdp is far more sunt subject to
7:03 pm
revisions, and thanks to mike darda, our friend here who writes a very good commentator, he said when income and production are at odds income wins. and i think this may be a 5% nominal, 3% real economy. if that's right i think -- >> if it were 5% nominal and 3% real, then i would have a completely different point of view. >> i think that maybe the economy -- >> i don't see that. i'm looking at fourth quarter changes. actually, in some sense there's a slowdown. rick mishkin, it is true that the job situation looks better. i agree with that. but there's a lot of evidence that says these are temporary jobs, not permanent jobs. they're part-time jobs. whether that's a function of obama care or not, the data show part-time jobs, whiches you know, rick, don't pay near as much. that's why i don't see the torque for this economy. that's why i don't think the fed has to take any action at all for many months. >> well, i think it's an issue that's important that's a slightly different slant, which is to distinguish between the
7:04 pm
issue of accommodating or very easy monetary policy and asset purchases. so remember the fed has two tools here. one is the purchase program which they're talking about tapering. but the other is keeping interest rates low and committing to do that for a very long time. and there are extra costs to this asset purchase program, and it's one of the reasons why the federal reserve has discussed tapering much sooner than people expected. i don't think that means they're going to start tightening policy in this context of committing to keeping interest rates low for a very long time. there is this difference between the tools because of the basic costs of actually thinking of having a large balance sheet and also the issues of the fed really being worried about potential losses, indicating they're less likely to sell assets. i think there's an issue here that is -- adds an extra dimension besides just the economy. now, i'm a little more positive than you are. i think the issue of what's happening in the housing market's really important. >> yeah, but i think -- i've got to say -- i want to go to steve
7:05 pm
reshuto. borrowing costs have gone up quite a bit. >> correct. >> for mortgages and car loans and credit cards. i find that very troubling. i also find it very troubling that nominal gdp is so low. and again, i come back to this issue. i thought the fed would have mentioned tapering today in some way, shape, or form. and they didn't. >> oh, no, i didn't think they would. i didn't think there was any reason for them to at this point. >> well, they've mentioned it. mr. bernanke's mentioned it time and time again. he's gotten into trouble, he's gotten out of trouble. i know steve liesman's shaking his head yes. well, let's see. september is what? it's a little more than a month from now, sick weeks from now. with these kinds of data points, steve reshuto, do you really think the fed is going to pull back on their bond purchases? >> no, i think there's no argument whatsoever. you can argue whether qe was necessary to begin with and whether or not they did the right thing by going down the path to qe. once you're here you're here. and this argument about stocks versus flows that the fed seems to be relying upon has proven to be wrong. what bond traders care about, what interest rates are determined by is the flow, not
7:06 pm
by the fed's purchases. and if you reduce the flow of purchases you're going to have a further backup in interest rates. that's not going to be good for housing, especially with income growth being as weak as it is. it's going to squeeze affordability fairly rapidly and in addition to that it's going to stamp out what's happening in terms of the automobile industry because the steeper the curve gets the higher the costs for -- >> and there's a lot of evidence, i just want to add to that, when you take a look at the weekly applications for mortgages, refis, and purchases that stuff is heading south at a very rapid rate. those things are going down. that could be a function of the interest rate. joe lavorgna, i know you're going to disagree because you're more on the bullish side than i am. but joe, i thought people, the consensus red the fed wrong in the minutes today. i thought they had a very dovish statement in the minutes today. and i think the idea that they downgraded the economy slightly and that they mentioned the inflation issue was very significant. >> the statement, larry, was dovish. i agree with you on that.
7:07 pm
and the treasury market essentially reflected that by rallying quite significantly afterward. however, there is a lot of time, larry, between now and the september meeting. and if the job market continues to generate 200,000 jobs a month, as i foresee, then i'm in liesman's camp. the fed will taper in september. >> in september. >> yes. that's been my view. and i still believe the job market is decent enough despite gdp that you get tapering. this is not tightening. policy is still extraordinarily easy, as rick mentioned. this is just -- >> i think that's an extremely important point. i think that's an extremely important point, that the chairman has emphasized that they want to keep monetary policy easy but the tapering and the issue of the asset purchases is not the only way they can do that. and in fact, that policy of building up the balance sheet has a lot of extra costs for the fed. and so the other element, i think the fed is actually going to be moving to a view that their key policy tool is going to be the commitment to keep interest rates low and convincing the markets of that.
7:08 pm
so i think that's why we have to think of -- >> one thing i want to add to what rick was saying. larry, when the fed instituted qe, the trend in job growth at the time in real time was about 94,000, 95,000. so we're generating 200,000 jobs a month. i believe even in bernanke's world that does constitute a substantial improvement in hiring. >> question for steve liesman. what kind of jobs are they? this troubles me. you look at these jobs, you've got to look two and three times because a lot of them are part-time jobs and a lot of them are low-paying jobs. there may be many reasons for that. but that seems to be the data point. that suggests to me there isn't that much strength. that suggests to me there isn't that much purchasing income. and with high interest rates, i think that's a bad combination. >> i think you're right about that. there has been some evidence these are part-time jobs. unclear how low-paying they are because they are in the service sector and there's a presumption they're low paying. but if i grant you that, they are jobs and they're net additions to the workforce.
7:09 pm
and they're going in the right direction. and i think you need to put yourself a little bit in a monetary policy maker's shoes right now. they want to dial this back. they don't want to be with their foot on the accelerator right now. so picking up on what ric was saying, imagine a world where they're going from 85 to 65 but let's say we lower the unemployment threshold for raising rates to 6% from 6.5% so, they give the market something important. and i gree steve ricchiutto that the stock and flow argument is a done deal. i still think there's a little evidence for -- >> even ben admitted it didn't work. they thought by saying what they did -- >> i think one example is not enough to go with. >> isht rates have moved back 100 basis points. it is important. it is the wrong concept. in addition to, that you have to look at the jobs. it's a net addition to jobs. if people are going from full-time to part-time and now you have two workers that's not a net addition. it's a net addition from payroll. it's not a net addition from income. if you look at corporate earnings growth, top line
7:10 pm
revenue growth, it's not there. >> steve, your math is wrong. you can't have one worker go from -- >> yes, you can. doormen in my building, for example. we used to have three. we now have six. none of them work full-time anymore. they work part-time. none of them get -- >> i don't want to pursue the doormen in his building, but that's a very interesting point. another interesting point, by the way, if the fed slows down its purchases the rate of growth of the money base, the monetary base, does in fact slow down. if you look at it in terms of growth rates. and it's possible the money supply too. mine slowed down also. but i want to ask in our remaining moments here, ric mishkin, today president obama spoke to the democratic caucus in the house. he defended larry summers. he said don't believe everything you read in the huffington post, which is a liberal media zation. he defended summers lock, stock, and barrel. ric mishkin, i have never heard a president get so active,
7:11 pm
involved in a federal reserve chairman discussion, debate, or whatever. i've never heard this before. what do you make of it, and do you think he wants summers to be his fed chairman? >> i really don't know. but i think the key thing to remember here is the decision about the fed chairman, it's a vote of one. the president really will decide this. you know, he has to take into consideration, i think larry summers will be much more controversial in the context of the confirmation process. but on the other hand it's really the president's decision. and it's what he's going to want to do. clearly, if he appointed somebody who everybody thought was a disaster and was incompetent. but that's not larry summers. larry's obviously a great economist but with some real baggage too. >> i've got to go politically. steve liesman no, matter how bad you might think larry summers might be, whether he deserves the job, it begins to look like he would be obama's guy at the federal reserve. and i don't think that's what you want. you want independence.
7:12 pm
and i want to add one more thing to it. donald cone's name was mentioned by president obama. former governor of the fed. veteran fefsh staff guy, vice chairman and so forth. what do you make of that? >> i think he may be trying to deflect a little of the heat away from two potential candidates, summers and yellin. i think you're right that this whole process i think has been botched a bit. >> have you ever seen anything like it? >> i have not. i think your point being if the president really has to lobby so hard he's in a sense undermining the fed chairman in that regard. >> he's undermining the independence of the whole institution. it just sounds -- whether this is true or not, it sounds like summers would be obama's guy at the fed. that's like arthur burns was nixon's guy at the fed, to be bipartisan. and that was wrong. right. and that didn't work out so good, with 15% inflation. >> no, it did not. >> i'm going to leave it there. i put that in just to be completely non-partisan. anyway, thank you very much, steve liesman.
7:13 pm
we appreciate it. steve ricchiutto, joe lavorgna, and ric mishkin, appreciate it out there. now, folks, we're going to look at what the fed statement might mean for stocks. there is no tapering at year end, how is that going to affect your portfolio strategy? and as always, don't forget, free market capitalism is the best path to prosperity. that means we need a solid, stable monetary policy with rules. i'm kudlow. we'll be right back. a quarter million tweeters musicare tweeting.eamed. and 900 million dollars are changing hands online. that's why the internet needs a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow.
7:14 pm
this ...is going to be big. it's time to build a better enterprise. together. uh-oh! guess what day it is?? guess what day it is! huh...anybody? julie! hey...guess what day it is?? ah come on, i know you can hear me. mike mike mike mike mike... what day is it mike? ha ha ha ha ha ha! leslie, guess what today is? it's hump day. whoot whoot! ronny, how happy are folks who save hundreds of dollars switching to geico?
7:15 pm
7:16 pm
today's fed statement sparked a volatile trading day on wall street. the dow, the nasdaq, s&p all gave up significant rallies and closed flat on the day. but my question is suppose there is no fed pullback on bond buying. just suppose that. humor me. what might that mean for your portfolio strategy? we've got two top experts, lazard capital markets director art hogan and fusion analytics vice president and cnbc contributor josh brown. humor me. humor me. suppose we don't see it until -- the fed pullback until december or january. what do you think? how would that affect your thinking on the stock market? >> so that's actually the million-dollar question now, and
7:17 pm
i think the answer's very simple. you don't have to nail the timing on the fed possibly tapering. what you have to do is start preparing for it. and b, and be acceptful of the fact you that you might be early. so the first thing you that want to start thinking about is whether or not you really need to stick with these core bond allocations that everyone believes are so conservative. the reality is they're probably not quite so conservative. if you're going to get volatility, larry, from both sides of the portfolio, which side is worthwhile taking that volatility from? odds are it's the stock side. you'd rather get the volatility where at least the up side is going to pay you off over time. >> and the bond side. art hogan, might the bond market sniff this out, though? i really think people are going to go home tonight, read a lot of this stuff and say the fed was kind of dovish, they didn't mention tapering at all, look at these lousy numbers coming in, i know jobs may be a little better. what if the ten-year treasury which was hovering around 260 today, it's up around 100 basis points. what if that thing starts to
7:18 pm
fall back down because they're not so worried they're going to see the fed tapering, let's say, for six months. say, it goes down to 2.50, 2.25, back to 2%. how would that change your thinking? how would that change your tom market? >> to josh's point i think you could get too concerned about the timing and try to get too cute on that, especially as it pertains to the ten-year because i think, you know, embedded in your question is what if it doesn't happen in september or even december? at some point in time that's going to be a trade you're going to want to get out of. i certainly think there's a greater risk that you can get sucked into the bond market in the ten-year than you can to get shaken out of some stocks. so yeah, there's a great possibility that come september it's not time yet for the first taper. i don't know if that's the case yet. consensus right now is september is going tonight first taper. the only difference in consensus is what does that mean? is that going from 85 to 80 million or is it going to 85 to 60 -- >> what if they do nothing? there's a sigh of relief. i can hear the sigh of relief through the bond market. i think that changes the game. >> the nightmare scenario is if
7:19 pm
what happened in june goes on for an extended period of time come september, meaning bonds and stocks correlate and sell off together. i don't know of many asset allocateors that are prepared for that to be reality over a long stretch of time. we looked at the data. the reality is over the last 50 years that's only happened about 3% of the time on a monthly basis. so if that's what's keeping you up at night and keeping you in cash, that both asset classes will sell off together, i would tell you it's a very small likelihood, number one. number two, if that gets started, eventually one side wins. we happen to think you should err on the risk side, on the stock side, and quite frankly steve liesman in your previous segment talked about gdp being prone to revisions. you can look at those numbers as if they're written in crayon, essentially. and i think you're going to have a lot of revisions. i don't know. you'd have to -- >> so do i. >> i just looked at these numbers that came out today. i know they were slightly better than the consensus. but i like to smooth it out year on year. year on year these numbers stink.
7:20 pm
in fact, they're getting worse. this used to be a 2% plus recovery. we are now dropping well below the 2% zone on a year on year. does that affect the stock market? does that affect the earnings outlook in does that affect cyclicals, for example, or industrials? >> well, if we're in a new fiphe of the new normal being a 1 1/2% growth rate and that's going to extend into 2014, which i don't believe we are, that absolutely is going to affect the earnings power of corporate america. but to josh's point, if we have another pored period of time post the may 22nd sell-off, the only real buyable dip we've seen this year, that 6% sell-off that lasted a couple of weeks, if we have that again and look at where we are post that, we've rationalized things in the equity markets, we're sort of back to above levels that we were entering the may 21st time frame but the debt market, the ten-year is exactly at where it spiked to. we spiked a little higher than we are. but the ten-year's exactly where it is. so to the extent you that don't need to time it on the bond side, i think there's more of a risk if you get pulled back in for the ten-year than there is
7:21 pm
if you -- >> that could be a growth trade. that could be a growth trade if the rates stay where they are but the stocks -- >> think about what's happened since may 22nd on the street, though. everyone's earnings estimates went up. jpmorgan's at $120 a share for the s&p at this point. that's all post-may 22nd. so you think people are getting comfortable with this idea that the economy, while not great, is not quite on life support and can tolerate a little bit less bond buying on a monthly basis. >> so that's all -- the fed story is discounted in the market. >> so most of this stuff is sentiment driven. and the narrative is that -- right now the narrative is oh, no, they're going to start buying bonds, we're screwed. think about when that narrative shifts to hey, wait a minute, guys, this is great news, look, the fed can buy less bonds, this is not a negative. that narrative has to work its way through the system. we're not quite there yet. maybe we're there by september. maybe not until october, november. but i would say that that's more likely than for us to continually look down at our navals and be upset about the fact the fed's going to buy 60
7:22 pm
versus -- >> last word. >> let's say hypothetically the fed does taper in september, the amount of issuance that's being pulled back on the government side is going to balance that out. we're actually not going to have a net effect. let's say at the end they pull back by 20 billion and now it's 65 on the treasury side, that's not going to have a net effect. >> earnings more important than the fed? >> as they should be. >> we'll leave it there. we'd like to talk more about earnings but we'll have to wait for another time. josh brown, art hogan. stick around, we have a lot more work to do because now the herbalife battle got got a lot more interesting today. a lot more personal. george soros entered into carl icahn and bill ackman's fight. soros is making a huge bet on this one. we have that story up is next on "kudlow."
7:23 pm
in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.
7:26 pm
i appreciate, bill, that you called me a great investor. i thank you for that. unfortunately, i can't say the same for you. >> icahn never one to shy away there from a good fight. the stock of herbalife has rocketed higher. now up nearly 100% so far this year, larry. >> up 100%. >> 100%. so what's interesting about this is a couple things. one, you had actually carl icahn, i'll put it to you this way, telling our own scott wapner at our delivering alpha conference recently he made 250 million on this. he said he changed his mind on ackman, he was now thinking much more positively of the pershing square founder. >> let me get system. very quick. very quick, art hogan, how do you read this? and i want to ask you this. do you think soros is acting alone? is he acting alone? there is some reports on the street that he's in a community of investors.
7:27 pm
right now he doesn't have to declare his position because it's less than 5%. but there's some reporting that he's in a community of investors to totally squeeze ackman out. >> well, it's interesting. and obviously, in the position ackman was in already he didn't need a strong player coming in saying i think you're on the wrong side of this trade. but it's also impossible for us to speculate what his motives are accept for profit. and it's been a profitable trade for carl icahn thus far. it's a difficult situation. but i will tell you as an outsider looking in this is the last stock you even want to punch up. why would anybody in their right mind want to get in an argument with these three personalities in this stock when there's another 6,000 stocks you can look at that don't have that crowded a trade? >> the takeaway here for investors is the stock is not the company. and you can throw your fundamental analysis of herbalife out the window at this point because you've got people with billions of dollars who have decided they don't want this thing to go down anytime soon and in fact they want it much higher. and when that's going on, this is not where you tread in and you say, hey, discounted cash
7:28 pm
flow analysis, they should only earn $2.20, not $2.80. that will not serve you very well when giants are battling it out in this fashion. mechanics have take ten over. >> giants and giant egos. art hogan and josh brown. thank you, gentlemen. the latest problem with obama care is more serious than ever. one doctor's explaining how the health care law will hurt cancer patients. we have him and that story for you up next. later in the show, one day after the president's big speech on corporate tax reform we still have precious few details. is anybody in the business community excited about it? we have more on what looks more and more like the same old obama tax and spend. please stay with us. we'll be right back. the great outdoors...
7:30 pm
7:31 pm
welcome back to "the kudlow report." i'm larry kudlow. in this half hour it's a huge win for natural gas. ford announces it will start offering nat gas powered ford 150, that's f-150 trucks this fall. that is the number one-selling vehicle in america, folks. so this is a big story. and what do business leaders really think of president obama's big corporate tax reform plan? here's a hint. not much.
7:32 pm
their overseas earnings are going to be taxed way too high, and net tax revenues could go up a trillion dollars. but first up, the problems with obama care keep piling up, and i want to go back to josh lipton for a look at what is happening today. what you got, josh? >> well, thank you, larry. first off the cbo now saying the delay of the employer mandate will cost the taxpayers an additional $12 billion. most of that because it will be another year before the government starts charging poenlts for businesses that don't provide health insurance to employees. also, florida and georgia are now both saying they expect health care premiums in their states to rise 20% to 100%, not counting potential government subsidies. and georgia says premiums for a 25-year-old male could triple. and if you've been talking about it a lot, the system relies on young healthy people to pay into it. and even congressional staffers are worried about obama care. they would be required to get
7:33 pm
insurance from the state exchanges, but there's confusion over whether the government will pay part of the premiums for them. it could mean an extra $11,000 a year in premium costs for some, larry. >> i would just say if you cook your dinner you have to eat it. and i think these congressional staffers and their members ought to go into the exchanges because that's the plan they put out there. that's all. they did it. >> the price they pay. >> it's the price you pay. i don't know. you make your bed, you sleep in it. many thanks, josh lipton. i appreciate it, as always. now, if all that wasn't enough, get this. obama care may also hurt cancer patients. how, you ask? well, this op-ed in today's "wall street journal" argues that obama care will encourage hospitals to abuse a program that will ultimately drive cancer care costs higher and treatment quality lower. here to explain is the op-ed's author, dr. scott gottlieb. he's a practicing physician and resident fellow with the american enterprise institute. scott gottlieb, welcome to the show. tell me what you mean. how obama care is going to hurt
7:34 pm
cancer patients. >> thanks for having me. well, obama care expands a program called 340b, which basically the program was started back in 1992 to help subsidize about 90 hospitals that cared for a lot of indigent patients. and the idea is that these hospitals were able to buy drugs at a very steep discount directly from the drug companies, then sell them back to the government or the private insurers for the full cost and pocket the spread, basically pocket the arbitrage, and this would help subsidize the hospitals. well, this program's expanded dramatically. now 1,600 hospitals qualify for it. fully a third of all u.s. hospitals. and the obama health care plan's going to further expand it. and the administration's also issued some what they're calling subregulatory guidance that expands it even further. so we're going to see thousands of hospitals eligible for this. what happens is -- >> so is this -- let me just ask a question right there on this point. in the article you mention some very classy hospitals. duke hospital, university of pennsylvania hospital and so forth. does this mean as the hospitals exploit this loophole that the cost of the treatment is going
7:35 pm
to go up? i'm going to come back to the quality in a minute. but does this jack up the cost of cancer treatment? >> well, the cost does go up because what the hospitals are trying to do is capture doctors, basically oncologists because they prescribe a lot of high-priced drugs, and move them into the hospital setting so they can capture the arbitrage on those prescriptions. also, the drug companies know that they're going to be subject to mandatory discounting. so when they launch new drugs, they're launching them at higher prices to account for this. so the prices, this isn't free money, it's being passed on to consumers. >> all right. let me go to another point that you make. you say that many cancer patients are moving from the doctor's offices to the hospitals with respect with their treatment. it's a whole new ballgame now and it's going to operate mostly out of the hospitals. and i think you infer or you may state that better to be in the doctor's offices in terms of the quality of the care. is that true? is that your point? >> well, that's true. and there's a lot of other things in the obama health care plan that try to move outpatient medicine into inpatient
7:36 pm
settings. they seem to have a preference for hospital-based delivery of care. costs go up when patients go into the hospital. that's been well demonstrated. so if you're a cancer patient getting chemotherapy in a hospital, outpatient department, those costs are going to be substantially more than if you got it in a private doctor's office because it's more overhead. i would also argue for a lot of patients it's going to be more inconvenient or not as comfortable to be in a hospital-based setting than it would be to be in a private office. since this passed four years ago, more than 400 oncology practices have been purchased by hospitals. in part because of the obama health care flan. >> is that because -- are they buying it because they're going to take the spread that you've got, they get to buy the drugs on a discounted basis and then they'll be reimbursed at a much higher basis, they like it as a business and therefore they're going into it lock, stock and barrel? is that what you're saying? >> that's exactly right. every time a hospital buys a single oncologist, a single oncologist will prescribe anywhere from 2.5 to $4 million worth of drugs over the course of a year. if you're getting those drugs at a 25% to 50% discounts you can
7:37 pm
capture, each on kolt gist is worth about a million dollars in additional revenue. if you buy a ten-person oncology practice, that's about $10 million to your bottom line. >> what happens? >> i think the idea of the doctor practicing in his own office and running his own business is gone in this country. there will still be doctors who do it but it's becoming exceedingly hard and the government is doing everything in their power to create incentives for doctors to join large multispecialty groups owned by hospitals. >> at what point does the government come after the hospitals, though, and cut back on the reimbursement? i mean, they're going to run short of money. i mean, we're just reporting here, you know, young people don't want to go into this program. the volume of money available for the subsidies is not going to work. the whole program may go bankrupt for all we know. and hospitals will be damaged on that. they will be damaged on that. when does that happen? >> right. well, the hospitals have been cut, and in part this program was expanded to make up for some of the cuts the hospitals absorbed as part of obama care.
7:38 pm
the bigger question is are the hospitals efficient? there's a lot of money going through the hospitals. they're hurting too. they've been cut. but are they delivering care efficiently and and i would argue a lot of them probably aren't efficient as they ought to be, they're sort of local monopolies, they don't face external competition. so there's a lot of ways to decrease productivity take place, and when doctors move into a hospital-based setting there's a lot of data showing that productivity goes down. if you believe that the only way to solve our long-term fiscal chajsz is to get more health care foefr dollar of gdp you spend on it's last thing you want to do is lower productivity. >> all right. we'll leave it there. many thanks, dr. scott gottlieb. tough stuff. >> thanks a lot. the president calls his federal tax reform plan a grand bargain. really? where's the bargain? net revenue increases are going to be way too high. foreign earnings are going to be taxed way too much. and the documents marginal tax rate should be much lower. we're going to take a look at everything this grand plan still missing. next up on "kudlow." we're cracking down on medicare fraud.
7:41 pm
the healthcare law gives us powerful tools to fight it... to investigate it... ...prosecute it... and stop criminals. our senior medicare patrol volunteers... are teaching seniors across the country... ...to stop, spot, and report fraud. you can help. guard your medicare card. don't give out your card number over the phone. call to report any suspected fraud. we're cracking down on medicare fraud. let's make medicare stronger for all of us. welcome back to "the kudlow report." i'm josh lipton. with this news alert. a key court ruling could eventually result in big money for current and former college athletes. players have been suing the ncaa and ea sports for years because
7:42 pm
they are not paid for video games that depict them by every characteristic except their names. an appeals court shooting down ea's claim that using the players' names was protected by the first amendment. but larry, this case is nowhere close to being over, but today was a big win for the players. >> all right. thank you, josh. appreciate it very much. now, a day after the president made his speech on corporate tax reform, we're learning about tax penalties for overseas cash, big spending plans for transition revenues, and a broken bargain because this idea was supposed to be revenue neutral with a much lower rate than 28%. so let's talk about it with our friend dan mitchell, senior fellow at the cato institute. dan, i want to begin with this overseas cash, of which there is something like a trillion dollars and so forth. we're hearing ceos say look, they'll bring the money home if the tax penalty is like 10, 12, 13%. but if it gets any higher than
7:43 pm
that, they're keeping the money overseas. what can you tell us about obama's plans for this? >> well, obama hasn't released a lot of details. all i can do is guess, which is what everyone else is doing. but what we have to understand is the reason the companies are keeping the money overseas in the first place is because we have a bad policy called worldwide taxation, where we try to double tax this income that is earned and already taxed by foreign governments overseas. now, companies can defer this double tax if they plow the money back into their overseas operations. obama is trying to say bring the money back home, we'll tax it at a lower rate. but what's the rate? your guess is as good as mine. >> all right. so i just want to ask this just to close the loop on this. that means if the cash stays overseas there's going to be some kind of penalty tax or minimal penalty tax. that is different than the territorial reform where double taxation would not occur. this is different from what, let's say, the business round
7:44 pm
table and other groups wanted. >> well, here's the really bad news i think about what obama's proposing. there's all this existing cash from previous years' profits that is bei ing held overseas b american companies. obamas saying bring that money back, we'll tax it at a preferential rate, we don't know what that is, but going forward obama it appears wants to extend worldwide taxation so companies don't even have a chance to defer or delay this extra layer of tax. so it's one of these things where we'll give you a little favor here but then tomorrow and the next day and the next day we'll hit you with much more policy. so it's not a good deal and we haven't even talked about some of the other bad features of the plan. >> well, let's go here. let's go home. let's come home on this. as i understand it, senator max baucus, who runs the finance committee, and chairman dave camp, who runs the ways and means committee, have been working on a revenue-neutral corporate tax reform plan. that is to say, you give up loopholes in return for which
7:45 pm
the marginal rate comes down. not from 35 to 28 but probably to 25% or even lower. what i understand is that team obama is going to have revenue positive and take that loophole money and spend it on pet projects. that's not what was supposed to happen. >> well, that's exactly what the president was saying, though, in tennessee where he said we're going to have this so-called corporate tax reform's which is really, as you say, a revenue increase, and then he wants to use the money for more sort of the same so-called stimulus spending, the same nonsense we got in 2009. and the last thing we need in terms of fiscal policy is to make government even bigger. that's what we've been doing for too long already. >> where's the bargain? i don't really understand the so-called bargain here. there was no talk about debt limitation. there was no talk about entitlements. but i don't even talk about talk of a bargain on tax reform because the rate's too high and the loophole closes are going to
7:46 pm
be spent and if they're spent one year they're going to have to find money to continue to spend it. so it's for all these pet projects, job training and what have you. there's already 40 programs. what i'm saying is who's getting a bargain here? >> i guess obama assumes that republicans just must be idiots or something because he's in effect saying i'm selling you a used car, you give me the money for the used car but then i keep the used car. republicans get nothing out of it other than a symbolic and very small we think reduction in the corporate tax rate. but it's completely offset by all the new taxes on business investment, the expansion of worldwide taxation, and of course all the new spending, which is our number one fiscal problem. >> what's max balkus and dave camp going to do? because these guys are on the level. they've been working very hard. they've been working with groups of senators and house members on a wholly different idea where whatever loopholes are closed those -- the savings goes to lower tax rates, which is what we all thought was going to happen. where are they? and will they compete with
7:47 pm
obama's plan? >> it's almost impossible to see something going flu without obama signing it. of course by definition it can't happen. and baucus in the senate, camp and the democrats in the house, orrin hatch also in the senate, i think they're making a very good faith effort not to do something dramatic like you and i have been talking about for a long time but at least do something to clean up the tax koerksd get rid of some of the most egregious loopholes, bring the rates down a little bit, but if obama insists that washington has to get a bigger pay allowance from us at the end of the day, i think that kills tax reform because not only in the house but i think even in the senate because max baucus, there's no way he can strike a reasonable deal if obama's insisting on another big tax increase on top of the fiscal cliff tax hike. >> senator harry reid said last week, tax reform should yield $975 billion. i reckon that he's talking about
7:48 pm
the obama plan. that is not what i thought was going to happen in terms of a compromise deal. >> i think you're right on that. harry reid is much more of a partisan. i think he's much more carrying water for the white house. max baucus as a committee chairman actually has some responsibilities to try to come up with legislation that can work. and so i think we're seeing some divisions in the democratic party. we see the same thing with the house ways and means committee, where some of the responsible democrats on the committee want to agree to the revenue-neutral condition but then you have some of the ideologues in the leadership, the nancy pelosis of the world and stuff like that. so i'm afraid at the end of the day when this year's over we will have done nothing to fix our big problems. and that hurts our competitiveness. >> one last thing. if you're a small business owner, you're going to pay 39.6%. if you're a large corporation and you got what we thought you are going to get, you'd be paying 25%. now, that is an inequity which is not at all treated in the
7:49 pm
obama plan. >> yeah, there's no question if you have schedule c income, if you're a sole proprietorship, a partnership, nothing in this plan is good for you. and it could actually make your taxes worse. now, to be fair, with a schedule c's traditional corporate income tax there is the double tax on dividends. you don't have that with some of the other small business entities. but we know small businesses are the job creators. why aren't we trying to lower their tax burden as well? >> we'll leave it there. dan mitchell, cato institute. thank you very much. appreciate it. >> thank you, larry. now, when the best-selling vehicle in america starts being offered in a nat gas powered version you take notice. that's what ford is doing with the f-150 truck. so is this a game changer? we're going to ask car coach lauren fix up next on "kudlow." ? i just wanted you to eat more fiber. chewy, oatie, gooeyness... and fraudulence. i'm in deep, babe. you certainly are. [ male announcer ] fiber one.
7:52 pm
7:53 pm
platform available in compressed natural gas, cng, or you're calling it nat gas. either way, it's a lot less expensive. and even though there's no federal tax credits, it is absolutely a winner for ford, and they're really setting the pace here. >> i'm a big fan of the natural gas revolution in all of its manifestations. but i read regarding the f-150 this thing has to be reconfigured in the factory and outside the factory. it's got to be outfitted and then refitted. the whole thing comes to almost $10,000 on top of the cost of the truck. now, is that going to be a barrier to selling these things to individuals? >> well, it shouldn't be. it's $350 prep fee. it comes with it when you order your truck. you say i'd like to get one that's got the preparation for it. and then an individual company can do it. they're going to be ford approved, of course. it will range somewhere between 7,500 and $9,500 depending on the size tank that you want. but it's really going to make a
7:54 pm
huge difference. a company like at&t just purchased a whole fleet of them, and they say they saved over 7 million gallons of gas. and at $1.50 savings approximately per gallon that's a huge savings when you can take those profits and put them elsewhere, whether having it as gasoline or an automotive expense. >> you're saying basically this is a corporate fleet operation, it's not really going to be individual retail. >> well, you can buy it retail. i mean, there will be some people that have smaller fleets. maybe you've got someone that does some sort of maintenance. maybe you'd like to have that vehicle for yourself. now you can finally do it. previously there, was only the honda that had the little civic that was available, and then available only in certain areas. it was a very difficult vehicle to obtain. there's a lot of demand for it. electric vehicles haven't been pulling the numbers that they were hoping. diesel is an option. i'm a huge diesel fan as well as compressed natural gas, and i just think there needs to be a multitude of different options available because depending on where you are in the country, what your company does, if you have this available to you and
7:55 pm
you're not hauling large trucks, this is a great solution for cutting your expenses, lowering your carbon footprint, and you know they're going to start taxing on that eventually. so if you're only putting water up your tailpipe, you're not going to have that additional tax expense too. >> i'm all for it. is there going to be enough gas station fill-ups for this thing? how far have we gone into making natural gas liquefied and making it gas, turning it into gasoline? how practical is it going to be? >> i think at one point we were moving forward and then the current administration decided they wanted everyone to go with electric vehicles and that sort of put the kibosh on the big infrastructure build that they were working on. but when you've got a huge fleet like at&t or any sort of cable company or anything like that, you're going to have your own tanks. and that's actually a way of saving money in addition and having your vehicles driving around, trying to locate places that actually can pump it for you. but i think it is part of the future, it is one solution that you're going to start seeing a lot more common.
7:56 pm
and ford's goal is to sell 18,000 of these vehicles by 2018 and i think they're going to make that goal. >> so ford has experimented. they've got, what, transit connect? is that right, transit connect? and they've got an e series van. how have those sales done? >> they've actually done very well. they redid the whole van setup for -- a lot of people, all the manufacturers starting to revamp these vehicles so they're more fuel efficient, they're lighter, they can haul more cargo. they've done really well. as you can see, ford f series has been the top-selling vehicle for 46 years in a row. nobody can outsell them. and i think this just helps propel them further forward. >> who wins this race, lauren? natural gas or battery powered? who wins? >> natural gas will win in the end, i believe. i know all those ev people love it, but the truth is when you drive them you have range anxiety and unless you've got a gasoline engine backing it up it makes it very concerning. >> all right. got to get out of here. i happen to agree with you. i'm rooting for the natural gas
7:57 pm
anyway. >> me too. >> lauren fix, thanks very much. that's it for this evening's show, folks. as always, i thank you for watching. i'm larry kudlow. more free market capitalism tomorrow. this whole natural gas revolution came from free market capitalism. i'm kudlow. please join us tomorrow night. right now, seven years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why the internet needs a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this ...is going to be big. it's time to build a better enterprise. together.
7:58 pm
humans. we are beautifully imperfect creatures living in an imperfect world. that's why liberty mutual insurance has your back, offering exclusive products like optional better car replacement, where if your car is totaled, we give you the money to buy one a model year newer. call... and ask an insurance expert about all our benefits today, like our 24/7 support and service, because at liberty mutual insurance,
7:59 pm
8:00 pm
>> narrator: in this episode of "american greed"... could this man be brooklyn's own bernie madoff? >> people who lived in that neighborhood never conceived that this schlubby-looking guy was going to hurt them. >> narrator: because, unlike madoff, philip barry's no fancy billionaire flaunting the high life in front of his victims. he's one them. >> he was wrapping himself in the mantle of the hardworking work ethic of that neighborhood and using it to lure people in. >> narrator: and he's quietly building what may be the
169 Views
IN COLLECTIONS
CNBC Television Archive Television Archive News Search ServiceUploaded by TV Archive on