meg whitman, ceo of hewlett-packard interviewing her tomorrow on "squawk on the street." tough day today. there's always a bull market out there, i promise to try to find most states welfare pays better than work. why? one reason is welfare is tax free while work is taxed more than ever. this is the wrong incentive structure to get people off the doll and back on their feet. one of the topo lit call minds in america is set to join us tonight. we're going to ask larry sabato

about what's wrong with the deck kratz today. hillary clinton's presidential chnss and get a look at the big new online course and all about the legacy of john f. kennedy. all of those stories and more coming up on "the kudlow report" coming up right now. good evening, everyone. i'm larry kudlow. this is "the kudlow report." the federal reserve minutes. did they tell us anything? steve liesman joins us in jackson hole. >> good evening, larry, from jackson hole where the fed is gathering. they're gathering without ben bernanke and mario draghi. the fed is releasing its minutes from the july meeting in which it showed no clear intention as to the tapering in september.

the committee is split with a few members saying the fed should be patient before tapering. there was not enough economic data and a few members saying the fed should stick to the plan announced in june. quote, it might soon be time to taper. almost all of the participants were pretty comfortable with the june guidance which said that the tapering or quantitative easing amounts would be dependent on the incoming economic data. if you were hoping for clear guidance from the minutes, you didn't get them. the fed meeting was a high but not unprecedented amount of uncertainty over its outlook and its leadership here. every four years we have a bit of uncertainty over who's going to be the next chairman. today we have two leading candidates, larry summers, the former treasury secretary and janet yellen. the guidance on quantitative easing is unclear and the guidance is something that will be debated. larry, reports from here will

have several different chair men. back to you from lovely jackson hole. >> thanks. cnbc's steve liesman, thanks. i'm delighted. right now i think the fed has no clear idea what it's going to do and when it's going to do it. with nominal gdp growth under 3%, real growth under 2%, a lot of very soft data, i don't know why the fed should taper at all. my message to the boys and girls of the fed, be very patient until you decide. my message to the marketplace, the fedotenko wait until december. a mini taper with $10 billion. i'm not even sure about that. let's get some kmin tear ri here. let's bring in our guests here. all right. lee hoskins, what did you hear the fed say today? what did they try to tell us or

do they simply not know? >> larry, i agree with you and steve in terms of the information about the minutes. you might do better looking at the entrails over goat to try to figure out what the fed is going to do. they'll do what bernanke wants to do. he's got the votes to do it. whether it's in september or january, it's an open question. what do i think they should do? you didn't ask me that but i'll tell you. i think they ought to start tapering. >> if they start tapering, let me ask you this, i know that's your position. this whole balance sheet business, 3, 3.5 trillion, $2 trillion of excess reserves, there's a whole lot of excess. this is crazy. this is not my approach. lee hoskins, former head of the cleveland fed. if the fed in effect tightens up by buying fewer bonds and injecting less cash, don't they have economic risks? i don't see this second half

economic growth as everybody is telling me about. >> you are right. there are risks to starting to taper because you won't be supplying as much reserves which end up on the fed's balance sheet in the form of excess reserve, but you're also at risk continuing to do this. when is going to be a good time to do it? it's going to be never. the markets are going to be pushing the fed and the political season is going to be pushing the fed. so the fed is going to be stuck if it doesn't get started soon on cleaning up its policy for the last five years. >> larry mcdonald, do you think the fed is going to get started soon? soon meaning september. my view is soon in september would be a bad idea. wait until the end of the year or maybe longer. what do you think? when do you think they're going to do this? >> i've been in the september camp. i'm going to move. there's a scene in the classic movie "frankenstein" where the doctor loses control of the

patient. if you look around the world, that's exactly what's happening right now. the indonesian long bond, the ten year, the ten-year bond has dropped 25 points in 60 days. banks globally own billions of dollars, billions of dollars of government bonds and these government bonds around the world are in sheer collapse. this is going to force the fed. >> great point. let's stay on the scene for a second. india looks like it's hemorrhaging and collapsing. nobody wants to own the ruppe. they've got problems with their fiscal policies, they've got political problems, they're moving to the left. people make loans to india and they're snapping the loans up. >> isaac newton said years ago for every action there's an equal and opposite reaction. the problem is for all the qe, $3.5 trillion worth, it's exponential actions around the world that give so much easy money around the world, now the world sees this potential exit by the fed and that's what's

causing these things to spike. it massively slows down the global -- >> i never believed they controlled medium and long-term goals. i'm a long term guy. steve, just one point. regarding these overseas countries. regarding indonesia you mentioned and i'm told and i saw a chart that banks here are lending less and less overnight money. they're called repurchase agreements to hedge funds because the hedge funds were along these emerging markets and now you have a liquidity tightening going on in new york because of the emerging markets and because of the fed that might taper. have you heard anything about that? what does this mean? this is how '08 started. it was the drying up of the repurchase overnight market. >> you're 100% right. that was what happened in 2008.

the catalysts between what happened in 2008 and here are very different. you have to be careful of jumping too far. the hedge funds have been over leafered. they're losing money quite rapidly. most bank risk spreads are not showing anything. the reason for that is there's so much liquidity in the system. banks are so flush with cash they don't need to borrow from each other. it's going to be harder and harder to tell whether or not they've pushed the envelope too far. they've lost control of the monster. the problem is they've created an environment that is just unhealthy. it's unhealthy for the economy and unhealthy for themselves. they should back away from tapering and allow themselves to follow interest rates higher at the long end rather than lead them higher. allow the cyclical economy to push them higher. we have global disinflationary pr

pressures. >> lee haskins, let me ask you a question. car sales are pretty good, home sales are pretty good. i don't see it in retailers. i don't see it in manufacturing. i don't see it in capital goods, for example, i don't see it in those places. i don't know how the fed gets out of this box. that's what i'm asking. they want to taper but the economy is coming in much less. how do they get out of this? >> there's no easy way out of the problem that they've created for themselves. they've tried an experimental policy, got other major central banks trying this policy as well and has already been pointed out, there are huge imbalances including great miss allocation of capital which will hurt us in the long run. it's better to bite the bullet now, try to get out of this without causing a -- either a breakout in inflation or some kind of financial disruption in markets around the world. i'm not sure you're going to be

able to do that, but you can't just keep doing what we're doing. you're going to end up at some point with a major catastrophe on your hands. i'd rather have a small one. >> larry mcdonald, i believe, i may be wrong, but i believe the big banks like the excess reserve cushion. the demand for cash is huge. by the way, all of washington is wagging war against jpmorgan and a lot of banks. that's another bad factor and the economy ain't great. why does the fed have to do anything. long term rates will do what they're going to do. why does the fed have to do anything right now? >> well, what they're trying to do, and i said this on cnbc back in april, is that the qe itself for the united states and around the world created these dislocations, these asset bubbles. there was billions of dollars that flew into high yield leverage loans, all of these speculative investments. coveted light loans.

i talk about this in my book. there was an explosion in coveted light loans. the riskiest loans. that was exploding in '07. that was exploding this year. the reason they started the taper talk on may 22nd -- >> for the bubbles. >> the market is doing that for them. it may be nasty. let me ask steve before i lose you. do you see a great second half rebound? >> no. >> the fed said it did. you look carefully in today's minutes. half of them have pulled back completely on that. they are totally divided on the economy. >> even the point you made earlier about corporate investment expenditures. people have an idea that it's going to be strong in the second half of the year. where? companies are rich with cash. they didn't need liquidity. they've been sitting there with an opportunity. we don't want it. we'd rather go back and buy our stock back. that's more important to them. they're telling you there is no up side, there is no growth, there is no revenue growth. these companies are in

retrenchment mode, they're in cost cutting mode and they're going to stay there. >> is there any chance for a positive profits? profits are the mother's milk of the stock market and for that matter the rest of the economy. is there any chance that a stronger than expected profit surge in the second half will occur? >> if we slash labor markets, if we slash employment. >> it's going to come out of employment. >> cut back on what we pay the individuals, you know, reduce wraj and salary growth, yeah, we'll be able to do that. longer term it's not. the interesting thing with the tapered discussion, i spent most of my time with issuers as well as investors. i got a sense that some of these guys were starting to say i can no longer squeeze profits out of costs, i've got to go for revenue. then they start to taper, the interest rate backs up. they pull in their horngs. >> we've got to get out. this big jump in rates coming

real fast is going to have a big impact on the economy. i have to believe that. i think people are kids themselves. lee hoskins, thank you very much. steve, as always. larry mcdonald will hang out when we talk about how all of this will affect your money. could this be a great time to buy bonds? that's the asset that everybody loves to hate. you know what, a weak economy could bring interest rates back down. that's next up on "kudlow." later in the show, why work when you can bring in more money by applying for welfare. 24 isn't rhetorical. we have the devastating results of a new story later in the hour. later, free market capitalism is the best path to prosperity. i'm kudlow. we'll be back. hey linda!

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volatile trading day on wall street as investors tried to dig into the latest fed minutes. the dow closed lower to end below 15,000. stocks looked like they're taking a breather. let's bring back larry mcdonald and bring back zach and jack berugian. larry mcdonald.

the asset that everybody loves to hate is bonds. i just want to put this out there. if the economy stays where it is, which is less than 2% growth, and this business about the federal reserve tapering gets pushed further and further and further, why can't bonds rally? why can't long-term rates drop 50, 60 bases points? why not? >> there's an inflection point coming in bonds. they're extremely, extremely oversold especially on the ten-year level. on the ten-year-year-old the 200 day moving average is at 2%. bonds hit today 290 so the ten-year treasury in the united states of america is trading 90 bases points above its 200 day moving average on the yield. that has happened only twice since lehman, only six times in the past ten years. it's extremely, extremely outside the normal range. >> and is it bullish? >> the rates are going to come back down.

>> there will be a snap back and i think to the 250, 240 level, 2.5% versus 290. >> i don't want to sound overly bearish, it's not the end of the world, there might be a bond rally. let me ask you about the stock market. seems to me the stock market will have trouble getting out of its way. there are so many uncertain things unless profits come roaring back in the third quarter. where are you on stocks? >> we've been talking about a correction, a good solid 10% correction. we're smack dab in the middle of it. over the course of the last ten months we have seen the rotation out of fixed income into stocks. it's what drove the yield from 1.5 up to 2.9 in the 10 year, but pay very close attention to what is happening over the course of these last couple of days. the selloff is indicative and is acting just like a bull market break. i mean, if we look at a dictionary under bull market, it says bull market breaks are fast and vicious. that's exactly the

characteristic of this break. it could get out of hand having said that. i do agree with larry. we are looking at what is a potential new term bottom in the bond market. >> that's a quote. >> ten years rates -- let me go to zach. i know you're a global guy but just here. you can get a 40, 50 bases point rally and rates come down in the ten year treasury market. that would be very healthy. >> think of it this way, larry. if you have 20% on your money, you've taken it off the table, 3% for the rest of the year does not look all that bad. that's a real good return for a portfolio. >> zach, where are you on this story? >> there are two things about bonds. there's money to be made because people trade bonds which is a very tiny portion of the overall market and then there's the amount of yield that people are getting on the bonds. people think this is a place for a yield. it hasn't been true in the last three or four years, i don't

think it will be in the next three or four. there may be trading opportunity. bonds are where the risk is in the global system because it's where people perceive there to be no risk. >> bonds are getting slammed overseas. >> that's a completely wrong reading as if the entire emerging market is simply a product of easy money emanating from the united states. i almost find there's something, you know, as if somehow the united states is the determinant of emerging world growth. i think that's structurally wrong. i think that's culturally misguided. i think it will prove to be fundamentally false. equities, they've been doing extraordinarily well for three years now. they've been doing really badly from 13 years from the peak in marve 2000. the only locus of activity is what companies are doing, whether earnings are great or bad. they're a whole lot better than any national economy. >> putting the fed aside, what is your outlook for equities? >> short term i'm negative.

good bounce in the next couple days, we're very close to the s&p at this level is very close to support because we're down to 60 handles from the recent high. i see a bounce and then a move sharply lower. i think the systemic -- >> sharply lower. i have an index in my 17 lehman risk indicators. interbank lending in asia is extremely tight. five year cds on hsbc, on standard charter, the asian banks, that's where the crisis is this time around. five years ago it was in the u.s. with lehman. now the asian tensions will drag u.s. stocks lower. >> all right. jack, we're uncertain about profits. we're uncertain about the economy. we're uncertain about the fed's policy and interest rates. we're also uncertain about the new fed chairman which is going to play a role more and more. there's this crazy public debate going on in washington between janet yellen and larry summers. awfully hard for stocks to hurdle over those uncertainties,

isn't it? >> absolutely, larry. that's one of the reasons why a month ago i got upset about it. it's contracting over the last quarter. even if profits are picking up with that top level contracting, it's going to be very difficult for us to get some momentum. having said that in the tapering talk, there is no way the fed can taper. listen, the numbers have been coming out so weak and we have been talking about them week after week, there is no way this fed can taper. if they do, they will send this economy into shock. >> that's what i think. >> absolutely. >> that's what i think. i think the economy is too weak to do anything to put in less cash. i think this is the wrong time to do that. zach, let me come back to you. if you are worried about the u.s., would you go into the international markets? are you brave enough to go back into international markets? >> i'm brave enough to dip. i don't know whether that crisis that may or may not come in

asian banking will be short, sudden and vicious and, therefore, will reverse itself within a matter of weeks. that's certainly possible. whether it will happen in -- it will take years or it won't happen at all, i certainly know there's been a huge selloff in the emerging markets which have been since june. we're talking double digit decreases in what have been less volatile classes. 30% in the last month or so. >> maybe it's a sport. >> i'm certainly beginning -- >> maybe china is stabilizing. >> look, my chronic bet here until i'm wrong is that china will continue to manage their economy better than anyone else manages their economy. >> we'll leave it there. very interesting. china, maybe that's the place to be, larry, zach, jack, thank you. syrian rebels say this is proof that their people have been attacked by chemical weapons. does this mean team obama will have to put up or shut up because of the so-called red

line? that story and more coming up on "kudlow." [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. ♪ a quarter million tweeters is beare tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less.

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believes year on year revenue growth is, quote, unlikely. you can hear more from whitman on "squawk box" tomorrow morning. in other news, 35 years in a military prison, that's the sentence the judge slapped private bradley planning with today. manning began leaking documents on u.s. conduct in iraq and afghanistan in early 2010. he will not be eligible for parole for at least eight years. and syrian rebels have released this video. they say it shows they have been attacked with chemical weapons by the assad regime. it was one year ago that they called the use of chemical weapons in syria the red line. right now france and britain are demanding that u.n. inspectors be allowed immediate access to the site of the alleged chemical weapons attack. larry. >> what's the buzz? how bad is h.p. going to hurt the market? coming off the fed, dropped 100

points. hp is not a great story. meg is going to be on "squawk box." >> getting hammered in the after hours, our colleague, john fore reports on the management changes just hours before that earnings report. that was probably your first clue that the report coming was not a good one. you saw p.c. sales down, storage and networking down. getting hammered, the stock has been a high flyer. 65% this year. down hard in the after hours. >> there you have it. josh, thank you very much. now has the social safety net become more like a hammock? a new report shows that it pays better to get on welfare than to work. oh, my gosh. this is a very heated issue next up on "kudlow." right now, 7 years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online.

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, he's probably america's number one political pundant and an expert on money and politics. that is larry sabato. he will join us to talk about hillary clinton's chances of being president and also a special online course that larry is about to launch about the legacy of john f. kennedy.

we all know what the best path to pros teperity is. what happens when people don't follow that path because well care is more beneficial than work. welfare benefits pay more than minimum wage in 35 states. welfare benefits come out to more than $15 an hour. that can't be good. here now we have former democratic national chair committee, howard dean. we welcome chris edwards from the cato institute. i want to go through this mike tanner piece that you put out. he's saying in new york, let's use new york, i want to make sure i understand. if you're on welfare, medicaid, food stamps, public housing, utility assistance, so forth, so on, you get $38,000 worth of welfare benefits in sum and you don't pay any taxes on that, so somebody who works has to make a

lot more, $21 an hour. is that what you're saying? >> that's right. in about 2/3 of the states the combined welfare package for a hypothetical family of a mom and two kids pays more than if the person was self-sufficient working in the private sector. so as you know, this is a real problem because the bigger the welfare benefits get, the less incentive there is to work. i mean, people think we solved the welfare problem in 1996. we haven't really. and one of the reasons is because welfare programs like food stamps have continued to soar in cost. >> why is there no -- just get to howard for rebuttal. why is there no tax on any of these welfare benefits? you're right. food stamps have been soaring. other forms of social security disability insurance has been soaring. the whole government benefit center has been soaring. why is it that there are no tax penalties on any of these

welfare assistance programs? >> well, there is a basic trade right now that everyone who works pays payroll taxes which can be very high, but that is offset by the federal earned income tax credit. so in a way taxes are awash and the real comparison is between the total sum of welfare benefits from all these programs like food stamps and tanf compared to an individual working and earning wages in the private sector. the bigger the welfare state gets, the less incentive especially for young people in their teens and 20s to work because they usually face low skill, low pay jobs. so the big danger is for people in their 20s getting hooked on to welfare rather than working. >> all right. governor dean, generous welfare payments giving people bad work habits? >> first of all, i think there's some fundamental mistakes chris made. i have a question. first of all, young people who aren't married and don't have

kids aren't eligible for welfare. the last statement i'm not sure exactly where that comes from. single men aren't eligible for welfare. single women aren't eligible for welfare in most programs. secondly, i think the solution here is to raise the minimum wage and make work pay. one of the reasons, for example, that food stamps have gone up is not because people are abusing them, it's because we've had a terrible recession and people are out of work and people's wages have not increased. the average wage in the bottom 80% has not gone up since the year 2000. we have a wage and economy problem, not a welfare problem. i read the study not thoroughly as you read it when you wrote it and put it together. you put in every benefit you could possibly think of in order to come out with a wage level of whatever it was, $38,000 and all of that stuff. what's in the other side? what's in the working part? is there, for example, health insurance benefits? did you put those in there?

did you put retirement plans in there because if you didn't, then it's not apples to apples. >> what's in there, chris? let's start with that. >> howard raises a good point. the study by michael tanner compares a package of government benefits for a mom and two kids, wi wic, tanf to being self sufficient in the private sector. it's not a perfect comparison. michael left out, for example, an additional cost of working which is often transportation or purchasing clothes so there are these additional costs of working which the study doesn't take into account. >> what about -- >> there are biases towards people toward welfare. >> what about the related question howard asked, single men, single women not eligible for welfare? >> well, sure. it depends on the state, but he's generally right. but the study looked at a hypothetical family of a mom and two kids and i think those people can get trapped into, you

know, being, you know, long-term welfare just like single men can. there might be less of a problem with single men, but it's a problem i think for everyone who has low incomes. i agree with howard that part of the solution is to raise wages. i would do that, larry, by supply side economics. increasing productivity and increasing capital investments. that's the way to raise wages across the economy to help solve this. >> governor howard dean, you know just as i know that if you force the minimum wage up you are going to create more unemployment, particularly around the marginal part of the population that you guys are talking about. you know the minimum wage can't work. >> of course it does. that's been the argument of the supply side, which i have no support for -- no respect for at all. that's nonsense. minimum wage does work and it's necessary. however, there is a place of agreement here. the agreement that i think i have with some of the folks that are talking about this issue,

i'm not sure we agree on what to do about it, but i do believe that long-term welfare makes people dependent and makes them less likely to be able to support themselves because of the lack of skills. that's a problem. and as you may remember in 1996 when there was a time limit on welfare benefits, what we did, we did welfare reform before the president did, president clinton did, we did a version of it where you would have to work but we would also give you credit forex tra college courses and stuff like that. i think the narrative, we can disagree about the statistics and the solution because i think minimum wage is important. i don't think it enables people. >> that's in the article. that's in the article. >> i think that's right and now we have to deal with that. people should not be on welfare long term. that's a matter of improving their education and skills. >> everyone is in favor of education. we pour money at it and don't get good schools. i would say it looks to me like

when you look at the welfare problem, the analysis may not be perfect to everyone's taste. when you look at that and you look at what's happening with food stamp explosion, you look at social security disability explosion, you look at what's happened with general increase in government benefits, you have to ask yourself, isn't be it time for another scrub of eligibility requirements like we did back in 1996? maybe every so often we just have to do that. you have almost half the population on government benefits and that cannot be a good thing. i don't want to play the blame game. i don't want to sound like the bad guy. i think it's time for another scrub on eligibility. we'll discuss it some more. i'm sorry. howard dean, thank you very much. chris edwards, thank you. federal court rule banning on stop and frisk has put the new york mayor's race in the spotlight. one of the candidates will join us with his own take.

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there's more to new york city's elections than just disgraced candidates like anthony weiner and eliot spitzer. weeks before voters head to the polls a federal court has banned

the city's stop and frisk. with the city finances in the spotlight, they're in the spotlight where the pension woes continue and the city's 300,000 employees are working under expired contracts. it is, in short, a mess. so here now to tell us how he'll get us out of this republican mess is john katsamias. he's the ceo of the red apple group and the united refining company. it's not a republican mess so much as it is a bipartisan mess. john, welcome back to the show. let me just begin with this crazy judge, this liberal judge. stop and frisk. what is your position on that? >> we have the safest city in north america. one of the safest cities. and to get back our streets we certainly don't want to turn new york into chicago. chicago has four times the murder rate that new york has. many of us remember from 20

years ago when we were scared to walk around at night. all our citizens were scared to walk around at night and we do not want to take back new york to those days. there's actually the stop and frisk law. we should use 21st century technology. >> just to clarify, john, the court order wants to appoint a monitor. the monitor will oversee police chief ray kelly or the whole stop and frisk plan. are you opposed to any kind of monitor? are you opposed to any kind of sanctions? are you opposed to any kind of, you know, legal councils overlooking the police force? where with you come out on that? >> we already have five district attorneys, two u.s. attorneys in new york and we already have a civilian review board. i mean, if you want to change the name of the head of civilian review board to another name,

that's fine, but that already exists. what does the federal judge know about keeping people safe? >> right. >> and i support commissioner kelly and i support mayor bloomberg in their thoughts that it's not needed. >> all right. would you reappoint mr. kelly real fast? >> in a heartbeat. i hope he wants to keep the job. >> great stuff. i want to go on, john. a couple of weeks ago your challenger in the republican primaries, joe loda, appeared on this show. he offered up his thoughts on tax cuts in new york. john, please take a listen. >> well, there are a couple of taxes i want to get rid of right away. we tax capital in new york city. it's outrageous that we're in a city that should be all about capital formation. we tax young companies when they don't have any income. we decide to charge them a capital income. i want to start the process of eliminated unincorporated

business tax. we have a tax on a tax in new york. enough. >> john, you heard him he wants to get rid of the capital tax on equipment and incompetent vestment, even new companies. he wants to get rid of the unincorporated tax on business and the commercial rent tax. do you agree? do you agree with those tax cuts? >> i definitely agree. i go far beyond that. i have already announced that on january 3rd i become mayor i freeze all taxes that the mayor is responsible for. that includes property taxes. larry, nobody talks about this. in the last 11 years our taxes have gone up 50% above the inflation rate. >> i'm going to stop it on january 3rd. >> why don't you cut them. >> find a way to drop them. >> why don't you cut the city income tax? the democratic candidates who are running, all the leaders, okay, they hate cops. they hate kelly. they hate business and they want to raise taxes on the rich.

why don't you counter publicly with an income tax cut of your own? >> i did say that i will freeze taxes on the way to cutting them and that's what i believe in. i want to look at that budget. i want to find out what's going on from the inside looking out and i want to cut those taxes. >> all right. what are you going to do about these unions? there are no contracts. bloomberg left that to whoever is going to be his successor and doing a little homework, as i'm sure you know, health benefits for the new york city government unions, health benefits, basically there is no co-pay. 95%, no co-pay. the taxpayers hand it over. you have to negotiate, john. what's your position going to be? >> we're going to sit down and work out a hard deal and we're going to make a deal that is going to keep all workers happy but at the same time make our taxpayers happy. i'm the only one that's working for the taxpayers. i don't need this job, larry. i'm going in there to make sure the taxpayers get the right deal

and the city goes in the right direction. >> does that mean -- i just want to be specific here. does that mean that you will ask and force and demand the city union workers to have significant co-pays like 25% as so many other cities do regarding their health benefits? will you force a co-pay situation? >> i will not negotiate a union contract on television, larry, and i will work hard for the taxpayers. you know what it comes to? whom do you trust to work a great deal for the taxpayers? and i'm the one, larry. >> all right. more to be revealed. john, republican candidate for mayor, thank you very much. appreciate it. >> thank you for having me. folks, who's the best person to ask about the 2014 mid-term elections and the 2016 presidential contenders. you can't beat larry sabato for that. we'll also ask him for a special new online course about john f. kennedy that saab ba tow is

about to watch. join us next up, saab ba tow from virginia on "kudlow."

in 1981 my critics charged that whether you keep more of your earnings would trigger an inflationary explosion, send interest rates soaring and destroy our economy. well, we cut your tax rates anyway, by nearly 25%, and what that helped trigger was falling inflation, falling interest rates, and the strongest

economic expansion in 30 years. >> all right. that, of course, was my former boss, president ronald regan, a true pro growth tax reformer. what you may not know is that reagan was often quoting another supply side tax cutter and liberty defending hawk who was also a democrat. that person being john f. kennedy. in fact, between his 1980 inauguration and 1984, reagan cited j.f.k. an astounding 133 times. reagan knew how to give credit where credit is due. anyway, my question tonight in the nearly 50 years since kennedy's tragic assassination, what has gone wrong with the democratic party? why have they lost kennedy's legacy. here to tell us all about it is larry sabato. he's the author of the soon to be released book "the kennedy half century." before i get to the j.f.k. thing, a story in the paper

today or yesterday, the joe biden forces are coming after hillary clinton hard for the nomination in 2016. my question is can hillary be up ended by joe biden? >> it's very unlikely, but i will say this. it's possible, larry. remember in 2006, 2007, what were we saying? hillary couldn't possibly be beaten. you never know. >> that was the answer i hoped you'd give me. let me ask you, besides joe biden who else in your judgment right now might be out there to challenge hillary who you think is not unbeatable? me, too. she could be beaten. >> well, governor martin o'malley is all but running, the governor of maryland. he clearly wants it more than any of the other candidates beyond hillary and biden. you know, if hillary doesn't run, i don't think it's likely. i think it's very unlikely she

wouldn't run. if she doesn't run, kady bar the door you'll see democrats right, left and in the middle running. >> let me ask you this. you do think she is going to run. >> when has a clinton not run when they've had the opportunity to run for a public office? never. >> i hear ya. let me go back to jfk, my favorite democrat. ronald regan's favorite democrat. kennedy's legacy, let me ask you. he was a tax cutter, a supply sider, a defense hawk. pay any price, bear any cost for american freedom. democratic party has lost those things. >> they sure have. larry, what my book does, "the kennedy half century" is to show how conservative john f. kennedy was. the public today misremembers him. we have a major poly peter hart and jeff gairn. he was very anticommunist and he had a conservative growth policy on economics which you know well

because ronald regan copied it and ronald regan used john f. kennedy's legacy better than any other president other than lyndon johnson who succeeded kennedy. >> i mean, in an odd way, maybe not in an odd way, just in a way kennedy's legacy was greater, yes, on reagan and then subsequently on the republican party. these are still republican themes. kennedy, by the way, was a budget hawk. he wanted a lower budget while he was lowering marginal tax rate. kennedy had a much bigger influence on the republicans. >> one of my themes in the "kennedy half century" is of the nine successors to john f. kennedy, ronald regan actually copied the kennedy agenda more closely than any of the others. larry, the democratic presidents tended to use jfk's rhetoric. they loved citing what kennedy said in his inaugural address or in this speech or that speech

but it's ronald regan and to a lesser degree other presidents who copied the policies of john f. kennedy. it's fascinating. it has been an eye opener for me. >> kennedy didn't want to tax rich people. he didn't want to cut the defense budget. kennedy used liberty all the time. i don't hear that from the current democratic party and i don't expect to hear it. >> as you've pointed out or will point out in your own forthcoming book on the tax cut, kennedy actually in proportionate terms had a larger tax cut than ronald regan did. >> yes. yes. you're absolutely right. going from 91 to 70 is a bigger cut than going from 70 to 50 which was reagan's initial one. you're absolutely right in proportional terms and economic terms. we're going to explore it. how, when, where, why did john f. kennedy turn out to be a supply sider because in some sense he's the father of the

modern republican party even though democrats aren't going to -- they'll never admit it. hillary won't run as john f. kennedy. larry sabato, thank you. as always, that's it for tonight's show. thanks for watching. i'm larry kudlow. more free market economics. yep, there i am with flo. hoo-hoo! watch it! [chuckles] anyhoo, 3 million people switched to me last year, saving an average of $475. [sigh] it feels good to help people save... with great discounts like safe driver, multicar, and multipolicy. so call me today. you'll be glad you did. cannonbox! [splash!] to experience the precision handling of the lexus performance vehicles, including the gs and all-new is.

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>> narrator: in this episode of "american greed"... kenneth ira starr is the money manager to hollywood's a-lists. >> among his past investors, annie leibovitz, martin scorsese, sylvester stallone, wesley snipes. >> you know, the names just went on and on. >> narrator: starr woos potential clients, but he doesn't stop there. >> ken wanted to be his clients. and he used my mother's money to purchase influence. >> narrator: he steals $30 million to buy his way onto the a-list and live in the lap of luxury. and it's all in the name of love. >> you know, when your money manager starts going out with a stripper, that's a tell.