solar city, that's another hot one. so, one thing that we have to conclude, a little too much stock coming all at once. let's be a little careful. there's always a bull market somewhere, i'm jim cramer and i'll see you tomorrow! key leadership lawmakers in both political parties came out in support of military action in syria after today's meeting with the president. but it may be a tough close slog for mr. obama. and it's noteworthy, by the way, that stocks fell when the leadership endorsed an attack. and might a majority bipartisan vote on syria spill over to fights on the budget deal and the debt ceiling? is such a thing possible? by the way, the fed's next meeting, september 17th and 18th, that might be smack in the middle of a syrian bombing operation. what might that mean for the central bank? oh, my goodness.

hold on. "the kudlow report" begins right now. good evening, everyone. i'm larry kudlow. this is "the kudlow report." president obama and his national security team continued to make their case for war today, urging members of congress to authorize a military strike against the syrian government. the president and his team warned that if the answer from congress is no that more chemicals and even worse wapz could be used by dictators like syria's assad. eamon javers joins us live from washington with the details. good evening. >> reporter: secretary of state john kerry made the administration's forceful case for military action on syria up on capitol hill today, testifying before his former committee, the committee that he chaired, the senate foreign relations committee. kerry said there were a number of reasons to take military action in syria. among them is that america's

potential enemies are paying attention. take a listen. >> the world is watching to see not just what we decide, but it's watching to see how we make this decision. whether in a dangerous world we can still make our government speak with one voice. they want to know if america will rise to this moment and make a difference. >> secretary kerry pressed congress for a vote on some kind of written resolution, the text of which is not clear yet. the administration would like that as soon as possible. but kerry was asked whether or not the administration could commit that if they lose this vote up on capitol hill that the president would not take action. secretary kerry did not make that commitment. he also said that it is very clear here what would happen if the united states does not take action. he said that bashar al assad, the leader in syria, would continue to use chemical weapons against innocent civilians. and that, he said, is not

acceptable, larry. >> eamon, may i ask, who's going to write this resolution? the first one that i saw from the administration totally open-ended. you know, we could have invaded three planets, mars, venus, and saturn. who's going to write the new resolution? >> i think your reaction was the same reaction that a lot of members on capitol hill had, and they said, wait a second, we're going to take control of this. in the senate foreign relations committee today, the chairman of that committee, senator menendez, said they might have a draft to start working on as early as tomorrow. so he advised his fellow senators to be ready to start doing this. and they also had a classified briefing for those members of the committee tomorrow. they're going to be able to go into a lot more of the details on the intelligence around what syria's done here than they could have done today in the public setting. >> all right. thanks very much. eamon javers. we appreciate it. as always. all right. some brief thoughts from me. i think this whole thing boils down to american credibility. american credibility is on the line. by the way, not just for president obama but for the

institution of the presidency itself. and i believe america cannot stand by and let dictators think they can use weapons of mass destruction. that's my view. joining me now, fresh from inside the senate foreign relations committee, wisconsin republican senator ron johnson. and we're also honored to be joined by former deputy secretary of defense paul wolfowitz, now a scholar at the american enterprise institute. senator johnson, after sitting through a very lengthy hearing today and listening to mr. kerry and mr. hagel, what do you take away? will you, do you expect to support this syrian resolution? >> larry, i still have an awful lot of unanswered questions. and i think the classified briefing is going to be key for me so i can really start getting into exactly what is the strategy, how far is this administration willing to go. what are the stated objectives? have they really thought about the repercussions? what would be the planning in case this thing doesn't go as smoothly or if they can calibrate it as closely as they think they can.

i still have an awful lot of unanswered questions. >> it seems like, senator, the administration has really changed its tone now. instead of saying no regime change, we're not going to cripple the military, what i'm hearing from contacts in washington is the administration is open to basically wiping out the syrian air force, taking out their air fields, taking out artillery, taking out weapons delivery systems, and a whole variety of areas that would in fact cripple the syrian military and would cripple assad's power. is that feasible? do you think that's the kind of thing that's going to go into a resolution, at least implicitly if not explicitly? >> i don't think it would be that explicit. that was really kind of my line of questioning. i was kind of putting aside my stated goal of replacing the assad regime with the very limited goal of this military strike and i was trying to figure out, what are you really trying to accomplish here? until i really understand what the goal is, i mean, obviously they stated this was going to be a limited trying designed to

hold assad accountable, deter him and degrade his capabilities, but at the same time not really willing to change the conditions on the ground, to me it just isn't make sense yet. like i say, i've still got a lot of questions. >> if they do change conditions on the ground, if they do change the -- and mr. wolfowitz, i'll be with you in one moment, please. but senator johnson, if they do change conditions on the ground. if they change the balance of this whole battle, if they go forward with very aggressive bombing mission that's in effect would cripple the syrian military and syrian air force, would you be inclined to support the resolution? >> my bottom line is my biggest concern about the national security interest 6 of this nation is chemical weapons falling into the wrong people's hands. and that was what was really left unsaid-s is are they going to do what it takes to make sure that those chemical weapons, if the result of their action really was the fall of the assad regime, are they prepared to do what's necessary to make sure that those chemical weapons don't fall in the hands of al qaeda-backed rebels? i didn't get that answer.

>> secretary wolfowitz, can that answer be given? >> not with any certainty. it's a heck of a lot cleared than it was 2 1/2 years ago. we're dealing with a situation created by the president's weak leadership over the last 2 1/2 years, and now he's raised the stakes by drawing the congress into it. you're absolutely right that the credibility of the presidency itself, not just this president, is at stake, and i think that's why congress will probably end up supporting him. but as i think senator graham said, it's a choice between bad and worse. and a strike that is ineffective in some ways would be as damaging. what is crucial here and what seems to be missing is fundamentally changing the balance between the regime and the resistance. and doing that in a way to gives us some influence over the resistance and particularly the ability to strengthen the moderate elements of it. if the regime collapses or whatever the future outcome is in syria, if we're not going to have american boots on the ground, and no one wants that,

then we'd better have some syrians we're able to work with. and we have not been doing that for 2 1/2 years. >> paul wolfowitz, let me just ask you, today apparently secretary kerry referred several times -- he put saddam hussein in the same category as adolf hitler. okay? and as someone who presided -- you presided over the iraq war now. does yours and president bush's efforts for regime change look a lot better and a lot similar to what's going on in syria? >> i think there's actually a lesson from the earlier period with saddam hussein when we allowed him to slaughter maybe 100,000, 200,000 shia in 1991 at the end of the first gulf war. if we had stopped that then, we might not have had a second war. i think a lesson in general is you have a lot more options if you're willing to act early. we are leaving this syrian thing until very late. but i think if we do the right thing late would be better than never. >> let me come back, senator johnson. a lot of people have pointed -- besides syria, of course, other

dictators with weapons of mass destruction, chemical or otherwise. of course iran, north korea, hezbollah. i don't want to forget them. what about the regional conflict risk? in other words, some senators, some house members are saying this doesn't directly affect the united states. but of course it might very directly affect our allies such as israel. such as turkey. such as jordan and so forth and so on. is that going to be a strong calling card to support a new resolution? >> it should be. larry, i really think that syria does represent a real threat to our national security. and i wish the administration would make a far stronger case. i mean, they're making the case that obviously assad crossed the line using chemical weapons. but again, from my standpoint it's the out of control nation with the chemical weapons and like you said the loss of credibility of america that is really now at stake because this president has really backed us in a corner, drawing that red line. secretary kerry said it's a world red line. i agree with him. but then we should have been

working with the coalition of the willing for a couple years to set the conditions where we could actually usher in a far better regime than the assad regime. >> so let me just understand as best i can. what conditions you want to see that would get you to support a resolution. >> really basically a commitment out of this administration, unlike what they did in afghanistan where they announced a surge and at the same time they announced the date of withdrawal. if this president is going to commit our military to action i want to make sure he's committed to winning. and i'm just not quite sure of that yet. >> paul wolfowitz, there was a little tiff about boots on the ground, that the current resolution allows for that. first senator kerry said it did. then he circled back and said no, it's not. how important is that, boots on the ground? >> i think everyone has said boots on the ground are not the answer. there are syrian boots on the ground and we're not giving them the weapons to fight with.

that's the big mistake. >> isn't the big issue, okay, syrian boots on the ground. there's also rebel boots on the ground. >> that's what i mean. rebels, syrian boots. >> okay. fine. are we now -- it sounds like the administration has changed its view, that they want to give assistance -- i guess quote unquote, there are good rebels. they're in the south. the bad jihadist rebels are up north, and they're a lot fewer. there's some talk that the cia relea released 50 rebels into the south that they had been trained by the cia or american security operations. this kind of thing we need to do? >> larry, i think we should do it out in the open and overtly. maybe some of it is secret, but this idea that we can't, to quote ben rhodes back in june, i can't give you an inventory of what we're supplying. and then it turns out we're denying them gas masks. i think we should be very clear about what we're supplying them, we should be open about it, and we should be open about who we're working with. that's the best way to find out

whether we're working with the right people or not. >> what i'm hearing is from you, expert, a lot of conditions you want to see. i'm hearing the same thing from senator johnson. a lot of conditions. that's why i was surprised that the leadership in both parties, particularly the republican party, i'll start with you, mr. wolfowitz. why do you suppose house speaker john boehner was so quick to sign on and back the resolution without knowing what the resolution's going to be? without knowing if the conditions that you and senator johnson are talking about are going to be in there. why do you think he jumped in so fast? >> i'm not here to read the speaker's mind. but i think what the president has done, quite unfairly, is to put the congress in an impossible situation because if they vote no, even on a bad resolution, it's going to have -- you said it up front. consequences for the presidency down the line. and on the other hand, if they go ahead and endorse a plan which doesn't really exist and which is weak and feckless and ineffective, that's also bad.

so i think trying, as senator johnson is, to use the leverage of the congress to get the administration to commit to a serious strategy here and not just a one-off strike is i think the best you can make of a bad situation. >> senator johnson, last one to you, sir. we thank you for your time. if the resolution fails and the president goes on ahead anyway, is that politically feasible? what would that do? >> i think it isn't. quite honestly, larry, i think he has the authority to do so. i think the smart thing to do, though, is for the president to make the case primarily to the american people and really quite honestly to the world. that is where he's really shown failure of leadership. he hasn't even talked about syria for the last 2 1/2 years. and now all of a sudden we're at this crunch point. our options are very limited. they're all bad. they're worse than they were 2 1/2 years ago. but it's up to the president to make the case to the american public. i hope he does it effectively. >> she he make a speech? should he just go on and make a speech to the american public? >> well, whatever it takes. but it's more than just one

speech. president obama's good at making speeches. this is a concerted effort across the board to lay out what is really at stake in syria for the american national security. and i think there is a very good case to be made. they're not making a very good one yet. >> all right. many thanks, gentlemen. senator ron johnson, secretary paul wolfowitz. we appreciate. now, let's look at how stocks and oil are reacting to a possible attack on syria. and what you need to look out for. that's next up. later in the show, we're going to talk about the other major battles brewing in washington. it would be the threat of a government shutdown over the soon to expire continuing budget resolution. there's a related threat of the default on our debt ceiling. this whole story could get ugly and more complex. don't forget, folks, free market capitalism is the best path to prosperity. i hope whatever fiscal policies we have they're at least pro growth. i'm kudlow. we'll be right back.

the dow was up more than 100 points until a little before noon when it tumbled into negative territory. that's when speaker john boehner announced his support for military action in syria.

brent and wti crude oil also climbed to session highs at the same time. was wall street sending a message to washington? joining us for the rest of the hour, ron krish efsky, ceo of stiff'll nicolaus. and john kilduff, founding partner at -- was it a coincidence or does the stock market just want us to stay out of syria? >> the stock market wants to stay out of war initially, larry. they're going to be concerned about what could happen after the strike. but sure, the market doesn't like it. >> we've been there before. we've covered this other wars. particularly the iraqi war. and a lot of times stocks sell off going into it. and when the action starts and american supremacy is established stocks rally back and then some. >> it could be here too. this might be the most choreographed strike. even more than apple's

announcement of its new phone. i'm waiting for them toex when the strike is going to occur. >> are there going to be casualties? >> probably not. there may not be casualties with the strike either. i think they're going to say where it's going to occur. >> john, what about the oil part? >> well, it's sort of the same thing with the mirror image. last tuesday i think i was on right after that with you. we spoke about this. we shot up to $112 a barrel for wti when the strike seemed imminent, that night or it was going to occur this weekend. some of us were making contingency plans for this weekend. obviously it all fell apart. and when the president came out over the weekend and said he was going to ask for that congressional approval, when oil opened up for the first time after that announcement, we fell about $4 a barrel. so it just shows you how the oil market is a tremendous headline risk right now in the oil market. it will spike up as we get closer. slow grind as we get closer to the strike date. it will spike on the announced strike. and then we're going to hold our breath to see what happens because of the retaliation. >> the retaliation is very

important. and i just want to ask you, there is something of a civil war going on in iraq. we don't like it, but that's life. the oil is down south in the basra region. if those oil flows -- there's a lot. they've been pumping a lot. they're back to about 3 1/2 million barrels a day, if i'm not mistaken. would that be the trigger? there's no oil in syria to speak -- or just a tiny amount. would it be southern iraq, the basra region? >> well, actually, the southern iraq region is a bit away. what we're more concerned about is iraq's northern export capacity. that's the part that goes up right off the syrian border through surky out to -- >> but this is the kirkuk. >> this is the kirkuk pipeline. >> there isn't a lot of oil coming through there. >> plus some azerbaijani oil comes there across turkey as well. it's nearby. that'll be the most in play. i think most of us in the oil market are more concerned about does israel get dragged into it via a rocket strike of some kind? that automatically gets the u.s. deeper into it.

>> it's just a conflagration effect, it becomes a much bigger action -- >> the real risk is northern iraq oil, 100 million barrels per day plus supply coming across -- >> i didn't realize it was as much as a million and a half barrels a day. ron kruszewski, another odd thing about this story, the federal reserve meeting september 17th and 18th, next week you'll get to hearings and a vote on the syrian resolution. the fed could be meeting right during a u.s. bombing mission for syria. what would that mean? >> it might be more important than the unemployment report this friday. >> do you think that was stopped enough from taking any action? >> i think it's going to be the spillover effect. it's going to be what happens after we have the strike. i actually think if nothing happens, it's what happened when clinton did it in the late '90s. oil i think will drop, actually. it's what happens after the strike. and that's sort of what no one knows. >> would you make for investors,

would you make a bet on it now or is it just -- or you have to stay on the sidelines? >> you know, i'm not going to bet on whether there's going to be an outcome, but i do think that this has been pretty well telegraphed. it's almost like saying, look, we have to do something, let's not let this ge out of -- >> there may be a larger action than initially thought. i mean, obama's changed his tune. the whole thing is sort of blown out -- and now i think you're going to see, we heard this from senator johnson and former secretary wolfowitz, we have to be you have tough. this is what mccain wants and lindsay graham. we have to go after their air force. we have to go after their artilleries, after their rockets. that was not really envisioned initially by obama. that maybe is what the stock market's worried about. >> that is what the stock market's worried about. i think he was trying to do something to retaliate. look, you can't do this. the u.s. has to do something -- >> the shot across the bow you don't care. >> and the retaliation could be greater. >> and would you say people should be into cash? >> i'm not going to speculate on

what's going to happen. at the end if the market drops i think it's a buying opportunity. >> would you buy? would you go into this long oil, john? >> you have to be pretty fleet of foot, larry. i would actually -- i think last time i was here i talked about buying puts or some other way to get yourself short the oil market in the aftermath of this or as it's happening. it's really hard to buy it here now and be in position to sell it when the bombs drop. usually, these things occur at 2:00 in the morning our time. but the pullback can be quite dramatic here, i think. once things settle out. it may go beyond a pinprick and that may be the greatest fall. >> it is going to go beyond a pinprick. but i think what makes this different, and i agree with both of you, you have to be so defensive and cautious here, is the spreading of the conflagration. that's what we don't know. with respect to israel, with respect to jordan, with respect to turkey. with respect to hezbollah. those are things we just don't know. and that's really a risk premium factor. >> that's what the market's worried about. >> one other fascinating background thing here, larry-s where does iran come out on this

for real? there's chatter out in that they're wavering on their support for assad and that there's back channel talks with the u.s. to maybe get back to the negotiating table for real. that could be a real october surprise for the oil market on the down side. >> that might be right, something positive for a change. thank you very much. john kilduff, as always, we appreciate it. ron kruszewski is going to stay with me for the remainder of the show. right now some very big numbers showing you just how many workers are quitting their unions. and it's all because of obama care. cnbc's seema modi has that story and more for us just ahead. please stay with us. "the kudlow report."

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sign of fracturing in one of the country's biggest labor unions, and it's all about obama care. cnbc's seema modi joins us now with that and other stories. good evening, seema. >> good evening, larry. that's right. the international longshore and warehouse union and its 40,000 members are cutting ties with the afl-cio. the union wrote a letter to afl-cio head richard trunka explaining the move saying that obama care taxes workers with so-called cadillac health plans. the letter also complained about trunka's stance on immigration. and the new span of the bay bridge between oakland and san francisco opened this morning. it replaces a structure that was damaged by an earthquake in 1989. plans for the project started in 1997 but was delayed for years. keep in mind the final cost of

$6.4 billion is more than four times the original estimate, larry. and lastly, cbs and time warner cable ended their dispute. so cable customers in new york, los angeles, and dallas get their cbs stations back just in time for nfl season. analysts say cbs clearly won the standoff. it got a big increase in the retransmission fee. and it also will be paid for digital rights to its shows. larry? >> i wasn't laughing. i know that bridge had to be repaired. >> right. >> but it's just an example. all right? infrastructure, even necessary infrastructure, costs a bloody fortune. and when people throw out let's do infrastructure, they should keep that in mind. it's unavoidable. that's just the way it works. >> absolutely. and that should definitely be something to think about when they make these budgets. >> seema mody, thank you very much. going to be joining us later on in the show. washington isn't just wrestling with the syria question. there's also a battle brewing over the debt ceiling and the continuing budget resolution

runs out at the end of this month. the clock is ticking. but is it possible that a bipartisan syrian coalition could lead to bipartisan solutions on the fiscal side? oh, my god, i'll ask my panelists. i'm probably dreaming. but please stay with us. mom, dad told me that cheerios is good for your heart, is that true? says here that cheerios has whole grain oats that can help remove some cholesterol, and that's heart healthy. ♪ [ dad ] jan? ♪ ♪

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welcome back to "the kudlow report." i'm larry kudlow. in this half hour, how about some good news for a change? clearly not everybody gloomy about the future. verizon, microsoft, and some others made some big acquisitions in the last couple days. we're going to talk about what these big mergers mean for the markets. and later, today's economic reports positive. ling manufacturing and construction spending both going a lot higher. we're going to break those numbers down, tell you what they mean. but first two, other battles loom much closer to home. congress has until october 1st to act on a continuing resolution and avoid a government shutdown. then congressional leaders need to come to an agreement to raise the debt ceiling. now, house speaker john boehner has promised to avoid a government shutdown, but he still vows a whale of a fight on the debt limit.

or, or is it possible that a bipartisan syrian coalition could spill over into fiscal policy? i know. i'm dreaming. but i have to ask. joining me now from washington, dean baker's the co-director of the center for economic and policy research. and former congressional budget office director doug eakin. and stay with me stifel nicolaus president and ceo ron kruszewski. okay, dougie, i have to ask, is it possible that if they come together on a syrian military resolution of some kind it spills over? the only reason i ask this silly question is it all happened so fast. right? you're going to be done with the resolution in ten days or a week and then all of a sudden bang, you've got your continuing resolution for october 1st and bang, you might have a debt ceiling in the middle of october. what's your take? >> well, larry, i admire your optimism. most people think that stirring the syrian issue into the pot makes things harder, not easier. but there are some common elements.

and i think the key is the common elements in getting the debt ceiling increased, getting a cr done are spending cuts, and there are reforms in the mandatory spending programs, the big entitlements. to get that done you have to have presidents providing leadership with the democrats. and that's also true in syria. he's going to have to get some democrats to support him on the syrian issue. and it may be the mechanics are similar enough it will work twice. we'll see. >> dean baker, mr. boehner has pledged that for every dollar increase in debt he wants to cut a dollar spending or more. he's pledged to oppose any tax hikes. i want to ask you about the sequester, though. the president wants to get rid of the sequester. but we're in a war. and a lot of people, including the joint chiefs of staff, have said that the army and the rest of the military is not sufficiently equipped. and the reason is the sequester and also budget cuts before the sequester. dean, do you think what's going to happen here is defense spending is going to go up no

matter how the deficit is? >> well, i don't see any way that you're going to break the tie that we've had between defense, discretionary and non-defense discretionary. there's a lot of areas of the budget that have been cut. and i don't see any way on earth you're going to get president obama, the democrats -- doug was just talking about how the democrats might go along on entitlements. that's going to be a real hard push. but if on top of that you ask them to go along with increasing the military budget and having no changes to domestic discretionary, that's not going to sell. president obama's not going to be able to get the democrats to go along with that one any day of the week. >> i grant that dean is right, it's going to be a tough sell. but we've heard it from the joint chiefs. we've heard it from a lot of people that defense spending is just too low. for example, the volume of bombers. you've got to have bombers to drop these bombs. and the cruise missiles. people say we're not even close to the levels we should be at. >> we're running right into a military confrontation right now. this issue's going to come up front and center. >> i mean, this is exactly the

wrong time to be short bombers, when we're talking about a bombing mission. >> absolutely. and if you think that something goes wrong or something doesn't happen right you're going to see defense spending go up. >> all right. what do you think, doug? >> it's very difficult to imagine the president getting democrats to do this. but it is the problem. all roads lead to the entitlement programs. because of the democrats' absolute unwillingness to cut those programs and undertake any meaningful reforms, the cuts are having to take place in the defense budget, which is unwise. and in the non-defense discretionary budget, which is at the heart of the democrats' domestic program. if they could get themselves to the point where they could undertake in serious reforms it would ease pressure in the other parts of the budget that really do need to be addressed. and i don't think that's in the cards, but that's the right thing to do. >> i want both of you to react to this. two washington guys, insiders. dean baker, i'll begin with you. if the syrian war goes badly, that i mean if it spreads, if

the bombing is greater than we think, and i think it is going to be much greater, if it spreads to the countries around syria, if it becomes more intense, what does that do to the fiscal deadlines? in other words, can congress put together in the middle of a war situation that nobody visualized and anticipated, can congress put together these deadlines without shutting down the government or without defaulting on our debt? >> i think they will. but let's stet back for a second. the presumption is you're going to war and nobody knows what they're doing. that may be true but that doesn't speak very well. doug suggested we may want to cut social security and medicare to pay for a war in syria. that's not just unpopular with democrats. that's hugely unpopular with republicans as well. i would urge speaker boehner to go put that on the table to his constituency. i don't think a lot of people want to see medicare and social security cut to have an air strike in syria. >> that's certainly -- dean

knows better than that. that's not what i'm proposing. >> in effect it is. >> we have an unsustainable fiscal situation. we haven't touched it in the last five years. remains unsuss feignable. there are some legitimate national security concerns about readiness. those can only be relieved by providing some budgetary space. same is true for non-defense spending. this isn't about a near-term issue. this is about a fundamental problem that's being unaddressed. >> i agree with both of you. i don't expect any entitlement reform, at least not in this session. >> i'm agreeing. >> there's not enough time. >> not in my lifetime. >> ron says not in his lifetime. >> i'm asking a different question. >> i know. >> and i'm not attacking -- look, there's known unknowns and unknown unknowns, to quote rumsfeld. and this may be an unknown unknown situation. how can we possibly understand what the reaction is to a tough bombing mission to the countries around? we have israel, as i said before, jordan, turkey. there's iran. i don't have to go through the litany. you guys probably know better

than i do. what i'm asking is these budget deadlines come up so fast. the government shutdown threat on september 30th, october 1st, and then the debt ceiling according to jack lew, treasury man, in mid october. can the congress do all this at the same time? >> i believe -- >> wait, who says they believe they can? >> that's me. >> i think we both do. >> look back at history, larry. when george w. bush came into office, he was a domestic policy president. he was not a presidency to be defined by international issues. it turned out that it was. and the congress acted rapidly to do what they asked and they threw the fiscal concerns out the window. the same thing would happen here. >> dean baker, i'll give you the last shot because actually, when you look at the numbers, spending has come way down and deficits have come way down and revenues for a variety of reasons, some of them are tax hikes, have gone up. do you think, dean, that this process will go smoothly? no breakdown in the government and no breakdown in the debt

ceiling extension. do you think that'll go smoothly? >> it's not a good political move. the republicans have lost when they brought this to a head. and it's hard for me to see that changing now. my expectation is maybe they'll get a fig leaf but i think at the end of the day you're not going to see a government shutdown, you won't see a default on the debt. >> thank you, gentlemen. we appreciate it. nour, it now, it's been a very busy few days for mergers and acquisition pz. the verizon vodafone deal is $130 billion alone. next up on "the kudlow report." (announcer) at scottrade, our clients trade and invest

exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. just by talking to a helmet. it grabbed the patient's record before we even picked him up.

it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. a busy weekend for mergers and acquisitions as two huge deals and some smaller ones were announced this morning. seema mody joins us once again with all the details. what you got, seema? >> all right, larry, let's run through these big deals. microsoft first announcing it will buy nokia's handset business for $7.2 billion. shares of nokia soaring more than 30% as investors added $4.5 billion to the company's market cap today. and nokia's ceo and microsoft alum steven alop will head the

combined mobile business. some see him as a successor to outgoing ceo steve ballmer. verizon will play $130 billion to buy vodafone's 45% stake in the company's verizon wireless joint venture. the long sought-after buyout gives verizon full control of the country's largest and most profitable wireless provider. the deal also infuses vodafone with cash to invest in its core business in europe as well as emerging markets. and shares of jarden company closing up better than 10% on news it will purchase privately held yankee candle for $1.75 billion. the acquisition of the country's largest scented candle company is expected to boost jarden's branded consumables business. >> i get that. seema, stick around. want to talk some more about these deals and whether they're a good sign for the economy, the stock market, or anything. joining me now is cnbc's dominic chu. ron kruszewski of stifel nicolaus is still with me.

dominic, welcome. if this is so good how come microsoft's stock went down 4%, how come verizon's stock went down 3%? may i add verizon should have done this a couple years ago. they did it because the federal reserve is financing it with ultra cheap credit. that's my view. zblts an interesting view to have. you know why. because see this rush to do deals when you start to see interest rates maybe start to tick higher. the easiest way to get somebody to buy something now is to tell them tomorrow it's going to be more expensive. that's what happens with -- >> that's what i'm saying. the rates have gone up a percentage point or more and they may go up another percentage point or more. but didn't they overpay? seriously. >> overpay or not, here's the issue. microsoft, this is their second big acquisition. they paid $9.7 billion for skype. that was a huge deal. now, with this one here, the question remains whether or not even if they paid whatever price, they can make a viable wireless business. they are at heart a software company that's trying to reinvent themselves. now, with vodafone and verizon

wireless this is business because this really does give verizon wireless full control of the asset -- >> that part i get. what's your take on this in terms of the stock market? what does it show you? what do you take away from this? >> take verizon. it's a huge -- these are two american companies buying from two foreign companies. this is bullish for their view of the american economy. look, did they overpay, larry? we'll know in a few years. >> they paid a lot. that's why the stock went down. >> the buyer's stock usually does go down in a deal. >> it should have gone in the federal reserve's portfolio. >> i think verizon has a very bullish view on wireless in the u.s. particularly. but also how many wireless devices do you have now that you didn't have before? they think you're going to have five, larry. if that's true, then they didn't overpay for this deal. >> do you use the activity as a barometer for corporation confidence, corporate confidence i should say? >> absolutely. you need the confidence to do a deal. but particularly in this case where you have -- it's not two american companies buying and

selling. these are two american buyers. >> because right when we start to see the economy improving that's when you see deal activity pick up. >> these are good points. and i believe in a free market for deals, including mergers and acquisition. but i will say this. i do not see any new jobs being created by this m&a. in fact, i see job losses happening because of m&a. i'm not opposed to m&a. i want to make that very clear. i believe in the free market for corporate governance and all the rest of it. but it doesn't put a couple of hundred thousand new jobs on the line. it's not like an entrepreneur or an inventor putting something together that is going to change a whole region in this country. >> it's an interesting point because it's an observation and whether or not you agree with that observation or not what you have is a situation for m&a right now where you're looking to create synergies, you're looking to create some cost-cutting initiatives, you're looking to actually do something to bring value without having to add jobs. the real issue becomes whether m&a happens because you want to improve or grow your sales profile. >> but larry, that's a whole

other topic. okay? m&a doesn't create jobs. what creates jobs is entrepreneurs. >> right. >> and entrepreneurs' access to capital. so if you want to create jobs, let's get the jobs act doing what it's supposed to, do which is to lower the cost of capital is for companies. >> you're right. the problem with this whole so-called recovery is the federal reserve is supplying all this money, zero -- i know, medium rates have gone up and financing rates have -- but it hasn't, pardon the phrase, trickled down. it hasn't trickled down into the towns. it hasn't trickled down into the villages. and it doesn't seem to have trickedled down into the entrepreneurs. i want guys in their garages getting money and starting new companies and hiring another 25,000 -- >> it has trickled down to house, larry. >> it's starting to trickle down. >> maybe a little bit. >> i'm just noting a few things. seema mody, thank you very much. dominic chu, thank you very much. as always. now, it's a big week for economic reports. started out with banks today.

we're going to look at good news on construction and manufacturing and talk about what it really means. next up on "the kudlow report." please stay with us. ♪ [ male announcer ] staying warm and dry has never been our priority. our priority is, was and always will be serving you, the american people. so we improved priority mail flat rate to give you a more reliable way to ship. now with tracking up to eleven scans, specified delivery dates, and free insurance up to $50 all for the same low rate. [ woman ] we are the united states postal service. [ man ] we are the united states postal service. [ male announcer ] and our priority is you.

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first of all, the ism manufacturing index in august beat expectations and increased to 55.7. all right? plus on top of that construction spending rose. he 0.6% to a new four-year high. that's a july number.

so these numbers open the door for a stronger second half. color me a wee bit skeptical. i want to see the jobs report on friday. jim pethokoukis of the american enterprise institute. and still with me is ron kruszewski. all right, jimmy p., are you turning wildly bullish because of these two reports? i just want to say one thing and then i'll keep my yap shut. we have a big ism number last month, right? manufacturing. but we did not get a good jobs number and did not get good durable goods or factory orders or business investment. that's what i'll say. >> we've been also getting a lot of good revisions on the gdp number. maybe we'll get some good revisions on the job number when it comes out. one of the interesting stories about how good is this economy? you've had some figures like gross domestic income, a lot stronger than gross domestic product. maybe that's the real number. maybe we're seeing some evidence of that. with the ism number, the construction number. very good jobless claims number. and i guess my concern here is

in going into the fall is this economy strong enough? is there enough momentum that it can withstand something going wrong in the fall, whether it's the debt ceiling, whether it's syria -- does it have that amount of momentum? i'd like to see that jobs report number before i declare that to be the case. >> you and i are in the same boat. ron kruszewski, how do you see the economic picture? >> look, it's sluggish. but if you didn't have sequester, we might have an escape velocity, maybe 3 1/2% gdp. but this market, i mean, the economy is still sluggish. these numbers are improving. but we have yet to have three numbers, three quarters add up to 3% gdp. >> if i take out the government sector and i just use private real gdp, i think, jimmy p., correct me if i'm wrong, but i think that is 3% or better. private sector. >> sure. but take out the government, it's 42% of gdp, larry. >> and it should be 6% or better. >> well, 20. okay. >> jimmy p., you've got complications. we talked a little bit about it

with doug holtz-eakin in the other segment. nobody knows what's going to happen to syria. nobody knows what's going to happen with oil. the rest of the sequester is coming down. you may have seen the piece in the "washington post" this morning or this afternoon that there's a lot of gloom and doom in washington, d.c. should there be? >> listen, i think there certainly should be regarding the debt ceiling because i don't really see what the end game is with that. the president said very clearly no negotiations. and oh, by the way, if you want to get rid of any part of the sequester i want tax hikes. he's still very focused on getting more tax hikes. republicans are not going to go for that. he's not getting any more out of this congress. so again, i think between that -- and i don't want to wish bad things. i don't know what's going to happen with syria. put those two together. the lack of uncertainty is supposed to be a big plus for this market. all of a sudden we're starting to see more uncertainty again. >> jim, your column for the national review online, you start talking about some very

high tax rates that will be necessary if we don't get spending cuts. what kind of tax rates are we looking at? >> listen, if we're not going to do a lot of our entitlements. right now it's been tax first, second, and third. we're really talking about tax rates of over 50% to 60% for theate. we're talking about a value added tax. that's where we're going the next 20 years if we don't begin to work on entitlements right now. >> ron kruszewski, we're not going to get a 50% or 60% tax rate right away but in some sense the handwriting is on the wall in terms of entitlements. what would a 60% tax rates do to this country? >> what did we have in the '70s? a 60% tax rate. look at the kind of economic growth we had in the '70s. >> the administration doesn't believe, that though. they think we can go back to those sorts of 6 30ers o.-0%, 70% rate. look at the 1950s. they're not frightened of high marginal tax -- >> we had three recessions in

the 50s. 91% tax rate. but jfk, he cut the top tax freight 91 to 70. reagan took it from 70 to 28. if we go backwards, from wherever it is today, 40, it was 35, to 60 or 70, we've got a problem. >> i don't think it will do much for employment, either. i think they'll keep kicking the can down the road on the debt issues. in the long term that's not about for the market. >> they've got to have a debt bill, right, jimmy? >> i think they do at some point. republicans, in a way they're in a good negotiating position because they're getting their spending cuts. the debt ceiling that could be catastrophic just for the country, also for their electoral hopes. but i'm not sure what the deal is. what's going to be the quid pro quo, the pipeline, regulatory form, some tax reform process? it all seems pretty fuzzy. >> there's no time for a grand design. the clock has rupp out.

and that's the whole thing that bothers me. you've got your war situation. then you've got october 1st. then you've got middle october for the debt. there's no time to make a deal. that's the biggest thing that troubles me right now. i've been in that process. time is valuable. we've got to get out of here. jim pethokoukis, thank you. ron kruszewski, you've been great. sitting on the set the whole show. we really appreciate it. that's it for us tonight. i'm larry kudlow, as always, thank you for watching. we'll be right back tomorrow night. you make a great team. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis.

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