we have to watch that. let's focus on this chrysler deal because i'm going to say would you buy it. it depends on the price. if they price it through ford and gm, imgoing to tell you to buy the heck out of it. it's the pricing. i'm jim cramer andly see you tomorrow. breaking news. the top two republican leaders in the senate will not support senator ted cruz's attempt to tie up the debate on the de-funding obama care budget. this essentially means that the harry reid democrats will have their way and will probably send a clean continuing budget resolution back to the house, and in this came of ping-pong what will be the next move from the republican house? and speaking of obama care, the truth is finally getting out. people with substantial illness who are forced to go out of network will pay a fortune and everybody else will face very

limited choices. and just this afternoon we learned that the possible quarterback of the irs conservative targeting scandal is calling it quits. so now that lois lerner has retired, what does that mean for the investigation? all those stories and much more coming up live on "the kudlow report" beginning right now. welcome to "the kudlow report. request "i'm larry kudlow. we're here live at 7:00 p.m. eastern and 4:00 p.m. pacific so let's get right to the late breaking developments from the senate. cnbc's john harwood in washington joins us with all the details. good evening, john. >> good evening, larry. you're right. the news that both john cornyn and mitch mcconnell will not vote to sustain the filibuster that ted cruz is mounting raises the odds that a clean bill will go back to the house, maybe sunday, maybe monday. now, we don't know whether that's going to play out exactly

that way, but we do know that republican leaders believe this is a disastrous strategy. if you look at the poll that we had, the cnbc all america poll, we show -- ask americans do you want to defend obama care by 44-38 they say no, but if you link it to a government shutdown or debt threat it's 59-19, overwhelming. republican leaders know that the gop would be blamed for this, and harry reid was on the floor hammering that message today. >> reporter: a republican so intent on undermining both president barack obama and his signature health care law that they are willing to inflict severe damage to our economy in the process. america will know exactly who to blame. republican fanatics in the house and the senate. >> reporter: larry, i can tell you the democratic leaders have a rising expectation that having voted to include the de-funding provision in the bill that passed the house giving all those conservatives a chance to

get on record, that john boehner will be willing to let that go to the floor and pass when it comes back. we'll see. boehner's staff may send it back once again with another provision but there won't be much time to avoid a shut down again. >> basically what you're saying is republicans don't want a part of a shutdown, this and many other polls say the same thing. i'm going to speculate. you tell me what the odds are. it will be a clean bill based on the sequester spending levels, the lower sequester budget cut spending levels, and it will last until the middle of september, middle of december, sorry. >> yes, and give them time to try to negotiate a longer term deal. whether that could be an actual budget deal that has some entitlement cuts, revenue from a democratic perspective, i've continued to believe that that is so clearly within the bounds of what both parties want to happen that it could ultimately take place, but i'm one of the rare optimists on that store. more likely they will take some

time to negotiate, monkey around a little bit with the allocation of sequester cuts and have a continuing resolution through the next year that preserves the sequester but not quite in the proportions, maybe alleviates a portion of it. >> last one, john. still the debt ceiling middle of october, end of october, whatever, and there's still a lot of talk. when i talk to sources in the leader's office in the house, there's still a lot of talk that a one-year delay in the individual mandate, including taxes and other mandates and other regulations may be attached to the debt ceiling bill, so -- so the obama care battle is not over yet. >> no, it's not, and they are talking about attaching that to the debt ceiling. that strategy is also not going to work because the president would never agree to that. that would in essence be nullifying his law because the individual mandate is really the core of the law, but it -- we may have another exercise in which conservatives get a chance

to go on record voting to delay obama care in return for a debt ceiling increase and then boehner again would have to face a decision when a cleaner debt limit hike came back to have something to give his members, whether it's a commitment on tax reform or something else, but they are not going to get that delay in the final product. >> all right. many thanks, john harwood, appreciate the update. with the shutdown countdown still going in effect, president obama is wasting no time racking up the partisan jabs. the latest during his saturday weekly address. he bashed republicans for threatening a government shutdown and debt default if they can't shut off obama care. take a listen to this. >> think about that. they would actually plunge this country back into recession all to deny the basic security of health care to millions of americans. >> all right. well, america's pointing fingers, too, right back at the president. the latest pew poll shows while 39% of americans would blame the gop if the latest budget battle

leads to a government shutdown, 36% would actually blame president obama. 17% would blame both. but the president apparently will not negotiate. that's what he told boehner friday night. i don't get it. let's bring in our guests. "washington post" online columnist matt miller and john fund, columnist for the national review. welcome, gentlemen. john fund, is my surmise and john harwood's surmise correct now that mitch mcconnell and john cornyn have said no go, they won't do the delaying tactics, the cr will go back to the house clean, it will be a clean continuing resolution. >> right, and i think the republicans, along with some democrats, will pass that out to keep the government going. i think that they are going to try to -- they are waiting for the senate, fiddle with the debt ceiling bill a little bit to see if they can attach something to that and say we'll live to fight another day in mid-october. remember, harry reid may have his own surprise.

i would not be shocked if harry reid put in a small tax increase to pay for higher military spending and put republicans on the spot in military-oriented districts. >> in the cr. >> yes. >> so he'll break the sequester and try to sneak in a tax hike. >> the big goal that obama has is to get rid of the budget control act in the sequester which originally, of course, was his idea. >> if they try, that john could be right, i've heard those rumors, if they try that then the shutdown is still very much a threat and democrats could be blamed for the shutdown, so going from a clean cr to a complicated cr, break the sequester and raise taxes, that's a different ball game, matt miller. >> it is, but i -- i don't expect that. i think we're going toned up with some version of a clean cr and the republicans will push the fight. you know, the next absurd fight to the debt ceiling thing, and we'll come back and do this in a little bit. meanwhile, ted cruz is the one who gets the most mileage out of

all of this as he continues his campaign for the presidency and suction up all the media and political oxygen there is. >> well, even though it's interesting, even though mr. cruz did not get the kind of legislative strategy support he hoped he would get, the reality is, matt miller, what cruz has done with the help of others is he's kept the obama care issue front and center, and you look at polls, people do not like obama care, and they don't like the individual mandate, and they don't like the fact that congress is exempting themselves from obama care, and they don't like the fact there's no verification for obama care. in other words, cruz has put this issue on the front page every day. >> you're right. now we disagree about all the substance of obama care. i think adopting mitt romney's approach to using private insurers to expand health coverage to millions was a good idea. put that aside, ted cruz, you're

right. i think his role model is boeck barack obama who had a drive-by visit to the senate, didn't stop to actually worry about passing anything and was immediately running for president. ted cruz went to school on that. realized so long as he can seize an issue and get immediate why and public attention on this, when i was in the green room, i was watching ted cruz, some ad campaign he's running, dial in and sign the petition to stop obama care. he's a big winner though he's alienating his own republican colleagues. we'll see how far he can push it. >> john fund, it's not over until it's over. let's skip from the continuing resolution to the debt ceiling, okay. what i gather is that speaker boehner and majority leader cantor and others in the leadership are thinking very hard about attaching a one-year obama care delay to the debt ceiling. they want to attach, that as a companion bill. whether it's a delay for the individual mandate or a delay

for all of obama care. i felt all along an individual mandate delay would pass the senate. red state senators up for re-election would vote for a delay. what's your take on that, john? >> i don't think as early as october. remember, obama care kicks in october 1st. if the headlines are really bad it's possible they might be spooked but i think will take a couple of months of bad headlines. what the republican debt strategy requires though is a separate piece of legislation like what senator toomey had last year which says no matter what happens, if the debt ceiling isn't raised, our bonds and our obligations will be paid first and that will quiet down wall street and foreign investors. i think that has to pass at least the house in order to make the other part, a one-year delay of obama care possible. >> i want to see the debt ceiling raised because i don't want to mess with that, never believed in that. having said that, can they get, is there a legislative way to get a vote on a one-year delay

of the individual mandate? let me say this again, john fund. congress and its staff exempting themselves from obama care, that is really unpopular. the lack of verification, really unpopular, the lack of security for personal information, really unpopular, the exchanges themselves are nowhere ready. in other words, john, having exempted business and having watched labor squealing left and right, i think there's a lot of popular support, matt miller, for a delay of the individual mandate. >> again, we just -- we just disagree, larry. there's already exemptions for people for whom the mandate would be a hardship because their premiums would be too high a percent of income. you're talking about 20 million to 30 million people getting subsidies to buy private insurance if they are lower income, exactly the republicans rightly urged as a way to move towards universal health coverage. the idea that the republicans now are trying to pull out everything and throw everything, you know, but the kitchen sink

to stop average folks from getting a little more health care security is appalling. i understand the politics, but i just think it's dead wrong. >> matt, look, there's some elements of this, but not enough choice. we'll another whole segment on this, the front page of the "new york times," there is not enough choice in this bill, there never was. a lot of people with illnesses are going to have to pay a fortune, an absolute fortune if they go out of network. >> mend it, don't end it. >> they hate the mandate and the tax hikes. go ahead, john fund. >> larry, i think we're seeing a lot of people that are going to get help with their private insurance, they are eventually going to be pushed into something that resembles medicaid, substandard medicaid, over half of doctors don't see medicaid patients. that's the sting here of the just because you have insurance and access. >> that's crazy. >> doesn't mean you get treated. >> it's crazy. spoken by very well insured people. there's no reason to think that just like in massachusetts, just

like in switzerland or holland, the subsidy of private health insurance is a way to give health security to folks. the idea that conservatives are walking away on the threshold of it being implemented from the idea they rightly suggested to the country is a sad commentary on where our politics. >> matt, i grew up partly in switzerland, and i have to tell you bluntly this is not the swiss model. this is a medicaid model because the choices are going to be much more restricted than what you normally get in a private insurance subsidy model. >> let's hear you guys come forward with ideas to improve obama care. >> he won't negotiate. obama will not negotiate. >> that's the key point. >> that's the bottom line. >> matt miller, john fund is right. >> just as our show is beginning on friday night, we get a breaking news that the president is calling the speaker of the house to tell him he won't negotiate on the debt ceiling. now why would he do that? >> we shouldn't even have a debt ceiling. >> that was the most obnoxious

thing imaginable. john fund is right. since when do presidents not negotiate with the leadership of the house and senate, and by the way, obama care is germane, it's as much a financial bill as it is a health care bill with the costs and the taxes and the budget-busting. see, that's the thing. this president doesn't want to compromise, matt. i'll take you at your word. you and i can sit down and hammer out something. i'll get you 25 different insurance plans, all right, off the internet, the way wall green and other companies are doing it, but obama won't do that. he won't do it that way to answer. >> listen, larry kudlow, the day the republicans put forward a plan that the congressional budget office certifies will insure the uninsured 50 million non-insured, i'm happy to walk away from obama care. the uninsured don't vote republicans and republicans have other priorities for the money. that's the truth.

>> insurance doesn't necessarily mean treatment. >> we're going to do that in a couple of segments. >> spoken like a well-insured man. >> i am not. >> matt miller and john fund, thank you, gentlemen. you're both terrific. now let's focus on how the markets are going to respond if there is a government shutdown. we'll talk live with two traders just ahead. and later on the show is this the obama care bait and switch? sure, can you get cheaper premiums but you may not believe what doctors, hospitals and other health care providers you'll have to give up. we have the grim details. even the liberal "new york times," the liberal "new york times," splashing this story all over the front page. don't forget free market capitalism is the best path to prosperity. i maintain obama care is nowhere near free market capitalist choice. i'm kudlow. we'll be back in the next segment. tomorrow, raising the stakes

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welcome back to "the kudlow report." i'm mary thompson. another day of losses, the longest losing streak in months.

it has to do with the uncertainty about the fed and about a possible government shutdown. back to you. >> on the money, cnbc's own mary thompson. let's ask our traders how markets are going to react to a government shutdown. here is alan valdez and jeff tillberg founder of kkm financial. welcome back, my friends. >> hi, larry, how are you? >> i read your notes. you are going crazy, obsessing about this government shutdown, and you've got it in psychological terms. you've got it in fiscal terms. you've got it in economic terms. now, look, i loved reading your cards, but i've got to tell there you isn't going to be a shutdown. it's not going to happen. >> well, larry, that's exactly my point where i think the damage is being done already. there's been a survey that 47% of americans will pull back equity exposure in the event we do have a shutdown but this past weekend talking to my father, he's an electrician, having a

bunch of his buddies asking questions to me so it's hit main street. the damage is being done. in the event we see a selloff, knee-jerk reaction, larry, we have to remember we live in an electronic trading world. we could see a 5% to 7% move down quickly. not being represented in the vix but we did see selling data in the financials which have had a tremendous run. >> i do want to talk about financials. from the last segment we reported as breaking news, the two republican leaders in the senate are not going to propose any kind of filibuster and will vote for -- will vote for cloture which means they can get the continuing resolution done. no one has perfect knowledge, but the chances of a shutdown after this with the republican leaders in the senate are virtually nill right now. >> and most traders i speak to no one believes there will be a real shutdown. >> jeff killberg, his dad is an electrician.

jeff is going crazy out there. >> getting a lot of calls from clients who are greatly concerned. they think it's real this time. there's been 17 shutdowns, six under president ragean, but they feel like this is real. >> in a couple days. reagan had one of the greatest bull markets in the history of the earth. >> agreed. >> we're been buying on dis. we'll watch it now because it's the end of the quarter and the month so we'll watch it. this will roll the market. no question about that, so i think you'll see the market exit late a little and come in a little more here, and i think we'll watch it. it's not a shutdown. >> why don't stocks go up tomorrow on the strength of what senator mcconnell said. mcconnell is the republican leader, and senator john cornyn. they basically said we're going to put a clean cr and put it back to the house. they basically said we don't want any shutdown. they read the polls. i think that's bullish for stocks. >> totally bullish for stocks. definitely no shutdown, but right now there's uncertainty the

there. >> i think they are all 3.5% in the downtown, why are banks and financials getting beaten down? >> look at goldman sachs around morgan stanley, off 3% 3.5%, morgan stanley up year to date 42% so this is the sector that's gained the most. therefore, people are checking profits and taking low off the table and going into this. >> what is it though? is it because long-term rates have come down and the so-called yield curve has flattened and that's bad for bank profits? something is going on inside there. take a guess for me. >> well, i think it's the uncertainty out of fed. i mean, big ben, he's waffled. saw him essentially move that unemployment goal post. 6.5%, 7% and now it's back 206.5%. banks don't like uncertainty out of our fed chairman. >> i agree with you on that. >> you know what else, larry? now you have goldman and goldman and citibank, travelers and visa all in the dow, all in baskets now so if one goes down it could take them all down. bad news out of citibank so that

brought a basket, jpmorgan, that will move the dow further down at times. >> i thought a few weeks ago when the banks reported pretty good earnings they were making mortgages and making commission on mortgages. their bond portfolios were hedged. they loved playing the spread. what happened to all that good news on banks. >> well, nowadays all you need is one bad news to one group. citibank had the bad news. it brings down the whole group because it's all these computer programming. >> i think the banks did make a lot of money early on. right now with the uncertainty, as there's oscillation around 2.75 in the ten-year, they are not producing as much out of income desk as they used to. >> the fed's timidity, some would call it busyness last wednesday, i think gives us a picture of a very dovish fed and a very dovish new fed chairman,

that's going to be janet yellen, i call her the queen of the ws, meaning no disrespect. i don't think the fed will tighten up its policies, i don't know, maybe until 2085 or maybe 2103. i think you've got easy money way murt than my eyes can see. i won't be around by the time the fed starts tightening >> you know, you're right, and we're not seeing inflation but the efficacy of this quantitative easing is being traded by portfolio managers globally and once we make that move we'll see other people lock in step, but i think right now, the fed, they are really scratching their head and i think they made a mistake but not signaling to the beginning to an end of this. >> now, they told us they would have the beginning of the end now and it backed off and really hurt their credibility. >> maybe it pulled back 5 billion or 10 billion would have been the right course to take. >> maybe this is all due to the potential shutdown. >> this is one of the reasons why they did not taper due to the fact that he's really worried about the fiscal woes so is this going to be a bigger

problem, back to my point? maybe bernanke is in my corner. it's going to be worse. >> i've got to get out. i kind of like your reverse spin on this. what you just said is now that there's not going to be a shutdown the fed might conceivably be more aggressive in reducing its bond purchases. now, that's a good reverse spin. that's very, very interesting. i have to mull that over. i don't want to sit and meditate about that. thanks so much. folks, about to get you the latest on the kenyan mall massacre, and could we see a historic gesture at the u.n. between the u.s. and iran? cnbc's mary thompson has those headlines and much more for us next up on "the kudlow report."

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because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. voted "best investment services company." all right. the big story that captured a lot of attention over the weekend, the kenyan terrorist attack and hostage killing situation at a mall in kenya. cnbc's mary thompson back with that story and more. good evening again, mary. >> reporter: seems like we have good news on that. kenya's interior ministry saying over its twitter feed saying we're in control of west gate mall. earlier today kenyan security forces exchanging fire with as many as 15 gunmen for several hours. at least three of the islamic militants were killed and few, if any, hostages were still inside the mall. but 62 people, of course, were killed and more than 200 injured over the weekend attack. germany's angela merkel elected over the weekend as third term

as chancellor of her party. she got 41.5% of the vote but not enough for a majority. many people in germany opposed her handling of the greek debt situation, she is one of the very few european leaders to survive that debt crisis. and there's a growing controversy about the u.n. general assembly in new york this week. there are reports president obama will shake hands with new iranian president hassan rouhani. may nod sound like a big deal. >> on the way into lunch. doesn't mean they are bringing the scrolls out. >> it could be an opening to some talks. >> i'm a hardliner on iran, but shake his hand, i don't know, nothing wrong with that. the guy doesn't have booing igi >> one way to look at it. >> i'm sorry. just what will people get when they sign up for one of the new obama care health plans in the

answer is not much. you're not going to believe how bare bones these plans are, and if you're looking for a choice of doctors and hospitals you are out of luck. we've got the details on that for you next up on "kudlow." hero: if you had a chance to go anywhere in the world, but you had to leave right now, would you go? man: 'oh i can't go tonight' woman: 'i can't.' hero : that's what expedia asked me. host: book the flight but you have to go right now. hero: (laughs) and i just go? this is for real right? this is for real? i always said one day i'd go to china, just never thought it'd be today. anncr: we're giving away a trip every day. download the expedia app and your next trip could be on us. expedia, find yours.

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welcome back to "the kudlow report" with this market update.

apple was a big gainer, up $23 or 5%. the launch of the new iphone is a stunning new success. 9 million iphones sold. a new record and a big jump over what analysts were expecting. apple says this will help the company reach the high end of its revenue forecast for the quarter. blackberry stock recovered today. a consortium agreed to take the company private for $4.7 billion amounting to $9 a share. this stock, of course, was in the $60 range a couple years ago. larry, back to you. >> mary thompson, appreciate it. >> t-minus seven days an counting until obama care's individual exchanges kick in, and surprise surprise, we're learning that the law is going to lead to reduced access to quality care, higher insurance premiums, and guess what, it's already costing jobs? now take a listen. >> many of the companies really are not interested in hiring full-time people that's real et issue with obama care, that they are not going to hire full-time people until they know what the

costs are going to be. >> and remember how president obama repeatedly told us this? >> let me be absolutely clear about what reform means for you. first of all, if you've got health insurance, you like your doctor and you like your plan, you can keep your dock tomorrow. can you keep your plan. nobody is talking about taking that away from you. >> well, mr. president, turns out that's not exactly the case. just today we saw a number of headlines highlighting the true costs of obama care, but none more striking than the "new york times" which writes that the only reason premiums may decline for some that many insurers are significantly limiting the choices of doctors and hospitals available. all right. let's talk with two experts, joining us is dr. bill grace, an assistant professor of medicine at new york medical college and health policy expert betsy mccoy, author of the book "beatty obama care."

betsy, begin with you. i was surprised with this "new york times," lower health insurance premiums to come at the cost of fewer choices. let me get this right. they are narrowed the base of doctors, hospitals and other health care hospitals in order to keep premiums down but what if you need better coverage, what are you going to do? >> what the insurance companies have done is this. they saw that premiums would have to spike for several reasons so to keep them from going higher and in the 16 states that have announced premiums, they are up 24% over last year, but to keep them from going even higher, insurance companies are paying the doctors and hospitals that participate in these exchange plans much less they are paying doctors and hospitals in insurance plans. really like medicaid with a private insurance name attached to it and because they are paying the doctors and hospitals bargain basement prices, fewer doctors and hospitals are willing to participate. >> right. >> so in california, none of the

university of california hospitals nor cedar sinai, the prestige hospital in los angeles, is willing to participate, and in many, many other parts of the united states the premiere academic hospitals say we can't do this. >> all right. dr. grace, two things going on here that interest me. one is the reimbursement rate. that's what the cleveland health center talked b.had to lay off a lot of workers and cut costs, they don't believe they are going to get reimbursed. that's your medicare and medicaid problem. the second problem is as advertised the idea -- one of the big ideas for obama care is that people with prior illnesses would get insurance but really when you read this "new york times" article, if you are ill, you have such narrow choices that you're going to have to go out of network, and if you go out of network it is going to cost a bloody fortune. now that is a direct contradiction to one of the big selling points of obama care. >> as i mentioned last time i was on the show, the numbers do not add up and will never add

up. just can't make something like that out of nothing. the other thing, layer, is nobody is ready for this. you know. there's a perfect storm coming come january 1st of next year. first of all, no one is ready today on october 1st because today 35 of the 50 states, we can't even get the software to determine if you're an employer or a physician or an individual person. what your subsidies are going to make a decision on what plan you want. >> we can't verify the income levels. >> you cannot verify, that and on top of that, you know, most of this is going to fall on primary care specialists. >> right, and what's happened is we are already 15,000 physicians too short, and right now with the perfect storm coming, obama care and the icd ten codes, these codes are going to make chaos. >> what's an icd ten codes. >> the new codes, european codes

that tell you whether you -- you code somebody if they have gotten bitten by a rat or a horse or -- >> right. >> they are chaos coming down the track. >> i want to go back, betsy. i want to go back to this point though, the "new york times" article, because coming from "the times" it's big news. >> although other newspapers covered this months earlier. the "los angeles times," for example, covered this many, many weeks ago. >> but dr. bruce segal, the president of america's essential hospitals, which was formerly the national association of public hospitals, that's a big deal, he says insurers are telling his members, quote, we don't want you in our network. we are worried about having your patients who are sick and have complicated conditions. now, this goes back to my other point. one of the selling points of obama care is people with prior illnesses would get taken care of. >> they will get clobbered -- >> they are saying the insurance companies won't let the proper

providers into the system. >> they don't want to pay them enough. >> the seriously ill people and many of the big disease advocacy groups like the american cancer society, juvenile diabetes, they all pushed for obama care, and now the president has removed the cap on out-of-pocket expenses so sudden lit seriously ill people, as dr. grace pointed out, are going to get clobbered the hardest because they will have to go out of network for the expert care and there will be no limit on how much they have to pay. >> how do you solve that? how do you solve this? you have to have some kind of federal and state risk pools to help those? >> that's what we had in 35 states before obama care. >> just tell me how to solve that because this i find troubling. not only undercuts the selling point, objection but more important to the people who are ill and who get into this system and who find out the system doesn't help them and then they are going to have to go out of network and they will get clobbered financially, how do we solve that problem. >> right now what you'll have is another super medicaid program,

not medicare, medicaid, who will be take care of you, the interns, residents and you hope they are supervised? >> how to sol of it, larry. we were solving t.35 states in the united states had publicly subsidized high risk pools for the very people. >> what happened to that? >> they are being supplanted by obama care, and the seriously ill are going to suffer the most. >> being replaced. >> absolutely. >> they are being replaced. in addition, of course, everybody got bamboozled by the claims that there would be so much choice. you arrive at that exchange on october 1st it's like going to a supermarket that only sells cereal. >> the shelves will be bare. >> that's one of many reasons why the individual mandate should be delayed. >> yes. >> should be delayed, and let people come back and take a look at this thing. all right. dr. bill grace and betsy mccoy, thank you. >> thank you, larry.

coming up now, the woman who may have been the ring leader in the irs conservative targeting scandal has called it quits. lois lerner retired today, but does this mean she's off the hook? does it mean no congressional or court testimony? we're going to get some answers to those questions just ahead on "the kudlow report." i was made to work. make my mark with pride. create moments of value. build character through quality. and earn the right to be called a classic. the lands' end no iron dress shirt. starting at 49 dollars. [ male announcer ] staying warm and dry has never been our priority. our priority is, was and always will be

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the irs official at the center of the tea party targeting scandal, lois learn, is retiring. lerner had been on paid leave since may, despite repeated calls from republicans in congress for the irs to just fire her, so just what does lerner's retirement mean for this ongoing scandal investigation? let's ask illeana johnson from national review covering this story from the very beginning. thank you very much. look, she was asked to retire apparently a while ago and wouldn't do it, and then we go through this rigamarole, she goes to court and takes the fifth amendment. i don't want her to get off scot-free and i want you to tell me, does this retirement allow her to get off scot-free, or will she still go on investigation or go to court? >> i think things are still up in the air. i think the fact that it took

the irs basically four and a half months to, you know, she got word that this internal and internal review with the irs was going to recommend that she be terminated, and so she chose a face-saving measure of retiring, but the fact that it took 4.5 months to get there is a testament to the sclerosis of the federal government. >> the temporary acting director asked her. >> he did. >> and he refused. >> so why now? why do we get this news today? >> because werfel initiated an internal review of the scanned a.m. the board reviewing it was or is set to say that the -- that she should be fired. >> right. >> did that just come down in. >> that just came down and my sources at the oversight committee told me as a government employee you are alerted far in advance when there's something, you know, coming down the pike that you will be terminated so she was basically allowed to save face and retire. she will get her pension.

i'm told you have to be convicted of espionage toward to not get your government pension. >> do you think knowing what you know and you've followed this as well as anybody, was lois lerner the quarterback, the mastermind of this attack on the conservative groups? >> i want to give the oversight committee credit for continuing to investigate the scandal, and they are still conducting interviews from some of the highest level people but i do believe she was the ring leader. >> not the chief counsel who was a presidential appointee. >> right. >> but lois lerner. >> i do believe that, and i think that -- it goes to show the power that, you know, one bureaucrat can, have and i believe other people were involved as well, but it does seem she that she was really at the center of this, and interestingly enough, you know, this report says that she was guilty of willful -- they say

she's guilty of a neglect of duties and not willful misconduct which let's her off the hook but a what from what we know her actions were incredibly purposeful from day one. >> we know that for a lot of reasons and from her e-mails of the federal election commission which really, really gave it away. >> okay. her e-mails to the fec and internal memos to the irs saying this is a very dangerous matter, hoping it can be used to challenge the citizens united decision, the oversight committee has said, chairman darrell issa said her retirement does not change the strategy for investigating this or to call her back for testimony. >> good, good, she should be put on the hot seat again. it's not a criminal charge but a civil charge and she ought to go to court. ought to have to go to court and pay some gigantic fine. elana johnson, appreciate it. heard some strong words today about fed easy money, this

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welcome back to "the kudlow report." i'm mary thompson. the united autoworkers trust fund has filed 100 million worth of shares compared to the 59% that's own by fiat but it does show the company has come a long

way since bankruptcy four years ago. larry, back to you. >> thanks very much. now, we're beginning to hear from some federal reserve presidents why they voted against a september taper of bond purchase. take a listen to what new york fed president william dudley told cnbc's own steve liesman. >> in my mind beginning to decide to reduce the pace of asset purchases from the current $85 billion pace requires two things in my mind. number one, improvement in the labor market, and number two, confidence that the economy is strong enough to support that improvement in the future. >> all right. question before the house tonight is bill dudley's easy money stand right or wrong as the president of the new york fed, by the way, the vice chairman of the open market committee, and he's, therefore, a permanent voting member and important influential guy. let's bring in dave malpass and jim pethokoukis of american enterprise institute. jim, is bill dudley correct? do we need a highly

accommodative monetary policy? >> listen, first i would like to say that i am based on your fed tightening in 2085, maybe 2103 call, i am shifting all the assets in the pethokoukis family fortune, so don't back out on me on that one. >> that's what i'm hearing. i don't think the fed funds rate goes up until 2110. >> if i were bill dudley, listen, i think he's right. listen, still like a ways from lower inflation. 7% employment target, i'm not quite sure what the path, is that's bad, but continuing the status quo is good. >> dave malpass, from reading your articles i believe that you believe the fed's money priming and bond buying has done more harm than good. >> that's right, and we shouldn't call it monetary

accommodation. what the fed is doing is borrowing from the private sector and stuffing the money into the government and big corporations, and that's just not good for growth, and the data shows it. the economy has done poorly as the fed bonds. the more they bought, the less growth we got. >> jimmy, why hasn't there been better growth i? mean, we got ourselves -- we're marching towards a $4 trillion balance sheet, among other things. why hasn't there been better growth? >> i think there's a couple reasons, the big reason as far as qe3 is happened at the same time as fiscal tightening including massive obama tax hikes. it did a good job offsetting bad policy. it would be better if we weren't paying interest on reserves, one of the channels you could have had the fed policy work better so given that, and the fact that it isn't, as i said many times,

a nominal gdp target, i think it's worked okay and has been worth doing. >> among things dudley says, he wants a very accommodative policy. talks a lot about something called fiscal drag which in his mind and also bernanke has said this, the tax increases, the payroll tax hike and the income tax hike, yes, and the spending cuts, now should the federal reserve be offsetting fiscal drag by buying more bonds and injecting more cash? >> well, i don't think there is fiscal drag from all the steps that you name there, and i also don't think that the fed should be looking so much at the fiscal policy, but the bigger issue that we have here is the bond buying itself is harmful. they aren't allowing credit to grow in a natural way in the economy. they are diverting it so that's the bigger problem that i see with where they are headed. >> all right. >> we have the central bank that

did exactly what david said which is don't look at fiscal policy. that was the ecb and what you got was a tremendous contraction, double dip and 12% unemployment. they raised taxes and didn't offset any of that, and that's been the problem with europe, a huge drop in total spending in the economy, not the debt problem. the spending problem created a debt problem. >> but, jim, europe didn't do it -- the austerity that people talk about in europe consisted of them raising taxes. they didn't really cut government spending, and so they -- they got a bad growth result, not because of the -- of the spending cuts but what else they were doing in the economy. portugal, spain -- >> how come we had a bad growth result in 2013, the same as last year, despite all the tax hikes we just talked about. what was the difference? why hasn't the economy done worse with the investment tax hike and the payroll tax hikes? why, the fed >> no, it's because up until 2013 we were under the risk of a major tax increase, the

inheritance tax, hit the alternative minimum tax and on down the list, and that was taken off the table in january, so i think the tax bill that they did in january improved the tax code, and we've seen the result in a little better growth data. >> you can't tell me the tax code got better in 2013? >> sure, i can. >> 60% increase in investment taxes, the worst taxes there are. >> wait a minute. the dividend rate is 15. remember, all through 2009, '10, '11 and '12, president obama said he wanted lots of taxes on the table. the problem is the fed is still buying bonds, and that's dumping money into people that don't create jobs. >> last word, jimmy p. just have a couple of seconds. >> i think the fed is doing the right thing.

i am worried that's become more discretionary, that's bad. >> when does the inflation hit? conservatives have been waiting for inflation? >> 2058 or 2103 i'm not sure. >> this isn't inflationary, it's contractionary, larry. >> dave malpass. they may never tighten in my lifetime. thank you, gentlemen. david malpass and jim pethokoukis. that's tonight's show. thanks for watching, everybody. i'm larry kudlow. more free market capitalism tomorrow night. i was made to work. make my mark with pride. create moments of value.

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