2,000 shows. right in front of the new york stock exchange. you can be there. we're going to start around 4:00. it's going to be really exciting. you're going to see how the show is done. see a lot of the people whom i'm always looking at around here. it's going to be really terrific. i always like to say there is always a bull mark somewhere. ings here's what you need to know. the shutdown is almost a foregone conclusion right now as the house is about to vote on another budget bill that the senate has already vowed to defeat, but there is one wild card if some moderate republicans may bolt from the rest of the party. we will keep you updated. meanwhile, president obama took to the podium at the white house late this afternoon to warn the nation that a shutdown would

hurt the economy and the dow closed down 128 points. the s&p fell ten bucks and the nasdaq also down 10, but investors are not in panic morning. after-hours trading, the dow and the s&p futures are actually trading up, perhaps pointing to a higher open tomorrow. all right. let's get more on this whole story live from washington, d.c. we bring in cnbc contributing robert costa. he's the washington editor of "the national review. "good evening, robert. as always, first of all, will this new cr which would delay the individual mandate, is it going to pass the gop house conference? >> as we speak, larry, there are simmering tensions on the floor of the house of representatives, a group of moderate republicans led by peter king of new york, they are revolting against house

speaker john boehner's strategy to delay the individual mandate for a year. they want a clean cr and fund the government. that's the fight right now on the floor. >> it's time to call it quits. sometimes you have to drop back, fold your tent and punt. >> that's exactly right. midnight is approaching. the got shuts down at midnight, and you have a lot of weary and wary house conservatives and republicans saying enough of all this cr. enough of all this government shutdown fight. let's just fund the government and move on. >> all right. if the bill does pass, okay, the delay for the individual mandate, if it does pass, will the senate take it and vote tonight? >> no way. >> 12:00 midnight. >> there's no way. >> senate democrats will not vote on this bill that will likely pass the house tonight, we'll see, because it includes an obamacare provision. senate majority leader harry reid says he'll not consider the bill. he'll kill it immediately. that puts speaker john boehner back at step one to have to scramble at the 11th hour to try to find a solution. >> let me get this right legislatively.

don't want to get too much in the weeds. if the vote goes to the senate, harry reid will table the motion and just send it back? >> that's right. send it back as a clean cr. that will force a ping-pong legislative activity between the chambers, and john boehner will have to come up with something before midnight. >> all right. robert costa will be back with us later in the show helping out. thanks to him right now. in the house it's the gop's plan "c." they clearly want to get senate democrats on the record. take a listen to house republican whip kevin mccarty. >> we'll pass a bill that funds government, so the question will rest with harry reid, just two questions. will we treat individual americans the same way he wants to treat big business, and secondly does he want special treatment? and we say no, you have to live within the law. >> all right. so will the senate blink first? joining us is senate republican conference chairman john thune of south dakota. as always, mr. thune, thank you, sir. can i get your reaction. president obama pretty rough at one of his news conferences.

he said the republican party is being held up by extremists. extremists are holding america hostage. your response. >> well, the one thing i notice about his news conference, too, though larry, the president has not been engaged in these discussions and secondly his statements are i'm not going to negotiate, period, and to me that's an unreasonable position to take, it's unrealistic. i think the american people recognize that. this has to be a noimpingts you'. you have a republican house and a democratic senate and the president saying he's not going to negotiate is completely unreasonable and not a position he can sustain, and i hope that the american people, as they evaluate this, will come to that same conclusion. >> let's take a look at it. you've lost two party line votes basically, to de-fund obamacare and to delay obamacare. now, tonight is coming a third plan "c" vote which is coming

tonight which is to delay the individual mandate and maybe have congress join the health care plan, but delay the individual mandate. do you expect a different outcome? do you think the democrats' discipline is going to hold? >> i hope there's some democrats that would be gettable on that particular issue. joe manchin has expressed support for delaying the individual mandate. i think are other democrats that might be able to break off, if there are a few them who would go in that direction. the idea of covering congress and making sure that we're treated the same way as everybody else i think is incredibly popular with the american people. i can't feature democrats wanting to sustain a position that members of congress and the staffs and people here in washington, d.c. shouldn't be treated the same as everybody else in the country. i think this is a very tough vote for the democrats. i think the house is now going to send over this particular proposal, and we'll see where the democrats, are but obviously you've have 46 republicans who will vote for it and if we can

get five democrats you might get a chance to actually come to a conclusion to keep the government from shutting down and help us doing something that's a bad law that's going to have very harmful impacts on the american people. >> if you lose is it time to fold up the tent and fund? even thought the university of alabama has to punt sometimes. is it time to do that? can you avoid a shutdown if you fail tonight's vote? >> i think, sometimes, larry, you have to -- you will see. we'll see what the traffic will bear when this comes over tonight. if the senate somehow finds the votes to strip this out, senate back to the house, where does the house go from there. there are some things, i think, that divide democrats, unify republicans and repeal the medical device tax, taxes on pacemakers and insulin pumps, something that democrats voted for. 17 democrats voted for it saturday in the house. we had 34 democrats in the senate that voted for it as an amendment to the budget earlier this year. that may be a place where we could actually get some

democratic support, to but we'll see. they have to obviously respond here in the senate when the house comes over with this latest proposal, assuming they can get 218 vote for it over there and this ping-pong match continues. but in the end we need to fund the government obviously, and republicans are very much committed to that, but we also want to do everything we can to deal with what is a bad law that is costing us jobs. >> i hear you, i hear. >> you and rising people yumsiums on the american people. >> i hear you on that. how long do you think this shutdown is going to go? i think the shutdown is discounted. the stock market discounted it. how long does the shutdown go? mr. reid said he wouldn't take six days for a cr from mr. mcconnell, two days, three days, a week, what's going to happen here? >> if we can't get a short-term extension to buy us time. i think this happens fairly quickly. haven't had a shutdown for a long time.

17 years now, every time we've gotten close to it we've been able to avert t.hopefully cooler heads will prevail and we'll find a solution to allow it to continue, but it would be nice to get some things done in the process, larry, that are good for the economy and doing something about obamacare would do that. >> senator thune, i'll leave it there. it's been a tough few days. thank you for your time, sir. >> thanks, larry. >> melissa lee. am i right to suggest to senator thune that the stock market has already discounted a shutdown? >> you're completely spot on. markets were down 1% last week so there's a little bit of uncertainty out there. at the same time history tells us, and we love numbers here at snoebs, h cnbc, history tells us the markets look past a government shutdown. when you look at the past 17 shutdowns, markets were up in both instances so the markets are looking past this. shutdown is little league baseball to the debt ceiling's major leagues, and that is what the markets really care about. what is the impact of this cr

going to be in terms of backpedaling and getting a clean cr passed going into the debt ceiling debate? that's really the question, whether or not it's going to be an acrimonious debate come october 15, 16, 17. >> you mean the debt ceiling. >> the debt ceiling, exactly. >> if the cr goes, i don't know. >> what does the cr do? >> four, five, six days? >> does the cr just postpone the moment for two month, as i understand it. it's a two-month extension. they can change that and make is six months or whatever it is, but it seems to me, that's exactly right. when you look at the vix which measures volatility in the marketplace, it has not risen very much as we are looking at this. now i'm not saying it might not, if we get to that big enchilada which is the debt ceiling thing, but it hasn't risen as much as it did back in 2011. i think most investors in general feel like we've seen this movie before. we've also heard the hyperbolic rhetoric. remember all the stuff about the sequester. the world was going to end.

it didn't. >> actually the world has done rather well. >> and for the defense stocks specifically which felt real cuts because of the sequester what, have they done? they have hit record highs. >> amazing. >> took their hits, early. all great points. with the shutdown virtually guaranteed, what do you need to know what have will be open and what will be closed tomorrow. we've got some answers coming up, and please don't forget, free market capitalism is the best path to prosperity as long as it's an orderly process. by the way, i would like a free market health plan. the trouble is i'm not going to get one. i'm "kudlow." we'll be right back.

all right. welcome back, everybody. you're looking at the florida house of representatives where they are voting on the rule which will then enable legislatively to vote on the continuing resolution they are going to submit to the senate which would delay the individual mandate. there are some republican defections, as you can see, if my reading is good. there are five nays on the republican side. there is a mini revolt, peter king and some moderate republicans just want to have a clean cr and give up the fight completely so we will follow this and update you just as soon as we get more information.

now, next one is there's been a lot of misinformation out there about what exactly happens during a government shutdown. who works and who doesn't? who get paid and who doesn't? so let's go to jackie deangelis to explain that all for us. good evening many tall order, jackie. >> good evening to you, larry, and you're right. there's a lot of misinformation out there. the first thing that people need to know is that if you're on social security or medicare your benefits will continue to be paid. however, paychecks for military personnel, those could be delayed even though they would remain on duty. meantime, air traffic controllers and tsu screeners and airports, they are going to be able to still work, and almost everyone involved in public safety or public health they will also operate as normal so the bottom line is this. if there's a shut doup. roughly 40% of federal workers, excluding the postal service, they will get sent home and 60% will still continue to work. another issue that wall street is watching very closely is we don't know if we'll get friday's jobs report. that's because data collection

and reporting is considered non-essential, larry. >> thanks to jackie deangelis. what happens if we don't get a friday jobs report? we won't know what to do about everything. >> i'm going to sell everything, i'm out of here if i don't get that jobs report. >> all your stock reporting. >> no, no, no. >> the longer we don't get government data, the better case is that the fed stays on the sidelines. >> oh, okay, okay. that reminds me, janet yellen, queen of the doves, they will stayed on the sidelines. the prolonged threat of a federal shutdown and potential debt default have many economists worried. here now to discuss the economic impact of washington's budget battles, we've got austan goolsbee, former council of economic advisers and chairman under president obama and douglas holtz eakin, chief economist under president bush. gentlemen, let me start with mr. goolsbee. austan, the president said today

if we have a shutdown it's going to throw a complete wrench into economic recovery. what's your take? >> well, it depends how long the shutdown is, and it depends how dysfunctional it is, so if it's a short little shutdown and then people kind of come to their senses and sort it out, i think the impact will be fairly modest. if it's an extended shutdown or if people start thinking, wow, they might actually default when it comes to the debt ceiling, then i think it will be pretty back. >> doug holtz eykyn, can i get your take. a junior junior version of the sequester. remember how awful the sequester was supposed to be. it wasn't awful. it may even have helped. >> in a government shutdown when you open it, the government spends the money it was going to spend anyway so this turns out to be a big timing shift, and as austan said, if there's a short shutdown, it won't even show up as a blip in the economic data. it's a very different calculation than one associated with the debt ceiling, and

shutdowns don't scare most people very much. >> gentlemen, please, stay with me for one moment. i've got to switch to eamon javers, our reporter in washington, d.c. will tell us about the house vote. eamon what, do you know? >> they just banged the gavel down and the little mini revolt you've been talking about from moderate republicans has just failed. they need 17 republicans to participate in this vote to block this rule, in order to block this version of the obamacare stripping cr. they only got 6 out of the 17 they needed on the moderate republican side. not enough to do it, so the rule has passed. now they will move on to a vote on final passage here, and that means that this little miniature insurgency that speaker boehner was worried about this afternoon, they tried to get it. they didn't get it, and now we're going to see the conservatives get what they want here in the house of representatives. the big question is if they get what they want on this final passage vote, will they get what they want in reality and law of

the land? that looks less likely because the senate says they won't do anything with this bill when the republicans send it over. >> they will table it, not even vote on it and send it back up. >> did we lose our friends? all right, gentlemen, i want to continue this other discussion. let me just throw one to you, austan. isn't the debt ceiling increase a more important vehicle for the economy and the country? >> it's a more important debate. i don't want it to be a vehicle at all. i mean, we shouldn't even have a debt ceiling, it's stupid. we either only major economy in the world that has such a thing. the markets should be the determinant of what the debt ceiling is. if they mess that up, it will be chaos. if you look back at the last debt ceiling fight, consumer confidence plunged the week that that broke out into the public, and it did really lasting damage to the economic growth of the

country, bad for the market and bad for the economy. >> but the second time around, doug, you have a little less worry, a little less fear. we came up against that debt ceiling thing back in 2011. >> right. >> and when all is said and done it got resolved so i wonder just how -- just how terrible the hit to confidence would be. the second time around you're a little less fearful, it would seem to me. >> certainly i would agree with austan about the impacts if you do in fact fail to raise the debt limit. first you'll get chaos and then real big problems in the treasury and then the next issue is when do people start developing expectations about the negative impacts, and as you point out we keep having conclusions to the last-minute impact to the crises. it's like thelma and the lewis, all just fine until you go off the cliff. you captain go off the cliff. as i look at this going forward,

so far the democrats have had the luxury of standing by and say we do nothing, but if get to a situation where the debt limit won't go up, we need a real negotiation. >> let's talk about the purgatory of in-between period where we're grappling with this. you aptly laid out the impact on different metrix of the economy. what happens, for instance, this time around to the bond market? because last time the borrowing costs of the united states did not go up. >> yeah. the last time of the debt ceiling or last time of the shutdown? we haven't had a shutdown for many years. >> debt ceiling, the ceiling, the ceiling. >> the debt ceiling -- >> during that so-called crisis, and shortly there after, even after the downgrade if i may add to melissa's point. long-term traits on u.s. treasury bonds and notes fell.

it was the stock market got clobbered mostly abuse of europe. how important is this, austan. i think it would be very important. city one is the shutdown and if there is a shutdown the one effective thing that could come out of it is that right now both sides think that they have got the american people at their back and that the wind is blowing their own sail, so if this shutdown led voters to stop paying no attention and make up their mind which way they want to do it, i think we wouldn't see a crisis on the debt ceiling or on the shutdown. one or the other side will sort it out. right now they just don't know which side they are on. >> just before austan goolsbee made a shocking statement that i want you to follow up on, he

said he believes we should not have any debt ceiling, and if you ask me we should have strict spending limits. is this like the free borrowing, free everything? >> certainly i don't think we need a lack of spending limits, something that restrains the confidence in the system. they don't have to agree and no one has to agree with the president. we don't have control. it came about when congress voted on every debt invoes and found in financing world war 1 they would give the congress more cushion. >> that was the first mistake,

that 1917 decision. by the way, it was a great period of time. i was there, and i watched -- >> larry, larry, this is your fault, larry. >> austan goolsbee, i want you to rethink your position on this free lunch you're talking about. >> why am i the guy on larry kudlow's show defending the market. >> larry's law to be passed in washington. i'm for the market. >> i want some rules and some discipline. i thought i agreed with me. >> i just want the market, the free market is the surest path to prosperity, larry. >> i've heard that somewhere. >> the trouble is the free market doesn't issue an unlimited volume of treasury debts and paper and social security and medicare and bankruptcy, oh, my god. 1917 though, that was a very

interesting year of the i've got to get out of here. by the way, the '20s were better when they slashed marginal tax rates. austan goolsbee, you're the best of the best, doug holtz eykyn, thanks to boast you. right back to capitol hill for the latest on any possible deal-making at this hour, but it does look more and more like we'll shut down the government this evening. we're "the kudlow report." please, stay with us.

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cnbc contributor robert costa, washington editor of "the national review" joins us. i'm here with tyler matheson and melissa lee. the moderate republicans didn't make much noise in the house so it's on to the next hurdle with what i'm going to call plan "c." >> speaker john boehner was working the floor during this rule vote trying to get votes around his final plan, plan "c" including a delay of the individual mandate. now it looks like it will be headed to final passage and will likely pass the house tonight and will go to senate where it will likely fail. >> they keep going back to the senate with the same kind of proposals, robert. how many times does the senate have to say no before what someone does what larry is saying and realize it a maybe it's time to punt? >> it's not so much about punting. what you see behind the scenes is republicans are trying to get ready to message a shutdown, getting ready to blame the senate, mounting a blame the senate defense so i expect the

black and forgot to continue late into tonight. house speaker john boehner may have come up with another revised cr but at this moment there's no compromise being brokered. >> in other words, tour talking about cr plan c, if a boxer keeps going down on the floor of the canvas, the referee does a tko. >> that's the frustration of peter king. john boehner is prepared to go to midnight tonight when the government is about to shut down. i hear had a house gp conference meeting is called later. hang on, stay with us. joining us now to talk more about this house republican chair kathy rogers. i know you're very busy and appreciate your time very, with you i just want to ask you as

our own robert costa was saying. the senate is going to get your resolution, your new continuing re-s is going to pass to delay the individual mandate which i think you should have done first. he's just going to table it over there. reid will table it and that's that. this sounds like an exercise in futility. this is the question as to fairness now. this is a question as to whether or not the senate is going to treat members of congress differently than any other american in this country. we no. we need the senate to look at it and to negotiate and risen to the american people about this law. >> at what point, dong woman, do you say enough is enough and we have to avoid the shutdown? >> the republicans do not want to shut down the government.

we started early. this is our third attempt to try to negotiate with the senate, to push the senate to consider difference options related to this morning. this bill. president obama has offered all kinds of waivers and exempted and delayed the employer mandate. he's issued exemptions for special there groups and other of his friends, and now, you know -- and even carved out members of congress and said we are going to get an extra subsidy that wasn't in the law, and we're saying this is not acceptable. everyone needs to be treated equally, fairly, under this law, individuals, members of congress, and that is what we're asking the senate to look at tonight. >> so if you had to choose, congresswoman, between the two, what i understand to be the central pillars of this text res lougs, one to postpone and the other to put members of congress and their staff on the soim

footing. if you had to choice one of the tuesday is that maybe will be a negotiable compromise might be. >> i would encourage the senate to take very seriously this question, it's really in the senate's court. they need to listen to the people that they represent, individuals that are facing being enrolled and members of congress, and, in fact, president obama, if this is such a great plan, then president obama should be the first to sign up tomorrow. we can get this bill on his desk and he can sign it and he can be the first to sign up tomorrow. >> if i may, if you had led with this, if you had led with plan "c." out be in better shape. my opinion, with all due respect, i know you're in the leadership. joe manchin, senator manchin of west virginia said a week ago that he would vote to delay the

individual mandate. you would have gotten manchin even vote and pryor's vote and begich's vote. why department you do that? >> there's still time. this is part of the legislative process and i would encourage them in the hours that remain to look at this honestly, to really consider what's in the best interest of the american people. this is a debate we've been wanting the senate to, have pushing the senate to have. harry reid, senator reid and president obama haven't wanted to negotiate anything or change anything. >> what happened to the medical device tax, congresswoman? what happened to that one, and did that one disappear and that was a problematic one because it opens a bigger hole in the deficit, $30 billion over ten years. >> the medical device tax is very important to us. we would like to see it repealed. the medical device tax is really

threatening medical innovation moving forward, and the senate rejected it. it was very disappointing that they rejected that after 79 senators earlier had voted to repeal the medical device tax. >> all right. >> i've got to leave it there. as always, ma'am, appreciate you coming on the show. >> good to be with you. >> now, we're about four and a half hours from a government shutdown. we'll talk about how that's going to affect stocks and a lot more in the next half hour. it's a special edition of "the kudlow report." please, stay with us. the american dream is of a better future, a confident retirement. those dreams, there's just no way we're going to let them die. ♪ like they helped millions of others.

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welcome back to "the cud row report." i'm larry kudlow. want to get you updated on the late forest capitol hill because a government shutdown less is than four and a half hours away. and as of now that shutdown seems almost 100% certain. the house is not expected to vote on a clean continuing budget bill that the senate would pass. it ain't going to happen and an attempt by moderate republicans to give up this fight just failed. president obama made an appearance late this afternoon to warn that a government shutdown would hurt the economy. he also said nothing will stop the obamacare exchanges from

going online tomorrow. stock investors aren't hitting the panic button yet though. they are not too happy about it. the dow closed down 128 bucks, the s&p fell ten and on the other hand the after market futures are trading up. i am here with melissa lee and tyler matheson so we move on. could the potential shutdown have an impact on the 2014 elections? no better to answer that question than larry sabato. great to have you here. before i turn you over to your fellow uva alumnus tyler matheson, i want to ask you how badly is this going to damage the republicans? >> well, it depends on how long the government shutdown goes on, layer. if it's a day or two, hey, the election is over 13 months away. loads of other things will happen, but if this turns into another 27-day shutdown the way the one in 1996 did, yes, it's

going to disproportionally hurt the republicans, hurt them with independents and swing voters >> you know, larry, i read a "wall street journal" editorial last week who made the case that if republicans really want to defeat obamacare, repeal obamacare, what they have to do is not fight the little skirmishes but win elections. they have to win the senate and control the house and they need to win the white house. is that how you see it? >> absolutely. that's an observation i would expect from a university of virginia grad a.it's absolutely correct. there's only one way, and i'm sorry to tell the republican leadership this, there's only one way they are going to abolish or de-fund obamacare and that is to win the presidency, the senate and the house simultaneously in an election. that is how you abolish or de-fund obamacare. this is a strategy guaranteed to fail. we all know the ending. the house republicans are going

to cave. we just don't know when it is. >> now, larry, you had already mentioned that it depends on how long the shutdown is in terms of the impact on the elections. it's also the same thing that you can say about the economy for the stock market, whatever and right the republicans are getting the blame for a shutdown that at this point looks 100% certain. does it make a difference in terms of the debt ceiling? if the people cans can seen to handle those negotiations, it could come out pretty good. >> we don't know how this is going to play out and you mentioned there's the debt ceiling still to come we may have an evaluation of 2014 elections after the debt ceiling. but this is about conservative republicans blaming they have --

the incumbents can only lose in a primary. that's what this is all about. >> what are the odds, larry, as we sit here 14 months away from the 2014 elections, what are the odds that the republicans could win the senate? are there enough vulnerable democrats in the senate that the republicans could control that house a year from now? >> yes, yes, it's possible. i wouldn't say right now it's probable, but it's very possible. look, the average since world war ii for the out-of-power party to win senate seats in a 6 this year election. six seats. guess how many seats the republicans have to gain to gain control of the senate? six seats. they have a shot at it. right now they are at three or four. that's close. if they get a wave they might be able to win it. i don't think this shipdown is

helping them though. >> larry sabato, thanks so much for your wisdom. now back to the market reaction. the dow fell again on the shutdown fears today, but we're not exactly in panic mode is this a buying opportunity? we'll talk it over with money experts next up on a special edition of "the kudlow report." tomorrow on "squawk box," shutdown showdown, famed investor bill miller navigates the markets when the bulls and the economy are the focus. and everything that goes along with it. [ thunder crashes, tires squeal ] ♪ ♪ so, what do you say? thanks... but i think i got this. ♪ [ male announcer ] the all-new cla. starting at $29,900.

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stock market did sell off today on shutdown fears. but right now futures are pointing to a higher open tomorrow, so how will a government shutdown impact stocks? i'm joined by allison deans and asset management senior adviser and don luskin, trend macro chief investment officer, tyler matheson and melissa lee. are your knees shaking over this government shutdown? >> no. why should they? the last shutdown we had, two of them back-to-back. there was a shutdown because we hadn't raised the debt limit. we were facing default. clinton had to shut down the government to avoid a default. the crisis doesn't get any more than that and the stock market went up 15% during that period. really, this is just not a big deal. move on. cover something else.

>> i wish we could, don, you took the word right out of my mouth. >> you have your job to do. >> i understand. >> and it's our job to get people out there red for a potential shutdown, what they should be doing with their portfolios, so on "fast money" tonight it was said this will be a buying opportunity. what do you say? >> i like the equity markets. what i do worry about is the debt limit ceiling. i'm less worried about a government shutdown but if it becomes protracted people lose confidence for congress to reach an agreement on the debt limit which could have an impact on global economies. if they start negotiating on finer points within observingary, i think that will give the market some assurance that it is an opportunity to buy. they hold their ground and dig their heels in and we don't see any improvement. it lasts quite a while and that could be a bigger issue. >> if the issue is losing

confidence in congress, how many people does that apply to at this point, like three snoinguy? who has any confidence left? it's a joke. >> are you buying? >> i'd be buying. >> where? >> buying stocks and selling bonds, every time you get a dip in the futures market. >> allison, i want to speak on your worries. >> yes. >> i'll just throw this out there, okay? i'm no genius about this. all i will say is this. i think the debt ceiling bat s&l going talkly. >> why. >> because it's going to go back to obamacare and defending obamacare, and on top of that, on top of that as paul ryan has already said, they will have a laundry list, tax reform, regulatory reform, energy reform, things that don't generally go into a debt ceiling and as i said the obamacare fight all over again. i think it's going to be real

hard. >> the person on before us made fact that a lot of republicans are in a protected market where they don't have to worry about being pushed out or it's only a primary issue. if they are protected they are not worried how they are going to come across and particularly these tea party folks will really get very stubborn and i don't think some of them necessarily understand the implications of being inflexible on the subject. they don't seem to also understand that i don't think the country is as against it as they are, and so i just see them being almost suicidal in the nature of the way they are handling things and that's what makes me nervous. >> good contrary opinion. don luskin, appreciate it. the man so many people say is responsible for the entrenched fight in congress against obamacare, that being senator ted cruz. he is about to join us, and we will welcome him back right after this quick break. is that true? says here that cheerios has whole grain oats that can help remove some cholesterol, and that's heart healthy. ♪

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welcome back to "the kudlow report." let's give you a quick recap of what's happening right now. hours before the government shuts down, the house is voting right now on a continuing resolution bill that includes a one-year delay on the obamacare individual mandate. it would also strip away the special obamacare exemption for members of congress and their staffs. senate democrats, meanwhile, have already vowed to table the

resolution. the driving force behind the republican and obamacare strategy. senator cruz, welcome back to the show. despite your what i'm going to term heroic efforts to bring obamacare's flaws to the american public, you're at loggerheads now. you're at loggerheads. house keeps sending stuff over and harry reid will table the motions and we're face a big shutdown. is it time for the republican party to say, okay, not this time, and just kind of pull out before something nasty really happens. >> well, larry, it's great to join you, and i think absolutely not. you know, three times we've seen the house of representatives compromise. three times the house of representatives has stepped forward, has passed continuing resolutions that would fund the entire federal government and then at the same time would work to mitigate the harms that obamacare is inflicting on millions of americans, and three times now harry reid and the senate have said absolutely not. we will not negotiate. we will not compromise. if you're right, if in a few

hours harry reid brings the senate back and all senate democrats vote in lockstep as they have before to kill this continuing resolution, then i'm sorry to say harry reid will force us into a government shutdown. i don't want that to happen. i don't think we should have a government shutdown, but at the same time, you know, both harry reid and president obama are refusing to negotiate at all. president obama will negotiate with iran, but he won't negotiate with leaders of congress. that's not a path for resolving anything. >> senator cruz, i gather they just told me that you have made an offer that if the government does shut down that you'll donate your salary to charity for every day the government is shut. what's the origin of that, and what might that accomplish other than a symbolic gesture of some proportion? >> well, that's correct. if harry read forces a government shutdown, i don't think he should, i think that would be a mistake, but at the same time i don't think elected officials should be treated better than the american people, and so if harry reid forces a

shutdown, then i intend to donate my federal salary to charity for every day the government is shut down. i don't want it to shut down as all. i want us to fix this problem but at the same time i want to us listen to the american people. there are millions of americans losing their jobs, not finding jobs, being forced into part-time work, forcing skyrocketing health insurance premiums, and at risk of losing their health insurance and congress needs to listen to the american people. that's what i hope is the end point of all of this. >> senator cruz, what is the impact here as we go into the debt ceiling debate of what's going on with the shutdown? tonight we witnessed a mini revolt in your party. how does that get us set up for the potentially much more acrimonious debate still to come which is much more the focus of the financial markets? >> well, i'll tell you for the debt ceiling debate, we're not in that now but it's coming up, the most ominous sign was earlier last week when harry reid and the democrats all voted unanimously to strip out of the

house continuing resolution a proposal that i call the default prevention act. it's a proposal that says in the event the debt ceiling isn't raised, we will always, always, always pay our national debt. i don't think we should ever default. i don't think any responsible president would ever threaten a default, and i'll tell you, melissa, what was most ominous harry reid on the floor of the senate referred to that bill that the house passed, which would have taken the threat of a default off the table, as the quote pay china first bill, and so he and every democrat voted to strip it from the continuation resolution, and the reason is, unfortunately, they want to threaten the government default. i think that's irresponsible. it's irresponsible with the financial markets. we should always honor our debts, but right now given harry reid's intransigence i think it does not bode well for how this fight proceeds. >> well, i think republicans have been quite clear they don't want any default on our debt. >> right. >> or the interest on our debt, but senator cruz, what's not clear, there's a study coming

out of the brookings institute, very sharp over there, and they said, okay, you can cover the interest on the debt, but -- and you can pay social security. can you pay out medicare, but if you don't raise the borrowing ceiling there's roughly one-third of budget obligations that will not be paid, so what i'm saying it's going to be crucial to raise the budget -- to raise the borrowing ceiling, absolutely crucial. >> look, everyone agrees that the debt ceiling is going to be raised. the question is whether harry reid and the president will maintain the same negotiating position they have on the continuing resolution, bargain for nothing, give us 100% of what we want and we'll threaten a default. that's not the way to get anything done in washington. let me point to something that was a promising thing that happened today. today the senate unanimously passed a bill that the house unanimously passed earlier that provided all men and women of the military will be paid regardless of whether there's a

government shutdown. that great. unanimously passed. i commend harry reid for doing that because for weeks harry reid and president obama had been threatening the men and women of the military, using their paychecks to hold them hostage, and i'm glad we passed that, but that also points a way forward. i think and i encourage the house tonight, i think the house should pass multiple continuing resolutions focusing on all of the things president obama listed in his speech to the american people this afternoon and funding them, so one continuing resolution funding the v.a. in its entirety, another one funding our national parks and another one funding our border patrol agents so that we don't have critical services denied the american people. not full-fledged appropriations where they are making policy decisions, just focused continuing resolutions that say let's maintain the status quo and not cut off the funds, and

harry reid ought to be able to cooperate bipartisan to get that. >> i've got to jump. senator ted cruz, thank you, sir. appreciate it as always. >> thanks. >> many thanks to cnbc's melissa lee and tyler matheson. we'll keep you informed of any major developments tonight here on cnbc. that's it for "kudlow report." americans take care of business. they always have. they always will. that's why you take charge of your future.

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