who will get to them first? don't miss it. twitter files, one thing you need to know from me, i'm not going to bless this deal. we have no idea what's coming, what price, what market cap. let's do the work before we make a decision to get too excited. there's always a bull market somewhere, i promise to try to find it for you here on "mad money." i'm jim cramer. i will see you tomorrow. this was a dramatic scene earlier today as a car rammed the security barrier near the white house and the driver led police on a wild chase all the way up to capitol hill. police shot and killed the driver near the capitol building. the capitol was put on lockdown. the latest right here. she did not have guns, she was unarmed, but she was using her car as a weapon. that according to police. the woman had a 1-year-old baby with her in the car, the baby was not hurt. one police officer was injured in a car crash related to the incident. we're going to have more on this

story and full coverage of the government shutdown on the "kudlow report." this is the "kudlow report," we are live here at 7:00 p.m. eastern and 4:00 p.m. pacific. let's get right to eamon javers for more on the shocking situation that occurred on capitol hill just a few hours ago. good evening, eamon. >> reporter: there were moments of terror, an incident that began as you say over at the white house and made its way down here to the capitol building. shots fired here on the west front of the capitol. the scene just behind me now. we got details just within the past hour here now on exactly how this transpired from the united states secret service. take a listen to those comments. >> the sedan struck temporary security fencing and one of our uniformed division officers at a check point of the white house

at 15th street and e street northwest. the vehicle then fled east on pennsylvania avenue. there were multiple crime scenes as a result of the vehicle fleeing. there were multiple shots fired at several different locations. >> now, larry, that vehicle was able to get down pennsylvania avenue being chased by police the whole way. they were able to stop the female driver at this location right behind where i'm standing here on the west front of the capitol. and that's where our eyewitness we talked to a few moments ago was able to describe the scene for us. take a listen to what he had to say. >> they cornered the vehicle on the southwest side of the drive there. police surrounded the vehicle, had their guns drawn, had the passenger's door open telling the person to get out. at that point, the sedan slammed into reverse, smacked the cruiser behind it, did a 180 and peeled off on the south side of

the capitol and disappeared around there. by that time, the police had us down on the ground, securing area. and then a couple minutes later, we heard a bang on the opposite side of the capital. capitol. >> reporter: larry, stunningly all of that incident was captured on video by a camera crew. take a look at this video, and you can see what the eyewitness was describing. the black sedan surrounded by police, shots ringing out, the sedan making an escape, looping around garfield circle here on the west side of the capitol. two loops around the circle and up constitution avenue, past the capitol building. the chase ultimately ended with the vehicle stopped at second and maryland avenues right over between the capitol and the supreme court building, larry. that's where the suspect in this case, a woman was shot dead. she was pronounced dead at the scene. we're also told that she had a small child, a small girl in the car with her. thankfully that girl was able to

be rescued by police officers in the moments just after the crash up on capitol hill, larry, very, very scary moments today. >> let me ask one question. i know it's early in the game in the investigation, does anybody have any idea what was motivating this crazy woman? >> we don't have any idea. what capitol hill police and others have told us is there's no -- so far no evidence of any link to terrorism here. they've also said this appears to be an isolated incident. the immediate fear in washington, of course, when you have an event that happens, a security event that happens at the white house and also happens at the capitol building is some kind of coordinated attack. they're saying this is an isolated incident apparently just involving this woman. but we do know that police are researching her background right now trying to figure out who she knew, why she might have done this and why she put her child in such a dangerous, dangerous situation today, larry. >> incredible. all right. many, many thanks to eamon javers reporting from washington, d.c. now, we also have big news on the budget battles today.

john boehner's office says the speaker is determined to prevent a federal default, which he knows would be disastrous for the economy. and markets welcome this statement. but president obama was still in his bashing mode today choosing to score political points in front of a hand picked adoring audience. listen to what he was saying. >> and there's one way out of this reckless and damaging republican shutdown, congress has to pass a budget that funds our government with no partisan strings attached. that speaker john boehner won't even let the bill get a yes or no vote because he doesn't want to anger the extremists in his party. that's all. that's what this whole thing is about. have you noticed that? since they've taken over the house of representatives, we have one of these crises every three months.

have you noticed? >> all right. simple question. how do you make a deal with somebody who is out there talking like that? really just talking trash to the very people he's supposed to be dealing with? let's talk to our panel. co-host of msnbc's the cycle. and of course our ace political reporter robert. here's a guy who was trash talking the republicans and will not negotiate with the republicans. now i ask you, doesn't this wind up hardening the gop position and actually preventing any deals from getting made? >> i think it may be hardening the position for the gop. but at the same time, the emerging news right now on capitol hill is that speaker boehner is looking to combine the debt limit negotiations with the continuing resolution to fund the government and try to get some kind of grand fiscal package and that's what's really the chatter right now and what may drive a deal. >> is that going to take a

couple of weeks and is it -- i know it's hard to estimate. but i've also read paul ryan, chairman of the budget committee, are looking for a grand design. but that's going to take a couple weeks to get underway? >> that's exactly right. >> i think, larry, when i talk to congressmen today at the capitol, they believe the shutdown could last three weeks. if they want to make that concession to not default, they want to win something in return. maybe a repeal of the medical device tax, maybe getting some entitlement reform. they're looking to get some kind of fiscal package. >> larry, robert's a great reporter and i've been reading his stuff with great interest, but i think we have to be careful here. raising the debt ceiling is not a concession. it's not a concession to the white house, it's not a concession to wall street. although anyone who knows anything about the markets understands how vital this is. and there's a problem here and that the republican party by being led by a minority of a

minority in the overall scheme of government keeps talking like raising the debt ceiling and doing the responsible thing is a concession. they're wrong, the supporters know it's wrong and increasingly a lot of executives and financiers are going to make sure they know it's wrong. >> let me go to you on this point. the president today started up on the debt ceiling, basically using it to trash the republicans and scaring people in the economy. the treasury department issued an incredible statement talking about catastrophic problems and it's going to be worse than it was in the recession of 2008. they're just being negative, they're just trying to scare. boehner countered that with his point today. boehner countered that with a very useful point. but the point i'm making is this, these guys had a chance a year ago to pass the full faith and credit act from senator pat toomey which would've by law on paper protected all treasury interest and principle and guess who opposed it?

obama, guess who second to oppose it? harry reid? all this nonsense could have been put to rest if they'd taken pat toomey's bill and they wouldn't do it, bob. that's why i think they're insincere and trying to cause trouble. >> you're right. there's a false sense of hysteria out there and a lot of it has to do on the president's side. let's remember one thing here, larry and robert. the president needs to show leadership. he is the head of our executive branch. and one should make the argument he should be negotiating in full faith behind closed doors. 17 years ago when it was bill clinton on the stage, bill clinton had partisan jabs from a public standpoint, but behind the scenes he was negotiating, showing leadership, and behind the scenes he was literally conceding different points. we don't see that with this white house. >> i was saying, i couldn't disagree more respectfully, robert. if democrats refuse to raise the debt ceiling for unrelated issues saying they want on-demand abortion across the country, they'd be laughed out

of the room -- >> by the way, they have done that. go back -- they exactly have done that. and by the way, it's funny you use the abortion issue because that was the issue that was used. by the way, it was used during the carter administration and then it was used later on in the bush -- the papa bush administration. so you're wrong. you're dead wrong. but the point i want to make is i don't know besides trying to scare people in the economy -- let me go to bob costa on this, trying to scare people in the economy. the president and the treasury department issuing these statements. i heard boehner say it's not going to happen. and again i say, if they had used senator pat toomey's amendment last year, that would've codified all of these questions that the principal and interest on the federal debt would be serviced on time. these guys are using this for political purposes. that's all it is, robert. >> and if you listen to the

president's remarks, really at a moment where both sides seeing if the other will blink. boehner doesn't want to blink and the president doesn't want to blink. eventually they'll keep sweating it out until this debt limit deadline. and eventually they are going to come to the table. i hear at the white house yesterday, they did start talking general terms about some kind of fiscal package to solve both of these impasses. >> by the way, okay -- we've got -- besides this week, two more weeks to go you're saying until we get to the october 17th week. ari, i didn't want to be rude. but i want to tell you, go back and read -- there's a great article in the national review that reviews most of the debt -- most of these shutdowns came under jimmy carter. a lot under ronald reagan. they had issues like the sandanistas, issues like school prayer, abortion that were nongermane. so you can't tell me this is john boehner operating. >> let me say, yes, there has been jockeying about the debt

ceiling from both parties over history. i don't deny that. what i was saying and i standby my historical claim is we have never seen us go this close to defaulting to the point that we have our credit rating downgraded, going up to the ninth inning in a way that wall street understandably thinks has no logical reason, no good thing for the country over these kind of issues. >> i've got to say -- we've never seen as a factual matter. we have never seen a downgrade like this which we saw the last time. what did they get out of last time in 2011? tremendous spending cut. the president and democrats met them on that. the so-called cr includes everything the tea party asks for through sequestration. and it's not enough. there's a reason why -- >> i've got to get out. i've got to get out. you guys are coming back later in the show. we'll pursue this later. >> thank you. stick around, everybody, so we'll have them back in the end of the show. now i've got to talk to two distinguished house members to see if we can make a deal, suggest a deal, whatever.

paul tonko, welcome back. and the chair of the republican study committee. steve, i want to ask you this question. when you hear all the negativism coming out of mr. obama and his treasury regarding this phony issue of a debt default which no one wants. it's almost, steve, as though obama and company are trying to create a market panic. you know, like 500, 600, 700 points in the marketplace and a run on our bonds. that's what it sounds like and that is not something any president should ever do. >> well, larry, the president showing a severe lack of leadership, but i think if you look at what he's doing. this goes back to november. he has wanted to create all of these crises of the moment and he tries to scare people, tries to threaten things like default, which is incredibly irresponsible so he can get everything he wants. and he's made it clear, pass my bill, one bill, no negotiation or nothing. all or nothing, that's not how

we work. we've passed eight different bills to fund all parts of government including a number that has broad bipartisan support and yet they said, no, they'll kill everything. even the bill that funds cancer patients and our veterans unless they get everything they want. >> we passed language to take default off the table as you said with the full faith and credit act. >> that's the incredible thing. it would have solved any of this speculation. but john boehner, in my opinion, speaker boehner did a good job today rebutting all this default nonsense. but let me ask you this, what do you want? tell me simple, clear, what do you want in the cr that would end the shutdown? >> i think we should do a clean cr. i think we're way into the 11th hour. we need to move quickly here to avoid a credit default, a full faith and credit of this country should not be challenged and downgraded. it's important for us to keep that strong and to reopen

government to make certain that we can move quickly here. it's causing a huge loss every day that we have these workers furloughed and that services are not rendered out there to american families and businesses. so what i would like to see is a clean cr. we have given already as was stated earlier by a comment made in this segment of your show, we have already given. we have given sequestration, the cuts associated with sequestration and we've given that lowest number, which is the house republicans' number in the process. >> by the way, i acknowledge that. we've had a number of guests on. i was even on msnbc, heaven forbid, last night. i acknowledged the numbers are pretty good. you've held the numbers. but let me move on, you want essentially a clean bill. steve scalise, what do you want the continuing resolution bill to look like? give me your top two or three. >> let's first keep in mind that the sequestration was an idea that barack obama himself

proposed two years ago but signed into law. that's the law of the land from two years ago. obviously we have some serious issues with the president's health care law as most americans do. and so we've said, look, we want to address the problems and make everybody live by the same rules that the law says you have to live by that the president's exempted his friends -- >> that's the vitter amendment? >> but also we've passed -- >> no exemptions to obama care, is that right? >> right. and we've also passed a number of other proposals over to the senate they said no way, it's my way or the highway. we haven't taken just one position where it's all or nothing, we've said here are a number of issues including bills to say make sure we fund our veterans, cancer treatment, and they said no to that unless they get everything they want. >> i think what you need here is regular order to do a full budget. we say get the clean cr done, and by the way, sequestration was something the president moved on the table because of the request earlier by the republicans in the house of representatives. they like that concept. so they can't walk away from it

now. it was a give, it was a concession. and we also think that with a clean cr, if we can get this done, it buys us time from november and december, name the conferees, we've been begging to have names to go to the table, do the budget in regular order under subcommittees, committees, report to the floor, that's the best way to do the business. this goes back to the days of thomas jefferson. regular order. >> i knew tom jefferson very well. so you want a clean cr. steve, i'll give you equal time. you've already mentioned the vitter amendment not to exempt government from the obama care bill. what's your next -- what other add-on would you like? >> we've offered a number of ideas. in fact, one of the things we want to do is try to get spending under control in washington. when paul talks about the sequestration agreement, he acts as if the president didn't get anything. he got the increase on the debt ceiling two years ago. he negotiated as all have negotiated and ultrama timately

have another negotiation now. the president cannot just continue to say i'm not going to do anything unless i get everything and aisle going to bash republicans because the country doesn't want the partisanship. let's get at the table and get the agreement. we can get all this done. we need cooperation from the president and harry reid. >> you don't repeal a law as part of a concession. >> i wish we'd have you both back as a blueprint. i'd love to have you both back. now, right now, big drop for stocks today. it's obvious markets are worried about the shutdown and the debt ceiling fight. question, did the president realize what would happen when he said this? >> wall street's been pretty calm about this. the reaction i would say generally speaking has been washington fighting, washington posturing, yada yada yada. >> i think this time is different. i think they should be concerned. >> all right. this time's different. they are concerned. anyway, we'll keep you updated on any new developments

in today's incredible capitol hill shooting incident. and finally as always, don't forget free market capitalism is the best path to prosperity. yes, of course, we have to defend american debt. but it would be nice if we had less of it. i'm kudlow and we'll be right back.

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welcome back to the "kudlow report." here with this market flash. the dow finished down 136 points. it closed below 15,000 for the first time in about a month here. the nasdaq and s&p 500 also down big by about a percent. now this is more than just about the shutdown. obviously the capitol hill incident spooked investors, but the dow downright out of the gate this morning and the big reason was the debt ceiling. using scary words like catastrophic. larry, that debt ceiling day is only, of course, two weeks away. back over to you. >> all right. many, many thanks, we appreciate it. we're going to talk about that. gentlemen, question before the house, will the government shutdown and the debt ceiling -- will the government shutdown shut down stocks and the debt ceiling? let's ask dan greenhouse at

btig, alan valdez from dme securities. let me just start with the debt ceiling. there isn't going to be a shutdown. there's not going to be a default of treasury. it's going to go at least two more weeks because they're going to merge the shutdown continuing resolution with the debt ceiling debate. and my view is the chances are growing that this will go on a third week, a fourth week. my crystal ball is no better than anybody else. i want to put that option. if you have a four-week for argument, what does that mean for the stock market? >> not good, larry. investors are nervous now. and nervous investors don't buy, if anything they sell and the longer this goes on, the worse it's going to get for the market. it seems, you know, i've been around a long time. when your boss spoke to the speaker, they were negotiating. tip o'neill and reagan, they would negotiate. this president does not want to negotiate.

we elect the president to work. you have to deal with people you don't like. >> i hate to be the ari mel ver of the panel here. >> you can be the dan greenhouse. >> but to play devil's advocate in the president's defense, we have litigated this already. we had election and congress. his point of view is we've been through this already, why do i have to do it again? i'm sympathetic to that view -- >> because we always -- >> but if the opposite was true, you'd be blowing a gasket right now. >> i actually worked for reagan and went through debt ceiling after debt ceiling fights and reagan swept with much bigger numbers than obama. i want to make that point. and reagan not only controlled the senate he controlled the house with the help of 60 or 70 southern democrats. that's not the point. the point is when you're talking about borrowing and spending, you're always going to have this debate. it is part of it. unfortunately down through the years, they've had stuff like abortion debates and school prayer debates and nicaragua

debates and so on and so on. what i want you to tell me, though, is if this shutdown does merge into the debt ceiling as i believe it will and our own bob costa suggests it will, and we go four weeks or five weeks or six weeks. what is the impact on the market? what's your view on that? >> well, let me start by saying robert costa's reporting has been fantastic, jake sherman has done fantastic work and out with a big story right now talking about how, indeed, the speaker is targeting another ground bargain if you will. >> that is correct. >> has investors, to a rj large degree you have to look through this, can't control what's going on in washington. >> tell me -- you may be dead right, but what would you look at instead? >> i am dead right. >> say you had a thought experiment and pushes washington out of the picture, out of your mind, what should you look at for stocks? >> you're still looking at the path for earnings, and with that regard, everything that was true yesterday is true today. whether or not you have an opportunity to buy stocks in general at a 5%, 7%, 10%, or in

the case of 2011, a 20% lower level. i'm not saying that's not going to happen again, but i am saying the closer it gets to a debt ceiling breach because the budget debate doesn't bother -- the closer to the debt ceiling, the more rattled investors will get. >> it's interested me enormously, the ten-year treasury closed at 2.59, 2.60 today. it's having a nice rally. if bonds were such jeopardy, if treasury bonds were in such jeopardy, why are people buying them? they're buying them, bidding up the price and bidding down the rate. >> yeah, they sure are. and it's right. they're comfortable with that right now. and, again, i go back. there's a lot of fear amomonger out there. and that creeps into investors' minds. and if they get nervous, they're not going to buy this market.

>> they're playing with fire but they're going to the treasury -- >> we're not seeing a real selloff. buyers aren't coming into the market. there's light volume. >> we will see. it's tricky but it's going to go on for a while. thank you. now, folks, we talked about how stocks are responding to the shutdown but what about the rest of the economy? we're going to ask george w. bush's former chief economic adviser. please stay with us. clients are always learning more to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars...

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here with this market flash. it's finally here. everyone wanted to know what's under the hood at twitter got their first peek. filed an s1 with regulators, a precursor to going public. in these documents we learned a great deal about the financials. twitter isn't yet profitable but sales grew from 28 million in 2010 to 317 million in the year 2012. also learned it hasn't selected which exchange to list on so the battle between the nyse and the nasdaq continues. but either way, it intends to trade under the ticker twtr. back over to you. >> all right. as a constant tweeter, i like that very much. now, day three and counting, how will the government shutdown impact the economy if at all? let's welcome back our friend ed lezier and now professor at stanford university. how do you reckon this -- we're three days into this. by most accounts, we're going to

go a couple more weeks minimum. couple more weeks. let me give it a round number of four weeks. how would that impact the economy in your judgment? >> i think minimally. and there are a couple of pieces of evidence on that. first, if you look at the sequester which everybody was deathly afraid of, there's not a lot of evidence that even a sequester had a significant effect on economic growth. remember that the quarter before the sequester had zero growth. the first quarter the sequester had 1%, the next quarter had 2.5%. if you're looking at the numbers, you just don't see it. but the other way to do it is the way we always did it at council of economic advisers, also the way that cbo does it. and that is to use the models. and if you use the models, we're talking about a month having about a 1/20th of a percent on gdp. the only way we would get big effect is if this were to escalate and have general kinds

of effects on other services, like customs, like tsa, air traffic control. >> when you say escalate, you're saying if they -- if money is so short because they can't raise the borrowing ceiling, then they'd have to redefine essential and nonessential and start cutting into quote, unquote, essential services which you say would have a larger negative effect on the economy. is that fair? >> that's right. yeah, and that's pretty obvious. you know, if you start affecting transportation, you're going to have a significant effect on the economy. i don't think that's going to happen. and i don't think we're going to default on our debt. that's just almost zero probability event. and, you know, it's unfortunate that we have to go through these theatrics in order to get to a solution. fortunately, i think, speaker boehner actually was rational today and responsible and his comments were welcome. i hope we move in that direction because that's where we're going to end up anyway. >> i agree with you that boehner

was a hero today, but it's all great for reporters and anchors and things like that. it's fantastic. now, hang on. i want you to listen to what president obama had to say to our very own john harwood yesterday in a great interview about what he, obama, wants from the next fed chairman. >> okay. >> they're going to be making sure that they keep an eye on inflation, that they're not encouraging some of the bubbles that we've seen in our economy that have resulted in bust. but they're also going to stay focused on the fact that the unemployment rate is still too high. >> all right. now here's the thing -- he says, yeah, dual target unemployment inflation. but when he talks about bubbles and he's talked about bubbles in other speeches, ed, i've heard this before. it kind of seems to me leaning toward tighter money, leaning toward the position held by larry summers before he took himself out of the race. if the president warns about bubbles, that tells me thinks money's too loose.

>> that's right although he said he was worried about the dual mandate aspect of it which is also employment. it's always nice after the fact to talk about bubbles that should have been burst and when they should have been burst. but if we know they're bubbles at the time, then you can make a lot of money in the market by selling them short and, you know, i can't imagine that any government official is going to be wiser than the people out there trading on these things and -- >> no, i agree, but i was going a different direction and i'm running out of time. i want to ask you -- >> yeah. >> do you think obama was somehow subtly signaling that janet yellen, the new favorite to be the chair of the fed is herself a little too much of a bubble maker? >> no, i don't think so at all. i think his emphasis on employment and the second aspect of the dual mandate suggests that's what he's worried about. when he's talking about bubbles that were in the past what he's really talking about is what he thinks of his irresponsible behavior.

i don't think he wants a tight money policy at all. >> thank you very much. we appreciate it. >> thanks, larry. we're going to get a quick update on the shooting incident at the u.s. capitol today and day three of the obama care exchanges, more glitches being reported. and what about these very steep deductibles. next up 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.

welcome back to the "kudlow report," i'm larry kudlow. you're looking at the dramatic video of the shooting incident in washington, d.c. today. police shot and killed a woman who drove her car into security barricades near the white house. the woman led the police on a chase all the way to the capitol building and that's where she was shot. sources are now telling nbc news that she did not have a gun. she did have a 1-year-old baby in the car. the child was fortunately not hurt. police say there is no connection to terrorism and it was an isolated incident. we will update you on any significant developments as they come in. now, we are on day three of obama care enrollment. but still lots of glitches and uncertainties and very few signups according to reports coming in from across the

country. many people, once again, seeing this error message when they reach the online exchange. and who knows how high cost and deductibles will be if they get past the error screen. welcome back. you know, i don't know what the final story's going to be until we get, i guess, but not a single person is enrolled in these exchanges. no t not a single person. the london daily mail is reporting 1% of those who visited exchanges signed up. and my last one for you is in california. first they said 5 million people looked into it, then brought that number down to 645,000 from 5 million and then they report nobody has actually enrolled yet. now i know it's only day three, but it sounds like a bust. >> i thought this all along and the numbers are showing it.

computer glitch, some of the states operating in their own exchanges, the number was down 645,000. d.c. has delayed their own exchange, colorado. this is a huge nightmare. the government, the administration spent a lot of money promoting these exchanges. it's not happening. the dropdown box is not working security glitches. and this is what i thought all along. it's just unfolding as it should. >> let me ask you quickly, i want to get to the financing of these health care policies. at what point do you say, you know, conclusively this is not happening right? this is only day three. and i acknowledge that. day three is nothing. >> well, people have until march

31st for the exchanges to be open. they will get their coverage on january 1st. the issue is are the invincibles going to sign up for insurance? the average premium for a young, healthy 30-year-old is about $260, which is a lot more than if they had a, say, in california, a blue cross -- a blue shield silver plan at $94 a month. if these young people do not sign up, the old er eer sicker e will be using the exchange. some will drop out and it's going to be a big implosion. >> there's a lot in the paper today about $5,000 to $6,000 deductibl deductibles. talk to me about that relative to premiums. what's the impact going to be? >> the deductibles will be higher. 60% of americans get their

health insurance through their employer. seeing home depot, u.p.s. making changes. when the president said over and over again, if you like health insurance, if you like your doctor, nothing will change. these high deductibles will be a shock to people. people being pushed our their employer based coverage where they paid a low copay and low premium, they're going to be astounded. and the dissatisfaction with obama care in the polls is going to rise significantly. >> all right. we'll leave it there. sally, thanks very much. >> thanks, larry. >> now, we're about to talk to a key moderate republican congressman who is trying to end the shutdown battle and live to fight another day. that being congressman michael grimm. he's with us next. stay with us, this is the "kudlow report." at farmers, we make you smarter about insurance.

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resolution. what's your reason? >> well, one, because as bad as the policy is of obama care, a shutdown it is also bad policy. a lot of people i know barely make ends meet. you know, whatever they may be in the u.s. government and they can't pay their bills. i don't think we resolve the issue of bad policy, which is obama care, with more bad policy of shutting our government down. >> what do you say? i'm somewhat sympathetic with your point of view and i think the game's about to change anyway because i think the cr's going to be folded into the debt ceiling. but what about the house unity requires that the republicans get something from the democrats before they sign off on a continuing res. house unity? >> no, i mean, listen, the big issue for me and for most of my colleagues. putting aside the faction it's obama care or nothing. let's put that aside for a second. there's no question the way the president is handling this and harry reid is handling this now it's getting personal.

now it's almost getting to the point where his name calling and there's a tremendous sense of arrogance that they -- it's, you know, their way or the highway. that's even making, you know, members like myself now start to dig in a little bit. so i think the issue for me is why we haven't tried to completely revolt. why we are still supporting our leadership. is because we don't want to set a precedent where the senate dictates over the house. >> right. >> that's -- that we can't lose because it's the people's house. and that regardless of whether you're a republican or democrat, that's a bad precedent for whoever is in power. >> harry reid is regarded in many republican circles as the antichrist and you're right and i totally agree with this. the way obama and reid have treated republicans in this is really, really bad. it's one of the reasons why i'd like to see you all take another whack at the ball. let me ask you something, on the way to passing some kind of cr, you've got these small spending

bills, okay, national parks, veterans, d.c. funding, the national institute of health care. that's pretty clever. i think that's pretty clever. now that happened, i don't know, couple of days ago it started. i think that's going to put the democrats on the defensive as they keep vetoing these spending bills. what do you think? >> well, i think it certainly turns up the heat. it broadens the debate a little bit. but overall, the way i see it is everyone loses when there's a shutdown. the american people lose, congress loses and for me, listen, i came here to really get something done to try to govern. and it looks like we can't get together at all on anything. and i think that the american people are a little bit disgusted and disenchanted with the whole process. listen, this is not easy. but the more the president comes out and says the things he's saying, the worse this is going to become. and as you mentioned, we're very close to a debt ceiling and that's a big deal. we've already seen, you know, the one-month treasuries tick up

to .016. that's anticipation of short-term default. wouldn't be a long-term default. we'll get the government running again. not like a default in another country they can't pay their bills. it would be more like a technical default. but something we don't want to see and the markets don't want to see. >> we'll never let them default. or they should've passed senator toomey's bill. do you approve of the yed that the congressional resolution cr is folded into the debt ceiling and that we then seek or you all then seek some kind of grand design as proposed by paul ryan, for example? >> well, i would certainly support that if it ends the shutdown. and we can get on with business as usual and, of course, i would need to see for the debt ceiling, i need to see some reforms. i'd like to see some entitlement reform, other things we've been working on, maybe even tax reform. doesn't have to be monumental, but some steps forward to making this a healthier country and

dealing with the very systemic issues that we've been dealing with for a long time now. i want to see some substantive reforms to raise the debt ceiling. and i think this may be a way to do it. but, unfortunately, i think there's a lot of good people getting hurt right now that really shouldn't be in that situation. >> all right. fair enough. we appreciate it. mike grimm, appreciate it very much. now, how long will this shutdown last? and who do you think has the upper hand? our panel will rejoin us to debate that very point. stay with us. when we made our commitment to the gulf, bp had two big goals:

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welcome back to the "kudlow report." so joining us one more time our expert political panel members. robert costa, i want to pick up where i left off with michael grimm. there is -- as you reported -- a growing consensus in the republican ranks in the house of shifting the cr debate into the debt ceiling debate which is really going to become a grand bargain debate, a big grand bargain debate led by paul ryan and, i guess, david cant. i'll ask you if it's a good idea. here's the house, if the republicans have that, they don't have the senate, don't have the white house. do you think this is a good idea? >> i think it's a difficult proposition. but the problem for speaker boehner is the conservatives in the house will not accept a stand alone clean cr to fund the government. because he knows that, because he knows he would almost have an open revolt on the right if he did that, he's trying to move

forward to have some kind of combination deal. but it's going to be very difficult because the president and senate democrats continue to insist that's not an option. >> yeah. you know, ari, i'm going to you on this. i don't see the president and the harry reid democrats getting into heavy entitlement reform, which is what ryan wants. i think they want to raise spending. i think they want to get rid of the sequester. i think they want to raise taxes by getting rid of deductions. in other words, i think this is a poorly baited trap for the gop right now. what do you think? >> yeah, i'm not sure if it's a trap, but i agree with your sense of the lay of the land in washington which means this is unlikely based on the equities and what we know thus far from the two parties. a quick analogy. if you walk in to buy a car and find yourself fighting with the guy trying to sell your the car and you're $10,000 apart and you wait a week and then he comes back and says, okay, you didn't like my price at $30,000, you want to get it for $20,000, why don't we start negotiating over a new house i want to sell you.

you're really unlikely to get a deal on the house if you didn't do a smaller item. it's basically where we are at. and what i think will happen based oen what we know about boehner. this is not a prediction, but i think my understanding of the rules of the house are given his constraints, if we get into october 12th, 13, 14, i think the markets are most likely to rattle as they get close even with the statements made that calmed some investors today. then you get to a scenario where it's very attractive for boehner to move a clean debt ceiling with votes of democrats, keep the government shutdown and the political argument he makes is, look, i'm still holding the argument on big fight. >> robert, it seems to me the kind of grand bargain being discussed, you know, entitlements, tax reform, i guess continued sequestration and, of course, the debt limit. seems to me that kind of package

requires a republican victory in 2014. >> yeah. >> and a republican victory in 2016. that's my take. what's yours? >> i agree with you 1,000%. i think that's more long-term strategy and short-term strategy. i think what boehner's probably going to do. probably going to throw out the rule, the majority of the mar j majority. i'm going to have to get democratic votes here. and i think that's what the president and congressional democrats know. they know boehner is stuck because there's a small minority within his caucus that will simply not negotiate under any circumstances. i think it's more of a long-term strategy in terms of 2014 and 2016. >> bob costa, real fast. this grand bargain stuff even if they tried, isn't it going to take weeks and weeks and weeks? >> it really will. and you may have to see some sort of short-term cr if we start pushing into late october. >> think about winning elections, i think that's the bottom line. and i think some people in the

u.s. senate forgot you need to win elections in order to win controversial votes. i don't want to name any names, but i think they forgot. all right. i agree with ari melber. we've got to get this done or markets will be in trouble. thank you, gentlemen. >> thank you. >> that's it for this evening's show. thanks for watching. i'm larry kudlow. we will see you again tomorrow night. [ driver ] today, my ambulance knew all about a bike accident, 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. that your mouth is under attack, from food particles and bacteria. try fixodent.

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