industrials snapped back today. i hope it wasn't all short squeeze. it did seem to be heavily motivated by shorts covering, though. there's always a bull market somewhere. i promise i'll find it after the crimea votes for russia, president obama's sanctions were economically cost-free and frankly fall way short of having any real teeth. well, at least stocks jumped 181 points on the hope that a new cold war is not imminent. and we're still looking for answers about malaysian airlines flight 370. was it a hijacking, a terror attack? where on earth is that plane? get ready for a commercial kudlow report. we're going toe to toe about the democrats going down in flames this november.

all those stories and much more on "the kudlow report" beginning right now. good evening, everyone. welcome to "the kudlow report." i'm larry kudlow. we're live here at 7:00 p.m. in the east. crimea may be going to russia. but a new cold war hasn't broken out just yet. stocks also loved a strong manufacturing report today. cnbc's courtney reagan has all the market action for us. it was a good day. >> it was a good day. u.s. investors focusing on the positive economic data today, shrugging off the ongoing tension in ukraine for now at least, focusing on better-than-expected industrial output and homebuilder sentiment. green arrows across the board for the major indices on this st. patrick's day. the dow snapping a five-day losing streak, surging 181 points.

yahoo! shares gaining 4% today following news that alibaba's chosen to list its ipo in the u.s. alibaba's ipo could raise $15 million, making it the biggest since facebook. let's start with intercept pharmaceuticals. one of its drugs showed a higher occurrence with heart-related patients than those given the placebo. shares of amgen surged higher as that company says its new cholesterol drug met the primary goal in late stage trials, cutting the bad cholesterol levels among patients. >> thanks, courtney reagan. let's go to ukraine. let's look at the russian and president obama. all this, the question is

whether the president's sanctions on a handful of vladimir putin's deputies are going to make much of a difference at all. nbc news's steve handelsman joins us live from washington. >> reporter: good evening. here in washington, white house officials insist that these new obama sanctions will bite and will impose a cost on russia. but only seven russians are sanctioned so far. they're cronies of vladimir putin, people the white house charges helped putin grabbed crimea. it's his seven associates' personal asset and wealth tar targeted, frozen if they're in u.s. banks. the other four sanctioned are ukrainians, pro-putin crimean president yanukovych. this is the start of escalating u.s. punishment. >> as an initial step, i'm

authorizing sanctions on russian officia officials, individuals who provide material support to senior officials of the russian government. and if russia continues to interfere in ukraine, we stand ready to impose further sanctions. >> reporter: but republican senators john mccain and john barrasso you were both in ukraine over the weekend slammed president obama for not directly sanctioning russia and its president. >> vladimir putin must be encouraged by the absolute timidity the president said we will, quote, consider other options. the president should have said, we're going to provide military assistance to ukraine and that will be in defensive weaponry. >> reporter: to try to prevent putin from grabbing more of ukraine, president obama who goes to europe next week on a previously planned trip, plans to put on more diplomatic

pressure. >> thanks very much, steve handelsman, we appreciate that. the question is, will president obama's sanctions have any teeth at all and will russia invade east ukraine to build a new empire? here now, we bring in charles dalera, bill taylor and angela stint from georgetown university. she's the author of "the limits of partnership." thanks to all of you. angela, let me begin with you. i don't understand this. i've been supporting obama -- the problem here is putin, not obama. putin's the problem. but i didn't understand today's sanctions. there's nothing on the oligarchs who have the real money and the real assets to be seized. nothing on banking sanctions, nothing that suggested we should stop importing russian energy. to me, there's no teeth just affecting a handful of putin's top lieutenants, people that

don't have any money in the first place. can you explain to me what this is all about? >> well, i think it's intended, first of all, to deter russia from doing any more, possibly to deter russia from annexing crimea and making it part of the russian federation, although i think putin will probably do that in the end, although maybe not so quickly. and i think it's also a realization that there's not very much that the u.s. can do unilaterally if the europeans wouldn't go along with much tougher sanctions, we have limited leverage there. so it's intended as a warning. and by the way, i think those other oligarchs you mentioned, they don't have much of an impact on these kinds of decisions that putin makes. that's a very small group of people and those people don't have too many assets in the west. >> i don't know, charles, is that true? i don't want to get hung up on the oligarchs. putin may not be close to the oligarchs but the oligarchs have

a lot of assets in western banking, including the united states. they come to new york all the time. their kids go to american schools. to slap visa sanctions on them would be something, be a lot of squealing. to slap banking sanctions, wire transfer sanctions on russian banks would be worth something. maybe the president's going to ramp up to this, charles, but i thought today was very disappointing. >> well, larry, he is moving very, very slowly with the sanctions. i was a bit surprised at the tepidness of the sanction initiation here. i do think that the plan is to escalate the sanction pressure. but at this point, i think there will have to be significant moves, not just for the oligarchs but to consider moves relative to the russian financial institutions. we have to remember that the european concern focuses merely on russian energy and understandably so. they depend heavily on russian energy, particularly gas and oil

as well, for their manufacturing sector. but i do think that there is scope to accelerate the sanctions and still fall short of damaging the fundamental flow of oil and gas from russia to western europe. >> and there are some people, ambassador taylor, we had boyden gray on this show friday evening. he said imports on russian energy could be done, that the spring is coming, the inventories of oil and gas are higher than you think, we could help them out. i'm amazed so far that president obama hasn't talked about repealing or changing the exhort act, the oil and gas export act which goes back to the 1930s, there's no sort of future, we're going to be tough here, we're going to be tough there. i accept he may just be beginning. but i wish he'd put out some options that would really make putin think twice. >> you're right. the energy factor is a big one.

in the short term, there are things that one can do that takes advantage of a pretty warm winter, pretty large stocks of natural gas in ukraine and in other places. in the short term, there are some things that reduce the leverage that the russians have over both ukraine and over europe. in the longer term, absolutely. the united states should be exporting gas and should be improving the energy market. those steps take time. and they should be done, but we can't effect the russian behavior in the immediate term with those kind of things. >> as i said, getting rid of the export act, the export prohibition act, that could be done overnight. how about permitting? how about the president saying, okay, i'm going to permit 25, 35 or more lng plants, projects, installations. we know it's going to take a while, five, seven years to come

online. through this is new american policy. once that's done, we're going to export. that would have an effect. the russians would have to listen to that. >> they would have to listen to that. again, that's not going to affect them in the short term. in three, five years, it reduces their leverage. their leverage is reduced immediately because of the stocks, the stocks that are already on hand. but that's the kind of thing that needs to be taken into account. >> ms. stint, let me go back to you, to senator mccain's talk. mccain wants the president to announce some military assistance to the ukraine. mccain wants to see nato with a greater show of strength around the baltics and poland and the czech republic. mccain wants more discussion. i think he's probably in favor of looking at reinstalling some missile defense systems for poland and the czech republic or a radar system or both. do you think president obama is having that conversation internally? i'm not saying go to war, i'm

not saying boots on the ground. but i am saying reverse what we thought was londgstanding u.s. policies until this so-called reset took place? >> i'm sure they're having these conversations internally. we've already beefed up -- we have more nato patrols in the area. we've been meeting with the baltic states, nato has, and poland, reassuring them we're dedicated to their own security and guaranteeing their security. the defense, if there were any attack on them -- there are things that we're already doing. but you have to tread very carefully because we're still trying to give diplomacy a chance to work. we're still trying to give mr. putin a way of at least not escalating this in eastern ukraine. this is a very delicate and fragile situation. there are already fights breaking out in eastern ukraine. i think we do have to be very careful and we have to have

these sanctions but we still have to try to negotiate something with the russians to get them at least to back down from any further incursions because putin has said, if these russians in eastern ukraine call for our assistance, we're going to assist them. and then you're going to get civil war in ukraine. and nobody wants a civil war in ukraine. >> charles dallara, i assume crimea is lost to russia. fair assumption or not? >> it certainly seems to be. there is the fundamental question which was just mentioned about annexation. i have to say that as we focus on crimea, i think we've also -- and as we focus on sanctions and i do think there is scope for and most likely need for an acceleration of a broader set of sanctions here, economic and financial. we've also got to focus on the ukraine economy. it is in desperate need of support, larry.

the previous leaders of the ukraine allowed this economy to deteriorate to a frightingly feeble and fragile state. and i think they need to move expeditiously to provide additional support. they could do so in the range of $15 billion to $20 billion injected into that economy and give stability and hope to the ukrainian people. >> charles, you're an expert on these international financial questions. do you expect president obama to upgrade the financial banking and visa sanctions, particularly the financial and banking sanctions? do you expect him to do that? >> i think he will have little choice, larry. i think that there is going to have to be a move into tighter sanctions here if we are to expect to have any impact. and even that impact, we have to be realistic, will be very limited in the short run. but i think we know the iranian experience and other experiences do demonstrate that an

accelerated program of sanctions -- i'm not trying to compare russia to iran now. but an accelerated program of sanctions can biteover time. it's a question not only of the financial impact but of the signaling impact. >> ambassador taylor, i want to give you the last word. from what you know and what you see right now, do you believe russia will invade eastern ukraine? >> i think they would make a horrible mistake if they invaded eastern ukraine. and i think that they recognize that the sanctions, the broader economic sanctions, the financial sanctions that we've talked about here are biting and will bite and will come into effect. but from the united states as well as from the europeans, if he were to do that. >> if he were to do that and show leadership. we'll leave it there. thanks to all of you. i appreciate it. our next guest argues -- this is interesting, total employment is actually falling, not rising. he sees what he calls hidden rot in the job numbers.

we'll explain all that next up. and later, two "kudlow report" all-time all-stars will join us. they'll be back to talk live on everything, obamacare, the 2014 midterm elections. don't forget, free market capitalism is the best path to prosperity. and we hope president obama defends that theory and helps the ukrainian people. i'm larry kudlow. we'll be right back. let me talk to you about retirement. a 401(k) is the most sound way to go. let's talk asset allocation. sure.

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most economists are going to tell you that jobs have been rising, maybe the recovery's not so bad after all. but in an op-ed today in "the wall street journal," our next guest says if you dig a little deeper into the number, employment has actually been falling over the past six months. here now to tell us why, ed lazear, president george w. bush's chief economic adviser, now a senior fellow at stanford university's hoover institute. and if i'm not mistaken, a professor of economics at stanford university. ed lazear, welcome back. hell of an article. you're basically saying when you look at the numbers the right way when you dig into them, we haven't had a 900,000 job increase in the last six months, we've actually had 100,000 job, is that correct?

>> that's right. you've got it, larry. and the reason is that we have more people working but they're working fewer hours per person. when you take both effects into account, the total amount of hours worked has actually fallen since september. >> now, hours worked, you say, is a key variable to look at. on wall street, it's always nonfarm payrolls and private payrolls -- >> right. >> sometimes the household employment report from which the unemployment rate is derived. but you're drawing attention to private hours -- you're point is they have been slumping over the past six months. >> that's right. there are a couple of reasons to look at hours worked. one is, hours worked tend to be a leading indicator. so they tend to move before the rest of employment moves. if you look at early parts of the recovery, hours picked up, that was a good thing. that went largely unnoticed and

it shouldn't have. on the opposite side of that, over the past six months, it's gone in the reverse direction where hours are falling. so we worry about that. we worry about it because when hours fall that, suggests that something else is going on in the economy. the second reason is if you're thinking about overall economic activity, just think about the following. suppose you had a firm that was employing 100 workers at 40 hours a week and replaced them all with 120 workers with 20 hours a week. which would be the better situation? obviously the former has more hours of work, a heck of a lot more economic activity than the latter. and yet number of jobs would have gone up. but that's not the right way to think about it. we need to convert jobs into equivalent jobs where equivalent jobs takes into account the number of hours worked as well. >> which, if i'm not mistaken, is exactly what the cbo, the congressional budget office, did if its recent jobs evaluation of obamacare.

they say that we will lose the equivalent of 2.5 million jobs. now, i believe that they were looking at hours worked and the disincentive for hours worked, is that right or is that wrong? >> that's correct. they're looking at this for incentives to work. there's been a lot of talk about that. i must say, i've found most of the talk confusing rather than actually shedding light on the issue. the problem has been that people say, well, that's a good thing because individuals are given choice, they're actually getting out of the labor market because they don't have to stay in the labor market. well, that's true. everybody likes subsidies but that doesn't mean that subsidies are a good thing. if they distort the decision to work, they're not a good thing. in fact, what cbo was pointing out in their report is there is a distortion to the amount of work that actually occurs. and that's particularly problematic because we already have underincentives to work because people are taxed on their labor and don't get the

full rewards it from. the last thing we want to be doing right now is moving people out of the labor force. >> just like a lot of entitlements. just like all the entitlements, at least the smaller ones. you lose your benefit and you may move into a higher tax bracket and your marginal tax rate may with 70 mer%, 80%. so why work? if we don't work, we can't produce. if we don't produce, we can't have an economy. work is a virtue. it's how you produce. work is what makes men great. they don't work in europe. i get that, okay? but they don't produce anything over there. don't we want to work and isn't that why you're watching hours worked because it's an indicator of the whole economy's health? >> indeed that's right. the strongest form of job lock is wages. you are locked into your job because you want to earn wages. obviously we don't think of that as a bad thing. whether you're paid in the form of monetary wages or whether

you're paid in the form of benefits, both of those things induce you to work. and the question is whether they're inducing you to work appropriately. the problem, again, with some of the things we've been looking at -- and you mentioned obamacare, one of the things i point out in the article is that's a potential source of a decline in hours. we don't know if that's what's going on yet. but it's certainly a potential source because when firms have incentives to keep hours low or keep the number of employees low, you can see both employment fall and hours worked fall. that could be a cause for concern in the future. >> right, i'm just going to read this. we just put on the full screen. in the month of february, hours worked or the length of the average workweek, 34.2 hours. back in last september, it was 34.5 hours. so actually what seems like a small drop when you multiply it through the workforce is a very substantial drop. so we will in the future emphasize hours worked. it's a great article. thank you very much. tough one.

ed lazear, stanford university. gm beginning this week the way it ended last week with more bad news. today we learned about more recalls and a big charge to the company's profits and there was also an apology from gm's new ceo. question, though -- just how much is the new gm liable for the acts of the old bailed-out gm? phil lebeau has more on gm's growing legal troubles next up on "kudlow." ameriprise asked people a simple question: in retirement, will you outlive your money?

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the gm recall crisis keeps getting worse for the company. another 1.5 million vehicles recalled at a cost of about $300 million. and that may not be the end of it. cnbc's phil lebeau has that story. good evening, phil. >> larry, general motors is out trying to get in front of this recall story that has been dogging the company over the last month. today the company announced it will take a $300 million charge in the first quarter related to repairs of recalls, also announcing an additional 1.4 million vehicles that will be recalled. this is a rough idea of these recalls announced today. for the first time since this recall crisis, we've heard from ceo mary barra in a video message to gm employees, she was frank in saying she understands the severity of the situation. >> these are serious developments that shouldn't surprise anyone. after all, something went wrong with our process in this instance. and terrible things happened. >> starting next month, general

motors will start repairing 1.6 million vehicles that need to have their ignition switch repaired. owners of those recalled vehicles are urged to get their repairs done as soon as they receive notification from their dealer. and there's question about how much liability gm is on the hook f f for. on the civil side, most civil penalties for accident that happened before them will go to the holding company of the old company. but the criminal investigation that continues right now, if there are any charges brought against general motors for work committed before bankruptcy, the current company would be held responsible for that. that's the latest. back to you. >> many thanks to phil lebeau. to last point was a key point. the question everybody's asking, where is that plane? we have a live report just ahead with the latest on the search

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welcome back to "the kudlow report." the mystery of what happened to the missing malaysia airlines flight continues to go in many

different directions. the latest twist in the story, authorities believe the pilot and co-pilot were involved in the plane's disappearance. nbc news's kerry sanders joins us with all the latest theories. good evening, kerry. >> good evening, larry. first off, let me say, some theories are best left to science fiction riders, like the idea that some passengers cloaked the plane. but those sorts of stories are beginning to float up because the experts have little concrete facts to offer. the chief focus right now is on the pilot and the co-pilot. investigators believe one or the other or maybe both or maybe someone else who got into the cockpit acted deliberately to take the plane off course. why? the transponders on the plane was turned off and another communication system on the plane called acars was also partially disabled. both require someone with

avionics knowledge to turn off equipment. but now malaysian officials are contradicting the time line of when they say this happens. both the pilot and co-pilot's homes have been searched and detectives have taken items including the pilot's personal flight simulator. authorities want to know if the hard drive on that simulator captured any evidence of a dry run where a 777 breaks from its flight path. where is this boeing 777? there's little evidence to go on. it could have flown north over land. there are 15 countries in central asia where the plane might have gone. the problem with that is, it's been ten days and no one's said they saw a plane where it didn't belong. the plane also may have gone south into the indian ocean and even further south towards antarctica. the australian military has now dispatched ships and aircraft to its western coast to begin searching.

but none of this jibes with the popular radar data gathered which shows no evidence of flight 370, larry? >> this whole thing -- i'm trying to keep up with it. you gave us a great report. first of all, let me ask you, is the united states government essentially withdrawing its active involvement? we had a bunch of ships in the indian ocean. are we pulling out of there now? >> we're doing a drawing back. we have p-3 and p-8 aircraft, designed for anti-s susub marin warfare. but they have the ability to see something as small as a door floating on the surface of the ocean. they have found nothing. the u.s. military is now scaling back, is the better term than saying pulling out. >> and one last one. this is a hard one. maybe you prefer not to answer it. a lot of these governments that you named, we know who they are, sometimes they speak with forked tongues.

they just don't tell us the truth. how reliable is any of this narrative? >> you know, i've got to say, when you start seeing the conflicting information in the malaysian government changing sort of their time lines on this stuff, it raises serious questions. and quite frankly, many of these governments may not be sharing information with the central focus here, which is where is this plane because they don't really want to tip their hand as to the capabilities of their radar defensive networks. i want to give it two ways. they don't want to tip their hands that they know more or that they know very little. >> a couple of hundred lives at stake in all this. many thanks, kerry sanders. thank you for the update report. let's turn to today's huge stock market rally. an unexpected jump in manufacturing looked more important than russia, crimea and the ukraine, at least for today. so check out what happened. the dow popped 182 bucks. the nasdaq gained 35. the s&p 500 added 18.

let's bring my ace panel in, regulars of "the kudlow report." thank you for coming back on. rebecca patterson, bob dole. rebecca, this is a big number today, industrial production up .6%. manufacturing, .8%. maybe as the winter weather clears, the economy's stronger. not saying crimea and the ukraine don't matter, but it seemed like this mattered more today. >> i think today was definitely one of relief, relief that the crimea situation didn't get worse than it did, relief that the u.s. economic data while it wasn't great, it was good enough. and i think some relief, too, on china. we got that news this weekend about them widening their currency band and also bringing forward fiscal stimulus. if you get the second biggest economy in the world, china, stabilizing growth sentiment, the u.s. stabilizing growth sentiment, a lot of investors took a deep breath.

>> one other piece and i'll get off of this and go to broader subjects. inside this production report, business equipment production was up 1.3%. three months now, it's up 5.1%. that's anything to that effect capex investment, which has been terrible, which is one of the reasons jobs have been terrible. is it possible that this surge in equipment production portends a stronger economy overall and more jobs? >> i think the answer to that question is most likely yes, larry. we absolutely need it. the consumer and the government are unlikely to provide stimulus from here. it's going to have to come from business capital spending and a bit maybe from net exports. capital expenditures are not far above expectation. corporations have the cash, they have the projects to invest in. they just need a little more confidence and i think the litany of statistics you just pointed to is the beginning of

that. >> rebecca, i hear -- i'm deliberately putting crimea and ukraine aside. we've talked about that. i don't know what we're going to add to that. to me the stock market lives on profits and interest rates, those are the two biggest factors, of which comes from the economy overall. what's your outlook for profits? people are going to go crazy -- one day putin says this, the next day putin says that. but the fundamentals, bessemer trust, great company that it is, i'm sorry with your company, bob. >> we're still overweight equities. a lot is made out of profit margin, especially in the u.s., being near record highs as a percent of gdp. but i don't think it's just cyclical. some structure elements have helped profits especially over the last decade or so. wages have structurally shifted lower as global labor markets have increased. you can offshore jobs.

you can do a lot of things to bring down costs and technology. it might not be good for the person on main street. but it is good for corporate america, if you can be more efficient with technology use. so i think those things are going to help keep profits higher longer which should at the margin be a support for equities. >> bob doll, get your same take -- if profits are rising, the stock market is not going to crash or collapse. it's just not going to. profits got hit very hard in 2008 and 2009. people should not forget that. profits are actually a leading indicator. the problem is they're published late. my friend and former partner, jim cramer, has been writing that he's a little concerned about froth in the market. what is your take on that? is that something that troubles you? >> i do think the market is acting a little tired. froth is a little strong for me. i think just backing and filling, we came back so fast

from that january decline, i think it's going to take some more time to repair. but if we're all right, the profits are going to improve, and i'm in that camp. by the way, i think the fourth quarter was a good down payment on things are beginning to turn. we got some revenue growth which we desperately needed. we're going to right off the first quarter to weather. but second, third, fourth quarters, i think we see improvement in both revenue growth and profit growth. that will let the stock market go back up. >> rebecca, i'm seeing now from some of the best economists -- we had dave malpass and others. seeing-eye loans are starting to pick up. i think the three-month change is now 20%-plus, the two-month change is 30%-plus. if there's a turnaround in this business loan story -- i presume a lot of this is medium size if not smaller companies -- that could be real torque for the economy. also had fed implications.

do you see this loan demand, is it for real? >> we do. i think that's only good news for the economy. my hope is that we don't see this growth too fast, that we can stay at this positive rate of loan growth of banking lending getting back in, positive wage growth but still well below the 4%, 4.5% threshold that historically has started to weigh on profit margins. right now, wages are growing only a little over 2%. the average person in america would like faster growing wages. but some wage growth will keep the fed easy but enough that we can get growth accelerating broadly for the economy. things are improving but not too fast to change the fed's outlook. >> bob doll, last word, i'm a very old-fashioned free market supply side guy. i don't believe that more growth and more jobs creates inflation. i don't believe that. i've never believed that. and, therefore, i think more growth and more jobs would be

good for the economy and earnings -- i'll give you the last word on that. >> you know where i come from, i agree with you 100%, larry. i think that would be great news for the economy and back to where we started, good news for profits. more jobs we're starting to see it as rebecca pointed out a little more real wage growth. both of those combined, i think, makes 2014's second half look pretty good. >> let us not forget, in the '80s and '90s where 45 million new jobs were created then. stocks did very well. i don't think job creation is such a bad thing. rebecca patterson, bob doll, thank you very much for your views. it's time for the main event tonight. art laffer versus austan goolsbee, two "kudlow report" all-stars. they're going toe to toe. it is live next. don't miss it. two of the best and brightest guys ever to appear on this show.

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i just ah woke up today and i said i need something sportier. annnd done. ok maxwell, just need to ah contact your insurance company with the vin number. oh, i just did it. with my geico app. vin # is up to the loaded. ok well then jerry here will take you through all of the features then. why don't weeeeeeeeeeee go out to the car. ok, i'll just be outside... ok, yeah. his dad is my boss. yeah. vin scanning to add a car. just a tap away on the geico app. welcome back to "the kudlow report." i want to get a lay of the land, politics and the economy, from two of the best and brightest

people ever to appear on this show over its nine-year life. and i'm pleased to bring them back on. here now is austan goolsbee, former council of economic advisers chairman under president obama. and art laffer, chairman of laffer and associates. gentlemen, thank you very, very much for everything you've done for this show and for me. it's great to see you. austan goolsbee, easy one for you -- >> let me just say, it's a great honor to be here, larry. you've had an amazing run. >> thank you, i appreciate that very much. austan, are the democrats taking a shellacking in november? >> i fear they may. in most midterm elections, the composition of the electorate is pretty different than in a presidential year. i think the republicans are really motivated by the affordable care act, really motivated to get out and fight the president and so i fear it's going to be a tough year.

>> so turnout may be lower. let me just take a follow-up on that. austan, do you think it's primarily going to be obamacare, might it be the economy, might it be jobs? are there underlying themes before we get to art laffer, that you're worried about? >> i'm worried over the perception of the affordable care act. i'm sure we'll get into it. i actually think that minus the six-week-deep stumble at the beginning, the affordable care act is not proving in reality to be nearly as onerous as what they feared. but i think that that piled on with the composition is going to be the factor. i don't think the economy's going to be so bad. >> art laffer, do you see a republican landslide? a lot of people think, art -- this goes along with the landslide, i think. a lot of people think that not only is obamacare structurally flawed and didn't work out but also it's been kind of a wet blanket on the economy. austan doesn't think so. what's your take? >> i think it's been a terrible wet blanket. but the only thing i disagree

with austan on is the word "i fear." i hope is the only thing i'd say. i think there is going to be a landside in november both in the house and the senate and that there will be a real change in economic policies, one of which i think will be defanging the affordable care act, which is really important to get this economy really going. we can't afford to give away real resources and expect the economy to do well. it just doesn't work that way. >> do the republicans have a good pro-market supplied sigh economic growth message, jobs for the middle class, rising incomes -- in other words, art, gop probably should have won the senate back in 2010, they didn't. should have won it back in 2012, they didn't. lousy candidates but sometimes the message wasn't as good as it should have been. is this the year of the gop message? >> i think the message will be a lot better this year. you never can tell if some rogue senator goes off and says something stupid. but bottom line, people understand it's the economy, the

affordable care act, raising the minimum wage, what a terrible idea, allowing for overtime. it's just crazy. those are tax increases on tax increases. and these are the things the republicans are really united to oppose. and i think those are the right issues. it's the economy, stupid, as our friend down in louisiana always says. >> let me ask you about this, austan, this democratic counterattack on the minimum wage, on overtime hours and a few or nicks and knacks. i don't think that makes any sense. i don't think the government has the right to tell companies how to behave. >> i think with that last statement -- i think if you roll back the clock to the days of child labor or you go look at other countries where the pollution is so bad you can't even see the sun at noon, i think a lot of people would disagree with you that there is a role to play for establishing worker safety, for establishing basic -- >> of course. >> i think this issue of the

median worker having their incomes flat or maybe going down for a long period of time, wow, corporate profits are setting record levels and not -- the middle class not being able to drive economic growth in a way that it has for a long time, i think that's a big-time issue. and there are a bunch of small policy arguments. but that fundamental issue, i think, is going to be quite central in 2016. i don't know that it will in 2014. >> larry, they've got the wrong idea of how to raise the wages of the low-incomers. you need are jobs. as jack kennedy said so many times, the best form of welfare is still a good high-paying job. you never make any american better off by making all of us worse off. it doesn't make any sense what's being done. the lot of the poor, the minorities, the disenfranchised as gotten worse under obama, not

better. >> i'm not opposed to health and safety regulations. >> me neither. >> but i think when you start dictating wages, promotions, overtime, minimum wage really hurts more than it helps. there are better ways to do it if you want to put money in the hands of the younger workforce. i think all this government intervention, frankly, from obamacare on down, has put a burr under the saddle of the american voter. i think you can see a lot of that coming out. stay with me, art, austan. got much more to do. i want to hear about solutions as well as problems. plead stay with us. i'm larry kudlow.

welcome back to "the kudlow report." the great duo of austan goolsbee and art laffer still with us, two of the best and brightest to come on this show. austan, if you had it to do over again and you wanted a stronger recovery, would you have gone to a different formula, such as spending less and cutting marginal tax rates the way jfk did it, the way ronald reagan did it and basically the way bill clinton did it? would you have gone in that direction -- >> wait a minute, what are you talking about? bill clinton raised -- the first thing he did is come in and raise the top marginal tax rate. >> and wished he hadn't -- >> followed by a huge increase in the surplus -- decrease in the deficit, conversion to surplus, booming economy. >> i thought clinton cut the

capital gains tax. >> he did, enormously. got rid of the retirement on social security -- he signed into law welfare reform, cut government spending. he was a supply sider except for one mistake and reagan made mistakes as well. but that was a mistake of bill clinton's and it cost him the house and the senate and prosperity for a lot of years. >> look, i don't agree with -- on the history, you guys are getting this backward and wrong. now, on john f. kennedy, it's true he cut taxes. if taxes are 91% as they were when john kennedy came in, you should cut them to 77%, as he did. >> 70%. >> but we're not anywhere near those kind of tax rates. >> how about the corporate tax rate, austan? >> i've been on this show, larry. you know that i favor broaden

the base, lower the corporate tax rate. i think that's a competitive reality out in the world. >> i think it's great. >> i think he's wonderful on that issue. let's just stay in that way and we'll all be together for the rest of the show. it's wonderful. >> we're going to hold hands. >> we should do that with personal income taxes, too. lower rates and broaden the base. the '86 tax act which joe biden voted for, all the others voted for it. it's just the right thing to do. it's just good economics. >> i have no problem with that. i favor that type of thing. but what has happened, if you take -- the irs puts out information on top 500 taxpayers in the country. their average income is up -- more than 100% from the late 1990s and the share of taxes that they're paying has been cut almost in half. >> but that's because they've got every tax dodge in the world, austan.

you've never raised taxes on unrealized capital gains but you've never proposed that. just have a low rate flat tax. get on with it. >> i have to get out of here. austan goolsbee who has great potential football a jfk democrat, art laffer, larry kudlow. i've always been a jfk democrat. that's it for tonight's show. thank you, gentlemen. everybody out there, thanks for watching. we'll be back tomorrow night. , g your business does is done on the internet. and tomorrow you'll deveno more. that's what comcast business was built for. slow dsl from the phone company was built for stuff like this. sign up for internet and voice and find out how to get four weeks of tomorrow ready internet for free. and you'll be ready for tomorrow too. comcast business. built for business. ameriprise asked people a simple question: can you keep your lifestyle in retirement?

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>> tonight, on the profit, i go inside athans motors, a used car dealership started by a guy with no car experience. >> i don't have cars, but i have a good business. >> but you don't have cars! that the business! >> no, i'm done arguing with you. >> he spent so much money building the most opulent dealership i have ever seen that now he can't afford to buy cars or pay bills. if i can't stop the wasteful spending... what'd you spend on these walls? >> $100,000. >> wow. and sell some cars... >> i won't sell it. that car's worth 30 all day. >> athans motors will be out of business. my name is marcus lemonis. i fix failing businesses. this month you lost $150,000. i make tough decisions... you're not gonna come behind every single person and change the deal. >> i didn't agree to this [bleep]. >> and i back them up with my