youkilis saying-- and josh hamilton now with the angels says that texas ranger fans are spoiled and the dallas fort worth area is not a baseball town. i mean, just-- >> shut up. >> why would they have to say something after they go to a new club. imus: i don't know. 18 after the hour, "varney & company" is next on television. coming up on the radio, doug brinkley and lou ruffino. this is in horrible taste. ♪ she came in through the bathroom window ♪ ♪ protected by a silver spoon ♪ ♪

♪ ♪ didn't anybody tell her ♪ ♪ didn't anybody see ♪ ♪ sundays look forward to mondays ♪ ♪ tuesday's to me ♪ ♪ imus in the morning ♪ >> gas up again and the word recession is back on the table. good morning, everyone. can our economy handle what's happening at the pump? good question. you've seen it every day for more than a month and they've changed the signs at the gas station and prices have gone straight up. today, triple-a says regular

costs 3.74 a gallon. we're closing in on a 50 cent gain just this year. four big population states are at or very close to $4 a gallon already. all right, now shall the impact. every penny that gas goes up takes 1.2 billion dollars from consumer spending, like a tax. and it comes on top of other tax increaseses that cut everybody's paycheck and will slow a weak economy and some say brings recession that much closer. watch out. "varney & company" is about to begin. [ male announcer ] at his current pace, bob will retire when he's 153, which would be fine if bob were a vampire. but he's not. ♪ he's an architect with two kids and a mortgage. luckily, he found someone who gave him a fresh perspective on hisortfolio. and with some planning and effort, hopefully bob can retire at a more appropriate age. it's not rocket science.

it's just common sense. om td ameritrade.

>> we are back and yes, the markets return today, after a three day break and we're on dow 14 k watch and we're what, 182 od from the old record. and the indication is we do indeed open right at 14,000 this morning. the checkbooks are out again. another merger involving a big name a couple that you know,

officemax, office depot reportedly getting together. a merger would help them to compete with the big rival, that is staples. officemax premarket, is up and a combined officemax and office depot would be a quarter of the size of staples and staples straight up this morning as well. we've got another headache for boeing, swelling found in a second battery after japanese dreamliner the same plane that made an emergency landing last month. the people who are supposed to fix the dreamliner they're voting to strike. and next question, would you shop at a google store? reports about opening bricks and mortar outlets, and run google products, nexis 7 and android

and chrome operating systems and coast guard says a leak in the fuel line caused the fire in the engine in the carnival cruise ship. the commander says the full investigation is going to take about six months. the lawsuits have already begun, but in our next hour we've got an attorney who says the passengers shouldn't even bother filing suit. he they should take the money that carnival is offering right now and go with the money. take it. we'll tell you why he's suggesting that coming up at the top of the next hour. gas prices truly spiking, up nearly 50 cents this year and remember, please, for every penny that gas goes up that's more than a million dollars of consumer taken out. that's essentially a tax. we've got an economist who is warning of recession if gas prices keep going up. and the opening bell after a three-day weekend, 14,000 on the dow next.

all stations come over to mission a for a final go.

this is for real this time. step seven point two one two. rify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers.

>> about one minute from now, i confidently predict into the dow industrial average will be at 14,000, where we start when we start trading. i've got a brief time before the

market opens, david. and ask this question, will the gas price spike lead us into another recession. >> if it persists, the answer is yes, if it's quickly, the answer is no. stuart: and another question, do you expect this price spike to persist? >> yes, it's not over. we've got a refining capacity contraction in the u.s., it's not resolved so more higher gasoline is ahead of us. stuart: and david, hold on, i want to see what happens when the opening bell starts to ring and starting right now. i'm expecting the dow to hit 14,000, we've been away for three days and friday afternoon the dow closed at 13,981. the early indicator suggested we go up, 20, maybe 20 points at the opening bell and that would take us to 14,000 so we're off and running again. stocks at a very high level. i've got a question for you. are you in this market, you, the

little guy. we've got an expert on that coming up in just a moment from charles schwab and he'll give us the answer and on the high side in the first seconds. today's merger talk, a number of mergers, officemax, office depot reportedly getting together. and lauren simonetti on the floor of the exchange. looks like they will he' give staples a run for their money. >> it may be higher prices for consumers. let's go straight to where they both trade. as you can see, office depot and officemax surging and opening up 32% to the upside from depot and officemax, up 27% so this is just stellar volume. you've got to take a look at staples in all of this, too, it's a bigger company, bigger than the two combined. it does about 17% right now, and staples is seeing a huge pop. remember april of 1997 though, stuart. stuart: yeah. >> staples tried to merge with office depot and the sec said

no. so if this report between office depot and officemax does proceed and ring true, we'll see if it can get past the legislators at this point. stuart: interesting because they're all this tuesday morning. >> surging. stuart: surging, that's true. lauren, thank you very much indeed and google started trading and more talk that google would open retail stores for branded products. the stock is up three bucks, the point is it's very close to $800 a share on kool right now. now take a look at boeing. and they've got battery problems, more battery problems and the engineers voting to strike, it's dropped below $75 a share on boeing this morning. and i've got to show you the major health insurance stocks as well. they are down big. now, there is a reason for this. there's significant losses, percentage losses there and humana is down 10% and there's a reason and peter barnes has it. peter in washington, go. >> hey, stuart, the federal government is proposing is

surprise 5% cuts in the rates it pays insurance companies like humana. startening 2014 for a popular medicare option known as medicare advantage, it's basically the hmo for medicare, it's about a quarter of all seniors in medicare are enrolled in medicare advantage and instead of regular medicare, it tends to cost less and lower deductibles, but you have to be in the hmo. late friday, theecenters for medicare and medicaid services quietly announced this proposed change which would take effect for the companies that manage medicare beneficiaries in medicare advantage, it's a 45 day comment period so it's not settled and decided firmly yet and the company had time to push back, but that's what it's got the health care stocks knocked off today. >> they have may have announced it quietly on friday, but on tuesday morning, a spectacular effect on stocks, they're down big time. peter barnes in washington, thank you very much indeed.

david is with us from couple berland advisors and i want you to flesh out this response more. you said it was a refiner problem. tell bus that. >> you have refiners in the united states shut down for maintenance and some of that is extending out. so, there's somewhere about 8, 900,000 barrels a day of refining capacity in the u.s., which is off line. some of it planned and some testify by surprise. in addition, we have had an energy policy for the last four or five years which has been backwards. we tried to develop natural gas and didn't convert it to fuel use quickly enough and we're becoming independent of energy sources and not converting it to the final consumed product and we have a policy about crude oil. we have crude oil, $20 a barrel, lower than the world price and we have a u.s. impediment by law in exporting it. so, the combination of factors

has running in the wrong direction and gradually fixed by market forces and certainly not being fixed by politics in washington. >> david, on january the 1st, everybody got a tax increase in social security. that took a lot of money out of the economy and since january the 1st we've got a spike in gas prices and taking more money out of the economy. now, you told us if this goes on we might go towards recession, my question is, surely this weakens further a very weak economy to begin with? >> no question about it. the payroll-- 2% payroll tax took growth rates down perhaps .7, .8, 3/4 of a point where they might have been. now we pile on this gas spike and we take another couple of ticks out of it. we could have a 1% growth rate for the u.s. economy in the first half of this year and even

longer if there's any other type of shock and we have no resolution in washington about sequester, fiscal policy. we have more impasse and likely to have it for two years. >> david, let me ask you about that, because at 10:45 this morning, president obama goes before the cameras and i think he's going to give us his ideas how to avoid sequester, how to avoid the big spending cuts. let's suppose that he's not successful, that we cut spending, 85 billion dollars between march 1st and the end of this year. if you take 85 billion dollars worth of government spending out of the economy, does that push us into recession? >> i don't believe 85 is enough to push us into recession, it's slightly weakening, in the scheme of the size of the federal budget. 85 is not very large. the payroll tax is double that amount when you add the gas tax, so it's much more severe and it

hits right into the consumption, personal consumption expenditure of 130 million working americans, i don't think that the 85 is the issue, it's an extended period that becomes the issue if they don't resolve things. stuart: david, thanks for joining us, sir, come back again soon, thank you. >> thank you, stuart. stuart: all right, everybody, you saw the headlines, nightmare at sea and the video, people kissing the ground when they got off the ship. now, the coast guard says the leak in the fuel line caused the fire that left the carnival cruise line triumph floatling aimlessly at sea. and lawsuits have begun. and before we get to that, lauren, where is carnival stock? >> where it's trading, stuart, as you can see down 1.63% and the level is $36.32 right now and to get this exactly right coming from the u.s. coast guard, the fuel leaks from a diesel fuel oil return line,

that was touching a hot surface caused the fire and we'll spare you the gory details that caused t in the middle of the gulf. stuart: we'll deal with this later on the program and we've got an attorney on our show who say, look, all of those people filing lawsuits, you're wasting your time. even though they spent what is it, four days at sea, awful conditions you're not going to get any money out of the lawsuit system. he's coming up later in the program, i do notice as lauren pointed out there carnival stock down at 36 cents a share. how is this for a headline outgoing social security secretary says the disability fund will run out of money before the second term ends, 2016. >> the disability trust fund runs out in 2016. that's three years away. stuart: all right. that's-- that was with neil cavuto last night on the fox business network. we'll have more on that story

coming up a little later. and now i've got another example of i'm going to call it ineffective government, the head start program. 8 billion dollars a year does not give those kids the head start after all. full details on that story. remember, the president wants to expand it. that's coming up top of the hour, ten o'clock this morning. and remember, we always want to hear from you. e-mail us right now, varney@foxbusiness.com. tuesday morning, back in business. the markets open, seven early movers. the travel site orbitz is speaking strategic for away network, matter of fact doesn't care for that. and the discovery group revealed a mi a-- and velty is up. and a 75% surge in fourth quarter profits, that's a big number and that's up express.

and dell reports this afternoon. and heart device maker higher than expected quarterly profits, higher profits, down. new buzz about a google retail store and the stock is closer to $800 a share and more trouble for boeing, swelling found in a second battery on a nippon airway as dreamliner and 74. check the big board, i said we'd come out of 14,000 and i was wrong. we're up at 13,987. and all of this talk of a carbon tax and the green is protesting in washington over the weekend, but it's unlikely to get through congress. how can president obama use the environmental protection agency to enforce new climate change rules? former epa chief christie todd whitman joins us this morning. and i say environmentalists are getting desperate and want to stop the keystone pipeline no

matter what it takes. what? i'll have my take on green desperation and a republican governor raising taxes and tell you how the concern of ohio wants to extend the tax base in his state. and someone says it's a good idea for a republican to do that and where is the price of oil, $95 a barrel, where we are right now. and the dow and 14 k, the markets near all time highs. is the little guy finally back in this market? after the break, we talk to the managing director, charles schwab. he knows what you investors are doing. are you in or are you out? he's next. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to.

plus, when i call my local scottrade office, i can talk to someone who ows how i trade. because i don't trade like everi'm with scottrade. me. (announcer) scottrade. awarded five-stars from smartmoney magazine. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪

if you don't have something important to say? we asked total strangers to watch it for us. thank you so much. i appreciatet. i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money? if your bank takes more money than a stranger, you need an ally. ally bank. your money needs an ally. >> i ral want to show-- i really want to show you the health insurer stocks again. lower rates and payments than expected from medicare next

year. they talk about a 5% cut. they're just talking about it, but all of those health insurers are down big time. you can tell, when you start quoting percentage declines you know you've got a big decline on your hands. all right, are you buying stocks right now? yes, you the little guy when i say that. the latest numbers say yes, you are. look at this. last month, stock mutual funds took in the most money since january of 2000. about 37 billion dollars. that's a pretty sizable inflow. joining the company right now is randy fredericks, managing director of trading at charles schwab and company. randy you've got your finger on the pulse of the little guy. you're charles schwab and you know what these guys are doing, an influx into stock mutual funds. i asked the question, is the little guy piling back into stocks? >> i think there's no question that the little guy is coming into stocks, i wouldn't say that piling is necessarily the-- >> it's not a flood?

>> it's definitely a pick up in momentum from what we've seen, especially during the last year, a lot of people are very concerned about the fiscal cliff issue and had their money put away into safe investments many weren't paying hardly anything and although january is normally a month where you see an influx of money going into equities this year we've seen a little bit more, we've seen a pick up in trading activity and things like that. stuart: where is the money coming from? >> out of bond funds in some cases and a chunk is coming out of cash investments like money markets and other things that are still depressed in terms of interest rates because of the-- >> but that implies a free choice, doesn't it? you've got cash on hand. you've got the choice, where are you going to put it? and a lot of people are saying i'm putting it into stocks. >> i think that's probably true. stuart: am i reading too much into it? >> no, not at all. we've had a pickup in interest rates. when we see improvement in the economy and interest rates start to come up. that has a tendency to eventually depress bonds and

people who had a pretty high allocation in the bonds are starting to say, hey, wait a minute, might be time to start get more cautious on bonds or if they had money packed away as i mentioned earlier, in a money market fund to be safe because they were worried about things like the fiscal cliff. that's passed and it hasn't been resolved, but certainly, we've seen somewhat of a resolution and we've seen a small amount of cooperation in washington to kind of get some of the big sort of, you know, the perpetual flow of issues, so they've moved a little of that into equities. stuart: put the big board up. just a second ago, the dow went back to exactly 14,000, there we are, that means we're what, 164 points away from the all time high. you've got to make a prediction for me. are we going to get a new all-time high soon? >> with my protect and the research i'm confident we will. i'm looking at the s&p 500, and looking at 1565 level and not quite, just about like the dow jones, the same distance away from the potential all-time high and the question is whether or

not we're going to get this sequestration issue resolved and i think if there is he' reason for concern in the near term. it's probably coming up in the next couple of weeks as we hit that deadline on sequestration. >> today at 10:45, i believe the president is going to address the question of how to get around the spending cuts and how to get-- don't cut spending that much. let's do this. now, if he's successful and we don't get the sequestration spending cuts, do you think that's good for a rally? >> my belief is that's probably the case and i've been saying for the last several weeks i expected we'd see an all time high in the s&p and that would be in line with that if that issue, if they come to reach some sort of compromise or they at least postpone some of that because we're not far from the all time high. stuart: are the day traders back, guys who buy at ten o'clock in the morning, wait for the stock to go up ten cents and sell it.

>> not really. stuart: really? >> and i think a majority of day traders were put out of business years ago. if you were a day trader, january probably was one of the best months to ask for, those months are few and forebetween. active traders and those engaged in the market in general have never really left although we've seen sort of i would say an increase in the confidence of the everyday investor and the long-term investor here recently and the active traders have been engaged and relatively confident all of last year and they didn't miss out on the rally. only the skeptics missed out on the rallies. >> here is where we'll leave it. >> randy frederick, runs for charles schwab which we'll hit a new all-time high for stocks. >> my believe is we will. stuart: thank you for joining us. thank you. 9:49, 9:50 on the button right now. where are we for gold? i'm sorry let's go to google first, look at that, almost 40 cents shy of $800 per share. that's google right now. if somebody bought some, and see

it go to 800. and gold, 1608 that's where we are, down ever a fraction and holding right there at 1600 bucks. they call him johnnie football. texas a & m football quarterback jonathan manziel, takes his classes on-line. is johnnie football mailing it in or a sign of the times in our education system. we'll debate it in just a moment. ♪

but we can still help you see your big picture.

with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next. all in one place. i'm meredith stoddard and i helped create the fidelity guided portfolio summary. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

>> yeah, it happened. and gone up more. 802 on google, look at that, happened on our air. heisman trophy winning quarterback johnny manziel says all the classes he's taking next time are onhine. once a month. and here is the question from a nonfootball guy. is this a sign of the times in

college education, it's all onhine, or a sign of the times in football where he's getting an academic pass? >> i'd go with "b". >> by the way, now what? he looks so old to me, what is he-- >> do we have a picture? >> golly, johnnie football, looks like he's 30 years old. but here is the point though. stuart: you're-- >> he's amazing a great enthusiastic kid and bottom line, this is the way it is, they're identified as being great early, early on even before high school and they are coded all the way through period, bottom line. stuart: they're professionals in any other name. >> a new trend in education. a lot of new students are rejecting the standard four-year degree. but as a former teacher and dean, how do i know he's the guy doing the work if he's doing it on-line. stuart: never thought of that one. maybe more on that one. social security running out of the money so says the outgoing

head of social security. it will be social security disability running out of money, that and more examples of clearly ineffective government, waste, fraud, all involving your money, all of it new at ten. to grow, we have to boost our social media visibility. more "likes." more tweets.

so, beginning today, my son brock and his wle team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ ma announcer ] fast, reliable deliveries worldwide. fedex. >> announcer: you never know when, but thieves can steal your identity and turn your life upside down. >> hi. >> hi. you know, i can save you 15% today if you open up a charge card account with us. >> you just read my mind. >> announcer: just one little piece of information and they can open bogus accounts, stealing your credit, your money and ruining your reputation. that's why you need lifelock to relentlessly protect what matters most... [beeping...] helping stop crooks before your identity is attacked. and now you can have the most comprehensive identity theft protection available today... lifelock ultimate.

so for protection you just can't get anywhere else, get lifelock ultimate. >> i didn't know how serious identity theft was until i lost my credit and eventually i lost my home. >> announcer: credit monitoring is not enough, because it tells you after the fact, sometimes as much as 30 days later. with lifelock, as soon as our network spots a threat to your identity, you'll get a proactive risk alert, protecting you before you become a victim. >> identity theft was a huge, huge problem for me and it's gone away because of lifelock. >> announcer: while no one can stop all identity theft, if criminals do steal your information, lifelock will help fix it, with our $1 million service guarantee. don't wait until you become the next victim. you have so much to protect and nothing to lose when you call lifelock now to get two full months of identity theft protection risk free. that's right, 60 days risk-free. use promo code: gethelp. if you're not completely satisfied, notify lifelock and you won't pay a cent.

order now and also get this shredder to keep your documents out of the wrong hands-- a $29 dollar value, free. get protectenow. call the number on your screen or go to lifelock.com to try lifelock protection risk free for a full 60 days. use promo code: gethelp. plus get this document shredder free-- but only if you act right now. call the number on your screen now! stuart: good morning everyone. this is the value-added edition of varney & company. not one, not two, but three headlines for you. number one, the social security disability fund is almost broke. it's flat out of money by the year 2016.

so says the outgoing social security chief. the number of people on disability has exploded in the obama years. the cash is almost gone. two, the head start program, ineffective so says a new study commissioned by the government, but president obama plans to expand head start and spend more money on it. he says it will not add one dime to the deficit. three, at this moment, simpson bowles will submit a new debt reduction plan. it cuts the red ink by 2.4 trillion. since the president ignored the first plan, the debt has gone up by 2.4 trillion. stuart: welcome to a new hour of varney & company. we begin with this, the lawsuits against the carnival cruise line have started. passengers stranded on the ship for days adrift in the gulf, no power, very little food, no

bathrooms. the coast guard says a leak in the fuel line caused the engine fire that knocked out the power. coming up in a few minutes, we have an attorney who says the passengers that were stuck on the ship have no case. they should take the money that carnival's offered them and run. wait till you hear this. it will be just a few minutes from now. here is our company this tuesday morning as we get back to market action: fox news contributor, charles payne is here and lauren simonetti joins us from the floor of the new york stock exchange. check the big board, we're above 14,000 as expected, a 54 point gain to get things going again this week. lauren, you are watching the office supply companies. there's merger talk. take me through it. >> office depot and office max both surging in addition to staples. the "wall street journal" reported that office depot and office max are looking to merge. most analysts agreeing this could save about half a billion dollars a year, but of course with the merger comes cost cuts and maybe some 500 out of the 2,000 combined stores would

close. job cuts as well, if this merger does indeed get the green light. also, staples shares, the big leader in this group, believe it or not, they are up as well too by better than 15%, stuart. stuart: mergers, it is merger mania in 2013. i want you to look at google though. it was at 802 a moment ago. that can't be all about their opening retail stores, can't be that. >> google shares hit the highest level in history just seconds ago, so it pushed back that 800 mark and it seems to be holding. in october of last year, we did see a push higher. then the stock came down a little bit. and whether it's on the general report that google wants to sell its hardware in brick and mortar stores, who knows, but that's the story that's out today and this is a stock reaction indeed. stuart: if you own the stock, who cares, the thing is at 801, case closed, all right. i want to take a look at major health insurers, they are down real big because medicare

reimbursement will be smaller than expected next year, they are talking about a 5% cut, not imposed yet but when you talk like that, you get big percentage losses on the health insurers. outgoing head of the social security administration says disability, that fund is going broke. he was on cavuto last night. watch this. >> but the disability trust fund runs out in 2016. that's three years away. and so congress is going to either be forced to act or allow fairly substantial cuts for the disability beneficiaries within three years. stuart: let's repeat that, broke out of money, 2016, and there's no really clear solution to the problem in sight. congress just can't seem to fix this problem. charles, what do you make of it? charles: well, i think congress will come up with something, but the cuts will be 21%. those are huge devastating cuts. stuart: that's when they run out of money. charles: when they run out of money. stuart: you lose 21% -- they

will never allow that to happen. charles: right. they have about 1 1/2 million reviews backlogged to even know if people should legitimately receiving these benefits in the first place. stuart: you have 8.8 million americans on social security disability at a cost of 10 billion dollars a year. that says a lot about what we're doing with disability in america today. charles: yeah, something's wrong. something is wrong. and there's no doubt it's being heavily abused heavily abused. stuart: president obama has called for more funding for preschools as part of the head start program. however, the extra money might not do much good. the u.s. spends about 8 billion dollars a year on head start, but according to the department of health and human services, they commissioned a study, the program, they say, has failed to deliver academic impact. and by the third grade, students are still behind their peers. >> head start also got over 2 billion dollars in stimulus money as i recall. this is a ton of money. we have learned over the years

that throwing money at the educational system never works. what they found is that even the gains that are made with respect to these kids that are young are lost by the time they get into elementary school and the reason is that parental involvement is at play here, environmental factors, poverty, social circumstances. no matter what you do in the context of classroom, if you don't have parental support, if you don't have outside factors playing in that will help you out, you may not have a successful result. stuart: why expand the program, why spend more money on it? it is basically a new entitlement program. >> because the democrat's philosophy is let's throw more money at everything, and that will somehow solve the problem. if that was the case, our educational system would be in a lot better shape than it is today. charles: it is redistribution of accountability. the parents should be playing a major role here it is about the parents. black and latino kids in 12th grade seniors in high school reading at about the same level as 13-year-old white kids. if you do the math, do all the summer vacations, you add them up, they don't read over those

summer vacations, they just hang out and play. no one is forcing them to read. that's where the gap gets wide. and high school really becomes a huge huge gap. stuart: back in 65, head start was originally a summer program. that's all it was. charles: it made sense it was a summer program. >> if you want these programs to get better, competition, merit pay for teachers, you need to turn this into a real marketplace. charles: and parents need to ggt involved. >> absolutely. stuart: president obama calling for action on climate action. protesters over the weekend calling for action on climate change. with a carbon tax unlikely to get through the congress, how could the president use executive authority using the epa to force climate change rules? we will find out. epa head -- former head christie todd whitman joins the company later this hour. she has the answer to the back door carbon tax question. 10:35 christie todd whitman. here's the story you have been waiting for, the carnival cruise story. the lawsuits have begun, but our

next guest says the passengers don't have a case. let's bring in criminal defense attorney randy zellin is here. you're used to seeing him with shep smith on the fox news channel. he's with us today. you say these passengers who were stranded on this awful situation, they don't have a case, they won't win any money. tell me why. >> first of all, my segment on the show is going to last longer than these lawsuits. but there's some good news here, why is it that you can pay, i don't know, less than a hundred dollars a day to be on a cruise ship, all you can eat, you can go up to the buffet 40 times. it is because they don't have to worry about paying crazy insurance costs, worrying about getting sued. there are limitations on liability. when you buy your ticket, like any other contract, it clearly says in black and white, you want to sue us for emotional distress, forget about it. you want to sue us?

you're going to do it in district court in florida. you want to sue us? you better have real injuries and we're only going to pay you for your actual injuries. that's why you get to pay less than $100 a day. if you don't like it, don't cruise. but it is there. stuart: hold on a second. you are saying it is written into the ticket that your right to sue is extremely limited. >> it is. stuart: you're saying that where you can sue -- the jurisdiction of your suit is highly limited and prejudiced against the complaint, that's correct. and you're saying that you can't just sue for oh i feel bad or i'm emotional distressed. >> forget it. i will give you another one, something called vicarious liability, if carnival employed a third party, an independent contractor to do work on the boat and something happened, you can't sue carnival. i understand there was a leaky fuel line that caused the fire. if the leaky fuel line was the result of some third party not having done what they were supposed to do, go after the

third party. you ain't going after carnival. stuart: that's very interesting because that makes the cruise industry immune from the kind of lawsuits that affect every other industry in america. is it because they are floating around on the open ocean on a boat that's flagged to a foreign country? that's part of the deal here? >> you are bringing up two great points. first of all because you are dealing with the water you are dealing with maritime law. that goes back hundreds and hundreds of years, maybe even longer than that. it is extremely favorable to ships' owners. in addition, you're talking about -- i think they call it flags of convenience. just because a boat seems to only be leaving and going back to the united states, look at the back of the boat. look where it's registered. it could be panama. it could be the bahamas. different laws, more favorable laws there to the ships' owners. all of this is done to benefit the ships' owners. but again all of it's done to benefit the passenger who is paying less than $100 a day. if you don't like it, don't go.

if you don't like it, pay more money, you will be able to sue for more later on. stuart: where else can you impose the idea buyer beware? there's nowhere else. buyer can sue, that's always the case. this is unique, isn't it? >> if buyer wants to eat all day long -- >> and some of us do. stuart: you do not. >> that's my only motivation for going on a cruise is the all you can eat buffet. truthfully. stuart: you're saying there's no way around this. we came into work this morning. we said look these guys have been floating around with no toilets for heaven's sake, no air-conditioning, pretty bad situation, and they are distraught when they get off the boat. they kiss the ground in america. and we couldn't believe that you are saying, and you're saying no, no, no. you don't get a dime. >> there is a small window of opportunity --

stuart: go, i know there has to be. >> when there is something called an agregious act which is a fancy way of saying if carnival knew and they intended to injure the passengers, you can get around these restrictions. if carnival was reckless, in other words, when you close your eyes to the high probability that something bad is going to happen to somebody else, and you go forward anyway, like -- charles: if someone said a consultant told them five years ago that hey listen you guys should put something in the engines to help, sort of a fail safe, would that qualify? they had to know that listen they couldn't be so naive they wouldn't know this couldn't possibly happen. >> that might be more negligence than recklessness, but remember, what you just said, if a consultant did it, the limitation on liability says hey, if somebody else messes up and they are not a carnival employee, good luck going after us. it is not going to happen. i think the point would be if a

carnival employee purposely damaged the fuel line and caused the fire, then maybe you'd have a shot, but of course you'd have to then show that carnival knew or should have known that this employee, was out of their mind in doing that and shouldn't be working for the cruise line. it's very difficult, but you get what you pay for. stuart: fascinating. would you come back on the show sometime? >> i would come back every day if you would have me. stuart: careful. thank you very much. >> thank you. stuart: excellent stuff. we appreciate it. cyber espionage a major threat to our security and according to a new report, china is behind the bulk of the attacks. the judge on that next.

today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and brinit online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities.e. siemens. answers.

u stuart: microsoft taking another shot at google. this time with its e-mail services. microsoft says it will spend 30 million dollars to promote its revamped outlook.com, getting rid of hot mail. microsoft is hoping to rival google's g-mail. shares of microsoft are right around 28 bucks a share. keeping with google, the "wall street journal" reporting that it plans to build bricks and mortar stores in america, just like apple. sources say it would sell its own google merchandise. google says no final decision has been made, but it puts the stock at 802, all-time high. investigators found swelling in a second battery in a boeing 787 dreamliner, the same plane that

made an emergency landing last month. and now the engineers at boeing who were supposed to fix the problem, they are set to vote on a potential strike. boeing back to $74 a share. we have got the judge on cyber spying, is it an act of war? next.

stuart: hackers took over burger king's twitter feed yesterday. as you can see, the hackers changed burger king's logo to mcdonald's. sent out about 55 tweets, including some references to drug use. there were some obscenities as

well. the twitter feed gained 30,000 followers yesterday. the stock at 17.50. a new report from a u.s. security firm alleges that cyberattacks from a chinese military unit stole massive amounts of information from military contractors, energy companies, and other u.s. industries. all rise, judge napolitano is here. judge, this is the lead story in the new york times, front page. china's army seen as tied to hacking against u.s. is it an act of war? >> well, remember, the publishers of that newspaper allege that they themselves had been hacked by the chinese military in response to a very commendable and interesting story that they did about the family of china's leaders and their personal wealth, something the leaders don't want the chinese public to know about. is it an act of war? it is not an act of war in the traditional sense where one government shoots at the facilities of another government, but stuart, if there's anything that we pay our taxes for the federal government to do, it's to protect us from

invasion, real or virtual, from a foreign government. so if a foreign government instead of sending missiles here is destroying our ability to live, to engage in commercial, by interfering with our computer system, we expect the federal government to put a stop to that to protect us. stated differently, if you or i are hacked or fox is hacked and it is done by a federal government, how could we have the wherewithal to resist? only the american government can do that. this is not missiles. this is people in a computer room. stuart: but in this instance, constitutionally, you're okay with federal government action to repel the borders? >> absolutely. stuart: you're okay with that? >> absolutely. this is to the clause of the constitution which empowers the federal government to promote the common defense to defend us from those who from a foreign

shore would interfere with our way of life. we're not talking about somebody using propaganda to use words. we're talking about somebody who instead of using missiles is using computers to destroy our assets by preventing us from using them. stuart: the new york times for the story, they are saying the building near shanghai is the headquarters of pla unit 61398, a growing body of evidence confirms that from that building, they tapped into the activity of america. >> who would think today in 2013, we have been using computers for almost a generation now, there would be a way to keep -- other people's hands off of them. i mean some industries that we have that aren't nearly as high-tech are far more secure than computers are. i don't know enough about the technical aspect to know why this isn't the case, but one would think it would be. this shouldn't be happening. stuart: what would you say if we did the same thing to them, a

quid pro quo? >> i'm not so sure that's the best way to do this. stuart: constitutionally, would it be legit? >> i don't know. stuart: if we could say conclusively that the chinese army attacked an installation in america and destroyed its capacity to function, that is sufficient excuse for quid pro quo, we do the same thing to one of their units? >> first to be lawful under the law of war, to a chinese military unit, not to chinese commercial units as american commercial units were hacked, if this story is true in the times, we're not the federal government, but private enterprise was hacked. so we can't do the same to them. but we can certainly take down, if we can, without violence, the hackers' ability to hack in the future. the hackers are the chinese government. stuart: i've got one minute left. you heard randy zellin a moment ago saying the people on that

carnival cruise ship, they don't have a case. they won't win any money. they can file lawsuits and it won't do them any good. >> randy is correct under the law. this is a part of the law that most of the public don't know about. it probably makes you happy because you are going to say if the cruise ships can do this, why can't fill in the blank do this >> yes, why not. every other industry in america is sued constantly. >> i will tell you why under the law without getting into the weeds. the cruise ships deliver a service, fun, happiness, good times. that is not regulated by statute. but when someone sells a good, an automobile, a house, a pencil or a computer, that is regulated by statute which provide what's called a warranty of merchant ability, it has to work the way it's represented to work, otherwise you get your money back or you get damages. so one industry is regulated. i'm not preaching regulation. i'm just telling you the way this has worked. another industry is not. stuart: this has been a most unusual performance -- >> yes, this truly has. [laughter]

stuart: judge, thank you very much indeed. the climate change radicals i say are getting desperate. they will stop at nothing to prevent doomsday -- not going to go there, but my take on desperation is next. ♪ how do traders using technical analysis streamline their process? at fidelity, we do it by merging two tools into one. combining your customized charts with leading-edge analysis tools from recognia

so you can quickly spot key trends and possible entry and exit points. we like this idea so much that we've applied for a patent. i'm colin beck of fidelity investments. our integred technical analysis is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

stuart: it is an even 51 point gain for the dow, back at 14,033. what are we? about 130 odd points away from the all-time high. look at this, please. health insurers, they are down big. the whole health insurance sector is down. lauren, tell me why. >> the reason here is that the government's 2014 proposed rates for their medicare advantage program are too low. humana for instance which is the biggest stock declining here in its group down more than 8%, saying that is going to cut into

its profit outlook. you can see a huge decline across the the board because they weren't expecting these rates to be as low as they are. what's so interesting here is that this report came out on friday, but we're really just looking at it now, and this is the reaction. stuart: they talked about it late friday. the market is closed for three days. they open on tuesday morning and down they go. thank you very much, lauren. >> sure. stuart: let's bring in charles. this is the let's make some money segment, and he's looking at a healthcare stock, not a health insurer, it is a healthcare stock. it will be express scripts. charles: the stock took a pretty big hit last year, they took a major acquisition. they're back with walgreen's. they are doing well. earnings were up 74%. the generic drug space is great, great margins. guidance is phenomenal. i'm thinking the stock probably gets back and retests its all-time high. by the way, earlier this month, walgreen's said that their customers were filing more and

more prescriptions through express scripts. you know, of course the stock is up today, but it's one that's worth chasing for sure. stuart: up until maybe two years ago that was a stock and a half, wasn't it? charles: it was unstoppable. it's starting to get back there. i love the stock now. stuart: charles, thank you. we will be checking the progress of express scripts. ohio's republican governor has a plan, lower state income taxes, but raise the sales tax on things like concert and football tickets. should other governors, republican or otherwise, follow suit? at 10:45 we have someone who says yes, they should. i think they are getting desperate, the global warming crowd senses that their scare tactics are increasingly falling on deaf ears. here's my take, i was watching the weather channel yesterday. they had a reporter covering the pipeline protest outside the

white house. the message was very clear, if we don't stop the pipeline, we are doomed. climate change will get us. but then i clicked on a statement from james hanson, who runs nasa's space institute, he says we only have four years to radically change our ways before the climate dooms the planet. professor hanson alerted the world to the global warming threat way back in 1988. then i reran some of the interviews that we have done with leading environmentalists. watch out they said curb emissions now or face ever more dangerous storms. they echoed the president in his inaugural address. i'm not convinced and i don't think the general public is either. for a generation we have blamed the ups and downs of weather on some sinister climate change. i don't propose to get into the science of global warming, which i'm told is in, and the debate is over. but i am keenly aware of the tone the global warmers are now

taking. they are desperate and slightly ridiculous. those alarmists outside the white house were clearly freezing cold, despite global warming. one young man said the pipeline should be stopped by any means possible. really? and professor hanson, along with prince charles and al gore, have been predicting disaster for years. they just extend the doomsday deadline. and when a cnn anchor tried to link the russian media with carbon emissions, you could tell the global warmers were at the least stretching. desperation, that's what it is. and we're not buying it. [ male announcer ] it's simple physics...

a body at rest tends to stay at rest... while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prscription celebrex can help relieve arthritis pain so your body can stay in motion. because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation. plus, in clinical studies, celebrex is proven to improve daily physical function so moving is easier. celebrex can be taken with or without food. and it's not a narcotic. you and your doctor should balance the benefits with the risks. all prescription nsaids, like celebrex, ibuprofen, naproxen and meloxicam

have the same cardiovascular warning. they all may increase the chance of heart attack or stroke, which can lead to death. this chance increases if you have heart disease or risk factors such as high blood pressure or when nsaids are taken for long periods. nsaids, including celebrex, increase the chance of serious skin or allergic reactions or stomach and intestine problems, such as bleeding and ulcers, which can occur without warning and may cause death. patients also taking aspirin and the elderly are at increased risk for stomach bleeding and ulcers. do not take celebrex if you've had an asthma attack, hives, or other allergies to aspirin, nsaids or sulfonamides. get help right away if you have swelling of the face or throat, or trouble breathing. tell your doctor your medical history. and find an arthritis treatment for you. visit celebrex.com and ask your doctor about celebrex. for a body in motion.

>> it's not over yet. we have a refining capacity contraction in the u.s. it's not resolved. so more higher gasoline is ahead of us. stuart: ouch, that was an economist in our last hour talking about gas prices. the price of a gallon of regular jumping again overnight, up about 2 cents, $3.74. so prices are up 33 days in a row, and they are over 40 cents higher than they were a month ago. i have to ask you, charles, we asked the economist, look, is this going to push us into recession? he wouldn't go that far but he said it is really going to slow

us down. charles: it is going to slow us down, that, the payroll tax hike, also people need to remember, you want a weaker dollar, your house is worth more, it is easy, anyone can buy a car, but this is the negative consequence of that. opec has cut back production. the dollars is weak. we have no refineries. this is what happens. stuart: you see it every day. i head down the highway. there you see the guys changing the signs every single day, they are changing them. charles: you saw that wal-mart, an executive leaked there was a memo and the executive said listen this was the worse february for wal-mart in seven years. stuart: so wal-mart is feeling the pinch because of high gas prices? charles: yes, and the payroll tax hike. stuart: interesting. we know obama wants a carbon tax, got it. he probably can't get it through congress though. he may consider using the epa or some kind of executive order to make it happen. christie todd whitman is with us, former governor of new jersey and former epa

administrator. good to see you again. >> always good to be with you. stuart: can the president use executive authority, executive orders to get not a carbon tax, i know he can't get that, but can he get his way on climate change? can he get his way? >> well, he can certainly push the envelope, by getting epa to promulgate some regulations but congress can stop that too. frankly and in all honesty i think you and i have talked about this a bit before, epa doesn't want to do it. they'd rather have congress act. there's clearly pressure. we're all seeing that there are changes in climate. we're not going to stop climate change from occurring. it is a question can we slow it enough to be able to deal with it so we can plan for how do we rebuild after storms like sandy, what is the responsible way to react to these things. we need to give ourselves some time. but to have epa try to be too aggressive and overreach with its regulatory authority i think would be -- do huge damage to our ability to do anything sensible in the future.

that's the problem. stuart: do you think, though, that the president will at least try? i mean he's right out there in a couple of major speeches recently, he wants to do something about this. i think he might try. >> i was going to say -- well, if congress doesn't act, i i think he will. he's been very clear about that. he said it's a shared responsibility. we both have to deal with this issue, but if you don't, i will. and i hope that's just a threat to get congress to start to have some meaningful negotiations and discussions, but if this is going to turn into another one of those partisan battles, we're not going to get anything done, and we're all the worse for it, frankly. stuart: what do you think the first thing is that the president would do via the epa? >> well, what he'd do is get them to move forward with their regulations limiting the amount of carbon that can be emitted into the atmosphere. they have already established a ceiling for new refineries

coming on and new coal-fired plants which makes it very difficult to bring them on board because we don't have the kind of carbon scrubbers that would be needed to reach the standards that have been set. then they would take another look in the next year about what to do with the old coal fired plants. we should clean the air and should reduce the amount of carbon we put into it, but if he is going to be hugely aggressive on this, it is going to stop any progress at all and it is going to hurt the economy because business can't react that quickly. stuart: what do you think of public opinion at the moment? i did an editorial there saying i think the global warming people are getting rather desperate because i think the public opinion is going against them. what is your judgment on the public opinion of global warming climate change issue? >> actually what i have seen of polls here in the united states is that people in the united states are beginning to say something is happening. i mean in new jersey we've had 2,000 year storms within 14

months and a nor'easter in between. people are beginning to make the connection to themselves personally. there isn't the same kind of public demand for something to happen that we have seen in the past on some of these issues, but they are starting -- but there is starting to be a recognition that something is occurring. stuart: you're governor of new jersey you ran the epa, you know what you are talking about, is there an association between say sandy and climate change? >> no responsible person would say that sandy was caused by climate change. when you look at the trends, the hottest years we have ever recorded the last 15 years of the 12 of the hottest years have been in the last 15, continuing, we have seen more storms, more frequent storms, more severe storms, more frequent droughts, more frequent flooding, more severe, those are all the things that scientists will tell you come from climate change. do i believe the climate is changing? absolutely. do i think it is a natural phenomena? yes. but do i think that human activity is exacerbating that?

without question. i think the amount of carbon we put into the atmosphere, the way we have changed our land use is having an impact. what we need to do is step back and say what can we do to slow this down in a way that doesn't hurt our economy, and there's absolute ways to doing that? stuart: you said that no responsible person would link sandy and climate change and i believe that governor cuomo of new york did? >> well, i have never seen a reputable scientist be willing to say that this storm was a result of the climate change. it is accumulated evidence of these storms. you can make that but i think it's a stretch to say that frankly. stuart: thank you. governor whitman always a pleasure. thank you very much for joining us again. you look like you are in florida, is that true? >> we are. stuart: you are not a tax refugee, are you? >> no, i refuse to change my residence. i'm a new jersey resident. going to stay that way. stuart: governor whitman thank you very much for joining us. >> a pleasure.

stuart: ohio's governor wants to cut the state income tax and wants to make up for it by taxing services like cruises, arcade games, carnival rides, should other states follow? what he's doing is spreading the tax burden. after the break we will have someone with us who says yes other governors should do that. [ male announcer ] at his current pace, bob will retire when he's 153, which would be fine if bob were a vampire. but he's not. ♪ he's an architect with two kids and a mortgage. luckily, he found someone who gave him a fresh perspective on hisortfolio. and with some planning and effort, hopefully bob can retire at a more appropriate age. it's not rocket science. it's just common sense. from td ameritrade. ♪ [ male announcer ] it was designed to escape the ordinary.

it feels like it can escape gravity. ♪ the 2013 c-class coupe. ♪ starting at $37,800. ♪

stuart: health insurer investors, we have that whole sector down today. it is the one group that's in the red so far in this trading session. insurers face lower medicare rates than expected in 2014. that hurts them. humana especially is down now 8%. medtronic that's the company that makes implantable heart devices reported higher profits, weaker sales, however. shares of medtronic are down 3% at the moment. i've got news for coffee drinkers. smuckers is lowering the price for most of its coffees by an average of 6% as the price of unroasted coffee beans continue to fall. price cuts will come in brands that you know like folger's, dunkin donut brands. shares of smuckers are down almost 1%. we're talking taxes, in just one moment.

stuart: i have not netflix stock up again. why? lauren? >> yeah, it is surging. it actually hit an annual high today of $194 and change. according to the national traders association, they're saying that netflix remains the world's leading internet tv network. this is great commentary on the stock. and they do have that original programming, people really like that and they also like using netflix to catch up on shows line downton abbey. all of this, this popularity certainly helps a stock like them. stuart: lauren, it is downton.

>> oh. stuart: it is not downtown. it's downton. >> now i know. i haven't seen it yet. maybe i will catch up on it on netflix. stuart: you have to. it is great. charles is going to make some money for us and he's now recommending monster beverage. charles: we know it's been under some pressure, all these reports of people drinking 17 of these and then getting on a treadmill and falling off of it. they said our 16 ounce can has the half the caffeine of a 16 ounce cup of coffee. they are relabelling and say it is not a dietary supplement. over the last few years their market share has soared. they are right behind red bull. this is prime for a takeover. you consider how much business pepsi and coke are losing in the carbonated segment of the industry, i'm surprised. my biggest concern is management execution, they have missed the street three of the last four quarters but as far as valuation is concerned, i think the stock is oversold. the caveat i would add it is also extremely volatile.

stuart: it is a caffeine delivery system. charles: it is a pick me upper. stuart: ohio's republican governor has a plan to balance the budget, cut state income taxes but raise the sales tax on things like concerts and football tickets. our next guest says that other governors should follow suit. he's with the manhattan institute and he is here. okay, let me get this right. in ohio, republican governor, he wants the lower the tax on income. but spread the net for taxing consumption, in this case, spreading it to services. you think that's a good idea. why? >> because it would really improve the tax and better suited for the 21st century economy. when sales tax codes were first designed back in the 30s, our economy was on goods. a greater share of personal consumption was on goods. that has shifted to services but sales tax codes have not caught up. this is an inefficient tax system. they raise the rates in order to compensate for all that lost

revenue. stuart: if you transfer tax from income to put it to consumption, that is regressive. in other words rich people would pay the same amount as poor people and in our society we tend to say that's not good. >> well, that's one way to look at it. another way to look at it is when you levy a tax on something, you create a disincentive for that type of activity. do we want to create a disincentive for work, for savings and investment or do we want to create a disincentive for consumption. stuart: is the ohio governor part of the tax experiment that's going on around the country? louisiana wants to get rid of all income taxes. north carolina is considering the same. oklahoma, kansas, i believe all trying the same kind of thing. is he just part of this? >> yes, i think that's one way to look at it. we have seen the rise in one party control, 37 states have the same party controlling both the government and legislative branches. massachusetts and minnesota governors, are going in the opposite direction.

stuart: do you think it will happen at the federal level. >> it is a difficult question and frustrating. at the federal level, you have two different thoughts on tax. for democrats, raise more revenues to support more government spending. republicans want a revenue neutral on tax reform. stuart: if you do it at the federal level, they will say we will have a consumption tax. let's get rid of the income tax. they never get rid of it. they don't reduce it. you have an extra tax on consumption. that's what happened in europe with the vat. do you see the same thing happening here if we tried this? >> and also at the state level where they have sales and income taxes, it is a problem. stuart: steven, thank you very much for joining us. everybody, we're just waiting for president obama. he's approaching the podium right now. he's speaking from the white house on possibly, possibly ways to avoid the sequester. let's listen in. >> thank you. thank you. [applause] >> thank you. good morning everybody. please have a seat.

welcome to the white house. as i said in my state of the union address last week, our top priority must be to do everything we can to grow the economy and create good middle class jobs. that's our top priority. that's our north star. that drives every decision we make and it has to drive every decision that congress and everybody in washington makes over the next several years. and that's why it's so troubling that just ten days from now, congress might allow a series of automatic severe budget cuts to take place that will do the exact opposite. won't help the economy. won't create jobs. will visit hardship on a whole lot of people. here's what's at stake, over the last few years both parties have worked together to reduce our deficits by more than 2.5 trillion dollars.

more than two thirds of that was through some pretty tough spending cuts. the rest of it was through raising taxes, tax rates on the wealthiest 1% of americans. and together, when you take the spending cuts and the increased tax rates on the top 1%, it puts us more than halfway towards the goal of 4 trillion dollars in deficit reduction that economists say we need to stabilize our finances. congress back in 2011 also passed a law saying that if both parties couldn't agree on a plan to reach that 4 trillion dollars goal, about a trillion dollars of additional arbitrary budget cuts would start to take effect this year. and by the way, the whole design of these arbitrary cuts was to make them so unattractive and unappealing, the democrats and republicans would actually get together and find a good

compromise of sensible cuts as well as closing tax loopholes, so forth, and so this was all designed to say we can't do the bad cuts, let's do something smarter. that was the whole point of this sequestration. unfortunately, congress didn't compromise. they haven't come together. and done their jobs. so the consequence we have these automatic brutal spending cuts that are poised to happen next friday. now, if congress allows this approach to take place, it will jeopardize our military readiness. it will hurt job creating investments in education and energy and medical research. it won't consider whether we're cutting some bloated program that has outlived its usefulness or a vital service that americans depend on every single day. it doesn't make those distinctions. emergency responders like the

ones who are here today, their ability to help communities respond to and recover from disasters will be degraded. border patrol agents will see their hours reduced. fbi agents will be furloughed. federal prosecutors will have to close cases and let criminals go. air traffic controllers and airport security will see cutbacks, which means more delays at airports across the country. thousands of teachers and educators will be laid off. tens of thousands of parents will have to scramble to find child care for their kids. hundreds of thousands of americans will lose access to primary care and preventive care, like flu vaccinations and cancer screenings. and already, the threat of these cuts has forced the navy to delay an aircraft carrier that was supposed to deploy to the

persian gulf. and as our military leaders have made clear, changes like this, not well thought through, not phased in properly, changes like this affect our ability to respond to threats in unstable parts of the world. these cuts are not smart. they are not fair. they will hurt our economy. they will add hundreds of thousands of americans to the unemployment roles. people will lose their jobs. the unemployment rate might tick up again. and that's why democrats, republicans, business leaders, and economists, they've already said that these cuts, known here in washington as sequestration, are a bad idea. they are not good for our economy. they are not how we should run our government. and here's the thing, they don't have to happen. there's a smarter way to do this, to reduce our deficits,

without harming our economy, but congress has to act in order for that to happen. now, for two years, i've offered a balanced approach to deficit reduction that would prevent these harmful cuts. i outlined it again last week at the state of the union. i am willing to cut more spending that we don't need. get rid of programs that aren't working. i've laid out specific reforms that -- reforms to our entitlement programs that can achieve the same amount of healthcare savings by the beginning of next decade as the reforms that were by the simpson bowles. gets rid of the tax loopholes and deductions for the well off and well connected without raising tax rates. i believe such a balanced

approach that combines tax reform with some additional spending reforms done in a smart thoughtful way is the best way to finish the job of deficit reduction and avoid these cuts once and for all that could hurt our economy, slow our recovery, put people out of work. and most americans agree with me. the house and the senate are working on budgets that i hope reflect this approach. but if they can't get such a budget agreement done by next friday, the day these harmful cuts begin to take effect, then at minimum congress should pass a smaller package of spending cuts and tax reforms that would prevent these harmful cuts not to kick the can down the road, but to give them time to work together on a plan that finishes the job of deficit reduction in

a sensible way. i know democrats in the house and in the senate have proposed such a plan, a balanced plan, one that pares more spending cuts with tax reform, that closes special interest loopholes and makes sure that billionaires can't pay a lower tax rate than their secretaries. and i know that republicans have proposed some ideas too. i have to say, though, that so far, at least, the ideas that the republicans have proposed asks nothing of the wealthiest americans or biggest corporations. so the burden is all on first responders or seniors or middle class families. they double down in fact on the harsh harmful cuts i have outlined. they slash medicare and investment that create good middle class jobs. and so far at least what they have expressed is a preference where they'd rather have these cuts go into effect than close a single tax loophole for the