value. >> if there's something left out a callout from the president of that very thing, the treatment of women in that religion, quite frankly, as he's making his way from saudi arabia to israel. thank you, kristin, john and steve. take it away. stuart: thank you very much indeed and good morning everyone. evil loses in life. i won't call them monsters because they would like to name. that's president trump on the terror attack in britain. a man detonates a nail become that's designed to terrorize the target population. nails rip people to shreds. the explosion occurs as a pop concert ended killing youngsters as they left. that's designed to terrorize parents and families. it's designed to make you think twice before joining any crowded event. it was an ariana grande concert in britain's largest indoor arena. it set up a stampede and

panicked teens trampled one year. they ran outside. and a holiday inn took in 60 youngsters and people opened their homes, private homes. manchester, england, terrorized the city center is still locked down. this attack took place two years to day after a british soldier, lee rigby was hacked to death on the streets of london by islamic terrorists. the manchester attack coincided with president trump's mideast trip where he confronted islamic terror. the timing, yes, it occurred just as the summer concert season gets underway. prime minister theresa may says the attack targeted some of the youngest people in our society with cold calculation. and president trump said so many young, beautiful people. this is "varney & company." ♪

>> oh, my god! >> what happened. (bleep) what's going on? oh, my god! . we stand in absolute solidarity with the people of the united kingdom. so many young, beautiful, innocent people living and enjoying their lives, murdered by evil losers. stuart: that was president trump speaking about the terror attack at an ariana grande concert in manchester, england. 22 dead and dozens more injured. we have the latest on this. ashley: we do. we heard police believe they know the identity of the attker, the person who set off this device. they have not named them, they say it would not be helpful and

would hurt their investigation. this came at the worst time calculated setting off the device at the end of the concert which attracted a very young female audience as they're coming out of the arena. the bomb goes off. and 22 dead is the latest number. 59 injured. at least a dozen of those that are injured are under the age of 16. some are still in surgery as we speak and have life threatening injuries. some say they will be in hospital for quite some time if they can survive their injuries. there was an arrest of a 23-year-old man in manchester, he had on a backpack and he was swarmed by police. and a person acting by himself? or was this part of a network. we should say that isis, no big surprise has claimed responsibility for this attack and you know, the effort goes on now to find out who was this person, who was he dealing

with, was it single, just someone made a homemade bomb or part of a bigger network. >> thanks, ashley. now, let's get to your money. check the futures, the stocks will open a little higher again, and the markets are not showing any direct impact from the manchester attack. we'll be up at the opening bell. let's get more on this attack. our next guest is lieutenant general mack nerney, with us this morning, general, 3,500 terror suspects in britain. you can't surveil them all 24/7. the brits know they're there. what should they do with them, do you think, general? >> well, i would arrest them all and i would bring them in and i'd put them through an interrogation process, stuart. we now must stand up we've been at this for 16 years and we have the platitudes and the words of the evil and all this, but let's start taking action. now, by arresting these people and you go through the interrogation process, if you know how to handle the ideology

that we're facing, not the religion, 85% of islam is an ideology that has nothing to do with religion. so, let's go through and start identifying and ranking those people. now, people are going to cry out, my god, you're violating our civil rights. but that's the civil rights weren't violated last night? >> you're talking about britain which does not have a written constitution. you could not round people up and arrest them without probable cause. what you can't do here, what you're suggesting, you probably could do there. i'm interested to see how close the brits are to doing just like that. my question, why fewer mass attacks here in america compared to europe? >> well, first of all, if you go back to the obama administration, there were not, there were more attacks here than there were in the united kingdom. if you go to since president

trump has taken over, he's finally put teeth in it, isis, arresting people. our intelligence is better. look at illegal immigrants coming across the border, it's less. we are taking action. now, we could arrest those people in the united states that are targets, and there's-- if there's probable cause and if we understand the ideology and the ideology is what we're trying to defeat. are' talking two things, do you defeat a fourth structure, that's people or do you defeat the ideology. president trump's trip is brilliant. he talked to 50 leaders, muslim leaders, the first werner weste westerner to do that. a and. stuart: general, hold on a second. marine one just landed at

bengorian airport in israel and he's crossing the tarmac and he'll get on air f and depart for rome where he's attending the g7 summit and of course, be meeting with pope francis, very germane, bearing in mind the terror attack in britain. that's the president, about to leave tel aviv, about to leave israel. general, back to you. would you say that our president confronted trer in his trip to the middle east. >> i ranked that speech with president reagan's speech in front of the berlin wall, tear down that gall mr. gorbachev. i rank that and will have that historically. we're now confronting and if we do create the central treaty organization that i participated in as a colonel almost some 30 years ago, if we

do reinvigorate that and get deat and drive out this hem to ideology, that's what they've got to do, drive out the evilness in that ideology. only they can do it. infidels cannot. we can help defeat the force structure, but they must defeat the ideology. stuart: general, appreciate you joining us on a day like today. on the left-hand side of the screen, this is a formal departure ceremony as our president is about to board air force one, he'll be taking off for rome very, very shortly. that's at the tarmac at bengorian airport in tel aviv, israel. he with as in israel literally for no more than 23 hours, but his impact was very significant. joining us -- i'm sorry, hold on a second. ashley: sorry to interrupt, a tweet from manchester police they've executed warrants in two separate areas in

manchester where controlled explosion has taken place, it's part of the investigation linked to the developments in manchester. stuart: and raids were taking place so this was the result. ashley: controlled explosion. stuart: thank you very much indeed. joining us zuhdi jasser. zuhdi, the president used specifically words to describe the terror attack last night. he called the people who did it evil losers. i want to concentrate on the word loser. is there significance to that word? >> what they're finally seeing, they're taking this to where the terrorists are, which is, this is a war, and we will win, and they will lose. not only are they evil, not only barbarians, but lose in the field of war and this is one of the reasons they've been threatening since two weeks ago, they were threatening m p's and asking them to commit acts where they can in the u.k. and we are entering into this

month of ramadan, which for muslim is a holy month of spiritual atonement and internal lookingment if you look in history the last few years, there's been spikes in attacks during this time and it's important to take the jihad to them and engage muslims and tell them, this is your war. you need to have a jihad against jihad and the president will turn them into losers. that's happening. while they were cheering this on twitter, et cetera, the isis, pro isis forums were saying they were getting revenge for the eye tax in iraq and syria. as we treat this cancer, stuart, as we often see in patients with cancer, they get sicker before they get better and these acts are not unfortunately unexpected as we continue to defeat them on the battlefield. stuart: earlier today, our president held a joint news coverage with mahmoud abbas the leader of the palestinian authority and subsequently israel's prime minister netanyahu lectured the palestinians saying you've got

to stop paying and rewarding the families of dead jihadists, that's apparently palestinian law. do you go along with that. >> we have to speak beyond the corrupt leadership of abbas and hamas and we have to speak to the palestinians, because their culture of hate is rewarded. they say one thing in english to president trump and will say something completely different in arabic. just a few days ago, abbas was talking about sort of just this being a gesture, et cetera, and then goes and says he wants to make peace. that's a corrupt leadership, they're fueling hate. they're fueling a culture of hate and hamas has in its charter a doctrine wi. and i would disagree, there is no regional peace, it's a false linkage. he needs to speak past the leadership to the palestinians. if they really need to first

their abandon the corrupt leadership before there's any genuine peace. stuart: zuhdi jasser, thank you as always for joining us, sir. >> thank you. stuart: the door to air force one is about to close and the president will take off on the way to the g7 meeting and of course his meeting with pope francis, he will be taking off shortly. if you're tuning in, i'm sure you want to know what is the impact on the terror attack in britain on our financial markets. the answer is, there is no impact. there is no relationship between the two events. we will open higher this morning on the dow industrials and open pretty close to 21,000. nasdaq up, s&p up as well, but no connection to terror. i've got a retail ice age story for you, it's for autozone, sell parts for your cars. and they say that sales are down because the tax refunds are delayed. that's, dare i say, their

excuse. and it's down $61, that's 9%, that's a loss. for the big news of the day, the terror attack, 22ead in britain. isis claimed responsibility. the terrorists clearly going after soft targets, young people. we have an all-star lineup this morning. and nigel farage, and chris, and republican senator john kennedy and walid ferris. they're all with us this morning. more varney after this. are allergies holding you back?

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>> the official trump budget proposal has arrived on capitol hill. it includes a big increase in defense spending and decrease in future spending on medicaid and also some welfare programs. details. ashley: let me give you the details, stu, i'm raring to go as you can tell. stuart: please. ashley: economic growth spurred by tax cuts will make up for the revenue lost through the

tax cuts and also through, as you say, spending cuts to issues like medicaid, food stamps, disability benefits, welfare, students loans, so on. budget, medicaid and welfare cuts. this is how much will be saved. 1.74 trillion over ten years. that's the saving. now, budget, defense and border security spending, that will go up 56.6 billion. now, this is part of a much, much bigger spending plan and it will balance the budget according to mr. trump and his accountants within ten years. >> and it's a strong growth of 3%. >> it certainly does, which others say-- >> contentious, shall we say, as the president leaves bengorian airport in tel aviv. he's about to get underway to rome, italy and meeting with g7 and with pope francis. he's on his way. the manchester attack shows that terrorists really are going after and choosing very

soft targets, a concert with lots and lots of children there, and they are among the dead. n national security analyst ryan morrow is with us now. ryan, i suspect that the terrorists want, that they're deliberately terrorizing soft targets, children. they want us to go after them in a harsh fashion, am i right? >> yes, a few different reactions, obviously to be terrified and not going to a concert because of this. and terror is the reward they want and causes a strategic plan that they have that very few people are talking about. it's called the extension of the gray zone. what this is, it's an idea to carry out horrible attacks, the most provocative possible in europe in the hope that random people then attack innocent muslims and they bulb -- published this. and they believe in anti-muslim backlash will enable them to

have a new wave of recruits. >> so they're trying for an anti-muslim backlash in some fashion or another, that's what they want? >> it's the stated strategy that they've laid out in their own propaganda, going out for 12 pages in one issue. >> they say that they're deliberately targeting soft targets and terrorizing us so at that we will change our life style to some degree. i put it to you that they're winning on that score. >> i would say so. i would say in many ways we don't respond properly because the way the response is, it is my patriotic duty to go out to that event and think of it this way. for those of you scared to go to an event because of this attack, the people there need you there because you're going to be the one that's not complacent. you make them safer because you're the one that's going to see and do something about it if there's a problem. stuart: nonetheless, parents will consider and they will think twice about sending a youngster, a pre-teeto a

concert. they will think twicout that. like it or n they ll think twice about it. >> right. stuart: are they winning with this, then? >> in that way, yes. but let's wait and see if see there's economic down turn, where people say they're not going to the events. i have confidence in americans saying i'm not going to reward the terrorists that way. it seems the conversation goes to what fence or barrier or higher security. that's not a winning strategy. we need an offensive strategy. this problem comes from overseas and then leaks in here and you're not going to stop it, even by just beefing up the fbi. stuart: get out and attack. >> and celebrate when you win. and destroy the islamist infrastructure, not just violence, a reaganite strategy, where is this ideology coming

from, and hold the governments accountable for this and i don't think we need to pass to the jeks nen ration. >> we're seeing the stock market open up and nine minutes time. we're looking for a small gain in the dow industrials. please, there is no connection between the terror attack in manchester and the performance of our financial markets this morning, they are distinct entities, they are separate. and we'll be back. we asked people to write down the things they love to do most on these balloons. travel with my daughter. roller derby. ♪ now give up half of 'em. do i have to? this is a tough financial choice we could face when we retire. but, if we start saving even just 1% more of our annual income... we could keep doing all the things we love.

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>> that is the new york stock exchange. they're about to observe a moment of silence for victims night. and we will observe it. listen in, please. [moment of silence] [moment of silence]

[bell ringing] . stuart:. the new york stock exchange observes that moment of silence because of the events in manchester, england last night. the market will open in just under four minutes' time and when it does, it will open higher. we want to make the point here there is no connection at this point in time between what happens on our financial markets and what happened yesterday or last night, i should say, in manchester, england. ashley webster is with me, mike murphy and shah gilani as well. mike, first of all, there is no impact from this terror attack, one way or the other there's no impact. >> to the markets, no. unfortunately, a horrible situation for the people

involved and all of us with young children out there. my kids were just at an ariana grande concert this past summer in new york and hits home for anybody with children, but that's the world we live in now. as far as the markets go, no impact at all. stuart: now, shah gilani, there would be an impact on our financial markets if a terror attack had a direct impact on the economy, am i right in saying that? >> it certainly would. it's a concern for all investors, it's bare barrick and demonic and unfortunately the scourge on entire world. i don't think it's a bad thing. if markets were to react to each one of the awful events and go down, it would encourage this type of behavior. i'm glad the markets take this with a grain of salt. stuart: the truth is it does not affect money. morale, diplomacy, law enforcement, the military, understood.

but money, there's no direct impact. >> fortunately, not. stuart: tell me, mike murphy, why is this market going to open nearly 50 points higher? >> the positive is earnings growth. we have earnings coming in strong and you have technology. we talk about the big techs. you mention then every single day that are hitting new highs and these are up 22% year over year and you also have an economy, forget the market for a minute. the economy, people are feeling better. people believe they're going to get some sort of tax relief. people believe they're going to have a pro business environment out there. it is true, it's out there. that's the underpinnings of the economy. look at housing, it's there. stuart: how long have we been saying this? how long? the market went straight up after the election. ashley: yes. stuart: and then paused around 21,000. ashley: right. stuart: there was political turmoil, evident, right and cent of washington d.c. and a lot of people say it's going to

affect the tax cut. ain't going to happen. affect obamacare reform. ain't going to happen. ashley: looking strong, the earnings are strong and fundamentals of the economy are looking strong there and it's standing there on its own two legs. stuart: let's call it what it is, it's profits. i hate that compression, earnings. we've got profitability in america. did you say 22% up for the famous five. >> for the technologies companies, 22% year over year, last year wasn't a great year but realize what you're comparing against. the companies have growth, earnings, profits. they have technology, they have innovation, so, that's why there's money going into the market. >> have you changed your-- wait a minute, you were always --. [laughter] >> shah gilani, you were always in favor of the fabulous five as we call them. >> yes. stuart: you've never detracted from them?

>> love all of them. i think that microsoft of the five up the one that's going to rise above and move ahead of them. it's solid and taken a huge position in the clouds and that's where the growth is, you have to be there. stuart: thanks for being with us. >> he's saying that because i do own microsoft stock and bang, it's 9:30. it's a tuesday morning, we're off and running, 13 points, 19 points, a lot of green on the left-hand side and that's a state ofhe market, a feeling how the market is open. it's on the upside. look at that, i've got 25, 26 of the dow industrials up as opposed to red and down. 35 points-- that's the dow 30 up at the opening bell. look 20, 930. 70 points from 21,000. how about the s&p 500? a broader market indicator, also higher. three points up there. how about the nasdaq, we say it every day, home to the technology companies. another solid gain for the nasdaq.

16 points higher. all right, the fabulous five. we love them. so do you. they keep going straight up. facebook, 148. amazon 973. that's an all-time high. it's never touched to level-- 975 on amazon as we speak. microsoft moving along there, oh, you took it away from me. 974 on amazon. ashley: do i hear 975? >>. [laughter] >> there you go, 974 on amazon, the fabulous five are up this morning and that's the base of the market and the dow is knew up 41 points. back to big tech, amazon, microsoft, alphabet, facebook, all of them at or close to record highs. investors, you've got to say they've shrugged off the terror attack because as we were saying earlier, it has no direct impact on the economy or on money period.

you shrug these things off. >> you have to. it's becoming kind of common place, especially in europe, we're seeing these attacks occur somewhat regularly. shah mentioned it earlier. i love the fact that the markets are not reacting to this because that would give the terrorists more power and lead them to believe that they could actually have an impact on the financial markets. they can't, we will track them down and we will get past this at some point in time. but the markets trade on these events. stuart: there's a financial story, that is president trump and his budget. the plan heads to capitol hill today. the proposal is spend a lot more money, like 56 billion dollars on defense and border security. cut 1.7 trillion dollars out of future spending on medicaid and some other welfare programs over a 10-year period. but that's the economic back drop, but a lot of people say

they don't have a prayer. >> even the republicans are split and you know you'll get strong pushback from the democrats. you know, it's the donald trump way, you start with some draconian kind of proposal and then you come down and down until you find something in the middle everyone can agree on and at least everybody hopes. >> and the 3% growth in the next-- >> in terms of the budget and growth and expectations, that's baked into the expectations, balance the budget in ten years, we don't know what those projections actually look like how they go year to year and what the average is, so forth. a lot of that's looked over closely and i don't know that that's going to stand up. >> no impact on the market thus far today, i might add. have a look at the social media stocks. we' we're seeing those using sites like these here, to try to check in with loved ones and to

get news on the attack. this is not exactly a plus for social media stocks, but that's how they're used today. >> it's the new world, facebook has over 2 billion users, and that's how people can check in with loved ones especially like this when you have the horrible attack. that's just the world that we live in and that's not changing. stuart: last night the kids were running out of that stadium, the attack took place and they ran out, stampeded out. parent didn't know where they were, a lot of cell phones on the floor, all over the place, some ran into a nearby hotel. and some into private homes and the people were trying to connect with social media. >>. ashley: just like that. and the arab spring, a lot the twitter users saw that and were

in that because of that. stuart: do you think that facebook will be the first trillion dollar valued company? >> i think you will get there. apple has some lead and up over 800 billion. you know, really going to be tough to hold them back from a trillion in the next years. >> 803 billion is what apple is worth. >> it's up 32% this year in 2017. spectacular group. >> facebook along at 430 billion. amazon 464 billion. microsoft, 529 billion dollars, ladies and gentlemen. take that. not bad. >> i'm not sure what this means, but facebook has great growth and great upside, but tough to catch apple. stuart: well said. check the big board, we were up and we're up after the terror attack in britain. autozone, that stock falling.

the company reporting disappointing sales. the reason is, they say there's been a delay in tax returns, tax refunds i should say that hurts business. seems like an excuse to me. that's $50 a share and it's just know the delaying tax refunds. and cracker barrel making more money than expected. sales down, and the stock is down 5%. dsw, another retailer struggling to keep up with e-commerce, the sales falling inhe fst quarter. taking it on the chin. dsw down 5%. how about toll brothers. it's a home builder that reports strong profits, cites higher demand for quote, affordable luxury homes. and get around that one, okay? 38 bucks a share, 2% higher. viacom is in advanced talks to create a sport three tv bundle costing $20 or less per month.

the news comes as more cable companies look to cut high cost sports channels like espn. what do you say about that? >> i think that the way that people consume content is changing due to technology. the way we get our shoes and view television is looking at the need for companies to make accusations, you're going to watch your phones when you watch them on portable device. no longer sitting down at 8:00 to watch television. ashley: some including fox will hate this, spent a lot of money for sports rights, to broadcast sports. for young millennials who don't have cable, they don't particularly care for sports, this is a good deal for them. stuart: you think so? >> yes. stuart: i would have thought they'd like it on tv. ashley: no. >> i don't think that people watch tv as much as they used to and--

>> wait, wait, wait, you're on the cable tv show. [laughter]. doing rather well. >> i'm talking about sports. >> everybody watches news on cable. stuart: well said. [laughter] >> they do, actually, we're doing rather well. facebook is facing delays getting the original content up and running. the first batch of videos supposed to go live this spring, now mid summer looks more likely. you know, is there a rush to roll out? >> i imagine they want today do it early spring before the colleges break up and get the word out there. i think that summertime will be fine. and i don't think it will affect the stock. i think the licensing content, original programming and they'll hit it out of the park when they get it right. stuart: that's just at 148. no impact on facebook, 148. we've got to wait a while before it gets to trillion bucks, the total market capital value, but it's there. this is something i find

fascinating. disney world avatar-themed attraction. okay. it's just an attraction. eight years after the movie's release, out comes this attraction. the park is called pandora, the world of avatar. here is what's important to me. it cost $500 million to build it, okay? that's a gamble and a half, isn't it, mike? 500 million? >> especially this far after the movie. the reason disney does so well, they can put out a movie and then they can get the people into the theme parks with the rides, sell the merchandise. so, they're kind of getting six or seven bites of the apple. this seems late to the gall game. i don't know if too many people remember avatar, maybe disney execs, maybe there's another avatar coming out, i don't know, but-- >> 500 million dollars. >> it's a huge gamble. if you look at the stock price, it may have been affected by this. it's hit last month.

and it's a huge gamble. i agree with mike, nine years since the movie and maybe there's another one. there's nor lovable characters in avatar. some of thfrozen characters and disney has that draw people to the theme park and-- >> i took my kids to see avatar and i fell asleep in the first ten minutes. with the 3-d glasses on. and i took them again, apparently i missed a movie. and i fell asleep again. stuart: this 500 million, is that for a ride or entire new park? >> it's like a 12-acre park that has separate rides, they have restaurant themes, apparently it's very interactive and if you're really into avatar, you'll love it. >> although it sounds like a lot of money. ashley: i'll fall asleep. >> disney can recoup quickly if it's a hit and people in the theme park are spending a lot of money there and put out more

movies and sell more merchandise. it's a gamble, but if it works, they'll make their money back three or four times. the market is up 42 points and we're close to erasing the losses of may by the way, back almost to where we were the start of the month. say thank you very much for mike murphy and shah gilani, thank you very much indeed. breaking news, here we go. a u.k. ambulance official says that of the 59 injured in last night's terror attack in manchester, what is it, ashley. ashley: a dozen. stuart: 12 were children under 16. ashley: a dozen were under 16 years old of the 59 injured and many of those injuries are considered life threatening. stuart: well, that's a shock to the system and a shock to the brits, it's a political story, but it's not a financial story. ashley: it's not. they're in the middle of a general election and all campaigns have been suspended so there's no politicking going on thankfully while the investigation goes on.

stuart: two of the dead are, did you say 18? eight and 18 years of age. extraordinary. ashley: yeah. stuart: the dow industrials up 34 points. no impact on the markets from terror, but certainly on our souls. we'll be back.

echl. stuart: the morning after the manchester tower attack. no impact. the dow is up. here is the amazon story, they're expanding offerings in europe, they're about to launch a new tv subscription service there. come in, nicole, tell us how it works. nicole: a short time ago,

amazon stock, if you have it, you're happy. 975 and change. once again, amazon just expanding the behemoth that it is. live programming, original content and screaming programming for prime members. they're expanning into the euro zone and u.k. and germany in particular and making a lot of deals there. in addition very particular programs such as fitness channels, equestrian channels and wedding business here at home. stuart: the wedding business. >> invitations and gifts for your groomsmen and bridesmaids. >> i should have known. my daughter was married ten days ago. thank you, nicole, good stuff. isis is officially taking credit for the manchester attack which left nearly two dozen people dead. nigel farage, i often thought that the brits must be close to

the boiling point with atrocities like this. how close are they to a social explosion? >> well, actually, we haven't had many of these attacks. most of the attacks have taken place in france. there have been 21 separate attacks in france. many more problems in belgium. we have not had many. this one is a particular schork, it's an outright attack on children and i think the country is very shocked by this. i believe what people want is action. you know, yes, we expect our leaders to express their condolences for the dead, the injured for the families. i think the time has come for us to reasonably ask, what is our government actually going to do? you see, a lot of the problem. would he talk about immigration and about people coming in without the security check, but a lot of the problem is home grown.

the high that road over westminster bridge killing people a few weeks ago, was radicalized in a british prison. it's happening in british prisons, happening in british schools. i don't think it's right and fair, but we demand our government tell us exactly how they're going to stop this. stuart: the daily telegraph reports there are 3,500 active terror suspects in britain. i was expecting, i have thought that prime minister theresa may might suggest that some of them, a few hundred might be brought in for questioning. a kind of a mass roundup. are the brits close to that? >> theresa may certainly isn't. she is our prime minister, but remember, she was our home security, in this, we did almost nothing. i don't see a mass roundup happening in this country, but

i do expect our security services to keep all three and a half thousand under very close scrutiny. by the way, that's the number in this country. in little belgium, they've got 18,000 terror suspects. stuart: possible. >> i'm very depressed about things here and they're worse on the continent. stuart: that's impossible, you can't surveil 24/7, 3,500 or 18,000 in belgium. >> it's a massive problem. the thought of free societies rounding people up in europe brings back horrible memories of the 1930's. i think we want to know there will be no more radicalization in our prisons and schools and vet everybody from middle east and north african countries.

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attack, a lot of people are suggesting that maybe the brits round up the 3,500 active terror suspects that there are in britain. you can't do that here, can you, judge andrew napolitano, who knows the constitution. in all seriousness. >> i laughed because of the conversation we had before the cameras came on us. stuart: at the moment, i think we have in america, i think we have a defensive posture. >> yes. stuart: we attempt to stop attacks before they happen. in what way could we take in attacking preemptive policy and go after them before they do something? can we do that? >> we do have that policy in the land of your birth. because parliament authorized it. over here it could not be authorized without a fundamental change to the constitution. there are things the government can do and share some of the criticisms of the british and american government that

mr. farage just leveled at theresa may. i have argued for a long time that great britain is the most is yosurveilled country in all europe and manchester the most surveilled, only london has more cameras. the governme, if it had eyes to watch every camera, would know everything everybody is doing. it obviously doesn't have all of those eyes. it's information overload and too much surveillance and it causes a false sense of security on the part of security forces when they believe what we can capture everything. but they do the capturing after the event occurs. stuart: oh, hold on, judge, the value for all of these surveillance cameras is not in preemptive action, stopping people before they act, it's mopping up the ring leaders and the group after the attack. >> no, no, my argument is it should be used for preemptive--

>> you can't. >> you can follow a guy, you can surveil a guy, be sure he's not in a position to harm anyone, as long as you have articulatable suspicious. and a guy wearing a vest is articulatable suspicion. stuart: you're arguing out of both sides. >> no, in america because we have information overload, we learned about the phone calls that the boston marathon bombing made, the crazy person in orlando made before he shot up the nightclub, that the husband and wife team in san bernardino made, after these killings occurred, even though the nsa had in real-time the phone calls and the texts at the time they were made, but they didn't look at them. they just stored them because they have more information than they can process. if they focused on people as to whom there is reason for

suicion, there is more likely to focus on the bad people rather than everyone. stuart: let's boil it all down. if there's reasonable grounds for suspicion on the camera surveillance or wiretapping, whatever it is. if there's reasonable grounds for suspicion, you go to the judge and bring them in for questioning. >> you can only arrest as probable cause, without getting into the weeds. the standard for surveils is easier and lower than the standard for probable cause. this character, this monster last night should have been on their radar screen. he was and they didn't know it. stuart: should we do what i suggest, that is, surveillance, wiretapping, pick them up, question them aggressively. >> if the wiretapping is done pursue to probable cause. stuart: we're on the same page. >> did i bring you to my side. stuart: no, i brought you to my side. >> that will be the day.

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stuart: this morning the western world, the judeo-christian world of rob and america is confronted with islamic terror. manchester, england, a concert at britain's largest indoor arena. 18,000 in the crowd, mostly teens and children. a man waits outside, he knows he can't get in because he is carrying explosives and a lot of metal to create shrapnel, maybe nails or nuts and bolts. he waits until the concert ends, knowing a large crowd will soon be around him as youngsters leave the arena. he detonates his bomb. shrapnel tears young bodies to pieces. 22 dead, dozens injured. it's a terror atta, other terror attack. the authorities have identified the bomber but have not yet named him.

the timing is surely not a coincidence. our president is in the mid-east calling out islamic terror, branding it a wicked ideology. and it is just two weeks to britain's general election. and this is the start of the summer concert season. the manchester attack is surely timed to make people think twice about being in crowds. the target, yeah, was children, designed to instill terror in parent and families just as summer begins. now what? the daily telegraph reports, a british newspaper, there are 3500 terror suspects in britain. you can not surveil them out. so should the brits round them up for questioning? at some point, democracies have to figure out how to respond to endless bloody attacks from within. at the moment, we're in defense mode. we try to prevent attacks beforehand using intel and surveilance. at what point does public

opinion and public policy change? at what point does a democracy defend itself by preemptive attack? paul ryan right now, speaker of the house is now speaking about the attack. >> think about that for a second. many rushing in hoping to god and fearing the worst. to deliberately target innocent children is cowardice in its most heinous form. so we should not be surprised that isis has claimed responsibility for this attack. but we will never bow or bend to radical islamic terror. in manchester, we have seen hotels taking in survivors. we've seen local residents offering beds to those who were stranded. we've seen taxicabs driving back and forth through the night offering free rides to bring people to safety. as we speak, people on social media are reaching out to connect families with their loved ones. terror is a threat that we all

face together. and with our might, and with our humanity too. in that spirit i want to express so dieter of the whole house of representatives to prime minister may and her government. we stand ready to help in any way we can. because freedom, compassion and peace will always prevail over violence and hate. stuart: that was speaker paul ryan there. we joined him right at the top of his weekly news conference. as you heard he used the expression, radical islamic terror. so across the board of america's government that expression is now in use. by the way president trump who has been in the middle east, he left this morning, he has been talking about islamic terror, and he called it this morning a wicked, repeat, a wicked ideology. that is just happened. we'll go back to paul ryan when he starts talking about the budget and answers questions

from reporters on the scene. quickly to your money we're getting latest numbers on new home sales. ashley: disappointing, coming in at annualized rate of 569,000. that is below what was expected at 610,000. it follows on the march numbers which blew the doors out. they were decade-high level. so we retreated a little bit with number of new homes being sold. stuart: still strong i would say. ashley: very hd to beat march. stuart: yes, it certainlwould. the markets not responding to the terror effect whatsoever. the dow industrials up 13 points. look at that we're above 20,907. i have got to point this out to you because it is very important. amazon and alphabet are both at record highs. both of them at $971 per share. both of them, $38 and change away from $1000 per share. the performance of those two stocks has been simply astonishing over the past couple years.

look at that, all-time highs for both of them right now. and now this. president trump says the palestinian people are ready to reach a deal with israel for peace. listen to this. >> i had a meeting this morning with president abbas and can tell you that the palestinians are ready to reach for peace. i know you have heard it before. i am telling you, that is what i do, they are ready to reach for peace. and in my meeting with my very good friend benjamin, i can tell you also that he is reaching for peace. he wants peace. stuart: joining us now is robert charles, former assistant secretary of state to colin powell. robert, welcome back to the program. very poignant moment i think. there was a meeting this morning, a joint press conference this morning, between president trump and mahmoud abbas who leads the palestinian

authority. mahmoud abbas is paying relatives of dead jihadists as rewarded for their terror. now the president of the united states confronts that. what do you make of all this? >> well i think the manchester event quite frankly puts a lot of this in perspective. it punctuates the president's message on this trip, evil, the balef good and evil crosscut religious lines, muslim, jewish, christian, doesn't really matter. that event puts in stark contrast the evil that we're confronting in islamic terrorism. when you're killing children that is pretty graphic. i'm reminded, frankly of just this morning of win ton churchhill and his statement that victory is never final and defeat is never fatal. it is courage to continue that matters. i think president trump has done an extraordinary job on this triple straighting this to a battle against the evil we all confront. stuart: extraordinary trip, that's for sure. i have to ask this question.

this is on the minds of throughout the western world. at what point does public opinion, public policy change in the face of this kind of attack we saw yesterday in manchester? at what point does a democracy defend itself by preemptive attack. >> you have to abide civil rights. that is a straightforward starting point but i do think we have to be much more vigilant. the president is telegraphing very clearly we are in one fight, we are together in this fight. using the word evil, incidentally it was inflection point when ronald reagan used the world evil, evil empire and communist soviet union. it made them review what we had in common, common cause. whether you're talking about great britain or anywhere in the middle east, he laid it bare, he said very clearly the last

several days this is combat against evil, delegitimatizes even within those terrorist institutions, it delegitimatiz whatever the internal thinking is. that is exactly wh reagan did. he delegitimatized the soviet union internally. very powerful inflection point i think. stuart: moments ago the director of national intelligence had a pretty grim assessment of the terror threat. robert, listen to this please. >> i just returned from london a couple days ago and met with all of my intelligence community colleagues there. we spent a significant amount of time discussing threats to our respective homelands and this tragic situation that we see all too much of happening in countries around the world, particularly our allies, so once again remind us that the, this threat is real. it is not going away. and needs significant attention.

stuart: robert, your comment on that, please? >> i think it's a straightforward statement of fact. we have a common fight against the evil that is currently taking the form of terrorism, and nothing is particularly different from where it was yesterday. but, i also would note, and a little off topic, what the president is doing, if you carefully distill his messaging on this trip, he is really laying out what amounts to a trump doctrine. it's a relentless engagement on this issue as a primary issue but on other issues. you can see the pillars now sort of emerging of a coherent strategy, one that probably has three or four pillars. among those the use of kinetic force when necessary. the interchange between and exchange of economic benefit for security advantage. a little bit of chess in all this i credit mattis and mcmaster and others beuse is is really doing credible things. stuart: we hear it. robert charles, thanks for joining us sir, appreciate it. >> yes, sir. stuart: staying on the terror

attack in manchester, the police there say this, with regards to last night's incident at the manchester arena, we have confirmed, we have arrested a 23-year-old man in south manchester, connected to the attack. mike baker joins us now, former cia covert operations officer. mike, i'm hearing that maybe some new kind of explosive was used? can you give me details on this? >> no, unfather natalie in that regard i don't have insight into the device and composition of the explosive materials. there is not a lot new under the sun and you know, it may have been fueled expediency where the bomb was made. they may have had to go with a different composition just because of what was available, what they could actually get their hands on. that would be speculation on my part. stuart: now you're a guy who was in the cia you're the sharpened of our military. do you think we should start

using, not people like but more aggressive, physical approach to terror, preemptively attacking them before they attack us? it is a question of how does democracy want to cope with this, continuing defense or start offense? what do you favor? >> well i would argue that i mean, we are on the offensive. just, we don't see it. people don't see what goes on off the radar screen. so i understand what you're saying. that is a natural reaction to something as horrific as this but i would say that we are to the degree possible out there targeting and trying to take down whether we can pick them up or terminate them, you know, as many operatives as we can. but -- stuart: is this why, it seems to me there are fewer, certainly mass attacks in the united states, fewer here than there are in europe. why would that be? >> well, in part because, again all of this work that goes

around 24/7 that people don't see and it is no happy coincidence. i'm really actually very glad you bring this up because it is not a happy circumstance or coincidence that we haven't had that range of attacks here on the homeland. it is due to a great deal of hard work by the local, state, federal authority, intel community and others. either that community doesn't sit around and boast every time they disrupt or prevent something from happening. what happens is, you do get an incident that comes through. people say, what are they doing? come on, get busy. but the truth of the matter is there is a tremendous amount of work. people don't sleep, so other people can go home, go to bed at night and get up in the morning and don't have to worry. one thing, i heard you talking about the mass gathering up of people. uart: yes. >> yeah, i mean normally, stuart, you know this, i'm constantly praising your insight and your analytical clarity but

i think on this one you're off base. operational perspective. stuart: hold on. no i'm not in favor of a mass round-up, i'm not. >> okay. stuart: flat-out i'm not. >> okay. stuart: however, the brits are overwhelmed with 3500 suspects. and that is a very difficult thing to deal with. you can't surveil them 24/7. >> no. stuart: i was expecting maybe theresa may said we'll take the top 100 suspects, bring them in. that is what i was suggesting. >> i see now, okay. i take back what i was saying. i was about to be very insulting. no, the point of the matter is from operational perspective that doesn't work. stuart: okay. >> you're right, they are stretched thin, just like we are here in the united states. stuart: mike baker, i'm sorry i have to leave you. i have to bring in speaker ryan answering questions. >> we have a question who is willing to balance the budget. the last president never proposed let alone tried to balance the budget. we have a president giving us an actual balanced budget plan.

it is a plan to boost economic growth. clearly congress will take that budget and work on our own budget which is the case every single year, but at least we now have common objectives. grow the economy, balance the budget. so we are now on that common ground. we will have a great debate about the details and how to achieve those goals. >> given abundance of caution -- [inaudible] the senate really needs to get to work on a lot of specifics until the cbo score. what was the rationale for voting -- >> well, first of all we want to work on our schedule, and not on schedule like some other body like cbo sometimes the cbo can take a long time. the legislative schedule is important to us to make sure we hit our benchmarks and timelines and we have done that we have every reason to believe we will hit our mark. it has to say $2 billion. the last score was $150 billion. the last amendment was an 8 billion-dollar amendment.

we want to have abundance of caution. cbo scores have been unpredictable in the past. we want to do the our is and cross our ts so when we send a bill to the senate. to make sure it is not fatal. >> last question. >> [inaudible] >> i'm not going to give you any of it right now. >> how concerned are you something like manchester could happen in -- [inaudible] >> yeah. you know, i won't go into the screening procedures of events like this. i went to all my concerts growing up at the coliseum in madison. like our kids do that now. i can't get the picture of this 8-year-old girl out of my head we saw this morning who last, the 23rd victim. this is heinous. we have to be in solidarity with our friends in england. it shows how we have to be ever

vigilant ourselves with homeland security to make sure something like that can't happen again to do everything we can to prevent that from happening. this is why i'm pleased the president is overseas going on offense against isis. fight them over there instead of over here. we need a comprehensive strategy to go on offense against isis. the president is doing a great job getting our sunni-arab allies in the gulf to he us do just tha one more. >> mr. speaker, the president's budget to rebalance through economic predictions for -- somy overoptimistic. are you confident that those projections are realistic? >> i haven't seen the details. i don't want to get ahead of mulvaney. he actually hasn't unveiled it yet. probably an hour or two. i haven't seen all the details but i would say this. clearly, getting to regulatory reform and tax reform will help us grow this economy. we never hit 3% growth in the

last presidency at all since this recession. so if we can get to faster economic growth that will help some of our problems. the problem for us as americans is, we have embraced slow growth strategies over the last eight years and now we have an administration and a congress committed to pro-growth strategies that will get this economy growing again. whether or not we hit those numbers or not, i don't know the answer because i haven't seen all the numbers but i would expect omb will put their projections what they think the economy will reach inside of their budget. that is the whole purpose of budgeting. that is the whole purpose of having pro-growth tax reform, pro-growth regulatory reform and all the rest. thank you very much. appreciate it. stuart: that is speaker of the house paul ryan. holed as weekly news conference. normally the news conference is about tax reform or other measures heading through the house of representatives. today it was very much dominated by yesterday's terror attack in manchester, england.

katie pavlich with us, "town hall" editor and fox news contributor. i'm right in saying the terror attack and the president's trip to the middle east cplety overshadowed any comments about the budget mr. ryan went on to say he really approves president trump going after isis. what do you think of this? >> obviously the focus is on president trump's overseas trip. he is still enroute going to rome to meet with the pope to talk about issues of human trafficking. i'm sure the issue of terrorism will also come up. but domestically the president introduced his budget. he is getting a lot of criticism from the left and democrats using their old scare tactic of taking food away from children, taking food off the tables of the poor when really he is reevaluating the fact that food stamps have exploded over the course of the obama administration. they're looking at some minor entitlement reforms. they're not touching medicare and social security. and, as paul ryan mentioned, this budget is set to balance in

2027, which is something we really haven't seen in very long time from a white house budget. stuart: however, i mean, all of that news is relevant, yes, certainly relevant to wall street and relevant to washington, d.c. but it is completely overshadowed by what happened in britain last night and what the president is saying in the middle east. once again, our president is controlling the news cycle. >> well, i think, you know, when there are bloody bodies in the streets and you have a suicide bomber attacking young girls and children and showing up in a place that is not supposed to be the middle east where suicide bombings regularly take place, it is obviously jarring, alarming, something that we've been trying to grapple with. you know, as you mentioned earlier in the show it is concert season and our parents now are going to reassess whether they want to be standing in large crowds, whether baball ge, cds. so ts certaly something

that is terrorizing which obviously is the goal. it is scary. the budget does take a back seat because it is not as scary as having you know, your children hurt or killed at a concert. stuart: that is very true. katie, thank you very much indeed. i'm just going to read a news item which is germane to what you just said. madison square garden right here, new york city, boosting security. ashley: yeah. stuart: i take it because of last night. ashley: of course it is. across the country. this a statement from msg saying, "madison square garden has increased security measures including greater police presence and is continuing to work closely with local law enforcement to make sure we remained informed of any special concerns." stuart: you can understand. ashley: of course. stuart: when this awful event occurs overseas, young children targeted, a stadium full pop fans -- ashley: cynical way it was done. did this individual go into the concert?

he hung out in the lobby outside, waited for the concert to end, a whole new level. stuart: madison square garden responding this morning. >> exactly. stuart: the big board shows, 16, 17-point gain. this is not a market affected by the terror attack in manchester last flight. 20,911 is where we are.

stuart: homeland security has begun extreme vetting of refugees now held in detention centers off the coast of australia. ashley: this was a deal, refugee swap if you like. the president trump had once called a dumb deal. now they have begun doing interviews of these refugees sitting on this island off of papua, new guinea.

six-hour interviews with in depth questions on associates, family, friends, any interactions with the islamic state. this is loaning drawn you out process. they have gone through about 70 asylum seekers. they will know whether they have been approved or not. as part of the swap, if you like, the deal, australia agreed to take central american refugees from costa rica. so the ereme vetting is underway. strt: it is indeed. i have another story for you. let me briefly outline it. concealed carry permits are now at all-time high. explain. ashley: 15.7 million. now that has gone up 1.2 million since july of last year. where? in states like arizona, florida, michigan and texas. why? this is interesting. a rise in women and minorities purchasing handguns. the rate of women buying concealed permits for handguns is double that for men. stuart: i looked at that map. all across the board all in red, concealed carry is legit. ashley: it is.

stuart: now, time to please look at this. 18-year-old georgina calendar, the lady in glasses there. this is two-year-old picture, next to ariana grande on the right of your screen. the picture taken two years ago. the young lady on left, she was one of the victims of the terror attack last night. the terrorists trying to change the way we live. brian kilmeade joins us on that subject next.

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stuart: coming back a little. we were actually slightly down now we're up 32 points. look at the level please, 20,927. i don't know how high we are

away from all-time record high. ashley: you can see it from here. stuart: got it. check the share price of autozone please, because it is way down $55 lower. they came out and said they had a problem because tax refunds were slow in coming. then they also said, they have got cost problems with opening new distribution centers. any way you slice it, autozone is way, way down, $55 a share. look at this. president trump releases details of his budget for the fiscal year 2018. big cuts in programs, social programs, over the next 10 years. $1.74 trillion, taken out of medicaid and food stamps spending and other social programs in the next 10 years. increases though for military and border security. $56 billion extra, 2018. joining us now, mark serrano, former deputy campaign director for george h.w. bush. mark, good to see you, sir.

>> good morning, sir. stuart: this budget doesn't have a prayer. what say you? >> i say if adopted this blueprint for a budget would usher in a new era of the conservatism, fiscal conservatism. when was last time you heard someone talking about balancing the budget within 10 years, starting to take down the national debt, by as much as 20% within 10 years from now? that is what this blueprt says t relies on conservative principles. it is replaces dependency with dignity. it provides job training f adopted, it would, you know, provide some pride to people who have been relying on the government for too long. stuart: i'm with you, i'm with you. i like the way it is going but the officers question to speaker ryan a few moments ago, was, is this budget dead on arrival? his answer of course was no. obviously said no, it is not did he on arrival but you get the point. >> yeah. stuart: conventional wisdom is, you can not slash or reduce

spending socially, boost the military and give whopping great big tax breaks primarily for wealthier people. conventional wisdom is you can't do that. i think you would agree with that. you are not getting it through congress, are you? >> this comes from a president who doesn't believe in conventional wisdom for starters. we understand it is the job of congress to pass budgets and appropriate dollars. stuart: yes. >> look at recent history where ronald reagan's tax cut led to 7.8% in gdp growth. so it is it is possible. we need courage in the republican leadership in congress to take a look at these things. and, you're astutely pointed out by your colleague neil cavuto yesterday, medicaid is not overall a cut. it is decrse in the planned increases in spending. stuart: it is a way get it under control. it has to be brought under control, all well and good. but given the balance of power in congress, although it favors republicans, republicans need every single vote in the house

and in the senate to get anything like this passed. so again, i return to the theme, very positive, i understand that. thatthat is a good thing. you know, you will not get all of this, are you? >> that may be the case, stuart. i will concede that to you, we're not going to get all of this but it provides a great blueprint. i think the republicans have got to take a look at this. we have to increase defense spending. clearly after eight years of defense spending gutted by president obama, president obama called in his 2017 budget plan called for over 10 years, $3 trillion in tax increases. so let's focus first on getting tax reform done and health care. then let's take a look at this budget. i think we can get most of it in place, sets us on a very good course, to take care of most needy in the country, to get our budget deficits under control in 10 years. i think we can do it. we need republicans to show strength and courage, what it needs and requires. stuart: we need republicans to

act like a governing party to show unity. you're laughing but you know i'm right. >> amen. i agree. stuart: we'll go with that one. mark, you're all right. we'll see you again soon. >> appreciate it. stuart: now, disney world's "avatar"-themed attraction it opens this week. i willsk ashy to givme details. there is one detail i want t get to right from the get-go. ashley: okay. stuart: it cost $500 million for an attraction at a theme park. ashley: based on a movie that came out eight years ago. they're rolling the dice on this one, belief of that the "avatar" fans. it is 12-acres and they take you on a bio loom necessary sense and fly on back of mountain banshee. stuart: how long is the line? ashley: we shall see based on other attractions at disney could be a while. stuart: how much does it cost to buy special passes.

ashley: hadn't even told you it is that expensive. stuart: how much cost for one day? ashley: theme here, stu. it is going to cost a lot of money. all i'm going to tell you. this is a big risk for disney but they believe an eight-year-old movie will bring people into this theme park. we shall see. charles: another one for you. right up your street. ashley: yes. stuart: viacom in talks to create a sports-free tv bundle. ashley: i'm a sports nut. that doesn't make sense to me but, viacom says it is in advanced talks to be part of a sports-free tv package, priced between 10 and 20 bucks a month, completely free of sports. espn is incrediblyxpensive. works out just above $6 per subscribe are just to have espn in that package. stuart: do you think it is a success? ashley: i think there are people out there maybe are not sports fans would like something like this, not have to pay a lot of extra money for the sports programing they're never going

to watch. millenials, for instance, who never even had cable before might be interested in this. stuart: that is interesting point, fair point indeed. thank you very much, ash, good stuff, appreciate it. ashley: sure. stuart: the first victim of the suicide bombing in manchester last night has been revealed. it is that young lady there. i believe she is 18-year-old george gina calendar. brian kilmeade joins us from the radio. i get the impression they want us to change where way we live and i expect they have some success. what say you. >> we have had to sit sidecar, watch carnage and get information far too many times especially overseas. think about it. we had six major attacks over in europe from stockholm to france. now we're back over in britain for two strikes in the last i guess eight, 10 weeks. so right now we're looking at a 23-year-old pop star.

they don't like that. they look at young kids having a good time watching that star, idol worship, they don't like that. out with their families. they don't like the western family. what they do to get maximum carnage they wait for the concert to end, create chaos that cses injuries and stress, creating death and destruction. we find out as i'm leaving television, "fox & friends," we find out one of the victims is just eight years old. sadly far too many, the eyewitnesses are between, mostly between eight and 16. stuart: now, brian, we in america are reacting in the typical traditional way. madison square garden, for example, has just upped its security. it is a concert venue. the concert series of the summer is about to begin. so they take this defensive mode. i've been asking all morning, why is it that the brits, especially the brits, they don't have a written constitution, why don't they take a more preemptive attack line against

the 3500 known sympathizers and activists who are out there in britain at this point? i'm asking, when are we going to take a preemptive attack mode against our enemies as opposed to end lis defense? >> well, it is because we're afraid, hey, i'm going to school, i'm a student, i'm innocent, what do you mean i'm going to jail because i'm muslim? they're afraid being labeled anti-muslim, anti-islamic. sweep through a neighborhood, gets someone caught in the net nothing to do with terror. sadly we get to the point we'll not the have a choice. ask the people run over in nice, france because they wanted to go to the beach. ask a woman killed whi holding her daughter's hand. may have bn fatality fighting for their lives in a hospital of the answer we'll have to be more aggressive. the good news, stuart, we're being more aggressive in yemen where al qaeda is beginning to take root again. we're extremely aggressive in

mosul, our special operations are leading and supporting where isis is still fighting. we're being much more aggressive in raqqa, turks, fighting with the kurds much to the chagrin of the turks. sincere aid, my fingers are crossed, i'm very savvy about this, in saudi arabia realize their future is threatened if they don't get on top of this. i will add to this, 3500 in britain are suspected terrorists? okay. how about 400 coming back from syria suspected? stuart: yeah. >> those are ones should get extra attention. i can't wait to find out if this guy was on anybody's radar before he blew himself up. stuart: how about 18,000 terror suspects in tiny belgium. how about that? brian, you're pressed for time. thank you very much for your time being with us on "varney & company." we'll see you again soon. >> go get them, stuart. stuart: will do. 21 points higher for the dow jones industrial average despite what you see on the left-hand side of your screen. you will see a lot of these

videos. these are people stampeding out of the stadium right after a pop concert, right after a suicide bomber blew himself up right outside of the stadium, shredding human lives. we'll be right back.

♪ ashley: ash national security analyst ryan mauro says

terrorists are taking out a terror strategy. roll tape. >> it causes economic damage but there is also a strategic plan they have that publish very few people talk about. called the extinction of the gray zone. what this is, the idea is to carry out horrible attacks, most provocative attacks possible in europe, in hopes, random people, than attack innocent muslims. they published this, what will happen the gray zone are the muslims not on the side of isis but not quite on the side of the west either. they believe in anti-muslim backlash will enable them to have a new wave of recruits.

stuart: fabulous five are doing well mostly. amazon which had been at a new all-time high. microsoft up. alphabet up again. apple down nine cents at 153.90. the fab five are doing oak. now this. president trump during fairwell speech in israel demand that the world drive out radical islamic terrorists. listen to this. >> we must drive out the terrorists and extremists from our midst. obliterate this evil ideology and protect and defend our

citizens and people of the world. all sieve liesed nations -- civilized nations must be united in this effort. stuart: sebastian gorka, trump's deputy assistant on the security matters, he says dates matter to terrorists. here is his quote. manchester happens on forth anniversary of murder of fusilier lee rigby. dates matter to islamic terrorists. he was hacked to death on the streets of london by islamic terrorist. joining us now walid phares. i was intrigued by our president's evil losers, in particular the word losers. that was deliberate on his farther. what do you think he was trying to do? >> he was trying to send a message to the world and also arab and muslim world, the path of active jihadism, violent jihadism will lead them nowhere. will lead jihadists everywhere

except they want to establish a caliphate. this should be followed by another call to bring down isis caliphate on the ground in syria, iraq, libya and be more forceful in europe against these cells or individuals. stuart: that is the almost the intellectual side of it. undermining, whatever the terrorists themselves. what about the other side of the coin? i suspect that the president wants a more muscular approach to terror force, kinetic response, if you like? >> he does, he does. look in his address which in my view is historic to 50 leaders of the arab and muslim countries in reyou-yard, what he has done is create the vastest, largest alliance. it includes 50 to 55 maybe of these count hetries. he will go to nato soon. he will be also putting together western and arab alliance and go after them. that is, again, on paper. what needs to be done on the ground is to end and finish isis in those three countries in the region.

stuart: that is a starting point, is it? go after them over there? that is the start? >> absolutely. look we have begun an operation in syria then we stopped. we need to finish the operation, he needs, the united states needs the arabs to help us from the south. that is the reason for why declared a formation of army of 23, 24,000 troops or 34,000 troops. so these are practical effects of that conference. but after finishing isis in the region this, is not going to end the conflict. we have another army of isis which is now manifest activity in europe and partially also in the united states. that is our next problem. stuart: what should we do about them? we know, i think we know some of who they are, and they're here, what should we do? >> well it is like tip of the iceberg. those whom we know or those who have been traveling, making statements, on list of agencies on both sides of the atlantic. those we don't know are the radicalized. we need to engage in war of ideas.

first thing you do in war of ideas, determine what is that ideology. because your allies won't know how to detect it. the other side won't know if they are detected. we need to be very forceful making sure our allies in europe, will happen probably in brussels and nato, needs to start naming this ideology. stuart: is there, do you think there is likely more of this certainly in europe, on the cards, likely? >> rationally speaking, we know that there are large networks of jihadists. i would move one inch in saying they are already, they have already planned to do similar things. if you take the map, historical map over the past month or couple of years, you will see that every time we had an attack we ask the same question, will this be the last attack? of course not. because the jihadists are still planning. they have a standing order by isis. then they have individuals, should they be dispersed as lone wolves or pack of wolves, don't matter, yes we will see more attacks unfortunately.

stuart: i wonder what point the public responds with communal violence? i'm wondering if we're close to that point? your comment on that, sir? >> this is one of the goals of the jihadists, believe it or not. i saw what our friend ryan mentioned on tv. i included it in my book, future jihad, 2005. one of the major goals for 9/11, for everything that followed in europe they want see civil societies respond. they want to break down the legal system. by responding with violence we will go into and urban clash, that would give them more strength in recruitment. so the people of these community, if they are targeted by violence which would be terrible, the jihadists will be the ones who will win. stuart: walid phares, as always, thank you, sir. >> thank you. stuart: moments ago former cia director john brennan told house lawmakers he is not aware of any efforts by president trump to push back against probes into russia's meddling in the election last year. listen to this.

>> are you aware of any efforts the president has made to enlist the support of intelligence community personnel to push back on a narrative involving the collusion issue that mr. rooney was asking about. >> i am unaware of it. stuart: doesn't that contradict earlier reports that the president did indeed say back off? ashley: yeah, but you know what? i'm getting sick of it. he said/she said. every day, one person says this, one person says that i think majority of this country are glazed over. they don't care. stuart: unnamed sources, "new york times," "washington post." there is brennan, the man himself saying he didn't push back. all right. the dow industrials moving nicely higher, thank you very much. we're up 35 points now. mulvaney, budget director and budget coming up in our next hour. all right we are about. your insurance company

won't replace the full value of your totaled new car. the guy says you picked the wrong insurance plan. no, i picked the wrong insurance company. with liberty mutual new car replacement™, you won't have to worry about replacing your car because you'll get the full value back including depreciation. swit and you could save $509 on auto insurance. call for a free quote today. liberty stands with you™. liberty mutual insurance. ashley: manchester, england, hit with a terror attack. stuart asked fox news contributor nigel farage about it. roll tape. stuart: i often thought brits must be pretty much to the boiling point with atrocities like this going on. how close are they to a social explosion? >> well, actually, we haven't had many of these attacks.

most of the attacks taken place in france. there have been 21 separate attacks since 2015 in france. many more problems in belgium. we have not had many. now this one is particular shock. i think it marks a new low because it is an outright attack on children. so i think the country is very shocked by this. i think what people want is action. you know, yes, we expect our leaders to express their condolences for the dead, the injured, for the families. i think the time has come for us to reasonably ask, what is our government actually going to do? because you see a lot of this problem that we talk about immigration, we talk about people coming in without being security checked but a lot of this problem is homegrown. the guy that drove over west minister bridge killing people a few weeks ago was, radicalized in a british prison. it is happening in british prisons. it is happening in british

schools. and i don't think it is -- i think it is right and fair to demand our government tell us exactly how they will stop it. stuart: the daily telegraph, a british newspaper today, reports there are 3500 active terror suspects in britain. i was expecting, i have thought that prime minister theresa may might suggest that some of them a few hundred might be brought in for questioning, a kind of a mass round-up. are the brits close to that? >> well theresa may certainly ist. she is our prime minister, but remember, she was our home secretary. she was in charge of this stuff for six years before becoming prime minister. under her, we did virtually nothing to deal with this problem. so i don't see mass round-ups happening in this country.

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stuart: we're about to hear details on how our government

will spend our money. in a nutshell, it's this: slow downen spending increases for social programs, spend more on the military and tax less. all of that is highly contentious. it will general rate intense political debate. it is important, and it's happening over here. over there the important story is terror. you can be sure that story has implications over here as well. in manchester, england, terror targeted children. a man detonated a bomb just as youngsters emerged from a pop concert. he used nails to make the bomb knowing the shrapnel would tear young bodies apart. parents will surely be concerned about their children in crowds this summer. it is appalling. meanwhile, our president is in israel -- he just left -- laying down a new approach to the whole region. this morning he repeated a very important point. iran, he said, would never have

nuclear weapons. three extraordinary developments, and we're following it all. the third hour of "varney & company" is about to begin. ♪ ♪ >> oh my god. [bleep] what's going on? oh, my god! >> the terrorists and extremists and those who give them aid and comfort must be driven out from our society forever. stuart: president trump there speaking about the terror attack. the attack occurred at an arianna grand day concert in manchester, england last night. the latest, please. >> yeah, among the 22 dead,

children. we've gotten the identity of an 8-year-old girl, an 18-year-old girl, a dozen of those under the age of 16, some with life-threatening injuries. they're doing everything they can to save them. they know the identity of the bomber, according to government officials. they're not releasing his identity, but they believe they know who he is. they've arrested a 23-year-old man in connection with the i tack, and raids are ongoing -- attack. armed police going into several areas of manchester. there was word earlier of a controlled explosion at one of those locations. this was an attack that isis has claimed responsibility for. it was the softest of soft attacks, it was set in the lobby of this arena in manchester as mainly young girls with the arianna gran a day concert were coming out, set off the bomb. homemade device, we believe. how did this happen, is it part of a bigger terror network, and

they're on it. stuart: thanks, ash. i'm sure a lot of our viewers started to tune in today to see what impact this terror attack may have on our financial markets. the answer is no impact. the dow industrials not shocken by the terror attack this britain. in fact, we're now up 38 points, 20,932. we're up this morning. peter kiean, former goldman sachs guy, with us this morning. a lot of people want to know why was their no impact after a dreadful attack like this? >> i'm sorry to say the softer the target, the less the impact. it seems to be only when economic kind of targets are involved, does the market really react. the thing that's most striking to he is how a lot of -- to me is how a lot of the action is on the perimeter of security, whether it's the airports this brussels or in paris. once you're outside security, that's where they're choosing to strike. stuart: it was targeting children quite deliberately -- >> a nail bomb, which i think is

particularly disgraceful. stuart: it sure is. we're waiting for details from budget director mick mulvaney, some details on the president's budget proposal coming up. peter, in broad terms we know that the proposal is to spend less going forward on medicaid and social programs, spend more on the military and tax a whole lot less. the objective being to balance the budget in ten years. your response. >> i think that's an awfully difficult math problem. the one thing i would say is people should remember that congress is the one that passes a budget. this is a statement of intent and direction by the president, where we would like to go. all these people say it's dead on arrival. it's not meant to be alive, it's meant to be the beginning of a long discussion with congress, because they're the ones who actually make the budget. stuart: it will be an intense discussion, that's for sure. >> there's no doubt about it. if you look at, for instance, snap, which is something i watch very closely. we spent $20 billion on food stamps in the year 2000. by 2012 it had gone to $83

billion. and so we've seen a massive growth, and when people say he's slashinghat, they have to put it in contt. that's after almost a quadrupling. stuart: medicaid too, vast expansion in spending is simply reining it this a little. it's not necessarily cutting it. there's a huge difference. >> people always find things to say and complain about in these kinds of budget proposals, but the fact is congress is going to approve it, not the president. stuart: got it. president trump meeting with palestinian president mahmoud has been bass earlier this morning. he's renewing efforts to bring peace to the middle east. our next guest is not very hopeful, the founder of the simon wiesenthal center. president trump was pretty strong in attacking islamic terror and the ideology of terror and pretty strong with the palestinian authority leader. why are you not hopeful for some kind of movement towards a more

peaceful relationship? >> well, first, let he -- let me say that president trump was outstanding, a much more powerful speech than president obama's speech in chi row. he told the -- in cairo. he told the arab leaders the truth. now look, it could be that the majority of muslims oppose terrorism, but the simple fact is that the overwhelming majority of terrorist attacks around the world are committed by muslims. it's your issue. and he said, drive them out. drive them out of your mosques, drive them out of your community. very important message. why am i not -- stuart: i'm sorry, i'm jumping in too early, i know i am, but why are you not hopeful? if that's a forceful message delivered forcefully by our president, why areou not hopeful for some kind of positive response from the other side? >> because mahmoud abbas is not powerful enough to deliver. there are two palestinian

entities, one in gaza, one in ramallah. the one in gaza is hamas, a terrorist organization committed to israel's destruction. the only way you're going to have peace, the mahmoud abbas says i'm the president of all the palestinians, tomorrow i'm visiting gaza, they won't let him in. and the world sits by and does nothing. the only real solution is the removal of hamas fromç gaza. when you remove hamas from gaza, both sides -- the israelis and the palestinians -- will be able to make a deal. but i think that i give president trump all the credit because he said the right thing in israel, his support for israel. but i think the tasks is very difficult -- the task is very difficult because nobody wants to say the magic words, remove hamas from gaza. stuart: how about another aspect of what the president was talking about? he looked at mahmoud abbas and

said, look, you are rewarding the families of dead jihadis. that is the law of the palestinian authority. knock it off. unithat's going to -- you think that's going to happen? >> that's the only way that israel will agree to talk to the palestinians. if they continue to pay, you know, handsome sums to the families of terrorism, i mean, they're just continuing the attacks that, the horrific attack that we saw today in manchester. stuart: do you favor a more forceful approach in europe and america? at the moment, it seems we're slightly defensive, waiting for something to happen, trying to stop something from happening. would you favor a change, a more forceful, proactive approach to known terror suspects? >> i think we need more political leaders like winston churchill and less political leaders like neville chamberlain. and we have too many

chamberlains. you know that -- look at north korea. we wasted eight or nine years. what if we got tough with north korea eight years ago we wouldn't be where we are today. stuart: okay. rabbi marvin, thanks for appearing on our program again, sir. you're welcome back anytime. thank you, indeed, rabbi. >> thank you. stuart: now this. the d. of homeland security says nearly 740,000 foreign ors overstayed their visas last year. that's about 200,000 more than the year before. many of the people staying are students from countries like china, saudi arabia and south korea. a visa problem, clearly. any moment now white house budget director mick mulvaney faces the white house press corps on the budget. maybe some fireworks. you'll certainly see it when it happens. and next we're joined by the man on your screen, big day to make a guy -- to have a guy like him here. watch this.

>> we stand in absolute solidarity with the people of the united kingdom. so many young, beautiful, innocent be people living -- innocent people living and enjoying their lives murdered by evil losers.

stuart: if you've been watching, you'll know that is mick mulvaney. he's about to outline the president's budget and take questions are the press corps. we will listen in. >> talk briefly about what happened in manchester, england.

the president this morning summed it up emotionally for a lot of us who just called these people who perpetrated this, one person or maybe more, evil losers. the president has, i think barron's 11 or 12. i took my son to his first concert when he was 11 or 12, and i think all of us that have children that age, take them to concerts, this hits especially close to home. we stand shoulder to shoulder with our friends and allies in the u.k. and also have the victims and families in our hearts as we talk about these other things that somehow pale in comparison. with that, let's talk about the budget. and i know some of you were here yesterday, and i'll -- some of what i say at the opening will be a repeat, but a lot of folks were not here. let's talk about what this is. this is the president's fy-2018 budget. the name on the cover is the new foundation for american greatness.

okay? as i read through it over the weekend, as i did, in fact, we've been working on this since before i actually got here, it struck me that the title should have been different, that the title should have been a taxpayer-first budge, because that's what this is. and as i was trying to reconcile those two things, it's called the new foundation for american greatness, but i wanted to call it the taxpayer-first budget, it struck me that was one of the things that was new about this budget. that we looked at this budget through the eyes of the people who are actually paying th bills. i think for years and years we've simply looked at a budget in terms of the folks who are b, the recipients of the taxpayer money, and we haven't spent nearly enough time focusing our attention on the people who pay the taxes. i've got a couple questions yesterday, i know i will today about compassion. compassion needs to be on both sides of that equation. yes, you have to have compassion for folks receiving the federal funds, but also for the folks who are paying it.

and that is one of things that is new about this president's budget. what else is new? it's new in that it balances for the first time in at least ten years. the last time we looked, we couldn't find a president obama budget that balanced ever. i think he tried a couple times to convince us that primary balance, balance without regard for interest payments on the debt, was balance. we reject that. we get to an actual balance in this budget within the ten-year window. it begins to reduce the size of the debt relative to the size of the economy in year one. okay? that's, that's how important it was and is to this president to try and bring some fiscal discipline. again, if you're looking through the perspective of the people who pay, you'd like to be able to tell them at some point in the foreseeable future you're going to be able to balance. previous administration completely gave up on that. as i've said before to the previous administration, if you borrow money -- or if i take

money from you and i have no intention of ever giving it back, that is not debt. that is theft. and if we're going to borrow money from people, we have to have a plan for how we are going to pay it back. and that's what this budget does, and that's one of the things that is new about this budget. the next word in the title is "foundation." what is the foundation that we're trying to build here. and i sum it upç this way. again, i saw an article a couple weeks ago about what is trumponomics. what is it. it's sustained, 3% economic growth. everything that we do in this administration, every single time i am called into the oval office whether it's on immigration policy, health care policy, tax reform policy, trade policy, budgets and spending, the focus be is standed 3% economic growth. we have been attacked, stunningly, by some folks on the left and even in the mainstream who say that's an unreasonable

assumption. stop and think how absurd that is to think that 3% growth in an american economy is, to some people, an absurd assumption. it used to be normal. ten years ago it was normal. in fact, it's been normal for the history of the country. the 240-odd years that we've been a country, it's been over 3%, certainly since world war ii. the 1.9% growth rate that is the previous administration -- rates that the previous administration assumed towards the end of their administration and the 1% further entire ten-year window that the cbo growth rates, that the cbo assumes, the congressional budget office assumes, we simply reject. that is a pessimistic look at what the potential for this country and for what this country's people is. we reject that pessimism and say, you know what? we probably should have gone in and assumed 3.5 or 4% growth, because that would be aggressive. 3% growth is just getting back to normal.

i've said it before, i say it again if you are 30 years old nd you're watching this, you have never had a job as an adult in a healthy american economy. it's either been a recession or a slow, sluggish economy stumbling along at less than 2% growth. the difference doesn't sound like much, in fact, i cringe when i hear people say it's only a 1% difference. it's not, it's a 50% difference, but that's just math. the difference in that is tangible. at 3% economic growth in a healthy american economy, if you don't like your job, you can quit because you know you can go get another job. if you get laid off, you can start your own business. these are the opportunities that people have forgotten about, and these are the things, the opt mitt romney in the country, the dine -- optimism in the country, the dynamism that the president is eager to bring back to the country. it's what drives every one of our policies especially when it comes to anything dealing with jobs and the economy. we will bring back 3% economic growth to this country x those

numbers are assumed in this budget. by the way, if you don't, the budget will never balance. if you assume 1.9% growth, my guess is you'll never see a balanced budget again. so we refuse to accept that that's the new normal in this country. 3% is the old normal, 3% will be the new normal again under the trump administration, and that is part and parcel one of the foundations of this budget. along those same lines, the budget also speaks to and funds a lot of the president's priorities. we've talked about this since march when we unveiled, excuse me, when we unveiled the budget blueprint. national security, obviously, a priority for this president. border security, another priority for him. we can talk at length if you want to about the details of the additional money that we spend in those areas. e total plus-up again for the 2018 budget is $54 billion over the congressional budget office baseline. the law enforcement gets a

significant increase here, and that's both at the federal and the state and local level as we follow through on our efforts to enforce the law. veterans see more money here. that's a classic example of looking at the budget through the eyes of the taxpayer. i put myself in the role of the person who's actually taking the money from you as taxpayer and giving the money to someone else in terms of the benefit. and if i can look you in the eye and say, look, i need to take this money from you so i can help this injured vet, my guess is you're okay with that. i am a lot less comfortable, to the point of not wanting to say, look, i these to give this money to this person over here who isn't disabled but is getting a disabled benefit or this person over here who was supposed to use the money to go to school but isn't actually going, or a program that is supposed to encourage you to graduate from high school or college but is only 6%áejtt(ur+e. that's the type of compassion we talk about, and that's the type

of different perspective that we bring to the budget. and it's one of the things that i like to talk about when we talk about the veterans. people don't mind paying their taxes as long as they know that money is not being wasted and frit perked away. frittered away. we also increase spending for school choice and paid parental leave making this president the first president of either party to propose a nationwide paid parental leave program for parents and adopted parents. there's $20 billion in that over the course of the ten-year window. i think i gave an incorrect number yesterday at 25. national security, worder curity, paid -- border security, paid parental leaf, all campaign promises that the president made while he was running for office. that's why i say these numbers are simply the president's policies put onto paper. we took the president's speeches, we took his priorities, we turned them into numbers, and that's what's in the document. does not, along the same lines, not a single thing in here touches social security retirement or medicare.

why? because that's what the president said when he was campaigning, that he would not change those things. in fact, i've told the story several times of sitting in the president's office with a list of possible reforms to mandatory what some people call entitlement spending, and have the president at the end of list go yes, yes, no, no, no, no, and the nos were always social security retirement and medicare. didn't change those at all because he promised people that he wouldn't. we can do all that and balance at the same time because we look at spending differently. we're no longer going to measure coming a passion by the number of programs or the number of people on those programs, but by the number of people we help get off of those programs. we're not going to measure compassion by the amount of money that we spend, but by the number of people that we help. and that is how you can get 3% economic growth. that is how you can balance the budget in ten years. that is how you can borrow money from people still promising and intending to pay it back.

that is how you can help people take charge of their own lives again, and that is the part of the budget that deals with the american greatness. so with that, i'll take questions for a little bit. i know there's a couple. yes, ma'am. >> president trump's sticking to his campaign promise not to touch medicare or social security retirement benefits but not medicaid. so how does he intend t square that with his supporters? >> yeah. a couple things about medicaid, and this is one of my favorite stories to tell about washington spending. keeping this mind, and i know that y'all probably get this, but if you're watching this at home, in washington, d.c. if you spent $100 last year on something, okay, and we pend $100 on it this year on that same thing, in washington people call that a cut, okay? a hundred last year, hundred this year, y'all call it a cut. in fact, i've seen several occasions where we spent $100 last year and $102 this year, and many people will still call that a cut. because the budget is hard-wired

by the congressional budget office to go up every single year. and if the congressional budget office says we spent $100 last year and we're supposed to spend $106 this year, for a lot of people, anything less than 107 is a cut. i've heard 106 referred to as a freeze. a classic example of how washington speaks differently than the world back home. a couple things about medicaid, okay? there are no medicaid cuts in the terms of what ordinary human beings would refer to as a cut. we are not spending less money one year than we pent before. what we are doing is growing medicaid more slowly over the ten-year budget window than the congressional budget office says that we should or says that we will under current law. why do we change it? we change it -- we change those growth rates in medicaid spending because of the american health care act which this president does support. we said from the very beginning we support the house efforts, looking forward and are working right now with the senate working on what their health

care bill would look like, but we support the american health care act x tht does change medicaid. how doesit change it? and this is something that i don't think enough people are talking about. it makes it a lot better and a lot more able to deliver the necessary services to the people who need it. here's how. medicaid is funded in large part by the states. in fact, i was in the state legislature, and our second largest line item, i think, after k-12 education was medicaid. and we wgumd see this program come down from washington with all these instructions on how to use it and say, goodness gracious, this won't work this south carolina. we happen to think, for example, medicaid is designed for more of an urban poor population than a rural poor as predominates in south carolina. and we would ask them every single year, the federal government, give us more control over how this money gets spent. we think we can do it better. we can either provide the same services to the same number of people cheaper, or we can provide better service to more people at the same amount of money if you let us do it better. and the federal government

always said, no. in the american health care act, we say yes and we give the governors and state legislatures a lot more control over medicaid. everyone is interested this seeing the truly needy this their state and in our nation get the care we promised them in medicaid, be -- but there's a better way than current law, obama care, and that's what the american health care act does. in the back, yes, sir. >> director mull vain think, you mentioned the previous administration and stagnant growth and that the deficit has doubled -- [inaudible] but a member of that administration, larry summers, today actually went on the attack. i'm curious how you would respond to be his assessment of the budget? he called it simply ludicrous in that the administration is double counting the tax cut and the benefit from growth. >> i did get a chance to just see the piece that mr. summers wrote on the way out the door, and i couldn't -- the ideas were rush aring into my head what i might say if he was here. if he's hide anything the back, now would be a good time to come

out and identify himself. i went back and looked at some of the economic assumptions that the obama administration made in its first couple of years. and i want to say on a couple of different occasions their assumed growth rate was more than 4.5%. keep this mind this is the first administration in history, okay, it was the first decade, the first eight-year period in history not to have a 3% growth rate, yet they were promising us 4.5% growth. so if larry wants to talk about unreasonable assumptions, we talk about my 3% growth rate and his 4.5, and we'll talk about who actually is closer to reality. regarding the double counting, here's one of the things i think a lot of folks have overlooked. and be we did it on purpose because it's sort of hard to count this, and you don't want to make too many assumptions. you have to make assumptions about a budget. you're talking about a document that will look ten years into the future, so it's natural for both administrations from either party to make some assumptions. but one of the assumptions we didn't make is we didn'tlose

any of the tax gap. for those not familiar, it's the amountof money that we should collect in taxes every single year but don't. 2016 that number is $486 billion. almost enough to close the deficit that year. and we don't assume an additional penny of that being closed as part of our tax reform. why is that important? there's probably two reasons that -- well, three reasons people don't want to attacks. number one, they just don't pay tax, and there's always a certain number of people who don't want to do it. number two, it's too hard, too complicated for them to do it. two reasons. now i feel like i'm a monty python skit. two reasons -- >> [inaudible] >> exactly. that if there's two, if it's a simpler tax code, okay, that people are more likely to pay, that simply makes sense. if you can really fill out your tax reform, tax returns on a single piece of paper, you're much more likely to actually do it. it's also easier for us to see the you're paying the right amount. a simpler code is easier for you

to pay and easier for the government to see if you're paying the right amount which would allow us very reasonably to assume a reduction in the tax gap, and we don't codo a single penny of that. there are other places where we were probably overly conservative in our accounting. we stand by the numbers. we thought that the assumption that the tax reform would be deaf thit service neutral was the most reasonable of the three options we had. we could either assume our tax reform was deficit neutral, it would reduce the deficit or add to the deficit. and given the fact that we're this early in the process about dealing with tax reform, we thought assuming that middle road was the bestay to do it. yes, sir. >> can you aracterize the treatment of climate science programs and cuts to those, and do you describe those as a taxpayer waste? >> you tell me. i think the national scienceç foundation last year used your

taxpayer money the fund a climate change -- to fund a climate change musical. do you think that's a waste of your money? >> what about climate science? >> i'll take that as a yes, by the way. [laughter] so you see my point. what i think you saw happen during the previous administration was the pendulum went too far to one side. we were spending too much of your money on climate change and not very efficiently. we don't get rid of it here. do we target it? sure. do a lot of the epa reductions aimed at reducing the focus on climate science? yes. does it mean that we are anti-science? absolutely not. we are simply trying to get things back in order to where we can look at the folks who pay the taxes and say, yeah, look, we want to do some climate science, but we're not going to do some of the crazy stuff the previous administration did. and i will note you didn't say thinking about the musical. yes, ma'am. >> just wondering, you were talking about making assumptions. what are your assumptions and

expectations for the budget in reference to the wall? i mean, congress really seems to have come on the record and say they are not in support of funding it. o what are your expectations -- >> well, some folks aren't in support of it, some are very much in support of it i don't know if there's anybody here from the folks who broke the embargo, but i thought -- there was only one place. i don't think it was anybody here, but i read the article about how we supposedly dramatically reduced our request for the wall funding. it's not accurate. the 2017 request was 1.5 billion for border security and, $3 billion in additional dhs funding. and the request in the, the proposal in the 2018 is $2.6 billion for border security, almost twice as much, and $4.5 billion for total dhs. again, a much larger number than 2017, so i'm not really sure how person got to that number. but let me address your question. >> [inaudible] >> it was. we are absolutely dead serious about the wall.

in fact, after taking care of the national security and the vets, my guess is it's in the president's top three. in fact, i know for a fact that it is. and we've made that very clear to the folks on the hill that while we did not get as much money as we wanted for boarder security in the 2017 omnibus, we did get a lot. many of you were here for the presentation i gave on that, and we will see increased border security between today and the end of the calendar year. by the same token, we're going to continue to press on. we do think there's a role for technology, a role for ditional people, all of which we ask for in this those, in this 28 budget request. but it is absolutely priority for the president. yes, sir. >> you said you reject the recommendation the economy not growing at 3%. >> yep. >> did you set the 3% target and then reverse engineer the -- [inaudible] in order to achieve that? no. keep in mind we had -- because there was a lot of numbers that were floated during the campaign, 3, 3.5, 4, 4.5.

we stat down and did -- we sat down and, in fact, it was the group of myself, secretary mnuchin, director cohn from the nec who at the time and still is playing, filling the role often filled by the head of the council of economic advisers, and what we did was we sat down and looked at the cbo baseline numbers and said, okay, what will our tax policy increase gdp by. and what are the ranges for that. what will our regulatory policy impact gdp by, and what could the ranges be be for that. what does repealing obamacare do for increasing gdp. by the way, the congressional budget office has hard numbers on that. the cbo assumes that if you repeal obamacare, it will increase gdp because obamacare creates a disincentive to work. so we went through the methodology item by item and be arrived at the 3%. and i also think you'll see that as well in the ramp-up to that 3%.

we don't assume 3% in year one, f example. i think our assumption for this year i 2.3, then 2.5, then 2.7 or 8 and then 3 out. so we think it's a very reasonable and defensible macroeconomic assumption. digging a little bit deeper into the numbers, we also think that our numbers regarding the related interest rates and and unemployment rates are likewise defense bl. we get a lot of questions sometimes aboutç productivity. we hear these stories now, there was an interesting story in one of the leading newspapers, i can't remember if it was the times or the post yesterday about a business in utah that can't find enough people to work. and people say, oh, how are you going to grow the economy at 3% if we don't, if we're already facing a tight employment market? i'm going to pull the numbers up here so i don't butcher these. of course, as soon as i say that, i can't pull the numbers up. the difference between the u6 rate and the u3 rate is i think the number was in excess of six million people. what does that mean?

the u3 rate is what we call the unemployment rate. the u6 rate is those folks who are unemployed, okay, they're in the labor force looking for work but they can't find it plus the people who are marginally attached or working part time for economic reasons. working part time because they can't find full-time work, okay? that difference, that delta is over six million people. so we believe that we should be able to drive u3 and u6 together and get those folks into full-time employment, and that's one of the ways you get productivity gain. >> you're saying u6, a measure that goes back to 1994, you can have it equal the u3 measure? >> we think that's -- in a properly functioning economy, that would be the case. what's the difference? marginally attached and part time against your will. you want to work full tim but you are not, so you're echnally not unemployed becau tha's not the technical definition of the u3 unemployment rate, but you want to be doing more, you want to be more productive to go back to the economic terms. and we do believe we bring those

people back to the job place, they will do that. >> the day he came down the escalator and became candidate trump, he said we're going to save medicare, medicaid and social security without cuts. have to do it. i recognize he's going to be saving social security retirement, but he's not saving social security disability insurance which benefits more than ten million americans. so the -- is the president keeping his promise on that? >> thank you for that, yes. he absolutely is doing that, and that's why. the fact that it's called social security disability insurance, i think is -- well, put it to you this way. we propose parental paid leave, the first president to do that. we propose to do that using the tools that already exist through the state unemployment insurance, okay? by the way, i think that's the same way that canada does it now. there are a couple of states, new york, new jersey, i think california who already provide statewide paid parental leave. they do it through their disability insurance programs,

their employment disability. that does not mean that parental leave is unemployment, and it does mean that parental leave is a disability. it simply means that program is managed through the infrastructure that already existed at the time it was set up. and the same is true with social security disability. it is a welfare program for the perma, for the lg-rm disabled. it is not what most people would consider to be soci security. >> so will any of those individuals who presently receive ssdi receive less as a result of this budget? >> i hope so. if there are people who are getting ssdi who should not be getting it -- >> those people who should be getting it. >> oh, no. if people are really disabled and there are folks who need -- listen -- >> how are you going to better determine who is getting it that shouldn't be getting it? so many antifraud programs exist already -- >> it's a great question, and one of the proposals we have is how we pick the administrative law judges. because i think it's a lifetime appointment on day one x we try to phase them in the make sure they're not -- there's been

several judges accused of sort of abusing the program. but your point is an excellent one. we are not kicking anybody off of any program who really needs it. that's not -- we have plenty of money in this country to take care of the people who need help. okay? and we will do that. we don't have enough money to take care of people, everybody who doesn't need help. so we try and look at these programs, again, through the perspective of the people paying for it and say s.n.a.p., for example, i haven'ting -- >> [inaudible] >> 42 million americans, i thought it was 44, i'll take your word for it on 42. it is. i think the high was 47, and that was during the recession. pre-recession the numbers were as low as 28. it spiked during theecession, okay, which you would expect on a countercyclical program like food stamps. it's completely within reason to look at that number. it went from 28 million on food stamps beforeç the recession to 47 at the height. it's 44 or 42 today.

yet here we are eight years removed from the end of the recession, we've had economic growth, albeit slow, what we consider to be full employment with the limitations of u3 and u6, why is the number till that high? is it possible -- if you're paying for it, isn't it reasonable for you to at least ask the question are there people on that program who shouldn't be on there? and shouldn't it be up to the government to make sure we can look folks who are paying the taxes in the eye and say, you know what? we did everything we could to make sure that everybody on ssdi is really disabled. we don't think that's unreasonable. in fact, we think that is the definition of compassionate, balanced between the people who get the benefits and can those who pay them. yes, ma'am. >> you talk about the provision affecting federal employees and how to strengthen, your plans to strengthen the federal government in. >> i'll deal with federal -- let's talk about federal retirement, because that's got a little bit of -- and that's one of our largest changes. simply put, we try and make federal retirement closer to the

private sector. so we've increased the contribution that they make to their 401(k) progras. i think on one proam we got rid of a ct of living adjust arement that was there, but keep in mind those are folks who will also be participating in social security at the same time which is a cost of living adjusted. so we thought they were common sense reforms to try and bring the federal government benefit programs closer to the private sector. i'm a federal worker, okay in i have a pension and be a 401(k). raise your hand if you're in the private sector and you have a pension and a 40 to 1k. my guess is -- one did? did you really? in the back? [laughter] she wanted to ask the next question. la. [laughter] so we're simply be trying to the get some common sense back into that program. and we don't think that's an unreasonable thing to do. again, it's the right thing to do on behalf of the fax payers.

in the -- taxpayers. in the back, yes, sir. >> talk about the $1.6 billion for brick and mortar, border security? are we talking about more replacement wall? new wall? and if so, how much new wall? >> yeah. just to be, just to be clear, the $1.5 was the request for 2017. $2.6 is the request for 2018. reflecting the fact that there are 12 months in 2018, there was only five months in 2017 when we were dealing with that. so the answer to your question or what are they going to see is all of the above. that would be replacement wall, that would be new wall, that would be land acquisition, that would be infrastructure. keep in mind you can't just -- you don't automatically, magically build a wall in the middle of nowhere. you have to build a road, run utility services out to it if you're going to do ghting, for example so it's all of the above. and part of the president's commitment. han't decided yet on the best kind of wall. i think we're going through a

competition right now, and i think they're either four or eight, and i lose track, depends on how you want to count it, different prototypes in the process of being designed and built right now as we try and pirg out what the most appropriate type of wall is. and by the way, in fact, we fully expect different barriers will serve best in different areas. >> a quick toll-up. are you projecting out, a lot of this budget had to do with projections it made ten years out. are you projecting out how much money you're going to need in the following years to complete the president's promise during the campaign? >> yeah, we don't -- the way this works, that's a great question. the federal budget is a budget in name only. i guess they called it a budget because they didn't know what else to call it, but it's got two big pieces to it. it has a spending proposal for the first year, okay, and that's where you get a good bit of detail. and then you have these policies and broader-brush sort of approaches for the next years 2-10. so the answer to your question

is, yes, we get very specific on where we would spend dhs money in 2018, but as you go further away, we get less specific. i'll take the last question. >> i have an energy question. >> okay. >> i want to talk about the -- [inaudible] >> yeah. >> [inaudible] half of the stocks. >> yeah. >> how concerned are you that that would hurt domestic producers by pressuring pricesç lower? and does the administration plan to break with its agreement with other oecd nations to keep 90 day -- [inaudible] >> i can't spook to the oecd -- speak to the oecd because i'm not familiar with that. we do not believe that the proposals we've got would harm the domestic production ability. in fact, one of the reasons we believe -- >> [inaudible] >> and, of course, if you do it slowly, if you telegraph it over the course of time, there's a way to do it without having a dramatic impact on prices. the reason -- by the way, what she's talking about is we

propose to reduce the size of the strategic petroleum reserve which was put in place back in the 1970s, may have been the early 1980s by the time they actually got it funded. and at that time, i think we were importing over six million barrels of oil a day from the middle east, and we had limited domestic production. i think what you've seen -- that's why you do it, right? it was a national security argument. if we're going to rely so heavily on imported oil, then there might be a national security and certainly a national economic argument to not exposing ourselves to the risks like the oil shocks that we had in the 1970s. that risk goes down dramatically when we have increased domestic production like we do today. in fact, i think you saw congress last year approve for the first time since the 1970s crude oil exports out of this country. so we have the opportunity now to do that. we also produce more oil because of hydraulic fracking. we also produce more natural gas and other hydrocarbons. so we think it's a responsible thing to do. it's no longer necessary, again,

go back to that perception of the taxpayers. i don't need to take this much of your money to bury it in the ground out in west texas someplace for domestic security and national security reasons when we have domestic surpluses, supplies like we do. thank you all very much. again, we'll be available for questions, you can reach out to -- [inaudible] s.n.a.p -- yes, i will, thank you, i will. we'll take s.n.a.p., go ahead -- i thought i answered the question. >> you touched on it, but i had a follow up from yesterday. >> okay. >> you said that you would be phasing in the work requirements, and i was wondering if you could tell us a little bit more about that process and how quickly you expect that to happen, and also if you could tell us what you would say to the able-bodied americans you reasoned who are saying i want to work but i can't find work. >> the answer to your question is i'm not familiar with the details of how we phase it in over time, so i apologize, we'll have to get back to you on that one. in terms of what we'd say to

people is, great, thank you. thank you for wanting to work, because we need you as a nation to do that. we are starting on the exact same page, so we are going to do everything we can to help you find a job that you are suited to and a job that you can, you can use to help take care of you, yourself and your family. that's, that's not the problem, okay? the folks who are out there who are on food stamps and want to work, we'll be able to work with them the solve the problem, okay? they are not what's causing the difficulties in suspect -- s.n.a.p., it's the folks who don't want to work. look, if there's 44 million people on there eight years removed from the end of the recession, maybe it's reasonable to ask if there are folks who are on there who shouldn't be. that is a reasonable question to ask. i would even suggest it's a compassionate question to ask. but i can assure you, if you're in this country and you want to work, there's good news. because donald trump is president and we're going to get 3% growth and give you the opportunity to go back to work. thank you all very much. i appreciate it.

stuart: now, that was interesting. mick mulvaney, budget director, one of the more articulate and someone who knows what he's talking about from top to bottom, an impressive performance talking about the complex budget. let's bring in senator john kennedy, republican from louisiana. quickly, senator, the budget director said we've got plenty of money in this country to take care of people who need help, but 44 million people on food stamps is too many. what say you, sir? >> what i say is, god bless director mulvaney. [laughter] finally! is there any reasonable person in the milky way that really believes -- [laughter] there's not an enormous amount of fat in this budget? we've got so many people that have all four feet and their snout in the trough. [laughter] i'll give you one example. we spend $60 billion a year onç thenned income tax credit -- the

earned income tax credit. we heard committee testimony day before yesterday that 24% of that, $15 billion, is sent to the wrong person. the wrong person, for god sakes. that's one program out of thousands. god bless director mulvaney. finally somebody's trying to do something about this. stuart: okay. senator, i'm terribly sorry, because you speak in sound bites -- [laughter] you are perfect for television x. you always make your point directly and succinctly. but i'm afraid i've got to leave you, because i've got to pack a lot of people in before the show's over. >> no problem. stuart: you come on back to us real fast, please. we like it. thanks very much. peter morici is us. he is the tenured professor of economics at a leading university. [laughter] quickly, peter. this whole budge, balancing the budget is premised on 3% growth, sustained 3% growth. you think he can do it?

>> i don't know that we can get to 3%, but it's premised on the notion that keynesian economics has failed, it is strangling the economy, and if we simply implement the right cut ands the right tax reforms, more people will work, there'll be investment to make them more productive, america will grow quicker, and the deficit might not go to zero, but it'll be a heck of a lot smaller, more manageable, and our kids will simply have a brighter future. i commend mr. mulvaney. this is the soundest budget philosophy i have seen this 40 years. stuart: one last, quick question, the budget director said they're not going to touch medicare or social security. can you balance the budget without touching those two gigantic entitlement programs? >> i think it's -- you can balance it if you get to 3% growth. if not, i think raising the retirement age and looking very seriously at medicare, making that for people that are a little bit older, say 68 makes a lot of sense. stuart: you need tax cuts for 3%

growth? that's the bottom line? >> yes, you do. you need tax reform especially so the tax system more reasonable, but you're going to need tax cuts, and you're going to have to pay for it by cutting entitlements, making those people that are refusing to work go back to work. tooth institute okay. strong stuff -- stuart: strong stuff. peter, we appreciate your expertise. thank you, sir. >> take care. stuart: peter kiernan is with us, your first impression from mulvaney. >> i have to compliment an adult conversation rather than talking past each other, to is i liked his presentation. i do think if you look at history, for example, in the last 70 years since world war ii we've had a dozen presidents. six of them had growth rates of the economy over 3%. in other words, only half. it is not the norm that we're going to have 3% growth. we will have to do things unusual to make that happen, and i think one of the things everyone who's watching and listening and thinking about it just say how hard is it to get 3%? the answer is really, really hard. stuart: but if you get tax cuts,

significant tax cuts, and you get some spending restraint, you >> i think, i think you could do 3%. i think the thing that really drives this is can we get productivity in the work force, people in that u6, the underemployed, can we get them real jobs. stuart: okay. let me wrap this up. we've just heard a really strong presentation from the director of the budget, mick mulvaney. articulate and very knowledgeable. and very, he engaged his audience. his audience was the white house press corps. he engaged. throughout this the stock market continued to show a gain of around 450 points throughout the presentation -- 40 points. that's where we were, 40 points, 20,937. that's big story -- one of the big stories of the day. the other one, of course, is the terror attack in manchester yesterday. and i want to bring in this man with another story that's developing as we speak. he's the author of the new book "the ranger way," benghazi hero

chris tanto pass sow who is with us in new york. welcome to a crowded show. >> thank you for having me on. i love how you still say tonto. i just want to hear you say it again. stuart: how do you say it? >> tonto. [laughter] stuart: we got news early this morning of another raid in yemen. stuart: i believe it was the seal who is carried it out. >> yes. stuart: i believe they killed seven terrorists and walked away with a lot of intel. now, you know this field. i'm not going to ask you whether you were on that kind of mission or not, that's not the point. how does this go down? what's important in a mission like in this. >> important is the practice before, the intel collection prior to. if you don't have proper intel of what's on the location, who your target is and even what it looks like, the dematics of it -- schematics of it, the

operation's destined to fail. and special ops are best at planning, planning, planning. stuart: so we've got drones, cameras looking down surveilling a large area. >> yes. stuart: do we have human -- >> you have to have human. if you don't -- stuart: an informant? >> or maybe even a u.s. citizen embedded somewhere in there. and, again, without getting into more operational aspects of it, you have to have that human intelligence. if you don't, the mission will fail and you'll have multiple casualties. stuart: you have scout toes who go forward, single guys on their own getting -- [laughter] >> no, no, there is a possibility of that. there always is a human collection element. i think over the past administration though we utilized more of local intelligence which sometimes was not, was not good to do. the integrity there. you're giving money, you're giving funds out where now i think under this administration and general mattis particularly, i think they're going to utilize more u.s., u.s. assets to do that. stuart: are you the best? when i say you --

>> am i the best? well, no. the u.s -- who are you going to trust to do a u.s. mission, is to have a -- stuart: understood. okay, in terms of competition between special forces -- [laughter] the brits have got -- >> you know, that is a team network. when you're working with the sas guys, to me, that's like working with the navy seals. we are the same team. when we see each other aside from the language, the brits say tonto better, it just sounds better, we're on the same team. i will never say the sas are better than the seals, but the rangers are better overall, but that's because i'm a ranger. [laughter] people do not know how funny you are, i tell you what, always need to come see you in the studio. and have my jacket, because i'm always underdressed -- stuart: hold on a second, i've got some serious news that has broken within the last few minutes. which, where are we?

salman abedi, that is the name of the suspect who blew himself up the authorities believe. that was last night in manchester. salman abedi. that news, by the way, was broken by a -- >> it hasn't come from the u.k., it's come from u.s. officials citing british government. so it's news to the u.k. the u.k. media outlets are now reporting what the u.s. is saying, which is kind of interesting. stuart: very interesting, indeed. back to tonto paronto, these guys are just dreadful people going after soft targets. how do you go after them? >> one of your last guests said you can't beget violence with violence, and i tend to disagree a little bit with that. just like the yemeni raid that took place, you have to go in and strike terror back into the terrorists which is what we're doing before the past administration. and you have to put fear back into them. i agree with him that it's going to be impossible to stop these little attacks with these soft targets unless we start

utilizing physical security which i don't think at this place, correct me if i'm wrong in manchester, they had security there. you have to have that in place. you have to have a show of force to stop or deter these terrorist attacks. stuart: tell me about president's trip to the middle east, because it seemed like he changed the conversation dramatically. number one, he's telling people there the iranians will never get a nuclear weapon. >> yeah. stuart: and number two, he's organizing a coalition of muslims in egypt and saudi arabia -- >> yes. stuart: -- to go after terror, i take it you approve of this? >> perfect. we have to show a united front with christians and muslims and show there is a distinction between muslims and terrorists. i think that was the problem with the prior administration, is they tried to lump it in. muslims, when we say terrorists, we mean all muslims. no, that's not true. we have friends in the muslim nation that want to destroy terrorism, and i think he showeç

that. also we are the strength of the world, showing that we are strong again and that we want to take these things head on and lead, lead from the front not from behind. stuart: so you want a muscular approach to this kind of thing. >> yes. stuart: okay. what should our approach be to north korea? it's a very different situation. they are threatening much of asia with their missiles and maybe an atomic bomb. what will be the approach there? >> well, you do have the sanctionses that you can continue to do through the u.n., but that doesn't help a whole bunch. at least we haven't seen anytime the past. i think you still throw more sanctions on there but, again, maybe a show of force maybe even in south korea, putting people up, having more troops there. i know people dislike that, but if we sit back and sit on our has haunches, we're going to continue to let north korea get its hands on the possibility of a nuclear attack. stuart: do you feel that americans are on, have the kind of opinion that you have which is, as i side, a more muscular

approach, a forward approach? take your gun out and use it. >> after these last eight years, no, i don't think so. i think the majority of americans now are more of a hands-off, let's just be nice, let's hug it, let's kiss these terrorists, and they're going to change their ways. but i think we're going back to the other direction, more of a muscular, strong approach because terrorists do not listen to, hey, we're going to help you guys out. we want you to be part of this project. no, they want to destroy us, and the only way you can take on that is try to destroy them back. that's my opinion. stuart: before we leave this subject, one of the great things that the president's trip to the mideast, in my opinion, was where he mentioned is the slaughter of christians -- >> yeah. which we have not heard of from the previous administration at all. stuart: no, we did not. peter? >> i think he's willing to confront things in a very definitely way, and i think he handled -- deft way. one of the other things is he also, he's got the chinese now

reducing imports to the lowest level in years from north korea. down below $100 million. so sanctions are coming in from china of all places. so if donald trump has to get earmarked for some of his foreign affair opportunity, he's doing a great job in the middle east. tiewfer stuart all right. tonto -- >> you make it sound so soft and cuddly. [laughter] stuart: let's not get carried away, lad. what's the title. of the book? >> the ranger way. i know, that's not going to sell any books is it? thank you, sir. god bless you. yes, sir. stuart: all right. check that big board. what a news day it has been. >> yes. stuart: we've had the budget director, the aftermath of the terror incident in manchester yesterday and the president's trip to the middle east. he has now left. he's, i believe he's, shortly, he's going to land in rome. >> yep. stuart: he will meet with pope francis, and then he will conduct the g7 meeting. our time is up, but what a day it has been. the dow's up 37 points.

neil cavuto, sir, it's yours. neil: all right. thank you very much, stuart. it's not often you have the budget director, a tour de force performance, but that's exactly what america got here. mick mulvaney spelling it all out, we have a budget for the folks who pay the bills. there's a concept. listen to this. >> we looked at this budget through the eyes of the people who are actually paying the bills. yes, you have to have compassion for folks receiving the federal funds, but also you have to have compassion for the folks who are paying it. and that is one of the things that is new about this president's budget. neil: all right. again, as someone who's into basic math and nerdy little statistics and all, you can play fast and loose with a lot of numbers. better than $4 trillion. we never spent more on a