Transcripts For CNBC The Kudlow Report 20131004

And the unveiling of obama care is continuing disaster. Meanwhile we have this latebreaking news. The administration is taking major parts of obama Care Exchange website offline for large parts of the weekend for, and i quote, maintenance, whatever that means. All these stories and much more coming up. This is the kudlow report, beginning right now. Good evening, everyone. Im larry kudlow. This is the kudlow report. We are live here at 7 00 p. M. Eastern and 4 00 p. M. Pacific. Now, the current battle over the Government Shutdown and the debt ceiling deadline may seem like politics as usual, but there is something very different this time around. President obama seems to want to raise the fear level and actually i think he is deliberately talking down the markets to create a crisis for his own narrow political gain. Just listen to this. They are threatening to actually force the United States to default on its obligations for the very first time in history. As reckless as a Government Shutdown is, as many people as are being hurt by a Government Shutdown, an economic shutdown that results from default would be dramatically worse. And thats not all. The treasury also released this report, using the sharpest rhetoric possible, warning that default could cause credit markets to freeze, the dollar to plummet, and Interest Rates to skyrocket. On the other hand, we have Speaker John Boehner acting like a true leader and a hero as he promises to prevent a default. And today he made that promise very clear. I dont believe that we should default on our debt. Its not good for our country. All right. That is called leadership. And the dire default warning coming from president obama can be summed up in three words, lack of leadership. Its pure provocation, and its borderline unpatriotic. Its almost as though the president wants a default and a big market selloff, just so he can blame the gop and somehow win this battle over the shutdown. Thats my take but lets ask our distinguished panel. Here with us tonight former president obama aide blake zef and wor radio host and personality mike simone. Michael steele, you have a good memory. Can you tell me which republican, which republican is calling for a treasury default . Which one . I havent heard it. What is obama talk about . I dont know. And thats the part of this that for me is really problematic. Because youre talking about something that everyone in washington is pretty much agreed on they dont want to have happen. So why are you getting out here saying that the actions that are related to obama care or this current Government Shutdown are somehow inextricably tied to and ultimately will lead to a Government Shutdown. I can beat up, as you have as well, beat up the gop on sort of creating this sort of linkage unnecessarily between obama care and the shutdown. I think the real battleground is the default or potential default on our debt and not this masquerade that is currently going on right now with obama care. Ive said long set that aside. The bottom line is the president doesnt want to negotiate on the debt because he knows he is not in a strong position. Ah, thats an interesting point. But blake, ive never seen a president talk down the economy and the markets as this president did. I dont know who he is talking about that wants a default. I think john boehner saved the day today by saying there isnt going to be any default whatsoever. You know, i want to tell you something. Ive been through a few president s, all right, in one form or another. No one, not even carter behaved this way. And i think in a sense what obama is doing by provoking a market crash, 100 Million People own stocks in this country, is borderline unpatriotic for his own narrowly based political battles. What is your take on this . Do you want to defend that . The first thing i have to say is i know the most nasty insult you could possibly level at someone is not even carter did this. I want to acknowledge that. Thats bad. Thats the worst it could be. Until recently. So i just wanted to lay that out. Until recently. Exactly. Now, in terms of this, youre talking about fearmongering, you just said he is trying to wreck the economy, but you noted a few minutes ago the numbers havent changed. Stocks are ignoring him but not for lack of him trying hi, is not downing the economy. Come on, blake. You can look at what he said. Reckless as the Government Shutdown is, an economic shutdown resulting from default would be dramatically worse. Who have is talking default . Just explain to me. Name me one republican, name me onethird level Republican National Committee Staffer who is talking about a default. Thats what baffles me about this. I think what he is referring to is the fact that we have still not agreed to an increase of the debt ceiling. Thats what he is referring to. Thats not a default. Thats just a disagreement politically. Well, he is saying if you allow that to happen, then the ramifications economically could be quite severe. And its well within his right. When george w. Bush was president , i know the chairman will remember this, he used to talk all the time when he didnt like what the democrats were doing on national security, he would talk all the time about how this could be very bad for the country. And people accused him of fearmongering. National security is a lot different than talking down the market. Look, so, i want to conclude, you tell me. This is a phony default threat that he is issuing. And i dont think he would care much if the stock market sold off 500 or 600 points, because he thinks that would strengthen his position. Let me clear up and defend him. That speech seemed out of place and inappropriate. But whenever there is a crisis, he plugs in the teleprompter and makes a speech. Apparently couldnt get a new speech written. Thats the one from 2011 that were on the brink. I was sitting right in this chair in 2011. He did that then. Its that same speech. Dust it off. I mention the same question every two years because he keeps kicking the can down the road. I want to be the first to tell you and you and you, especially you. Okay. There will never be a treasury default in this country. We will never default on our interest expense. We will never default on our principle obligations. We will never default on rollovers. It will never happen. Other ramifications may happen inside the budget. Thats a different story. But there will never be a treasury default. And you know what . He knows that. And his Treasury Department advisers, they know that too. And theyre sitting there with the laws, theyre sitting there with tradition. They would never let it happen. So therefore i conclude he somehow thinks this is going to help him in the debt battle and in the shutdown battle. Thats what this is all about. I think that guess to the point i was just making about the president knows based on what you have just said there is no wiggle room here. Nothing. In terms of going in the room with john boehner to talk about the debt ceiling, he knows what john boehner is going to put on the table in terms of taxes and spending cuts. He knows he is in a tough spot right now. So you create, you manufacture in my estimation, you manufacture this noise over here and the gop played into it a little bit with the linkages between obama care and the closing down the government. You manufacture the noise and you kind of feed that beast and hope that something happens. But as you said, the market has not responded the way they thought it would. The markets heard boehner today. Its very interesting. They did. They did. And they rallied very, very nicely. No Management Experience ever, and i dont think he realizes when you have total disagreement, thats where negotiation starts. Its not an unusual start. But boehner has a much better sense of history. I tell you, this is going to backfire. You wait and see. Its going to backfire. He is not going to asia. Now, two reasons why he is not going to asia. A, he doesnt like the golf course. Thats one possibility. B, he is in fact going to go and break his promise, and this coming week he is going to start to negotiate. Which do you think it is, golf courses or negotiation . I cant speak to the golf, but i will say certainly you dont want to go halfway across the world when you have these problems going on at home. Really . Of course he is staying to take care of this. You guys would kill him. Let me finish. You guys would beat him up and kill him if he went overseas. You know it. Absolutely. But my question is will he negotiate. Is he going to take this time to action and negotiate. Thats a key question. But first up, first up, while democrats and the white house use default scare tactics, what theyre not telling you is this. Very interesting. They had a chance to pass the full faith and credit act proposed by senator pat toomey, and already passed by House Republicans. And that would have protected all treasury interest and principle. But guess what . The democrats opposed it. Joining us now is the house sponsor of that toomey bill to avoid a default, California Republican and Budget Committee member tom mcclintock. Tom, good to see you. If your bill had passed, then by law obama wouldnt be pointing fingers about defaults and so forth. Now why is it democrats dont like your bill, and two years ago didnt like pat toomeys bill . Whats up with that . Because they want to use a credit default as a threat. And its an irresponsible threat for all the reasons youve been discussing. But its interesting. The law that establishes the department of the treasury that goes back to 1789 already gives the treasury secretary the responsibility and the authority to manage the public revenues and to protect the public credit. In the mean 80s, the Government Accountability group says that the Treasury Department has the authority to manage payments to assure that debt is always paid first. In other words, they already have the authority. So that undercuts obamas position even more. I mean, for him to point the finger of a default, he may as wellpoint the finger at his own treasury, because they have the authority to do that. Revenues come into the government, right . Revenues come in on an ongoing basis. What youre really saying is treasury interest expense or servicing, treasury principle, treasury rollovers, they get first dibs on that money. And this country not since Alexander Hamilton consolidated the debt and put gold behind it have we defaulted. And we aint going to start now. Our revenues are ten times our interest in debt payments. There is absolutely no excuse for a default of the differences that geithner and now lew for the first time as i know in American History have actually threatened not to exercise that responsibility and authority and actually threaten the credit of the United States. And, you know, when youre living off your credit cards, its really important to make your credit card payment first. We have the ability to do that. We have the authority to do that. Hr807 passed by the house not only gives them the authority and the responsibility, it mandates them to do that, and even allows them to exceed the debt limit in order to assure that that credit is maintained even if they oppose it. I was talking to senator pat toomey this afternoon. It actually covers the principle and interest on treasuries that are held by the Social Security trust funds. Exactly. It even goes right into that. So therefore, therefore, tom mcclinton, congressman mcclintock, i conclude that obama knows all this. This is is not a dumb guy. He is doing this deliberately. He is trying to scare the markets. And he wouldnt mind seeing a Little Market crash here. Somehow he thinks strengthen his position on what were going to do about the shutdown and the debt ceiling limit. Isnt that what is really the interior, ulterior motive . Its same strategy that were seeing on the shutdown. Make it as damaging and difficult as possible, even if you have to go out of your way to do it. And theyre going way out of their way to do it on threatening a credit default. Blake zeff, do you have a response to that . I do. Your background is in economics and youre quite an expert in it. Politically it would be devastating for obama to have the economy have a crash. He owns the economy. When he is thinking about his political legacy, he doesnt want to have the economy be wrecked for fun or free. You know what . Youre making a good point. Youre making a good point. It will hurt him. Thank you. But this is why i do not understand the kind of harsh, threatening, provocative language that he is using. Now, you had some experts today, larry fink of blackrock, and whats his name from pimco, bill gross. Bill gross, right. And those guys said, tom mcclintock, ill get back to you. Gross of pimco and Larry Kudlow Fink of blackrock, both said there will be no default. Youre talking the heart of wall street. So therefore i have the heart of wall street, the market itself that ignored obama today. The whole thing smacks of politics. Blake zeff is right. If it boomeranged and the market actually fell and we went back into recession, hell, were only growing 1. 5 . Were not that far. It would destroy obama. It would absolutely destroy him. So this is stupid on obamas part for about five different reasons, mr. Mcclintock. We dont expect that out of a president. But i do think we could expect that out of a street fighting politician. And unfortunately, hes got his street fighting politician hat on and not his president ial hat. Thats been true for some time. Do you get any democratic votes in your bill, tom . Nope. No democrats voted in the house . No, not to my recollection. And did it ever get vote in is the senate . I cant remember if toomeys bill ever got voted on. No. It was stopped dead by harry reid in the senate. Isnt that clever . Stopped dead by harry reid in the senate. Were going leave it there. Congressman tom mcclintock, thanks very much. And i hope your bill passes. Talk about bad timing. Blake zeff nailed it. Just as president obama and the democrats refuse to negotiate over the new health care law, the list of its problems continues to grow. Every day brings new stories of glitches with the registration process, sticker shock, and massive confusion. Today was no different. Nobody is hardly signing up. And were going to have the latest on the unpleasant obama care surprise just ahead. And please dont forget, folks. Free market capitalism is the best path to prosperity. You need a basic Government Bond market to survive. We have one. Someone should thats to the president. Im kudlow, and ill be back after this. Bny mellon combines Investment Management investment servicing, giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Day four of the obama care enrollment. We already know the exchanges are full of glitches. We have this breaking news tonight. The Obama Administration now says it will take down the key application part of the obama care websites for large segments of the whole weekend. So this is for, quote, maintenance, unquote. But the problems dont end with those websites. Weve been seeing reports of single digit enrollments in some states. Thats likely because people are realizing premiums are far from affordable. And on top of that, the quality of coverage, frankly, bareboned. Here now to break it all down for us, dr. Scott gottlieb, resident, though, at the American Enterprise institute. Welcome back, scott, good to talk to you. First of all, the enrollment rates are so low. Youre talking Single Digits in some of these states. To what co. Do you attribute that . Right now people just cant get through. Theyre kicking out 99 out of 100 applications. But the bottom line is even if this was working fluidly, i think enrollment would be very slow. A lot of people are going to go on the website and find out it just isnt a good economic deal. When they do get the coverage a year from now, i think theyre going to be very disappointed. These are very narrow hmo Network Plans that arent a lot for the money theyre paying. So lets take a look at this. I think some of the people going on were thinking it was free. The way it was marketed by the administration you could almost think it was free. Maybe for the low, low income people it is effectively free. But not for the middle class. And that leads me to my second question. Doesnt the middle class and higher get hosed on this thing, particularly the young people . Right. Well, they do get squeezed. How much you pay for your premiums is determined based on your income level. Someone making 30,000 a year for a family of 4 will pay about 2 of their take home on health care premiums. And that doesnt include what they pay out of pocket costs which could be 12,500 a year. But when you get to a family of four earning about 70,000 a year, under this law, theyll pay about 10 of their pay on the premiums. So thats a substantial portion. And that doesnt include the 12,500 in outofpocket expenses that they can pay. So literally a family of four earning 70,000 a year could be paying almost 20,000 a year in obama care. So really, there is a discovery process here in an odd sort of way. People will get through. Im sure theyll fix the computer glitches. Thats the least of their problems. But when people get through and get a chance to look at the numbers and work through it, there is going to be a big problem. Right. Right now the problem is determining the subsidies youre eligible for. Thats why most people are getting kicked out. Thats a real problem. To determine the subsidies, they have to talk to different Computer Systems at the irs, at the state Medicaid Programs and theyre not able to do that. I think its going to take a long time to fix it. This is the web hub breakdown you and i talked about. But once you determine what your subsidy is, then that tells you how much this insurance is actually going to cost you. And thats where theyre going to have the sticker shock youre talk about. So most people havent had that sticker shock yet because they havent gotten that far. But the government will never know because the verification process doesnt work. Well, they claim theyre going to claw back the money a year from now. But this is going to make, you know, a pay and chase scheme there is going to be a lot of difficulty getting this money back when people get subsidies that theyre not eligible for. I was looking at your notes. You basically think the individual mandate which is what were talking about now will be suspended. This was a highly controversial issue. It was voted on. Couldnt pass the senate. The house wanted it as part of the continuing resolution. Why do you think at the end of the day, the individual mandate will be suspended . Well, it will be delayed. Its a weak mandate anyway. The penalty isnt that much money. You cant penalize someone for not having something they cant purchase. And right now they cant go into the portals and purchase the health care coverage. They claim theyre going to fix these in a month or so. I think this is going to take far longer. The problems that theyre having dont look like the kind of glitches that are coating the stakes. Theyre going to be taking the systems down every weekend. The fact that they made news this weekend, i think theyll be take it down a lot to do major maintenance on this. So in effect, in effect the individual mandate will be suspended. It will be suspended or delayed. I think theyre going to have to come out and say look, were not going to hold you to it the first year or push out the date. So the fact that theyre fighting over this right now politically is surprising, because theyre going to have to come back. This is an easy one. If the republicans had started with this, had started with this. Absolutely. Instead of the defunding nonsense, they would have a gotten it. And they could have argued it as you are technically, technically. Rite. You dont have to do the politics. Right. They would have gotten it. They would have changed the whole game. Is there going to be any major, major changes . People have to change doctors. Thats as i understand it. The change in insurance plan. What president obama said a while back is youll keep your own doctor, youll keep your own plan. Youll keep your own provider. Thats not really true, is it . No. These are very Narrow Network hmo style plans, really a throwback to the 1980s where you dont have a lot of choice. The coinsurance is going to be very, very high when you go outside your network. So youre going to have to stay within your network. This is going to put at disadvantage people with serious disorders who need specialized care and wont be able to go to the specialized institutions. So really, one of the big issues with obama care is not the computer glitches, its basic structure of the program . They made it very expensive and not very high quality insurance. And they had to do that because they and the president really spoke with forked tongue. He said you wouldnt have to change your plan. You wouldnt have to change your doctor. Thats not true. Thats not true. Forked tongue. Im being polite here. I give you the last word. Forked tongue. Its not true. People are going to be very disappointed once they have this product. All right. Were going to get out of here. Dr. Scott gottlieb, thanks very much. We appreciate it. Please go to cnbc. Com. A great article just posted titled 99 of obama care applications hit a wall. Thats on cnbc. Com. Now, the markets rallied today despite the scare tactics from the white house. But one stock in particular had an eyepopping rally that was truly all because of a mistake. Cnbcs dominic chu has that story. You may be surprised, but he is going to leave you laughing. I love to watch dominic chu make me laugh. Im larry kudlow. Well be right back. So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. So, if youre sleeping in your contact lenses, what you wear to bed is your business. Ask about the air optix® contacts so breathable theyre approved for up to 30 nights of continuous wear. Serious eye problems may occur. Ask your doctor and visit airoptix. Com for Safety Information and a free onemonth trial. Could save you fifteen percent or more on car insurance. Yep, Everybody Knows that. Well, did you know the ancient pyramids were actually a mistake . Uhoh. Geico. Fifteen minutes could save you. Well, you know. Welcome back to the kudlow report. Im dominic chu. Its one of the strangest stock stories weve seen in quite some time. Shares in a Company Called tweeter, not twitter, tweeter skyrocketed today. Its a bankrupt chain of consumer electronic stores. Now, it seems some people got it confused with twitter, the social network, because the Ticker Symbol is twtrq. When the stock went up 1800 , it got lat of notice. It went to 13 cents a share on very heavy volume. It was eventually halted in trading with a more modest, get this, larry, 600 plus increase. Back over to you. Tweeter is close. Tweeter is close. Just a couple of vowels here and there. Whats a couple of vowels among friends, right . I love that good work, dominic chu. Well see you a little later in the show. Now, were going to go back to capitol hill to get the latest on the budget battle and discuss who is supposedly winning this shutdown war. Take a look at the latest gallup poll. President obamas approval rates near a historic low. Please stay with us. Weve got a lot to cover tonight. Welcome back live to the kudlow report. All right. The Government Shutdown going to merge with the debt ceiling battle. Thats the word. The president says he wont negotiate. But frankly, the gop does not yet have its own strategy nailed down yet. At least thats my take. Lets bring in our panel, blake zeff, michael steele, and mark simone. Michael steele, just on this point, theyre going to merge the continuing resolution shutdown with the debt ceiling. I dont really hear a plan, though, how theyre going to do that what the conditions are. I dont think there is. What are you hearing . I agree. Ive heard the same thing. I had a couple of dinners earlier this week where that was part of the conversation. So what do you think . Well, whats your plan . And ill be happy to share. Let me tell you what the problem is here. They have sold this whole idea of obama care defunding and replacing and repealing to the base. And that has been that was the basis of this whole shutdown. That was the selling point. That is why so many republicans in the house and the senate were upset with the way and the direction ted cruz was going on this. Because now here you are. Youre going to link the two together. That means youre prepared to give the Obama Administration what they need in order to get the get passed that part of the conversation. So when you do that, what do you say to the base . How do you go back and tell them weve built you up, jacked you up on this whole idea of shutting down obama care, which by the way started out without any it was already prefunded. So it not appropriated funds. Its not as important to the overall discussion as the debt is. Right. How are you going to go back to that base and say, well, just overlook that. Now lets really fight on the debt. This is the problem. This is why the strategy is up in the air. Well, there are things you can go for. Obviously you want the get rid of the tax on medical devices. Right. The big thing is you want the individual mandate delayed for a year. Weve already seen from these websites that very, very, very few people are signing up. So its not going to hurt that many people. You also have 1200 waivers out there to every friend of obama, every union, company. Lets rescind all those waivers, put congress on it. I think everybody will admit if they cant get anything through. They cant get it through the senate. Thats the problem. Everybody realizes its going to be chaotic for a year or two. The more people on it, the quicker it will get fixed. On the other hand, blake, i think president obama is losing ground because of his unwillingness to negotiate. I think the public takes a look at that and says huh, what . Youre the chief executive. I think harry reid is conceivably the worst possible representative spokesperson in the history of politics. I mean, in guy really needs to replace this guy. Either that or just give him a lobotomy or a facelift or something. Youre in trouble every time harry reid shows up. You dont think hes handsome enough for the job . You want surgery . Apparently doesnt have much sympathy for people with cancer. Come on. He is not helping you at all. I dont want to be too hard on him. A lot of things in there i need to unpack. First of all in terms of the obama care thing, just to get that out of the way, i agree with the chairman, with all due respect to mark. This is a losing issue. The leverage. They cant get anything through the senate and obama care is the law of the land. Unfortunately for republicans, i know you guys dont like it. Its not going to happen. You keep saying the law of the land. The Obama Administration has made five changes to it. If its settled law why change it . Im not having an ideological battle. It literally already exists. Its very hard to undo it. If nothing happens youre at loggerheads. The thing exists. As opposed to the Government Shutdown and the debt limit. If you do with the employer mandate for a year. But the votes in the senate and obama wont do it. Obama is not going to give up the the signature piece of the law. So what do you do to get past this roadblock at this point with the administration, if youre looking to larrys point to link the debt discussion with obama care government closure. Thats what i hear. If you cant solve one problem, meaning the continuing resolution. Create a few more. Merge it into a second problem you cant solve. So now you have a larger unsolvable problem. Thats the way i see the republican strategy right now. Were going to hang on. After that introduction. Stay right with me, because i want to go to somebody who is on the inside of these meetings and has been a part of the republican negotiations. Here now is House Republican policy Committee Chairman congressman james leiffert from oklahoma. Tell me what is doable and what is not doable. What im hearing is there is now, yes, the cr merges with the debt ceiling, and the whole package has a laundry list of conservative ideas which are going to be very difficult to pass, okay. Its going to link it i mean there is a here, let me recap. Socalled, a mechanism for tax reform, socalled a mechanism for entitlement reform, repeal the medical device tax as mark simone says. That should be a layout but its not bog to be, the keystone pipeline. This stuff is going to be hard to do alone much less adds part of a shutdown and debt resolution. You tell me how its going to work. Well, id love to be able to tell you how its going to work. Were actually walking through this a piece at a time. Were dealing with two things on this, larry. One is the people of our districts really dont want a Government Shutdown, dont want to see all the stuff happening. Well get that completely, but they also dont want to live under the effects of obama care. So were running two tracks on this constantly. You get a chance to communicate with the folks in our districts over and over again who are incredibly frustrated. As your guest mentioned earlier, very eloquently, all the problems, all the price increase, all the things happening with doctors, all the things people see, the longer the president goes defending his law, the long err we go fighting it saying we told you so, we told you so, well watch the American People respond to that. The problem is, youre right. Were up against a cliff here with right now were in a Government Shutdown. And we have a debt ceiling right in front of us. And were not going resolve all those issues at once. Look, the country really dislikes obama care. There is no question about that. Right. No argument about that. Not even blake zeff is really going to argue about that. He is very rational democrat. But the trouble is the republicans are in a political box because they cant get this stuff through the senate. What im asking you for, jim, i know you all have been conferencing on a daily basis. People have been talking about a grand bargain with entitlements and tax reform and this and that. Now from what i gather is you all are pulling back. Maybe its not going to be such a grand bargain. But when i look down the list, when i look down the list of items liken advertisements, like tax reform, like keystone, like the medical device, thats a lot of stuff to get done first of all in a week or two, which is bad enough. Right. Meanwhile, that would be stuff that would be hard to get done on their own merits. Sure. Much less as part of this. Explain to me how the linkage is going to allow all this stuff to get done. Yeah, larry, were looking at our list that we had two weeks ago. Here is a whole group of agenda items we feel like longterm can begin a process of getting us some kind of economic stability. We know were dealing with two things here. We have to have Economic Growth and be able to put things in place that allow our economy to take off. But we also have to have reductions in spend organize more efficient spending to say the least. But its got to be longterm. We cant just look at what happens the next two years. Thats what sequestration is taking care of at the moment. Its longterm. Youre going to give up on the sequester. Probably not. Im told that republicans are willing to negotiate with democrats to at the least loosen up the sequester, which i think is the best darn thing you guys have done in the whole last couple of years, cut spending. Its actually helped the economy. Right. Youre going to give up on the sequester in order to get some entitlements. You tell me, jim lankford, tell me, what is going to be in this debt ceiling package, okay . Weve been now four days shut down. Were going to have to wait a couple more weeks. Give me one or two things that you think are going to be inside this package. I think there will be some minor reforms in entitlements. I think there will be some things well look at. We may have to look at a shortterm debt ceiling package to give space on this. We may have to be able to evaluate. Lets see what the president proposedly, what we proposed already, things we can pull off the shelf and be able to walk through. Not trying to give you all the exacts on that but what we put out a couple weeks ago in the plan you mentioned is a laundry list of things. Were very open to negotiating these things. You watch us move on it the whole time, were willing to negotiate. But what were not willing to negotiate is people are really being affected. People are really frustrated, and quite frankly, people are paying more money that they dont have money to be able to pay on that. We ant the president to acknowledge that and say what committee we do to resolve that. I get all that. But we got to solve it. Michael steele, all that is the true. I just dont see how it gets done. Thats all i mean. In other words, its going to be hard enough. Right. To get this thing done. And its going to take weeks and weeks and weeks, which suggest a longer shutdown than anybody in this country wants, including the politicians. Right. Michael, former rnc chairman, how do you do this . I take a little leap off of what the congressman said there. And i dont gloss over it. He talked about something shortterm, something shortterm with respect to the debt limit increase, something shortterm with with respect to a cr to fund the government to get it open again. And that shortterm i think is probably somewhere between six and eight weeks. And if they can get in a room and ham theyre out, i think the congressman is dead on point in terms of the things theyre going to put in the pieces. But thats the problem. How do you do that. Jim lankford, last word. Will there be a shortterm spending resolution that will give you elbow room to work out a longer deal . Is that what is coming . If we can get it to the table. Our problem is weve said to the senate, here are our negotiators, were ready to go. Meet with us and negotiate. They dont want the negotiate. The president said ill meet with you to tell you i dont want to negotiate. If we can get everybody together in one room, i think we can resolve this in a couple of days. The issue is the president doesnt want to meet. The president is not going to asia. First of all, as i said earlier in the show, he doesnt like the golf courses there. And second of all, the entire country wants him to negotiate this deal. So i think youre going to see it. Whether that helps or hurts remains to be seen. Congressman games lankford, thanks very, very much. Thanks, guys. My panel, im going to check back with you in a couple more minutes. How about a thought experiment. Lets ignore washington and focus on the fundamentals of the stock market like Economic Growth and profits. We are going to do that with two top traders, next up on kudlow. I was made to work. Make my mark with pride. Create moments of value. Build character through quality. And earn the right to be called a classic. The lands end no iron dress shirt. Starting at 49 dollars. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Welcome back to the kudlow report. Im dominic chu with this market flash. Major u. S. Stock indices finished the day higher. The dow is up 76 points. The nasdaq 33, and the s p 500 gained 11 points. Now for the week, though, the dow was actually down 186. Now, next week, earnings season kicks off. Were going to get the minutes from the feds meeting. This is of course the meeting where they chose not to taper or scale back the bond purchases. And of course, the shutdown still lingering and the debt ceiling deadline, larry, gets ever closer. You know what is cool, dominic . What is that. No numbers are coming out. No numbers. We can just make them up. This is one of the benefits of a got shutdown there is no numbers. Nothing to confuse the matter. We can just make them up on our own. Well just be positive. Thats what economists do anyway. Yes. We must all be positive. Great reporting. Thank you very much. Welcome back Greg Mcdonald and Warren Meyers from dma securities to our discussion. Okay. Warren, shutdown didnt seem to really affect the stock market this week. Will that condition continue . I think the only way it will is if this thing drags on and on and goes past the debt ceiling. I give you four weeks, what does that mean . I think it will be a little bit of a negative repercussion. But at the end of the day, i dont think its going to have a major impact at all. The Economic Impact is really small, no matter how you slice the pie. But i know you write about this. You bring wry about this every day. I get these amazing details from you. Do you do that alone or do you have a staff . Anyway. If the shutdown goes four weeks, im just using four, its got to go two more weeks. But if it goes four more weeks, does it matter . I think it does in the sense that the first week is about an eighth of gdp. The second week is maybe 50 bips. But its exponential. The fourth week you believe that stuff . I really believe. How can you believe that . I talked to someone and customs is shut down. It starts to impact trade. Its exponential. Each week that goes on, it affects more and more and more people. Thats what people tell me about the sequester. It didnt have any impact at all. This is a little different thinking is a bigger sequester . Actually, it may be a bigger sequester. Its still a loft people frozen. I hear you on the sequester, though. The government shook it off. The Federal Reserve will not taper their bond purchases and probably not tighten in my lifetime now, in my entire lifetime, okay. I dont know if its naturally going to be in your lifetime. I hope you live long enough to see that. But no, i think theyre on hold for now. Theyre not going to do anything. I dont think they can, especially with what is going on in washington. Right. Thats going to push us back. I thought it us going to be pushed back to 2014 at the earliest anyway. And now this confirms. Youre absolutely right its not going to happen. I want to talk about i want a thought experiment, a thought experiment. I want to put washington out. And i just want to talk about stuff that normal people would look at if theyre going to buy and sell stocks. Now, dominic, you can help me. From your reporting, is there a consensus Earnings Growth number for q 3 . We all right start to see some of the analysts taking down their expectations for this earnings season. It happens every single earnings season, especially in the two weeks that come right up to it. They take down their expectations. What is interesting about whether or not this is going to be a real issue, many of the experts i speak to think that the shutdown is a big deal, yes, it is. The debt court of appealing is a big deal. But theyre looking for some kind of validation from the earnings season. The microeconomic details that say companies in america are actually still profitable and still trying to grow their profits. Now, what is going to be more interesting is whether or not yes, we always talk, guys, about sales growth, topline growth. Thats an indicator. We know were not going to see a robust. Profits. Yes. And profits are the mothers milk of stocks i say for the 9,000th time. But even if youre not getting the revenues, you can find a way to be profitable if youre a clever company. Sure. And i know lots of companies that get lots of revenues and waste the money and are not profitable. I want to ask you, larry mcdonald, go fast for me. Profits, expectations. You buy the market the market or sell the market . What you thinking . Im a seller coming into this earnings season, only because in the first two quarters, were averaging about 2. 5 Earnings Growth. And the last two quarters the street is expecting 6 to 8. So youre a seller . A seller. I think qe has created a massive disconnect between earnings and where the market circumstances i completely disagree because i think earnings have been driving the market ever since march 2009. In fact, if you go through it, many people have made this comparison. The markets increase since the bottom in 09 is almost precisely the increase in profits. So its not a coincidence. I dont disagree that the fed helped. But what are you looking for on the floor or money managers. What are people looking for profits . I think as you dominic mentioned that the expectations have been lowered a little bit already. I think this quarter is going to come in very similar to what weve seen over the last quarter or two. And that its probably a 70, 75 match or beat on earnings. And about 5 growth . That aint bad. That aint bad. No, its not bad at all. In a 2 economy. More of the same. And what that does is put the fed on hold with making any other decisions. It keeps the floor underneath this market. Good. A difference of opinion. Ive got to get out. Sorry. Larry mcdonald, Warren Meyers, dominic chu. Now, an Obama Administration official says, and i quote, were winning. In other words, team obama likes the shutdown and wants to keep it going. Very clever. Were going ask our expert panel up ahead. But first, look how cnbc covered the lack of a jobs report this morning. Check this out. September nonfarm payrolls, not released. The unemployment rate, we dont know. Average hourly earnings, not released. You got to kind of forgive me, guys. But after doing this for the better part of 15 years, im going through jobs report data withdrawal right now. I was made to work. Make my mark with pride. Create moments of value. Build character through quality. And earn the right to be called a classic. The lands end no iron dress shirt. Starting at 49 dollars. A confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Welcome back to the kudlow report. Were back with our free market friday panel. We have blake zeff, michael steele, and mark simone. Okay. I just want to review some of the bidding here. One of the geniuses in the obama operation says were winning, okay, were wing. It doesnt matter how long the shutdown lasts as long as were winning. Michael steele, you were the head of the Republican National committee. What kind of attitude is that and where is that going to lead . Well, i think it leads to a very dark place. And i think a lot of a lot of people, whether theyre votering or not, just american citizens who hear Something Like that, who have been furloughed or who know that their paycheck is only going to have four hours worth of pay in it next friday are going to be very, very concerned about the seriousness with which theyre taking this problem. And, you know, that attitude that, you know, were winning, well, what are you winning . How you winning . Right. If youre not negotiating, if youre not in the room sitting down trying to work out the problem people are getting laid off, furloughed, whatever. No one is wing there is no win here. Listen to, this how do they come out and, would you say that if you were in that operation, that were winning . I probably wouldnt. Its a dumb comment. Did you see the hot mic video where its rand paul and Mitch Mcconnell and mcconnells got his mic on like us and said look, i just did an interview. I think theyre going to lose on this. This isnt the position we want to be in, but were going to win this one. Its not excusable. Its happening on both sides. Theyre both wrong for saying it. All right. Theyre both wrong for saying it. When youre in the trenches, whatever rand paul said to Mitch Mcconnell, thats interesting. They have no real power in the senate right now. These are obama people. And they look at it like a big game. And boehner blasted them today for it. Said this is not a game, this is serious stuff. I dont know if anybody really understands this. Watching tv today, and jay carney is on, i thought nonessential workers are furloughed. [ laughter ] we had 17 shutdowns in 30 years. We had seven shutdowns in the reagan years. I was essential, i just want you to know. I was really essential. I was. Sorry. I think you made the best point in the last segment about the best Program Obama ever created for economy is the sequester. Yes. Lets double down on that. Lets go another 1 next year. By the way, this is an important point. We dont have any time. I do not want to lose the sequester. And i am afraid that a deal, quote unquote, the sequester will go away. I think youre right. And i think that would be terrible, and republicans should be ashamed of themselves because cutting spending is progrowth. Its the one good thing they have done. Blake zeff, michael steele, mark simone you are all fabulous. Thats it for tonights show. Im larry kudlow. With luck, well be back here on monday. Thanks, everybody. My customers can shop around see who does good work and compare costs. It doesnt usually work that way with health care. But with unitedhealthcare, i get information on quality rated doctors, Treatment Options and estimates for how much ill pay. That helps me, and my guys, make better decisions. I dont like guesses with my business, and definitely not with our health. Innovations that work for you. Thats health in numbers. Unitedhealthcare. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. Therell be the usual presentations on research. And development. Some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. To help you take charge. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. In a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Narrator in this episode of american greed the fugitives, victor and natalia wolf come all the way from russia, reeking of success. He had very expensive watches. I think his watches were probably 60,000, 70,000. Narrator setting up a realestate business in florida, they sell hundreds of acres of land, but allegedly not all of the land is theirs to sell. Were talking about basic stealing of land by forging documents and deeds. Narrator they are in business for only two years and they are accused of stealing tens of millions of dollars, and just as their victims begin to catch on, victor and natalia disappear. Their timing was excellent. They are not stupid. Greedy . Yes. Stupid . No