Transcripts For CNBC The Kudlow Report 20131023

By the white house to hide prices for Insurance Plans until after a user registered in obama care is a big reason for the website failure. And some of americas Top Health Insurance Company Chiefs have just wrapped up a hastily arranged white house meeting. They criticize the Communications Breakdown between the obama care websites and their own system. So many errors, they cant sign people up. Good evening, everyone. Im larry kudlow. This is the kudlow report. We are live here at 7 00 p. M. Eastern, 4 00 p. M. Pacific. We have just in besides the breaking news, nbcs chuck todd. He is reporting the white house hopes to slide the deadline for individuals to be required to buy Health Insurance by as much as six weeks. Now individuals will only have to have started the process of inrolling in obama care by march 31st to avoid any financial penalties. Thats the white house going in that direction. Eamon javers live in washington, d. C. With all of this latebreaking news. Good evening, eamon. Whats really happening down there . Good evening, larry. Well, you just gave the big news here, and that is nbc news is hearing from white house officials who say they want this key obama care deadline now to slide. They say that individuals until now were expected to begin starting up signing for obama care by february 15th. They want that to slide to march 31st. Thats a big slide, and its one of the key deadlines in the beginning parts of obama care that all because of the problems that you were talking about in the obama care website, healthcare. Gov. Meanwhile as you also said, the ceos of the nations Biggest Insurance Companies were at the white house today. We have video of them walking in for their meeting earlier today. The white house says a key subject here was discussion of the socalled 834 forms. Now, this is a crucial backend piece of the website. All of the reporting so far has focused on the front end of the website, problems people have had signing up for healthcare. Gov. This 834 problem however is a backend problem. Its a problem with the data going from health care. Gov to the Insurance Companies and somehow showing up garbled over the Insurance Company end. That could be a big problem for the companies and for individuals who get insurance through the obama care website, because if their data isnt right, their insurance isnt going to be right. And earlier today, we heard from speaker of the house john boehner who said that he thinks there are bigger problems with obama care. When you look at the problems with obama care, all the focus here lately has been on the website. Clearly, there is problems with the website. But i would argue that the problems go much further than that. And all this coming on a day when we saw an increasing number of democrats now starting to call for delays in the implementation of obama care, arguing that its simply not fair to ask people to sign up for a Health Care Service and penalize them for not having it when they cant get on the website to do just that. And tomorrow, larry, were going to hear from some of the executives from the firms that built this website. And you can expect theyre going to get very, very tough questioning up on capitol hill as to what exactly went wrong here, what its going to take to fix it, and how long that whole process might take, larry. They already released their testimonies or at least parts of it. We have a sense. And youre exactly right. This frontend, backend dichotomy is one of the Biggest Issues. Well get to that in a minute. I want to ask you one other thing, eamon. Sure. When will we see Kathleen Sebelius, the secretary of hhs. When will we see her . Were expecting to see next week up on capitol hill. Apparently there is not going to be a u. S. Government person up there tomorrow. Were going to see just the contractors who built the website. That might put sebelius and the government at a little bit of a disadvantage here, because you can expect that the fingerpointing here is just going to be fast and furious. You expect to hear from the contractors that they were given unrealistic deadlines and a lot of pressure from the white house and from the government, including sebelius. You can expect she would then want to put the blame somewhere else. I think its a huge mistake, i agree with you, eamon, a huge mistake. The contractors, you are exactly right. Theyre pinning the blame on white house decisions for Early Registration before you could go browsing and shopping. And that has a lot to do with this. And she is going to let that sit for all weekend long, friday, saturday, sunday . She probably wont go on the sunday talk shows. I think its a huge mistake. Part of the problem for the white house, larry, is that sebelius has not done well when they have used her publicly in high profile segments. A couple of interviews that have not gone very well in recent weeks for her. So there may be a little wary of putting her out in a very High Pressure situation like this until they have a chance to really go through some of these problems and have some good answers for her to give. Right now they dont have a whole lot of good answer. They simply say there are problems. Were working on it, and we dont have an estimate of how long its going to take or what exactly the problems are before we can get this whole thing fixed. Many thanks to eamon javers, cnbc washington, d. C. Now, lets give you more of the latest obama care headlines there is more. Hhs secretary Kathleen Sebelius said in an interview that president obama did not know about the problems with the website until it went live october 1. Meanwhile, congressman paul ryan is trying to get sebelius to testify in front of the house budget committee. He says she has been trying to get her testify for more than two months. The new shop and browse feature on the obama care website often shows users inaccurate information. In some cases, prices shown are half the actual costs. And then there is a report from north dakota that says the Obama Administration is trying to hide the low enrollment numbers. One official with Blue Cross Blue Shield there says the federal government told the insurer not to go public with the data. But the company did anyway. And only 14 North Dakotans signed up in the first three weeks. All right. Unbelievable. Lets bring in our distinguished panel of the night. With us is former health and Human Services assistant secretary ben sass. Now he is a republican candidate for the u. S. Senate in nebraska. Bob krzyzeweski. Gentlemen, thank you very much. Let me just go to ben. Let me start with you. I want to touch about this breaking news that the white house might extend the signup period for at least six weeks, that all these Democratic Senators running for reelection. Likewise, the white house on the run or are they making an astute decision to cut the rug out from republican criticism . Yeah, larry, i think that we know that there have been claims about being the most Transparent Administration in history. All of the data about the runup to the rollout of this website has been hidden, and now we know were having the information hidden from us about how many people are actually getting enrolled. I think the white house should be doing more than a sixweek delay. They should hit the pause button and admit right now this is not implementable and not ready for prime time. Bob, you said at one point in one of your blogs, ive reading up. Its really great stuff and an enindication for me. You said it would be have been off if they shut it down right away. With the sixweek delay, in your opinion, is that enough to accommodate the demand that is out there, or should they go longer . Nobody knows how long its going to fix. I absolutely agree. One of the biggest problems weve had here is everything is top secret. We dont know what is wrong yet. We know the symptoms, but thats all we know. Another thing that is interesting about all these Democratic Senators wanting to extend the mandate, what theyre essentially saying is the Insurance Companies have to take all the sick people for as listening as they want to extend the mandate, but the Healthy People dont have to sign up. This is just part of the train wreck that is evolving right here is the congress of the United States going to include as part of that legislation a subsidy for the Insurance Companies to pick up all these desperately ill people who want to sign up for Health Insurance right now . Because the Healthy People are going to sit it out as listening as the mandate is postponed. This thing comes completely out of balance. This is the Unfunded Mandate of all unfunded man dates. Does it unravel . You say out of balance. Interesting term. What youre basically saying is the sicker people, theyre going to come in first, but theyre going to cost a lot of money. A lot of money. Youre saying secondly, the younger people, the younger healthy cohort of which theyre expecting close to three million to sign up i think in the first year, they are going to stay away. Now, what does that mean out of balance . Does that mean the problem implodes . Does that mean the Insurance Companies get penalized . Does that mean this thing just has to break down . What i think the Administration Still does not understand is that they continue to talk about these website problems as if its just a computer problem. Were going to get beyond it, and obama care is going to be there. The way this works is weve got to get many more Healthy People signing up in order to pay the costs of the sick people. These website glitches are such that the sick people are sitting up all night in their pajamas to sign up for this thing. The Healthy People look at it and say i dont want to fool around with this. Im hearing all these horror stories. So what you get is a pool of insured that is mostly sick people, not healthy, and the whole program implodes. Now, if theyre going to extend the mandate a year, which i agree, they may have to do. You cant force people to pay fines if they cant sign up. I understand that problem. But if they extend the mandate a year, theyre just inviting this, theyre inviting this to be nothing but a pool of sick people. Right. And it blows up financially. It does. Theyll come to congress and they wont get it. Theyll want more money and more taxes. Theyre not going to get it. Ben sasse, everyone is jumping on sebelius, blaming her, saying she ought to be fire and so forth. Maybe she should. I dont know enough about it. But one of the Key Contractors releasing their early testimony for tomorrows investigative hearing blames the white house, blames the administration for a crucial decision. I want to get your take on this that the front end, the front end of this they decided that only registered, you have to register with a lot of personal information in order to see the prices. And see all the other specifics and the financing methods of these plans. Not browse, not shop around. You have to register. And that held back a lot of people who were going to register, but decided it wouldnt work. Is it the white houses fault because they wanted to hide this information and hide the prices, or do you think sebelius was part of that decision . Yeah, i dont think we know the answer to who knew what, when. But whats clear is in the administration across the white house and hhs, there was a desire to hide from the American People and from reporters how much rate shock there was going to be. So theyre claiming your north dakota example was a good one, only 14 people getting enrolled in north dakota and trying to prohibit the insurers from releasing that information. Theyve tried to claim there are 450,000 people who are actively engaged on the website. We dont know what small fraction of the 450,000 are enrolled, and we dont know what the average rates are. Oso to bobs point, the white house thinks according to cbo calculations, they need seven Million People to sign up next year. 2. 7 million of those have to be young, Healthy People who are paying rates that are much higher than the market would normally bear. Thats why they tried to create this wall on the front end so you couldnt see the real rates systems of ultimately this isnt just a website problem, its a political problem. Go ahead, bob. It sounds like let me just ask. I think what ben just said is right. This sounds like at the last minute now this is what the contractors are saying in their released testimony. I cant swear on it. But look, it sounds like at the last minute, the white house made a decision to put the registration first and the shopping second, and the contractors are going to say that that screwed up their whole system and put everything on overload. In your judgment, does that sound right . Is that a plausible explanation . Because if it is, then the white house is going to be blamed bigtime for this. There is no question about that and the contractors are finally talking. But what has happened here is rate shock has been such a serious issue. The administration has worn up and down there is no rate shock. Let me tell you, millions of letters have gone out to people in the individual Health Insurance market today telling them that next year when they go to obama care, their rates are going way up. The Insurance Companies by and large are giving their customers the chance to change their renewal date. Its a loophole in the law. If you change your renewal date to december, you can keep your old rates and your old Insurance Plan for 11 more months. Larry, i talked to a Health Insurance company ceo today who told me that theyre offering this to their customers. And the customers by 151 are choosing to stay on their old products and their old insurance rate base rather than to convert to obama care. Right, right, right. 151, that tells you there is rate shock. They were promised, they were promised initially by the president. If you like your Insurance Plan, you dont have to change it. If you like your doctor, you dont have to change it. We are learning thats completely untrue. Huge states in california and florida, for example, are ceasing, ending the insurance policies that people had. Literally. Absolutely. Hundreds of thousands of policies are ending because of obama care whereas the president , whenever it was, two, three years ago and still says its not necessary. Larry, its millions. Its millions. Its millions of policies. Its absolutely millions. There are 19 Million People in the individual Health Insurance market. The vast majority of them are losing their policies. Those policies are vaporizing. And thats another problem here with these computer systems. The Insurance Companies have been by law required to vaporize those policies effective december 31, and these people are supposed to go reenroll. They cant get on the website to reenroll. There you go. Real quick. Go ahead, ben. Real quick. I was just going to say, bobs point is quick. 80 of the individual market is evaporating in florida. But because you cant get on the website and youre hidden to whats in your plans, no one even knows if their own doctor will still be in their plans because you cant get to that detail on the website. Its all hidden on purpose. Gentlemen, thank you. I really appreciate it. Now, well go to stocks. The rally took a pause today, but came back well off the lows of the day. Were going to look at that with our ace investors. And later, team bohms Foreign Policy track record just keeps getting uglier. Just today, two longtime American Allies showed their displeasure with the white house. One even made an accusatory phone call to the president himself. We have all the details. And as usual, dont forget free market capitalism is the best path to prosperity. This obama care plan is the exact wrong direction. Im larry kudlow. Well be right back. What you wear to bed is your business. So, if youre sleeping in your contact lenses, 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. Welcome back to the kudlow report. Stocks took a breather today. The dow losing 54 points. The nasdaq down 22 and the s p off a few points breaking a strong streak before today. The benchmark closed at record highs each of the last four sections. Caterpillar proved to be a big drag on the markets today, down 6 after a report in earnings falling short of analysts expectations. The company also lowering its Sales Guidance for the full year. And we want to show you oil, falling again today, down to 97 a barrel. And the yield on the tenyear note fallen to 2. 5 . Larry, back to you. All right, courtney. Thanks very much. All right. Lets go. And look at the statement. We have steve cortes with us from veracruz. Steve, welcome. Thank you. My pale munson couldnt get hooked up in new mexico. Bond rates continue to drop. They were near 3 a couple of months ago. Theyre now below 2. 5 . And secondly, Oil Prices Continue to drop. What does that mean . How does that affect the Investment Strategy . You know, larry, i think i can connect the dots between those two and add in the third factor that courtney mentioned which is caterpillar. I think all three are directly connected to china. So the reason the u. S. Stock market got hit today and it wasnt a severe hit, i think the main reason is last night china tightened policy. The chinese stock market and the japanese stock market got hit hard. Then today anything chinarelated really got smacked. If you look at yum brands, for example, caterpillar, china is the big marginal buyer of crude oil. I think that is primarily what sent commodities, especially crude oil lower. And where are the chinese putting their money . Not into their own stocks, but into u. S. Treasuries. So that forces rates ever lower here. Were now at 2. 5 . We were just at three a few weeks ago. A pretty swift decline in rates here. I really think its not so much about the u. S. , its about trouble on the other side of the world. I just wonder than. Estimates coming out of china for gdp stayed 7. 8, 7. 9 . Retail sales, industrial production. I dont want to get bogged down this china. Its possible people overreacted. Money market rates went up in china. Thats like the equivalent of our fed target rate. But i dont think this is a real tightening move. I think this is technical. And i dont think it has lasting value. Im interested, though, something we talked about last night, dropping crude oil and falling gasoline prices. Very bullish for consumers and businesses if it lasts. Yeah, larry, i completely agree. Thing is a great move for u. S. Staples. So the half v to kind of stocks, like walmart is a company that is doing very well lately. And the drop in gasoline, as you mentioned particularly is great for the staples. I like if youre looking for an etf, the xlp represents lots of the staples together. I dont think you want to be in the gogo momentum names. Yesterday we saw massive ranges in names like netflix and tesla and the highflying glamorous games of the stock market that came off very hard. I dont think you want to be in those names. But i do think you want to be invested in consumer staples. The one i like best is walmart. Steve cortes, what about what im calling the janet yellen dollar . I know she hasnt taken over yet. And bernanke agrees with her. Dollar has been falling that could help the stock market in the shortrun that could help cyclical sectors in the short run. But that could also be very dangerous in the long run where. Do you come out on the dollar . Larry, i think youre exactly right. And its really disappointing to see, for instance, the Euro Currency rally to levels that we hadnt seen since 2011. So fx markets clearly are saying they do not have confidence in janet yellin. They do not believe she will espouse a strong dollar policy. We certainly rant seeing it from the fiscal side. The markets are telling us the dollar is in trouble. I agree with you. Can that be a nearterm positive . Yes. I think it has been for Global Markets over the last few months. But is it a longterm positive . No. You dont have a sound economy without a sound currency. I agree with that. We need to start defending the United States dollar again. I agree with that. But im just interested. Bond prices are going up and rates are going down. And therefore i dont see why stock prices cant keep going up. In other words, let me just people are saying the multiple on the s p is too high, 16 times earnings, more or less. I dont think thats historically too high. Its not cheap, but i dont think its historically too high. On the other hand, on the other hand, convert that into a yield. That means the equityrisk premium 6 1 4 is the stock market yield. Compare that the a treasury or a corporate bond. The risk premiums on stocks are still very attractive. And thats why i dont see why people shouldnt stay in the stock market. I tend to agree. I think that easy Monetary Policy is enough to keep the market going probably for some time. My guess is through the end of the year. But i do also think this kind of Central Planning from Monetary Policy is ultimately dangerous. And does create a misallocation of capital. But i do think for right now with rates this low that the stock market continues to do reasonably well. But i also think its important to point out, i think many of our viewers know this inherently, it doesnt necessarily mean that the underlying economy is improving. And i think thats the Biggest Issue longterm. Its not. Its lousy 2 . Youre right. The fed has become the greatest central planner in history. Thats wrong. We tutsi have some commodities and goal behind the dollar. But we dont have any of that, steve. And my bottom line here is while we fight for that stuff, i still think the situation with bond rates steady to falling and stock premiums over bonds pretty hefty, i think its still an attractive place to be. Steve cortes, thanks very much for coming back on the show. Now, folks, it was a big day in detroit there is a bankruptcy saga going on, as you may know. The citys unions and Pension Funds are in court to demand they get every penny promised to them. Weve got that story next up on kudlow. The American Dream is of a better future, 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. Today in detroit, a judge started hearing arguments about detroits plan to file for chapter 9 bankruptcy. Scott cohn is in detroit for thus evening. Good evening, scott. Reporter larry, is detroit really so broke that it needs bankruptcy protection, or is this just a clever trick to try and get around the citys pension obligations . Hundreds of protesters showed up at day one of this bankruptcy trial to argue thats exactly what is happening. The attorney for the American Federation of state, county, and municipal employees says pensioners are being used as scapegoats. Youre talking about retirees that are making 18,000 a year. So were not talking about you know, a lot of people with a lot of money to spare. Reporter but kevin orr, the emergency managementer appointed by michigans republican governor rick snider to take over the citys finances says bankruptcy really is the only alternative. It gives us an opportunity to have a structured environment with federal Court Supervision for a comprehensive solution to some very real problems. Reporter if the city prevails in this trial, detroit could have its finances reorganized as soon as the spring. And we learned today that governor snyder, a lightning rod in this whole dispute, has agreed to testify in the trial. He could be on the stand, larry, as soon as ponl monday. All right. Many thanks, scott cohn. Appreciate it. Once again, we are jampacked with very Important News on obama care tonight. That includes news on four key Democratic Senators now calling for delays and key changes to the obama care individual mandate. We have more on that coming up. But first, its time for some tonights obama care comedy lightning rounds. Check it out. The president said yes today that it was taking too long when youre having trouble, you can bypass the website and enroll by mail. See, only the federal government could come up with a website that is slower than sending something by mail. Isnt that amazing . First, the website is all screwed up. Thats got a bunch of glitches. And now people are getting a busy signal when youre trying to apply over the phone for obama care. So you cant use the internet, and you cant use the phone. And now fax machines are look whose come crawling back to mr. Fax machine. Obama care having a hard time. Yeah. Yeah. Colorados obama care website is trying to sell obama care to college kids by calling it brosurance. Yeah. Unfortunately, the website wasnt working today because its brobroken. Thank you orville and wilbur. Amelia. Neil and buzz for teaching us that you cant create the future. By clinging to the past. And with that youre history. Instead of looking behind. Delta is looking beyond. 80 thousand of us investing billions. In everything from the best experiences below. To the finest comforts above. Were not simply saluting history. Were making it. Avo sales event is sback. Hen drive which means its never been easier to get a new passat, awarded j. D. Powers most appealing midsize car, two years in a row. And right now you can drive one home for practically just your signature. Get zero due at signing, zero down, zero deposit, and zero first months payment on any new 2014 volkswagen. Hurry, this offer ends october 31st. For details, visit vwdealer. Com today. Welcome back to the kudlow report. Im larry kudlow. All right. We have an avalanche of latebreaking stories on obama care tonight. Just to recap, first, president obama starting to feel opposition from his own party. Weve just learned that West Virginia democratic senator joe manchin is working on draft legislation to delay the individual mandate for a year. Other Democratic Senators, especially those running for reelection next year, may join manchin. Second, the lead contractor for healthcare. Gov is pointing fingers. Its blaming other contractors. Also saying a decision by the white house to hide prices for Insurance Plans helped create the problems with the website. And then they head to the Biggest Health insurers in america were at a white house meeting today, hastily arranged. And they were talking about an issue that could be even more problematic than the website glitches. Now lets focus on some of this. How the democrats are running scared tonight. Are they . Is this a dismal obama care rollout continues in its 23rd day, how much damage. We told you about democratic senator joe manchins bill to delay the individual mandate. But how many other democrats are going to follow . And just what could the political fallout in the 2014 midterms be . All right. Lets talk. We have former Obama Campaign aide, democratic strategist mark hanna, and Health Policy expert grace marie turner, president of the yellin institute. Mark, is there a revolt going on here . And the white house itself today said they would entertain a sixweek delay of registration or enrollment for this plan. The white house on the run because democrats are scared . No, no. Larry, one democratic senator does not a revolt make. But, look, democrats have legitimate concerns about the obama care rollout there is no question whatsoever its been a sloppy process, a messy process and an embarrassing one not just for the administration, but for democrats. What you see are legitimate concerns that Democratic Senators are have that if youre not able to get on the website and enroll for this coverage, shouldnt you have a few more weeks to do it . As it is now, americans have five months. The deadline is five months away. If these bugs are fixed in good time, then there is plenty of time to register. The white house made this statement. They said that they were taking a look at a sixweek extension. Essentially, from february 15th to march 31st. And i must disagree with you, mark, about just one democratic doesnt make. Its not only senator manchin. Its senator gene shaheen from new hampshire. Its senator beg begin from alaska. Right. Its senator pryor from arkansas, and then manchin. I wouldnt be surprised if mary landrieu, senator landrieu was in that too. These were the headstate senators up for reelection in mitt Romney States that i thought were going to delay the whole individual mandate to begin with. Grace, i want to bring you in on this. First of all, are the senators right . And second of all, the White House Acting correctly to extend this . That includes the tax penalty, which would also be extended. You know, larry, remember last summer when the administration decided to delay the employer mandate because the employers couldnt comply. And the housepassed legislation said lets delay the individual too and the president said he would veto that legislation because it was so important to this law. And now because of this disaster, it is not a glitch. This is a disastrous rollout of this health plan, then they themselves are saying that they may have to delay the individual mandate because people cant enroll. You cant force people to pay a penalty when they cant get this product. Right. And applying on paper, every one of these applications, whether you call on the phone or whether you fill out a paper application, all of that has to be processed through the website, for one thing, to find out if any of the seven different agencies that it has to be processed through yeah, i get that. I dont want to go too deep in that. I want to follow up with another question for you. Okay. Youve got these democrats changing their position, and youve got the white house possibly changing its position. So in a sense, i want both you have to go to this. But gracemarie, you first. In a sense, does this diminish the damage that was done to republicans over their being blamed for the shutdown . Because in effect, okay, although its not defunding, its postponing the individual mandate, which was a key republican position. Does this take a lot of the heat off the gop as it blows up in the white houses face . I think it shows that they were right in the beginning. And larry, you were talking earlier also about how did this happen. A decision was made in september to put to make people sign up first so they could find out what their subsidized price would be for this insurance. They didnt want the see the full Sticker Price of this insurance. Somebody politically i think made a decision that people were not going to see the full Sticker Price. They were going to see the subsidized price. And in order to do that, millions of people have to put their personal data into this computer at the same time, and it crashed. So i think the white house has to look very carefully at itself. Did they cause this. Mark hannah, this is going to be a big thing. Trust me on this. I know youre an obama guy. Right. But youre going to have the contractors tomorrow testify i think its Darrell Issas committee, investigative committee, theyre going to say what gracemarie just said. On the eve of the launching, which is october 1st, in september, they were given orders to reverse the role. In other words, you cant just shop and browse first. You had to register first. And the registration was very personal information in order to get all the correct information, which they still didnt get on prices anyway. Now, that is going to be a charge leveled against the white house. Right. And the president. Sure. Youre not going to get around that. And the republicans are going to say see . We told you so. We told you so. And the white house, because it has a tendency to confront reality, unlike some Political Parties i know will adjust to the changing nature of reality. If its determined that there was botched what will they say, mark . Give me a for instance. What will they say . I cant speak for the white house, but i wouldnt be surprised if they delay the signup for the mandate because theyre confronting reality. Again, there is a reason why but thats an ahha moment. But its not a civil war. Its not a civil war in the Democratic Party the way the shutdown was a civil war in the republican party. Well, all right. Thats a false equivalence, larry, and you know that. Thats inside. Nobody gets that. What im saying is if the white house is having this ahha moment that they have to extend the signup period, because you have all the senators, and its not just going to be the four or five, youre going to get a whole bunch, the white house has that ahha moment, i think that takes some, not all, but some of the heat off of the gop. It changes it. Larry, it cost 24 billion by s ps measure. The fact that we shut the government down over this temper tantrum. I dont believe that you dont belief that either. You dont believe the s p . No, i dont believe the s p with all due respect to the s p. Mark hannah, i do try to believe you sometimes. Thank you. And gracemarie turner, it is always great to see you. Thanks to both of you. Now, if you think the white house had a bad domestic policy day, wait until you hear what happened on the Foreign Policy point. Why the german chancellor Angela Merkel made an angry call to president obama himself today. And saudi arabia isnt too happy with us either. And later a blockbuster new book says congressional leaders simply manipulate the entire legislative process in order to maximize lobbyist donations. They cant help themselves. Well talk to author of the book, Peter Schweitzer, and the book is already making a big splash. First up, look at this video we found. Here is president obama in 2010 demonstrating just how easy it was supposed to be to log on to the obama care website. Oh, what might have been. Hello, everybody. 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And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Welcome back to the kudlow report. Im courtney reagan. Well, german chancellor Angela Merkel called president obama today to complain after she learned u. S. Intelligence may have targeted her cell phone, saying that would be a serious breach of trust. Here is the white house response from u. S. Press secretary jay carney. The president assured the United States is not monitoring and will not monitor the communications of the chancellor. Larry, there are some people out there very carefully parsing carneys words. He said its not happening now, present tense, and its not happening in the future. But some are noting he didnt explicitly say it never happened in the past. Right. I think thats why she is so furious. Thanks, courtney. Appreciate it very much. Joining mow to talk about this, we have michael rubin, scholar at the American Enterprise institute and john bachelor. I dont really care that much about the miracle story. But i just want the get a take on it. John bachelor, do you really think we were tapping into her phone . Thing is super serious. I think the suggestion is that it has happened, and thing is a sharp break, a very bad breakdown between berlin and washington. The chancellor is very angry, and she grew up under the stasi. This is a stasilike maneuver. She is more than a little annoyed. This is going to cause damage throughout europe. Michael rubin . Absolutely. President Obama Campaigned and early on in his administration he said that his goal was to repair all the relationships which supposedly frayed under the george w. Bush administration. Now when we fast forward several years, we see that the real damage has been done under president obama. All right. Well leave it there i want to turn to another Foreign Policy story. These are these new reports that suggest our decision not to intervene in syria coupled with what appears to be a warming relationship with iran, plus some cutting off of egypt. All that is suggested we may lose the backing and alliance of a decades old ally, plainly saudi arabia. John bachelor, i want to go here. I think this is an earth shattering story. The reports say there is a threat, that the saudis havent made up their mind. But they are angry we cut off money to egypt. They are angry there was no follow through to syria, and theyre angry that we seem to be warming relations with iran. Is saudi arabia going to go the nine yards . Are they going to walk away from us . My information tonight is that it is done. Saudi arabia has walked way from the United States and is now in conversation not only with cairo, which has also been alienated by the Obama Administration, but also with moscow there is a new Alliance Coming in the middle east, larry, and that is going to cause trouble throughout the gulf. Where is saudi arabia going to get their weapons . We supply them. Were going to outproduce them in oil and gas. But particularly the weapons . The russians are happy to sell, and there is enough of our weaponry floating around. Everybody will sell to the sawed saudis for cash. The saudis have broken with the Obama Administration because of iran. Not because of syria, but because of iran. The saudis have been saying very clearly to the president for years that iran is a profound threat. He has turned his back on them. They even believe he has betrayed them to make peace with iran. This is at very sharp move. Michael rubin, put yourself in the white house now. Do you think president obama understands the kind of power, relationships that John Batchelor just talked about . Does he get it . I dont believe he does get it. Its hard to think that he would proceed with the policies he is proceeding with in the way he is doing if he truly understood the situation. Under his administration, the United States has developed a troubling reputation for coddling adversaries and treating allies with disdain. The saudis, the egyptians, the israelis are all asking what is the value of being an ally of the United States at this point if this is the way the white house treats us. So, john, what if prince bandar, maybe its already happened, goes and has a meeting with president obama and just tells him this straight out, or maybe he has already done that. I mean, its hard for me to believe that even president obama would disrupt this relationship which what, goes back to fdr, if im not mistaken. Prince bandar has paid for every langley and white house adventure since for at least the contras. He is tired of paying for it. Its over, larry. Thats my information tonight. This is not contingent. Its done. Im talking to riyadh. Im talking to moscow. They know its done. Michael rubin, you reckon its over or still in the discussion phase . Well, let me put it this way. At the very least, what were seeing is ashot across the bow in a way that is more serious than what weve seen in decades. But the whole confidence of our arab allies in the persian gulf has been shaken. The second president obama talked about pivot to asia, because this the life span of all the defense ministers, all the kings, they remember harold mcmillan, the british Prime Minister in 1968 who talked about abandoning east of suez, and then the british left two years later. What that gulf arab ally sees is history repeating themselves. They believe theyre being abandoned, and theyre going to accommodate whatever they need to do in order to come out ahead. All right. Well leave there it, gentlemen. Thanks very much. Michael rubin, John Batchelor, we appreciate it. Now, very controversial new oped says members of congress manipulate the entire legislative order in terms of getting money from lobbyists and donors. Thats right. The man who wrote the oped, Peter Schweitzer is about to join us and tell us how to make money in washington. Brandnew bombshell investigation reveals how washingtons underground economy really works. Politicians extort money from you and me, then they use it to buy each others votes. That may be a little simplistic, but there is a lot of evidence. Here now to reveal the dark side of d. C. Is peter schweizer. He is the author of the new book extortion how politicians extract your money, buy votes and line their own pockets. Welcome back, peter. Thank you, larry. What is a tollbooth . A tollbooth is basically a method of charging people for a congressional leader to perform their duties. So for example, the speaker of the house, whether its nancy pelosi or john boehner, a vote for a bill comes out of a committee. It needs to be scheduled for the full house floor votes. Theyre going to delay and wait until the affected industries cough up enough money. Until the money comes. Absolutely. And they do it all the time. And then they can move it down the legislative highway. These are just procedural . These are just scheduling votes. Thats exactly right. Honestly, the reason things dont seem to get done in washington, there are milker bills. These are bills that have nothing do to do with the dairy industry. Its all about lobbying for family and friends. Do you think, let me go back to. This were going to get to obama in a minute. You go ahead. This last shutdown episode with all these issues involved, massive, huge, large issues, do you think this tollbooth and milking things, does that play a role . There are always a lot of procedural votes. And i always wonder what is behind those votes. I think so. I mean, the reality is if you just look at the economics of it, larry, if youre talking about campaign donations, lobbying gigs, et cetera, there is not a lot of money, frankly, to be made in washington by fixing problems. Having crisis, having conflict, thats where you maximize your potential to raise money. Youve got to create fear in the mind of either a powerful industry or a constituency group. And so thats part of this. So, yes, when youre talking about the shutdown, youre talking about procedural votes, youre talking about crisis, a fiscal cliff. Tax policy which is so important. Absolutely. Regulatory policy. Absolutely. All right. Lets go over to the house, because youre an equal opportunity barber. Obama really hosed Silicon Valley. Really led them down the garden path on the antipiracy bill. Tell us about that. Well, yes. This is an example of a double milker bill. A milker is when you go after one industry. A double milker is you set two powerful industries against each other. In this case, hollywood and the hightech industry over the stop online piracy act. The double milker was basically the Obama Administration setting off an arms race saying which one of these powerful industries is going to pay the most and raise the money cash for us . And were not going to announce our position on this bill until the 11th hour and 55th minute when weve milked both sides. Thats exactly what they did. Two points. How much money did he take in while this process was going on . Well, millions of dollars. He thought Silicon Valley was a little shy, a little short. He wanted some torque from them. Did he get it . Yes, he did. Campaign raising the second part of that year went up fivefold in Silicon Valley. And there was real fears silicon was not going to deliver. Boy did they deliver after this. Were talking millions here . Yes, absolutely. Not small sums. Finally, did obama reward them . No. Obama rewarded Silicon Valley in the sense they didnt vote for the stop online piracy act. But it was hollywood that was furious. There were a lot of quotes from industry executives that they milked us. They told us we were going to sign the bill until we were all maxed out on our contributions, and only then did they make clear they werent going to support it. Did he ever sign the bill . He did not. And the bill did not pass. I thought hollywood loved obama. They did. The suits dont as much as the celebrities. And there is no laws against this stuff . Its legal extortion. Its like the squeegee guys in new york. They stand there with a sponge in one hand and the brick in the other. You dont have to say anything. Its apparent to people what is going to happen if you dont play along. Its not like earmarks. Earmarks may be dead, but this stuff is not. Absolutely. Peter schweizer, be sure to check out his new book. Its called extortion how politicians extract your money, buy votes and line their own pockets. Thats it for this evenings show. Thanks for watching. Im larry kudlow. Well be back tomorrow evening. . Trust your instincts to make the call. To treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. Axiron can restore t levels to normal in about 2 weeks in most men. Axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. Women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. Report these symptoms to your doctor. 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