Good evening, everyone. Im larry kudlow. This is the kudlow report. And we are live with you, everything you need to know heading into what will be a very important weekend. Lets get an update right away on the negotiations to get a deal done to raise the debt ceiling and end the shutdown. We go to nbc newss luke russert. He is live on capitol hill for us this evening. Good evening, luke. Reporter good evening, larry. A lot of optimism today when it started and came to the knowledge that there had been ongoing negotiations throughout the night between staffers for the House Republican leadership and the white house. But there is still no deal to report. Weve seen some different frameworks. First, the House Republican framework. They would have a thing with two tracts, an extension of the debt limit till november 22nd and a separate funding of the government. The extension of the debt limit would be done in exchange for large scale negotiations, figure out a way to address the large scale deficit drivers of debt. Then you have another tract which is from the government dill december 15th. Its unclear what the white house would give. Then youre starting to see some action on the senate side where Susan Collins of maine proposed repealing the medical advice tax, having it paid for and a sixmonth government funding bill as well as a sixmonth extension of the debt limit. Youre seeing two divergent trains here. Its unclear which one will eventually get the votes. We know that harry reid is opposed to the sixweek strategy brought forward by john boehner. Its unclear if john boehner could get that strategy out of the house with only republican votes. From where we stand right now, there is still optimism. But the prospects of having a deal as early as tonight or tomorrow, they dont look too good. It could be monday before we see some sort of vehicle in order to extend the nations debt limit. And how the markets react to that i think will really make or break whether or not to get a deal done by monday night. I think the polling data has shaken up the republicans. Were going to talk a little bit about that in a moment. But let me just ask you, i just interviewed senator collins, going to be on in just a few moments. I know shes contributing very important ideas on verification and ending the medical advice tax. Whos she negotiating with . Is she talking to democrats . Is there any process thats been put together, conferees inside the senate . Reporter its not gotten to that former level. The negotiations have been between more of the staff levels. Its still very much a fluid process. But what i can tell you is that i suspect that from where the president sits with this recent polling data showing the republicans branding a huge hit and hes backed them into a corner, i dont see why he would except a sixweek deal from the House Republicans. I could see him trying to work out a deal with the senate, six months, longer. They repeal the medical device tax. Have them change the Health Care Law in terms of verification for those who enroll, whether or not they should be able to have a work requirement. But while they might target the law and reneges on the idea of he wouldnt negotiate gives them a better play and puts the House Republicans in a difficult position. If john boehner is given a bill thats bipartisan and its take it or leave it and he leaves it, the republican brand could be as good as dead going into next year. I agree with you. I think thats exactly right. Thats one of the drivers for this whole process. As always, many thanks to luke russert. Before we get on with our show, i want to tell you how relieved i am to see that the house and Senate Republicans are finally going to climb out of the ditch they made for themselves with the Government Shutdown and the threat not to raise the treasury borrowing limit. May i say, these tactics never work. In fact, they are temper tantrums, not tactics. I assume every republican in washington can see the catastrophic polls where republican approval at 28 , the lowest in the history of the gallup poll. And the gop registered the lowest marks across the board from the history of the wall street journal poll. 70 of americans blame republicans for this budget battle. 70 . And you know what else . Not only were the gop geniuses wrong, that the public would be behind them to defund obama care, they were wrong to assume that millions of people were going to flock to washington and protest and that the president would even sign a bill that, by the way, would never pass anyway. Many gop strategists ought to be ashamed of themselves for their misjudgment and potential damage that they may have done for the 2014 elections. Meanwhile, all of this unnecessary interference with Government Operations in debt has obscured the catastrophic opening of obama care, which should have been the front page headline. But it has not been because the story is the gop is fiddling around with the debt ceiling. Republicans have not been able to tell the disastrous obama care story. They got hung up on other stuff and now its time for them to get out of this mess, lock, stock and barrel. Get out of the debt ceiling mess and get out of the shutdown mess. Final thought from me, republicans should be pushing for Economic Growth policies. Take this paltry recovery from 2 to 4 with some supplyside tax reform and disciplined spending and entitlement reform. This should be their message. Hopefully now the party is going to come to its senses and figure all this out. I say hopefully. Joining us now is house member scott riddle, republican from virginia. You put together your own plan. But before we get into the details, in your plan, you have, reopen the government. That was almost a revolutionary thought when you put this thing out a couple of days ago. For the life of me, i dont understand how shutting down the government would be on a separate track with the debt ceiling. I never understood that. Will the gop now stay on both tracks . Reporter im a businessman. I said we ought to open the government on october the 1st. I sent out a tweet at 9 30 a. M. Because i assessed where this was going to take us. This strategy weve been following. I told my staff and everyone who would listen, this thing gets worse, not better. Its going to put us in a putrid environment. Thats where we found ourselves. Your assessment of where we are and how we got here is accurate. What we really need to do, to swing that radar out farther, do whats right for the next generation of americans and deal with mandatory spending. Thats what my America First plan does. I appreciate the opportunity to talk about it. First of all, you also want to extend the debt, which i think is important. Everybodys on board with that. Let me ask you about some more controversial things. You want to repeal the medical device tax. I think thats great. You do, however, put in a plug of 100 billion in new revenues. Absolutely. Im curious, what are you referring to on that . Principally its limiting deductions for highincome wage earners, those that are making 1 million or more. Heres the reality. Republicans we voted for some spending that were not yet willing to basically get the tax revenue to pay for it. Thats the fact. And our democratic friends are no better. In fact, i think theyre really driving this business not responsibly addressing the spending side. Anytime we try to touch mandatory spending, they go apoplectic on it. What ive said here reflects two realities. It reflects a Financial Reality and it reflects political reality. But i would say this i would suggest this. Im a ronald reagan, jack kemp, paul ryan suppliycider. Why not go for fullfledged tax reform. The problem i see is you want to raise revenues by putting the deductions in on the upperend people. Thats what the democrats want to do to the 5th power and weve already had two major tax hikes this year alone. Larry, let me respond to that. This is my first elected office. I went right from running my own business, entrepreneur, to coming here. Ive been here 34 months. And this idea of comprehensive tax reform, i fully support it. But its elusive. Its all the way around the corner. Every time we try to deal with it. What ive presented here with the America First plan is a practical incremental step. Not saying it will fix america. But im saying i want to show that this institution, the Republican Party, the Democratic Party can come together and deal with at least some level of mandatory spending, start to get ahold of this, larry, because if we dont, you talk about it all the time on your show, it truly does threaten the foundation of our recovery. Im with you on that. Im also with you, by the way, in getting rid of the deductions. But where we disagree is i want to lower the marginal tax rates on the other side. This is for individuals and corporations. I think thats a matter of progrowth way to go. One of the things i want the gop to do, scott, i appreciate you coming on the show, i want growth. I want growth policies. I want people to talk growth, not austerity, not debt ceilings, not shutting down the government. I want growth. Absolutely. Look, energy is the principal way to do that. We can create 18,000 jobs right there off the coast of virginia for local residents in hampton roads, virginia, norfolk, virginia beach, if the administration would get out of the way and let us leverage those resources that are there. The governor wants it. The General Assembly wants it. Two u. S. Senators, both democrats want it. I ran on it. The administration is holding us up. I love the energy story totally. Many thanks, congressman. Now lets begin our expert free market panel for this evening. Here now we welcome former congressman martin frost. He was a democrat from texas. John fund is here, columnist for the national review. And kellyann conway. I may be too hard on him, but i think this whole bloody shutdown debt ceiling thing was one very big mistake. Youre entitled to your opinion. It certainly got the president s attention. Your points are correct in that theyve got to find a solution. Ive never heard Speaker Boehner say the october 17th deadline is not real. Ive never heard him once intimate to anyone publicly or privately that he would allow this country to go into default. I take note that the president s polling numbers have also fallen. Hes lost a ton of credibility over this. And hes now locking arms with john boehner. I havent heard harry reids name all day. I think thats very purposeful. Obama and boehner seem much more reasonable. Harry reid is like, hes the only mormon ive ever met with a potty mouth. He insults john boehner, insults ted cruz, insults the tea party. And theres no way to negotiate like a grownup. I think they will come to some kind of deal and well put the focus back on obama care. You cant perfume that pig. Its a disaster. The majority of the country is against it. 16 of the people in this country are going to benefit. Ive never seen a time when shutdowns or messing around with the treasury debt has ever helped that party do it. But i want to ask you, marty, democrat that you are, youre a very powerful and influential democrat when you served. Is kellyanne right about the harry reid problem . This guy could be his own worst enemy. The democrats have made a lot of mistakes not negotiating, for example, the military benefits, for example, not signing these shortterm spending bills. They really have done all they can to help staunch the republican bleeding. Look, harry is a tough, tough guy. People tend to underestimate him because he looks kind of meek. Hes not meek at all. I understand why hes doing what he is. Well see how this plays out. I was chairman of the Democratic CongressionalCampaign Committee in 1996, the last time there was a big Government Shutdown in 95. You would think the republicans would have learned some lessons from that. They lost nine seats in 1996. They could lose even more than that this time. I mentioned on your show about a week ago that they may be working hard to make nancy pelosi speaker. You poopooed that at the time. But the polls show the republicans have made a mistake. Maybe they can get well. The election is not for another year. But this thing has to be brought to a conclusion. Youre right on the merits. They need to get this off the table. John, i dont want to obsess about polls. Polls are polls. Real votes are more important than polls. But ive heard for weeks now that the republicans were doing well, that everybody hated obama care. Turns out, they hate republicans more than they hate obama care. Thats why ive emphasized this. Ive never seen an opportunity, a moment when messing around with the government and messing around with our federal debt has been good. And i want to ask you, have they obscured their real message, their real message, which should be a progrowth message across the board, including rolling back and ultimately getting rid of obama care . Well, i dont think their message before the shutdown was that clear either. Right. The timing of this is bad for the country. Ill tell you why. The president and harry reid and nancy pelosi now smell blood. And theyre going to be very few changes or reforms around the edges in order to get out of this mess. Rather than have grand tax reform or a grand bargain, the odds have gone up dramatically that its going to be trench warfare heading into the political season. That means bad news for any immigration bill, whether small or big. It means believe me, there were a lot of nervous democrats on obama care. Privately, a lot of nervous democrats know obama care is, shall we say, problematic. But the chances of convincing the president to go along with any of that are gone. The republicans stepped on their best line. Right. What is the enemy of growth right now . Its uncertainty, high tax rates, policy obama care regulations. Epa regulations. All of those are now more likely to be static, not changing for the next 14 months. Thats bad news for the country at least ryan i give ryan credit. Ryan wants to make the good fight on the progrowth issues. Its the first time ive heard that from a republican in i dont know how long. Its been such a terrible summer. I have to give ryan credit for that. I know its not going to get done. I understand the democrats dont agree on entitlements or tax reform or obama care. I get that. But at least you have to make the best fight you can make on the issues rather than getting diverted with all this other nonsense of global defaults and the rest. Larry, what happened in 1996, congressman frost should have put a semicolon where he put an exclamation point. Bill clinton after vetoing welfare reform signed it into law. They got entitlement reform by pushing it. Nobodys suggesting that shutting down the government is the way to do that. But the republicans held onto the house because they held their ground. The last time we got major entitlement reform was in 1996. Lets not rewrite history. Youre all going to come back. I have to take a quick break. We have to get your money. How do you manage your investments over the next couple of days when the slightest little political move could really shock the markets . Well look at the Market Reaction today which was pretty good, including the steep drop of gold. And later, the Obama Care HealthCare Exchange signups are still a disaster. The exchanges still a disaster. Its been 11 days and were still seeing massive screwups and very few people successfully signing up. We have to ask when is somebody going to lose their job over this disastrous obama care . And that person should be, i think, kathleen sebelius. But well see. As always, free market capitalism is the best path to prosperity. Ill say it again. As a reagan supplysider, thats where the Republican Party should go. 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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 Courtney Reagan with this market flash. Another good day for stocks. The dow adding another 111 points today. The nasdaq up 91 points. The s p 500 up ten, closing back above 1,700. We also want to show you gold. Today down nearly 30 an ounce. Part of it certainly a reaction to hopes for a deal in washington. But there was also a weird situation this morning. A huge order to sell gold futures went through. Gold fell so far so fast it had to be halted for ten seconds to replenish the liquidity. Many thanks, Courtney Reagan. Appreciate it. Lets go to don luskin. Youre an optimistic guy these days. I am. I said buy stocks and sell binds. This crisis was going to be another opportunity. I think were in a very special situation here. Over 2013, investors are learning bad things can happen, these risks can happen, Government Shutdown, debt limit threat, sabres will be rattled, but were learning these things do not have to be systemic. They do not have to lead automatically to global contagion. Not everything is the next lehman. Were going to be through this crisis in the next couple of weeks. Its going to be sfin. When w