tv The Kudlow Report CNBC May 10, 2012 7:00pm-8:00pm EDT
pro-growth measures on taxes. the budget and everything else, and what's gone wrong with obamanomics and the recovery? i take on the architect of it all, larry summers mano y mano. really jarring night after the close. two terrific brand name companies. dow stocks, jpmorgan, tremendous disapointment in the loss column on some derivative that i'm sure, well, let's just say they've lost control of. and nordstrom's disappointing, it's been a bell weather retail player. i'd always like to say there's always a bull market somewhere, i promise to try to find it for you here on "mad money." i'm jim cramer. i'll see you tomorrow. hey, larry, what do you have for us? all right, jimmy, the president goes to hollywood like a star, but it's another distraction from tackling the economy. good evening, everyone, i'm larry kudlow. this is the "kudlow report." our top story tonight, the
president at this hour is headed to hollywood, expected to wine and dine and collect at least $12 million. while he's hobnobbing with george clooney, what is he going to tell americans when they complain about the stagnant economy. he blames the republican house, but it is the democratic senate that is blocking the budget, tax cuts, entitlement reform, keystone pipeline, all things that would be good for business, good for growth, good for jobs, and good for america. so why are senate democrats and harry reid locking the economy? also this evening, what went wrong with the $800 billion obama stimulus package? three years, why has it still not worked? i say start with the architect of obamanomics, larry summers, you won't want to miss it. also, talk about another pea-brain regulation, a $4 billion proposal to label those
with cy bladder syndrome disabled, requiring business to rebuild bathrooms to accommodate those who are pee shy. and a stunning admission minutes ago, jamie dimon said the banks had a $2 billion trading loss since the end of march. the stock is falling, cnbc's mary thompson joins us now with the details. good evening, mary. >> good evening to you, larry. dimon called the losses egregious mistakes committed to by the chief investment office. the portfolio used to manage interest rate and credit risk. those losses linked to trades aimed at reducing a short position on credit. jpmorgan set up to protect the bank in times of severe credit stress. on a conference call earlier tonight, dimon called the trades poorly executed and poorly monitored. >> i know it was done with the intention for jpmorgan, but i'm telling you, it morphed over time and the new strategy meant to reduce the hedge overall made
it more complex, more risky, and it was unbelievably ineffective. >> as a result, the firm expected corporate unit to report an $800 million loss this quarter and further adjustments could cost the unit another $1 billion by year's end. the firm says even with those losses, the bank is on track to earn about $4 billion in the current quarter. in line with analyst estimates. jpmorgan shares taking a hit on the news in the after hours trade. news that also pressured s&p futures so they are off the lows and after hours, jpmorgan rivals also failing to escape the downdraft. but when asked if other banks may see similar losses, dimon said on the call just because we're stupid doesn't mean everyone else is. cnbc's jim cramer weighed in on the news and here's what he had to say. >> this jpmorgan is jarring, as jarring as it is last night when we had cisco, john chambers saying things are bad. when jpmorgan lost control of its business, and that's what
this is, egregious losses. what this tells you is banks other than traditional banks that make loans to you and me and then securetize them or keep them on the balance sheet may be dangerous. i've been against owning the international banks or trying to scale back the exposure and trying to own the domestic banks. here's the thing, every bank will be down. when they're throwing them all away, you should be looking at a bank like wells fargo which doesn't do this kind of derivative trading. jpmorgan, jamie dimon, downright embarrassing, my charitable trust owns it. just kicking myself to think he was any different from the other guys. back to you, larry. >> all right. thanks for jim cramer and thanks, of course, to mary thompson for great reporting. there'll be much more on this tomorrow all day on cnbc. now let's turn to our other big story tonight on the "kudlow report." the president's at george clooney's house mingling with the hollywood a-list, the senate back in washington doing, well, nothing as usual.
they're holding up the budget, they're holding up keystone. in fact, 2011 the least number of public laws passed in over 15 years in the senate. republican senator marco rubio lashed out yesterday on the floor. take a listen. >> the senate's become a theater. it's become a show. and that's why people get grossed out by politics. that's why people watch the news at night and just don't understand this whole thing. they have a right to be frustrated and upset, a right to be impatient with us. because nothing is happening on the issues that matter to the real lives. >> cisco ceo john chambers says government policy is going to determine job creation. so why are do-nothing senate dems blocking business and the whole u.s. economy? let's talk, we have joy reed, managing editor of the greo.com,
and board member and columnist and bill hennesy. welcome back. >> hey. >> when the democrats ran the senate in '09 and '10, when they ran the senate and the house, i'm going to kick it off. an $800 billion stimulus bill, obama care, and dodd/frank, and i'm going to say they're all job killers. now that the republicans run the house, the democratic senate doesn't want to put through any pro-growth measures. budget, tax cut, keystone pipeline. i don't get this and my question to you is why? and will they bury themselves those senate democrats? >> no, you're absolutely right. and senate majority leader harry reid has made the senate the place where good bills go to die. there is nothing happening, not on the budget, they haven't had a budget in three years, propose rations not moving, you know, we've got this sequestration problem, the cuts, the house has put together a fix, the senate's
not going to touch it. we got a huge tax hike coming at the end of the year and there's nothing because harry reid has decided he's going to be the gate keeper, doesn't want any bills that the president's not onboard with to reach his desk and these are all things the president wants to run on class warfare and that doesn't fit into the agenda. >> you know, bill, hennessey, there's a lot of tea party stuff in the paul ryan budget and tax cuts and various amendments to balance the budget, none of which get taken up in the senate. and i want to ask you, will this mobilize the tea party? you're a leader. will this be used in the elections around the country to get a gop control of the senate in that's really where i'm going on this. >> absolutely i think it will. a lot of people say -- want to criticize the tea party as being a response to barack obama. in a sense, we're a response to harry reid. he passed the obama care legislation which increased bankrupt entitlements, bankrupt the day it was born.
and that's what we're fighting against. and as we pay more attention to the election coming up, we're going to realize that the senate is standing for progress on the economy, on right-sizing the government, and reestablishing the proper balance between washington and the state. >> joy reed, as republicans accuse the senate democrats of stopping economic growth and stopping jobs and driving unemployment, this is something where they're going to fall on their swords. this is a self-destruct move by your friends, harry reid, chuck schumer, and the other leading democrats. what do they think they're doing? >> by the way harry reid, no relation. i have to say three cheers for the do-nothing senate. the founders of this country created the senate to be moderating bodies to sort of put the brakes on the house, which is sort of the more wild and crazy body. right now the legislation coming out of the house, which is going to the senate for its approval is so extreme, so radical, and
so influenced by the radical tea party movement that thank god the senate has enough good sense to stop it. >> let me ask you something, joy. you disagree with the ryan budget and so forth. i get that and respect your disagreement. even though i disagree with your disagreement. why won't they even hold hearings in the senate? kent conrad, a moderate, i suppose, the head of the budget committee wanted to at least hold hearings on a budget, maybe the ryan budget, and harry reid wouldn't even let him do that. now, that is an abrogation of senate responsibility. >> you know what? i think if you look at the kind of hearings that are held, let's say in the house. let's look at the issa hearings, for instance. what happens is republicans want to put on a show for their base. they want to call only the kind of people to testify who will testify to their already existing ideology. they aren't hearings. it's a show.
so there's no point in doing that. these things even if they were to make it through the senate somehow would be vetoed by the president. >> yeah, but wait -- kim, i think joy is missing the point. what i'm saying is there's no process in the senate, in other words, i'm not expecting the senate democrats to necessarily vote the paul ryan budget. but i am expecting them to hold hearings to have a national discussion to set an agenda for a policy debate that might look like simpson/bowles or whatever that might actually extend the bush tax cuts so we don't have another recession. you see what i'm saying, kim? >> they won't even talk about -- forget about the hearings, they won't even pass their own budget. put out their own blueprint, this is what they're supposed to do. >> kim, you have to understand -- can you -- can i remind you -- >> why wouldn't they? they haven't passed a budget in three years and the reason why, i'll tell you why, because to do that they would have to acknowledge that you can't just for instance get yourself out of the deficit problems by having a
millionaire's tax. they would have to acknowledge they need some of the cuts that paul ryan is talking about over in the house. >> kim, kim, kim, kim. i'm sorry, i have to put the brakes on you for a second. the reason that nothing can pass through the senate that is reasonable and bipartisan is because a guy named mitch mcconnell has had a strategy for almost four years of literally filibustering everything. they can't take a vote on whether to take a bathroom break without it being filibustered by the republican party -- >> put it out there. >> go ahead. go ahead -- >> won't even try it. >> nothing can come to the floor. >> the rules of the senate to block a vote on barack obama's job still? >> nothing will come to the floor -- >> nothing can come to the floor because -- >> that's not true. things do come to the floor. so you have, for instance, that totally outratalls supposedly bill to create 20,000 jobs in the keystone pipeline. and there's more than a majority of senators who want to pass that. there are democrats who want to pass that as well as republicans. mr. reid and the president
called and twisted arms to make sure they couldn't get enough to overcome the filibuster. >> kim, let me ask you another one. hold on, joy. the bush tax cuts must be extended. they have to be extended. everybody with a pea brain knows that, kim. they may not be extended permanently. but you don't want to have the economy completely tank in the next several months. now, i want to ask you from your reporting what are the senate democrats going to do. the republican house will extend the bush tax cuts. what will harry reid and chuck schumer and the senate democrats do? >> listen, i'll tell you. all we have talked about for three years, larry, is uncertainty in the business community. and they are paralyzed with fear right now because what is becoming clear is there is no intention to deal with this during the regular course of order. they are going to wait until they get in the lame duck and your going to have the election that could well be for instance the republicans take over the senate, might take over the white house. but instead you're going to have
the leftovers from this congress that are not unresponsible making decisions about -- >> i've got to leave it there. joy reid, bill hennessy, thank you very much. up next, rick scott of florida, now the question is, is there a resurgeonsy party going to carry the state of florida for mitt romney? and ahead, stocks snap a six-day losing streak, a possible breakthrough in greece's political deadlock. and later, larry summers, the chief architect of obamanomics. i'm going to ask him, what was he thinking? don't forget, free market capitalism is the best path to prosperity. unfortunately, obamanomics doesn't have it. i'm kudlow. we'll be right back.
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largely overlooked in yesterday's same-sex marriage, political side show was president obama's fine print. while he voiced his personal support for same-sex marriage, he deferred any legal concern back to the states which leads to bigger questions of just what's really at stake when it comes to states' rights. joining me now is florida's republican governor rick scott just wrapped up a round table
discussion about the economic benefits that his state's often visited. before we go to your round table on business, i want to get your thoughts on a couple of issues. help me out. here's obama coming out with this personal whatever it is on same-sex marriage. but he leaves it up to the states. now, what does that mean for the state of florida? what does that mean to you, sir? >> it's already been decided. in 2008 over 60% of our voters passed a constitutional amendment that said there's not going to be same-sex marriage in florida. it's a non-issue here. it'll hurt the president, i think, in florida. his decision. >> it's a non-issue in a swing state? >> yeah, it's -- it's a non-issue in the swing state. look, this is the state you have to win. you have to win florida to win the presidency. this election is going to be about one thing, and just like my race in 2010, it's going to be who is going to create jobs? you know, i ran on a campaign, seven steps to 700,000 jobs. this is going to be an issue.
can president obama create jobs or can mitt romney create jobs? mitt romney's got the background of being in business. if he has the right jobs plan, he easily wins this state. >> governor rick scott, let me ask you, you're talking to the business guys, down at the players' golf championship as i understand it. you're trying to convince them to come to florida. what's your biggest selling point? florida economy, unemployment -- you've still got a housing problem. what are you telling them? >> oh, gosh, we're headed in the right direction. just the opposite of what the federal government's doing. i've cut taxes, i have balanced the budget, i have paid down debt for the first time in 20 years, we have regular -- we're reducing regulations, doing exactly what the federal government ought to be doing and, guess what? jobs are coming back. and i've been in office for 16 months, we've got data for 15 months, our unemployment has dropped every month or stayed the same but one. we've generated over 100,000 jobs, this is going to be -- we're clearly on the path to
being the number one job creator in the country. >> i was surprised to learn that you have said no businesses in florida can do business in cuba, which i think means that your businesses may lose some jobs and brazil and canada doing business in florida, they're going to lose jobs. why are you so restrictionist on this? >> well, what the legislature did, passed a bill saying the repressive regimes of castro, you can't do business with florida government. it'll be the law of the states july 1st. there's going to be a -- it's we're going to question -- it's going to be questioned constitutionally whether we can do that until the federal government passes a law that says it applies the same way that we have laws -- federal law about sudan and iran. so we'll see whether it's something that the federal government will do their job and pass something similar. but those are oppressive
regimes, they shouldn't be doing business with our state government or local government if they're doing business there. >> all right, that you think, sir, we appreciate it. coming up on kudlow -- taking us to george clooney's house where president obama will have his own handout. was his stand on same-sex marriage time to placate hollywood? stay with us. still ahead tonight on the "kudlow report." 1 in 7 unemployed or underemployed, trillions of dollars of debt, growth at a stagnant 2%. larry faces off with the architect of obamanomics. larry summers. don't go anywhere. the "kudlow report" will be right back.
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all in real time. good idea. ♪ it's the at&t network -- providing new ways to work together, so business works better. ♪ the president is at this hour headed to hollywood to hobnob with a-list celebrities. i think it's a total distraction from the economy in this election. critics wonder whether the so-called evolution was political darwinism. now it's happening at george clooney's house in the hollywood hills. that's where cnbc's own jane wells joins us now live with the details. good evening, jane. >> reporter: hey, larry, they're calling it starmageddon. they're going to shut down the canyon just in time for rush
hour. we were there for a little while and here's video we shot outside george clooney's home where it's expected 150 people may show up and raise by some estimates now $15 million. that would be a record for a single fundraiser. while individual tickets ran as high as $40,000, it's believed most of the money not coming from actual celebrities, but an online raffle where people could enter for a few bucks. those two winners we learned are karen bletcher, a science teacher from new jersey, the contest was announced last month this way. listen. >> george's hosting a fundraiser event for the obama campaign. for $3, you can enter the raffle and the winner gets to have dinner at george clooney's house. and remember, you can still win dinner with george himself if you have 6'1" blond with a perfect body. >> there will probably be a few stars there like barbara
streisand, robert downy jr., toby maguire. the food will be catered by wolfgang puck. protesters on hand. thinking that the president hasn't done enough, larry, to crack down on lenders in the mortgage crisis which hit l.a. hard. by the way, i went on zillow. it has george clooney's house worth $2.7 million down 34% from a peak of $4.1 million in 2005. that's if you believe zillow. back to you. >> i'm still looking for my invitation. but up next on "kudlow," jobless claims fell. it's an important statistic and there's the lowest level in four weeks. so could it mean a rebound in employment, it would actually drive stocks higher. later in the show, i take on the architect of obamanomics, that being larry summers. here's my question to president obama's former top economic adviser, it's the worst recovery
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welcome back to the "kudlow report." i'm larry kudlow. in this half hour, so-called stimulus. millions vanishing from the workforce, $15 trillion in debt, all of this obamanomics. what were they thinking? i take on former treasury secretary larry summers. he was one of the architects of obamanomics. also this evening, talk about ridiculous regulation from washington. there is a pea-brained proposal to add being pee shy as a disability and thus forcing businesses to redo bathrooms in order to comply with the americans with disabilities act. when will these regulations stop? we will flush that out. but first up, breaking news tonight on the story that will impact trading tomorrow. jpmorgan down almost 7% in
after-hours on egregious trading losses of $2 million. as a result, they expect to record a second quarter loss of at least $800 million. that was a loss of $2 billion and the loss they're going to record is $800 million. u.s. futures markets already taking a hit on the news. let's turn to our ace investors to get some reaction. we have lee munson chief investment officer at the portfolio. russ costerich of blackrock, and "fast money" contributor brian kelly, the co-founder of shelter harbor capital. give us your quick take on this dreadful story of jpmorgan. >> it's been out there. if you look at the tranche they were rumored to be short, it's up about 21% since march, though, people certainly knew they could be taking a bath on it. the real question is, is it systemat systematic? at this point, looks like it's probably not systematic. therefore, it's a one off and $2
billion to jpmorgan it's a lot of money maybe to you and me, larry, but maybe just to me, not you. but to jpmorgan as well. >> $2 million's a lot to me, it's a lot to everybody. just one follow-up. what's the underlying security here? these were cdxs as i understand it, what was underneath these derivatives? were they trading european bonds? >> european corporate bonds, european corporate debt. they were short the cds. from what i understand, they were short the cds which made them long european corporate bonds as yield spiked over the last couple of weeks, that's probably where they took their losses. >> russ, what's your reaction. this is another example of the huge volatile going on in europe which can shake up everybody including the best bank ceo jamie dimon. what's your take, russ? >> well, look, i think this is something that we've been living through the last few years, unfortunately, living through it for a while longer. the situation in europe, you know, the ecb today, wonderful
job of sort of adding liquidity, calming things down for a brief period of time. but the reality is, larry, as you know, there are structural issues. it's going to take time for spain, italy, and portugal to reform. back in the center of headlines, and europe is a chronic condition. we're going to see these headlines pop up again and again and again and keep the volatility hot. >> i want to switch gears. let's go back to america. lee munson, buddy, good to see you. today we had a good report. weekly jobless claims fell. i believe it's the fourth straight month. they're kind of back to where they were at the low point in late march. here's my question, lee. is there going to be enough of a rebound in employment and the economy to spur a rally in stocks and end the correction? >> absolutely. i think that, you know, the whole notion we're going to sell in may. what do we have news wise that's really not long in the tooth? it's the euro crisis, it's over,
china hard landing, it's over. the u.s. deficit. it's over as far as being a new news thing. quite frankly, this whole thing with jamie dimon is awesome. while it may not be that material of one off, i think it's the type of unknown known that will wash out the weak retail money that we're already seeing. when you're seeing sentiment from retail investors so bearish right now, i think it's time to strike. i say sell in may, no way. and i think the unemployment is improving. it's just slower than any of us want in this country. >> brian kelly, i've been looking at the decline in gold and energy and treasury bond rates and the rise in the dollar. which has a little bit of the deflationary feel to it. now, reading your notes, you're saying if i understand this correctly, the germans are going to be wobbly on inflation and it's time to go in and buy gold. what's your real take here? what's the real bk position? >> the real bk position is that i think it was a massive move
yesterday. the bank made a presentation to the german parliament. they talked about how they may actually tolerate inflation in germany a little bit higher than the rest of the euro zone. that is a huge move i do not think the market's picked up on. it's very positive for europe. i do think you have central banks around the world that will tolerate a bit more inflation. you're seeing it in japan. it's not here yet. it's not like we're going to have hyperinflation. but gold is starting to look like it's starting to make a bottom and an awful lot of data pointing to huge buys of gold and silver. and that's another wild card out there. >> you're buying these -- are you buying the precious metals? are you buying the raw materials? >> well, in the raw material space, i love the grains area, actually. we had crop report today which showed an awful lot of corn in the field, but showed that china is buying an awful lot of grain. the trade has skipped from
buying the hard metals and raw materials there that china was buying which they're probably not going to buy as much and move to the grains. one of the things i did today was buy some archer daniels adm, they export grains to china, spreads really nice and wide. they're going to make a lot of money this year. >> how about a lay of the land outside of the u.s. and outside of europe. what are you looking at in brazil? what are you looking at in south america? what are you looking at in asia? what are you looking at in ch a china? >> generally our thesis is that the u.s., europe, japan goes without saying are stuck in the slow-growth environment. so we generally like the emerging markets, we see better growth prospects there. you can buy these markets now at a significant discount. any time in the past 20 years, you've been able to buy stock down 20% or more from a valuation perspective. one other thing. there was a silver lining for merging markets the slow-growth world. and that is lower inflation. a big head wind for 2011.
as inflation falls in brazil. these are countries that have been traumatized in the past. investors bid up the multiples. china, brazil, very cheap, a lot of room for multiple expansion if these countries, engineer soft landing. >> with all due respect, though, you're looking at china. i don't know why we want to send u.s. investors to places that are politically unstable and we don't have transparency. when you have something as simple as japan, which is cheap, and 100-year recession. >> japan hasn't been cheap for 20 years. for a long time -- >> hold on, russ, wait. >> -- in the past, i think it's better in china. >> go ahead. >> japan is a perpetually cheap market. no return on equity in that market. and again, if you're going to look for growth, a low-growth world, growth will trade at a premium, it's very hard to make a story for japan. >> yeah, but china here betting that the growth is actually what they're saying. we all know that growth is not as high as what china is
suggesting, but aren't you a little bit concerned about how they're going to recover from this hard landing? everybody said they weren't going to have a hard landing, but they did. that doesn't look so bad. >> wait, wait, wait -- a hard landing at 7.5%. that's not a hard landing -- >> exactly. i'll take 7.5% any day. >> we'd be doing back flips if we had 7.5% gdp. >> exactly. >> come on. you guys are going to go into the belly -- listen -- >> of course, i'm going to go into the belly of a billion consumers, why wouldn't i? >> i would like a stable market with a stable political system -- >> -- in china. was japan -- >> all right, gentlemen. >> japan -- listen, japan makes a lot of money off china. >> i've got to get out. i've got to get out. lee munson, thank you. russ, thank you, brian kelly, we'll bring you all back to finish off this debate. it's fascinating. up next on "kudlow." however, tonight, get this
pee-brained regulation. redesigning bathrooms for pee-shy employees as part of the americans with disabilities act. oh, my gosh. later in the show, more seriously with the obama economy in stall mode. the archite architect of obaman larry summers. [ horn honks ] hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too.
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talk about outrageous, the obama administration is now discussing whether being pee-shy in public should qualify as a federally regulated disability. get this, it could cost employers between $2 billion and $4 billion to accommodate workers who avoid public restrooms. oh, my god. here now to flush out all the details, our pal matt lewis senior contributor for the "daily column." let me get this right, shy bladder syndrome. shy bladder syndrome because certain guys can't pee with the rest of the boys? is this a serious story? >> it's a serious story. and look, i identify -- i can understand people who are a little bit nervous, a little bit
shy when somebody comes up next to you in the urinal, but i don't think we need to mandate private companies to provide private bathrooms. this is happening. this is a letter to the association saying that this, you know, bladder issue could qualify under the americans with disabilities act. >> is this the right time for a lousy economy with businesses worried about costs, with businesses worried about hiring. do we need this now? i guess that's really the thing that caught me. >> it's absurd, but we wouldn't be talking about it if it wasn't possible. i mean, the justice department right now, civil rights division is going to force hotels to put in mechanical wheelchair lifts at every swimming pool. so, you know, never mind the economy, never mind how businesses are struggling with regulation, it could be that to accommodate folks who have problems urinating around other
people that there have to be special accommodations reached. >> all right. i'll be more accommodative to that position, but let me just ask you this, i think it was today obama administration put out some statement they were going to review regulations. and i've heard this before. they're going to review regulations and try and help business. you buy any of that, matt lewis? >> i hope they do. but, again, this sort of thing -- it's horrible for business. and just think of this issue here. you could be sued, lawsuits, all sorts of regulations and not just regulations, but fear of regulations, fear of lawsuits has a chilling effect on business as you know. so this is problematic and it's indicative of a larger trend. it's not just people with shy bladder syndrome. it is all sorts of people worried about starting businesses. >> i think it's the obama administration's anti-business syndrome. i think that's at the root of
this. and i think people should take a careful look at all of these add-ones. matt lewis, thank you for helping us. now, let's turn back to other news stories. cnbc's brian shactman joins us with the latest on jpmorgan after hours and all the latest breaking headlines coming into the cnbc newsroom. good evening, brian. >> thank you very much. let's take a quick look at the after hours chart of jpmorgan. it's now down slightly less than 7% and futures overall are down on the jpm news. i want to get to other stories, though. the next stop on the yahoo controversy train or train reck. ceo scott thompson told a meeting of executives that he never provided his resume to the company meaning, perhaps, he himself didn't provide incorrect information. every day we say it, stay tuned on this story. also, arena pharmaceutical going through the ringer right now. up 88% after hours as an fda panel votes to approve the
obesity drug bringing the company one step closer to full approval. we now know what a stock certificate for facebook will look like. and there it is. there's no like button on those shares and it is not interactive. prince charles gave a tv weather cast today. >> rain. there'll be snow for the higher ground and the highlands. the potential for a few flurries over -- who the hell wrote this script? >> there's an ad lib right there for you, larry. a question most of us talking -- we've asked that many times, right, larry? who put the question mark in the teleprompter. >> i understand that. by the way, it looks good. i loved his suit, liked the shirt and tie. >> he was smooth. >> but he has put on a couple of pounds. thank you very much, buddy. still ahead tonight in the "kudlow report." 1 in 7 unemployed or underemployed, growth at a
stagnant 2%. it's the worst recovery since world war ii, i'm going to face off with the architect of obamanomics. that being former treasury secretary larry summers. don't go anywhere, you're going to want to see this. ♪ i'm making my money do more. i'm consolidating my assets. i'm not paying hidden fees or high commissions. i'm making the most of my money. and seven-dollar trades are just the start. i'm with scottrade. i'm with scottrade. i'm with scottrade. and i'm loving every minute of it. [ rodger riney ] at scottrade, we give you commission-free etfs, no-fee iras and more. come see why more investors are saying...
welcome back, everyone. my opposition to president obama's economic policy should come as no surprise to my next guest who is former obama economic adviser larry summers. many call him the architect of obamanomics. right now, 1 in 7 in this country are unemployed or underemployed. there's trillions of dollars in debt, and growth remains at a rock bottom stagnant 2%. bottom line, team obama's economic policies are not working. and they may be hindering economic growth. but to get the other side of this discussion, let us bring in our special guest. all right. we welcome back to the show, former treasury secretary under president clinton and former top economic adviser to president obama, now professor of economics at harvard university larry summers, mr. summers,
welcome back to the show. i appreciate your time very much. and i just want to begin, larry, with this. after the big stimulus package several years ago, the $800 billion stimulus package, each and every year the obama administration projects 4% economic growth and an unemployment rate that should be around 5.7%, 5.8%. as you know, the economy's stuck around 2%, unemployment's around 8%, the workforce seems to be vanishing. what's going on here? what's gone wrong? why isn't this working out? >> i think i'm glad to be on your show. larry, those descriptions to the obama forecast aren't right. nobody was ever predicting a return to 5% unemployment quickly and a number of the other things you said about the forecasts weren't right. but it is true that the obama administration made forecasts that pretty much tracked the
consensus forecast. and those have proven to be too optimistic for a couple of years now after having proved to be way too pessimistic in 2009. >> all right. i just wondering -- in terms of the forecast, i didn't say 5%. it's 4%. i just took that out of the budget. and -- >> no, you said -- you spoke 4% gdp growth, you also spoke about 5.5% unemployment and that -- >> that's correct. >> that was -- except in the very long run, there wasn't the forecast of 5.5% unemployment. >> no, the most recent. i don't want to get hung up on this because i want to hear your views on the economy. the most recent budget predicted it would come down to less than 6%. but tell me more. you say that growth has not been established as much as you would like. obviously that's true. what i'm wondering is what's your opinion, first of all? this is so far the slowest recovery in the post world war ii period.
and normally very deep recessions are followed by very strong springbacks. larry summers, why has that not happened? >> because this -- this recession's a very different recession than the ones we've seen historically. the ones we've seen historically were caused by an inflation upsurge, tight money, the fed hit the brakes and then this economy skidded out of control and then the fed took its foot off the brakes and the economy recovered rapidly. this was a very different kind of recession caused by overleveraging, excessive asset values, and when those burst, those bubbles burst when the de-leveraging takes place, when you have a massive contraction in the private sector's propensity to spend, then it takes a long time. >> larry, what do you say to your critics? okay. you just debated john taylor of stanford a couple of times, john do cochran is a colleague of yours,
another colleague in the "wall street journal" today. they acknowledge the financial roots of this deep downturn. but they also argue that bad policy responses, too much stimulus spending for the short-term, too much borrowing, obama care because of its taxes in regulatory mandates have inhibited hiring. no corporate tax reform to get competitive. you're aware of these critici s criticisms, what do you say to them? >> look, with the benefit of hindsight, there's certainly aspects of policy that you could think about having adjusted. but i think if you look, what you have to go back to is an economy that was facing depression-type conditions and in the six months after the president took office he put in place the set of policies that were declined. if you use as many of your
political persuasion like to market as evidence, we've had a strong as stock market through the obama years as in almost any presidency since the second world war. >> and i have acknowledged that -- no, no, i have -- >> i'm glad you've acknowledged it. but -- >> i've even said it to mitt romney. no, i've been very candid about that. >> that's great. and it reflects an increased -- there's all this about record levels of uncertainty. nowadays we have a market measure of that in the vix. the so-called measure of volatility. the fear gauge. and what's striking is that it's at below normal historical levels, and that it has fallen by more than 2/3 since the president came into office, hardly consistent with the kinds of arguments that a number of -- >> no. >> a number of critics -- critics are making. >> again, i acknowledge the stock market, i think that's exactly right.
but -- >> yeah. >> i think you need to acknowledge that this is a very slow growth recovery that the employment story with people leading the labor force is very, very difficult. you just had a story coming out the bureau of labor statistics, something like 340,000 women left the labor force in the last two months alone. what i'm interested in is what you started to say before, larry. you said you would have made some adjustments, you would have done some stuff differently. and i wonder what you had in mind. what would you have done differently? >> oh, i think it's unfortunate that the congress was unwilling to pass the stimulus in the form that the president originally proposed it, which would've put more money into the economy. and i think would've driven a somewhat more rapid recovery. i think it's unfortunate that the congress was knnot preparedo pass the infrastructure investments and the support for employment that the president proposed at the end of 2010 as it was becoming clear that this
recession was slower. it was lasting longer than we had expected. i think it's unfortunate that the congress was not prepared to sign on to the kind of broad approach to long-term deficit reduction that the president set forth in april of 2011 and then compromised further on with speaker boehner coming up to the debt limit in august. i think that the failure to do all of those things is -- has compromised this recovery. >> so if i summarize, you would have preferred more stimulus even though a lot of critics say the spending stimulus has not worked. larry summers, thank you ever so much. i appreciate it. it's been too long, i hope you'll come back on the program and i wish you all the best of luck. >> good to be with you, larry. >> all right. not surprisingly, i don't
agree, i don't want more federal spending stimulus, i want the federal government spending to be smaller as a share of gdp. i believe that would be pro-growth. and i do want corporate tax reform. i want lower corporate tax breaks which, mr. summers agrees with. let's get those corporate tax rates down. that's it for tonight's show, thanks for watching. how about more free market capitalism to grow the economy? ♪ [ piano chords ] [ man announcing ] what we created here. what we achieved here. what we learned here. and what we pioneered here.
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